arizona health facilities authorityconstruction, improvement and equipping of certain assisted...

NEW ISSUE – BOOK ENTRY ONLY UNRATED

In the opinion of Greenberg Traurig, LLP, Phoenix, Arizona, Bond Counsel, under existing law, as currently enacted and construed, and assuming compliance with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Series 2015 Bonds and with certain covenants described under the heading “Tax MaTTers” herein, interest on the Series 2015A Bonds is excludable from gross income of the owners of the Series 2015A Bonds for federal income tax purposes except for interest on any Series 2015A Bond for any period during which such Series 2015A Bond is held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code. Interest on the Series 2015A Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax, and interest on the Series 2015A Bonds is not taken into account in determining adjusted current earnings for the purpose of computing corporate alternative minimum tax imposed on certain corporations as more fully described under the caption “Tax MaTTers” herein. Additionally, certain provisions of the Code may affect the tax treatment of interest on the Series 2015A Bonds for certain Beneficial Owners. Interest on the Series 2015B Bonds is not excludable from gross income for federal income tax purposes. Bond Counsel is further of the opinion that the interest on the Series 2015 Bonds is exempt from Arizona state income tax. See the heading “Tax MaTTers” herein.

$14,510,000 ARIZONA HEALTH FACILITIES AUTHORITY

First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project)

Series 2015A



Taxable Series 2015B

Dated: October 27, 2015 Due: October 1, as shown on inside cover

The Arizona Health Facilities Authority (the “Issuer”) is issuing $14,510,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”), and $1,315,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”), pursuant to Title 36, Chapter 4.2 of the Arizona Revised Statutes, as amended (the “Act”), in conformity with the provisions, restrictions and limitations thereof pursuant to an Indenture of Trust (the “Bond Indenture”), between the Issuer and Wilmington Trust, National Association, as bond trustee (the “Bond Trustee”).

The proceeds of the sale of the Series 2015 Bonds will be used, together with other legally available moneys, to (i) finance the cost of acquisition, construction, improvement and equipping of certain assisted living and memory care facilities (the “Project”) owned and operated by Gilbert AL Partners, LP (the “Obligor”), (ii) pay interest accruing on the Series 2015 Bonds for approximately twelve months, (iii) fund a working capital fund, and (iv) pay the costs of issuance.

Pursuant to a Loan Agreement (the “Loan Agreement”) between the Issuer and the Obligor, the Obligor will agree to make loan payments to the Bond Trustee in amounts sufficient to pay debt service on the Series 2015 Bonds. The obligation of the Obligor to make such payments for the Series 2015 Bonds will be evidenced by two separate promissory notes of the Obligor (collectively, the “Series 2015 Notes”) issued under a Master Trust Indenture, as supplemented (the “Master Indenture”), between the Obligor and Wilmington Trust, National Association, as master trustee (the “Master Trustee”).

The Series 2015 Bonds are issuable only as fully registered bonds in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to ultimate purchasers (“Beneficial Owners”) under the book-entry only system maintained by DTC, only through brokers and dealers who are, or act through, DTC Participants. Purchases by Beneficial Owners will be made in book-entry only form in denominations of $25,000 or any integral multiple of $5,000; provided, however, any Beneficial Holder of Series 2015A Bonds or Series 2015B Bonds shall be allowed to purchase, transfer or sell such Bonds in multiples of $5,000 as long as, upon completion of such purchase, transfer or sale, the Beneficial Holder owns at least $25,000 of principal amount of Series 2015A Bonds or Series 2015B Bonds, as applicable. Beneficial Owners will not be entitled to receive physical delivery of the Series 2015 Bonds. Interest on the Series 2015 Bonds accrues from the delivery date of the Series 2015 Bonds and is payable on each January 1, April 1, July 1 and October 1, beginning January 1, 2016, until maturity or prior redemption. So long as Cede & Co. is the registered owner of the Series 2015 Bonds, payments of principal or redemption price of and interest on the Series 2015 Bonds are required to be made to Beneficial Owners by DTC through its participants. See “Book-Entry only SyStEm” herein.

SEE MATURITY AND PRICING SCHEDULE HEREIN

The Series 2015 Bonds are subject to redemption prior to maturity, as described herein under “thE SEriES 2015 BondS – Redemption Prior to Maturity.”

THE SERIES 2015 BONDS, INCLUDING THE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST THEREON, ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM THE TRUST ESTATE (AS DEFINED HEREIN). THE SERIES 2015 BONDS DO NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER, THE STATE OF ARIZONA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL NEVER CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER OR THE STATE OF ARIZONA. THE SERIES 2015 BONDS WILL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE CREDIT OF THE ISSUER, BUT WILL BE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES DESCRIBED IN THE BOND INDENTURE. THE ISSUER HAS NO TAXING POWER.

An investment in the Series 2015 Bonds involves a certain degree of risk related to, among other things, the nature of the Obligor’s business, the regulatory environment, and the provisions of the principal documents. A prospective owner of a Series 2015 Bond is advised to read “Security For the BondS” and “certain BondholderS’ riSkS” herein for a discussion of certain risk factors that should be considered in connection with an investment in the Series 2015 Bonds.

THE SERIES 2015 BONDS ARE BEING OFFERED ONLY TO AND MAY BE PURCHASED ONLY BY A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED), OR AN INVESTOR THAT MEETS THE REQUIREMENTS OF BEING AN “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(a) OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED). FOLLOWING INITIAL ISSUANCE OF THE SERIES 2015 BONDS, UNLESS THE ISSUER IS INFORMED THAT THE SERIES 2015 BONDS HAVE AN INVESTMENT-GRADE RATING, THEY MAY ONLY BE TRANSFERRED TO A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR. SEE “the SerieS 2015 BondS – Transfers and Exchanges; Persons Treated as Owners.”

The Series 2015 Bonds are being offered, subject to prior sale and withdrawal of such offer without notice, when, as and if issued by the Issuer and accepted by the Underwriter subject to the approving opinion of Greenberg Traurig, LLP, Phoeniz, Arizona, Bond Counsel. Certain legal matters will be passed upon for the Issuer by its General Counsel; for the Obligor by its special counsels, Bracewell & Giuliani LLP, Dallas, Texas, Powell Coleman & Arnold LLP, Dallas, Texas, and Lewis Roca Rothgerber LLP, Phoenix, Arizona; and for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Dallas, Texas. It is expected that the Series 2015 Bonds will be available for delivery through the facilities of DTC, against payment therefor, on or about October 27, 2015.

The date of this Limited Offering Memorandum is October 2, 2015.

MATURITY AND PRICING SCHEDULE



Series 2015A

Maturity (October 1)

Principal Amount

Interest Rate Through and Including

December 27, 2016

Interest Rate From and After December 28, 2016 Yield CUSIP*

2050 $14,510,000 4.000% 7.250% 6.972% 040507PY5




Maturity (October 1)

Principal Amount

Interest Rate Yield CUSIP*

2025 $1,315,000 8.000% 8.000% 040507PZ2

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* CUSIP® is a registered trademark of American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed by Standard & Poor’s Financial Services LLC on behalf of American Bankers Association. CUSIP numbers have been assigned by an independent company not affiliated with the Issuer, the Underwriter or the Obligor and are included solely for the convenience of the holders of the Series 2015 Bonds. None of the Issuer, the Underwriter or the Obligor is responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the Series 2015 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Series 2015 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2015 Bonds.

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FINANCING PARTICIPANTS

ISSUER OF THE BONDS Arizona Health Facilities Authority

Phoenix, Arizona

BOND COUNSEL Greenberg Traurig, LLP

Phoenix, Arizona

OBLIGOR Gilbert AL Partners, LP

Dallas, Texas

DEVELOPER McFarlin Group, LLC

Dallas, Texas

MANAGER Surpass Senior Living, LLC

Dallas, Texas

OBLIGOR COUNSEL Bracewell & Giuliani LLP

Dallas, Texas

Powell Coleman & Arnold LLP Dallas, Texas

Lewis Roca Rothgerber LLP Phoenix, Arizona

UNDERWRITER Piper Jaffray & Co.

The Woodlands, Texas

UNDERWRITER’S COUNSEL Norton Rose Fulbright US LLP

Dallas, Texas

FEASIBILITY CONSULTANT Dixon Hughes Goodman, LLP

Atlanta, Georgia

TRUSTEE Wilmington Trust, National Association

Baltimore, Maryland

TRUSTEE COUNSEL Taboada Rochlin Govier

Simi Valley, California

BONDHOLDER REPRESENTATIVE Greenwich Investment Management, Inc.

Stamford, Connecticut

BONDHOLDER REPRESENTATIVE’S COUNSEL Robinson & Cole LLP Hartford, Connecticut

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SHORT STATEMENT

The information set forth in this short statement is subject in all respects to more complete information set forth elsewhere in this Limited Offering Memorandum, which should be read in its entirety.

The offering of the Series 2015 Bonds to potential investors is made only by means of this entire Limited Offering Memorandum. No person is authorized to detach this short statement from this Limited Offering Memorandum or otherwise to use it without this entire Limited Offering Memorandum. Certain capitalized terms used herein are defined in “PROPOSED FORMS OF PRINCIPAL LEGAL DOCUMENTS” in APPENDIX C hereto.

NOTICE TO INVESTORS. The Series 2015 Bonds are not rated. Non-rated bonds may have significant credit uncertainties and risks. As a result, the purchase of the Series 2015 Bonds is suitable only for investors that understand and are able to bear the credit, liquidity and market risks associated with the Series 2015 Bonds. Accordingly, the Series 2015 Bonds are being offered only to (i) “qualified institutional buyers” as defined in Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”) and (ii) “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act.

THE ISSUER. The Arizona Health Facilities Authority (the “Issuer”) is issuing $14,510,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”), and $1,315,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”), pursuant to Title 36, Chapter 4.2 of the Arizona Revised Statutes, as amended (the “Act”), in conformity with the provisions, restrictions and limitations thereof pursuant to an Indenture of Trust (the “Bond Indenture”), between the Issuer and Wilmington Trust, National Association, as bond trustee (the “Bond Trustee”).

THE OBLIGOR. Gilbert AL Partners, LP (the “Obligor”), a Texas limited partnership, will own and operate the Project (as described herein).

The Obligor, as the initial sole Obligated Group Member (as defined herein), is the only entity obligated to pay debt service on the Series 2015 Bonds.

THE PROJECT. The Obligor will use the proceeds of the Series 2015 Bonds, together with other legally available moneys, to finance the costs the development of an assisted living and memory care facility, consisting of approximately 49 assisted living units, which will include approximately 57 licensed assisted living beds, and approximately 30 memory care units, which will include approximately 34 licensed memory care beds, in a one-story facility encompassing approximately 63,000 square feet on approximately 5.1-acres in Gilbert, Arizona (the “Project”). Construction is expected to commence in November 2015, with the assisted living units and memory care units available for occupancy in December 2016. See APPENDIX A – “THE PROJECT” for a further description.

Further information regarding the Obligor and the Project is included in APPENDIX A hereto – “MARIPOSA

POINT OF GILBERT.”

DEVELOPMENT OF THE PROJECT. The Obligor has entered into a development agreement, as amended (the “Development Agreement”), with McFarlin Group, LLC, a Texas limited liability company (the “Developer”), to provide project management and financial services for the Project. The Developer, formed in January 2008, has senior living experience that includes the planning, financing and development of over $1 billion in total project costs over the last 15 years and the successful development of over 4,900 senior living units. The Developer shares certain common ownership interests with the Obligor. See APPENDIX A hereto, “THE

DEVELOPER.”

The Obligor will pay the Developer a development fee of $788,467, payable as follows: (i) 75% will be paid on a monthly installment basis in twelve equal monthly installments of $49,279 during construction, and (ii) the remaining 25% will be deferred without interest until the percentage occupancy of the assisted living units and the memory care units in the Project is equal to or greater than 85%.

MANAGEMENT OF THE PROJECT. The Obligor has entered into a management agreement, as amended, with Surpass Senior Living, LLC, a Texas limited liability company (the “Manager”), to be effective as of the date of delivery of the Series 2015 Bonds (the “Management Agreement”), to manage all aspects of the operations of the Project. The Manager’s staff has over fifty years of combined senior living management experience. The Manager shares certain common ownership interests with the Obligor. See APPENDIX A hereto, “MANAGEMENT OF THE PROJECT.”

Payment of the Start-Up Fee and the Management Fee is 100% subordinate to the payment of debt service on the Series 2015 Bonds.

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COMMON OWNERSHIP INTERESTS. The Obligor, the Manager and the Developer have certain

common ownership interests.

CONSTRUCTION. The Obligor has entered into a construction contract for a guaranteed maximum price (the “Construction Contract”) with Summit dck, LLC (the “General Contractor”) for the construction of the Project. The cost of the work and the General Contractor’s fee is guaranteed by the General Contractor not exceed $8,450,000, subject to additions and deductions by change order as provided in the Construction Contract. Project construction is expected to begin in November 2015, with substantial completion of the Project expected by October 2016. For a more complete description, see APPENDIX A – “DEVELOPMENT AND MARKETING OF THE PROJECT –

Construction Contract.”

CONSTRUCTION MONITOR. The Obligor has engaged zumBrunnen, Inc. (the “Construction Monitor”) to serve as the construction monitor for the Project and to provide independent reports to the Bond Trustee. The Construction Monitor will make monthly site visits during which the Construction Monitor will approve each construction draw. The Construction Monitor’s monthly site visits will be summarized in a monthly report detailing the Project’s construction progress, compliance with plans, specifications, budgets and timelines, construction observations and other pertinent issues or matters related to the Project’s construction. The Construction Monitor’s final report will be issued upon the final construction draw. For a more detailed description of the Construction Monitor’s responsibilities, see APPENDIX A – “Development of the Project – Construction Monitor.”

PLAN OF FINANCING. The proceeds of the Series 2015 Bonds will be loaned by the Issuer to the Obligor pursuant to a Loan Agreement, dated as of October 1, 2015 (the “Loan Agreement”), and will be applied, together with other available funds, to (i) finance the acquisition, construction, improvement and equipping of the Project, (ii) pay the interest accruing on the Series 2015 Bonds for approximately twelve months, (iii) fund a working capital fund, and (iv) pay the costs of issuance. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND

USES OF FUNDS.”

LAND USE RESTRICTION AGREEMENT. The Project will be a “qualified residential rental project” within the meaning of Section 142(d) of the Internal Revenue Code of 1986, as amended (the “Code”). The Obligor will enter into a Land Use Restriction Agreement, dated as of October 1, 2015 (the “Regulatory Agreement”), by and among the Obligor, the Issuer and the Bond Trustee. The Regulatory Agreement requires the Obligor to rent, or make available for rent, at least 20% of the total assisted living units and memory care units (determined both (1) on the basis of treating each living unit and its related shared and common facilities as a “unit” (i.e., 79 units) and (2) on the basis of treating each assisting living bed and/or memory care bed and its related shared and common facilities as a “unit” (i.e., 91 units)) (the “Restricted Living Units”) to tenants whose incomes, in the aggregate for each living unit, do not exceed 50% of the applicable area median family income, as adjusted from time to time and for the number of tenants residing in each Restricted Living Unit as determined by the United States Department of Housing and Urban Development (“HUD”) in accordance with applicable U.S. Treasury Regulations. Consequently, a minimum of 19 of the Restricted Living Units will need to be rented by or made available for tenants whose incomes, in the aggregate for each Restricted Living Unit, do not exceed 50% of the applicable median family income, as adjusted from time to time and for the number of tenants residing in each Restricted Living Unit. According to HUD’s published statistics, (i) the area median family income in Maricopa County, Arizona, in 2015 is $64,000, (ii) 50% of the area median family income in Maricopa County, Arizona, in 2015, as adjusted for an applicable living unit housing one tenant, is $22,400, and (iii) 50% of the area median family income in Maricopa County, Arizona, in 2015, as adjusted for an applicable living unit housing two tenants, is $25,600. The Obligor will agree that, during the term of the Regulatory Agreement, each Restricted Living Unit in the Project will be rented or held for rental to the general public on a first-come, first-served basis, subject to the income-based restrictions described above. For a more complete description, see APPENDIX A hereto, “INCOME LIMITATIONS.”

ADDITIONAL BONDS. Subject to the prior written consent of the Bondholder Representative, the Issuer may issue additional bonds under the Bond Indenture (collectively, the “Additional Bonds”) on conditions described therein. Additional Bonds may be issued to be payable and secured on a parity basis with the Series 2015 Bonds (together with the Senior 2015 Bonds, “Senior Bonds”) or on a subordinate basis with the Series 2015 Bonds (“Subordinate Bonds”) under the Bond Indenture (all Additional Bonds together with the Series 2015 Bonds, the “Bonds”). Payment of Subordinate Bonds would be subordinate to payment of the Senior Bonds.

SECURITY. Pursuant to the Loan Agreement, the Obligor will agree to make loan payments to the Bond Trustee in such amounts as will pay, when due, the principal or redemption price of and interest on the Series 2015 Bonds. Pursuant to the Bond Indenture, the Issuer has assigned to the Bond Trustee all of its right, title and interest in and to, and remedies under, the Loan Agreement, except for certain reserved rights, including rights to reimbursement of expenses and indemnification and to its annual fees.

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The obligation of the Obligor to repay the loan from the Issuer will be evidenced by promissory notes of

the Obligor designated the “Gilbert AL Partners, LP Senior Series 2015A Note” and the “Gilbert AL Partners, LP Senior Series 2015B Note” (collectively, the “Series 2015 Notes”), issued under and entitled to the benefit and security of a Master Trust Indenture, dated as of October 1, 2015, as supplemented by Supplemental Indenture Number 1, dated as of October 1, 2015 (collectively, the “Master Indenture”), between the Obligor (as the initial “Member” of the “Obligated Group” and as the “Obligated Group Representative”) and Wilmington Trust, National Association, as master trustee (the “Master Trustee”). See “SECURITY FOR THE BONDS - The Master Indenture.” See also “PROPOSED FORM OF MASTER TRUST INDENTURE” in APPENDIX C hereto.

The Obligor is, initially, the only Member of the Obligated Group under the Master Indenture, but additional Obligated Group Members may be admitted to the Obligated Group (see “PROPOSED FORM OF MASTER

TRUST INDENTURE – Admission of Obligated Group Members” in APPENDIX C hereto. The Series 2015 Notes will constitute a joint and several general obligation of the Obligated Group Members to pay amounts sufficient to pay principal or redemption price of and interest on the Series 2015 Bonds and other obligations of the Obligor under the Loan Agreement. The Series 2015 Notes will be secured on a parity basis with any other Senior Obligations issued or hereafter issued under the Master Indenture (collectively with the Series 2015 Notes, “Senior Obligations”), by a security interest in the Gross Revenues of the Obligated Group and the funds established under the Master Indenture, and by a deed of trust lien on the Project and personal property of the Obligor (the “Mortgaged Property”) created pursuant to a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing from the Obligated Group Representative to the trustee named therein for the benefit of the Master Trustee (the “Deed of Trust”). The lien and security interests created by the Master Indenture and the Deed of Trust will be subject to additional Permitted Encumbrances, as defined in APPENDIX C.

THE SERIES 2015 BONDS WILL BE THE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER. PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2015 BONDS WILL BE PAYABLE SOLELY FROM THE SOURCES PROVIDED FOR IN THE BOND INDENTURE AND WILL NOT CONSTITUTE A DEBT OF THE ISSUER, THE STATE OF ARIZONA (THE “STATE”) OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF THE CONSTITUTION OR LAWS OF THE STATE AND SHALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF ANY OF THEM. THE ISSUER HAS NO TAXING POWER.

WORKING CAPITAL FUND. The Master Indenture establishes a Working Capital Fund, which is being initially funded in the total amount of $1,662,011. See “ESTIMATED SOURCES AND USES OF FUNDS.” Money in the Working Capital Fund will be available to pay (i) the costs of completion of the Project, but, if and only if, the amounts in the Construction Fund created under the Bond Indenture is completely disbursed, (ii) lease-up and operating expenses of the Project, (iii) the costs of needed repairs to the Project, (iv) the costs of capital improvements to the Project required by law or regulation, (v) judgments against the Obligor, or (vi) amounts due on any Senior Obligations, including without limitation, the Series 2015 Notes. The Working Capital Fund will be closed upon receipt of a financial report required by the Master Indenture indicating that the Debt Service Coverage Ratio for the immediately preceding 12 calendar months was not less than 1.00, and the funds therein will be released to the Obligor as unrestricted cash. See “SECURITY FOR THE BONDS – Working Capital Fund.”

RATE COVENANT. The Master Indenture requires the Obligated Group to calculate the Debt Service Coverage Ratio for each Fiscal Year, based on audited financial statements, in each case commencing the first Fiscal Year following the earlier of (a) Stabilization or (b) the Fiscal Year ending December 31, 2019. The Master Indenture requires the Obligated Group to maintain a Debt Service Coverage Ratio of 1.00 for each Fiscal Year. Failure to maintain a Debt Service Coverage Ratio of at least 1.00 for any Fiscal Year will, at the request of the Bondholder Representative, require a Consultant being engaged. See “SECURITY FOR THE BONDS – Rate Covenant” for a further description of the Debt Service Coverage Ratio covenant, including a description of the actions required to be taken if such covenant is not met. “Stabilization” means the percentage occupancy of the Project’s assisted living beds and memory care beds is equal to or greater than 85%.

INCREASED CONSTRUCTION COST COVENANT. The Obligor covenants that it will not submit or accept any change order or construction change directive or otherwise take any action under the Construction Contract (as defined herein), without the consent of the Bondholder Representative or, if no Bondholder Representative, not less than a majority of the Holders in aggregate principal amount of the Series 2015 Notes, that would increase the guaranteed maximum price of construction of the Project by more than $500,000.

NON-COMPETE COVENANT. Each of the Obligated Group Members covenants that neither it nor any of its general partners, members, managers or other principals will own or operate a competing assisted living or memory care facility within a five mile radius of the Project while the Series 2015 Bonds are outstanding.

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FINANCIAL REPORTING AND CONTINUING DISCLOSURE. The Obligor has agreed to provide

certain periodic reports regarding its financial and operating condition. See “FINANCIAL REPORTING AND

CONTINUING DISCLOSURE” herein.

SALE OR LEASE OF PROPERTY COVENANT. The Obligated Group covenants that it will not sell, lease, donate, transfer or otherwise dispose of Property unless the Obligated Group Representative determines that the Property has been sold, leased, donated, transferred or otherwise disposed of in accordance with the terms of the Master Indenture. See “SECURITY FOR THE BONDS – Sale or Lease of Property Covenant” for a further description of such covenant, including a description of the restrictions related to (i) the sale, lease, donation, transfer or other disposition of the Project while any of the Series 2015 Bonds are Outstanding and (ii) the transfer or other distribution of the Obligated Group’s Cash and Investments to one or more partners, members or shareholders of a Member of the Obligated Group.

MERGER, CONSOLIDATION, SALE OR CONVEYANCE COVENANT. Each Member of the Obligated Group covenants that it will not merge into, or consolidate with, one or more Persons which are not Obligated Group Members, or allow one or more of such Persons to merge into it, or sell or convey all or substantially all of its Property to any Person who is not a Member, unless done in accordance with the terms of the Master Indenture. See “SECURITY FOR THE BONDS – Merger, Consolidation, Sale or Conveyance Covenant” for a further description of such covenant, including a description of the restrictions related to (i) the merger, consolidation, sale or conveyance of the Project while any of the Series 2015 Bonds are Outstanding, (ii) any transfer of any direct or indirect ownership interest in the General Partner and the admittance of any other general partner to be admitted as a partner of the Obligor and (iii) the substitution of the Manager.

MANAGEMENT AND OPERATING AGREEMENTS. The Obligated Group Members will not change the Architect, General Contractor, Construction Monitor, Developer or Manager without the prior written consent of the Bondholder Representative.

APPROVAL OF CONSULTANTS. If at any time the Obligor is required to engage a Consultant under the provisions of the Master Indenture, then upon selecting such Consultant as required under the applicable provision of the Master Indenture, the Obligor will notify the Master Trustee and the Bondholder Representative of such selection. If there is no Bondholder Representative, the Master Trustee will, as soon as practicable, but in no case longer than five Business Days after the receipt of notice, notify the holders of all Obligations outstanding under the Master Indenture of such selection, and the Obligor will be required to select a different Consultant, if the Bondholder Representative or, if there is no Bondholder Representative, the owners of 33.4% or more in aggregate principal amount of Obligations outstanding, have objected to the Consultant selected.

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FEASIBILITY STUDY. Dixon Hughes Goodman LLP (the “Feasibility Consultant”) has prepared its

financial feasibility study, dated September 28, 2015 (the “Feasibility Study”), which is included herein as APPENDIX B. The Feasibility Study includes management’s financial forecast of the Obligor for each of the five years ending December 31, 2019. As stated in the Feasibility Study, the financial forecast presents, to the best of the management’s knowledge and belief, management’s expected results of operations, changes in net assets, cash flows, and financial position for the Obligor. Forecasted results usually differ from actual results because events and circumstances frequently do not occur as expected, and those differences may be material. The Feasibility Study should be read in its entirety, including management’s notes and assumptions set forth therein. See APPENDIX B hereto.

The table below reflects the forecasted Debt Service Coverage Ratio for the fiscal year ending December 31, 2019, and the forecasted Days’ Cash on Hand as of the end of such period. The information in the table below has been extracted from the Feasibility Study included in APPENDIX B hereto.

Forecasted Schedule of Financial Ratios

Debt Service Coverage Ratio

Year Ending December 31,

2019 ($ in thousands)Net Income $ 80 Add:

Depreciation 458 Interest Expense – Series 2015 Bonds 1,175

Income Available for Debt Service [A] 1,713 Maximum Annual Debt Service Requirement [B] 1,312 Debt Service Coverage Ratio(1) [A/B] 1.31x

Days’ Cash on Hand


2019 ($ in thousands)Unrestricted Cash and Investments Available(2) $1,025 Total Operating expenses 4,491 Deduct:

Depreciation (458) Amortization (21)

Expenses, net 4,012 Daily cash operating expenses(3) 11 Days’ Cash on Hand 93

__________________ (1) The Debt Service Coverage Ratio with subordination of management fees would equal 1.50x. (2) For the purpose of the Feasibility Study, no distributions to the partnership of the Obligor have been assumed. (3) Daily operating expenses are equal to annual operating expenses less depreciation and amortization divided by 365 days.

The above table should be considered in conjunction with the entire Feasibility Study, included herein as APPENDIX B, to understand the Obligor’s financial requirements and management’s assumptions upon which the Feasibility Study is based. The realization of any financial forecast depends on future events the occurrence of which cannot be assured. Therefore, the actual results realized may vary from the Feasibility Study. Such variation could be material. See the Feasibility Study in APPENDIX B hereto.

THE TRUSTEE. Wilmington Trust, National Association, in each of its capacities, including, but not limited to Bond Trustee, Master Trustee, bond registrar and paying agent, has not participated in the preparation of this Limited Offering Memorandum and assumes no responsibility for its content.

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CERTAIN BONDHOLDERS’ RISKS. AN INVESTMENT IN THE SERIES 2015 BONDS

INVOLVES A HIGH DEGREE OF RISK. A PROSPECTIVE BONDHOLDER IS ADVISED TO READ THIS ENTIRE LIMITED OFFERING MEMORANDUM, INCLUDING THE APPENDICES HERETO, BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE THE SERIES 2015 BONDS. SPECIAL REFERENCE IS MADE TO THE SECTIONS “SECURITY FOR THE BONDS” AND “CERTAIN BONDHOLDERS’

RISKS” HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2015 BONDS. Careful consideration should be given to these risks and other risks described elsewhere in this Limited Offering Memorandum. Among other things, because the Series 2015 Bonds are payable solely from the revenues and real and personal property of the Obligor and other money pledged to such payment and certain factors (including, but not limited to, the ability of the Obligor to attract residents and enter into Residency Agreements and manage the Project in a manner that maintains high occupancy levels) that may adversely affect the ability of the Obligor to generate sufficient revenues to pay its expenses of operation, including the principal or redemption price of and interest on the Series 2015 Bonds.

FORWARD-LOOKING STATEMENTS. This Limited Offering Memorandum and the Appendices hereto contain forward-looking information within the meaning of the federal securities laws. The forward-looking statements include statements about the Obligor’s outlook for the future, as well as other statements of beliefs, future plans or strategies or anticipated events, and similar expressions concerning matters that are not historical facts. Forward-looking statements and information are subject to many risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. The reader is cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements. The forward-looking statements contained in this Limited Offering Memorandum are applicable only as of their dates, and the Obligor undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2015 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2015 BONDS TO CERTAIN DEALERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE SERIES 2015 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE ON CERTAIN EXEMPTIONS FROM REGISTRATION.

No dealer, broker, salesman or other person has been authorized by the Issuer, the Obligor, DTC or the Underwriter to give any information or to make any representations with respect to this offering, other than those contained in this Limited Offering Memorandum and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2015 Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinions contained herein are subject to change without notice and neither the delivery of this Limited Offering Memorandum 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 the Obligor since the date hereof.

This Limited Offering Memorandum contains a general description of the Series 2015 Bonds, the Issuer, the Obligor, the Project and the plan of financing and sets forth certain provisions of the Bond Indenture, the Loan Agreement, the Deed of Trust and the Master Indenture. The description and summaries herein do not purport to be complete. The Issuer has furnished only the information included herein under the sections entitled “INTRODUCTION – The Issuer, “THE ISSUER,” and “LITIGATION – The Issuer.” The Issuer assumes no responsibility for the accuracy or completeness of any other information in this Limited Offering Memorandum. Persons interested in purchasing the Series 2015 Bonds should review carefully the Appendices, which include copies of such documents.

The order and placement of materials in this Limited Offering Memorandum, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Limited Offering Memorandum, including the Appendices, must be considered in its entirety.

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The Series 2015 Bonds are not rated. Non-rated bonds may have significant credit uncertainties and risks.

As a result, the purchase of the Series 2015 Bonds is suitable only for investors that understand and are able to bear the credit, liquidity and market risks associated with the Series 2015 Bonds. Accordingly, the Series 2015 Bonds are being offered only to (i) “qualified institutional buyers” as defined in Rule 144A of the Securities Act and (ii) “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act.


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TABLE OF CONTENTS

Page Page

INTRODUCTION ........................................................ 1

Notice to Investors .................................................... 1 Purpose of this Limited Offering Memorandum ....... 1 The Issuer .................................................................. 1 Application of the Proceeds ...................................... 1 Security for the Bonds .............................................. 2 Certain Bondholders’ Risks ...................................... 2

THE ISSUER ................................................................ 3 THE OBLIGOR AND THE PROJECT ........................ 3

The Obligor ............................................................... 3 The Project ................................................................ 3 Land Use Restriction Agreement .............................. 4 Construction .............................................................. 4 Construction Monitor ................................................ 4 Development of the Project ...................................... 4 Management of the Project ....................................... 4

PLAN OF FINANCING ............................................... 5

Application of Proceeds ............................................ 5 Equity Contribution .................................................. 5

ESTIMATED SOURCES AND USES OF FUNDS .... 5 ESTIMATED DEBT SERVICE SCHEDULE ............. 6 THE SERIES 2015 BONDS ......................................... 7

General ...................................................................... 7 Series 2015A Bonds .................................................. 8 Series 2015B Bonds .................................................. 8 Redemption Prior to Maturity ................................... 8 Payment of Principal and Interest ........................... 11 Transfers and Exchanges; Persons Treated as

Owners ................................................................ 11

BOOK-ENTRY ONLY SYSTEM ............................. 12

General .................................................................... 12 Limitation ............................................................... 14

SECURITY FOR THE BONDS ................................. 15

General .................................................................... 15 Limited Obligations ................................................ 15 The Master Indenture .............................................. 15 Working Capital Fund............................................. 16 Deed of Trust .......................................................... 16 Revenue Fund ......................................................... 17 Rate Covenant ......................................................... 18 Increased Construction Cost Covenant ................... 19 Sale or Lease of Property Covenant ........................ 19 Merger, Consolidation, Sale or Conveyance

Covenant ............................................................. 20 Non-Compete Covenant .......................................... 22 Approval of Consultants ......................................... 22

CERTAIN BONDHOLDERS’ RISKS ....................... 22

General Risk Factors ............................................... 22 Lack of Marketability for the Series 2015 Bonds ... 22 Impact of Market Turmoil ...................................... 22 Feasibility Study ..................................................... 23 Additions to the Obligated Group ........................... 23 Limited Obligations ................................................ 23

Uncertainty of Revenues ......................................... 23 Construction Risks .................................................. 24 New Construction Requirements ............................. 24 Construction Monitor Approval of Construction

Draws ................................................................... 24 Failure to Achieve or Maintain Occupancy or

Turnover .............................................................. 24 Licensing Delay ....................................................... 25 Additional Indebtedness .......................................... 25 Additional Covenants .............................................. 25 Sale of Personal Residences .................................... 25 Rights of Residents .................................................. 25 Competition ............................................................. 25 Professional Liability Claims and Losses ................ 26 Nursing Shortage ..................................................... 26 Overview of Government Regulation of the

Healthcare Industry .............................................. 26 Federal Legislation and Regulations Governing

the Project ............................................................ 27 Third Party Payments and Managed Care ............... 28 Regulatory Enforcement .......................................... 29 State of Arizona Legislation and Regulations ......... 33 Arizona Conflict of Interest Law ............................. 34 Federal Tax Matters ................................................. 34 Bankruptcy .............................................................. 34 Certain Matters Relating to Enforceability of the

Master Indenture .................................................. 36 Limitation on Security ............................................. 36 Environmental Matters ............................................ 37 Lien for Clean-up of Hazardous Materials .............. 37 Uncertainty of Investment Income .......................... 38 Other Possible Risk Factors ..................................... 38

FINANCIAL REPORTING AND CONTINUING DISCLOSURE ........................................................ 38

Financial Reporting ................................................. 38 Continuing Disclosure ............................................. 39

LITIGATION .............................................................. 41

The Issuer ................................................................ 41 The Obligor ............................................................. 41

THE BONDHOLDER REPRESENTATIVE ............. 41 LEGAL MATTERS .................................................... 41 TAX MATTERS ......................................................... 41

Tax-Exempt Series 2015A Bonds ........................... 41 Taxable Series 2015B Bonds ................................... 44 Changes in Federal and State Tax Law ................... 44

NO RATING ............................................................... 44 UNDERWRITING ...................................................... 44 MISCELLANEOUS ................................................... 45

APPENDIX A – Gilbert AL Partners, LP APPENDIX B – Financial Feasibility Study APPENDIX C – Proposed Forms of Principal Legal

Documents APPENDIX D – Proposed Form of Bond Counsel

Opinion

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LIMITED OFFERING MEMORANDUM relating to



Series 2015A




INTRODUCTION

Notice to Investors

The Series 2015 Bonds are not rated. Non-rated bonds may have significant credit uncertainties and risks. As a result, the purchase of the Series 2015 Bonds is suitable only for investors that understand and are able to bear the credit, liquidity and market risks associated with the Series 2015 Bonds. Accordingly, the Series 2015 Bonds are being offered only to (i) “qualified institutional buyers” as defined in Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”) and (ii) “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act.

Purpose of this Limited Offering Memorandum

This Limited Offering Memorandum, including the cover page and Appendices hereto, is provided to furnish information with respect to the issuance, sale and delivery by Arizona Health Facilities Authority (the “Issuer”) of its $14,510,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”), and its $1,315,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”). The Series 2015 Bonds are being issued in accordance with Title 36, Chapter 4.2 of the Arizona Revised Statutes, as amended (the “Act”), pursuant to an Indenture of Trust, dated as of October 1, 2015 (the “Bond Indenture”), between the Issuer and Wilmington Trust, National Association, as bond trustee (the “Bond Trustee”).

Subject to the prior written consent of the Bondholder Representative, Additional Bonds may be issued to be payable and secured on a parity basis with the Series 2015 Bonds (together with the Senior 2015 Bonds, “Senior Bonds”) or on a subordinate basis with the Series 2015 Bonds (“Subordinate Bonds”) under the Bond Indenture (all Additional Bonds together with the Series 2015 Bonds, the “Bonds”). Payment of Subordinate Bonds would be subordinate to payment of the Senior Bonds. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF

FUNDS.

Certain capitalized terms used herein are defined in “PROPOSED FORMS OF PRINCIPAL LEGAL DOCUMENTS” in APPENDIX C hereto.

The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document for the complete details of its terms and conditions. All statements herein are qualified in their entirety by reference to each document.

The Issuer

The Issuer is a political subdivision and instrumentality of the State of Arizona created pursuant to the Act. See “THE ISSUER” herein.

Application of the Proceeds

The proceeds of the Series 2015 Bonds will be loaned by the Issuer to Gilbert AL Partners, LP (the “Obligor”), pursuant to a Loan Agreement, dated as of October 1, 2015 (the “Loan Agreement”), between the Issuer and the Obligor, and will be applied, together with other available funds, to (i) finance the acquisition, construction, improvement and equipping of an assisted living and memory care facility, consisting of approximately 49 assisted living units and approximately 30 memory care units in an approximately 63,000 square feet, one-story facility, located on the western portion of land at 1505 East Willis Road (which is at the southwest corner of Val Vista Drive and Willis Road) in Gilbert, Arizona (as described below), which will be owned and operated by the Obligor, (ii) pay interest accruing on the Series 2015 Bonds for approximately twelve months, (iii) fund a working capital fund, and (iv) pay the costs of issuance. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF

FUNDS.”

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Security for the Bonds

Pursuant to the Loan Agreement, the Obligor will agree to make loan payments to the Bond Trustee in such amounts as will pay, when due, the principal or redemption price of and interest on the Series 2015 Bonds. Pursuant to the Bond Indenture, the Issuer has assigned to the Bond Trustee all of its right, title and interest in and to, and remedies under, the Loan Agreement, except for certain reserved rights, including rights to reimbursement of expenses and indemnification.

Each obligation of the Obligated Group to repay each loan from the Issuer relating to Senior Bonds will be evidenced by a promissory note of the Obligor (each, a “Senior Obligation”), issued under and entitled to the benefit and security of a Master Trust Indenture, dated as of October 1, 2015, as supplemented by Supplemental Indenture Number 1, dated as of October 1, 2015 (collectively, the “Master Indenture”), between the Obligor (as the initial “Member” of the “Obligated Group” and as the “Obligated Group Representative”) and Wilmington Trust, National Association, as master trustee (the “Master Trustee”). Each obligation of the Obligated Group to repay each loan from the Issuer relating to Subordinate Bonds will be evidenced by a promissory note of the Obligor (each, a “Subordinate Obligation” and together with Senior Obligations, the “Obligations”). See “SECURITY FOR

THE BONDS - The Master Indenture.”

The Senior Obligations of the Obligor to repay the loan from the Issuer will be evidenced by promissory notes of the Obligor designated the “Gilbert AL Partners, LP Senior Series 2015A Note” and the “Gilbert AL Partners, LP Senior Series 2015B Note” (collectively, the “Series 2015 Notes”). The Obligor is, initially, the only Member of the Obligated Group under the Master Indenture, but additional Obligated Group Members may be admitted to the Obligated Group (see APPENDIX C – “PROPOSED FORM OF MASTER TRUST INDENTURE – Admission of Obligated Group Members”). The Series 2015 Notes will constitute joint and several general obligations of the Obligated Group Members to pay amounts sufficient to pay principal or redemption price of and interest on the Series 2015 Bonds and remaining obligations of the Obligor under the Loan Agreement.

The Series 2015 Notes will be secured on a parity basis with any other Senior Obligations hereafter issued under the Master Indenture by a security interest in the Gross Revenues of the Obligated Group and the funds established under the Master Indenture, and by a deed of trust lien on the Project and personal property of the Obligor (the “Mortgaged Property”) created pursuant to a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing from the Obligated Group Representative to the trustee named therein for the benefit of the Master Trustee (the “Deed of Trust”). The liens and security interests created by the Master Indenture and the Deed of Trust are subject to certain Permitted Encumbrances, as defined in APPENDIX C.


Certain Bondholders’ Risks

AN INVESTMENT IN THE SERIES 2015 BONDS INVOLVES A HIGH DEGREE OF RISK. A PROSPECTIVE BONDHOLDER IS ADVISED TO READ THIS ENTIRE LIMITED OFFERING MEMORANDUM, INCLUDING THE APPENDICES HERETO, BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE SERIES 2015 BONDS. SPECIAL REFERENCE IS MADE TO THE SECTIONS “SECURITY FOR THE BONDS” AND “CERTAIN BONDHOLDERS’ RISKS” HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2015 BONDS.

THE SERIES 2015 BONDS ARE BEING OFFERED ONLY TO “ACCREDITED INVESTORS,” AS DEFINED IN RULE 501(A) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT, AND

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TO “QUALIFIED INSTITUTIONAL BUYERS,” AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT.

THE ISSUER

The Issuer is a political subdivision and instrumentality of the State of Arizona (the “State”) established pursuant to the provisions of the Constitution of the State and Title 36, Chapter 4.2, Arizona Revised Statutes, as amended (the “Act”). The Issuer is governed by a Board of Directors, consisting of seven members who are appointed by the Governor of the State. Pursuant to the Act, the Issuer is empowered to issue bonds for the purposes, among other things, of providing financing and refinancing for the acquisition, construction, equipping and improvement of certain health care facilities.

The Issuer has no taxing power. The Issuer does not have the power to pledge the general credit or taxing power of the State or of any political subdivision thereof. The Series 2015A Bonds will not be obligations, general or otherwise, of the State, will not constitute debt of the State, and will not be enforceable against the State.

The Series 2015 Bonds will be special, limited obligations of the Issuer, payable solely from the income, revenues and security pledged by or on behalf of the Obligated Group or held in trust pursuant to the Bond Indenture or the Master Indenture. The Issuer is not pledging any of its assets to secure payment of the Series 2015 Bonds and the Issuer has no obligation nor expectation of making such assets subject to the lien of the Bond Indenture.

The Issuer does not and will not in the future monitor the financial condition of the Obligated Group or the operation of the Project, or otherwise monitor payment of the Series 2015 Bonds or compliance with the documents relating thereto. The responsibility for the operation of the Project will rest entirely with the Obligated Group and not with the Issuer. The Issuer will rely entirely upon the Bond Trustee, the Master Trustee and the Obligated Group to carry out their respective responsibilities under the Master Indenture, the Bond Indenture and the Loan Agreement and with respect to the Project.

The Issuer does not employ staff to carry out its limited functions, except for an executive director and a general counsel. Neither the Issuer nor its staff have furnished, reviewed, investigated or verified the information contained in this Limited Offering Memorandum other than the information contained in this section and the information contained under the headings “INTRODUCTION – The Issuer” and “LITIGATION – The Issuer.” The Issuer has determined that no financial or operating data concerning the Issuer is material to any decision to purchase, hold or sell the Series 2015 Bonds and the Issuer will not provide any such information. The Issuer has not, and will not, undertake any responsibilities to provide continuing disclosure with respect to the Series 2015 Bonds or the security therefor, and the Issuer will have no liability to holders of the Series 2015 Bonds with respect to any such disclosures.

THE OBLIGOR AND THE PROJECT

The Obligor

Gilbert AL Partners, LP is a Texas limited partnership that will own and operate a senior care community to be known as “Mariposa Point of Gilbert” (the “Community”) to be built and located on approximately 5.1 acres in the Town of Gilbert, Arizona, and will include an assisted living facility and memory care facility, consisting of approximately 49 assisted living units, which will include approximately 57 licensed assisted living beds, and approximately 30 memory care units, which will include approximately 34 licensed memory care beds in an approximately 63,000 square feet, one-story facility (the “Project”).

The Obligor, as the initial sole Obligated Group Member (as defined herein), is the only entity obligated to pay debt service on the Series 2015 Bonds.

The Project

The Obligor will use the proceeds of the Series 2015 Bonds and other legally available moneys to finance the costs the development of the Project. See APPENDIX A – “THE PROJECT” for a further description.

Further information regarding the Obligor and the Project is included in APPENDIX A hereto – “GILBERT

AL PARTNERS, LP.”

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Land Use Restriction Agreement

The Project will be a “qualified residential rental project” within the meaning of Section 142(d) of the Internal Revenue Code of 1986, as amended (the “Code”). The Obligor will enter into a Land Use Restriction Agreement, dated as of October 1, 2015 (the “Regulatory Agreement”), by and among the Obligor, the Issuer and the Bond Trustee. The Regulatory Agreement requires the Obligor to rent, or make available for rent, at least 20% of the total assisted living units and memory care units (determined both (1) on the basis of treating each living unit and its related shared and common facilities as a “unit” (i.e., 79 units) and (2) on the basis of treating each assisting living bed and/or memory care bed and its related shared and common facilities as a “unit” (i.e., 91 units)) (the “Restricted Living Units”) to tenants whose incomes, in the aggregate for each living unit, do not exceed 50% of the applicable area median family income, as adjusted from time to time and for the number of tenants residing in each Restricted Living Unit as determined by the United States Department of Housing and Urban Development (“HUD”) in accordance with applicable U.S. Treasury Regulations. Consequently, a minimum of 19 of the Restricted Living Units will need to be rented by or made available for tenants whose incomes, in the aggregate for each Restricted Living Unit, do not exceed 50% of the applicable median family income, as adjusted from time to time and for the number of tenants residing in each Restricted Living Unit. According to HUD’s published statistics, (i) the area median family income in Maricopa County, Arizona, in 2015 is $64,000, (ii) 50% of the area median family income in Maricopa County, Arizona, in 2015, as adjusted for an applicable living unit housing one tenant, is $22,400, and (iii) 50% of the area median family income in Maricopa County, Arizona, in 2015, as adjusted for an applicable living unit housing two tenants, is $25,600. The Obligor will agree that, during the term of the Regulatory Agreement, each Restricted Living Unit in the Project will be rented or held for rental to the general public on a first-come, first-served basis, subject to the income-based restrictions described above. For a more complete description, see APPENDIX A hereto, “INCOME LIMITATIONS.”

Construction

The Obligor has entered into a construction contract for a guaranteed maximum price (the “Construction Contract”) with Summit dck, LLC (the “General Contractor”) for the construction of the Project, which is contingent upon receiving notice to proceed. The cost of the work and the General Contractor’s fee is guaranteed by the General Contractor not to exceed $8,450,000 (the “GMP”), subject to additions and deductions by change order as provided in the Construction Contract. Project construction is expected to begin in November 2015, with substantial completion of the Project expected by October 2016. For a more complete description, see APPENDIX A

– “DEVELOPMENT AND MARKETING OF THE PROJECT – Construction Contract.”

Construction Monitor

The Obligor has engaged zumBrunnen, Inc. (the “Construction Monitor”) to serve as the construction monitor for the Project and to provide independent reports to the Bond Trustee. The Construction Monitor will make site visits on a regular basis, but not more than one per month, will review and approve each construction draw, and will report to the Obligor and the Bondholder Representative identifying scheduling milestone adherence and appropriate allocation of funds. For a more detailed description of the Construction Monitor’s responsibilities, see APPENDIX A – “DEVELOPMENT AND MARKETING OF THE PROJECT – Construction Monitor.”

Development of the Project

The Obligor has entered into a development agreement, as amended (the “Development Agreement”), with McFarlin Group, LLC, a Texas limited liability company (the “Developer”), to provide project management and financial services for the Project. The Developer, formed in January 2008, has senior living experience that includes the planning, financing and development of over $1 billion in total project costs over the last 15 years and the successful development of over 4,900 senior living units. The Developer shares certain common ownership interests with the Obligor.

The Obligor will pay the Developer a development fee of $788,467, payable as follows: (i) 75% will be paid on a monthly installment basis in twelve equal monthly installments of $49,279 during construction, and (ii) the remaining 25% will be deferred without interest until the percentage occupancy of the assisted living units and the memory care units in the Project is equal to or greater than 85%.

Management of the Project

The Obligor has entered into a Management Agreement, as amended, with Surpass Senior Living, LLC, a Texas limited liability company (the “Manager”), to be effective as of the date of delivery of the Series 2015 Bonds (the “Management Agreement”), to manage all aspects of the operations of the Project. The Manager’s staff has

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over fifty years of combined senior living management experience. The Manager shares certain common ownership interests with the Obligor. See APPENDIX A hereto, “MANAGEMENT OF THE PROJECT.”

Payment of the Start-Up Fee and the Management Fee is 100% subordinate to the payment of debt service on the Series 2015 Bonds.

PLAN OF FINANCING

Application of Proceeds

The proceeds of the Series 2015 Bonds will be loaned by the Issuer to the Obligor pursuant to the Loan Agreement, and will be applied, together with other available funds, to: (i) finance the costs of acquisition, construction, improvement and equipping of the Project; (ii) pay interest accruing on the Series 2015 Bonds for approximately twelve months, (iii) fund a working capital fund, and (iv) pay the costs of issuance. See “ESTIMATED

SOURCES AND USES OF FUNDS.”

Equity Contribution

Upon the issuance of the Series 2015 Bonds, the total equity contribution of the Obligor is expected to equal $1,900,000, consisting of (i) $237,989 related to costs of issuance of the Series 2015 Bonds, and (ii) $1,662,011 for deposit to the Working Capital Fund. See “ESTIMATED SOURCES AND USES OF FUNDS.”

ESTIMATED SOURCES AND USES OF FUNDS

The following is the estimated sources and uses of funds in connection with the issuance of the Series 2015 Bonds:

Series 2015A Bonds

Series 2015B Bonds

Equity Contribution Total

Sources of Funds Series 2015A Bonds .................................... $14,510,000 - - $14,510,000Series 2015B Bonds .................................... - $1,315,000 - $1,315,000Equity Contribution - - $1,900,000 1,900,000Total Sources of Funds ............................. $14,510,000 $1,315,000 $1,900,000 $17,725,000

Uses of Funds Project Fund for Project(1) ........................... $13,634,884 $540,000 - $14,174,884Capitalized Interest(2) .................................. 587,621 106,369 - 693,990Working Capital .......................................... - - $1,662,011 1,662,011Costs of Issuance(3) ..................................... 287,495 668,631 237,989 1,194,115Total Uses of Funds ................................... $14,510,000 $1,315,000 $1,900,000 $17,725,000

______________________________ (1) Construction costs, contractor fees, site work, and other costs related to the construction of the Project is assumed to be approximately

$9,361,000, based on a GMP contract total of $8,450,000 provided by the General Contractor. The General Contractor’s contingencies totaling $39,000 have been included within the GMP.

(2) Includes capitalized interest for approximately 12 months related to the Series 2015 Bonds. (3) Includes Underwriter’s fees, fees and expenses of the Bond Trustee and Master Trustee, legal, accounting and other professional fees,

printing and other miscellaneous expenses relating to the issuance and sale of the Series 2015 Bonds.


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ESTIMATED DEBT SERVICE SCHEDULE

The following table sets forth the debt service schedule for the Series 2015 Bonds:

Period Ending

Series 2015A Bonds Series 2015B Bonds

Total(1) Principal Interest Principal Interest

12/31/2015 - - - - - 12/31/2016 - $ 538,482 - $ 97,602 $ 636,084 12/31/2017 - 936,399 - 105,200 1,041,599 12/31/2018 - 1,051,975 - 105,200 1,157,175 12/31/2019 $ 5,000 1,051,975 $150,000 105,200 1,312,175 12/31/2020 5,000 1,051,613 160,000 93,200 1,309,813 12/31/2021 5,000 1,051,250 170,000 80,400 1,306,650 12/31/2022 5,000 1,050,888 185,000 66,800 1,307,688 12/31/2023 5,000 1,050,525 200,000 52,000 1,307,525 12/31/2024 5,000 1,050,163 215,000 36,000 1,306,163 12/31/2025 5,000 1,049,800 235,000 18,800 1,308,600 12/31/2026 220,000 1,049,438 - - 1,269,438 12/31/2027 235,000 1,033,488 - - 1,268,488 12/31/2028 255,000 1,016,450 - - 1,271,450 12/31/2029 275,000 997,963 - - 1,272,963 12/31/2030 290,000 978,025 - - 1,268,025 12/31/2031 315,000 957,000 - - 1,272,000 12/31/2032 335,000 934,163 - - 1,269,163 12/31/2033 360,000 909,875 - - 1,269,875 12/31/2034 385,000 883,775 - - 1,268,775 12/31/2035 415,000 855,863 - - 1,270,863 12/31/2036 445,000 825,775 - - 1,270,775 12/31/2037 475,000 793,513 - - 1,268,513 12/31/2038 510,000 759,075 - - 1,269,075 12/31/2039 550,000 722,100 - - 1,272,100 12/31/2040 590,000 682,225 - - 1,272,225 12/31/2041 630,000 639,450 - - 1,269,450 12/31/2042 675,000 593,775 - - 1,268,775 12/31/2043 725,000 544,838 - - 1,269,838 12/31/2044 780,000 492,275 - - 1,272,275 12/31/2045 835,000 435,725 - - 1,270,725 12/31/2046 895,000 375,188 - - 1,270,188 12/31/2047 960,000 310,300 - - 1,270,300 12/31/2048 1,030,000 240,700 - - 1,270,700 12/31/2049 1,105,000 166,025 - - 1,271,025 12/31/2050 1,185,000 85,913 - - 1,270,913

Total $14,510,000 $27,165,987 $1,315,000 $760,402 $43,751,389 ______________________________ (1) Totals may not add up due to rounding.


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THE SERIES 2015 BONDS

General

The Series 2015 Bonds will be issued only in fully registered form without coupons in the denominations of $25,000 and any integral multiple of $5,000 in excess thereof; provided, however, any Beneficial Holder of Series 2015A Bonds or Series 2015B Bonds shall be allowed to purchase, transfer or sell such Bonds in multiples of $5,000 as long as, upon completion of such purchase, transfer or sale, the Beneficial Holder owns at least $25,000 of principal amount of Series 2015A Bonds or Series 2015B Bonds, as applicable. The Series 2015 Bonds will be dated as of October 27, 2015, and will accrue interest from the date of their delivery, except as otherwise provided in the Bond Indenture. The Series 2015 Bonds will bear interest based on a 360-day year of twelve 30-day months payable quarterly on each January 1, April 1, July 1 and October 1, beginning January 1, 2016 (each, an “Interest Payment Date”), until maturity or prior redemption. The Series 2015 Bonds will mature on the dates and bear interest at the rates set forth on the inside cover hereof and as described below.

The Series 2015 Bonds provide that no recourse under any obligation, covenant or agreement contained in the Bond Indenture, or in any Series 2015 Bond, or under any judgment obtained against the Issuer or by the enforcement of any assessment or by any legal or equitable proceeding by virtue of any constitution or statute or otherwise or under any circumstances, under or independent of the Bond Indenture, will be had against any past, present or future officer, director, agent or employee of the Issuer. None of the officers, directors, agents or employees of the Issuer, past, present or future, will be personally liable under the Series 2015 Bonds or the Bond Indenture, or be subject to any personal liability by reason of the issuance of the Series 2015 Bonds or the Bond Indenture, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability being released and waived as a condition of and in consideration for the execution of the Bond Indenture and the issuance of the Series 2015 Bonds.

So long as DTC acts as securities depository for the Series 2015 Bonds, as described under “BOOK-ENTRY

ONLY SYSTEM” herein, and except as otherwise described under “TAX MATTERS” herein, all references herein to “Owner,” “owner,” “Holder” or “holder” of any Series 2015 Bonds or “Bondowner,” “Bondholder,” “bondowner” or “bondholder” are deemed to refer to Cede & Co., as nominee for DTC, and not to Participants, Indirect Participants or Beneficial Owners (as defined herein).


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Series 2015A Bonds

The Series 2015A Bonds shall bear interest from the most recent interest payment date to which interest has been paid or provided for, or, if no interest has been paid, from the Delivery Date of such Series 2015A Bonds. The Series 2015A Bonds shall bear interest on the basis of a 360 day year composed of twelve 30 day months payable on each January 1, April 1, July 1 and October 1, beginning January 1, 2016, at the rates per annum and shall mature on October 1 in the year and principal amount as follows:

Year Principal Amount

Interest Rate Through and Including

December 27, 2016

Interest Rate From and After

December 28, 2016

2050 $14,510,000 4.000% 7.250%

Series 2015B Bonds

The Series 2015B Bonds shall bear interest from the most recent interest payment date to which interest has been paid or provided for, or if no interest has been paid, from the Delivery Date of the Series 2015B Bonds. The Series 2015B Bonds shall bear interest on the basis of a 360 day year composed of twelve 30 day months payable each January 1, April 1, July 1 and October 1, beginning January 1, 2016, at the rate per annum and shall mature on October 1 in the year and principal amount as follows:

Year Principal Amount Interest Rate

2025 $1,315,000 8.000%

Redemption Prior to Maturity

Optional Redemption of Series 2015 Bonds. The Series 2015A Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole at any time between December 28, 2016, and January 27, 2017, inclusive, at the redemption price equal to the principal amount of the Series 2015A Bonds, together with accrued interest to the date of redemption, without premium.

The Series 2015 Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor, in whole or in part, on the following dates at the following redemption prices (expressed as percentages of the principal amount of such Series 2015 Bonds to be redeemed) together with accrued interest to the date of redemption:

Redemption Dates Redemption Prices

October 1, 2017 – September 30, 2019 106% October 1, 2019 – September 30, 2020 105% October 1, 2020 – September 30, 2021 104% October 1, 2021 – September 30, 2022 103% October 1, 2022 – September 30, 2023 102% October 1, 2023 – September 30, 2024 101% October 1, 2024 – and thereafter 100%


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Mandatory Sinking Fund Redemption of Series 2015A Bonds. The Series 2015A Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, on October 1, in each of the years and amounts as follows:

Series 2015A Bonds Maturing October 1, 2050

Year Amount Year Amount

2019 $ 5,000 2035 $ 415,000 2020 5,000 2036 445,000 2021 5,000 2037 475,000 2022 5,000 2038 510,000 2023 5,000 2039 550,000 2024 5,000 2040 590,000 2025 5,000 2041 630,000 2026 220,000 2042 675,000 2027 235,000 2043 725,000 2028 255,000 2044 780,000 2029 275,000 2045 835,000 2030 290,000 2046 895,000 2031 315,000 2047 960,000 2032 335,000 2048 1,030,000 2033 360,000 2049 1,105,000 2034 385,000 2050* 1,185,000

______________________________ * Remaining due at stated maturity.

Mandatory Sinking Fund Redemption of Series 2015B Bonds. The Series 2015B Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, on October 1, in each of the years and amounts as follows:

Series 2015B Bonds Maturing October 1, 2025


2019 $150,000 2023 $200,000 2020 160,000 2024 215,000 2021 170,000 2025* 235,000 2022 185,000

______________________________ * Remaining due at stated maturity.

Credits Against Mandatory Sinking Fund Redemption Payments. At the option of the Obligor to be exercised by delivery of a written certificate to the Bond Trustee on or before the forty-fifth day next preceding any sinking fund redemption date, the Obligor may (i) deliver to the Bond Trustee for cancellation Series 2015 Bonds or portions thereof of the same series and maturity, in an aggregate principal amount desired by the Obligor, or (ii) specify a principal amount of Series 2015 Bonds or portions thereof of the same series and maturity, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Bond Trustee at the request of the Issuer, upon the direction of the Obligor, and not previously applied as a credit against any sinking fund redemption obligation. Any such Series 2015 Bonds will be credited against the next succeeding or any other sinking fund redemption date designated in writing by the Obligor.

Extraordinary Redemption. The Series 2015 Bonds will be subject to extraordinary redemption by the Issuer at the direction of the Obligor prior to their scheduled maturities, in whole or in part at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date on any date following the occurrence of any of the following events:

(a) in case of damage or destruction to, or condemnation of, any property, plant, and equipment of any Obligated Group Member, to the extent that the net proceeds of insurance or condemnation award exceed the Threshold Amount and the Obligor has determined not to use such net proceeds or award to repair, rebuild or replace such property, plant, and equipment; or

(b) as a result of any changes in the Constitution or laws of the State of Arizona or of the United States of America or of any legislative, executive, or administrative action (whether state or federal)

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or of any final decree, judgment, or order of any court or administrative body (whether state or federal), the obligations of the Obligor under the Loan Agreement have become, as established by an Opinion of Counsel, void or unenforceable in each case in any material respect in accordance with the intent and purpose of the parties as expressed in the Loan Agreement.

Special Mandatory Redemption of Series 2015A Bonds. The Series 2015A Bonds are subject to mandatory redemption in whole, or in part at any time if such partial redemption will preserve the exemption from federal income taxation of interest on the remaining Series 2015A Bonds Outstanding, at a redemption price equal to the principal amount thereof together with unpaid interest accrued to the date fixed for redemption, and without premium, if (i) a final decree or judgment of any federal court, in which the Obligor participates to the extent it deems sufficient, or (ii) a final action by the Internal Revenue Service (the “IRS”), in proceedings in which the Obligor participates to the extent it deems sufficient, determines that the interest paid or payable on any such Series 2015A Bonds to other than, as provided in the Code, a “substantial user” of the Project or a “related person” is or was includable in the gross income of the owner thereof for federal income tax purposes under the Code, as a result of the failure by the Obligor to observe or perform any covenant, condition, or agreement on its part to be observed or performed under the Loan Agreement or the inaccuracy of any representation by the Obligor under the Loan Agreement; provided, however, that no decree or judgment by any court or action by the IRS shall be considered final unless the Registered Owner involved in such proceeding or action (A) gives the Obligor and the Bond Trustee prompt written notice of the commencement thereof and (B), if the Obligor agrees to pay all expenses in connection therewith and to indemnify such Registered Owner against all liabilities in connection therewith, offers the Obligor the opportunity to control the defense thereof. Any such redemption shall be made on a date determined by the Obligor not more than 180 days after the time of such final decree, judgment or action.

Partial Redemption. Unless otherwise specifically stated in this paragraph, if fewer than all of the Outstanding Series 2015 Bonds that are stated to mature on different dates are called for redemption at one time, those Bonds which are called shall be called in inverse order of the maturities of the Bonds of that Series to be redeemed. If fewer than all of the Bonds of a single maturity are to be redeemed, the selection of Bonds to be redeemed, or portions thereof, in amounts equal to $5,000 or any integral multiples thereof, shall be made either (a) by lot by the Bond Trustee in any manner which the Bond Trustee may determine or (b) by pro ration calculated using the each individual holder’s total principal amount of Series 2015 Bonds held divided into the total principal amount of the Series 2015 Bonds multiplied by the total amount of funds utilized for the partial redemption, with the method of redemption to be determined by the Bondholder Representative or if none exists then by the holders of at least 662/3% of the aggregate principal amount of the Series 2015 Bonds then outstanding; provided that the Bond Trustee shall select Series 2015 Bonds for redemption so as to assure that after such redemption no Registered Owner shall retain Series 2015 Bonds in an aggregate amount less than $25,000; and provided further that, if less than all of an Outstanding Bond of one maturity in a Book-Entry System is to be called for redemption, the Bond Trustee shall give notice to the Depository or the nominee of the Depository that is the Registered Owner of such Bond, and the selection of the beneficial ownership interest in that Bond to be redeemed shall be by lot or pro ration calculated using each individual holder's total principal amount of Series 2015 Bonds held divided into the total principal amount of the Series 2015 Bonds multiplied by the total amount of funds utilized for the partial redemption, with the method of redemption to be determined by the Bondholder Representative or if none exists then by the holders of at least 662/3% of the aggregate principal amount of the Series 2015 Bonds then outstanding. In the case of a partial redemption of Bonds each unit of face value of principal thereof equal to $5,000 (each such $5,000 unit is hereinafter referred to as a “Unit”) shall be treated as though it were a separate Bond in the amount of such Unit. If it is determined that one or more, but not all of the Units represented by a Bond are to be called for redemption, then upon notice of redemption of Unit or Units of Bonds, the Registered Owner of that Bond shall surrender the Bond to the Bond Trustee (a) for payment of the redemption price of the Unit or Units of Bonds called for redemption (including without limitation, the interest accrued to the date fixed for redemption and any premium); and (b) for issuance, without charge to the Registered Owner thereof, of a new Bond or Bonds of the same Series, aggregating a principal amount equal to the unmatured and unredeemed portion of, and bearing interest at the same rate and maturing on the same date as, the Bond surrendered. The Obligor shall provide the Bond Trustee with a payment schedule upon any partial redemption pursuant to the Bond Indenture.

Notice of Redemption. In case of every redemption, the Bond Trustee shall cause notice of such redemption to be given by mailing by first class mail, postage prepaid, a copy of the redemption notice to the Bondholder Representative and the owners of the Series 2015 Bonds designated for redemption in whole or in part, at their addresses as the same shall last appear upon the registration books, in each case not more than 60 nor less than 20 days prior to the redemption date. In addition, notice of redemption shall be sent by first class or registered mail, return receipt requested, or by overnight delivery service (1) contemporaneously with such mailing: (A) to any owner of $1,000,000 or more in principal amount of Series 2015 Bonds and (B) to at least one information service

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of national recognition that disseminates redemption information with respect to municipal bonds and (C) to the Issuer; and (2) to any securities depository registered as such pursuant to the Securities Exchange Act of 1934, as amended, that is an owner of Series 2015 Bonds to be redeemed so that such notice is received at least two days prior to such mailing date. An additional notice of redemption shall be given by certified mail, postage prepaid, mailed not less than 60 nor more than 90 days after the redemption date to any owner of Series 2015 Bonds selected for redemption that has not surrendered the Series 2015 Bonds called for redemption, at the address as the same shall last appear upon the registration books. Any notice of redemption is required to contain the information specified in the Bond Indenture, including any condition to such redemption.

The failure to give any such notice, or any defect therein, will not affect the validity of any proceedings for the redemption of such Series 2015 Bonds.

Purchase in Lieu of Redemption. The Series 2015 Bonds are subject to purchase in lieu of redemption by the Obligor prior to their respective maturity dates at any time in whole or in part, if the following conditions are satisfied:

(i) The Obligor and the Bondholder Representative negotiate and agree upon a purchase price that is communicated in writing to the Bond Trustee;

(ii) Upon written notice to the Bond Trustee as described in (i) above, the Obligor shall direct the Bond Trustee to purchase certain Series 2015 Bonds and will provide funds to the Bond Trustee for deposit in the Bond Fund in the amount necessary to pay the purchase price of the Series 2015 Bonds selected by the Bondholder Representative in excess of that required to fully satisfy the next scheduled interest and principal payments due on the selected Series 2015 Bonds, and will provide an amount the Bond Trustee may require to cover its accrued and anticipated fees and expenses;

(iii) The Bond Trustee confirms that the amount provided for by the Obligor pursuant to (ii) above is sufficient to warrant such purchase at the purchase price agreed to by the Obligor and the Bondholder Representative pursuant to (i) above; and

(iv) The Beneficial Holders of the Series 2015 Bonds shall severally indemnify and hold harmless the Bond Trustee from and against any and all liability, claims, or losses arising out of, by virtue of, or in connection with, the tender of bonds, up to the amount of the value of the Series 2015 Bonds tendered, except in the case of negligence, willful misconduct, or bad faith on the part of the Bond Trustee.

As Series 2015 Bonds are purchased pursuant to this provision, such purchase of Series 2015 Bonds will be considered to have satisfied, in whole or in part, the next succeeding scheduled sinking fund payment requirements as set forth in this Bond Indenture. Once purchased such Series 2015 Bonds shall be delivered to the Bond Trustee and cancelled.

Payment of Principal and Interest

The principal or redemption price of the Series 2015 Bonds is payable in lawful money of the United States of America at the payment office of the Bond Trustee, or at the designated corporate trust office of its successor, upon presentation and surrender of the Series 2015 Bonds. Payment of interest on each Series 2015 Bond will be made to the person in whose name such Series 2015 Bond is registered on the bond register at the close of business on the applicable Record Date and is required to be paid (i) by check mailed to such registered owner on the applicable Interest Payment Date at such owner’s address as it appears on the bond register or (ii) as to any registered owner of $1,000,000 or more in aggregate principal amount of Series 2015 Bonds who so elects, by wire transfer of funds. In the event of default in the payment of interest due on such Interest Payment Date, defaulted interest will be payable to the person in whose name such Series 2015 Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Bond Trustee to the registered owners of Series 2015 Bonds not less than ten days preceding such Special Record Date.

Transfers and Exchanges; Persons Treated as Owners

The Series 2015 Bonds are exchangeable for an equal aggregate principal amount of fully registered Series 2015 Bonds of the same maturity and series and in authorized denominations at the principal office of the Bond Trustee but only in the manner and subject to the limitations and on payment of the charges provided in the Bond Indenture.

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The Series 2015 Bonds are fully transferable by the registered owner in person or by his or her duly authorized attorney on the registration books kept at the principal office of the Bond Trustee upon surrender of the Series 2015 Bond together with a duly executed written instrument of transfer satisfactory to the Bond Trustee. Upon such transfer a new fully registered Series 2015 Bond of authorized denomination or denominations for the same aggregate principal amount, series and maturity will be issued to the transferee in exchange therefor, all upon payment of the charges and subject to the terms and conditions set forth in the Bond Indenture; provided, however, any Beneficial Holder of Series 2015A Bonds or Series 2015B Bonds shall be allowed to purchase, transfer or sell such Bonds in multiples of $5,000 as long as, upon completion of such purchase, transfer or sale, the Beneficial Holder owns at least $25,000 of principal amount of Series 2015A Bonds or Series 2015B Bonds, as applicable.

The Bond Trustee will not be required to transfer or exchange any Series 2015 Bond after the mailing of notice calling such Series 2015 Bond or any portion thereof for redemption has been given, nor during the period beginning at the opening of business 15 days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing except for Bondholders of $1,000,000 or more in aggregate principal amount of Series 2015 Bonds.

As to any Series 2015 Bond, the person in whose name such Series 2015 Bond is registered will be deemed and regarded as the absolute owner thereof for all purposes, and payment of principal of or interest on any Series 2015 Bond will be made only to or upon the written order of the registered owner thereof or his legal representative. All such payments will be valid and effectual to satisfy and discharge the liability upon such Series 2015 Bond to the extent of the sum or sums paid.

Notwithstanding the foregoing, the Series 2015 Bonds may only be transferred, in whole or in part, in connection with a sale to or through a broker/dealer only to (i) any Accredited Investor (within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended) or Qualified Institutional Buyer (within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended), (ii) any bank, savings institution or insurance company (whether acting in a trustee or custodial capacity for any Accredited Investor or Qualified Institutional Buyer or on its own behalf), or (iii) any trust or custodial arrangement each of the beneficial owners of which is an Accredited Investor or Qualified Institution Buyer. An executed Certificate of Bondholder Representative must be provided in connection with investment in the Series 2015 Bonds by any prospective investors or their authorized representative prior to such investment in the initial sale and delivery of the Series 2015 Bonds.

BOOK-ENTRY ONLY SYSTEM

This section describes how ownership of the Series 2015 Bonds is to be transferred and how the principal of and interest on the Series 2015 Bonds are to be paid to and credited by DTC while the Series 2015 Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Limited Offering Memorandum. The Obligor and the Underwriter believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof.

The Obligor cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Series 2015 Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Series 2015 Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Limited Offering Memorandum. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.

DTC will act as securities depository for the Series 2015 Bonds. The Series 2015 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of each series of the Series 2015 Bonds, in the aggregate principal amount of each maturity of such series, and will be deposited with DTC.

General

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code,

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and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments, (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of certificated securities. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC rules applicable to its Participants are on file with the United States Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Series 2015 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2015 Bonds on DTC’s records. The ownership interest of each actual purchaser of Series 2015 Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Series 2015 Bonds representing their ownership interests in Series 2015 Bonds, except in the event that use of the book-entry system for the Series 2015 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2015 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2015 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2015 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2015 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2015 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2015 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2015 Bond documents. For example, Beneficial Owners of Series 2015 Bonds may wish to ascertain that the nominee holding the Series 2015 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Trustee and request that copies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2015 Bonds within a maturity of a series are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity of such series to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2015 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2015 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy).

Principal, redemption price and interest payments on the Series 2015 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the Bond Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by

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Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Bond Trustee, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Series 2015 Bonds at any time by giving reasonable notice to the Issuer or the Bond Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2015 Bond certificates are required to be printed and delivered to DTC Participants or the Beneficial Owners, as the case may be.

Limitation

Under the Bond Indenture, payments made by the Bond Trustee to DTC or its nominee shall satisfy the Issuer’s obligations under the Bond Indenture and the Obligor’s obligations under the Loan Agreement to the extent of the payments so made.

None of the Issuer, the Obligor or the Bond Trustee shall have any responsibility or obligation with respect to:

(i) the accuracy of the records of DTC, its nominee or any Direct Participant or Indirect Participant with respect to any beneficial ownership interest in any Series 2015 Bonds;

(ii) the delivery to any Direct Participant or Indirect Participant or any other Person, other than a Holder, as shown on the registration books maintained by the Bond Trustee, of any notice with respect to any Series 2015 Bond including, without limitation, any notice of redemption with respect to any Series 2015 Bond;

(iii) the payment to any Direct Participant or Indirect Participant or any other Person, other than a Holder, as shown on the registration books maintained by the Bond Trustee, of any amount with respect to the principal or redemption price of, or interest on, any Series 2015 Bond; or

(iv) any consent given by DTC or its nominee as registered owner.

Prior to any discontinuation of the book-entry only system hereinabove described, the Issuer, the Obligor and the Bond Trustee may treat Cede & Co. (or such other nominee of DTC) as, and deem Cede & Co. (or such other nominee) to be, the absolute Holder of the Series 2015 Bonds for all purposes whatsoever, including, without limitation:

(i) the payment of the principal or redemption or purchase price of and interest on and the Series 2015 Bonds;

(ii) giving notices of redemption and other matters with respect to the Series 2015 Bonds;

(iii) registering transfers with respect to the Series 2015 Bonds; and

(iv) the selection of Series 2015 Bonds for redemption.

The Issuer and the Bond Trustee cannot give any assurances that DTC or the Participants will distribute payments of the principal or redemption price of and interest on the Series 2015 Bonds, paid to DTC or its nominee, as the registered owner of the Series 2015 Bonds, or any redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in the manner described in this Limited Offering Memorandum.

So long as Cede & Co. is the registered owner of the Series 2015 Bonds, as nominee of DTC, references in this Limited Offering Memorandum to the Holders of the Series 2015 Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners, except as otherwise described under “TAX MATTERS,” and Cede & Co. will be treated as the only Bondholder of Series 2015 Bonds for all purposes under the Bond Indenture.

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The Issuer may enter into amendments to the agreement with DTC or successor agreements with a successor securities depository relating to the book-entry system to be maintained with respect to the Series 2015 Bonds without the consent of Beneficial Owners or Bondholders.

SECURITY FOR THE BONDS

General

The Series 2015 Bonds will be issued under the Bond Indenture, pursuant to which the Issuer will assign to the Bond Trustee (1) the Notes, (2) certain rights of the Issuer under the Loan Agreement, (3) the funds and accounts established under the Bond Indenture, but excluding the Rebate Fund, and (4) such other property as may from time to time be pledged to the Bond Trustee as additional security for such Bonds or which may come into possession of the Bond Trustee pursuant to the terms of the Loan Agreement or the Notes.

The proceeds of the Series 2015 Bonds will be loaned to the Obligor pursuant to the Loan Agreement. Under the Loan Agreement, the Obligor is required duly and punctually to pay the principal or redemption price of, and interest, on the Notes and to make certain other payments. See “PROPOSED FORM OF LOAN AGREEMENT” in APPENDIX C hereto.

The obligation of the Obligor to repay that loan will be evidenced by the Notes of the Obligor issued pursuant to, and entitled to the benefit and security of, the Master Indenture, and to the security of the Deed of Trust.

Limited Obligations

The Series 2015 Bonds and the interest thereon are limited obligations of the Issuer, payable by the Issuer solely from and secured exclusively by certain payments to be made by the Obligor under the Loan Agreement and certain other funds held by the Bond Trustee under the Bond Indenture and not from any other fund or source of the Issuer.


The Master Indenture

The Master Indenture is intended to provide assurance for the repayment of obligations entitled to its benefits by imposing financial and operating covenants on the Obligor and any other future Obligated Group Members, and by the appointment of the Master Trustee to enforce such covenants for the benefit of the holders of such obligations. The Series 2015 Notes are the only Obligations currently entitled to the benefits of the Master Indenture.

Pursuant to the Master Indenture, the Obligor and any future Obligated Group Members have pledged and granted to the Master Trustee (a) a security interest in all revenue, accounts receivable, and Gross Revenues of the Obligated Group Members, with certain limited exceptions, (b) a security interest in the amounts on deposit in any fund or account established under the Master Indenture, and (c) a security interest in any other property from time to time subjected to the lien of the Master Indenture (the “Trust Estate”). The lien and security interests created by the Master Indenture are subject to Permitted Encumbrances, as defined in APPENDIX C hereto. See “PROPOSED FORM

OF MASTER TRUST INDENTURE” in APPENDIX C hereto.

The Series 2015 Notes will be secured on a parity basis with any other Senior Obligations by the lien and security interests created by the Master Indenture. Subordinate Obligations may also be issued under the Master Indenture and, if so issued, will be secured by the lien and security interests created by the Master Indenture on a

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subordinate basis to the Senior Obligations. See “PROPOSED FORM OF MASTER TRUST INDENTURE” in APPENDIX C hereto.

The Series 2015 Notes constitute the joint and several obligations of each Obligated Group Member. Currently, only the Obligor and the Master Trustee are parties to the Master Indenture and the Obligor is the only Obligated Group Member. The Obligor and each Obligated Group Member admitted in the future will be jointly and severally liable for the payment for all Obligations entitled to the benefits of the Master Indenture and will be subject to the financial and operating covenants thereunder. See “PROPOSED FORM OF MASTER TRUST INDENTURE - Admission of Obligated Group Members” and “- Withdrawal of Obligated Group Members” in APPENDIX C for a description of the limitations on admission and release of Obligated Group Members.

In addition to the covenants described below, the Master Indenture contains additional covenants relating to, among others, the maintenance of each Obligated Group Member’s property and existence, the maintenance of certain levels of insurance coverage, the incurrence of additional debt, the sale or lease of certain property, and permitted liens. For a description of these and other covenants, see “PROPOSED FORM OF MASTER TRUST

INDENTURE” in APPENDIX C hereto.

Working Capital Fund

The Master Trustee will establish and maintain the Working Capital Fund. The Master Trustee will deposit into the Working Capital Fund (a) at closing, the amount of $1,662,011, and (b) any amounts transferred by the Obligor to the Master Trustee with instructions to deposit such amounts into the Working Capital Fund.

Amounts on deposit in the Working Capital Fund will be disbursed by the Master Trustee upon receipt of an Officer’s Certificate of the Obligor to the effect that (i) such moneys will be used to pay (A) the costs of completion of the Project, but, if and only if, the amounts in the Construction Fund created under the Bond Indenture is completely disbursed, (B) lease-up and operating expenses of the Project, (C) the costs of needed repairs to the Project, (D) the costs of capital improvements to the Project required by law or regulation, (E) judgments against the Obligor, or (F) amounts due on any Senior Obligations, including without limitation, the Series 2015 Notes, (ii) such moneys are anticipated to be expended in the calendar month following the month in which such Officer’s Certificate is submitted, together with an itemized budget describing the uses for which such moneys are needed and the amount needed for each such use and (iii) the Obligor has insufficient operating funds to make payments for such uses.

Notwithstanding the foregoing, the Working Capital Fund will be closed upon receipt of a financial report required by the Master Indenture indicating that the Debt Service Coverage Ratio for the immediately preceding 12 calendar months was not less than 1.00, and the funds therein will be released to the Obligor as unrestricted cash.

Deed of Trust

Pursuant to the Deed of Trust, the Obligor, as the sole initial Obligated Group Member, has granted a lien and security interest to the Deed of Trust trustee for the benefit of the Master Trustee, in the Mortgaged Property. The Deed of Trust secures payment of all amounts due under the Series 2015 Notes and any future Obligations by granting a first mortgage lien on the Mortgaged Property, subject to Permitted Encumbrances as described in the Master Indenture, which includes the following:

Land. All of the real estate and premises described or referred to in the Deed of Trust, which comprises the real property upon which the Project is located (the “Land”);

Improvements. Any and all buildings, structures, fixtures and improvements, including, without limitation, the fixtures, attachments and other articles attached to such buildings, structures and improvements on the Land (collectively, and together with the Land, the “Real Property”).

Equipment. All goods, furniture, furnishings, equipment, supplies and other tangible personal property owned by the Obligor, whether in the possession of the Obligor, warehousemen, bailees or any other person (collectively, the “Equipment”);

Rents and Derivative Interests. All rents, issues, profits, revenues, royalties, income and other benefits derived from the Real Property, the Intangibles (as defined below) and the Equipment and the operation thereof, and any and all entitlements, warrants, gifts, donations, grants, and bequests, to the extent allowed by the terms thereof, regardless of the source; all estate, right, title and interest of the Obligor in and to all leases and subleases covering the Real Property or any portion thereof now or hereafter existing or entered into, including, without limitation, all

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cash and security deposits, advance rentals and deposits or payments of similar nature; all right, title and interest of the Obligor in and to all options to purchase or lease the Real Property or any portion thereof or interest therein, and any greater estate therein now owned or hereafter acquired; all interests, estate or other claims, both in law and in equity, which the Obligor now has or may hereafter acquire in the Real Property or any portion thereof or interest therein; all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, and all tenements, hereditaments and appurtenances thereof and thereto, all right, title and interest of the Obligor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Real Property and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Real Property (all of the foregoing in this paragraph being, collectively, the “Derivative Interests”);

Intangibles. All of the Obligor’s interest in all existing and future accounts, contract rights, general intangibles, files, books of account, plans, specifications, agreements, permits, licenses and certificates necessary or desirable in connection with the acquisition, ownership, leasing, construction, operation, furnishing, equipping, servicing or management of the Real Property (whether now existing or entered into or obtained after the date hereof), all existing and future names under or by which the Real Property or any portion thereof may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all existing and future telephone numbers and listings, advertising and marketing materials, trademarks, tradenames, licenses, patents, copyrights and good will in any way relating to the Real Property or any portion thereof (collectively, the “Intangibles”);

Claims and Awards. All the estate, interest, right, title, other claim or demand, including, without limitation, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which the Obligor now has or may hereafter acquire in the Real Property, the Equipment, the Derivative Interests, or the Intangibles and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole or any part of the Real Property, the Equipment, the Derivative Interests, or the Intangibles including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages (collectively, the “Claims and Awards”); and

Proceeds. All of the rents, revenues, issues, profits, products and proceeds of any and all of the foregoing. See “PROPOSED FORM OF DEED OF TRUST” in APPENDIX C hereto.

Chicago Title Agency, Inc., will issue a lender’s title insurance policy that it will underwrite in favor of the Master Trustee. The policy insures against loss from any defects in the Obligor’s title to the Mortgaged Property or encumbrances (other than utility easements) on the Mortgaged Property, up to the principal amount of the Series 2015 Bonds, subject to the conditions, exclusions and exceptions described in the policy.

Revenue Fund

The Obligated Group has agreed to deposit all Gross Revenues into a Deposit Account subject to the Control Agreement. Except as provided in the next paragraph, on or before the last Business Day during each calendar month on which payment of principal of, premium if any, or interest on any Obligations are due (including installments of any such payments), the Master Trustee shall, in accordance with the Control Agreement, direct the Depository Bank to (i) transfer to the Master Trustee from the Deposit Account for deposit to the Revenue Fund an amount equal to the total amount of principal of, premium if any, and interest due on the Obligations due by such date (less any credits received against such amount) and (ii) transfer the balance in the Deposit Account on such date, if any, to an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto. The Master Trustee shall use the amounts deposited into the Revenue Fund as described in this paragraph to pay, on behalf of the Obligated Group, the payments of principal of, premium, if any, and interest on the Obligations then due. The Master Trustee shall transfer any amounts remaining in the Revenue Fund after all payments required by the preceding sentence during each calendar month have been made, within two Business Days, to an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto.

Upon (a) the occurrence of an Event of Default under the Master Indenture due to failure to pay any Senior Obligations when due for a period of five days, or (b) the occurrence of an Event of Default under the Master Indenture due to failure to pay any Subordinate Obligations when due for a period of five days, but only if no Senior Obligations are then Outstanding, in each case with the consent of or direction of the Bondholder Representative, the Master Trustee shall, in accordance with the Control Agreement, direct the Depository Bank to transfer to the Master Trustee for deposit to the Revenue Fund all amounts in the Deposit Account (except to the extent otherwise provided by or inconsistent with any instrument creating any Permitted Encumbrances) beginning on the first

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Business Day following such five-day period and on the last Business Day of each month thereafter, until no such default then exists. On the last Business Day of each calendar month in which any amounts from the Deposit Account referenced above have been deposited into the Revenue Fund, the Master Trustee will withdraw and pay or deposit from the amounts on deposit in the Revenue Fund the following amounts in the order indicated, unless, as otherwise directed by the Bondholder Representative (but not with respect to paragraph First, or the fees, expenses and advances of the Issuer, required indemnities, and the reasonable fees and expenses of the Issuer’s counsel and advisors):

First, to the payment of all amounts due the Master Trustee under the Master Indenture;

Second, to the payment of all amounts due the Issuer under the Loan Agreement, any Related Loan Agreement entered into with the Issuer in connection with a series of Related Senior Bonds, or the Bond Indenture, including, without limitation, the fees, expenses and advances of the Issuer, required indemnities and the reasonable fees and expenses of the Issuer’s counsel and advisors;

Third, to the payment of the amounts then due and unpaid upon Senior Obligations ratably, without preference or priority of any kind, according to the amounts due and payable on such Senior Obligations;

Fourth, to an operating account designated by the Obligated Group Representative (which account will not be subject to the lien of the Master Indenture), the amount necessary to pay the Expenses due or expected to become due in the following month as set forth in the then-current annual budget;

Fifth, to restore any deficiency in any debt service reserve fund established for Related Bonds secured by a Senior Obligation under each Related Bond Indenture for such Related Bonds on a pro rata basis;

Sixth, to the payment of the amounts then due and unpaid upon the Subordinate Obligations, ratably, without preference or priority of any kind, according to the amounts due and payable on such Subordinate Obligations;

Seventh, to restore any deficiency in any debt service reserve fund established for Related Bonds secured by a Subordinate Obligation under each Related Bond Indenture for such Related Bonds on a pro rata basis;

Eighth, to the payment of the amounts then due and unpaid upon any Indebtedness not constituting or secured by Obligations, in respect of which or for the benefit of which such money has been collected; and

Ninth, To an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto.

Rate Covenant

The Obligated Group Representative is required to calculate the Debt Service Coverage Ratio of the Obligated Group for each Fiscal Year, based on audited financial statements, commencing with the Initial Testing Period, and will deliver a copy of such calculation to each Required Information Recipient. “Initial Testing Period” means the Fiscal Year following the earlier of (a) Stabilization or (b) the Fiscal Year ending December 31, 2019. “Stabilization” means the percentage occupancy of the Project’s assisted living beds and memory care beds is equal to or greater than 85%.

If, for any Fiscal Year, the Debt Service Coverage Ratio of the Obligated Group is less than 1.00, the Obligated Group Representative is required, if requested by the Bondholder Representative, to engage a Consultant within 30 days following the calculation to make recommendations with respect to the rates, fees and charges of the Members and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to generate a Debt Service Coverage Ratio of at least 1.00 for the following Fiscal Year.

Within 60 days of engaging any such Consultant in accordance with the procedures set forth in the Master Indenture, the Obligated Group Representative is required to cause a copy of the Consultant’s report and recommendations, if any, to be filed with each Member and each Required Information Recipient. Each Member is required to follow each recommendation of the Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Obligated Group Representative) and permitted by law.

Unless otherwise directed by the Bondholder Representative, if the Obligated Group fails to achieve a Debt Service Coverage Ratio of 1.00 for any Fiscal Year commencing with the Initial Testing Period, such failure will not constitute an Event of Default under the Master Indenture if (i) the Obligated Group takes all action necessary to

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comply with the procedures set forth above for preparing a report and adopting a plan and (ii) follows each recommendation contained in such report to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Obligated Group Representative) and permitted by law. See “PROPOSED FORM OF MASTER

TRUST INDENTURE – Rates and Charges” in APPENDIX C hereto.

Increased Construction Cost Covenant

The Obligor covenants that it will not submit or accept any change order or construction change directive or otherwise take any action under the Construction Contract (as defined herein), without the consent of the Bondholder Representative or, if there is no Bondholder Representative, the owners of more than 50% in aggregate principal amount of the Series 2015 Notes, that would increase the GMP by more than $500,000.

Sale or Lease of Property Covenant

Subject to the restrictions set forth below, each Member of the Obligated Group agrees that it will not sell, lease, donate, transfer or otherwise dispose (including without limitation any involuntary disposition) of Property (either real or personal property, including Cash and Investments) unless the Obligated Group Representative determines that the Property has been sold, leased, donated, transferred or otherwise disposed of in one or more of the following transfers or other dispositions of Property:

(1) in return for other Property of equal or greater value and usefulness;

(2) in the ordinary course of business upon fair and reasonable terms;

(3) to any Person, if prior to such sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate of a Member stating that, in the judgment of the signer, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property;

(4) upon fair and reasonable terms no less favorable to the Member than would be obtained in a comparable arm’s length transaction;

(5) (A) the Property sold, leased, donated, transferred or otherwise disposed of does not, for any consecutive 12 month period, exceed 6% of the total Book Value or, at the option of the Obligated Group Representative, the Current Value of all Property of the Obligated Group, (B) the Debt Service Coverage Ratio was not less than 1.30:1 for the last Fiscal Year for which audited financial statements have been delivered to the Master Trustee, and (C) as of the end of the last fiscal quarter for which financial statements have been delivered to the Master Trustee as required under the Master Indenture, the Obligated Group had not less than 130 Days Cash on Hand after giving effect to the transaction. If the Debt Service Coverage Ratio as calculated above is not less than 1.30:1, the foregoing percentage of the total Book Value or Current Value may be increased as follows under the following conditions: (i) to 8%, if Days Cash on Hand would not be less than 150 after the effect of such sale, lease, donation, transfer or other disposition of assets; or (ii) to 9.5%, if Days Cash on Hand would not be less than 180 after the effect of such sale, lease, donation, transfer or other disposition of assets; (iii) or to 12%, if Days Cash on Hand would not be less than 210 after the effect of such sale, lease, donation, transfer or other disposition of assets; or

(6) to any Person if such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on the Obligations.

For avoidance of doubt, it is understood that these provisions in this section do not prohibit: (i) any transfer of cash by a Member in payment of any of its obligations, indebtedness and liabilities, the incurrence of which obligation, indebtedness or liability did not or would not, either immediately or with the giving of notice, the passage of time or both, result in the occurrence of an Event of Default under the Master Indenture; (ii) investments in marketable securities; (iii) the making of loans to residents for their financial assistance; or (iv) the expenditure by the Obligated Group of the proceeds of gifts, grants, bequests, donations or contributions heretofore or hereafter made which are designated by the donor at the time made for certain specific purposes other than described in clauses (i), (ii) and (iii) of this sentence.

For purposes of the provisions in this section, payments by the Obligated Group of any development, marketing, operating, or other subordinated fees that have been deferred from the year in which they were originally due as a result of subordination will not be treated as a disposition of Property.

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In connection with any sale, lease, donation, transfer or other disposition of Property, to the extent the Member of the Obligated Group receives Property in return for such sale, lease or disposition, the Property which is sold, leased or disposed of shall be treated, for purposes of the provisions in this section, as having been transferred in satisfaction of the provisions of Subsection (1) above to the extent of the fair market value of the Property received by the Member of the Obligated Group. The Member shall be required, however, to satisfy the conditions contained in one of the other provisions of this section with respect to the remaining value of such Property in excess of the fair market value of the Property received by the Member in return therefor prior to any such sale, lease or other disposition.

Each Member further agrees that it will not sell, lease, donate, transfer or otherwise dispose of Property (A) which could reasonably be expected at the time of such sale, lease, donation or disposition to result in a reduction of the Debt Service Coverage Ratio for the Obligated Group such that the Master Trustee would be obligated to require the Obligated Group to retain a Consultant pursuant to the applicable terms of the Master Indenture, or (B) if a Consultant has been retained in the circumstances described in in the applicable provisions of the Master Indenture, such action, in the opinion of such Consultant, will have an adverse effect on the Income Available for Debt Service of the Obligated Group.

The rendering of any service, the making of any loan or gift, the extension of any credit or any other transaction, with any Affiliate shall be permitted if there is compliance with any of subsections (1) through (6) above or if such transaction is pursuant to the reasonable requirements of such Member’s activities and upon fair and reasonable terms no less favorable to it than would obtain in a comparable arm’s length transaction with a person not an Affiliate.

Notwithstanding anything in this section to the contrary, so long as any of the Series 2015 Notes are Outstanding, no Member may sell, lease, donate, transfer or otherwise dispose of all or any portion of the Project without the prior written consent of the Bondholder Representative, or if there is no Bondholder Representative, the prior unanimous written consent of the Holders of the Series 2015 Notes.

Merger, Consolidation, Sale or Conveyance Covenant

Subject to the restrictions set forth in the final paragraph of this section, each Member agrees that it will not merge into, or consolidate with, one or more Persons which are not Members, or allow one or more of such Persons to merge into it, or sell or convey all or substantially all of its Property to any Person who is not a Member, unless consented to by the Bondholder Representative and unless:

(1) Any successor entity to such Member (including without limitation any purchaser of all or substantially all the Property of such Member) is an entity organized and existing under the laws of the United States of America or a state thereof and shall execute and deliver to the Master Trustee and the Bondholder Representative an appropriate instrument, satisfactory to the Master Trustee and the Bondholder Representative, containing the agreement of such successor entity to assume, jointly and severally, the due and punctual payment of the principal of, premium, if any, and interest on all Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of the Master Indenture to be kept and performed by such Member;

(2) Immediately after such merger or consolidation, or such sale or conveyance, no Member would be in default in the performance or observance of any covenant or condition of any Related Loan Agreement, any Deed of Trust or the Master Indenture;

(3) The Master Trustee and the Bondholder Representative receive an Officer’s Certificate showing that (A) immediately after such merger, consolidation, sale or conveyance, the Debt Service Coverage Ratio of the Obligated Group for the most recent Fiscal Year for which financial statements that have been reported upon by independent certified public accountants are available would be not less than 1.00 or that such Debt Service Coverage Ratio of the Obligated Group is greater than the Debt Service Coverage Ratio of the Obligated Group was for such Fiscal Year prior to such merger or consolidation, sale or conveyance; provided that in lieu of such Officer’s Certificate, the Obligated Group Representative may deliver to the Master Trustee a Feasibility Report or Officer’s Certificate necessary to support the incurrence of one dollar of Long-Term Indebtedness pursuant to the applicable provisions of the Master Indenture, after giving effect to such merger or consolidation;

(4) If all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then-existing law the consummation of such merger, consolidation, sale or conveyance would not

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adversely affect the validity of such Related Bonds or any exemption from federal or state income taxation of interest payable on such Related Bonds otherwise entitled to such exemption; and

(5) The Master Trustee receives a duly executed and delivered Deed of Trust (or amendment to an existing Deed of Trust) encumbering the Property, Plant and Equipment of the successor entity, for the benefit of the Master Trustee, subject only to Permitted Encumbrances.

Notwithstanding the foregoing in this section, so long as any of the Series 2015 Notes are Outstanding, no Member may merge into, or consolidate with, one or more Persons which are not Members, or allow one or more of such Persons to merge into it, or sell or convey the Project to any Person who is not a Member without the prior written consent of the Bondholder Representative, or if there is no Bondholder Representative, the prior unanimous written consent of the Holders of the Series 2015 Notes. Furthermore, so long as any of the Series 2015 Notes are Outstanding, the Obligor shall not:

(1) permit any transfer, including, without limitation, any pledge, hypothecation or encumbrance, of any direct or indirect ownership interest in the General Partner nor permit any other general partner to be admitted as a partner of the Obligor without the prior written consent of the Bondholder Representative, or if there is no Bondholder Representative, the prior written consent of the Holders of a majority of the aggregate Outstanding principal amount of the Series 2015 Notes, and

(2) cause the Project to be managed by any Person other than Surpass Senior Living, LLC, except (A) in any event and at any time the substitute manager and management agreement are approved by the prior written consent of the Bondholder Representative, or if there is no Bondholder Representative, the prior written consent of the Holders of a majority of the aggregate Outstanding principal amount of the Series 2015 Notes, or (B) in the event the Manager is terminated pursuant to the terms of the Management Agreement, in which case the Obligated Group Representative shall (y) appoint a successor Manager (the “Acting Manager”), which shall be the acting Manager on a temporary basis for a period of 75 days (the “Temporary Period”) and notify the Master Trustee and the Bondholder Representative of the termination of the Manager and the appointment of the Acting Manager and (z) if there is no Bondholder Representative, immediately direct the Master Trustee to send written notice to the Holders of the Series 2015 Notes notifying such Holders of the termination of the Manager and the appointment of the Acting Manager. The Acting Manager shall become the successor Manager at the conclusion of the Temporary Period, unless the Bondholder Representative, or if there is no Bondholder Representative, the Holders of a majority of the aggregate Outstanding principal amount of the Series 2015 Notes object to the Acting Manager continuing as the successor Manager on or before the date 60 days after the Bondholder Representative receives notice of the same or, if there is no Bondholder Representative, the Master Trustee delivers the notice described in the Master Indenture. If the Bondholder Representative or if the Holders of a majority of the aggregate Outstanding principal amount of the Series 2015 Notes, as applicable, object to the Acting Manager continuing as the successor Manager, then the Obligated Group Representative shall repeat the procedure set forth in this section until such time as a successor Manager is appointed in accordance with this section.

In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for its predecessor, with the same effect as if it had been named herein as such Member. Each successor, assignee, surviving, resulting or transferee entity of a Member must agree to become, and satisfy the conditions described in in the Master Indenture, a Member of the Obligated Group prior to any such succession, assignment or other change in such Member’s status. Any successor entity to such Member thereupon may cause to be signed and may issue in its own name Obligations under the Master Indenture and the predecessor entity shall be released from its obligations under the Master Indenture and under any Obligations, if such predecessor entity shall have conveyed all Property owned by it (or all such Property shall be deemed conveyed by operation of law) to such successor entity. All Obligations so issued by such successor entity under the Master Indenture shall in all respects have the same legal rank and benefit under the Master Indenture as Obligations theretofore or thereafter issued in accordance with the terms of the Master Indenture as though all of such Obligations had been issued under the Master Indenture by such prior Member without any such consolidation, merger, sale or conveyance having occurred.

In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate.

The Master Trustee may rely upon an opinion of Independent Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of this section and that it is proper for the Master Trustee under the provisions of the Master Indenture to join in the execution of any instrument required to be executed and delivered by the Master Trustee.

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Non-Compete Covenant

Each of the Obligated Group Members covenants that none of it or any of its general partners, members, managers or other principals will own or operate a competing assisted living or memory care facility within a five mile radius of the Project while the Series 2015 Bonds are Outstanding.

Approval of Consultants

If at any time the Obligated Group Members are required to engage a Consultant under the provisions of the Master Indenture, then upon selecting such Consultant as required under the applicable provision of the Master Indenture, the Obligated Group Representative will notify the Master Trustee and the Bondholder Representative of such selection. If there is no Bondholder Representative, the Master Trustee will, as soon as practicable, but in no case longer than five Business Days after the receipt of notice, notify the holders of all Obligations outstanding under the Master Indenture of such selection, and the Obligated Group Representative will be required to select a different Consultant if the Bondholder Representative, or if there is no Bondholder Representative, the owners of 33.4% or more in aggregate principal amount of the owners of the Outstanding Senior Obligations (or, if no Senior Obligations are Outstanding, the Subordinate Obligations), have objected to the Consultant selected.

CERTAIN BONDHOLDERS’ RISKS

General Risk Factors

The Series 2015 Bonds are special and limited obligations of the Issuer, payable solely from and secured exclusively by the funds pledged thereto, including the payments to be made by the Obligor under the Master Indenture.

A BONDHOLDER IS ADVISED TO READ THE ENTIRE LIMITED OFFERING MEMORANDUM, INCLUDING THE APPENDICES HERETO, AND SPECIAL REFERENCE IS MADE TO THE SECTION “SECURITY FOR THE BONDS” AND THIS SECTION FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2015 BONDS.

Certain risks are inherent in the successful development and operation of facilities such as the Project. Such risks should be considered in evaluating the Project’s ability to generate sufficient revenues to pay principal or redemption price of, purchase price, and interest on the Series 2015 Bonds when due. This section discusses some of these risks but is not intended to be a comprehensive listing of all risks associated with the operation of the Project or the payment of the Series 2015 Bonds.

Lack of Marketability for the Series 2015 Bonds

The Series 2015 Bonds are not rated. When any Bondholder attempts to resell its Series 2015 Bonds, this absence of a rating could adversely affect the market price and marketability thereof. Although the Underwriter intends, but is not obligated, to make a market for the Series 2015 Bonds, there can be no assurance that there will be a secondary market for the Series 2015 Bonds, and the absence of such a market for the Series 2015 Bonds could result in investors not being able to resell the Series 2015 Bonds should they need to do so, or wish to do so.

Impact of Market Turmoil

The current economic turmoil has had and will continue to have negative repercussions upon the United States and global economies. To date, this turmoil has particularly impacted the real estate and the financial sector, prompting a number of banks and other financial institutions to seek additional capital, to merge, and, in some cases, to cease operating. These events collectively have led to a scarcity of credit, lack of confidence in the financial sector, volatility in the real estate and financial markets, fluctuations in interest rates, reduced economic activity, increased business failures and increased consumer and business bankruptcies. This could affect the market and demand for the Series 2015 Bonds.

Current market conditions have adversely affected investment earnings and the net worth of prospective residents. As described above, these conditions and any continued decline in general economic conditions or conditions in the market area of the Project could adversely affect the ability of prospective residents to sell their homes and result in a decline in the net worth and future investment earnings of prospective residents. These factors could render prospective residents unable or unwilling to pay the Monthly Fees required for residency in the Project.

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Feasibility Study

The financial forecast contained in the Financial Feasibility Study included in APPENDIX B hereto (the “Feasibility Study”) is based upon assumptions made by management of the Obligor. As stated in the Feasibility Study, there will usually be differences between the forecasted 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 five years ending December 31, 2019, and consequently does not cover the whole period during which the Series 2015 Bonds may be outstanding. See the Feasibility Study included herein as APPENDIX B, which should be read in its entirety, including management’s notes and assumptions set forth therein.

BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE BY MANAGEMENT, NO GUARANTEE CAN BE MADE THAT THE FINANCIAL FORECAST IN THE 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 REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN THE RETIREMENT LIVING AND HEALTH CARE INDUSTRIES, AND GENERAL ECONOMIC CONDITIONS.

Additions to the Obligated Group

The Obligor is, initially, the only Member of the Obligated Group. Upon satisfaction of certain conditions in the Master Indenture, other entities can become Obligated Group Members. See “THE MASTER INDENTURE – Admission of Obligated Group Members” in APPENDIX C hereto. Management of the Obligor currently has no plans to add additional Members to the Obligated Group. However, if and when new Members are added, the Obligated Group’s financial situation and operations will be altered from that of the Obligor alone.

Limited Obligations

The Series 2015 Bonds and the interest thereon are special, limited obligations of the Issuer, payable by the Issuer solely from and secured exclusively by certain payments to be made by the Obligor under the Loan Agreement and certain other funds held by the Bond Trustee under the Bond Indenture and by the Master Trustee under the Master Indenture and not from any other fund or source of the Issuer. The Series 2015 Bonds, including the principal, premium, if any, and interest thereon, are special, limited obligations of the issuer payable exclusively from the Trust Estate (as defined herein). The Series 2015 Bonds do not constitute a debt or a loan of credit or a pledge of the full faith and credit or taxing power of the Issuer, the State of Arizona, or any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and will never constitute or give rise to a pecuniary liability of the Issuer or the State of Arizona. The Series 2015 Bonds will not directly, indirectly or contingently obligate or otherwise constitute a general obligation of or a charge against the credit of the Issuer, but will be special, limited obligations of the Issuer payable solely from the sources described in the Bond Indenture. The Issuer has no taxing power.

Uncertainty of Revenues

The Obligor has no income-producing assets other than the Mortgaged Property and is not expected to have any revenues except those derived from operations of the Project, contributions and income from investments.

As noted elsewhere, except to the extent that the holders receive, under certain circumstances, proceeds of insurance, sale or condemnation awards, the Series 2015 Bonds will be payable solely from payments or prepayments to be made by the Obligor under the Loan Agreement and by the Obligor and any other future Obligated Group Members on the related Series 2015 Notes. The ability of the Obligor to make payments under the Loan Agreement and the ability of the Obligor and any other future Obligated Group Members to make payments on the Series 2015 Notes is dependent upon the generation by the Obligor of revenues in the amounts necessary for the Obligor to pay the principal or redemption price of and interest on the Series 2015 Bonds as well as other operating and capital expenses. The realization of future revenues and expenses are subject to, among other things, the capabilities of the management of the Obligor, government regulation and future economic (including but not limited to availability of credit) and other conditions that are unpredictable and that may affect revenues and payment of principal of and interest on the Series 2015 Bonds. No representation or assurance can be made that revenues will be realized by the Obligor in amounts sufficient to make the required payments with respect to debt service on the Series 2015 Bonds.

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Construction Risks

Construction of the Project is subject to the usual risks associated with construction projects including, but not limited to, delays in issuance of required building permits or other necessary approvals or permits, strikes, labor disputes, shortages of materials and/or labor, transportation delays, restrictions related to endangered species, adverse weather conditions, fire, casualties, acts of God, war, acts of public enemies, terrorism, orders of any kind of federal, state, county, city or local government, insurrections, riots, adverse conditions not reasonably anticipated or other causes beyond the control of the Obligor or its contractors. Such events could result in delayed marketing, substantial completion, and/or occupancy of the Project and thus the revenue flow therefrom. In addition, the marketing, substantial completion and occupancy of the Project may be extended by reason of changes authorized by the Obligor, delays due to acts or neglect of the Obligor, or by independent contractors employed by the Obligor. Cost overruns could also result in the Obligor not having sufficient money to complete construction of the Project, thereby materially affecting the receipt of revenues needed to pay the Series 2015 Bonds.

The building permits and the minor subdivision plat are expected to be approved on or about October 23, 2015. An unexpected delay in the approval of the building permit or the minor subdivision plat may delay the expected construction schedule and opening of the Project. Management does not currently anticipate such a delay to occur.

It is anticipated that the proceeds from the sale of the Series 2015 Bonds, including other available funds, together with anticipated investment earnings thereon will be sufficient to complete the construction and equipping of the Project based upon the fixed price obtained from the contractor therefor. The Obligor and the General Contractor have entered into the Construction Contract for the construction of the Project under which the General Contractor has agreed to complete the construction and site work for the Project for the GMP.

Although it is expected that the General Contractor’s work will be completed at or below the GMP, it is possible that the cost of construction could be adjusted to a level in excess of the GMP. The GMP may be increased or decreased by written change orders authorized by the Obligor, or the General Contractor could be entitled to an increase in the GMP under certain circumstances, such as unexpected subsurface conditions or delays. In addition, the costs of construction may increase to an amount in excess of the GMP as the result of certain insured casualties or suspension of the work due to certain governmental actions.

The Construction Contract may be terminated by the General Contractor upon the cessation of work due to certain governmental actions or upon failure of the Obligor to make required progress payments. The Construction Contract may be terminated by the Obligor upon the bankruptcy or insolvency of the General Contractor, upon the persistent disregard of applicable laws or substantial violation of the Construction Contract and related documents by the General Contractor, or for convenience. Moreover, to maintain the Construction Contract and GMP, the Obligor must issue a notice to proceed. See APPENDIX A “DEVELOPMENT AND MARKETING OF THE PROJECT –Construction Contract.” If such contingencies are not met, the GMP may increase.

New Construction Requirements

All construction of assisted living facilities must be done in accordance with minimum licensing requirements. Each facility must meet the applicable provisions of the Life Safety Code of the National Fire Protection Association.

Construction Monitor Approval of Construction Draws

The ability of the Obligor to receive disbursement from the Project Account of the Construction Fund held under the Bond Indenture is subject to approval by the Construction Monitor. If the conditions to receipt of disbursements are not met, the Construction Monitor may temporarily suspend construction draws. A temporary suspension of funding might cause delay in completion and related cost overruns. Proceeds remaining in the Construction Fund together with other funds held under the Bond Indenture and the Master Indenture would not be sufficient to pay the principal of the Series 2015 Bonds upon acceleration.

Failure to Achieve or Maintain Occupancy or Turnover

The economic feasibility of the Project depends in large part upon the ability of the Obligor to attract sufficient numbers of residents to the Community and to achieve and maintain substantial occupancy throughout the term of the Series 2015 Bonds. This depends to some extent on factors outside management’s control such as the residents’ right to terminate their residency agreements (the “Residency Agreements”), subject to the conditions provided in the Residency Agreements. If market changes require a reduction (or limit the rate of increase) in the

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amount of the rental fees payable by new residents of the Community, the Obligor’s revenues may be impaired. Such impairment would also result if the Obligor is unable to remarket units becoming available when residents die, withdraw, or are permanently transferred out of the Community.

Licensing Delay

The timeline to maintain licensure for assisted living and memory care may be longer than expected and negatively impact occupancy levels and revenues of the Project.

Additional Indebtedness

The Master Indenture permits the Obligor to incur Additional Indebtedness which may be equally and ratably secured with the Series 2015 Notes. See “THE MASTER INDENTURE” in APPENDIX C hereto. Any such additional parity indebtedness would be entitled to share ratably with the holders of the Series 2015 Notes Series 2015 Notes in any money realized from the exercise of remedies in the event of a default under the Master Indenture. The issuance of additional parity indebtedness could reduce the Debt Service Coverage Ratio, and could impair the ability of the Obligor to maintain its compliance with certain covenants described in “THE MASTER

INDENTURE” in APPENDIX C hereto. There is no assurance that, despite compliance with the conditions upon which Additional Indebtedness may be incurred at the time such debt is created, the ability of the Obligor to make the necessary payments to repay the Series 2015 Notes may not be materially adversely affected upon the incurrence of Additional Indebtedness.

Additional Covenants

The Loan Agreement and agreements with other parties relating to Bonds or other Indebtedness issued for the benefit of the Obligor in the future contain and may contain covenants that may be waived or enforced by such parties and which are more restrictive than the Master Indenture covenants described herein. Such covenants could impede the ability of the Obligor to realize cash flows sufficient to pay the Series 2015 Bonds or maintain the ratings assigned to the Series 2015 Bonds and their value. The ability of the Obligor to abide by such other covenants can be affected by events beyond its control, and there can be no assurance that it will continue to do so. A breach of any of these covenants could result in a default under the Master Indenture, the Loan Agreement or future agreements. Upon an event of default under any of these agreements, creditors of the Obligor could elect to declare all outstanding indebtedness or advances immediately due and payable. Any such action could deplete cash available to pay debt service on the Series 2015 Bonds, or could result in an acceleration of the due date for the Series 2015 Bonds without the consent of the Holders.

Sale of Personal Residences

It is anticipated that many prospective residents of the Project will be required to sell their current homes to meet the financial obligations under their Residency Agreements. Housing prices have declined nationally and in many areas longer time periods have been needed for homeowners to sell their homes. If prospective residents encounter difficulties in selling their current homes due to local or national economic conditions affecting the sale and finance of residential real estate, such prospective residents may not have sufficient funds to meet the obligations under their Residency Agreements, thereby causing a delay in scheduled occupancy of the Project or remarketing of vacated units, which would have an adverse impact on the revenues of the Obligor.

Rights of Residents

The Obligor enters into Residency Agreements with its residents. For more information about the Residency Agreements, see APPENDIX A – “RESIDENCY AGREEMENT – Residency Agreement.” Although these agreements give to each resident a contractual right to use space and not any ownership rights in the Project, in the event that the Bond Trustee, the Deed of Trust trustee or the holders of the Series 2015 Bonds seek to enforce any of the remedies provided by the Bond Indenture upon the occurrence of a default or the Master Trustee seeks to enforce remedies under the Deed of Trust or the Master Indenture, it is impossible to predict the resolution that a court might make of competing claims among the Master Trustee, the Bond Trustee, the Issuer or the holders of the Series 2015 Bonds and a resident of the Project who has fully or substantially complied with the terms and conditions of his or her Residency Agreement.

Competition

The Project is located in an area where other assisted living facilities and other competitive facilities exist or may be developed. See “Characteristics of the Market Area” in the Feasibility Study, which is attached as

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APPENDIX B hereto. The Project may also face additional competition in the future as a result of changing demographic conditions and the construction of new, or the renovation or expansion of existing assisted living facilities in the geographic area served by the Project. The Obligor will also face competition from other forms of retirement living including condominiums, apartment buildings and facilities not specifically designed for the elderly, some of which may be designed to offer similar facilities, but not necessarily similar services, at lower prices. In addition, there are few entry barriers to future competitors because competing facilities generally do not require a certificate of need approval for residential living facilities. All of these factors combine to make the elderly housing industry volatile and subject to material change that cannot be currently predicted. See “Characteristics of the Market Area” in the Feasibility Study, which is attached as APPENDIX B hereto.

Professional Liability Claims and Losses

The operations of the Obligor, and thereby of the Project, may also be affected by increases in the incidence of professional liability lawsuits against health care facilities in general and increases in the dollar amount of patient damage recoveries, resulting in increased insurance premiums and an increased difficulty in obtaining malpractice insurance. The Obligor covenants to maintain professional liability insurance in the amount required under the Master Indenture. It is not possible at this time to determine either the extent to which such insurance coverage will continue to be available to the Obligor or the premiums at which such coverage can be obtained.

Nursing Shortage

The health care industry has experienced a shortage of nursing staff that has resulted in increased costs for health care providers due to the need to hire agency nursing personnel at higher rates. Even though the Obligor has not experienced this in recent history, if the nursing shortage continues, it could possibly adversely affect the Obligor’s operations or financial condition.

Overview of Government Regulation of the Healthcare Industry

General. The Obligor operates in a highly regulated industry. Both the federal and state governments have extensive powers to regulate the operation of the facilities. The Obligor may be subject to, among others, the following: regulatory actions by the governmental agencies that administer the Medicare and Medicaid programs; changes in the form or amount of payment from governmental and other third party payors; actions by governmental agencies concerning the licensure and certification of the Project’s operations; and actions by governmental and other accreditation organizations, and federal, state, and local agencies.

National Healthcare Reform. The enactment of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, “ACA”) represents a significant reform of federal health care legislation. Additionally, Congress continues to consider the adoption of additional laws to modify several aspects of such legislation. The ACA is intended to bring about substantial changes to the delivery of health care services, the financing of health care costs, reimbursement to health care providers, and the legal obligations of health insurers, providers, and employers. The numerous ACA provisions are slated to take effect at specified times over approximately the next decade, and, therefore, the full consequences of the new laws on the health care industry will not be immediately realized. The ramifications of the ACA provisions may become apparent only as a result of regulatory interpretations promulgated during the implementation of the enacted laws. Portions of the ACA may also be limited or nullified as a result of legal challenges.

A significant component of the ACA is the reformation of the sources and methods by which consumers will pay for health care for themselves and their families and by which employers will procure health insurance for their employees and dependents. One of the primary purposes of the ACA is to provide or make available through subsidized premiums, health care insurance for consumers who are currently uninsured (or underinsured) and who fall below certain income levels. The ACA proposes to accomplish this through various provisions, summarized as follows: (i) transparent insurance markets (referred to as exchanges) intended to increase competition among private health insurers and to allow individuals and small employers to purchase health care insurance for themselves and their families or their employees and dependents; (ii) subsidies for insurance premium costs to individuals and families based upon their income relative to federal poverty levels; (iii) individual mandate for consumers to obtain, and for certain employers to provide, a minimum level of health care insurance, enforced through penalties (i.e., taxes) on consumers and employers that do not comply with these mandates; (iv) elimination of lifetime or annual cost caps and prohibition on private insurers denying coverage or adjusting insurance premiums based on health status (i.e., pre-existing conditions), gender or other specified factors; (v) substantially increased federal and state-funded Medicaid insurance program, authorizing states to establish federally subsidized non-Medicaid health plans

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for low-income residents not eligible for Medicaid; and (vi) voluntary expansion of Medicaid programs to a broader population with incomes up to 133% of federal poverty levels.

The ACA provisions relating to skilled nursing facilities (“SNFs”) include requirements that facilities (i) make certain disclosures regarding ownership; (ii) implement compliance and ethics programs; and (iii) make certain disclosures regarding expenditures for wages and benefits for direct care staff.

These ACA provisions could have a significant impact on health care providers, including their operations and revenues, and such impact could be negative. For example, expanded health insurance coverage, in particular, could affect the composition of the population enrolled in various public and private health plans, potentially resulting in a capacity strain on provider networks or unanticipated service costs. The Supreme Court held unconstitutional ACA sections that sought to withdraw federal Medicaid funding in the event that states do not comply with the coverage requirements. Pursuant to that decision, the federal government may not penalize states that choose not to participate in the Medicaid expansion program by taking away their existing Medicaid funding. See also “Third Party Payments and Managed Care – Medicaid” below. The Supreme Court recently heard arguments to determine whether consumers who obtain health insurance through the federal insurance exchange, and not a state-run exchange, may receive premium tax credits. The Supreme Court, having decided that the ACA does permit federal exchange participants to receive such subsidies, has preserved individuals’ ability to purchase insurance with the premium tax credit subsidies in both federal and state-run exchanges and, ultimately, the viability of federally-run exchanges such as the ones operated in Arizona.

Further, under the ACA, payments to providers for the provision of health care services under federally-funded health insurance programs are reduced. To offset the cost of expanded health care coverage and implementation of health reform, the ACA includes cuts in Medicare reimbursement and increased taxes. Cost-cutting provisions will impact health care providers by reducing or eliminating reimbursement for failure to satisfy certain quality requirements and reduction of Medicare market basket updates. Health care providers are also likely to be subjected to decreased reimbursement as a result of the Independent Payment Advisory Board, whose directive is to reduce Medicare cost growth. The Independent Payment Advisory Board’s recommended reductions would be automatically implemented unless Congress adopts alternative legislation that meets equivalent savings targets.

Due to the voluntary federal legislative expansion of Medicaid in the face of the budgetary pressures at the state level, payments made to health care providers under Medicaid are subject to further change as a result of federal or state legislative and administrative actions, including changes to the methods for calculating payments, the amount of payments that will be made for covered services and the types of services that will be covered under the program. Also, measures may be taken to increase enrollment in Medicaid recipients in managed care programs and/or to impose additional taxes on health care facilities to help finance or expand the state’s Medicaid system.

With varying effective dates, the ACA seeks to reduce waste, fraud, and abuse in public programs by allowing provider enrollment screening and enhanced oversight periods for new providers and suppliers; through enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs; by requiring Medicare and Medicaid program providers and suppliers to establish compliance programs; by increasing penalties for fraud and abuse violations; and by increasing funding for anti-fraud activities. The ACA required the development of a database to capture and share health care provider data across federal health care programs.

It is unclear to what extent these provisions may affect the Obligor’s finances at this time. Investors are encouraged to review legislative, legal, and regulatory developments as they occur and to assess the elements and potential effects of the health care reform initiative as it evolves.

Federal Legislation and Regulations Governing the Project

The Community is subject to regulation by a number of federal, state and local government agencies and private agencies. The Obligor may be subject to, among others, actions by governmental agencies concerning the licensure and certification of the facilities; or the initiation of audits and investigations concerning billing practices. All of these factors could potentially have an adverse effect on the results of operations of the Obligated Group.

The Obligor operates in a complex regulatory environment. The following description of federal and state laws, regulations and policies is not meant to be an all-inclusive discussion of the federal and state laws, regulations and policies that may adversely affect the revenues generated by the operation of the Obligor.

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Third Party Payments and Managed Care

General. In the environment of increasing managed care, the Obligor can expect additional challenges in maintaining the Community’s resident population and attendant revenues. Third party payors, such as health maintenance organizations, direct their subscribers to providers who have agreed to accept discounted rates or reduced per diem charges. Continuing care retirement communities and assisted living facilities are less sensitive to this directed utilization than stand-alone skilled nursing facilities; however, the risk may increase and the Obligor may be required to accept residents under such conditions should managed care cost reduction measures now pervasive in the health care industry continue to grow.

Medicare. The Medicare program is a federal insurance program under the Social Security Act primarily for individuals aged 65 and over. Medicare provides coverage for skilled nursing care (1) up to 100 days per year, (2) immediately following at least three days of hospitalization and (3) for care related to the condition treated by the prior hospitalization. The Balanced Budget Act of 1997 implemented a Prospective Payment System ("PPS") for all skilled nursing facilities with annual cost reporting periods beginning on or after July 1, 1998. The PPS pays an all- inclusive per diem rate for routine, ancillary and capital costs, and is adjusted geographically for wages and case mix index to reflect a patient's resource requirements. Higher acuity patients receive more reimbursement under the payment formula. The per diem prospective payment amount covers all Medicare Part A skilled nursing services and any items in therapy services furnished during the patient's Medicare covered stay (with a few minor exceptions). "Ancillary" services furnished to skilled nursing residents are also covered under Medicare Part B and may be reimbursed after Medicare Part A coverage is exhausted. The Balanced Budget Act of 1997 also provided for the implementation of consolidated billing for skilled nursing facilities, whereby skilled nursing facilities are required to bill the Medicare program for virtually all Medicare services and supplies provided to Medicare residents.

Proposed fiscal year 2016 SNF prospective payment rates reflect a 1.4% increase over the previous fiscal year. The proposed fiscal year 2016 SNF payment and policy changes also include the implementation of a quality reporting program under the Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) and the Social Security Act; SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program will have their annual updates reduced by 2 percentage points. Further, Section 215 of the Protecting Access to Medicare Act of 2014 (“PAMA”) added new subsections (g) and (h) to section 1888 to the Social Security Act New Subsection 1888(h) that authorizes establishing a Skilled Nursing Facility Value-Based Purchasing Program beginning with FY 2019, under which value-based incentive payments are made to SNFs in a fiscal year based on performance.

Other future legislation, regulation or actions by the federal government are expected to continue the trend toward more limitations on reimbursement for long term care services. At present, no determination can be made concerning whether or in what form such legislation could be introduced and enacted into law. Similarly, the impact of future cost control programs and future regulations upon the Members’ financial performance cannot be determined at this time. Although the Community is not currently reimbursed for services under the Medicare program, changes in Medicare program reimbursement to facilities competing with the Community may ultimately reduce the need for Community services. In this regard, changes to Medicare reimbursement policies could have a material negative impact on the Obligor.

Medicare Managed Care. Medicare beneficiaries who are entitled to Part A and enrolled in Part B may choose to obtain their benefits through a variety of risk-based plans under the Medicare Advantage Program, which allows Medicare beneficiaries to participate in coordinated care plans, including health maintenance organizations and preferred provider organizations. Reimbursement under these plans may be less than what traditional Medicare pays.

The ACA provides for payments under the Medicare Advantage programs (Medicare managed care) to be reduced. Although these reductions have been delayed to date, they may result in increased premiums or out-of-pocket costs to Medicare beneficiaries enrolled in Medicare Advantage plans if implemented. These beneficiaries may terminate their participation in those plans and opt for the traditional Medicare fee for service program. The reduction in payments to Medicare Advantage programs may also lead to decreased payments to providers by managed care companies operating Medicare Advantage programs. All or any of these outcomes could have a disproportionately negative effect upon providers with relatively high dependence upon Medicare managed care revenues. As noted above, the Community is not currently reimbursed for services under the Medicare Advantage Program, but changes in Medicare Advantage Program reimbursement to facilities competing with the Community may ultimately have a material negative impact on the Obligor.

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Medicaid. Medicaid is a health insurance program for certain low-income and needy individuals that is jointly funded by the federal government and the states. Pursuant to federal guidelines, each state establishes its own eligibility standards; determines the type, amount, duration and scope of services; sets the payment rates for services; and administers its own programs. Under Medicaid, the federal government provides grants to states that have medical assistance programs that are consistent with (or have secured waivers from) federal standards. Medicaid makes per-diem payments for SNF services on a cost basis.

Under the ACA, states have the option to expand Medicaid to cover individuals under the age of 65 with incomes up to 133% of the federal poverty level; the federal government pays 100% of costs for those made newly eligible for Medicaid under the ACA, but the federal match is pared down to 95% in 2017, 94% in 2018, 93% in 2017 and 90% in 2020 and beyond. See “State of Arizona Legislation and Regulations – AHCCCS.”

Regulatory Enforcement

General. Health care “fraud and abuse” laws have been enacted at the federal and state levels to broadly regulate the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under these laws, healthcare providers and others can be penalized for a wide variety of conduct, including submitting claims for services that are not provided, billing in a manner that does not comply with government requirements or including inaccurate or misleading billing information, billing for services deemed to be medically unnecessary, or billings accompanied by an illegal inducement to utilize or refrain from utilizing a service or product.

False Claims Act Liability and Enforcement Actions. The federal civil False Claims Act (“Civil FCA”) prohibits anyone from knowingly submitting a false, fictitious or fraudulent claim to the federal government. Violation of the Civil FCA can result in civil money penalties and fines, including treble damages. Private individuals may initiate actions on behalf of the federal government in lawsuits called qui tam actions. The plaintiffs, or “whistleblowers,” can recover significant amounts from the damages awarded to the government. In several cases, Civil FCA violations have been alleged solely on the existence of alleged kickback arrangements or Stark law violations, even in the absence of evidence that false claims had been submitted as a result of those arrangements. Under the ACA, Congress has created new Civil FCA liabilities associated with knowingly failing to report and return an overpayment by the later of: (i) the date which is 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable. An overpayment is defined to include any funds that a person “receives or retains” under Medicare or Medicaid “to which the person, after applicable reconciliation, is not entitled.” Any overpayment that has been retained after the deadline is considered an obligation under the Civil FCA. The Department of Justice has also begun using the Civil FCA as a basis for prosecuting nursing homes for providing substandard care.

The Fraud Enforcement and Recovery Act of 2009 (“FERA”) includes several amendments to the Civil FCA intended to protect federal government funds disbursed to subcontractors to the same extent that the Civil FCA protects funds distributed to prime contractors. FERA also seeks to address recent judicial interpretations of the statute’s so-called “presentment clause,” which requires that a false claim be presented to a government employee for payment before liability may be imposed, by clarifying that FCA liability “attaches whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the Government without regard to whether the wrongdoer deals directly with the federal government; with an agent acting on the government’s behalf; or with a third party contractor, grantee, or other recipient of such money or property.” FERA also allows the attorney general to delegate to Department of Justice attorneys the power to issue civil investigative demands for testimony, documents and interrogatory answers in FCA investigations and provides that information obtained through the use of the civil investigative demands can be used in a range of federal investigations and prosecutions.

FERA and ACA provisions amend and expand the reach of the FCA. FERA expanded the FCA’s reverse false claims provision, imposing liability on any person who “knowingly conceals” or “knowingly and improperly avoids or decreases” an “obligation to pay or transmit money or property to the Government,” whether the person uses a false record or statement to do so or not. FERA also clarified that an “obligation” can arise from the retention of an overpayment. Section 6402 of the ACA further addresses the retention of overpayments by defining the term overpayment and the circumstances and timing under which an overpayment need be returned to the government before it becomes an “obligation” under the FCA. FERA and the ACA also amend certain jurisdictional bars to the ACA, effectively narrowing the public disclosure bar and expanding the definition of “original source,” thus potentially broadening the field of potential whistleblowers.

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Under the Civil FCA, health care providers may be liable if they take steps to obtain or retain improper payments from the government. In several cases, Civil FCA violations have been alleged solely on the existence of alleged kickback or self-referral arrangements, even in the absence of evidence that false claims had been submitted as a result of those arrangements. In addition to the types of potential actions described above, Civil FCA cases have proceeded on a theory that providers are liable for the submission of false claims when they are not in full compliance with applicable legal and regulatory standards. Thus, even though the Community does not directly participate in the Medicare or Medicaid programs, the Obligor could be subjected to Civil FCA risk to the extent that it enters into arrangements with healthcare providers that do. Any potential Civil FCA liability could have a negative material impact on the Obligor. There can be no assurance that the Obligor will not be subject to enforcement actions in the future, and if so, that the Obligor will not suffer any monetary or other penalties.

The criminal False Claims Act (“Criminal FCA”) prohibits the knowing and willful making of a false statement or misrepresentation of a material fact in submitting a claim to the government. Sanctions for violation of the Criminal FCA include imprisonment, fines, and exclusions. To the extent the government cannot prove criminal intent or meet its burden of proving a false claim beyond a reasonable doubt, the same conduct can typically be prosecuted under civil statutes, including the Civil FCA. Imposition of such penalties or exclusions would result in a significant loss of reimbursement and may have a material adverse effect on the Obligor’s financial condition. Management of the Obligor has adopted a corporate compliance program addressing, among other items, submission of claims under the government health programs. Nevertheless, there can be no assurance that the affiliates of the Obligor will not be subject to enforcement actions in the future, and if so, that the Obligor, generally, and the Obligated Group, specifically, will not suffer any monetary or other penalties.

Civil Monetary Penalty Law. The Civil Monetary Penalty Law in part authorizes the government to impose penalties against individuals and entities committing a variety of acts. For example, penalties may be imposed for the knowing presentation of claims that are (i) incorrectly coded for payment, (ii) for services that are known to be medically unnecessary, (iii) for services furnished by an excluded party, or (iv) otherwise false. An entity that offers remuneration to an individual that the entity knows is likely to induce the individual to receive care from a particular provider may also be fined. Moreover, a provider may not knowingly make a payment, directly or indirectly, to a physician as an inducement to reduce or limit services to Medicare patients under the physician’s direct care. The ACA amended the Civil Monetary Penalty Law to authorize civil monetary penalties for a number of additional activities, including (i) knowingly making or using a false record or statement material to a false or fraudulent claim for payment; (ii) failing to grant the Office of Inspector General timely access for audits, investigations, or evaluations; or (iii) failing to report and return a known overpayment within statutory time limits. Violations of the Civil Monetary Penalty Law can result in substantial civil money penalties plus three times the amount claimed. Thus, even though the Community does not directly participate in the Medicare or Medicaid programs, the Obligor could be subjected to Civil Monetary Penalty Law penalties if, for example, it enters into certain prohibited arrangements with healthcare providers that do. Any potential Civil Monetary Penalty Law liability could have a negative material impact on the Obligor.

Federal Referral Laws. There is ever-increasing scrutiny by law enforcement authorities, DHHS Office of Inspector General (“OIG”), the courts, and Congress of arrangements between healthcare providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to exchange remuneration for patient care referrals and opportunities. DHHS, OIG, the courts, and Congress have also demonstrated a willingness to look behind the formalities of an entity’s structure to determine the underlying purpose of payments between healthcare providers and potential referral sources. Enforcement actions have increased, as evidenced by recent Federal court decisions and activities initiated by the OIG.

Under federal anti-kickback law, it is illegal to offer, pay, solicit or receive a payment in return for referring, ordering, recommending or arranging for the referral of any product or service covered by Medicare, Medicaid or other government health care programs. This prohibition has been broadly applied by the courts. Violations may result in civil and criminal penalties. Criminal penalties include imprisonment and fines. Civil penalties include temporary or permanent exclusion from government health care programs and civil money penalties. Under the ACA, Congress revised the intent requirement of the anti-kickback law to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the anti-kickback law in order to be found guilty of violating such law. The ACA also provided that any claims for items or services that violate the anti-kickback law are also considered false claims for purposes of the federal civil FCA.

The Physician Self-Referral Statute (the “Stark Law”) prohibits a physician from referring a Medicare or Medicaid patient for certain “designated health services” to an entity with which the physician (or a member of the physician’s immediate family) has a financial relationship, unless the financial relationship meets the requirements

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of one of the exceptions set forth in the Stark statute or regulations. “Designated health services” include the following: clinical laboratory services; physical therapy services; occupational therapy services; outpatient speech-language pathology services, radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and services; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services.

If a prohibited financial relationship exists, the physician may not refer Medicare or Medicaid patients to an entity for certain designated health services, and the entity may not present a claim for such services. If a Medicare fiscal intermediary, carrier, or administrative contractor determines that there has been a Stark Law violation, it must deny payment, and the physician and entity must refund any amounts collected from any individual. Further, DHHS may seek civil monetary penalties of up to $15,000 for each illegal referral and up to $100,000 for each offense consisting of a scheme designed to circumvent the Stark Law requirements. If Stark Law violations are prosecuted under the Civil FCA, the potential liability would be increased. Penalties may be assessed against either the referring physician or the entity that receives the prohibited referral, or both.

The Stark Law includes specific reporting requirements mandating that each entity furnishing covered items or services, upon request, must provide DHHS with certain information concerning its ownership, investment and compensation arrangements. Reportable information includes the covered items and services provided by the entity and the names and unique physician identification numbers of all physicians who have a financial relationship with the entity. Failure to adhere to these reporting requirements may subject the entity to significant civil money penalties. Finally, qui tam plaintiffs may file actions under the Civil FCA, discussed above, on the basis of alleged Stark Law violations.

The anti-kickback law and Stark Law are very broad in scope and the agencies responsible for investigation and prosecution under them have considerable discretion. Prosecution under the anti-kickback statute or the Stark Law could have a material adverse impact on the financial condition of a health care provider. Providers may act to reduce their exposure for federal referral law violations by establishing an effective corporate compliance program that periodically reviews physician relationships, promptly returning to the government any payments received by way of illegal referrals, and responding in an effective manner to complaints regarding potentially illegal financial arrangements. To the extent that the Community enters into arrangements prohibited under the anti-kickback law or the Stark Law, there can be no assurance that the Obligor would not be subject to such prosecution even with a corporate compliance program in place.

The state of Arizona has passed a statute that tracks and incorporates the federal FCA, anti-kickback and Stark laws; sanctions for violations include fines and imprisonment.

Other Federal Medicare Related Fraud Provisions. Federal health care criminal provisions applicable to private and governmental health benefit programs were enacted as part of Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Under these provisions, a person who knowingly and willfully executes, or attempts to execute, a scheme or artifice (1) to defraud any health care benefit program, or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with delivery of or payment for health care benefits, items or services, may be fined and/or imprisoned for not more than ten years. The term of imprisonment can increase if serious bodily injury or death results from the fraud. To the extent applicable, any violation of these provisions could have a material adverse impact on the Obligor.

Further, health care crimes applicable to all health care payment plans (governmental and private) have been established, the Medicare exclusion provisions have been expanded to provide reciprocal exclusion of entities and individuals with ownership or controlling interests in such entities, and civil monetary penalties for a variety of actions have been increased. Prosecution under these new crimes or expanded provisions could have a material adverse impact on the financial condition of a health care provider. The Obligor has in effect a corporate compliance program designed to facilitate compliance with these laws and provisions, however, there can be no assurance that the Obligor will not be subject to such prosecution in the future.

Administrative Enforcement. As with civil laws, administrative enforcement provisions require a lower standard of proof of a violation than the criminal standard. Thus, healthcare providers have a risk of incurring monetary penalties as a result of an administrative enforcement action.

Exclusions from Medicare Participation. The term “exclusion” means that no Medicare or state healthcare program reimbursement will be made for any services rendered by the excluded party or for any services

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rendered on the order or under the supervision of an excluded physician. DHHS is required to exclude from federal healthcare program participation for not less than five years any individual or entity convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state healthcare program; any criminal offense relating to patient neglect or abuse in connection with the delivery of healthcare; a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility or other misdemeanor in connection with the delivery of healthcare services or with respect to any act or omission in a healthcare program (other than Medicare or a state healthcare program) operated by or financed in whole or in part by a governmental agency; or a felony offense relating to the illegal manufacture, distribution, prescription or dispensing of a controlled substance. DHHS also has permissive authority to exclude individuals or entities under certain other circumstances, such as a misdemeanor conviction for fraud in connection with delivery of healthcare services or conviction for obstruction of an investigation of a healthcare violation. The minimum period of exclusion for certain permissive exclusions is three years. The Community is currently not a recipient of Medicare or Medicaid reimbursement. However, exclusion from Medicare participation could have a negative material impact on the Obligor to the extent that private payers from whom the Community does receive reimbursement make exclusion from Medicare participation a material breach of any payer agreement. Accordingly, exclusion from these programs could have a material adverse impact on the Obligor’s financial condition.

Enforcement Activity. Enforcement activity against healthcare providers is increasing, and enforcement authorities are adopting more aggressive approaches. In the current regulatory climate, it is anticipated that many healthcare providers will be subject to investigation, audit or inquiry regarding billing practices or false claims. Because of the complexity of these laws, the instances in which an alleged violation may arise to trigger such investigations, audits or inquiries are likely increasing and could result in enforcement action. Regardless of the merits of a particular case or cases, the Obligor could incur significant legal and settlement costs. Prolonged and publicized investigations could be damaging to the reputation, business and credit of the Obligor, regardless of the outcome, and could have material adverse consequences on the financial condition of the Obligor.

Regardless of the merits of a particular case or cases, the Members could incur significant legal and settlement costs. Prolonged and publicized investigations could be damaging to the reputation, business and credit of the Members, regardless of the outcome, and could have material adverse consequences on the financial condition of the Obligated Group.

Privacy and Security Regulations. The confidentiality of patient medical records and other health information is subject to considerable regulation by state and federal governments. Legislation and regulations governing the dissemination and use of medical record information are being proposed continually at both the state and federal levels.

HIPAA. HIPAA mandates the adoption of federal privacy and security standards to protect the confidentiality of protected health information. Regulations designed to protect health information impose very complex procedures and operational requirements. Failure to protect the privacy and security of protected health information could result in damages or civil or criminal penalties. Violations may increase operating expenses as necessary to notify affected individuals of privacy or security breaches, correct problems, comply with federal and state regulations, defend against potential claims and implement and maintain any additional requirements imposed by government action.

HIPAA includes administrative simplification provisions that require standardization of electronic transactions, specific security protections for medical information and processes, privacy protections for patient health information, and establishment of national employer and provider identifiers. DHHS and CMS have promulgated rules that require the implementation of policies and procedures by covered entities for coding, maintaining, storing and transmitting medical information, as well as policies and procedures designed to protect the security, data integrity and confidentiality of patient medical information and to permit patients to exercise their specific rights under HIPAA.

HITECH. Certain American Recovery and Reinvestment Act of 2009 provisions identified separately as the Health Information Technology for Economic and Clinical Health Act (“HITECH”) alter certain rules regarding the use and disclosure of protected health information. The HITECH Act (i) extends the reach of HIPAA beyond “covered entities,” (ii) imposes a breach notification requirement on HIPAA covered entities, (iii) limits certain uses and disclosures of individually identifiable health information, (iv) increases individuals’ rights with respect to individually identifiable health information and (v) increases enforcement of, and penalties for, violations of privacy and security of individually identifiable health information.

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Any violation of the HITECH Act is subject to HIPAA civil and criminal penalties. The HITECH Act broadened the applicability of the criminal penalty provisions under HIPAA to employees of covered entities and required penalties for violations resulting from willful neglect. The HITECH Act also significantly increased the amount of the civil penalties up to $50,000 per HIPAA violation for a maximum civil penalty of $1,500,000 per calendar year for violations of the same requirement. Criminal penalties may also be imposed on any person who knowingly obtains or discloses protected health information in violation of HIPAA. These penalties range from up to $50,000 and one year in prison for obtaining or disclosing protected health information; up to $100,000 and up to five years in prison for obtaining or disclosing protected health information under “false pretenses;” and up to $250,000 and up to ten years in prison for obtaining protected health information with the intent to sell, transfer or use it for commercial advantage, personal gain or malicious harm. DHHS has the authority to conduct compliance reviews to determine whether any covered entity is complying with HIPAA requirements, and to investigate complaints filed by any person who believes a covered entity is not complying with those requirements. However, HIPAA requires DHHS, to the extent practicable, to seek cooperation in obtaining compliance prior to formal action for civil monetary or criminal penalties.

The Obligor maintains a formal plan for compliance with all applicable HIPAA requirements, has trained its staff and employees in these requirements, and maintains specified HIPAA compliance officers who have been provided the authority to supervise, update, and enforce policies and procedures designed to assure HIPAA compliance. While the management of the Obligor believes they have taken reasonable and appropriate steps in the design of policies and procedures and in its supervision so as to maintain HIPAA compliance, it cannot be predicted when or to what extent complaints may be filed or investigations undertaken, which could involve the expenditure of possibly substantial sums to defend, and the possibility of fines or other penalties should DHHS determine that any covered component of the Obligor is not in compliance with HIPAA requirements.

State of Arizona Legislation and Regulations

AHCCCS. The Arizona Health Care Cost Containment System (“AHCCCS”) Arizona’s Medicaid program, was established in 1982 pursuant to a Section 1115 state-wide demonstration waiver. In 2014, Arizona expanded Medicaid coverage for low income adults under the ACA, and it is using the federal exchange, the Federally-Facilitated Marketplace (FFM), as its market for insurance plans.

The Arizona Long Term Care System (“AL TCS”), a capitated long term care program, was established in 1988. The AL TCS program for eligible aged, blind or disabled individuals includes nursing care/institutional service benefits as well as certain home and community-based services such as personal care services and home health services, administered in approved alternative care settings such as assisted living facilities. The AL TCS is managed by AL TCS program contractors. Arizona program contractors are paid a capitation rate for each qualified enrollee and, in turn, program contractors enter into contracts with long term care providers and/or provider networks to participate in a specific AL TCS program and deliver covered services. Nursing facilities and assisted living facilities that provide services to eligible enrollees must be Medicare certified and meet the Arizona Department of Health Services’ rules for licensure. In addition, providers must be registered with the AHCCCS Administration and have a current provider agreement with a program contractor.

Licensure. Arizona licenses and regularly surveys assisted living and nursing facilities to ascertain compliance with Arizona rules and regulations. Failing to satisfy licensure survey standards may lead to a finding of immediate jeopardy or loss or suspension of licensure and imposition of sanctions or civil penalties.

Arizona licensing requirements are subject to change, and there can be no assurance that the Obligor will continue to be able to maintain necessary licenses or that the Obligor will not incur substantial costs in doing so. Failure to comply with such requirements could result in a loss of the right to payment by Medicare or AHCCCS, to the extent applicable, as well as loss of the right to conduct the business of the licensed entity. From time to time, the Obligor may receive notices from federal and state regulatory agencies relating to alleged deficiencies for failure to comply with any components of licensing or other applicable regulations. There can be no assurance that the Obligor will not be subject to sanctions and penalties in the future as a result of such actions.

In addition, as part of the Arizona licensure process, modifications or expansions of assisted living and nursing facilities are subject to an architectural review to ensure compliance with building codes and other regulatory standards. The architectural review process can create delays, increase costs and result in modifications to proposed plans.

The Arizona Department of Health Services is responsible for reviewing nursing institution rates and proposed rate changes. Nursing institutions must justify any proposed rate increases and must also submit rate

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reports annually. In certain circumstances, persons affected by a proposed rate increase may request a public hearing relating to the increase. For more information, see “REGULATION AND LICENSURE – Health Care Center” in APPENDIX A.

The State Department of Insurance regulates the use of life care contracts. The Department of Insurance and the Superior Court of the State possess powers which may be exercised in proceedings with respect to a provider of life care contracts such as the Obligor.

Arizona Conflict of Interest Law

The provisions of Arizona Revised Statutes Section 38-511, as amended, provide that public agencies, including the Issuer, may, within three years after its execution, cancel any contract, without penalty or further obligation, made by the public agency if any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the public agency is, at any time while the contract or any extension thereof is in effect, an employee of any other party to the contract in any capacity or as an agent or a consultant of any other party to the contract with respect to the subject matter thereof. The cancellation becomes effective when written notice from the governing body of the public agency is received by all other parties to the contract unless the notice specifies a later time. The Issuer is a party to several contracts which are material to the payment of the Series 2015 Bonds, including the Loan Agreement and the Bond Indenture. Exercise of a remedy under Arizona Revised Statutes Section 38-511, as amended, would adversely affect the holders of the Series 2015 Bonds.

Federal Tax Matters

Section 7872 of the Code (Treatment of Loans with Below Market Interest Rates), provides for, in certain circumstances, the imputation of interest income to a lender when the rate of interest charged by the lender is below prevailing market rates (as determined under a formula) or, even if the below market interest rate loan would otherwise be exempt from the provisions of Section 7872, when one of the principal purposes for such below market rate loan is the avoidance of federal income taxation.

A refundable entrance fee payment made by a resident to certain continuing care facilities has been determined under Section 7872 to constitute a below market interest rate loan by the resident to the facility to the extent that the resident is not receiving a market rate of interest on the refundable portion of the entrance fee. Section 7872(h) provides a “safe harbor” exemption for certain types of refundable entrance fees. The statutory language of Section 7872 does not permit a conclusive determination as to whether the Residency Agreements come within the scope of the continuing care facility safe harbor or within the statute itself.

Provided the Residency Agreement falls within the scope of Section 7872, the safe harbor exemption under Section 7872(h) is applicable (i) if such loan was made pursuant to a continuing care contract, (ii) if the resident (or the resident’s spouse) has attained age 62 before the close of the year and (iii) irrespective of the amount of the “loan” by the resident (or the resident’s spouse) to the continuing care facility. Section 425 of the Tax Relief and Health Care Act of 2006 amended Section 7872(h) to make the exemption for loans to qualifying care facilities permanent.

Any determination of applicability of Section 7872 could have the effect of discouraging potential residents from becoming or remaining residents of the Project.

Bankruptcy

The filing by, or against, the Obligor or the Issuer for relief under the United States Bankruptcy Code (the “Bankruptcy Code”) would have an adverse effect on the ability of the Master Trustee and Obligation holders to enforce their claim or claims to the security granted by the Master Indenture and the Deed of Trust, and their claim or claims to money owed them as unsecured claimants, if any. The filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Obligor or the Issuer, as applicable, and their respective property and as an automatic stay of any act or proceeding to enforce a lien against such property. Moreover, following such a filing the revenues and accounts receivable and other property of the Obligor or the Issuer, as applicable, acquired after the filing (and under some conditions prior to the filing) would not be subject to the liens and security interests created under the Master Indenture. In addition, the bankruptcy court has the power to issue any order, process or judgment that is necessary or appropriate to carry out the provisions of the Bankruptcy Code; such a court order could require that the property of the Obligor or the Issuer, as applicable, including the Gross Revenues of the Obligor and proceeds thereof, could be used for the benefit of the Obligor, despite the lien and security interest of the Master Trustee therein.

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The amount of the secured claim which could be filed by the Master Trustee on behalf of the Obligation holders would be limited to the value of the Project at the time the bankruptcy proceeding was commenced. This amount would likely be less than the principal amount of the outstanding Obligations, since the failure of the Project to produce sufficient revenues to pay operating expenses and debt service requirements prior to the bankruptcy would reduce the value of the Project. To the extent the principal amount of the outstanding Obligations exceeds the value of the Project, the excess would be an unsecured claim which would rank on a parity with unpaid management, project and construction management fees, if any, and the claims of unsecured general creditors of the Obligor. As a result, if the Project were sold following commencement of a bankruptcy proceeding, it is unclear how much the Obligation holders would receive.

In a bankruptcy proceeding, the debtor could file a plan of reorganization which modifies the rights of creditors generally, or any class of creditors, secured or unsecured. The Bondholders may only receive post-petition interest on the Series 2015 Bonds to the extent the value of their security exceeds their claim. The plan, when confirmed by the court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan.

No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly in favor of junior creditors. More particularly, the Bankruptcy Code would permit the liquidation of the Obligor or the adoption of a reorganization plan for the Obligor or the Issuer, as applicable, even though such plan had not been accepted by (i) the holders of a majority in aggregate principal amount of the Series 2015 Bonds, if the plan is “fair and equitable” and does not discriminate unfairly against the Bondholders as a class and is in the “best interest of the creditors,” which may mean that the Bondholders are provided with the benefit of their original lien or the “indubitable equivalent;” or (ii) any holder of the Series 2015 Bonds if the Bondholders, as a class, are deemed unimpaired under the plan.

In addition, if the bankruptcy court were to conclude that the Bondholders have “adequate protection,” it may (1) substitute other security for the security subject to the lien of the Loan Agreement, the Bond Indenture, the Master Indenture, and the Deed of Trust or (2) subordinate the lien of the Bondholders to persons who supply credit to the Obligor or the Issuer, as applicable, after commencement of the case. In the event of the bankruptcy of the Obligor or the Issuer, any amount realized by the Master Trustee or Bondholders may depend on the bankruptcy court’s interpretation of “indubitable equivalent” and “adequate protection” under then existing circumstances. Any transfers made to the Bondholders or the Master Trustee at or prior to the commencement of the case may be avoided and recaptured if such transfers are (a) avoidable by a judicial lien creditor who obtained its lien on the date the case commenced (regardless of whether such a creditor actually exists), (b) preferential or fraudulent or (c) voidable under applicable law by any actual unsecured creditor. The Bondholders may also be subject to avoidance and recapture of post-petition transfers, turnover of property of the debtor which they, the Master Trustee or a custodian hold and assumption, assignment or rejection of executory contracts.

Certain judicial decisions have cast doubt upon the right of a trustee, in the event of a health care facility’s bankruptcy, to collect and retain for the benefit of bondholders portions of revenues consisting of Medicare and other governmental receivables.

Under Arizona law, the assets of the Obligor are subject to control by the Director of Insurance of the State of Arizona (the “Director of Insurance”), which possesses powers resembling those possessed by a trustee in bankruptcy. The Director of Insurance is required to apply to the Superior Court of Arizona for an order directing him to assume management and possession of the Obligor and the Project and to rehabilitate the Obligor to enable it to perform fully its life care contracts: (i) if the Director of Insurance has reason to believe that the Obligor is in a financially unsound or unsafe condition, or that its condition is such that it may be unable to perform fully its obligations under its life care contracts; or (ii) when the Obligor fails to implement the recommendations of a management consultant’s report prepared at the request of the Director of Insurance or when it is obvious to the Director of Insurance that to obtain the services of a financial consultant to prepare such report or that such report if prepared would be futile. Arizona law vests in the Superior Court and the Director of Insurance substantial rights and powers with respect to the rehabilitation of the Obligor and the Project. The powers possessed by the Director of Insurance include, without limitation, power to take possession of the Obligor’s property and assets, to preserve, protect and operate the Obligor and its property, to protect the residents of the Project, to perform all duties of the Obligor, to reject executory contracts to which the Obligor is a party, and to withdraw amounts from the statutory

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reserve for the purpose of rehabilitating the Project. The Superior Court is authorized to issue such orders as it may deem necessary to aid the Director of Insurance in the rehabilitation of the Obligor. If the Director of Insurance determines that further efforts to rehabilitate the Obligor are useless, the Director of Insurance may apply to the Superior Court for an order of liquidation and dissolution of the Obligor.

Certain Matters Relating to Enforceability of the Master Indenture

The obligations of the Obligor and any future Member of the Obligated Group under the Series 2015 Notes will be limited to the same extent as the obligations of debtors typically are affected by bankruptcy, insolvency and the application of general principles of creditors’ rights and as additionally described below.

The accounts of the Obligor and any future Member of the Obligated Group will be combined for financial reporting purposes and will be used in determining whether various covenants and tests contained in the Master Indenture (including tests relating to the incurrence of Additional Indebtedness) are met, notwithstanding the uncertainties as to the enforceability of certain obligations of the Obligated Group contained in the Master Indenture which bear on the availability of the assets and revenues of the Obligated Group to pay debt service on Obligations, including the Series 2015 Notes pledged under the Bond Indenture as security for the Series 2015 Bonds. The obligations described herein of the Obligated Group to make payments of debt service on Obligations issued under the Master Indenture (including transfers in connection with voluntary dissolution or liquidation) may not be enforceable to the extent (1) enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights and by general equitable principles and (2) such payments (i) are requested with respect to payments on any Obligations issued by a member other than the member from which such payment is requested; (ii) would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by the Member of the Obligated Group from which such payment is requested; or (iii) are requested to be made pursuant to any loan violating applicable usury laws. The extent to which payments by any future Member of the Obligated Group may fall within the categories above with respect to the Series 2015 Notes cannot now be determined. The amount of such payments which could fall within such categories could be substantial.

A Member of the Obligated Group may not be required to make any payment on any Obligation, or portion thereof, the proceeds of which were not loaned or otherwise disbursed to such Member of the Obligated Group to the extent that such payment would render such Member of the Obligated Group insolvent or which would conflict with or not be permitted by or which is subject to recovery for the benefit of other creditors of such Member of the Obligated Group under applicable laws. There is no clear precedent in the law as to whether such payments from a Member of the Obligated Group in order to pay debt service and other required payments on the Series 2015 Notes may be voided by a trustee in bankruptcy in the event of bankruptcy of a Member of the Obligated Group, or by third-party creditors in an action brought pursuant to Arizona fraudulent conveyance statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under Arizona fraudulent conveyance statutes and common law, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or Arizona fraudulent conveyance statutes, or the guarantor is undercapitalized.

Application by courts of the tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. It is possible that, in an action to force a Member of the Obligated Group to pay debt service on an Obligation for which it was not the direct beneficiary, a court might not enforce such a payment in the event it is determined that such Member is analogous to a guarantor of the debt of the Obligated Group who directly benefited from the borrowing and that sufficient consideration for such Member’s guaranty was not received and that the incurrence of such Obligation has rendered or will render such Member insolvent.

Limitation on Security

The Obligor will deliver, concurrently with the issuance of the Series 2015 Bonds, a title insurance policy which runs to the Master Trustee. The face amount of the policy will be equal to at least the expected aggregate principal amount of Obligations Outstanding following the issuance of the Series 2015 Bonds and the Series 2015 Notes. The Obligor is not required to obtain an increase in the amount of the policy in connection with the issuance of any additional Obligations subsequent to the issuance of the Series 2015 Notes, and the title insurance policy will not pay any claim which exceeds the aggregate face amount of the policy.

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The deed of trust lien granted under the Deed of Trust provides limited security. Little property that is subject to the deed of trust consists of general purpose building suitable for industrial or commercial use. Consequently, it could be difficult to find a buyer or lessee for the property, and, upon default, the Bond Trustee or the Master Trustee may not obtain an amount equal to the aggregate liabilities of the Obligor (including liabilities in respect of the Series 2015 Bonds then outstanding) from the sale or lease of the property, whether pursuant to a judgment against the Obligor or otherwise. The practical realization from the real property subject to the Deed of Trust upon any default will depend on the exercise of the remedies specified under the Deed of Trust, principally, foreclosure. Under Arizona law, however, the remedies specified in the Deed of Trust may not be readily available or may be limited. Other statutory provisions (such as the federal bankruptcy laws) also may have the effect of delaying enforcement of the deed of trust lien and security interest under the Deed of Trust in the event of a default by the Obligor.

The effectiveness of the security interest in the Obligated Group’s Gross Revenues granted in the Master Indenture may be limited by a number of factors, including: (i) federal bankruptcy laws which would, among other things, preclude enforceability of the security interest as to revenues arising subsequent to the commencement of bankruptcy proceedings and limit such enforceability as to revenues arising prior to such commencement to the extent a security interest therein would constitute a voidable preference or fraudulent conveyance, (ii) rights of third parties in cash, securities and instruments arising in favor of the United States of America or any agency thereof, (iii) present or future prohibitions against assignment in any 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 and rights of donors of property, (v) claims that might obtain priority if continuation statements or financing statement amendments are not filed in accordance with applicable laws, (vi) the rights of holders of prior perfected security interests in equipment and other goods owned by the Obligated Group Members and in the proceeds of sale of such property, (vii) statutory liens and (viii) the rights of parties secured by Permitted Encumbrances. Accordingly, such security interest is expected to provide only limited value in the event of default.

Pursuant to the Master Indenture, each Member of the Obligated Group who pledges its Gross Revenues under the Master Indenture covenants and agrees that, if an Event of Default involving a failure to pay any installment of interest or principal on any Obligation, including the Series 2015 Notes, should occur and be continuing, it will deposit daily the proceeds of its Gross Revenues. Such deposits will continue daily until such default is cured. It is unclear whether the covenant to deposit the proceeds of Gross Revenues with the Master Trustee is enforceable. In light of the foregoing and of questions as to limitations on the effectiveness of the security interest granted in such Gross Revenues, as described above, no opinion will be expressed by counsel to the Obligor as to enforceability of such covenant with respect to the required deposits.

Environmental Matters

In its role as the owner and operator of properties or facilities, the Obligor and any future Member of the Obligated Group may be subject to liability and practical, financial and legal risks for investigating and remedying any hazardous substances that exist on its property or that may have migrated off of its property. Such risks may (a) result in damage to individuals, property or the environment, (b) interrupt operations and increase their cost, (c) result in legal liabilities, damages, injunctions or fines and (d) result in investigations, administrative proceedings, penalties or other governmental agency actions. There is no assurance that the Obligor and any future Member of the Obligated Group will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Obligor and any future Member of the Obligated Group.

At the present time, management of the Obligor is not aware of any pending or threatened claim, investigation or enforcement action regarding such environmental issues which, if determined adversely to the Obligor, would have a material adverse effect on its operations or financial condition.

A Phase I Environment Site Assessment (a “Phase I”) dated March 10, 2015, was completed by Terracon Consultants, Inc. (“Terracon”) for the Project. The Phase I included field reconnaissance to observe surficial conditions and an environmental database review. Based on the results of Terracon’s assessment, no suspect environmental conditions were identified.

Lien for Clean-up of Hazardous Materials

The federal Comprehensive Environmental Response, Compensation and Liability Act (the “Federal Superfund Act”) provides authority to the United States Environmental Protection Agency (the “EPA”) to arrange for response actions in the event of a release or substantial threat of release of hazardous substances and also

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imposes liability for certain response costs and damages on the present owner (among other parties) of a site of such release or threat of release. The Federal Superfund Act provides that all costs and damages for which a person is liable to the United States will constitute a lien upon all real property belonging to such person which is subject to or affected by the response action. The federal lien is subject to the normal rules of priority.

Uncertainty of Investment Income

The investment earnings of, and accumulations in, certain funds established pursuant to the Bond Indenture have been estimated and are based on assumed interest rates as indicated. 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 Bond Trustee is permitted to invest under the Bond 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. Guaranteed investment contracts may be entered into with respect to certain of the funds held under the Bond Indenture. See “ESTIMATED SOURCES AND USES OF FUNDS.”

Other Possible Risk Factors

The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Obligor:

(1) Reinstatement or establishment of mandatory governmental wage, rent or price controls;

(2) Inability to control increases in operating costs, including salaries, wages and fringe benefits, supplies and other expenses, given an inability to obtain corresponding increases in revenues from residents 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) Adoption of other federal, state or local legislation or regulations having an adverse effect on the future operating or financial performance of the Obligor;

(5) The cost and availability of energy;

(6) Increased unemployment or other adverse economic conditions in the service areas of the Obligor which would increase the proportion of patients who are unable to pay fully for the cost of their care;

(7) Any increase in the quantity of indigent care provided which is mandated by law or required due to increased needs of the community;

(8) Inflation or other adverse economic conditions;

(9) Changes in tax, pension, social security or other laws and regulations affecting the provisions of health care and other services to the elderly;

(10) Inability to control the diminution of patients’ assets or insurance coverage with the result that the patients’ charges are reimbursed from government reimbursement programs rather than private payments;

(11) The occurrence of natural disasters, including hurricanes, floods or earthquakes, which may damage the facilities of the Obligor, interrupt utility service to the facilities, or otherwise impair the operation and generation of revenues from said facilities; or

(12) Cost and availability of any insurance, such as malpractice, fire, automobile and general comprehensive liability, that organizations such as the Obligor generally carry.

FINANCIAL REPORTING AND CONTINUING DISCLOSURE

Financial Reporting

The Master Indenture requires that the Obligor provide to each Required Information Recipient, the following:

(i) Beginning with the fiscal quarter ending December 31, 2016, quarterly unaudited financial statements of the Obligated Group as soon as practicable after they are available but in no event more than 45 days

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after the completion of such fiscal quarter, including a combined or combining statement of revenues and expenses and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such fiscal quarter, prepared in reasonable detail and certified, subject to year end adjustment, in an Officer’s Certificate of the Obligated Group Representative. Such financial statements and calculations are required to be accompanied by a comparison to the annual budget provided pursuant to subsection (iv) below. Commencing with the earlier of (A) the Stabilized Year or (B) December 31, 2019, the quarterly Officer’s Certificate is required to include the Days Cash on Hand. Commending with the first fiscal quarter which ends not less than 60 days following the issuance of the first certificate of occupancy for the first building in the Project containing Living Units, the quarterly Officer’s Certificate also is required to include the Percentage of Units Occupied;

(ii) Within 150 days of the end of each Fiscal Year, an annual audited financial report of the Obligated Group prepared by a firm of certified public accountants, including a combined and an unaudited combining balance sheet as of the end of such Fiscal Year and a combined and an unaudited combining statement of cash flows for such Fiscal Year and a combined and an unaudited combining statement of revenues and expenses for such Fiscal Year, showing in each case in comparative form the financial figures for the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing calculations of the Obligated Group’s Debt Service Coverage Ratio for said Fiscal Year and, to the extent required to be reported in the Officer’s Certificate described in subsection (i) above, the Days Cash on Hand of the Obligated Group at the end of such Fiscal Year, and a statement that such accountants have no knowledge of any default under the Master Indenture as it pertains to accounting matters, or if such accountants have obtained knowledge of any such default or defaults, they are required to disclose in such statement the default or defaults and the nature thereof;

(iii) On or before the date of delivery of the financial reports referred to in clause (ii) above, an Officer’s Certificate of the Obligated Group Representative (A) stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or, if not, specifying all such defaults and the nature thereof, and (B) calculating and certifying the Debt Service Coverage Ratio as of the end of such Fiscal Year to the extent such calculation is required to be calculated in accordance with the Master Indenture;

(iv) Annual budgets for its operations for each Fiscal Year, prepared and delivered at least 30 days prior to the start of each such Fiscal Year, and amendments thereof within 30 days after approval; and

(v) On or before the date of delivery of the financial reports referred to in clauses (i) and (ii) above, management’s discussion and analysis of results for the applicable fiscal period.

Continuing Disclosure

The Obligor will enter into a Disclosure Dissemination Agreement with Wilmington Trust, National Association, as Dissemination Agent (the “Continuing Disclosure Agreement”), pursuant to which the Obligor will covenant that, in compliance with Rule 15c2-12(b)(5) (the “Rule”) of the Securities Exchange Act of 1934, it will deliver to the Electronic Municipal Market Access System maintained by the Municipal Securities Rulemaking Board (“EMMA”), the following reports:

(a) Within 150 days after the end of each Fiscal Year:

(i) a copy of its annual financial statements prepared in accordance with generally accepted accounting principles and audited by a certified public accountant, including a statement of the balances on deposit in each fund and account established under the Master Indenture, and together with (1) calculations, beginning with the end of the first full Fiscal Year following the Fiscal Year in which Stabilization occurs, of the Obligated Group’s Debt Service Coverage Ratio and the Days’ Cash on Hand, and (2) a letter from such accountant to the effect that in the course of such audit nothing came to its attention to lead it to believe that any default had occurred under the Master Indenture as it pertains to accounting matters, or specifying the nature of such default;

(ii) a report of the occupancy of the Project, showing for each fiscal quarter during the preceding Fiscal Year, the number and percentage of assisted living beds and memory care beds occupied, respectively, as of the end of each fiscal quarter; and

(iii) management discussion with respect to the financial statements and, as applicable, construction status, marketing and occupancy results for the preceding Fiscal Year.

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(b) Within 45 days after the end of each fiscal quarter:

(i) a copy of its unaudited quarterly financial statements prepared on a basis substantially consistent with its audited financial statements and certified by the Obligor, including a statement of the balances on deposit in each fund and account established under the Master Indenture, and together with quarterly calculations, commencing with the first quarter ending after Stabilization, of the Obligated Group’s Debt Service Coverage Ratio and the Days’ Cash on Hand;

(ii) a report of the occupancy of the Project, showing for each of the preceding four fiscal quarters, the number and percentage of assisted living beds and memory care beds occupied, respectively, as of the end of each fiscal quarter;

(iii) management discussion with respect to the financial statements and, as applicable, construction status, marketing and occupancy results for the preceding fiscal quarter; and

(iv) and until Stabilization, an investor call discussing financial statements, construction status, marketing, and occupancy results, as applicable.

The Obligor has covenanted in the Continuing Disclosure Agreement to deliver to EMMA, in a timely manner and not more than 10 business days after occurrence of the event with respect to the Series 2015 Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax-exempt status of the Series 2015A Bonds, or other material events affecting the tax status of the Series 2015A Bonds; (7) modifications to rights of holders of the Series 2015A Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Series 2015 Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the Obligor, which shall occur as described below; (13) the consummation of a merger, consolidation, or acquisition involving the Obligor or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. For these purposes, any event described in (12) of the preceding sentence is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Obligor in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of any of the Obligor, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the any of the Obligor.

The Obligor has covenanted in the Continuing Disclosure Agreement to give to EMMA, in a timely manner, notice of any failure by the Obligor to provide any information required pursuant to subsections (a), and (b) above within the time limit specified therein.

The Obligor’s obligations under the Continuing Disclosure Agreement are for the benefit of the Beneficial Owners of the Series 2015 Bonds, and are enforceable by any Beneficial Owner of the Series 2015 Bonds in an action for specific performance against the Obligor.

The Obligor’s obligations under the Continuing Disclosure Agreement may be amended to the extent required or permitted by the Rule, or in connection with a change in the identity, nature or status of the Obligor, or the type of business conducted by it; provided that any such amendment either (i) does not materially impair the interests of Bondholders, in the determination of the Trustee (which may be based on an opinion of counsel); or (ii) is approved by the holders of a majority in aggregate principal amount of the Series 2015 Bonds.

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LITIGATION

The Issuer

There is no litigation pending or, to the knowledge of the Issuer, threatened against the Issuer restraining or enjoining the issuance or delivery of the Series 2015 Bonds or questioning or affecting the validity of such Series 2015 Bonds or the proceedings or authority under which they are to be issued, or which in any manner questions the right of the Issuer to enter into the Bond Indenture or Loan Agreement or to secure the Series 2015 Bonds in the manner provided in the Bond Indenture and the relevant statutes under which the Series 2015 Bonds are issued. Neither the creation, organization or existence of the Issuer nor the title of any of the present directors or officers of the Issuer is being contested.

The Obligor

There is no litigation pending or, to the Obligor’s knowledge, threatened against the Obligor, wherein an unfavorable decision would (i) adversely affect the ability of the Obligor to operate its facilities or to carry out its obligations under the Master Indenture or the Loan Agreement, or (ii) would have a material adverse impact on the financial position or results of operations of the Obligor.

THE BONDHOLDER REPRESENTATIVE

Greenwich Investment Management, Inc. (the “Bondholder Representative”) is a registered investment advisor under the Investment Advisors Act of 1940, as amended. Under the Bond Indenture, the Bondholder Representative, as well as any successor Bondholder Representative, has substantial rights to act in lieu of the Owners of the Series 2015 Bonds, including with respect to the direction of proceedings in the event of an Event of Default and the right to give consents in virtually all circumstances. See APPENDIX C – PROPOSED FORM OF

INDENTURE OF TRUST – Bondholder Representative.”

LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale of the Series 2015 Bonds are subject to the unqualified approval of Bond Counsel. Greenberg Traurig, LLP, Phoenix, Arizona, has acted in the capacity as Bond Counsel for the purpose of rendering an opinion with respect to the authorization, issuance, delivery, legality and validity of the Series 2015 Bonds and for the purpose of rendering an opinion on the exclusion of the interest on the Series 2015 Bonds from gross income for federal income tax purposes and certain other tax matters. Such firm has not been requested to examine, and has not investigated or verified, any statements, records, material or matters relating to the financial condition or capabilities of the Obligor, and has not assumed responsibility for the preparation of this Limited Offering Memorandum, except that, in its capacity as Bond Counsel, such firm has reviewed the information in this Limited Offering Memorandum under the captions “INTRODUCTION,” “THE SERIES

2015 BONDS,” “SECURITY FOR THE BONDS” (except the caption “DEED OF TRUST”) and “TAX MATTERS,” and in APPENDIX C - “PROPOSED FORMS OF PRINCIPAL DOCUMENTS.”

Certain matters will be passed upon for the Issuer by its General Counsel; for the Obligor by its special counsels, Bracewell & Giuliani LLP, Dallas, Texas, Powell Coleman & Arnold LLP, Dallas, Texas, and Lewis Roca Rothgerber LLP, Phoenix, Arizona; and for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Dallas, Texas.

The various legal opinions to be delivered concurrently with the delivery of the Series 2015 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

TAX MATTERS

Tax-Exempt Series 2015A Bonds

General. In the opinion of Greenberg Traurig, LLP, Phoenix, Arizona, Bond Counsel, assuming the accuracy of certain certifications and compliance with certain covenants of the Issuer and the Obligor designed to assure compliance with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), the interest on the Series 2015A Bonds is excludable gross income of the owners thereof for federal income tax purposes, except for interest on any Series 2015A Bond for any period during which such Series 2015A Bond is

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held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code, and interest on the Series 2015A Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations and is not required to be included in adjusted current earnings for purposes of calculating the alternative minimum tax imposed on corporations.

Section 142(d) of the Code provides that interest on certain governmental obligations, such as the Series 2015A Bonds, substantially all of the proceeds of which are to be used to provide financing for projects for “residential rental property,” shall be exempt from federal income tax if, among other things, at all times during the Qualified Project Period either 20 percent or more of the units are set aside for tenants having incomes of 50 percent or less of Area Median Gross Income or 40 percent or more of the units are set aside for tenants having incomes of 60 percent or less of Area Median Gross Income. The Issuer has elected the 20 percent at 50 percent set aside for the Series 2015A Bonds.

Under the Code and Treasury Regulations, the failure to satisfy the foregoing requirements on a continuous basis or the failure to satisfy any of the other requirements of the Code and the Treasury Regulations will, unless corrected within a reasonable period of time of not less than 60 days after such noncompliance is first discovered or should have been discovered, cause loss of the tax exempt status of the Series 2015A Bonds as of the date of issuance of the Series 2015A Bonds, irrespective of the date such noncompliance actually occurred.

The Issuer has established requirements, procedures and safeguards which it believes to be sufficient to ensure compliance with the requirements of Section 142(d) of the Code and the Treasury Regulations with respect to the Project. Such requirements, procedures, and safeguards are incorporated into the Loan Agreement and the Regulatory Agreement. However, no assurance can be given that in the event of a breach of any of the provisions or covenants described above, the remedies available to the Issuer or the Bond Trustee can be judicially enforced in such manner as to assure compliance with Section 142(d) of the Code and, therefore, to prevent the loss of tax exemption of interest on the Series 2015A Bonds. The opinion of Bond Counsel described below relies upon certifications by the Obligor as to compliance with Section 142(d) of the Code.

Section 148 of the Code provides that interest on the Series 2015A Bonds will not be excludable from gross income for federal income tax purposes unless (a) the investment of the proceeds of the Series 2015A Bonds meets certain arbitrage requirements and (b) certain “excess” earnings on such investments are rebated to the United States of America (collectively the “Arbitrage Restrictions”). The Bond Trustee has been provided with instructions regarding the Arbitrage Restrictions and the Bond Trustee has agreed that it will comply with those instructions. To the extent that the Arbitrage Restrictions are applicable to the Obligor, the Obligor has covenanted in the Loan Agreement and the Tax Agreement that it also will comply with such restrictions. In the event of noncompliance by either the Bond Trustee or the Obligor with the Arbitrage Restrictions, interest on the Series 2015A Bonds would be taxable for federal income tax purposes from the date of issuance of such Series 2015A Bonds. The Obligor has also covenanted to comply with certain other applicable provisions of the Code which are required as a condition to the exclusion from gross income of interest on the Series 2015A Bonds for federal income tax purposes.

The Code includes requirements which the Issuer and the Obligor must continue to meet after the issuance of the Series 2015 Bonds in order that interest on the Series 2015A Bonds not be included in gross income for federal income tax purposes. The Issuer’s or the Obligor’s failure to meet these requirements may cause interest on the Series 2015A Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The Issuer and the Obligor have covenanted in the Bond Indenture, the Regulatory Agreement and the Loan Agreement to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series 2015A Bonds.

Bond Counsel has not undertaken to advise in the future whether any events after the date of execution and delivery of the Series 2015 Bonds may affect the federal tax status of the interest on the Series 2015A Bonds.

Ownership of the Series 2015A Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, S corporations with “excess net passive income,” individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2015A Bonds. Bond Counsel expresses no opinion as to any such collateral tax consequences. Purchasers of Series 2015A Bonds should consult their own tax advisors as to such collateral tax consequences.

Bond Counsel is further of the opinion that interest on the Series 2015A Bonds is exempt from Arizona state income tax. Bond Counsel expresses no opinion regarding taxation of the Series 2015A Bonds or interest on the Series 2015A Bonds in any state other than Arizona. Prospective purchasers of the Series 2015A Bonds should

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consult their tax advisors as to whether the Series 2015A Bonds or interest on the Series 2015A Bonds is or is not exempt from taxation in any other state.

A form of the opinion of Bond Counsel is attached hereto as APPENDIX D. A copy of such opinion will be available at the time of the initial delivery of the Series 2015 Bonds.

Original Issue Discount. Under the Code, “original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the initial offering price to the public (excluding bond houses, brokers and similar persons or organizations acting in the capacity of underwriters or wholesalers), at which price a substantial amount of the same maturity was sold. For any Series 2015A Bond having OID (a “Discount Bond”), OID represents interest that is excludable from gross income; however, such interest is taken into account for purposes of determining the alternative minimum tax imposed on corporations and may result in the collateral federal tax consequences described above under “TAX MATTERS – General.” OID will accrue actuarially over the term of a Discount Bond at a constant interest rate.

In general, a purchaser who acquires a Discount Bond in the initial offering to the public at an initial offering price thereof as set forth on the inside front cover page of this Limited Offering Memorandum will be treated as receiving an amount of interest excludable from gross income for federal income tax purposes equal to the OID accruing during the period such purchaser holds such Discount Bond and will increase its adjusted basis in such Discount Bond by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or other disposition of such Discount Bond. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of the Discount Bond that are not purchased in the initial offering at the initial offering price may be determined according to rules that differ from those described above.

Prospective purchasers of a Discount Bond 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 the Discount Bonds and with respect to the state and local tax consequences of owning and disposing of the Discount Bonds.

Stepped Coupon Bonds. The coupon rate on the Series 2015A Bonds (referred to in this section as the “Stepped Coupon Bonds”) is subject to increase on December 28, 2016 (the “Rate Step Date”), to the coupon rate set forth on the inside front cover of this Limited Offering Memorandum. The Treasury Department has issued regulations under Section 1271 through 1275 of the Code (the “OID Regulations”). Pursuant to the OID Regulations, a stepped coupon bond such as the Stepped Coupon Bonds can be treated as issued with OID; however, pursuant to Section 1.1272-1(c)(5) of the Treasury Regulations, it is presumed that the Stepped Coupon Bonds will be called for redemption on the Rate Step Date, and that, accordingly, the amount of OID with respect to the Stepped Coupon Bonds is treated as zero. In the event the Stepped Coupon Bonds are not redeemed on the Rate Step Date, the Stepped Coupon Bonds will be considered to be reissued, solely for purposes of determining OID, on the Rate Step Date at an adjusted issue price.

Any future step-up in the interest rate of the Stepped Coupon Bonds will be similarly analyzed as of the applicable rate step date for purposes of determining whether such increase(s) in the interest rate may be disregarded for purposes of characterizing the additional interest as OID. Holders are advised to consult with their own tax advisors for specific treatment of interest on the Stepped Coupon Bonds resulting from such Holder’s ownership of the Stepped Coupon Bonds at the stepped interest rate(s).

Information Reporting and Backup Withholding. Interest paid on tax-exempt bonds such as the Series 2015A Bonds is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Series 2015A Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Series 2015A Bonds, under certain circumstances, to “backup withholding” at the rates set forth in the Code, with respect to payments on the Series 2015A Bonds and proceeds from the sale of Series 2015A Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Series 2015A Bonds. This withholding generally applies if the owner of Series 2015A Bonds (i) fails to furnish the payor such owner’s social security number or other taxpayer identification number (“TIN”), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other “reportable payments” as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner’s securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the

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Series 2015A Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding.

Taxable Series 2015B Bonds

Bond Counsel is of the opinion that interest on the Series 2015B Bonds is included in gross income for federal income tax purposes. Bond Counsel is further of the opinion that interest on the Series 2015B Bonds is exempt from Arizona state income tax. Bond Counsel has expressed no opinion regarding other tax consequences arising with respect to the Series 2015B Bonds under the laws of the State of Arizona or any other state or jurisdiction. Purchasers of the Series 2015B Bonds are urged to consult with an independent tax advisor as to the federal, state and local tax consequences of the purchase, ownership or disposition of the Series 2015B Bonds.

Any federal tax advice contained in this Limited Offering Memorandum was written to support the marketing of the Series 2015B Bonds and is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding any penalties that may be imposed under the Code. All taxpayers should seek advice based on such taxpayers’ particular circumstances from an independent tax advisor. This disclosure is provided to comply with Treasury Circular 230.

Changes in Federal and State Tax Law

From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading “TAX MATTERS” or adversely affect the market value of the Series 2015 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to obligations issued or executed and delivered prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2015 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2015 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2015 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based on existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2015 Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

PROSPECTIVE PURCHASERS OF THE SERIES 2015 BONDS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS PRIOR TO ANY PURCHASE OF THE SERIES 2015 BONDS AS TO THE IMPACT OF THE CODE UPON THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE SERIES 2015 BONDS.

NO RATING

THE SERIES 2015 BONDS ARE NOT RATED; NEITHER THE ISSUER NOR THE OBLIGOR HAS APPLIED TO ANY RATING SERVICE FOR A RATING OF THE SERIES 2015 BONDS.

UNDERWRITING

The Series 2015 Bonds are being purchased by Piper Jaffray & Co. (the “Underwriter”), for a purchase price of $15,429,375 (representing the principal amount of the Series 2015 Bonds minus an underwriter’s discount of $395,625, pursuant to a Bond Purchase Agreement, entered into among the Issuer, the Obligor and the Underwriter (the “Bond Purchase Agreement”). Pursuant to the Bond Purchase Agreement, the Obligor has agreed to indemnify the Underwriter and the Issuer against certain liabilities. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2015 Bonds to the public. The obligation of the Underwriter to accept delivery of the Series 2015 Bonds is subject to various conditions contained in the Bond Purchase Agreement. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Series 2015 Bonds if any Series 2015 Bonds are purchased.

The Underwriter may engage in other transactions with the Obligor, including transactions related to the investment of proceeds of the Series 2015 Bonds, in which they could earn additional compensation.

Moreover, the Underwriter is a full service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities

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and services. The Underwriter has provided, and may in the future provide, a variety of these services to the Obligor and to persons and entities with relationships with the Obligor, for which the Underwriter received or will receive customary fees and expenses.

In the ordinary course of its various business activities, the Underwriter, and its officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of its customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the Obligor and/or persons and entities with relationships with the Obligor. The Underwriter may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

MISCELLANEOUS

The references herein to the Act, the Bond Indenture, the Loan Agreement, the Master Indenture, the Deed of Trust and other materials are only brief outlines of certain provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is hereby made to such instruments, documents and other materials, copies of which will be furnished by the Bond Trustee upon request for further information.

Any statements in this Limited Offering Memorandum involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact.

The attached Appendices A through F are integral parts of this Limited Offering Memorandum and should be read in their entirety together with all of the foregoing statements.

It is anticipated that CUSIP identification numbers will be printed on the Series 2015 Bonds, but neither the failure to print such numbers on any Series 2015 Bond nor any error in the printing of such numbers will constitute cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for any Series 2015 Bonds.

The Obligor has reviewed the information contained herein which relates to the Obligor, its property and operations, and has authorized all such information for use in this Limited Offering Memorandum and has approved this Limited Offering Memorandum.

* * *

APPENDIX A

GILBERT AL PARTNERS, LP

A-i

TABLE OF CONTENTS Page

GILBERT AL PARTNERS, LP .............................................................................................................................. A-1

General ............................................................................................................................................................. A-1 History and Background ................................................................................................................................... A-1

GOVERNANCE AND MANAGEMENT .............................................................................................................. A-1

Organizational Structure of the Obligor ........................................................................................................... A-1 The Partnership Agreement .............................................................................................................................. A-1 Conflicts of Interest Policy ............................................................................................................................... A-2 Management of the Community ....................................................................................................................... A-2

THE DEVELOPER ................................................................................................................................................. A-3

McFarlin Group, LLC ...................................................................................................................................... A-3 Developer Experience ...................................................................................................................................... A-4 Senior Management of the Developer .............................................................................................................. A-4 Development Agreement .................................................................................................................................. A-4 Deferral of Development Fees .......................................................................................................................... A-5

THE COMMUNITY ............................................................................................................................................... A-5

Site and Location .............................................................................................................................................. A-5 Assisted Living and Memory Care ................................................................................................................... A-5

MANAGEMENT OF THE COMMUNITY ............................................................................................................ A-6

Surpass Senior Living, LLC ............................................................................................................................. A-6 Senior Management of the Manager ................................................................................................................ A-7 Manager Experience ......................................................................................................................................... A-7 Management Agreement .................................................................................................................................. A-7 Subordination of Management Fees ................................................................................................................. A-8 Employees ........................................................................................................................................................ A-8

MARKETING OF THE COMMUNITY ................................................................................................................ A-8 PRIORITY RESERVATION AGREEMENTS ...................................................................................................... A-9 RESIDENCY AGREEMENTS ............................................................................................................................... A-9 COMPETITION AND SERVICE AREA ............................................................................................................. A-11 INCOME LIMITATIONS ..................................................................................................................................... A-11 DEVELOPMENT OF THE COMMUNITY ......................................................................................................... A-12

The Architect .................................................................................................................................................. A-12 The General Contractor and the Construction Contract ................................................................................. A-12 Cost Summary for the Project ........................................................................................................................ A-14 Construction Monitor ..................................................................................................................................... A-14

PERMITS AND APPROVALS ............................................................................................................................ A-15

Licensure, Accreditations and Affiliations ..................................................................................................... A-15 Permits and Approvals ................................................................................................................................... A-15

OTHER FINANCIAL AND REGULATORY MATTERS .................................................................................. A-15

Property Taxes ................................................................................................................................................ A-15 Environmental Study, Floodplain, Wetlands and Geotechnical Testing ........................................................ A-16

A-1


General

Gilbert AL Partners, LP (the “Obligor”) is a Texas limited partnership that will own and operate a senior care community to be known as “Mariposa Point of Gilbert” (the “Community”) to be built and located on approximately 5.1 acres in the Town of Gilbert, Arizona (the “Site”) and will include an assisted living facility and memory care facility, consisting of approximately 49 assisted living units, which will include approximately 57 licensed assisted living beds, and approximately 30 memory care units, which will include approximately 34 licensed memory care beds (collectively, the “Project”). The Site is located approximately six miles south of downtown Gilbert, 22 miles southeast of downtown Phoenix, and is located less than a half-mile from Mercy Gilbert Medical Center and within 26 miles of Phoenix Sky Harbor International Airport.

History and Background

The Obligor, based in Dallas, Texas, was formed in March 2015 as a Texas limited partnership for the sole purpose of developing, constructing and operating the Community. The general partner of the Obligor, Gilbert AL GP, LLC, a Texas limited liability company (the “General Partner”), was also formed in March 2015. The General Partner, which will be responsible for governing the Obligor, is based in Dallas, Texas and has two members, Matthew J. Johnson and Dustin M. Pridmore. See “GOVERNANCE AND MANAGEMENT – Management of the Community” for more information about the member managers of the General Partner. The Obligor is the initial Member of the Obligated Group and, consequently, is currently the only entity directly obligated to pay debt service on the Series 2015 Bonds. The General Partner’s sole asset is its 0.55% ownership stake in the Obligor.

GOVERNANCE AND MANAGEMENT

Organizational Structure of the Obligor

____________________ (1) Obligated Group Member

The Partnership Agreement

The Obligor is governed by a limited partnership agreement (the “Partnership Agreement”), which specifies that the Obligor will be governed by the General Partner. The General Partner will have complete authority to take, in the name of the Obligor and in accordance with and as limited by the Partnership Agreement, any action that the General Partner reasonably determines to be appropriate under the terms of the Partnership

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Agreement or for the conduct of the ordinary and usual business and affairs of the Obligor subject to the terms and exceptions of the Partnership Agreement. Notwithstanding the foregoing, the Partnership Agreement provides that the General Partner will not be liable or accountable, in damages or otherwise, to the Obligor or any limited partner of the Obligor (the “Limited Partners”) for any loss or liability for any act, or the failure to act, except in the case of its fraud, intentional misconduct or gross negligence in connection with the business and affairs of the Obligor.

The Limited Partners, in their capacities as Limited Partners, may not act for or bind, except for Major Decisions as defined in the Partnership Agreement, the Obligor and may not participate in the general management, conduct or control of the Obligor’s business or affairs. The Limited Partners have no personal liability with respect to the liabilities and obligations of the Obligor, including the Series 2015 Bonds.

The initial members of the General Partner are Matthew J. Johnson and Dustin M. Pridmore, with both also serving as managers. The managers will have the power to do all things and perform any acts necessary and appropriate for successful accomplishment of the business purposes of the General Partner and the Obligor. See “– Management of the Community” below. The members and managers of the General Partner, however, are not liable for the payment of debt service on the Series 2015 Bonds. The Obligor’s General Partner and Limited Partners and their respective ownership interests are set forth below.

TABLE 1 – PARTNERS OF THE OBLIGOR

Name Ownership Interest General Partner 0.55% Limited Partners 99.45%

Conflicts of Interest Policy

From time to time, the Obligor may conduct business transactions with organizations or corporations with which one or more partners, officers or employees may be affiliated. The Obligor has a conflicts of interest policy which requires that any such duality of interest or possible conflict of interest on the part of any Partner be disclosed and be made a matter of record. In addition to disclosure, the policy states that the Limited Partners will determine by a majority in interest of the Limited Partners whether or not a conflict exists, and subsequently determine the course of action the Obligor’s General Partner will take in regards to the proposed transaction.

Management of the Community

The Obligor has entered into a management agreement with Surpass Senior Living, LLC (the “Manager”), a Texas limited liability company and an affiliate of the Obligor, dated September 9, 2015 (the “Management Agreement”), to manage all aspects of the operations of the Community. See “MANAGEMENT OF THE COMMUNITY – Management Agreement” herein. A brief summary of key members of the management team of the Obligor, the Manager and the Developer (defined hereinafter) are included below:

Matthew J. Johnson, Co-Chief Executive Officer, Surpass Senior Living, LLC, Manager, McFarlin Group, LLC (40), is a veteran of the senior housing industry and has spent the past 15 years working exclusively in senior living operations, marketing, finance and development. Over the past six years, Mr. Johnson has coordinated the finance and development of eight senior facilities similar to the Community with resident capacity of approximately 1,000 beds. Over the past two years, he has spent significant time coordinating and overseeing the operations and marketing programs at facilities owned by McFarlin Group Senior Living Investments, LLC. He is certified as an Assisted Living Manager in the State of Texas. Prior to forming the Developer in early 2008 with Dustin M. Pridmore, Mr. Johnson was a Vice President with Greystone Communities, Inc. in Irving, Texas. From 2001 to 2003, he was a Regional Marketing Manager responsible for definition of resident programs and marketing and initial leasing to residents for various senior living projects across the United States. From 2003 to 2008, he led the planning and structuring new senior living projects, coordinated and directed development and construction activities and coordinated pre-opening and fill-up operational activities (including all licensures). Mr. Johnson has had overall responsibility for senior living start-up projects with project budgets ranging from approximately $15 million to $240 million. He has overseen the planning and/or development of over 28 senior facilities in 14 states with total debt exceeding $550 million. Mr. Johnson received his Bachelor of Business Administration with a double major in Finance and Real Estate Finance from Southern Methodist University in 1998.

Dustin M. Pridmore, Co-Chief Executive Officer, Surpass Senior Living, LLC, Manager, McFarlin Group, LLC (36), has over 10 years’ experience in senior housing finance, development, marketing and management and is certified as an Assisted Living Manager in the State of Texas. He has successfully led the

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operations team in opening new properties and identifying and solving operational challenges. Prior to forming the Developer, he was a Manager at Greystone Communities, Inc. and was responsible for leading the planning, coordinating development, structuring and financing of non-profit senior living projects. Mr. Pridmore has completed financings for over $250 million in project costs with tax-exempt debt. He also led efforts to complete filings to obtain necessary regulatory approvals (e.g. IRS 501(c)(3) determination, state licensing agencies and issuing authorities). Prior to joining Greystone Communities Inc., Mr. Pridmore worked for Accenture, a global management consulting, technology services and outsourcing company. Mr. Pridmore received his Bachelor of Business Administration in Finance from the University of Notre Dame in 2001.

Tiffany Cobern, President & Chief Operations Officer, Surpass Senior Living, LLC (44), has over 20 years’ experience in seniors housing marketing and operations. Ms. Cobern received her Bachelor of Arts in Public Relations with a minor in Marketing from Texas Tech University in 1992. Additionally, Ms. Cobern has served in leading executive management roles with national assisted living providers including Emeritus, Horizon Bay and Enlivant. Experienced in multi-state operations and with diverse markets, Ms. Cobern has spent significant time customizing operations approaches that fit geographic profile sets. Ms. Cobern also possesses a depth of experience in hiring, training and overseeing community, regional, and divisional personnel, having designed customized training programs for various companies to meet specific performance objectives. Ms. Cobern is an occupancy growth strategist who works closely with properties to improve proficiency and remove operational barriers.

Joshua B. Rosen, Vice President, McFarlin Group, LLC (33), has been in the senior living industry for nearly a decade. Mr. Rosen joined the Developer shortly after its formation in 2008 and has assisted in the development, financing and operations of more than $100 million in senior living real estate. Prior to joining the Developer, he was a senior associate at Greystone Communities, Inc. and was responsible for business and development planning, strategic planning and financial advisory services for not-for-profit senior living providers. Mr. Rosen received his Bachelor of Business Administration in Finance from Texas A&M University in 2004.

THE DEVELOPER

McFarlin Group, LLC

Development activities for the Community began in February 2015 with the engagement of McFarlin Group, LLC, a Texas limited liability company formed in January 2008 and an affiliate of the Obligor (the “Developer”), to act as the development consultant for the Community. The Developer has senior living experience that includes the planning, financing and development of over $1 billion in total project costs over the last 15 years and the successful development of over 4,900 senior living units.


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Developer Experience

A list of retirement communities for which the Developer has provided development and marketing services since 2010 are included in “Table 2 – Developer’s Experience.” All of the completed developments were constructed with a gross maximum price contract with excess contingencies used for community upgrades and later held for additional operational contingency. The Community is similar to The Heritage at Twin Creek in Allen, Texas, but has been updated for appropriate building code and licensure requirements in Arizona.

TABLE 2 – DEVELOPER’S EXPERIENCE

Community Location Services Provided Facility Type Year

Developed

Orchard Park of McKinney McKinney, TX Development, management oversight, marketing and sales oversight, asset management

Assisted Living (67 units), Memory Support (30 units)

2010

River Point of Kerrville Kerrville, TX Development, management oversight, marketing and sales oversight, asset management


2011

Orchard Park of Murphy Murphy, TX Development, management oversight, marketing and sales oversight, asset management

Assisted Living (51 units), Memory Support (27units)

2011

Orchard Park of Odessa Odessa, TX Development, management oversight, marketing and sales oversight, asset management, sale broker


2011

Orchard Park of Kyle Kyle, TX Development, management oversight, marketing and sales oversight, asset management, sale broker


2012

Orchard Park at Victory Lakes

League City, TX

Development, management oversight, marketing and sales oversight, asset management, sale broker


2012

Orchard Park at Southfork Pearland, TX Development, management oversight, marketing and sales oversight, asset management, sale broker


2012

The Heritage at Twin Creeks Allen, TX Development, management oversight, marketing and sales oversight, asset management


2014

The Heritage at Westover Hills

San Antonio, TX

Development, management oversight, marketing and sales oversight, asset management


2015

Senior Management of the Developer

Senior management of the Developer involved in the development of the Community include Matthew J. Johnson, Dustin M. Pridmore and Joshua B. Rosen. See also “GOVERNANCE AND MANAGEMENT – Management of the Community” for a description of their relevant experience.

Development Agreement

The Obligor has entered into a development consulting agreement, dated September 9, 2015 (the “Development Agreement”), with the Developer to develop the Site into the Community. Under the Development Agreement, the Developer’s responsibilities include the following: (i) coordinate and assist Obligor with the pre-development and construction of the Project (ii) participate in regular design and production review meetings and review and comment, as may be necessary, on all drawings and specifications for the Project as they are prepared by the Architect (as defined below); (iii) make recommendations regarding the final plans and specifications to facilitate the bidding and awarding of the Construction Contract (as defined below); (iv) review the final plans and specifications with the Architect and the General Contractor (as defined below); (v) monitor the submittal process to ensure review of owner-interfaced items; (vi) perform such duties, as may be necessary, to coordinate completion of construction of the Project in a workmanlike manner and in accordance with the final drawings and specifications, subject to field changes and minor design changes approved by the Obligor; (vii) prepare or cause to be prepared, for review and approval by the Obligor, a time line which incorporates all material Project activities to be performed

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in connection with the development and construction of the Community; (viii) monitor the time line and advise the Obligor of the status of the time line, make recommendations to the Obligor for revisions to the time line based on a schedule of recovery as appropriate; and (ix) use all commercially reasonable efforts to supervise the performance by the design consultants and the General Contractor of their obligations relating to the design and construction of the Project in accordance with the time line and the final plans and specifications. Notwithstanding the above, the Developer shall not be responsible to the Obligor, or any other party for any errors, omissions, breaches or failures thereof, or any damage resulting from the acts or omissions of the Architect, the engineers, the General Contractor and other consultants engaged by the Obligor.

Deferral of Development Fees

The Obligor will pay the Developer development fees (the “Development Fees”) of $788,467 from proceeds of the Series 2015 Bonds deposited in the Project Account of the Construction Fund held by the Bond Trustee under the Bond Indenture, payable as follows: (i) 75% will be paid on a monthly installment basis in twelve equal monthly installments of $49,279 during construction, and (ii) the remaining 25% will be deferred without interest and paid when the percentage occupancy of the assisted living units and the memory care units in the Project is equal to or greater than 85%.

THE COMMUNITY

Site and Location

The Site is an approximately 5.1-acre tract of land located in the Town of Gilbert, Arizona, approximately six miles south of downtown Gilbert, 22 miles southeast of downtown Phoenix, and is one-half mile from Mercy Gilbert Medical Center and within 26 miles of Phoenix Sky Harbor International Airport. The Site is currently zoned for the intended use as an assisted living facility with Alzheimer’s care.

In addition to being close to Mercy Gilbert Medical Center, which was built in 2006, the Site is located approximately one mile south of The Main Street Commons, a recently developed shopping mall and retail center including hotels and conference center.

Assisted Living and Memory Care

The Community will consist of 49 assisted living units and 30 memory care units, and will be housed in a one-story facility encompassing approximately 63,000 square feet. The facility is expected to maintain 91 licensed beds initially, consisting of approximately 57 licensed assisted living beds and 34 licensed memory care beds, but be licensed for 121 beds total, consisting of approximately 61 licensed assisted living beds and 60 licensed memory care beds. All common areas and resident units will be appointed with features to create an inviting, homelike and supportive environment for residents and their family. The Community will be licensed to provide directed care services by the State of Arizona. Some of the common area amenities will include:

• Community Dining Rooms

• Private Dining Room

• Business/Skype Lounge

• Pre-dining Snack & Bar Area

• Outdoor Garden Plaza

• Memory Care Activity Room

• Memory Care Multi-Purpose/Activity Room

• Beauty Salon/Barber Shop

• Media/Wellness Room

• Resident Laundry Rooms

• Life Enrichment Center

• Two Interior Courtyards

• Memory Care Quiet Room

• Memory Care Country Kitchen

The assisted living units and memory care units will be available on a monthly market rental basis; the Community will not accept Medicare or Medicaid payments. In return for payment of a monthly service fee (the “Monthly Service Fee”) pursuant to the Residency Agreement (as described below), residents will receive the following from the Community: interior/exterior common area maintenance, ordinary wear and tear maintenance within the resident rooms, utilities except for long distance telephone and premium television, property taxes, insurance, congregate services including meal service, weekly light housekeeping, laundry and linen services, social activities, scheduled local transportation, medication assistance, assistance with the activities of daily living, and an emergency response system. For a more detailed description of the services provided to residents of assisted living

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units and memory care units under the Residency Agreements and the services provided at an additional cost, see “RESIDENCY AGREEMENTS” herein.

The planned layout and unit mix of the assisted living units and memory care units is below:

TABLE 4 – ASSISTED LIVING AND MEMORY CARE UNIT MIX AND FEES

Assisted Living Units(1) No. of Units

No. of Beds

Square Footage

Monthly Service Fees(2)

Studio – Shared 4 8 493 $2,795 Studio – Private 6 6 330 3,095 One Bedroom 15 15 420 3,395 One-Bedroom Deluxe 11 11 504 3,795 One-Bedroom Deluxe 5 5 637 3,995 Two-Bedroom Shared 4 8 671 3,195 Two-Bedroom Private 4 4 671 4,895 Total/Weighted Average 49 57 497 $3,486(3) Memory Care Units(4)

Studio w/ Private Bath 12 12 375 $4,495 Studio w/ Private Bath 6 6 277 4,095 Studio w/ Shared Bath 8 8 287 3,695 Studio w/ Shared Bath 4 8 608 3,395 Total/Weighted Average 30 34 363 $3,977(3)

____________________ (1) In addition to the basic rates shown for assisted living services, four additional levels of care are currently planned for additional monthly

fees of $400, $800, $1,200 and $1,600, respectively. (2) The Monthly Service Fees shown are the single-occupancy rates to be effective upon units being available for occupancy at the Community

in December 2016. Additionally, upon occupancy, residents are expected to pay a $2,000 one-time nonrefundable community fee. (3) The weighted average Monthly Service Fees are computed based on the number of units. (4) In addition to the basic rates shown for memory care services, two levels of care are currently planned for additional monthly fees of $600

and $1,200, respectively.

MANAGEMENT OF THE COMMUNITY

Surpass Senior Living, LLC

The Manager, formed in March 2015, is a privately owned operator of seniors housing communities and is headquartered in Dallas, Texas, and its principals have over 50 years of combined experience in senior living. It is affiliated with the Developer and the Obligor. The Manager was formed with the goal of providing “best in class” care for residents and families. The Manager set out to operate based on the following key principles:

• To differentiate itself, the Manager entered into a full-time relationship with Merit Senior Living (“Merit”), a Professional Employer Organization (“PEO”). Merit has more than 14 years of experience partnering with seniors housing organizations to provide human capital management services essential to their administrative and employment needs.

• The Manager monitors and measures employee motivation and the health of its culture by analyzing data such as employee retention and turnover percentages, soliciting direct feedback from employees and their families, reviewing satisfaction surveys and regularly scanning online reviews, and through the creation of an initiative that offers all employees the opportunity to provide input into company programs and community quality.

• The Manager utilizes technology to operate efficiently with less user input allowing each community to identify trends and react quickly with solutions. In addition, the Manager offers unique software resources to help create value for residents.

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Senior Management of the Manager

Senior management of the Manager involved in the management of the Community include Tiffany Cobern, Matthew J. Johnson and Dustin M. Pridmore. See “GOVERNANCE AND MANAGEMENT – Management of the Community” and “THE DEVELOPER – Senior Management of the Developer” for further information.

Manager Experience

The Manager’s staff has over 50 years of senior living management experience in both independent living, assisted living and memory care communities.

TABLE 5 –MANAGER’S EXPERIENCE

Community Location Facility Type Occupancy

The Heritage at Twin Creeks Allen, TX Assisted Living (49 units), Memory Support (30 units)

N/A(1)

The Heritage at Westover Hills San Antonio, TX Assisted Living (52 units), Memory Support (27 units)

N/A(1)

____________________ (1) Both projects are under construction and currently progressing on schedule and on budget as of September 28, 2015.

Management Agreement

The Obligor has entered into the Management Agreement with the Manager to manage the day-to-day operations of the Community. The Management Agreement provides for the appointment of the Manager by the Obligor as the sole and exclusive manager for the Community.

The primary term of the Management Agreement is for a minimum term of sixty months, commencing six months prior to the opening of the Project or until early termination or unless extended pursuant to the Management Agreement. At least 90 days prior to initial occupancy, the Manager is required to submit detailed operating budget and capital budgets (collectively, the “Management Plans”) to the Obligor for review and approval. The Manager is required to submit subsequent proposed Management Plans 90 days prior to the beginning of each subsequent fiscal year for Obligor review and approval. The Manager is required to exercise reasonable efforts to obtain and keep tenants and will be responsible for exercising reasonable efforts to collect all rents and other charges. Capital acquisitions and improvements over $10,000 are subject to written approval by the Obligor.

The Manager is required to maintain accounting records based on the Obligor’s fiscal year-end, which is currently December 31. The Manager is required to use its own chart of accounts and monthly financial statements. On or before the 20th day of each month during the term of the Management Agreement, the Manager is required to deliver to the Obligor a financial reporting package of the Community’s operating performance and financial condition for the preceding calendar month. The Manager is required to deliver annual financial reports within 45 days after fiscal year-end.

During the term of the Management Agreement, the Manager will, either directly, via Merit or other agents or through supervision of employees of the Community, and subject, when appropriate, to the Obligor’s approval, assist the Obligor in: (a) hiring and maintaining an adequate staff at the Community, including the Community's administrator, evaluating the performance of such employees, and terminating employment when appropriate; (b) recommending and instituting employee benefits; (c) designing and maintaining accounting, billing, resident and collection records, and preparing and filing insurance and other required reports and claims; (d) ordering, supervising and conducting a program of regular maintenance and repair of the Community; (e) purchasing supplies, solutions, equipment, furniture and furnishings for the Community; (f) supervising food service; (g) providing for the orderly payment of accounts payable, employee payroll, taxes and insurance premiums; (h) instituting standards and procedures for admitting residents, for charging residents for services, and for collecting the charges from the residents or third parties; (i) advising and assisting in obtaining and maintaining adequate insurance coverage; (j) establishing and maintaining books of account; and (k) reviewing and assisting in a marketing program.

The management fee (the “Management Fee”) under the Management Agreement will be the greater of a fixed dollar amount (the “Initial Base Fee”) or equal to 5.8% of the current month’s total Community Gross Revenues. The Initial Base Fee is $5,000 per month prior to the opening of the Community and $7,000 per month after the opening of the Community. In no event will the Initial Base Fee for the first six months prior to opening the Community exceed $30,000 in the aggregate, not including the Start-Up Fee (as defined below). In addition to

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the Management Fee, within 10 business days of the effective date of the Management Agreement, the Obligor is required to pay the Manager a start-up fee (the “Start-Up Fee”) not to exceed $5,000. On a quarterly basis during the term of the Management Agreement, the Obligor agrees to pay the Manager a performance incentive fee (“Incentive Fee”) equal to 25% of the positive difference between the Obligor approved budgeted Net Operating Income (“NOI”), and the actual NOI (where NOI is defined as commonly accepted net operating income under Generally Accepted Accounting Principles, but excluding taxes), provided that in no event may the aggregate Management Fee and Incentive Fee paid to the Manager exceed 7.8% of the Gross Revenues of the Community. On a quarterly basis during the term of the Management Agreement, the Management Fee payable to the Manager will, upon mutual agreement of the Obligor and the Manager, be reduced by 25% of the negative difference between the budgeted NOI and the actual NOI (“Adjustment to Management Fee”), provided that in no event will the aggregate Management Fee and Adjustment of Management Fee paid to the Manager fall below 4.8% of the Gross Revenues of the Community. The net cost of transportation and living expenses for employees, officers, and agents of the Manager or outside consultants of the Manager when traveling in connection with the Community are not reimbursable expenses and will be paid by the Manager from its Management Fee.

The Management Agreement may be terminated immediately by the Obligor if the Manager has committed fraud, made a material misrepresentation or embezzled funds, provided that such notice is accompanied by payment to the Manager of the Management Fee then accrued, plus complete reimbursement of the Manager’s costs. The Management Agreement may also be terminated by either party, without cause, upon 90 days’ prior written notice. The Management Agreement is assignable by either party with the written approval of the other party or if the assignment is to an affiliate of the assigning party and the assignment does not violate any provision in any existing loan document or licensing requirement of the state government body. No assignment to an affiliate shall release the assigning party for any liability or responsibility without the express written consent of the other party.

Subordination of Management Fees

The payment of the Start-Up Fee and the Management Fee is 100% subordinate to the payment of debt service on the Series 2015 Bonds.

Employees

The Manager, on the Obligor’s behalf, will hire an Executive Director of the Community who will manage the day-to-day operations of the Community, subject to and in accordance with the budgets, directives, and policies established and issued from time to time by the Obligor with input from the Manager. The Executive Director shall have available the full resources, operating procedures, systems and controls of the Manager to assist in management of the Community. The Manager will recruit, employ on the Obligor’s behalf, train, promote, direct, discipline, suspend and discharge Community personnel; establish salary levels, personnel policies and employee benefits; perform all employer and employee related duties, including Federal and State reports and forms; and establish employee performance standards, all as needed during the term of the Management Agreement to ensure the efficient operation of all departments within, and services offered by the Community. The Manager anticipates that upon stabilized occupancy, the Community will have approximately 43 full-time-equivalent employees, which includes administrative, caregivers, medical technicians, dining, housekeeping, transportation and maintenance staff.

Exact levels of staffing will comply with Arizona law and may be adjusted to complement the changing needs of residents and, at start-up, be appropriate to the occupancy level of the Project. There will be 24-hour staff coverage.

MARKETING OF THE COMMUNITY

Pre-marketing to educate the market regarding the Community’s product offering and secure reservations will occur approximately three to four months prior to the Project receiving a certificate of occupancy. The marketing effort will encompass an approximate five-mile radius around the Community. A community relations director will be hired by the Manager with input from the Obligor and will be responsible, with support from the Manager, for implementing the marketing plan. Marketing efforts may include the development of a Community website, a comprehensive publicity campaign, including community and town outreach, publication advertising, direct mail advertising and listing with senior referral services. Additionally, office space near the Site is planned to be leased prior to completion of construction to facilitate pre-leasing activities.

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PRIORITY RESERVATION AGREEMENTS

In order to reserve an assisted living unit or a memory care unit, a prospective resident (the “Applicant”) will be required to execute a priority reservation agreement (the “Priority Reservation Agreement”). The Applicant may reserve the unit of their choice by paying a reservation fee of $1,500. Prior to move-in, the Applicant will also be required to provide self-disclosure and medical physician evaluation of health status and complete a personal financial statement. The data submitted by each Applicant for residency will be evaluated and reviewed to determine the suitability of such Applicant for residency at the Community prior to move-in. Each Applicant will subsequently be notified of the admissions decision. In the case of each Applicant accepted for residency, a Residency Agreement will be executed by the Applicant and the Manager on behalf of the Obligor. If an Applicant is rejected for residency, their deposit will be refunded within 30 days. The Priority Reservation Agreement can be cancelled for any reason prior to the Applicant’s taking physical possession of their selected unit and a refund will be provided to the Applicant within 14 days.

The Priority Reservation Agreement will reserve the right of the Applicant to choose the selected unit and indicate his or her intent to execute a Residency Agreement upon receipt of final approval. The Priority Reservation Agreement will also provide residents priority admission upon executing a Residency Agreement, which will then replace the Reservation Agreement. The Manager anticipates that Priority Reservation Agreements will begin to be offered during the last three to four months of construction.

Priority Reservation Agreements will only be used during the construction and state licensure phase of the Project. Upon completion of construction and the receipt of state licensure, the use of Priority Reservation Agreements will cease.

RESIDENCY AGREEMENTS

Each resident of the Community will be required to enter into a residency agreement (a “Residency Agreement”). The Manager will consider applications for residence and maintains sole discretion on the decision to accept a resident. An application for residence for an assisted living unit or memory care unit will be accepted only if the resident meets the criteria established by applicable state law and by the Community’s applicable admission and discharge policies. Upon occupancy of an assisted living unit or memory care unit, residents are expected to pay a $2,000 one-time nonrefundable community fee.

Payment of the Monthly Service Fee entitles the resident to occupy an assisted living unit and memory care unit and receive the following basic services:

Housing. A private or shared assisted living or memory care apartment, which includes living space, a bathroom, kitchenette (not included in memory care), bedroom, and storage space.

Kitchenette (assisted living only). Includes a small refrigerator/freezer, microwave oven, and cabinetry.

Meals. Scheduled meals three times per day in the Dining Room.

Personal Care Services. Personal care services such as assistance with activities of daily living, reminders, escorts, and other supportive services as outlined in the personalized Service Plan (as described below).

Daily Observation. Daily observation by staff of a resident’s overall well-being and identification of any changes in the resident’s baseline level of function or health status.

Health and Social Evaluation. Provide ongoing support and assessment of a resident’s health condition and ability to participate or engage in planned social activities according to a resident’s preferences and interests. Aid in determining the extent to which a resident’s needs and preferences can continue to be met on an ongoing basis so that appropriate recommendations can be made if those needs change to the extent that the Community can no longer provide the optimum standard of living at the Community.

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Housekeeping and Laundry. Scheduled weekly light housekeeping services include light apartment cleaning and laundering of linens and towels. Enhanced housekeeping services, such as deep cleaning and personal laundry, are available for an additional fee. The Community also offers on-site resident laundry facilities for those who prefer to manage their own linens/towels and/or personal laundry.

Scheduled Transportation. Use of scheduled transportation to local planned destinations is available based on the utilization of the Community’s passenger vehicle and the driver’s schedule. These transportation services are available within a 10-mile radius of the Community and at scheduled times. The Manager provides enhanced transportation services for an additional charge.

Telephone and Utilities. The Community provides electricity, heating and air conditioning, water and sewer as part of resident’s monthly room and board charges. Other utilities are available for extra charges.

Activities. Planned social, cultural, spiritual, physical, intellectual and recreational activities are available for those who wish to participate.

Emergency Response System. All apartments will be equipped with an emergency response system that is monitored 24 hours per day. The resident is responsible for maintaining the location of the resident’s response pendant at all times. Replacement pendants are available for an additional fee.

Use of Common Areas. This includes all indoor and outdoor facilities designed for resident use.

Maintenance and Repairs. Building maintenance and grounds upkeep including all equipment owned by the Community.

Cable Television. Basic cable TV service is included. Expanded cable services are available through the cable provider for an additional cost at the resident’s personal expense.

High Speed Internet. High speed internet services is available in each resident apartment. Common areas offer wireless access to internet service.

Arrangements for Medical or other Related Services. Assistance in arranging for physician services, physical/occupational/speech therapy, pharmaceutical or medical supply support, and other appropriate services are made available to residents.

Grounds Patrol and Safety Monitoring. 24-hour on-site safety monitoring by trained personnel.

Lockable Space. Upon request, the Manager can provide a lockable space within the resident apartment (size limits apply, typically under-cabinet or over the counter) in which to secure small personal items, valuables or medications that are self-administered.

Each resident of the assisted living units and memory care units will have a personalized plan (the “Service Plan”) in accordance with his or her pre-evaluation (the “Resident Assessment”). The Community has established levels of care for the assisted living units and the memory care units so that each resident can conveniently pay for the level of care required. Within 14 days of a resident’s admission to the Community, the Manager will develop a comprehensive written Service Plan that addresses what services will be provided, who shall provide the services, and when and how often services will be rendered. A licensed nurse will complete the Service Plan in consultation with the resident, family (or designated representative), the resident’s physician and others involved with the resident’s care.

Based on the care needs determined in the Resident Assessment, a level of care fee is determined and charged based on the needs of the resident. The Community currently plans to offer four levels of care in the assisted living units and two levels of care in the memory care units in tiered fee arrangement. See “TABLE 4 - ASSISTED LIVING AND MEMORY CARE UNIT MIX AND FEES” herein for an estimate of the Monthly Service Fees for the different levels of care in the assisted living units and memory care units.

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A resident in the Community may terminate the Residency Agreement upon 30 days’ written notice with the Residency Agreement terminating at the end of the notice period. Upon unfortunate circumstances, including death, the Residency Agreement will terminate after 14 days’ notice. The Manager may terminate a Residency Agreement upon 30 days’ written notice for (i) medical reasons, (ii) the welfare of the resident or others at the facility, (iii) nonpayment of fees when due, (iv) default of the Residency Agreement or a misrepresentation by resident of critical health or financial information, (v) the licensing body or a government entity having jurisdiction determines that the resident is inappropriately housed at the Community or (vi) the Community’s license is revoked or the Community is being closed or otherwise ceases to operate.

COMPETITION AND SERVICE AREA

Information with respect to the service area and competition of the Community can be found under the caption “Characteristics of the Market Area” in the Feasibility Study, which is attached as APPENDIX B to the Official Statement. THE FEASIBILITY STUDY SHOULD BE READ IN ITS ENTIRETY, INCLUDING MANAGEMENT’S NOTES AND ASSUMPTIONS SET FORTH THEREIN.

INCOME LIMITATIONS

The Project will be a “qualified residential rental project” within the meaning of Section 142(d) of the Internal Revenue Code of 1986, as amended (the “Code”). The Obligor will enter into a Land Use Restriction Agreement, dated as of October 1, 2015 (the “Regulatory Agreement”), by and among the Obligor, the Issuer and the Bond Trustee. The Regulatory Agreement requires the Obligor to make at least 20% of the total assisted living units and memory care units (determined both (1) on the basis of treating each living unit and its related shared and common facilities as a “unit” (i.e., 79 units) and (2) on the basis of treating each assisting living bed and/or memory care bed and its related shared and common facilities as a “unit” (i.e., 91 units)) (the “Restricted Living Units”) available for tenants whose incomes do not exceed 50% of the applicable area median income, as adjusted from time to time and as determined by the United States Department of Housing and Urban Development (“HUD”). Consequently, at least 19 of the Restricted Living Units will need to be made available for tenants whose incomes are below 50% of the applicable area median income, as adjusted from time to time. According to HUD, (i) the area median income in Maricopa County in 2015 is $64,000, (ii) 50% of the area median family income in Maricopa County in 2015, as adjusted for an applicable living unit housing one tenant, is $22,400, and (iii) 50% of the area median income in Maricopa County in 2015, as adjusted for an applicable living unit housing two tenants, is $25,600. The Obligor will agree that during the term of the Regulatory Agreement each Restricted Living Unit in the Project will be rented or held for rental on a first-come, first-served basis, to the general public on a continuous basis.

The Regulatory Agreement will also contain provisions for verifying compliance with the terms thereof. The provisions of the Regulatory Agreement discussed herein are intended, among other things, to insure compliance with the requirements of the Code with respect to the excludability of the interest on the Series 2015A Bonds from gross income for purposes of federal income taxation. Upon any breach by the Obligor of any provisions of the Regulatory Agreement, the Issuer or the Bond Trustee may take such actions at law or in equity as deemed appropriate under the circumstances for the protection of the Series 2015A Bond holders, including an action for specific performance of the Regulatory Agreement. Such a breach by the Obligor may result in interest on the Series 2015A Bonds being included in gross income of the holders for purposes of federal income taxation and will also result in mandatory redemption of the Series 2015A Bonds as described in “CERTAIN BONDHOLDERS’

RISKS – Regulatory Agreement.”


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DEVELOPMENT OF THE COMMUNITY

The Architect

ARRIVE Architecture Group, LLC (the “Architect”), is based in Bedford, Texas, specializing in designing senior housing communities. Since July 1998, the Architect has designed over thirty assisted living and memory care communities and many other residential, active adult and skilled nursing facilities. A representative sample of completed senior living projects includes the following:

TABLE 6 – PARTIAL LIST OF ARCHITECT’S PRIOR PROJECTS Community Location Facility Type(1) Orchard Park of Murphy Murphy, TX AL/MC (109 beds) Orchard Park of Odessa Odessa, TX AL/MC (125 beds) Orchard Park of Kyle Kyle, TX AL/MC (141 beds) Orchard Park at Victory Lakes League City, TX AL/MC (136 beds) Orchard Park at Southfork Pearland, TX AL/MC (136 beds) The Heritage at Twin Creeks Allen, TX AL/MC (121 beds) The Heritage at Westover Hills San Antonio, TX AL/MC (114 beds) ____________________ (1) Assisted Living (“AL”); Memory Care (“MC”).

The General Contractor and the Construction Contract

General Contractor. Summit dck, LLC (the “General Contractor”), headquartered in Pittsburgh but with a regional office in Phoenix, Arizona, has a portfolio of projects completed in Arizona and throughout the United States and overseas. The General Contractor’s senior living portfolio experience includes over ten projects in the Phoenix area alone. The General Contractor has been in business for over 90 years and performs over $600 million of work per year ranging from commercial, hotel, governmental, educational facilities and assisted living facilities. The General Contractor has personnel with experience in the areas of project management, project and site superintendent management, accounting, contracts and compliance.

Examples of completed projects by the General Contractor are as follows:

TABLE 7 – PARTIAL LIST OF THE GENERAL CONTRACTOR’S PRIOR PROJECTS

Community Location Facility Type(1)

The Terraces, Phase I, II & III Phoenix, AZ CCRC (248 units) Kivel Campus of Care Phoenix, AZ AL/MC (30 units) Vi at Silverstone Scottsdale, AZ IL (270 units) Freedom Plaza Acute SNF/AL Phase I, II & III Peoria, AZ SN/AL (212 units) The Village at Ocotillo Chandler, AZ IL (120 units) Bethesda Gardens Assisted Living Phoenix, AZ AL (123 units) Kivel Campus of Care (Renovation/Addition) Phoenix, AZ AL (30 units) The Stratford Square at Scottsdale Scottsdale, AZ MC (48 units) Village at Sun City Grande Surprise, AZ IL (252 units) The Fountains Sun City, AZ IL (182 units) Park Regency Assisted Living (Addition) Chandler, AZ AL (42 units) ____________________ (1) Continuing Care Retirement Community (“CCRC”); Skilled Nursing (“SN”); Independent Living (“IL”); Memory Care (“MC”).

Construction Contract. The Obligor has entered into a construction contract for a guaranteed maximum price (the “Construction Contract”) with the General Contractor for the construction of the Community. The terms of the Construction Contract include the provisions summarized below. The commencement of construction is contingent upon receiving notice to proceed (which requires the closing of the Series 2015 Bonds) and all necessary building permits. See “PERMITS AND APPROVALS – Permits and Approvals” herein. The sum of the cost of the Work (as defined therein) and the General Contractor’s fees under the Construction Contract are guaranteed by the General Contractor not to exceed $8,450,000 (the “GMP”), subject to additions and deductions by change order as provided in the Construction Contract. See “SECURITY FOR THE BONDS – Increased Construction Cost Covenant” in the Limited Offering Memorandum. The GMP may also be adjusted for the following: (i) unforeseen conditions;

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(ii) differing site conditions; (iii) adverse weather delays; (iv) significant material, equipment or energy increases through no fault of the General Contractor and (v) items a prudent general contractor could not have reasonably detected or anticipated in the scope of the work on the project.

The following is a summary of some of the primary components of the GMP and aggregate terms of the Construction Contract:

TABLE 8 – THE CONSTRUCTION CONTRACT

Construction Costs $7,890,095

Contractor Contingency 39,000

Contractor Fee 350,000

SubGuard Policy 95,314

Insurance 75,591

Total GMP $8,450,000

Contract. AIA Document A102-2007, Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price.

Date of Commencement and Substantial Completion. The date of commencement under the Construction Contract is the date upon which the General Contractor receives the last of the following: a notice to proceed, receipt of all building permits, the executed Construction Contract, evidence of the Obligor’s Builder’s Risk Policy and the closing of the Series 2015 Bonds. Substantial Completion shall be not later than 330 days from the date of commencement of construction unless extended per the Construction Contract. Substantial Completion is defined within the Construction Contract as the receipt of a Final Certificate of Occupancy.

Liquidated Damages. Liquidated damages for each calendar day delay, as adjusted for time extensions provided by the Construction Contract, subsequent to the dates established for substantial completion are as follows:

TABLE 9 – LIQUIDATED DAMAGES

Days Late 0 to 29 days $0 30 to 90 days $1,650 Over 90 days $3,000

Contract Sum. The GMP under the Construction Contract is $8,450,000.

Applications for Payment. Once per month as submitted by the General Contractor to the Architect and Owner on percentage of completion basis as provided in the Construction Contract.

Final Payment. Final payments under the Construction Contract, constituting the entire unpaid balance, will be made when, (i) the General Contractor has fully performed the Construction Contract, except for the General Contractor’s responsibility to correct and satisfy other requirements, if any, which extend beyond final payment; (ii) the General Contractor has submitted a final accounting for the Contract Sum and final application for payment; (iii) a final certificate for payment has been issued by the Contractor and approved by the Architect; (iv) the Obligor receives an affidavit stating that (A) improvements relating to retainage have been substantially completed except for identified punch list items, (B) all amounts due from the General Contractor to all subcontractors and materialmen have been paid or will be paid out of funds requested to be advanced, (C) that the title company and the General Contractor have received lien waivers or releases from such subcontractors and materialmen in a form acceptable to the Construction Monitor, (D) that the General Contractor and, to its actual knowledge, such subcontractors and materialmen, if union members, have paid all union benefits then due and owing to their respective unions, and (E) stating such other information as the Obligor may reasonably require, and (v) evidence of final lien waivers to date by the General Contractor and all subcontractors working on the Project, which may be conditioned as to the

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final draw request (it being understood that final unconditional lien waivers shall be provided per the Construction Contract).

Dispute Resolution. Arbitration.

Insurance. The General Contractor will purchase and maintain insurance and require each subcontractor to purchase and maintain insurance from claims from the result of General Contractor’s operations and completed operations.

Cost Summary for the Project

The following table is a summary of certain anticipated costs of constructing the Project. For a discussion of certain factors which could cause the actual costs to materially differ from the following estimates, see “CERTAIN

BONDHOLDERS’ RISKS – Construction Risks.”

TABLE 10 – COST SUMMARY FOR THE PROJECT

Direct Construction Costs(1) $9,360,842 Land and Related(2) 2,044,192 Development Fees(3) 788,467 Project Contingency(4) 500,000 Interior Design / FF&E(5) 486,750 Architectural and Engineering(6) 388,490 Startup/Other Costs(7) 606,143

Total Project Related Costs $14,174,884 ____________________ (1) Includes construction, site work, construction management fees and other costs related to the construction of the Project based on the

Construction Contract totaling $8,450,000. (2) Land and land related costs include costs for purchasing the land, engineering reports, permitting and legal fees. (3) The assumed Development Fee is based on the terms of the Development Agreement. (4) The Project contingency is based on management’s assumption and previous project experience. (5) Includes interior design, furniture and equipment. (6) Design and engineering costs are based on contractual agreements with the Architect and Bowman Consulting Group. (7) Includes title insurance, Construction Monitor fees and pre-opening operating and marketing costs, which include salaries, direct marketing

costs, on-site trailer leasing costs, office supplies, transportation costs, temporary lodging costs and other promotional materials.

Construction Monitor

The construction consulting firm of zumBrunnen, Inc., Atlanta, Georgia (the “Construction Monitor”), a full-service national construction consulting company founded in 1989 that specializes in the senior living industry, has been selected and retained by the Obligor to review construction progress, quality, and contractor requisition requests on a monthly basis for the Community during the construction period. Prior to construction, the Construction Monitor’s responsibilities include conducting a review of the Project’s scope, including engineering designs, Project budgets, drawings, specifications, permits, construction contracts and fees, including a meeting with the Project team at the Project Site to verify current site conditions, review outstanding issues and documents, and establish an action list, and issue a final pre-closing report.

In addition to the pre-construction review, the Construction Monitor will continue to be responsible for (i) reviewing and certifying all disbursement requests for the payment of expenses incurred by the Obligor for work, labor, materials and equipment furnished in connection with the construction of the Project that are included in the Construction Contract; (ii) monitoring such items as change orders, budget amendments, updates to the construction schedule, releases of liens, governmental approvals and the final as-built survey; and (iii) reporting to the holders of the Series 2015 Bonds, no less than monthly, the status of the Project including, but not limited to, (a) whether the total Project account balance (including estimated investment income) is sufficient to pay the expected remaining Project costs of completing the Project in accordance with the Project budget and that there is no Project deficit; and (b) the current timing of the Project.

The Construction Monitor will hold a monthly Project review meeting during which the Construction Monitor will approve each construction draw and determine, among other things, that the Project’s construction progress is consistent with approved budgets and timelines, that the work completed is in substantial compliance with the plans and specifications, that on-site material is adequately stored and protected, that estimates of percentages of completion are confirmed by the actual work in place, and that hard cost funds needed to complete the Project are sufficient and available. The Construction Monitor’s monthly review will be summarized in a

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monthly report including dated and labeled color photographs and a narrative summarizing the general status of construction and any specific areas of concern. The Construction Monitor’s final report will be issued upon the final construction draw. The fees for such services will not exceed $35,350 without the written approval of the Obligor and the Construction Monitor. The cost includes a one-time pre-closing document review fee paid at closing. The monthly construction monitoring service is assumed to be payable over a 14 month period, plus reimbursable expenses.

PERMITS AND APPROVALS

The various approvals and permits necessary in order for the Obligor to begin construction on the Community and commence operations are outlined below.

Licensure, Accreditations and Affiliations

The Community will be licensed by the Arizona Department of Health Services (the “Department”) under provisions of the Arizona Administrative Code (the “AAC”) as an assisted living facility providing directed care services. An “Assisted living facility” is defined under the Arizona Revised Statutes, Title 36, Chapter 4, Article 1 as a residential care institution, including an adult foster care home, that provides or contracts to provide supervisory care services, personal care services or directed care services on a continuous basis. Directed care services are defined in the same section as programs and services, including supervisory and personal care services that are provided to persons who are incapable of recognizing danger, summoning assistance, expressing need or making basic care decisions.

The Department requires the architectural plans and specifications for the construction of a health care institution (e.g., an assisted living facility) comply with the physical plant codes and standards referenced in the AAC. An application packet including, among other required items, the Community’s architectural plans and specifications will be submitted once a building permit has been issued. The Department may conduct on-site facility reviews during the construction of a health care institution and shall approve or deny the application in accordance with the requirement of the AAC. Prior to this submission, an applicant may submit an abbreviated version of the application for an architectural evaluation. The Developer plans to make this architectural evaluation submittal prior to the Closing. In addition to obtaining an approval of a health care institution’s architectural plans and specifications, an applicant must obtain a health care institution license before commencing operations.

Prior to operating as a health care institution, a provider must submit an application for licensure with the Department. The application for licensure must be filed at least 60 days, but not more than 120 days, before the anticipated operation. Upon receipt of a properly completed application for licensure, the Department conducts an inspection of the health care institution. Once the license is approved it is valid for one year after the date that it is issued.

The Obligor plans to utilize consultants specializing in the licensing process as appropriate to ensure compliance with all licensing requirements. The Obligor does not currently anticipate any delays in acquiring all required licenses.

Permits and Approvals

A site plan permit, minor subdivision plat and building permit must be approved by the Town of Gilbert, Arizona. Throughout the planning of the Project, the Project team has worked with the Town to ensure that the Project plans were developed in conformance with the Town’s regulations. The building permit review process will include review and an approval of the construction plans from the Town’s building departments. See “CERTAIN

BONDHOLDERS’ RISKS – Construction Risks” in the Official Statement. The Obligor does not currently anticipate any delays in acquiring all required permits and approvals.

OTHER FINANCIAL AND REGULATORY MATTERS

Property Taxes

Based on correspondence with the Maricopa County Assessor’s Organizational Exemptions Supervisor, the Obligor anticipates, upon Stabilization, to have annual property tax payments of approximately $181,000. See “Forecasted Statements of Operations and Changes in Partners’ Equity” in APPENDIX B – FINANCIAL FEASIBILITY

STUDY.

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Environmental Study, Floodplain, Wetlands and Geotechnical Testing

A Phase I Environmental Site Assessment report (the “Phase I”) was completed in March 2015 by Terracon Consultants, Inc., an environmental engineering firm located in Tempe, Arizona. The Environmental Assessment included: (i) review of historical data relative to the Site; (ii) examination of the Site; (iii) review of the applicable regulatory database; and (iv) an examination of adjacent properties. The Phase I did not identify any recognized environmental conditions and concluded that no additional investigation was warranted at such time.

* * *

APPENDIX B

FINANCIAL FEASIBILITY STUDY

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert

Financial Feasibility Study

Five Years Ending December 31, 2019

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Financial Feasibility Study Five Years Ending December 31, 2019 TABLE OF CONTENTS Independent Accountants’ Examination Report ............................................................................. 1

Forecasted Financial Statements: Forecasted Statements of Operations and Changes in Partners’ Equity .............................. 4 Forecasted Statements of Cash Flows .................................................................................. 5 Forecasted Balance Sheets ................................................................................................... 6 Forecasted Financial Ratios .................................................................................................. 7

Summary of Significant Forecast Assumptions and Accounting Policies Basis of Presentation ............................................................................................................ 8 Background .......................................................................................................................... 8 Description of the Project. .................................................................................................... 8 Project Timing. ..................................................................................................................... 9 Development of the Project ................................................................................................ 10 Management of the Project ................................................................................................. 11 Regulatory and Land Use Agreement ................................................................................ 12 Construction Contract ......................................................................................................... 13 142(d) Housing Bonds ........................................................................................................ 14 Summary of Financing ....................................................................................................... 15 Description of the Residency Agreement ........................................................................... 17 Characteristics of the Market Area ..................................................................................... 18 Assisted Living Demand Analysis ..................................................................................... 38 Summary of Significant Accounting Policies .................................................................... 42 Summary of Revenue Assumptions ................................................................................... 43 Summary of Operating Expenses ....................................................................................... 46 Assets Limited as to Use .................................................................................................... 47 Property and Equipment and Depreciation Expense .......................................................... 47 Long-Term Debt and Interest Expense .............................................................................. 48 Related Party Transacations ............................................................................................... 50 Current Assets and Current Liabilities ............................................................................... 50

Independent Accountants’ on Supplemental Information ............................................................ 51

INDEPENDENT ACCOUNTANTS’ EXAMINATION REPORT Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Gilbert, Arizona We have prepared a financial feasibility study of the plans of Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert (the “Partnership”), to construct a 49-unit assisted living facility, consisting of 57 beds, and a 30-unit memory care facility, consisting of 34 beds, and supporting common areas (the “Project”). The Project is to be located on approximately 5 acres of land in Gilbert, Arizona and is to be known as “Mariposa Point of Gilbert” (the “Community”). Management of the Partnership plans to engage Surpass Senior Living, LLC as the “Manager” of the Project. Management of the Partnership and the Manager are collectively referred to as “Management”.

The feasibility study was undertaken to evaluate the Partnership’s ability to generate sufficient funds to meet its operating expenses, working capital needs, and other financial requirements, including the debt service requirements associated with the proposed $15,825,000, Arizona Health Facilities Authority First Mortgage Revenue Bonds (“Mariposa Point at Project”), Series 2015 Bonds (the “Series 2015 Bonds”). The Partnership’s underwriter Piper Jaffray & Co. (the “Underwriter”) has indicated that the Series 2015 Bonds will be issued as two series designated as the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”) and as the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), the Taxable Series 2015B (the “Series 2015B Bonds”).

The Partnership also plans to provide $1,900,000 of equity to the Project. The Partnership’s equity combined with the proceeds from the sale of the Series 2015A Bonds, and the Series 2015B Bonds, are to be used as follows:

� To pay all costs for the Project, including development, construction, land acquisition, contingency and architectural costs;

� To fund a Working Capital Fund for working capital requirements; � To fund interest for the Series 2015A Bonds and Series 2015B Bonds for a period of

approximately 12 months (12 month construction period; and � To pay costs associated with the issuance of the Series 2015 Bonds.

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Our procedures included analysis of:

� The Partnership’s history, objectives, timing and financing; � Future demand for the Partnership’s services, including consideration of:

� Socioeconomic and demographic characteristics of the Project’s defined primary market area (“PMA”);

� Locations, capacities and competitive information pertaining to other existing and planned facilities in the PMA; and

� Forecasted occupancy and utilization levels. � Project-related costs, debt service requirements and estimated financing costs; � Staffing requirements, salaries and wages, related fringe benefits and other operating

expenses; � Anticipated monthly fees and per diem charges for the Project’s residents; � Sources of other operating and non-operating revenues; and � Revenue/expense/volume relationships;

The accompanying financial forecast for each of the years in the five-year period ending December 31, 2019 is based on assumptions that were provided by Management. The financial forecast includes the following financial statements and the related summary of significant forecast assumptions and accounting policies:

� Forecasted Statements of Operations and Changes in Partners’ Equity; � Forecasted Statements of Cash Flows; � Forecasted Balance Sheets; and � Forecasted Financial Ratios.

We have examined the financial forecast. Management is responsible for the forecast. Our responsibility is to express an opinion on the forecast based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (“AICPA”) and, accordingly, included such procedures as we considered necessary to evaluate both the assumptions used by Management and the preparation and presentation of the forecast. We believe that our examination provides a reasonable basis for our opinion. Legislation and regulations at all levels of government have affected and may continue to affect the operations of assisted living facilities. The financial forecast is based upon legislation and regulations currently in effect. If future legislation or regulations related to the Partnership’s operations are subsequently enacted, such legislation or regulations could have a material effect on future operations. Management’s financial forecast is based on the achievement of occupancy levels as determined by Management. We have not been engaged to evaluate the effectiveness of Management and we are not responsible for future marketing efforts and other Management actions upon which actual results will depend. The assumed interest rates, principal payments, project costs and other financing assumptions are

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described in the section entitled “Summary of Significant Forecast Assumptions and Accounting Policies.” If actual interest rates, principal payments or funding requirements are different from those assumed in this study, the amount of the Series 2015 Bonds and associated debt service requirements would need to be adjusted accordingly from those indicated in the forecast. If such interest rates, principal payments and funding requirements are lower than those assumed, such adjustments would not adversely affect Management’s forecast. Our conclusions are presented below:

� In our opinion, the accompanying financial forecast is presented in conformity with guidelines for presentation of a financial forecast established by the AICPA.

� In our opinion, the underlying assumptions provide a reasonable basis for Management’s forecast. However, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material.

� The accompanying financial forecast indicates that sufficient funds could be generated to meet the Partnership’s operating expenses, working capital needs and other financial requirements, including the debt service requirements associated with the proposed Series 2015 Bonds, during the forecast period. However, the achievement of any financial forecast is dependent upon future events, the occurrence of which cannot be assured.

We have no responsibility to update this report for events and circumstances occurring after the date of this report.

Atlanta, Georgia September 28, 2015


See accompanying Summary of Significant Forecast Assumptions and Accounting Policies and Independent Accountants’ Examination Report

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Forecasted Statements of Operations and Changes in Partners’ Equity For the Five Years Ending December 31,

(In Thousands of Dollars)

2015 2016 2017 2018 2019

Revenues:Assisted living - 6 1,323 2,548 2,677 Memory support - 7 861 1,709 1,838 Incentives and discounts - (8) (100) (60) (46) Other - 12 136 95 72 Investment income - 21 11 17 30

Total revenues - 38 2,231 4,309 4,571

Expenses:Pre-opening expenses - 350 - - - Assisted living and memory care - 86 580 859 883 Dining services - 19 298 457 476 Administrative & general 2 60 317 349 360 Marketing - 23 173 153 150 Environmental services - 2 35 36 38 Maintenance - 12 92 115 118 Activities - - 28 52 53 Lifestyles - 10 56 75 78 Insurance - 5 83 84 87 Property tax - 10 174 179 183 Utilities - 9 164 169 173 Management fee - 7 121 243 259 Interest expense - 125 1,178 1,178 1,175 Depreciation - 277 445 450 458

Total expenses 2 995 3,744 4,399 4,491

Net income (loss) (2) (957) (1,513) (90) 80

Partners' equity, beginning of year - 1,898 941 (572) (662) Partners' contributions 1,900 - - - -

Partners' equity, end of year 1,898$ 941$ (572)$ (662)$ (582)$



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Forecasted Statements of Cash Flows For the Five Years Ending December 31,


2015 2016 2017 2018 2019Cash flows from operating activities:Net income (loss) (2)$ (957)$ (1,513)$ (90)$ 80$ Adjustments to reconcile change in partners' equity to net cash provided by (used in) operating activities:

Depreciation - 277 445 450 458 Amortization of issuance costs - 11 21 21 21 Net change in current assets and liabilities - (74) (156) (77) (3) Change in accrued interest 122 52 115 - (3)

Net cash provided by (used in) operating activities 120 (691) (1,088) 304 553

Cash flows from investing activities:Construction costs (4,396) (8,640) - - - Developer fees (329) (460) - - - Routine capital additions - - (35) (65) (90) Capitalized interest expense (122) (570) - - - Change in assets limited as to use (12,044) 10,246 1,123 221 454

Net cash provided by (used in) investing activities (16,891) 576 1,088 156 364

Cash flows from financing activities:Deferred financing costs (1,194) - - - - Rebate of commerce authority fees 158 - - - - Deferred developer fees 82 115 - (197) - Equity contribution 1,900 - - - - Issuance of long-term debt - Series 2015A Bonds 14,510 - - - - Issuance of long-term debt - Series 2015B Bonds 1,315 - - - - Principal payments - Series 2015A Bonds - - - - (5) Principal payments - Series 2015B Bonds - - - - (150)

Net cash provided by (used in) financing activities 16,771 115 - (197) (155)

Change in cash and investments -$ -$ -$ 263$ 762$ Cash and investments, beginning of year - - - - 263 Cash and investments, end of year -$ -$ -$ 263$ 1,025$



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Forecasted Balance Sheets For the Five Years Ending December 31,


Assets 2015 2016 2017 2018 2019Current assets:

Cash and investments -$ -$ -$ 263$ 1,025$ Accounts receivable, net - 1 91 176 187 Inventory - 3 12 15 16 Prepaid expenses - 18 64 84 86 Current portion of assets limited as to use - 116 289 328 327

Total current assets - 138 456 866 1,641

Assets limited as to use:Project Account of the Construction Fund 9,450 - - - - Deferred Developer Fee account 82 197 197 - - Working Capital Fund 1,660 1,543 478 454 - Working Capital Fund - Commerce Authority Fee Rebate 158 - - - - Funded Interest Account of the Construction Fund 694 58 - - - Bond Fund - 116 289 328 327 Total assets limited as to use 12,044 1,914 964 782 327

Less: current portion - (116) (289) (328) (327) Total assets limited as to use, net 12,044 1,798 675 454 - Property and equipment 4,847 14,517 14,552 14,617 14,707

Accumulated depreciation - (277) (722) (1,172) (1,630) Property and equipment, net 4,847 14,240 13,830 13,445 13,077 Total Assets 16,891$ 16,176$ 14,961$ 14,765$ 14,718$

Liabilities and Partners' equityCurrent liabilities:

Accounts payable -$ 41$ 145$ 190$ 196$ Accrued expenses - 23 81 106 110 Accrued interest 122 174 289 289 286 Current portion of Series 2015A Bonds - - - 5 5 Current portion of Series 2015B Bonds - - - 150 160

Total current liabilities 122 238 515 740 757

Deferred developer fees 82 197 197 - - Series 2015A Bonds, net of current portion 14,510 14,510 14,510 14,505 14,500 Series 2015B Bonds, net of current portion 1,315 1,315 1,315 1,165 1,005 Issuance costs (1,036) (1,025) (1,004) (983) (962) Total liabilities 14,993 15,235 15,533 15,427 15,300

Partners' equity 1,898 941 (572) (662) (582) Total liabilities and Partners' equity 16,891$ 16,176$ 14,961$ 14,765$ 14,718$



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Forecasted Financial Ratios For the Five Years Ending December 31,

(In Thousands of Dollars, Except for Ratios)

Debt Service Coverage Ratio 2019Net income 80$ Add:

Depreciation 458 Interest expense 1,175

Income Available for Debt Service 1,713$ Maximum Annual Debt Service Requirement (a) 1,312$ Debt Service Coverage Ratio (b) 1.31 x(a) Maximum Annual Debt Service Requirements for the Series 2015 Bonds.(b) The Debt Service Coverage Ratio with subordination of management fees would equal 1.50x.

Days' Cash on Hand 2019

Unrestricted Cash and Investments available (c) 1,025$

Total operating expenses 4,491$ Deduct:

Depreciation (458) Amortization (21)

Expenses, net 4,012$ Daily operating expenses (d) 11$ Days' Cash on Hand 93 (c) For the purpose of the feasibility study, no distributions to the Partnership have been assumed.(d) Daily operating expenses are equal to annual operating expenses less depreciation and amortization divided by 365 days.


Summary of Significant Forecast Assumptions and Accounting Policies

See Independent Accountants’ Examination Report B-8

Basis of Presentation The accompanying financial forecast presents, to the best of the knowledge and belief of Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert (the “Partnership”) the expected financial position, results of operations, and cash flows of the Partnership as of and for each of the five years ending December 31, 2019. Accordingly, the financial forecast reflects the judgment of management of the Partnership and the operating manager Surpass Senior Living, LLC (“Surpass”), (collectively “Management”), as of September 28, 2015, the date of this forecast, of the expected conditions and its expected course of action during the forecast period. However, there will usually be differences between the forecast and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Background The Partnership, was formed in March 2015 as a Texas limited partnership for the sole purpose of developing, owning, and operating an assisted living facility providing memory support services to be known as “Mariposa Point of Gilbert” (the “Community”), to be built and located in the Town of Gilbert, Arizona (the “Project”). The Partnership’s mission is to plan, implement, construct and operate an assisted living facility which will support the well-being of its residents and create an active, caring community by providing quality lifestyle and healthcare programs. The development activities of the Partnership were initiated by the McFarlin Group (“McFarlin” or the “Developer”) and McFarlin is the managing member of Gilbert AL GP, LLC the general partner of the Partnership (the “General Partner”). The General Partner will be responsible for governing the Partnership. Description of the Project The Project is proposed to include the construction and equipping of a 79-unit facility, configured to operate approximately 91-beds, providing assisted living and memory support services containing approximately 62,100 square feet containing 49 assisted living units (the “Assisted Living Units”) to provide for 57 license assisted living beds (the “Assisted Living Beds”) and 30 memory support units (the “Memory Support Units”) to provide for 34 licensed memory support beds (the “Memory Support Beds”). The Assisted Living Units and the Memory Support Units will offer private accommodations in studio units, one-bedroom units and two-bedroom units. Certain studio units are designed to be rented privately or to unrelated individuals who will share a bedroom area and bathroom. Common areas at the Project are planned to include courtyards, dining/lounge areas, a laundry facility, pre-dining snack and bar area, business/skype lounge, salon/spa, media/wellness room, and activity rooms. The Project site is situated on approximately 5 acres of land located in the Town of Gilbert, Maricopa County, Arizona.

Summary of Significant Forecast Assumptions Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert and Accounting Policies, Continued


The following table summarizes the type, number, approximate square footage and monthly fees (“Monthly Fees”) for the proposed units for the Project.

Table 1 Proposed Configuration – The Project

Number of Units

Number of Beds(3)

Unit Square Footage

Single OccupancyMonthly

Fees(1)(2)(3)(4)(5) Assisted Living

Studio – Shared 4 8 493 $2,795 Studio – Private 6 6 330 $3,095 One Bedroom 15 15 420 $3,395 One Bedroom Deluxe 11 11 504 $3,795 One Bedroom Deluxe 5 5 637 $3,995 Two Bedroom – Shared 4 8 671 $3,195 Two Bedroom – Private 4 4 671 $4,895

Total/Weighted Avg. – AL 49 57 497 $3,486 Memory Support

Studio w/ Private Bath 12 12 375 $4,495 Studio w/ Private Bath 6 6 277 $4,095 Studio w/ Shared Bath 8 8 287 $3,695 Studio w/ Shared Bath 4 8 608 $3,395

Total/Weighted Avg. – MS 30 34 363 $3,977 Total/Weighted Average at the Project 79 91 446 $3,670

Source: Management (1) The Monthly Fees shown for the Project are assumed to be effective upon opening in December 2016 and reflect the single

occupancy rate. (2) Management assumes approximately 7.5 Assisted Living Units to be double occupied, or approximately 16% of the total

occupied units and approximately 3.7 Memory Support Units to be double occupied, or approximately 13% of the total occupied units. Residents that double occupy a residential unit are each assumed to pay the single occupancy Monthly Fee.

(3) Upon occupancy, Residents are expected to pay a $2,000 one-time non-refundable community fee. (4) Additional levels of care for assisted living are planned as follows: Level I is $400, Level II is $800, Level III is $1,200

and Level IV is $1,600. (5) Additional levels of care for memory care are planned as follows: Level I is $600 and Level II is $1,200.



Project Timing The following table illustrates the anticipated timeline for financing, construction completion and fill-up of the Project.

Table 2 Development Timeline

Closing of bond financing October 2015Construction Permits received / Construction Commences November 2015Substantial construction completed October 2016Obtain licensure for the Project and complete staff training November 2016Assisted Living Units available for occupancy December 2016Memory Support Units available for occupancy December 2016Assisted Living Units achieve stabilized occupancy of 93% April 2018Memory Support Units achieve stabilized occupancy of 93% June 2018

Source: Management Development of the Community The Partnership and McFarlin Group, LLC (the “Developer”) plan to enter into a development agreement (the “Development Agreement”) effective upon permanent financing of the Series 2015 Bonds (as defined later in the report) under which the Developer is to provide development consulting services related to the Community and be responsible for providing planning, development, coordination, monitoring, and consulting services, among other things, related to the Community. The Developer was formed in 2008 and specializes in providing planning, development, marketing, and construction management services to senior housing communities. Since 2008, the Developer has developed and financed nine senior living projects in Texas, acting as the developer and/or owner. The Developer and the Partnership have common ownership interest and are considered related parties As compensation for services rendered the Partnership will pay the Developer a development fee consisting of approximately $788,000 (the “Development Fee”). The Development Fee is payable as follows: (i) 75 percent will be paid in twelve (12) equal monthly installments over the construction period of the Project and (ii) the remaining 25 percent will be deferred and paid when the percentage occupancy of the Project units is equal to or greater than 85 percent occupancy (the “Deferred Developer Fee”), beginning on the date of the closing of the Series 2015 Bonds.



Management of the Project The Partnership plans to enter into a management agreement with Surpass Senior Living, LLC (the “Manager” or “Surpass”) to be effective upon closing of the Series 2015 Bonds to provide the following: pre-development services; operating; marketing; and administrative services for the Project (the “Management Agreement”). The first date upon which the Manager is expected to commence services under the Management Agreement is the date that is six (6) months prior to the opening of the Project (the “Effective Date”). The Manager has common ownership interest with the Partnership and is considered a related party. The Manager was formed in January 2015 initially to manage McFarlin developed properties specializing in providing planning, development, marketing, management and certain consulting services related to senior living facilities on a fee-for-service basis. Headquartered in Dallas, Texas, the Manager currently operates two other retirement communities in Texas and plans to operate all McFarlin developed properties going forward. The Manager does not currently provide similar management services to any unrelated entities. The Manager is required to provide operating cash and capital expenditure budgets; establish a schedule of charges; provide marketing services; coordinate and implement the preparation and/or maintenance for financial and accounting services; maintain operating certificates and other licenses; acquire and maintain equipment which are needed to maintain or upgrade the Project; supervise, hire, promote or discharge any employees; negotiate contracts; and take action with regards to legal proceedings, after notifying the Partnership and obtaining its approval. The Manager will also be responsible for marketing, pre-leasing and maintenance of occupancy levels at the Project and will provide marketing activities such as lead generation; management and coordination of advertising, printing and collateral materials; development of marketing and sales plans; and stabilization of occupancy levels. Pre-leasing is estimated to begin approximately four months before opening of the project. The initial term of the Management Agreement shall commence on the Effective Date and remain effective for a period of sixty (60) months, unless sooner terminated by either party (the “Initial Term” or “Term”). Following the initial term of the Management Agreement, the Partnership or Manager may extend the term by their mutual agreement automatically for twelve (12) months renewal terms. As compensation for providing services, the Partnership shall pay the Manager (a) a pre-opening fee of $5,000 per month for 6 months (not to exceed $30,000) (“Pre-opening Management Fee”) and (b) after opening of the Community $7,000 per month or 5.8 percent of monthly gross revenues, whichever is greater the (“Base Management Fee”). In addition to the Base Management Fee, the following fees are payable to the Manager:

� A “Start-Up Fee” not to exceed $5,000 within ten (10) days of the Effective Date; � On a quarterly basis a performance incentive fee equal to 25 percent of the positive

difference between the Partnership’s budgeted Net Operating Income (“NOI”), and the actual NOI (the “Performance Incentive Fee”). The combined Base Management Fee and



Performance Incentive Fee shall not exceed 7.8 percent of the gross revenues of the Community.

� On a quarterly basis the Base Management Fee may, with the approval of both Manager and Partnership, to be reduced by 25 percent of the negative difference between the budgeted NOI and the actual NOI (“Adjustment to Base Management Fee”), provided that the Base Management Fee and Adjustment to Base Management Fee does not fall below 4.8 percent of the gross revenues of the Community.

The Pre-Opening Management Fee, Base Management Fee, Start-Up Fee, Performance Incentive Fee, and Adjustment to Base Management Fee are collectively referred to as the “Management Fee.” For purposes of the forecast, Management assumes that Management Fees will approximate the greater of $7,000 per month or 5.8 percent of gross monthly revenues during the forecast period. Management Fee Subordination The Management Fee is 100 percent subordinate to the payment of debt service (the “Subordinated Management Fee”). Regulatory and Land Use Agreement The Project will be a “qualified residential rental project” within the meaning of Section 142(d) of the Internal Revenue Code of 1986, as amended. The Partnership will enter into a Regulatory and Land Use Restriction Agreement, (the “Regulatory Agreement”), by and among the Partnership, Arizona Health Facilities Authority (the “Issuer”) and Manufacturers and Traders Trust Company as bond trustee (“the Bond Trustee”). The Regulatory Agreement requires that at least 20% of the residential units are occupied or made available for tenants whose incomes do not exceed 50% of the applicable area median income, as adjusted from time to time and as determined in accordance with applicable Treasury regulations by the United States Department of Housing and Urban Development (“HUD”).



Construction Contract Summit dck, LLC has been engaged to serve as the “General Contractor” for the Project pursuant to AIA Document A101-2007, executed September 15, 2015 between the General Contractor and the Partnership (the “Construction Contract”). The General Contractor has committed to provide all labor, materials, and services, to construct the Project for a Guaranteed Maximum Price of $8,450,000 (the “GMP”) as set forth in the Construction Contract, subject to additions and deductions by change order as provided in the Construction Contract. The construction schedule set forth in the Construction Contract requires that the General Contractor achieve substantial completion of the Project not later than 330 days from the date of commencement. Under the terms of the Construction Contract, if the General Contractor fails to achieve substantial completion of the Project on time, the General Contractor will owe the Borrower liquidated damages per calendar day if a delay in completion of the Project is more than 29 days after the defined date of substantial completion is reached (30-90 days at $1,650 per calendar day and 91+ days at $3,000 per calendar day). The General Contractor will be responsible for providing liability insurance. The commencement of construction is contingent upon receiving notice to proceed (which requires the closing of the Series 2015 Bonds) and necessary building permits. The GMP will also be adjusted for the following: (i) unforeseen conditions; (ii) differing site conditions; and (iii) items a prudent general contractor could not have reasonably detected or anticipated in the scope of the work on the project. Construction costs, construction manager fees, site work, and other costs related to the construction of the Project is assumed to approximate $8,450,000. The following construction and related costs are assumed for the Project:

Table 3 Construction Contract

(Based on Permits of Drawings)

Total sq ft Cost per

sq ft Total Cost

Construction Contract Base Building and general conditions 62,100 $ 116.15 $ 7,213,000 Site work 848,000 Contractor Contingency 39,000

Total Construction Contract (without General Contractor fee) (1) $ 8,100,000 General Contractor Fee 350,000

Total Construction Contract $ 8,450,000 Sources: (1) Based on the schedule of values provided by the General Contractor, approximately 1 percent of the construction budget is

assumed to be used for various allowances.



142(d) Housing Bonds The Series 2015 Bonds (as defined later in the report) are subject to the rules and regulations promulgated under Internal Revenue Code Section 142(d) (“the Guidelines”). To qualify under the Guidelines, among other things, projects must provide residential rental housing (i.e., have separate facilities for living, sleeping, eating, cooking and sanitation within the unit or single-room occupancy units with shared facilities for eating, cooking, and sanitation) without continual or frequent nursing, medical, or psychiatric services and the project must meet at all times one of two requirements, elected by the Partnership at the time of issuance, as outlined below:

(A) 20/50 Test: The facility meets the requirements of this test if 20% or more of the units are occupied by individuals whose income is 50% or less than the area median gross income.

(B) 40/60 Test: The facility meets the requirements of this test if 40% or more of the units are occupied by individuals whose income is 60% or less than the area median gross income.

At the time of issuance, the Partnership plans to elect the 20/50 Test. Based on a 20/50 election by Management, at least 20 percent of the residential units must be occupied by individuals whose aggregate household annual income is less than or equal to 50 percent of the area median gross income for Maricopa County, as adjusted for household size. According to HUD’s 2015 statistics, 50% of the median income in Maricopa County, Arizona is $22,400 for a residential unit with one tenant and $25,600 for a residential unit with two tenants. While the 50 percent median income limitation in Maricopa County falls below the income qualifications established for the Project, Management assumes that alternative sources of income from family members as well as the “spend down” or proceeds from an asset base will be available to residents.

The determination of resident income related to the 20/50 test shall be made at least annually for each unit on the basis of current income of the residents. Management will be required to submit an annual certification as to whether the Project continues to meet the requirement of subsection 142(d). Management is responsible for defining specific marketing strategies to market the community to potential residents that meet the low income criteria (“Qualified Income Residents”) while having sufficient assets to pay the full monthly fee via a spend down of assets, which is common use of assets by senior needing to afford healthcare services. Management plans to evaluate the total assets of prospective residents including home values, investments, and other assets prior to their admission. The expectation is that a potential resident would have sufficient assets to cover any short fall between the resident’s annual income and the annual cost of residing in a unit. Management has forecasted that the majority of the Project’s residents will be able to pay the market-rate rents forecasted for the Project through the utilization of the individual’s annual income and the spend down of assets, including proceeds from the sale of a primary residence and other alternative sources.



Summary of Financing Total financial requirements for the Project are assumed to approximate $17,725,000. The Partnership plans to be funded primarily through the issuance of approximately $15,825,000 of Arizona Health Facilities Authority First Mortgage Revenue Bonds (“Mariposa Point of Gilbert Project”), Series 2015 Bonds, in addition to equity. Management has assumed the following sources and uses of funds in preparing the financial forecast based upon information provided by the Partnership’s underwriter Piper Jaffray & Co. (the “Underwriter”).

Table 4 Sources and Uses of Funds

(In Thousands) Sources of Funds:

Series 2015 Bonds Series 2015A Bonds (1) $14,510 Series 2015B Bonds (1) 1,315

Total Series 2015 Bonds 15,825 Equity (2) 1,900

Total Sources of Funds $17,725 Uses of Funds: Direct construction costs (3) $9,361 Land (4) 2,044 Architectural and engineering/Interior design 5) 388 Project contingency (6) 500 Furniture fixtures & equipment (7) 487 Preopening expenses/Advertising and marketing (8) 350 Development fee (9) 788

Miscellaneous/Indirect construction costs (10) 257 Total Project Related Costs $14,175

Working Capital Fund (11)(14) 1,662 Capitalized Interest Account of the Project Fund12) 694Cost of issuance and other costs (13)(14) 1,194

Total Uses of Funds $17,725

Sources: Management and the Underwriter



(1) According to the Underwriter, the Issuer will issue fixed rate term bonds (the “Series 2015 Bonds”) consisting of the following structure and terms

� $14,510,000 of non-rated tax-exempt fixed rate term bonds (the “Series 2015A Bonds”); and

� $1,315,000 of non-rated taxable fixed rate term bonds (the “Series 2015B Bonds”). (2) Equity in the amount of $1,900,000 is assumed to be provided by the Partnership to fund Project related

costs. (3) Construction costs, contractor fees, site work, and other costs related to the construction of the Project

is assumed to approximate $9,361,000, based on a GMP contract totaling $8,450,000 provided by the Partnership’s general contractor, Summit dck, LLC, (the “General Contractor”). General Contractor’s contingencies totaling $39,000 have been included within the GMP.

(4) The Partnership plans to purchase an approximately 5-acre land parcel (the “Land Parcel”) from VWP Val Vista Land, LP for the purchase price of $2,044,000 based on the land purchase agreement dated February 17, 2015 (the “Land Purchase Agreement”).

(5) Design and engineering costs are assumed to be approximately $388,000 based primarily on a contractual agreement with the Partnership’s architect, Arrive Architecture Group.

(6) The Project contingency outside the Contract Sum for the Project is assumed to approximate $500,000, approximately 5.3 percent of the overall Project construction budget.

(7) Furniture and equipment are assumed to be approximately $487,000 based on a contractual agreement with Conley Design.

(8) Pre-opening costs including Management Fees, advertising and marketing costs are assumed to approximate $350,000.

(9) The Development Fee is assumed to approximate $788,000. (10) Miscellaneous and indirect construction costs include brokerage fees, title costs, engineering reports,

permitting costs, low voltage, accounting and other legal fees, among other miscellaneous costs. (11) The deposit to the “Working Capital Fund” is assumed to approximate $1,662,000 to provide working

capital for start-up costs and operating deficits during fill-up. (12) The Underwriter has estimated $694,000 to be used to fund interest for approximately 12 months (12

months construction) from the date of issuance on the Series 2015A Bonds and Series 2015B Bonds. (13) Costs of issuance related to the Series 2015 Bonds approximate $1,194,000 and include Underwriter

fees, accounting fees, legal fees, the bond issuance fees, the cost for the printing of the preliminary and/or final official statement and other miscellaneous financing costs. Within the cost of issuance is a refundable fee to the Arizona Commerce Authority of approximately $158,000.

(14) After financing of the Project, Management plans to include the refundable fee to the Arizona Commerce Authority in the working capital fund upon receipt of the refund for start-up costs and operating deficits during fill-up.



Description of the Residency Agreement

A prospective resident (“Resident”) of an Assisted Living Unit or Memory Support Unit will be required to sign a resident agreement (“Resident Agreement”) prior to assuming occupancy at the Project. The Resident Agreement term is month-to-month and will automatically renew for the following month unless the Community provides 30 days written notice of termination or the Resident provides 30 days written notice of termination of the Resident Agreement (14 days for unfortunate circumstances e.g., death).

The Community shall not admit any Resident if the Community is not able to meet the care needs of the Resident, within the scope of services authorized by such law, and within the scope of services determined necessary within the Resident’s service plan. The Community shall conduct an initial pre-evaluation of the prospective resident to determine whether or not the individual is appropriate for admission (“Resident Assessment”) and is required to re-evaluate the Resident quarterly. If, at any time, the Community determines that a Resident is in need of continual or frequent nursing, medical or psychiatric care, the Resident Agreement is assumed to terminate and such Resident shall be transferred to an appropriate healthcare facility.

Each Resident will have a personalized service plan (the “Service Plan”) in accordance with his or her Resident Assessment. Payment of the Monthly Fee entitles the Resident to occupy an Assisted Living Unit or Memory Support Unit and receive the following basic services and amenities (“Personal Services”):

� Three meals per day and daily snacks; � Scheduled Community activities; � Routine maintenance; � Personal care services such as assistance with activities of daily living, reminders, etc.; � Emergency Call System; � Weekly light housekeeping and flat linen and laundry service; � Heat, air-conditioning, electricity, and water; and � Scheduled transportation.

The following additional Personal Services are assumed to be offered to Residents for additional fees:

� Additional care services; � Personal Laundry; � Guest meals; � Ancillary services (e.g. incontinence fee, pharmacy management); � Additional housekeeping services;



Characteristics of the Market Area Assumptions for the future utilization of the Project were developed by Management based on analysis of the following factors that may affect the demand for the Project’s accommodations and services:

� Site description and general area analysis; � Defined primary market area for the Project; � Demographic and socioeconomic characteristics of the defined primary market area; � Estimated age- and income-qualified households within the defined primary market area; � Description and utilization of existing and proposed comparable assisted living and memory

support communities within the defined primary market area; and � Penetration rates and bed need potential for assisted living and memory support services.

Each of the above factors and the resulting assumed utilization of the Project are described in the following sections. Site Description

The Community is to be located on approximately 5 acres near the intersection of S. Mercy Road and N. Val Vista Drive in Gilbert, Maricopa County, Arizona (the “Project Site”). The Project Site, which is approximately six miles southeast of Downtown Gilbert, is located within one-half mile south of Gilbert Mercy Hospital and one-mile south of a newly developed shopping mall, retail, hotel and conference center called “The Main Street Commons.” General Area Analysis Highways

The Project Site is located less than one-mile south of Santan Freeway or 202 Loop, which travels northeast from the Gilbert area providing access to Mesa and travels west to Chandler connecting to Interstate 10 (“I-10”). I-10 is the fourth longest interstate highway in the United States, stretching west to east from Santa Monica, California to Jacksonville, Florida. Santan Freeway’s connection to I-10 provides the project access to downtown Phoenix, located approximately 30 miles northwest of the Project Site. I-10 also provides access to Interstate 17 (“I-17”) to the north and Interstate 8 (“I-8”) to the south. I-17 is a north/south freeway that originates in Phoenix and travels north to Flagstaff. I-8 originates in Arizona approximately 45 miles south of the Project Site and travels west to San Diego, California.

Airports

The Phoenix-Mesa Gateway Airport (“AZA”) is located approximately 10 miles northeast of the Project Site and provides domestic commercial flight services through Allegiant Airlines to 35 domestic locations across the Western and Midwestern United States.

The closest international airport, located approximately 26 miles from the Project, is Phoenix Sky Harbor International Airport (“PHX”). PHX is one of the ten busiest airports in the United States,



with more than 1,200 aircraft arriving and departing daily. PHX offers flights to 80 domestic and 20 international destinations.

Hospitals The following table identifies the closest hospital access and medical center to the Community.

Table 5 Hospitals Near the Community

Hospital Name Location

Driving Miles from the

Community Type Number of

Beds

Mercy Gilbert Medical Center Gilbert 85297 .5 Short Term Acute Care 212

Gilbert Hospital Gilbert 85295 6.5 Short Term Acute Care 19

Banner Gateway Medical Center Gilbert 85234 9.1 Short Term Acute Care 165 Source: American Hospital Directory, April 2015.

Unemployment

The unemployment trends for the Town of Gilbert, the Phoenix Metropolitan Statistical Area (“MSA”), Maricopa County, Arizona and the United States are shown in the following table.

Table 6 Unemployment Trends

2012 2013 2014 2015 Gilbert (1) 6.5% 5.5% 5.2% 4.7%

Phoenix-Mesa MSA(1) 8.7% 7.4% 6.7% 6.0%

Maricopa County(1) 8.6% 7.3% 6.6% 5.9%

State of Arizona(1) 9.5% 8.4% 7.8% 6.9%

United States(1) 8.9% 8.1% 7.4% 6.4%

Source: U.S. Department of Labor, Bureau of Labor Statistics, April 2015 (1) Data for Gilbert, the Phoenix MSA, Maricopa County, Arizona, and the United States is through April 2015.



Market Area Real Estate

The ability of potential residents to sell their home prior to assuming occupancy at a senior living community may have an impact on the ability of residents to pay the required monthly fee. As noted later in the report, non-income-qualified seniors may have an asset base that provides the financial means to afford this level of care. The following table summarizes the real estate statistics for the Gilbert area.

Table 7 Market Area Real Estate Trends

2013 2014 2015(1)

Gilbert Number of homes sold 4,842 4,736 2,042 Average Sales Price $265,179 $276,663 $282,925 Average Days on Market 50 76 79

Source: Realty Times, June 2015 (1) For the five months ending May 31, 2015.



Primary Market Area of the Project

The primary market area for senior living services is typically defined as the geographic area from which the majority of prospective residents and/or their adult child reside prior to assuming occupancy at a community.

Based on discussions with Management and existing senior living providers in the area as well as a significant time spent in the Gilbert area, the primary market area for the Project has been carefully defined to be a polygon area that is bordered by the following routes: E. Baseline Road to the north; S. Power Road to the east; E. Hunt Highway to the south; and S. Arizona Avenue (Highway 87) to the west that surround the Project site (the “PMA”). The PMA lies in Maricopa County and spans approximately six miles from north to south, and five miles east to west at its widest and longest points.

The following table lists the nine zip codes and towns associated with the polygon border comprising the PMA.

Table 8 The Primary Market Area Zip Codes

City Zip Code City Zip Code Chandler 85225 Gilbert 85295(1)

Gilbert 85233 Gilbert 85296 Gilbert 85234 Gilbert 85297 Chandler 85249 Gilbert 85298 Chandler 85286

Source: Management (1) The Project is to be located in zip code 85295.



The following map depicts the PMA, the Project, the five comparable existing assisted living and memory support communities in the PMA and two comparable planned assisted living and memory support communities located within the PMA.

Legend The Primary Market Area

The Project

Existing Communities within the PMA

1 – The Oaks at Gilbert 2 – Generations at Agritopia 3 – Sunrise of Gilbert 4 – Brookdale North Gilbert 5 – Silver Creek Inn

Planned Communities within the PMA

6 – American Orchid 7 – Savanna House Assisted Living

PMA

Arizona

Source: Microsoft MapPoint and MapInfo



Population

The U.S. Census Bureau has collected demographic data based on the 2010 census figures. The Nielsen Company, a firm that specializes in the analysis of demographic data, has extrapolated the 2010 census information to derive the estimated 2015 figures and projected statistics for 2020. The following table presents population data by age cohort for those ages 75 and older and the anticipated average annual compounded percentage change between 2010 and 2015 and 2015 and 2020 in the PMA, the state of Arizona (“Arizona”), and the United States.

Table 9 Historical, Estimated and Projected PMA, Arizona and United States Populations

2010 Population (Census)(1)

2015 Population (Estimated)

2020 Population (Projected)

Annual Percentage

Change 2010 – 2015

Annual Percentage

Change 2015 – 2020

PMA Total Population 309,392 351,315 388,034 2.6% 2.0% Ages 45 to 54 42,101 51,094 57,228 3.9% 2.3% Ages 55 to 64 26,582 34,028 42,972 5.1% 4.8% Ages 65 to 74 13,607 19,535 24,453 7.5% 4.6% Ages 75 to 84 5,486 7,071 9,982 5.2% 7.1% Ages 85+ 1,696 2,121 2,388 4.6% 2.4%

Total 65+ Population 20,789 28,727 36,823 6.7% 5.1% Total 75+ Population 7,182 9,192 12,370 5.1% 6.1%

Arizona Total Population 6,392,017 6,738,461 7,112,623 1.1% 1.1% Ages 45 to 54 842,546 841,268 848,356 0.0% 0.2% Ages 55 to 64 726,228 794,596 838,168 1.8% 1.1% Ages 65 to 74 497,892 613,231 719,460 4.3% 3.2% Ages 75 to 84 280,539 314,404 360,018 2.3% 2.7% Ages 85+ 103,400 121,400 133,101 3.3% 1.9%

Total 65+ Population 881,831 1,049,035 1,212,579 3.5% 2.9% Total 75+ Population 383,939 435,804 493,119 2.6% 2.5%

United States Total Population 308,745,538 319,459,991 330,689,365 0.7% 0.7% Ages 45 to 54 45,006,716 43,448,967 41,654,110 -0.7% -0.8% Ages 55 to 64 36,482,729 40,586,378 43,127,857 2.2% 1.2% Ages 65 to 74 21,713,429 27,015,466 33,160,425 4.5% 4.2% Ages 75 to 84 13,061,122 13,767,160 15,547,374 1.1% 2.5% Ages 85+ 5,493,433 6,094,345 6,447,122 2.1% 1.1%

Total 65+ Population 40,267,984 46,876,971 55,154,921 3.1% 3.3% Total 75+ Population 18,554,555 19,861,505 21,994,496 1.4% 2.1%

Source: The Nielsen Company



The following table presents the percentage of total population by age group for the targeted age population in the PMA, Arizona and the United States.

Table 10 Percentage of Total Population by Age Cohort

2010 (Census) PMA Arizona United States Age Groupings 45 plus 28.9% 38.3% 39.4% 55 plus 15.3% 25.2% 24.9% 65 plus 6. 7% 13.8% 13.0% 75 plus 2.3% 6.0% 6.0% 85 plus 0.5% 1.6% 1.8% 2015 (Estimated) PMA Arizona United States Age Groupings 45 plus 32.4% 39.8% 41.0% 55 plus 17.9% 27.4% 27.4%

65 plus 8. 2% 15.6% 14.7% 75 plus 2.6% 6.5% 6.2% 85 plus 0.6% 1.8% 1.9%

2020 (Projected) PMA Arizona United States Age Groupings 45 plus 35.3% 40.8% 42.3% 55 plus 20.6% 28.8% 29.7%

65 plus 9.5% 17.0% 16.7% 75 plus 3.2% 6.9% 6.7% 85 plus 0.6% 1.9% 1.9%

Source: The Nielsen Company



Age- and Income-Qualified Individuals for Assisted Living Services Income characteristics have been applied to determine a range of market penetration rates for age-qualified and age- and income-qualified individuals. The income qualification is determined, in part, by Management’s assumption that potential residents with lower income levels will utilize alternative sources of income from family members as well as the “spend down” or proceeds from an asset base to pay for the cost of their care. The following are two sources that contain information about the cost of assisted living care, the income and asset levels of assisted living residents and the sources that assisted living residents use to pay for their care:

� The 2009 Overview of Assisted Living, a collaborative research project by the American Association of Homes and Services for the Aging (now known as LeadingAge), American Seniors Housing Association (“ASHA”), Assisted Living Foundation of America (“ALFA”), the National Center for Assisted Living (“NCAL”) and the National Investment Center (“NIC”) that includes survey data from approximately 500 assisted living communities throughout the United States and personal data from 518 residents of the surveyed communities.

� “Costs and Concerns Among Residents in Seniors Housing and Care Communities: Evidence from The Residents Financial Survey,” published in April 2012 by the Center for Retirement Research at Boston College. The Residents Financial Survey was designed to measure the income and assets of individuals in independent living (“IL”), assisted living (“AL”) and communities that offer both IL and AL. Nearly two thirds of the 2,617 respondents resided in assisted living accommodations.

Table 11 Financial Resources of Assisted Living Residents

2009 Overview of Assisted Living 25th Percentile Median 75th Percentile Mean

Annual Income at Arrival $11,472 $18,972 $36,000 $27,260 Asset Value, including home equity $62,000 $205,000 $564,000 $431,020 Asset Value, excluding home equity $26,125 $125,000 $337,274 $238,924 The Residents Financial Survey (1)

Annual Income Range Freestanding AL AL in Combined IL/AL Less than $24,000 39.9% 34.2% $24,000 - $36,000 24.6% 17.8% $36,000+ 35.5% 48.0%

Total Net Worth Less than $100,000 47.0% 46.4% $100,000 - $500,000 33.3% 30.2% $500,000 - $1,000,000 12.8% 12.9% $1,000,000+ 6.9% 10.5%

Source: 2009 Overview of Assisted Living and The Residents Financial Survey (1) Percentages do not include non-responding and uncertain responses.



Participants in the 2009 Overview of Assisted Living also reported that between 10 and 15 percent of residents in assisted living and assisted living/memory care facilities rely on family to contribute to their cost of care as the primary income source and that between 15 percent and 35 percent of residents rely on family to contribute to their cost of care as a secondary income source. According to The Residents Financial Survey, approximately 25 percent of residents in freestanding assisted living facilities rely on contributions from family as a secondary income source and approximately 80 percent of residents who cannot afford the cost of care with using their personal income will spend down their assets to pay for their care. Based on the information above seniors age 75 and older with annual income $25,000 and higher and homeowners earning between $15,000 and $24,999 are typically considered to be age- and income-qualified for the purpose of calculating assisted living penetration rates. The following table presents the age- and income-qualified households for assisted living services within the PMA.

Table 12 Age- and Income-Qualified Households for Assisted Living Services within the PMA

Age 75+ 2015 (Estimated) 2020 (Projected) Total Households: 4,955 6,502 Household Income

Under $15,000 718 933 Renters $15,000 – 24,999 203 257 Homeowners $15,000 – 24,999 767 972

Total Under $25,000 1,688 2,162 $25,000 – 34,999 781 1,009 $35,000 – 49,999 897 1,176 $50,000 – 74,999 759 1,007 $75,000 – 99,999 376 516 $100,000+ 454 632 Total $25,000+ 3,267 4,340 Total Assisted Living Age- and Income-

Qualified Households – $25,000 Income Qualification(1)

4,034 5,312

Percentage of Assisted Living Age- and Income-Qualified Households – $25,000 Income Qualification

81.4% 81.7%

Source: The Nielsen Company (1) Age- and income-qualified households include households (age 75 and over) with income over $25,000 and homeowners

(age 75 and over) with income between $15,000 and $24,999.



Estimated Number of Age- and Income-Qualified Living Alone and Requiring Assistance The increased size of the private paying frail elderly market has in recent years attracted providers to develop new and creative options for caring for this population. There have been few barriers to entering this market, since existing regulations generally do not restrict or limit supply. Methodologies for projecting bed need or demand for assisted living vary.

Research studies have identified impairment levels in activities of daily living (“ADL”) such as dressing, bathing, eating, toileting, mobility and taking medications, and instrumental activities of daily living (“IADL”) such as meal preparation, home maintenance, shopping and personal finance, all of which generally are used to measure levels of functioning and estimate the care needs of a specific population. The decision by elderly persons to enter an assisted living facility to meet their need for assistance often depends on alternatives available and is somewhat more discretionary than the decision to enter a nursing facility, according to industry research studies.

Population data and income statistics may be utilized to some extent to estimate the number of qualified households (75+) for assisted living services, yet should not be relied upon entirely as a measure of success for a facility. The amount of cross subsidization that occurs between adult caregivers (assumed to be those households aged 45 to 64 years earning in excess of $75,000 annually) and their relatives may provide the financial means for a non-income-qualified senior to afford this level of care. Additionally, non-income-qualified seniors may have an asset base that provides the financial means to afford this level of care.

The following table estimates the number of age- and income-qualified individuals living alone and requiring assistance with ADLs in the PMA. Estimates of the percentage of households requiring assistance and the percentage living alone are based on the 2010 Census.

Table 13 Estimated Number of Age 75+ Assisted Living Qualified Individuals in the PMA

Years 2015 and 2020 2015 2020 Estimated Age–Qualified Households(1)(2) 4,955 6,502

Estimated Age– and Income–Qualified Households(1)(3) 4,034 5,312

Percentage Requiring Assistance(4) 20.1% 20.1%

Percentage Living Alone(5) 45.7% 45.7%

Estimated Number of Age–Qualified Individuals(2) 455 597

Estimated Number of Age– and Income–Qualified Individuals (3) 371 488 Source: The Nielsen Company (1) Based on 2015 estimated and 2020 projected population statistics as provided by The Nielsen Company. (2) Age-qualified includes age 75 and over. (3) $25,000 Income Qualification includes households with annual incomes of $25,000 and over and homeowners with income

between $15,000 and $24,999 annually. (4) Percentage requiring assistance is a weighted average of the percentage of the population requiring assistance with activities

of daily living as determined by the U.S. Census Bureau (Source: U.S. Census Bureau, Americans with Disabilities: 2010. p.5, Washington, DC, July 2012) and the age- and income-qualified households within the PMA.

(5) Based on The Nielsen Company demographic estimates.



Senior Housing Alternatives There is a broad array of housing options available to seniors, from staying in your own home to specialized facilities that provide 24 hour nursing care as follows:

NORCs - Naturally Occurring Retirement Communities (NORCs) include multi-unit buildings which were originally planned for people of all ages, but over time have evolved to include a significant proportion of residents aged 60 and over. NORCs enable seniors to stay in their own homes and access local services, volunteer programs and social activities.

Independent Living - Independent living communities are exclusively for seniors and include those that may be apartments, condominiums and/or free-standing homes where residents have access to on-site amenities and services that typically include 30 meals per month, weekly housekeeping, utilities, scheduled transportation, activities programs, emergency call system in each residence, 24-hour security and maintenance of grounds. Due to the recent trend of the older, frailer senior moving into a senior living establishment, the care for an independent living resident may be similar to that of one in need of assistance.

Assisted Living Facilities - Also known as residential care, board and care, adult care home, adult group home, alternative care facility, or sheltered housing. In general, assisted living is a housing option for those who need help with some activities of daily living, including minor help with medications. Costs tend to vary according to the level of daily help required, although staff is available 24 hours a day. Some assisted living facilities provide apartment-style living with scaled-down kitchens, while others provide rooms. Most facilities have a group dining area and common areas for social and recreational activities.

Memory Care Facilities – Memory care facilities provide care for seniors with neuro-cognitive disorders such as dementia, Alzheimer’s, Parkinson’s and other types of memory problems. Also called special care units (SCUs), memory care units usually provide 24-hour supervised care within a separate wing or floor of a residential facility. A memory care environment is designed for persons with a level of impairment making it unsafe to continue to stay at home, but who do not require the intensive care of a skilled nursing facility. Memory care allows a person experiencing memory loss to maintain a level of independence while relying on the safety and security of being in a residential facility with a professional staff.

Nursing care – Skilled nursing facilities generally provide the highest level of care for older adults outside of a hospital. While they do provide assistance in activities of daily living, they differ from other senior housing in that they also provide a high level of medical care 24 hours per day. A licensed physician supervises each resident’s care and a nurse or other medical professional is almost always on the premises. Skilled nursing care and medical professionals such as occupational or physical therapists are also available.

Continuing Care Retirement Communities (CCRCs) – CCRCs are facilities that include independent living, assisted living, and nursing home care in one location, to allow seniors to stay in the same general area as their housing needs change over time. There is normally the cost of buying a unit in the community as well as monthly fees that increase as you require higher levels of care. It also can mean spouses can still be very close to one another even if one requires a higher level of care.



Description and Utilization of Assisted Living

Assisted living communities typically charge a base monthly rent covering room and board plus level of care fees, depending on the amount of assistance a resident requires. The components of each level of care vary from facility to facility, but many facilities use a point system. Residents who are assessed prior to moving into the facility to determine the amount of assistance they will require. The components that typically determine the level of care a resident requires are bathing, dressing, grooming, mobility, continence, caregiver hours, eating and medication management. The number of points and/or the number of hours necessary to deliver the required care determine which level of care fee will be assessed. Many memory support facilities offer all-inclusive rates.

Assisted living facilities are licensed and regulated by the Arizona Department of Health Services (the “Department”) under the Health Care Institutions: Licensing code, R9-10-801-820. Assisted Living facilities are required by Arizona Revised Statute Title 36, Chapter 4, Article 6, to be under the supervision of a certified manager.

Rule A.R.S. 36-401 of the “Assisted Living Rules” defines an assisted living establishment as follows: “Assisted living facility” means a “residential care institution, including adult foster care, that provides or contracts to provide supervisory care services, personal care services or directed care services on a continuing basis.” No more than two residents may reside in a single unit and the Department subcategorizes assisted living facilities according to size. “An assisted living facility providing services to 11 or more residents is an assisted living center,” and is licensed at the level of services provided for either (1) Supervisory care services, (2) Personal care services, or (3) Directed care services. A facility must submit an application to change a sub classification and must submit a written request to change the level of service provided and comply with additional regulations at each level.

An assisted living center provides a physical environment that is a homelike setting and includes the following elements: a kitchen area with sink, refrigerator, and space for a cooking appliance and food preparation activity; private bathing, washing, and toilet facilities; and sufficient floor space in units accommodating two residents. Assisted living centers must maintain a portion of the center to providing personal care services or directed care services and provide those rooms with a bell or intercom for use in emergencies.

The Assisted Living Rules addresses community based residential care for persons in need of assistance with the activities of daily living, including personal, recreational, supportive, and health related services available to the resident. The rules set forth regulations consistent to the level of services provided and include but are not limited to, licensure and policy requirements; residents’ ability to direct self-care; appropriate staffing levels and certifications; resident rights, contracts, and service terms; physical plant and environmental requirements; medication policies and procedures; food service requirements; architectural and fire and safety requirements. No later than 14 days after the resident’s date of acceptance, the assisted living provider must conduct a comprehensive assessment of the resident with the resident, nurse, manager and case manager and any applicable caregiver or representatives of the resident to set forth and develop a plan of services for the resident and enter into a written service delivery contract with the resident or resident’s representative.



Assisted living facilities providing memory support services in Arizona do not require a special licensure. Based on licensure, the Memory Support Beds will be defined herein under the general term “assisted living.”

The 91 Assisted Living Beds and Memory Support Beds proposed for the Project are subject to licensure by the Department and regulations set forth in the Assisted Living Rules. Market Demand Overview

The National Investment Center for Seniors Housing and Care Industry (“NIC”) is a provider of research studies on demand and supply issues related to senior living. In order to determine general demand or the overall “health” of the market in a metropolitan area, NIC classifies all senior living communities into three categories “Majority Independent Living,” “Majority Assisted Living” and “Majority Nursing” based on the type of care level that comprises the majority of the total units at the community.

NIC defines the Aggregate Penetration rate as a measure of the general saturation of senior housing units in a market area among senior households regardless of ability to pay. NIC calculates the Assisted Living Aggregate Penetration Rate (“AL Aggregate Penetration Rate”) by dividing the total inventory of senior living units at properties where assisted living units comprise the largest share or majority of inventory at the community (Majority Assisted Living) by the number of age 75+ households (excluding an annual income qualification). A lower penetration rate indicates a less saturated market that may be favorable for development.

As shown in the graph below, the AL Aggregate Penetration Rate for the Phoenix MSA is only slightly higher than the Top 32 MSAs, and lower than the AL Aggregate Penetration Rate in the MSAs ranked 32 to 100 and the top 100 MSAs.

Table 14 AL Aggregate Penetration Rates Comparison

Source: NIC Map, 3rd Quarter 2014

4.2%

4.1%

4.9%

4.4%

3.6%

3.8%

4.0%

4.2%

4.4%

4.6%

4.8%

5.0%

Phoenix�MSA Top�32�MSAs 32��100�MSAs Top�100�MSAs



Comparable Assisted Living Facilities within the PMA

The Assisted Living Facilities with a majority of residents receiving subsidies and facilities with a capacity of less than 20 beds are not considered to be comparable with the Project due to the small size of these facilities and their typically low fee structure.

The following table profiles the Project and five comparable existing communities within the PMA that offer services similar to those planned to be provided to residents at the Project. The unit configuration of the Project and the competitive communities are shown in both units and beds; however, the bed capacity and penetration rate analyses following are calculated using beds.



Table 15 Existing Comparable Assisted Living Facilities Within the PMA

The Project The Oaks at Gilbert Generations at Agritopia Location Gilbert

85297 Gilbert 85297

Gilbert 85296

Miles from the Project – 1.3 5.8

Sponsor/Developer Gilbert AL Partners, LP Merrill Gardens, L.L.C. Retirement Community Specialists

Year Opened – May 2015 July 2014 For-profit/Not-for-profit For-Profit For-Profit For-Profit Unit/Bed Configuration

Assisted Living Units/Beds (AL) Units Beds Units Beds Units Beds Studios 10 14 47 47 18 18 One-bedroom apartments 31 31 25 25 36 36 Two-bedroom apartments 8 12 7 7 7 7

Total AL 49 57 79 79 61 61 Memory Support Units/Beds (MS) Studios with Shared Bath 12 16 20 40 12 12 Studios with Private Bath 18 18 14 14 12 12

Total MS 30 34 34 54 24 24 Total AL and MS 79 91 113 133 85 85 Square Footage Assisted Living Units:

Studios 330 – 493 340 – 473 – One-bedroom apartments 420 – 637 475 – 557 577 – 988 Two-bedroom 671 642 – 908 1,026 Memory Support Units: Studios with Shared Bath 287 – 304 340 – 473 402 Studios with Private 277 – 375 337 – 417 402 Assisted Living Monthly Fees – Basic Studios $2,795 – 3,095 $3,250 – 3,350 $3,450 – 3,650 One-bedroom $3,395 – 3,995 $3,495 – 3,895 $3,750 – 4,050 Two-bedroom $3,195 – 4,895 $3,995 – 4,895 $4,550 – 4,950 Additional Levels of Care Level I $400 $400 – Level II $800 $750 – Level III $1,200 $1,100 – Level IV $1,600 $1,450 – Level V N/A $1,800 – Memory Support Monthly Fees – Basic Studios with Shared Bath $3,395 – 3,695 $3,250 – 3,450 $4,550 Studios with Private $4,095 – 4,495 $3,495 – 3,895 $5,550 Additional Levels of Care Level I $600 $400 – Level II $1,200 $750 – Level III – $1,100 – Level IV – $1,450 –

Occupancy Rate – 45% AL/ MS 100% AL/MS

Source: Surveys conducted by Dixon Hughes Goodman LLP through May 2015.



Table 15 (Continued) Existing Comparable Assisted Living Facilities Within the PMA

Sunrise of Gilbert Brookdale North Gilbert Silver Creek Inn Location Gilbert

85296 Gilbert 85233

Gilbert 85296

Miles from the Project 6.8 10.8 11.1 Sponsor/Developer Sunrise Senior Living Brookdale Senior Living Koelsch Senior Communities Year Opened August 2008 January 1998 September 2012 For-profit/Not-for-profit For-Profit For-Profit For-Profit Unit/Bed Configuration

Assisted Living Units/Beds (AL) Units Beds Units Beds Units Beds Studios 20 20 – – – – One-bedroom apartments 18 18 – – – – Two-bedroom apartments 13 13 – – – –

Total AL 51 51 – – – – Memory Support Units/Beds(MS) Studios with Shared Bath 5 10 16 32 27 54 Studios with Private Bath 16 16 18 18 13 13

Total MS 21 26 34 50 40 67 Total AL and MS 72 77 34 50 40 67 Square Footage Assisted Living Units:

Studios 360 – – One-bedroom apartments 440 – – Two-bedroom 515 – – Memory Support Units: Studios with Shared Bath 515 352 – 464 350 Studios with Private 360 – 515 252 – 464 175 Assisted Living Monthly Fees – Basic Studios $3,500 – – One-bedroom $4,530 – – Two-bedroom $5,500 – – Additional Levels of Care Level I $46 – – Level II $67 – – Level III $89 – – Level IV $109 – – Level V – – – Memory Support Monthly Fees – Basic Studios with Shared Bath $2,850 $4,170 – Studios with Private $3,600 – 4,200 $4,545 – Additional Levels of Care Level I $46 $775 $4,550 – 5,950 Level II $67 $1,075 $5,000 – 6,400 Level III $89 $1,375 $5,450 – 6,850 Level IV $109 $1,675 $5,900 – 7,300

Occupancy Rate 100% AL/MS 100% MS 87% MS

Source: Surveys conducted by Dixon Hughes Goodman LLP through May 2015.



Notes to Table: The Project (a) Monthly Fee and level of care fees shown for the Project are assumed to be effective upon opening in December

2016. (b) The Project will require Residents to pay a one-time non-refundable community fee of $2,000 upon move-in. The Oaks at Gilbert (a) A one-time non-refundable community fee of $2,500 is required for new residents. (b) The second person fee is $650 per month plus any additional level of care monthly fees. (c) The Oaks at Gilbert opened in May 2015 and is still in its initial fill-up period. (d) Memory care also offers an additional fifth level of care for $1,800 per month. Generations at Agritopia (a) A one-time non-refundable community fee of $2,750 is required for new residents. (b) The second person fee is $650 per month. (c) Generations at Agritopia offers both independent living and assisted living in the same 74-unit apartment building

on the campus. The 74 beds are all licensed for assisted living to be flexible based on resident care level demand. Management of Generations at Agritopia indicated that approximately half or 50 percent (37 beds) of the units are currently being utilized by residents requiring assistance. Therefore, for the purposes of this analysis, 37 beds are assumed to be assisted living units. The 24 assisted living and 24 memory care beds are located in a separate secure building in four 12-unit pods. Therefore, the following penetration calculation assumes a total of 61 assisted living units (37 apartments and 24 secured units) and 24 memory care units.

Sunrise of Gilbert (a) A one-time non-refundable community fee starting at $2,500 is required upon occupancy. (b) Depending on unit size, the second person fee for assisted living ranges from $100 to $110 a day. (c) Sunrise of Gilbert also offers 67 independent living units. These units range in price from $2,350 to $4,400 a month. (d) The second person fee for independent living is $500 a month. Brookdale North Gilbert (a) A one-time non-refundable community fee starting at $2,500 is required upon occupancy. (b) There is a second person monthly fee of $750 for memory support care at Emeritus at Gilbert. (c) Emeritus at Gilbert offers six different levels of care. The monthly pricing for each level is as follows: Level I is

$775, Level II is $1,075. Level III is $1,375, Level IV is $1,675, Level V is $1,975, and Level VI is $2,275. Silver Creek Inn (a) A one-time non-refundable community fee starting at $2,000 is required upon occupancy. (b) There is a second person monthly fee of $1,800 plus any additional level of care fee for memory care. (c) Silver Creek Inn does not offer a separate base rate. Instead, the base rate for each room is included in the level of

care fee. Pricing for a semi-private room can range from $4,550 – $5,900 depending on level of care needed. Pricing for a private room can range from $5,950 – $7,300 depending on level of care needed.



Comparable Assisted Living Facilities Planned or Under Construction within and near the PMA

Based on discussions with representatives of the local planning and permitting agencies and interviews with management at existing retirement communities, there were two potential assisted living and/or memory support developments identified within the PMA. These two proposed developments have a combined total of 208 planned assisted living and memory care beds to be located within the PMA, through August 2015.

American Orchid, located approximately nine miles north of the Project, at the intersection of Guadalupe Road and Lindsay road, is a planned 73-bed assisted living and memory support facility currently in the construction stage of development. This facility will be owned by the franchise senior living company, Beehive Homes. According to Beehive Homes, this facility is expected to be ready for move in January 2016. American Orchid will offer both traditional assisted living and memory care beds in small and large private bedrooms, as well as shared private rooms. Prevarian Senior Living has proposed to develop an assisted living and memory care facility to be called “Savanna House” and located on a 6.8 acre south of the southeast corner of Higley Road and Baseline Road in Gilbert. The proposed site is approximately eight miles northeast of the Project Site within the PMA. Savanna House would be constructed as a two-story 73 unit/87-bed assisted living facility as well as a one-story 42-unit/48-bed memory care community that would be developed in 16-bed neighborhoods. The proposed unit mix of Savanna House would consist of studio units, one-bedroom units and two-bedroom units ranging from 320 to 949 square feet. Plans for the development of Savanna House have been approved and permitted for construction by July 15, 2015. Due to locations of American Orchard and Savanna House in the northern section of the PMA, similar to the locations of Brookdale North Gilbert and Silver Creek Inn who experienced a 50 percent draw from residents in the immediate Gilbert area surrounding the Project, the planned beds at these proposed developments will be considered 50 percent competitive in the following bed need and penetration rate calculations. Additional Health Care Planned Developments Lindsay Square is in the designing process to construct a skilled nursing facility located at the intersection of Lindsay Road and Williams Field Road approximately four miles north of the Project Site.��According to the Gilbert Planning Department, the plans for Lindsay Square mention assisted living and memory care as phases of development; however, those phases are undetermined at this time. The plans for Lindsay Square are still under review and construction timing has not been determined. Because of the preliminary nature of this proposed health care development, these units will not be included in the penetration rate analysis that follows.�



Summary of Existing and Planned Assisted Living Beds There are 191 assisted living beds and 221 memory support beds at the five comparable existing assisted living communities located within the PMA. Including the 57 assisted living beds and 34 memory support beds planned for the Project as well as the 160 assisted living beds and 48 memory support beds planned in the PMA, the total number of existing and planned assisted living and memory support beds in the PMA is 711. Based on our market site visits and discussions with management of the competitive communities, two existing communities, Brookdale North Gilbert and Silver Creek Inn located in the northern section of the PMA indicated they attracted approximately half of their residents from Gilbert and areas south. Therefore, a competitive draw of 50 percent was applied to the beds at these locations. Due to the proposed locations of the planned facilities American Orchard and Savanna House in similar areas in the northern part of the PMA, a 50 percent competitive factor was also assumed for these planned communities. Applying a 50 percent competitive draw to these four communities decreases the total number of existing and planned assisted living and memory support competitive beds in the PMA to 550. According to NIC and the Dixon Hughes Goodman assisted living database, the percentage of memory support units when compared to the total number of assisted living and memory support units in a market generally ranges from 25 percent to 35 percent. As shown, prior to the two planned assisted living and memory care developments, the percentage of memory support units approximated 60 percent of the total assisted living and memory support units in the PMA. After developments of the Project and planned communities, the percentage of memory support units to total units decreases to 46 percent, a more normalized standard.



The following table includes a summary of comparable assisted living and memory support units in the PMA, the percentage of memory support beds in the PMA before and after the Project as well as the percentage competitive units.

Table 16 Summary of Comparable Assisted Living and Memory Support Beds within the PMA

Comparable Communities Assisted Living

Memory Support

Total Beds

Percent Competitive

Competitive Beds

The Oaks at Gilbert 79 54 133 100% 133

Generations at Agritopia 61 24 85 100% 85

Sunrise of Gilbert 51 26 77 100% 77

Brookdale North Gilbert – 50 50 50% 25

Silver Creek Inn – 67 67 50% 34

Subtotal Comparable Existing Beds 191 221 412 354

Percentage of Existing AL and MS Beds in the PMA Prior to the Project 46.4% 53.6% 100.0%

Comparable Planned Communities

American Orchid 73 – 73 50% 37

Savanna House Assisted Living 87 48 135 50% 68

Subtotal Comparable Planned Beds 160 48 208 105

Total Comparable Existing & Planned Beds (excluding the Project) 351 269 620 459

The Project 57 34 91 100% 91

Total Comparable Existing & Planned Beds (including the Project) 408 303 711 550

Percentage of AL and MS Units including the Project and Other Planned Beds 57.4% 42.6% 100.0%

Source: Surveys conducted by Dixon Hughes Goodman LLP through May 2015



Assisted Living Demand Analysis

The following approaches have been utilized in order to assess the demand for assisted living and memory care services within the market area.

Assisted Living Bed Need Potential - The Assisted Living Bed Need Potential measures the market’s capacity based on a capture rate or assumed absorption of seniors age 75 or older combined with an absorption assumption of Adult Caregivers living within the PMA that may have an influence to relocate a parent requiring assistance to the area. The assisted living bed potential for each cohort is estimated based on the assumed absorption rates for senior qualified individuals and qualified Adult Caregiver households, respectively. The total bed need for the PMA is the total of these two bed need calculations less the existing and planned assisted living beds in the PMA.

Gross Market Penetration Rate – The Gross Market Penetration Rate is the percentage of age- and income-qualified individuals that the total market must absorb for the entire market to achieve stabilized occupancy. Market penetration is calculated by dividing the total number of existing and planned assisted living and memory support units in the PMA by the number of age- and income- qualified households in the PMA and the assumed draw percentage from within the PMA. Calculations are based on the demographics projected for the current year (2015) and the final year of the projection (2020).

Adult Caregiver Penetration Rate – The Adult Caregiver Penetration Rate measures the relationship between the Adult Caregiver market and supply of assisted or memory support beds in the market. The Adult Caregiver Penetration Rate is calculated by dividing the total number of existing and planned assisted living and memory support units in the PMA by the number of Adult Caregivers. Generally, an Adult Caregiver Penetration Rate of less than two percent is considered favorable.

The results of the demand methodologies should be considered in conjunction with each other and other market factors such as occupancy levels at existing communities within and near the PMA, the number of proposed facilities in the PMA, the design of the units and community spaces at the Project, alternatives for potential residents, and marketing plans and efforts of Management. Market penetration rates are one measure of the degree to which the PMA is under-served or saturated. As penetration rates increase, units may become more difficult to fill. However, higher penetration rates may not necessarily be an indication of the difficulty in achieving expected occupancy levels. Some markets may have a higher acceptance level for senior living housing options and may support higher penetration rates.



Assisted Living Bed Capacity within the PMA

The bed capacity is based on the market potential of seniors (age 75+) as well as adult caregiver households (ages 45 to 64 years earning annual incomes of $100,000+) currently living within the PMA. Adult caregivers that are qualified to provide financial assistance have proven to influence parents to move to an area that require health care assistance. Higher concentrations of adult caregivers as seen in suburban market areas such as Gilbert, result in a higher reliance on this adult caregiver influence as a component of demand for assisted living and memory care services. Bed capacity estimates are based on the absorption rates experienced by other projects in similar markets as indicated in the DHG database as well as the gross market and adult care giver penetration rates previously calculated. The total bed capacity for the PMA is the total of the estimated senior bed need plus the quantified bed need from adult caregiver influence, less the existing and planned assisted living beds (prior to development of the Project) located within the PMA.

Table 17 Assisted Living Bed Capacity within the PMA

Age Eligible Senior Individuals 2015 2020 Number of Senior Qualified Individuals (Age 75+) 455 597 Number of Individuals in Existing Comparable Beds(1) 329 329 Total Qualified Individuals 784 926

Assumed Absorption Rate for Seniors(2) 27.9% 27.9%

Number of Additional Beds the Market May Absorb (a) 219 258

Age- and Income-Qualified Adult Caregiver Households 2015 2020 Households Age 45 – 54 with Income $100,000+ 12,525 14,223 Households Age 55 – 64 with Income $100,000+ 7,034 8,733 Total Qualified Households 19,559 22,956

Assumed Absorption Rate for Adult Caregivers (3) 1.9% 1.9%

Number of Additional Beds the Market May Absorb (b) 372 436

Total Assisted Living Bed Potential (a) + (b) 591 694

Less: Number of Individuals in Existing Comparable Beds(1) 329 329 Less: Number of Other Planned Beds in the PMA(4) – 98 Total Bed Potential (Prior to Project Development) 262 267

Source: Management and The Nielsen Company (1) Represents the 354 existing assisted living and memory care competitive beds in the PMA, assuming 93 percent

occupancy for a total of 329 beds. (2) Based on the median gross market penetration rate in DHG’s database of over 100 assisted living communities financed

since 2000. (3) Based on the median adult caregiver penetration rate in DHG’s database of projects financed since 2000. (4) Represents the 105 planned assisted living and memory care beds (as calculated) in the PMA, assuming 93 percent

occupancy for a total of 98 beds.



Assisted Living Gross Market Penetration Rates The assisted living (including memory support care) market penetration rate measures the absorption of the senior market by presenting the percentage of age- and income- qualified senior individuals that the total market has absorbed (in current year 2015) or must absorb (over a five-year period to 2020) for the entire market to achieve stabilized occupancy. An increase in the gross market penetration rate shows the impact of new beds being added to the market. A decrease in the gross market assisted living penetration rates over the five-year period demonstrates that the senior market is growing at a faster rate than the number of units, indicating a favorable environment for unit absorption. The total assisted living beds are adjusted to reflect assumptions about the percentage of units expected to be filled from qualified senior individuals in the PMA and occupancy. The percentage of units expected to be filled from the PMA is 37 percent based on the results of the bed need potential from seniors in year 2020 (258 beds) as a percentage of total bed need potential (694 beds) as shown in the previous calculation. The assumed occupancy percentage is 93 percent based on the weighted average occupancy experienced by existing assisted living and memory support competitors in the PMA. The following table presents the gross market penetration rates for assisted living and memory support services for the $25,000 Income Qualification in the PMA.

Table 18 Assisted Living Gross Market Penetration Rates

$25,000 Income Qualification Age-Qualified

Individuals Age- and Income-

Qualified Individuals 2015 2020 2015 2020

Number of Qualified Individuals 455 597 371 488 Number of Individuals in Existing Comparable Beds(1) 122 122 122 122 Total Qualified Individuals (b) 577 719 493 610 Number of Individuals in Existing Comparable Beds(1) 122 122 122 122 Number of Planned Beds at the Project(2) – 32 – 32 Number of Other Planned Beds in the PMA(3) – 36 – 36

Total Beds, Including the Project (a) 122 190 122 190 Gross Market Penetration Rate for the PMA (a/b) 21.1% 26.4% 24.7% 31.1%

Source: Management and the Nielsen Company (1) Reflects 354 assisted living beds and memory support competitive beds at the existing assisted living communities

assuming that approximately 37 percent of residents have originated from the PMA, and a 93 percent occupancy rate (122 beds).

(2) Reflects the 91 planned assisted living beds and memory support beds at the Project, assuming 37 percent of residents will originate from the PMA and a 93 percent occupancy rate (32 beds).

(3) Reflects the 105 planned assisted living beds and memory support competitive beds (as calculated) in the PMA under table 16, assuming 37 percent of residents will originate from the PMA and a 93 percent occupancy rate (36 beds).



Adult Care Giver Penetration Rates Additionally, the penetration of the adult care giver households is shown, herein referred to as those households with householders aged 45 to 64, earning income in excess of $100,000 annually.

Income statistics may be utilized to some extent to estimate the number of qualified households (75+) for potential memory support projects, yet should not be relied upon entirely as a measure of success for a project, due to the amount of cross subsidization that may occur between Adult Care Givers and their parents.

Table 19 Adult Care Giver Market Penetration Rates

Profile of Adult Care Giver Market (Age 45-64) 2015 2020

Householders earning > $100,000

45 – 54 12,525 14,223

55 – 64 7,034 8,733

Total (a) 19,559 22,956

Number of Individuals in Existing Comparable Assisted Living Beds (1) 122 122

Number of Planned Beds at the Project(2) – 32

Number of Other Planned Assisted Living Beds in the PMA (3) – 36

Total Units to be Filled from the PMA (b) and (c) 122 190

Adult Care Giver Market Penetration Rates:

Based on existing assisted living beds (including memory support beds) (b/a) 0.6%

After the Project and other planned beds (c/a) 0.8% Source: The Nielsen Company

(1) Reflects 354 assisted living beds and memory support competitive beds at the existing assisted living communities assuming that approximately 37 percent of residents have originated from the PMA, and a 93 percent occupancy rate (122 beds).

(2) Reflects the 91 planned assisted living beds and memory support beds at the Project, assuming 37 percent of residents will originate from the PMA and a 93 percent occupancy rate (32 beds).

(3) Reflects the 105 planned assisted living beds and memory support competitive beds (as calculated) in the PMA, assuming 37 percent of residents will originate from the PMA and a 93 percent occupancy rate (36 beds).



Summary of Significant Accounting Policies

(a) Basis of Accounting The Partnership maintains its accounting and financial records according to the accrual basis of accounting.

(b) Deferred Costs Costs associated with the issuance of the Series 2015 Bonds are assumed to be capitalized and amortized over the expected life of the Series 2015 Bonds using the effective interest method.

Management has implemented ASU No. 2015-03 “Interest – Imputation of Interest” and simplifying the presentation of debt issuance costs. Under the new Standard, the debt issuance costs are netted against the related debt on the balance sheet and the amortization is included in interest expense on the statement of operations.

(c) Property, Equipment and Depreciation Expense Property and equipment are recorded at cost. Depreciation expense is calculated on the straight-line method over the estimated useful lives of depreciable assets. The cost of maintenance and repairs is charged to operations as incurred, whereas significant renewals and betterments are capitalized.

(d) Cash and Cash Equivalents Cash includes cash on hand, amounts on deposit in banks and highly liquid securities with an original maturity of 90 days or less when purchased, excluding amounts whose use is limited.

Investments include cash and cash equivalents, mutual funds, common stock, and fixed income funds in the form of U.S. Government and corporate obligations. Management assumes no material changes in fair values that result in material net realized or unrealized gains or losses during the forecast period.

(e) Assets Limited as to Use Assets limited as to use are assumed to be carried at fair value, which, based on the nature of the underlying securities (assumed to be high-grade debt securities), is assumed to approximate historical cost. Management assumes no material changes in fair values that result in material net realized or unrealized gains or losses during the forecast period.

(f) Investment Income Investment income, other than that capitalized as part of project costs, is reported as operating revenue unless restricted by donor or law. Management does not forecast any unrealized gains or losses on investments.

(g) Costs of Borrowing Net interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets.

(h) Income Taxes The Partnership is treated as a pass through entity for income tax purposes and, as such, the partners are taxed on the Partnership’s income, whether or not that income is actually distributed. Accordingly, the forecast includes no provision or liabilities for income taxes.



Summary of Revenue Assumptions Monthly Service Fees Assisted Living Units and Memory Support Units monthly service fees are based on the assumed occupancy of the respective units and assumed to increase 3.0 percent in January 2017 and annually thereafter. In addition to Monthly Fees, Management also assumes there would be a base fee plus four levels of care (“LOC”) in assisted living and a base fee and two levels of care in memory support. The following are the assumed level of care fees and associated utilization.

Table 20 Fiscal Year 2016

Assisted Living Level of Care Fees and Utilization

Assisted Living Memory Support Level of Care LOC Utilization (1) LOC Fees LOC Utilization (1) LOC Fees

Base Fee 43% N/A 30% N/A Level 1 20% $400 55% $600 Level 2 25% $800 15% $1,200 Level 3 10% $1,200 - - Level 4 2% $1,600 - - Total 100% 100%

Source: Management (1) Management plans to maintain the assumed LOC utilization assumptions throughout the forecast period.

Other Income Other revenue consists of revenues from Community fees, barber and beauty fees, assessments, private dining, and other miscellaneous revenues. These revenues are estimated based upon the assumed occupancy at the Project. Charges for other revenues are assumed to increase 3.0 percent annually beginning January 2017. Investment Income Based upon information provided by the Underwriter, Management has estimated interest to be earned annually on the current portion of assets limited as to use (the “Bond Fund”) at 0.5 percent; and assumes an average annual rate of return of 2.0 percent and increasing to 3.0 percent on the Partnership’s unrestricted cash.



Assumed Project Utilization The Assisted Living Units are assumed to achieve a 93.0 percent occupancy level in April 2018 and remain constant at that level throughout the forecast period. The following table summarizes the assumed utilization of the Assisted Living Units during the forecast period.

Table 21 Utilization of Assisted Living Units


Average Unit

Occupied

Average Unit

Available

Average Unit Occupancy

Percentage (1)

Average Unit Occupancy Percentage including 2nd Persons (2)

2016 0.1 49.0 0.2% 0.3% 2017 23.9 49.0 48.8% 56.7%

2018 44.7 49.0 91.2% 106.0%

2019 45.6 49.0 93.0% 108.2% Source: Management

(1) The Assisted Living Units are assumed to be available for occupancy in December 2016 and fill to a 93.0 percent occupancy level over a 17-month period at an average of 2.7 beds per month.

(2) Management assumes approximately 7 units to be double occupied or 16 percent of the occupied units.

The Memory Support Units are assumed to achieve a 93.0 percent occupancy level in June 2018 and remain constant at that level throughout the forecast period. The following table summarizes the assumed utilization of the Memory Support Units during the forecast period.

Table 22 Utilization of Memory Support Units


Average Unit

Occupied

Average Unit

Available

Average Unit Occupancy

Percentage (1)

Average Unit Occupancy Percentage including 2nd Persons (2)

2016 0.1 30.0 0.4% 0.4% 2017 13.9 30.0 46.2% 52.4%

2018 26.7 30.0 89.1% 101.0%

2019 27.9 30.0 93.0% 105.3% Source: Management

(1) The Memory Support Units are assumed to be available for occupancy in December 2016 and fill to a 93.0 percent occupancy level over a 19-month period at an average of 1.5 beds per month.

(2) Management assumes approximately 4 units to be double occupied or 13 percent of the occupied units.



Assumed Fill-Up – Assisted Living Units Residents are assumed to begin moving into the Assisted Living Units and Memory Support Units beginning in December 2016. The assumed monthly net move-in pattern is summarized below.

Assisted Living Units Move-in Schedule Memory Support Units

Move-in Schedule

Fiscal Year/Month

Monthly Unit

Total

Cumulative Unit Total

Cumulative Unit

Percentage

Monthly Unit

Total

Cumulative Unit Total

Cumulative Unit

Percentage

2016 December 2.6 2.6 5.3% 2.6 2.6 8.8%

2017 January 6.0 8.6 17.5% 1.8 4.4 14.7% February 3.4 12.0 24.6% 1.8 6.2 20.6% March 3.4 15.5 31.6% 1.8 7.9 26.5% April 3.4 18.9 38.6% 1.8 9.7 32.4% May 3.4 22.4 45.6% 1.8 11.5 38.2% June 2.6 24.9 50.9% 1.8 13.2 44.1% July 2.6 27.5 56.1% 1.8 15.0 50.0% August 2.6 30.1 61.4% 1.8 16.8 55.9% September 2.6 32.7 66.7% 1.8 18.5 61.8% October 2.6 35.2 71.9% 0.9 19.4 64.7% November 2.6 37.8 77.2% 1.8 21.2 70.6% December 1.7 39.5 80.7% 0.9 22.1 73.5%

2018 January 1.7 41.3 84.2% 1.8 23.8 79.4% February 1.7 43.0 87.7% 0.9 24.7 82.4%

March 1.7 44.7 91.2% 0.9 25.6 85.3% April 0.9 45.6 93.0% 0.9 26.5 88.2% May - 45.6 93.0% 0.9 27.4 91.2% June - 45.6 93.0% 0.5 27.9 93.0%

Total 45.6 93.0% 27.9 27.9 93.0% Source: Management

Table 23 Assumed Monthly Net Move-ins nits



Marketing Incentives and Discounts The following table shows the annual allowance for move-in incentives assumed for the Project during the forecast period:

Source: Management Summary of Operating Expenses Operating expenses are estimated based on Management’s experience with the development and operation of other similar communities. Staff salaries and benefits are estimated based on prevailing local salary and wage rates and are assumed to increase 3.0 percent annually throughout the forecast period. The costs of employee fringe benefits are assumed to approximate 33.0 percent of salaries and wages. The following table summarizes the assumed staffing levels for all departments.

Source: Management Other non-salary operating expenses are assumed to include ongoing marketing costs, raw food costs, utilities, supplies, maintenance and security contracts, building and general liability insurance, legal and accounting fees, Management Fees, property taxes, and other miscellaneous expenses. The cost of these non-salary operating expenses is assumed to increase 3.0 percent annually throughout the forecast period.

Table 24 Marketing Incentives and Discounts

(in Thousands)

Year Ending December 31, 2016 2017 2018 2019 Total Incentives and Discounts $ 8 $ 100 $ 60 $ 46

Table 25 Schedule of Assumed Staffing Levels– FY 2019

Department FTE Totals

Administrative 3.0 Marketing 1.0 Lifestyles/Activities/Transportation 3.7 Assisted living / Memory support 22.7 Building and grounds maintenance 1.8 Dining services 9.6 Housekeeping & laundry services 1.5 Total FTEs 43.3



Assets Limited as to Use Financing for the Project is assumed to be obtained from the issuance of the Series 2015 Bonds. The Bond Trustee is assumed to maintain the following funds and accounts for the Series 2015 Bonds under the terms of the Bond Trust Indenture: (1) Project Fund, funded from Series 2015A Bonds, to be used to be used to pay construction

and related costs to complete the Project. (2) Funded Interest Account of the Project Fund, net funded from Series 2015A Bonds and Series

2015B Bonds, to be used to fund interest costs for approximately 12 months (12 months construction).

(3) Bond Fund, to contain the bond principal and interest payments to be used for payment of debt service on the Series 2015A Bonds and Series 2015B Bonds.

(4) Working Capital Fund to be funded partially from an equity contribution and from Series 2015B Bonds proceeds and released to fund operating losses during the initial start-up period.

Property and Equipment and Depreciation Expense Management anticipates that the Partnership is to incur routine capital additions during the forecast period that are to be capitalized as property and equipment. Depreciation expense for all capital assets is computed based on the straight-line method for buildings and equipment over estimated average useful lives of 30 and 15 years, respectively. Construction-related costs as well as routine capital additions during the forecast period are summarized in the table below.

Table 26 Schedule of Property and Equipment

(In Thousands) Years Ending December 31, 2015 2016 2017 2018 2019 Property and equipment, gross Beginning balance $ - $ 4,847 $ 14,517 $ 14,552 $ 14,617 Project costs 4,725 9,100 - - - Capitalized interest, net 122 570 - - - Routine capital additions - - 35 65 90 Property and equipment, gross 4,847 14,517 14,552 14,617 14,707 Accumulated depreciation - (277) (722) (1,172) (1,630) Property and equipment, net Ending balance $ 4,847 $ 14,240 $ 13,830 $ 13,445 $ 13,077

Source: Management



Long-Term Debt and Interest Expense The Arizona Health Facilities Authority plans to issue $15,825,000 of non-rated tax-exempt and taxable bonds, the proceeds of which are to be lent to the Partnership to pay for the Project construction and other project-related costs. The Series 2015 Bonds are assumed to consist of:

� $14,510,000 of non-rated tax-exempt, fixed rate Series 2015A Bonds; and � $1,315,000 of non-rated taxable, fixed rate Series 2015B Bonds.

Series 2015A Bonds The Series 2015A Bonds are assumed to consist of $14,510,000 of non-rated, tax-exempt fixed rate bonds, issued with an initial average interest rate of 4.00 percent per annum for the first 14 months with the interest rate stepping up to 7.25 percent per annum at month 15 and thereafter. Interest on the Series 2015A Bonds is to be payable October 1, January 1, April 1 and July 1 of each year beginning January 1, 2016. Principal on the Series 2015A Bonds is to be paid annually on October 1, commencing October 1, 2019 with a final maturity on October 1, 2050. The following table presents the assumed annual debt service for the Series 2015A Bonds during the forecast period.

Table 27 Schedule of Series 2015A Bonds Annual Debt Service

(In Thousands) Year Ending December 31,

Principal Payment

Interest Payment

Total Debt Service

2015 $ - $ - $ - 2016 - 538 538 2017 - 936 936 2018 - 1,052 1,052 2019 5 1,052 1,057

Total $ 5 $ 3,578 $ 3,583 Source: Management and the Underwriter



Series 2015B Bonds The Series 2015B Bonds are assumed to consist of $1,315,000 of non-rated, taxable fixed rate bonds, to be issued with an average interest rate of 8.00 percent per annum. Interest on the Series 2015B Bonds is to be payable quarterly on October 1, January 1, April 1 and July 1 of each year beginning January 1, 2016. Principal on the Series 2015B Bonds is to be paid annually on October 1, commencing October 1, 2019 with a final maturity on October 1, 2025. The following table presents the assumed annual debt service for the Series 2015B Bonds during the forecast period.

Table 28 Schedule of Series 2015B Bonds Annual Debt Service

(In Thousands) Year Ending December 31,

Principal Payment

Interest Payment

Total Debt Service

2015 $ - $ - $ - 2016 (1) - 98 98 2017 - 105 105 2018 - 105 105 2019 150 105 255

Total $ 150 $ 413 $ 563 Source: Management and the Underwriter



Related Party Transactions The Partnership, the Developer, and the Manager have common ownership interest and the following are considered to be related party transactions, as described in FASB ASC 850 for financial reporting purposes under U.S. generally accepted accounting principles: Development Agreement – The Developer, a related party of the Partnership, will enter into a Development Agreement with the Partnership to provide development consulting services related to the Community upon closing of the Series 2015 Bonds. As compensation for services rendered under the Development Agreement, the Partnership is to pay a Development Fee (as defined earlier in the report). Management Agreement – The Manager, a related party of the Partnership, will enter into a Management Agreement with the Partnership to provide operating, administrative, and marketing services, among other things for the Project upon closing of the Series 2015 Bonds. As compensation for providing management services the Partnership is to pay a Management Fee (as defined earlier in the report). Current Assets and Current Liabilities Operating expenses exclude amortization, depreciation, other non-cash expenses and interest expense. Working capital components have been estimated based on industry standards and Management’s historical experience as follows:

Table 29 Working Capital – Days on Hand

Accounts receivable 15 days of operating revenues Inventory 2 days of operating expenses Prepaid expenses 11 days of operating expenses Accounts payable 25 days of operating expenses Other accrued liabilities 14 days of operating expenses

Source: Management

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Supplemental Disclosure

INDEPENDENT ACCOUNTANTS’ REPORT ON SUPPLEMENTAL INFORMATION

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Gilbert, Arizona Our examination of the financial forecast presented in the preceding section of this document was made for the purpose of forming an opinion on whether the financial forecast is presented in conformity with AICPA guidelines for the presentation of a forecast and that the underlying assumptions provide a reasonable basis for the forecast. The study was undertaken to evaluate the Partnership’s ability to generate sufficient funds to meet its operating expenses, working capital needs and other financial requirements, including the debt service requirements associated with the proposed Series 2015 Bonds based on Management’s assumptions of future operations of the Partnership. However, future events could occur which could adversely affect the financial forecast of the Partnership and its ability to meet debt service requirements. These factors include, among others, legislation and regulatory action, changes in assumptions concerning occupancy, per diem rates, financing and operating costs. The accompanying supplemental analysis is presented for purposes of demonstrating the significance of certain assumptions and is not a required part of the financial forecast nor considered an all-inclusive list. Such information has not been subjected to procedures applied in the examination of the financial forecast and, accordingly, we express no opinion or any other form of assurance on it.

Atlanta, Georgia September 28, 2015

B-51

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Supplemental Information

B-52

Sensitivity Analysis I – Occupancy

Occupancy rates can vary depending upon economic conditions, the competitive environment, and Management’s ability to execute the marketing and sales plan. The Project’s residents are to begin moving into the Assisted Living Units and Memory Support Units in December 2016. Management expects the Assisted Living Units to achieve a 93 percent occupancy level in April 2018 and the Memory Support Beds to achieve 93 percent occupancy level in June 2018, remaining constant at that level throughout the forecast period.

Sensitivity Analysis IA

The period of time it takes to achieve and maintain stabilized occupancy could be longer than Management’s forecast. The data presented in the table below demonstrate the impact of the Project’s stabilized occupancy filling up to 85 percent for the Assisted Living Units and the Memory Support Units.

Sensitivity Analysis IB

The data presented in the table below also provide a “Breakeven Analysis” assuming that the Project’s stabilized occupancy percentage filled-up to a breakeven point such that the Partnership’s Maximum Annual Debt Service Coverage Ratio would approximate near 1.00x. In the Breakeven Analysis, the Project’s Assisted Living Units and Memory Support Units were reduced proportionally to “Breakeven.” For purposes of this analysis, certain fixed operating expenses, staffing expenses and forecasted repayment of the Series 2015 Bonds have not been adjusted for reductions in the occupancy.

Source: Management (1) The sensitivity in the liquidity ratios is due to the extended move-in occupancy of the Assisted Living Units and Memory

Support Units without a corresponding adjustment to certain fixed operating expenses, staffing expenses or an adjustment to the repayment of the Series 2015 Bonds.

(2) Sensitivity IA & IB fill-up assumes the same fill-up assumption during the first 12 months as forecasted. (3) The sensitivity assumes no changes to the forecasted Management Fee distributions.

Table 30 Sensitivity Analysis – I

Estimated Financial Information For the Year Ending December 31, 2019

As Forecasted Sensitivity IA Sensitivity IB Assisted Living Beds:

Months of Move-in Period 17 months 15 months 13 months Stable Occupancy Achieved April 2018 February 2018 December 2017 Occupancy at December 31, 2017 93.0% 85.0% 80.5%

Memory Support Beds: Months of Move-in Period 19 months 16 months 15 months Stable Occupancy Achieved June 2018 March 2018 February 2018 Occupancy at December 31, 2017 93.0% 85.0% 80.5%

Long-Term Debt Service Coverage Ratio (1)(2)(3) 1.31x 1.09x 1.00 Days Cash on Hand (1)(2)(3) 93 47 17

Gilbert AL Partners, LP d/b/a Mariposa Point of Gilbert Supplemental Information

B-53

Sensitivity Analysis II – Marketing Incentive & Discounts During fill-up of the Project, Management plans to offer marketing incentives and discounts to help achieve assisted living and memory support occupancy assumptions. Actual marketing incentives and discounts may vary from Management’s assumptions included in the forecast in regard to the number of Residents requiring move-in incentives. The following table demonstrates the impact of marketing incentives increasing and decreasing by 50 percent (50%) during all years of the forecast.

Source: Management (1) For purposes of the sensitivity analysis, incentive fees and discounts were adjusted without a corresponding adjustment to

certain fixed or staffing expenses. (2) For purposes of the sensitivity analysis, the assumed schedule for the repayment of debt remains as originally forecasted.

Table 31 Sensitivity Analysis – II

Estimated Financial Information For the Year Ending December 31, 2019

As Forecasted Sensitivity IIA Sensitivity IIB

50% Decrease 50% Increase

Total Marketing Incentives & Discounts $46,000 $23,000 $68,000

Annual Debt Service Coverage Ratio (1)(2) 1.31x 1.32x 1.29x

Days Cash on Hand (1) (2) 93 103 83

APPENDIX C

PROPOSED FORMS OF PRINCIPAL LEGAL DOCUMENTS

ARIZONA HEALTH FACILITIES AUTHORITY TO

WILMINGTON TRUST, NATIONAL ASSOCIATION

AS BOND TRUSTEE

__________________________________

INDENTURE OF TRUST

__________________________________

DATED AS OF OCTOBER 1, 2015

RELATING TO

$14,510,000 Arizona Health Facilities Authority


Series 2015A




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TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS

Section 1.01 Definitions..........................................................................................................4 Section 1.02 Recital Incorporation .........................................................................................4

ARTICLE II AUTHORIZATION, TERMS, EXECUTION

AND ISSUANCE OF BONDS

Section 2.01 Authorized Amount of Series 2015 Bonds ........................................................4 Section 2.02 All Bonds Equally and Ratably Secured With Bonds of the Same

Series; Bonds Not an Obligation of Issuer .........................................................4 Section 2.03 Authorization of Series 2015 Bonds ..................................................................4 Section 2.04 Execution of Bonds, Signatures .........................................................................6 Section 2.05 Registration and Exchange of Bonds; Persons Treated as Owners;

Restrictions ........................................................................................................6 Section 2.06 Lost, Stolen, Destroyed, and Mutilated Bonds ..................................................7 Section 2.07 Delivery of Series 2015 Bonds ..........................................................................8 Section 2.08 Bond Trustee’s Authentication Certificate ........................................................9 Section 2.09 Issuance of Additional Bonds ..........................................................................10 Section 2.10 Requirements for Authentication and Delivery of Additional Bonds .............10 Section 2.11 Cancellation and Destruction of Bonds By the Bond Trustee .........................12 Section 2.12 Book Entry Only System .................................................................................12 Section 2.13 Successor Securities Depository; Transfers Outside Book Entry Only

System ..............................................................................................................13 Section 2.14 Payments to Cede & Co. ..................................................................................14 Section 2.15 Temporary Bonds .............................................................................................14

ARTICLE III REVENUES AND FUNDS

Section 3.01 Application of Proceeds of Series 2015 Bonds and Other Moneys .................14 Section 3.02 Creation of the Bond Fund ...............................................................................15 Section 3.03 Payments into the Bond Fund ..........................................................................16 Section 3.04 Use of Moneys in the Senior Principal Account and the Senior Interest

Account ............................................................................................................16 Section 3.05 Custody of the Bond Fund ...............................................................................17 Section 3.06 Construction Fund ............................................................................................17 Section 3.07 Completion Certificate .....................................................................................18 Section 3.08 [Reserved] ........................................................................................................18 Section 3.09 [Reserved] ........................................................................................................18 Section 3.10 Nonpresentment of Bonds................................................................................18 Section 3.11 Bond Trustee’s and Paying Agents’ Fees, Charges, and Expenses .................19 Section 3.12 Moneys to be Held in Trust .............................................................................19

TABLE OF CONTENTS (continued)

Page

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Section 3.13 Repayment to the Obligor from the Funds ......................................................19 Section 3.14 Rebate Fund .....................................................................................................19 Section 3.15 Cost of Issuance Fund ......................................................................................21

ARTICLE IV COVENANTS OF THE ISSUER

Section 4.01 Performance of Covenants: Authority .............................................................22 Section 4.02 Payments of Principal, Premium, If Any, and Interest ....................................22 Section 4.03 Supplemental Indentures: Recordation of Bond Indenture and

Supplemental Indentures ..................................................................................22 Section 4.04 Lien of Bond Indenture ....................................................................................23 Section 4.05 Rights Under the Loan Agreement ..................................................................23 Section 4.06 Tax Covenants .................................................................................................23 Section 4.07 Change in Law .................................................................................................24

ARTICLE V REDEMPTION OF BONDS

Section 5.01 Optional Redemption of Series 2015 Bonds ....................................................24 Section 5.02 Sinking Fund Redemption ...............................................................................24 Section 5.03 Method of Selection of Bonds in Case of Partial Redemption ........................26 Section 5.04 Notice of Redemption ......................................................................................27 Section 5.05 Bonds Due and Payable on Redemption Date; Interest Ceases to

Accrue ..............................................................................................................28 Section 5.06 Cancellation .....................................................................................................29 Section 5.07 Partial Redemption of Fully Registered Bonds ...............................................29 Section 5.08 Extraordinary Optional Redemption ................................................................29 Section 5.09 Special Mandatory Redemption .......................................................................29 Section 5.10 Purchase in Lieu of Redemption ......................................................................30 Section 5.11 Redemption in Full ..........................................................................................31

ARTICLE VI INVESTMENTS

Section 6.01 Investment of Bond Fund and Construction Fund ...........................................31 Section 6.02 Allocation and Transfers of Investment Income ..............................................31 Section 6.03 Valuation of Permitted Investments .................................................................32

ARTICLE VII DISCHARGE OF BOND INDENTURE

Section 7.01 Discharge of the Bond Indenture .....................................................................32


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ARTICLE VIII DEFAULTS AND REMEDIES

Section 8.01 Events of Default .............................................................................................34 Section 8.02 Remedies on Events of Default........................................................................34 Section 8.03 Majority Holders May Control Proceedings ....................................................36 Section 8.04 Rights and Remedies of Bondholders ..............................................................36 Section 8.05 Application of Moneys ....................................................................................37 Section 8.06 Bond Trustee May Enforce Rights Without Bonds .........................................39 Section 8.07 Bond Trustee to File Proofs of Claim in Receivership, Etc. ............................39 Section 8.08 Delay or Omission No Waiver .........................................................................39 Section 8.09 Discontinuance of Proceedings on Default, Position of Parties

Restored ...........................................................................................................39 Section 8.10 Enforcement of Rights .....................................................................................40 Section 8.11 Undertaking for Costs ......................................................................................40 Section 8.12 Waiver of Events of Default ............................................................................40

ARTICLE IX CONCERNING THE BOND TRUSTEE

AND PAYING AGENTS

Section 9.01 Duties of the Bond Trustee ..............................................................................41 Section 9.02 Fees and Expenses of Bond Trustee and Paying Agent ...................................44 Section 9.03 Resignation or Replacement of Bond Trustee .................................................44 Section 9.04 Conversion, Consolidation or Merger of Bond Trustee ...................................45 Section 9.05 Designation and Succession of Paying Agent .................................................46 Section 9.06 Voting Rights with Respect to Series 2015 Notes ...........................................46 Section 9.07 Report to the Issuer ..........................................................................................46

ARTICLE X SUPPLEMENTAL INDENTURES AND

AMENDMENTS TO THE LOAN AGREEMENT

Section 10.01 Supplemental Indentures Not Requiring Consent of Bondholders ..................47 Section 10.02 Supplemental Indentures Requiring Consent of Majority Holders ..................47 Section 10.03 Execution of Supplemental Indenture ..............................................................48 Section 10.04 Consent of Obligor ...........................................................................................49 Section 10.05 Amendments, Etc., of the Loan Agreement Not Requiring Consent of

Bondholders .....................................................................................................49 Section 10.06 Amendments, Etc., of the Loan Agreement Requiring Consent of

Bondholders .....................................................................................................49 Section 10.07 Bondholder Representative’s Consent .............................................................50

C-1


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ARTICLE IX MISCELLANEOUS

Section 11.01 Evidence of Signature of Bondholders and Ownership of Bonds ...................50 Section 11.02 No Personal Liability .......................................................................................51 Section 11.03 Limited Obligation ...........................................................................................51 Section 11.04 Role of Issuer ...................................................................................................51 Section 11.05 Parties Interested Herein ..................................................................................53 Section 11.06 Titles, Headings, Etc. .......................................................................................53 Section 11.07 Severability ......................................................................................................54 Section 11.08 Governing Law ................................................................................................54 Section 11.09 Execution of Counterparts ...............................................................................54 Section 11.10 Notices .............................................................................................................54 Section 11.11 Payments Due on Holidays ..............................................................................55 Section 11.12 Contractual Interpretation ................................................................................55 Section 11.13 Continuing Disclosure .....................................................................................56 Section 11.14 Notice of A.R.S. Section 38-511 - Cancellation ..............................................56 Section 11.15 Bondholder Representative ..............................................................................56 Section 11.16 Acceptance and Acknowledgement by Each Beneficial Owner ......................57

EXHIBIT A-1: FORM OF SERIES 2015A BONDS EXHIBIT A-2: FORM OF SERIES 2015B BONDS

EXHIBIT B: FORM OF CERTIFICATE OF BONDHOLDER REPRESENTATIVE

EXHIBIT C: COSTS OF ISSUANCE

INDENTURE OF TRUST

THIS INDENTURE OF TRUST dated as of October 1, 2015, between ARIZONA HEALTH FACILITIES AUTHORITY, a political subdivision and instrumentality of the State of Arizona (the “Issuer”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Bond Trustee (the “Bond Trustee”),

WITNESSETH:

WHEREAS, the Issuer is authorized by Title 36, Chapter 4.2 of the Arizona Revised Statutes (the “Act”) to sell and deliver its bonds for the purpose of financing the cost of a “project”, as defined in the Act; and

WHEREAS, the Issuer is further authorized by the Act to make a loan of the proceeds of its bonds in the amount of all or part of the cost of the health care facility or health care facilities for which such bonds have been authorized; and

WHEREAS, the execution and delivery of this Indenture of Trust (hereinafter sometimes referred to as the “Bond Indenture”), and the issuance of the bonds hereinafter authorized under this Bond Indenture, pursuant to the provisions of the Act, have been in all respects duly and validly authorized by a resolution duly adopted and approved by the Board of Directors of the Issuer; and

WHEREAS, the Issuer is authorized by law and deems necessary, in accordance with its powers described above, and has duly authorized and directed that its bonds, to be known as “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project)”, be issued in one or more series (all bonds from time to time outstanding under the terms of this Bond Indenture being hereinafter referred to as the “Bonds”); and

WHEREAS, the proceeds of the Bonds shall be loaned to Gilbert AL Partners, LP (the “Obligor”) pursuant to a Loan Agreement, dated as of October 1, 2015 (the “Loan Agreement”) between the Issuer and the Obligor; and

WHEREAS, to secure the payment of the principal of the Bonds, premium, if any, and the interest thereon and the performance and observance of the covenants and conditions herein contained the Issuer has authorized the execution and delivery of this Bond Indenture; and

WHEREAS, the Issuer has determined to issue an initial series of Bonds hereunder designated “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A” (hereinafter called the “Series 2015A Bonds”) in the aggregate principal amount of $14,510,000 and an initial series of Bonds hereunder designated “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B” (hereinafter called the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”) in the aggregate principal amount of $1,315,000 under this Bond Indenture for the purpose of financing the cost of an assisted living and memory care facility located in the Town of Gilbert, Arizona, funding capitalized interest on the Series 2015 Bonds, funding a working capital fund and paying the cost of issuance of the Series 2015 Bonds; and

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WHEREAS, the Series 2015A Bonds and the Series 2015B Bonds, the Bond Trustee’s Authentication Certificate and the Assignment are to be substantially in the forms included in Exhibit A-1 and Exhibit A-2, respectively, attached hereto and made a part hereof, with such necessary or appropriate variations, omissions, and insertions as permitted or required by this Bond Indenture; and

WHEREAS, the Series 2015 Bonds and any other bonds issued hereunder are sometimes hereinafter collectively referred to as the “Bonds”, the Series 2015 Bonds and any bonds issued hereunder on a parity with the Series 2015 Bonds are sometimes hereinafter collectively referred to as the “Senior Bonds”, and any bonds issued hereunder subordinate to the Senior Bonds are sometimes hereinafter collectively referred to as the “Subordinate Bonds”; and

WHEREAS, all things necessary to make the Series 2015 Bonds, when authenticated by the Bond Trustee and issued as in this Bond Indenture provided, the valid, binding, and legal obligations of the Issuer and to constitute this Bond Indenture a valid, binding, and legal instrument for the security of the Bonds in accordance with its terms, have been done and performed

NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH:

That the Issuer, in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Series 2015 Bonds by the owners thereof and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time Outstanding under this Bond Indenture, according to their tenor and effect, and to secure the performance and observance of all the covenants and conditions in the Bonds and herein contained, and to declare the terms and conditions upon and subject to which the Bonds are issued and secured, has executed and delivered this Bond Indenture and has granted, bargained, sold, warranted, alienated, remised, released, conveyed, assigned, pledged, set over, and confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, pledge, set over, and confirm unto Wilmington Trust, National Association, as trustee, and to its successors and assigns forever, all and singular the following described property, franchises, and income (the “Trust Estate”):

A. All of the Issuer’s right, title and interest in and to any Note delivered by the Obligor to the Issuer pursuant to the Loan Agreement; and

B. All of the Issuer’s right, title and interest in and to the Loan Agreement (except for the rights of the Issuer to receive indemnification and payments, if any, under Sections 5.7, 7.5, 7.9 and 9.5 of the Loan Agreement, to give or receive notices, approvals, consents and other communications, to inspect the Project or related records, and to limited liability), together with all powers, privileges, options and other benefits of the Issuer contained in the Loan Agreement; provided, however, that nothing in this clause shall impair, diminish or otherwise affect the Issuer’s obligations under the Loan Agreement or, except as otherwise provided in this Bond Indenture, impose any such obligations on the Bond Trustee; and

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C. Amounts on deposit from time to time in the Bond Fund and the Construction Fund, but excluding the Rebate Fund (as defined in the Loan Agreement), subject to the provisions of this Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein; and

D. Any and all property of every kind or description which may from time to time hereafter be sold, transferred, conveyed, assigned, hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to, or deposited with the Bond Trustee as additional security by the Issuer or anyone on its part or with its written consent, or which pursuant to any of the provisions hereof or of the Loan Agreement or any Note may come into the possession of or control of the Bond Trustee or a receiver appointed pursuant to Article VIII hereof, as such additional security; and the Bond Trustee is hereby authorized to receive any and all such property as and for additional security for the payment of the Bonds, and to hold and apply all such property subject to the terms hereof.

TO HAVE AND TO HOLD the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended to be, to the Bond Trustee and its successors in said trust and assigns forever;

IN TRUST, NEVERTHELESS, upon the terms herein set forth for (a) first, the equal and proportionate benefit, security and protection of all owners of the Senior Bonds issued under and secured by this Bond Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Senior Bonds over any other of the Senior Bonds and (b) then, the equal and proportionate benefit, security and protection of all the owners of the Subordinate Bonds issued under and secured by this Bond Indenture without privilege, priority, or distinction as to the lien or otherwise of any of the Subordinate Bonds over any other of the Subordinate Bonds (provided, however, notwithstanding anything to the contrary contained herein, any subaccounts of the Project Account and the Funded Interest Account of the Construction Fund shall secure solely such series of Bonds with respect to which such accounts or subaccounts were created);

PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall pay, or cause to be paid, the principal of the Bonds and the premium, if any, and the interest due or to become due thereon, at the times and in the manner mentioned in the Bonds according to the true intent and meaning thereof, and shall cause the payments to be made into the Bond Fund as hereinafter required or shall provide, as permitted hereby, for the payment thereof by depositing with the Bond Trustee the entire amount due or to become due hereon, or certain securities as herein permitted and shall keep, perform, and observe all the covenants and conditions pursuant to the terms of this Bond Indenture to be kept, performed, and observed by it, and shall pay or cause to be paid to the Bond Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon such final payments this Bond Indenture and the rights hereby granted shall cease, determine, and be void; otherwise this Bond Indenture to be and remain in full force and effect.

THIS BOND INDENTURE FURTHER WITNESSETH and it is expressly declared that all Bonds issued and secured hereunder are to be issued, authenticated, and delivered and all said rights hereby pledged and assigned are to be dealt with and disposed of under, upon, and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses, and purposes as

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hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby agree and covenant, with the Bond Trustee and with the respective owners from time to time of the Bonds as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. All defined words and phrases used in this Bond Indenture shall have the meaning given and ascribed to such words and phrases in Article I of the Loan Agreement.

Section 1.02 Recital Incorporation. The recitals set forth in the beginning of this Bond Indenture are hereby incorporated herein.

ARTICLE II

AUTHORIZATION, TERMS, EXECUTION AND ISSUANCE OF BONDS

Section 2.01 Authorized Amount of Series 2015 Bonds. No Series 2015 Bonds may be issued under this Bond Indenture except in accordance with this Article. The total original principal amount of Series 2015A Bonds that may be issued hereunder is hereby expressly limited to $14,510,000 and the total original principal amount of Series 2015B Bonds that may be issued hereunder is expressly limited to $1,315,000, except as provided in Section 2.06 hereof.

Section 2.02 All Bonds Equally and Ratably Secured With Bonds of the Same Series; Bonds Not an Obligation of Issuer. All Senior Bonds issued under this Bond Indenture and at any time Outstanding shall in all respects be equally and ratably secured hereby, without preference, priority, or distinction on account of the date or dates or the actual time or times of the issuance or maturity of the Senior Bonds, so that all Senior Bonds at any time issued and Outstanding hereunder shall have the same right, lien, and preference under and by virtue of this Bond Indenture, and shall all be equally and ratably secured hereby. Subject and subordinate to the pledge of and lien on the Trust Estate to the Senior Bonds, all Subordinate Bonds issued under this Bond Indenture and at any time Outstanding shall in all respects be equally and ratably secured hereby, without preference, priority, or distinction on account of the date or dates or the actual time or times of the issuance or maturity of the Subordinate Bonds, so that all Subordinate Bonds at any time issued and Outstanding hereunder shall have the same right, lien, and preference under and by virtue of this Bond Indenture, and shall be equally and ratably secured hereby. The Bonds shall be payable solely out of the revenues and other security pledged hereby and shall not constitute an indebtedness of the Issuer within the meaning of any state constitutional provision or statutory limitation and shall never constitute nor give rise to a pecuniary liability of the Issuer.

Section 2.03 Authorization of Series 2015 Bonds.

(a) There is hereby authorized to be issued hereunder and secured hereby an issue of Bonds designated as the “Arizona Health Facilities Authority First Mortgage Revenue Bonds

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(Mariposa Point of Gilbert Project), Series 2015A.” The Series 2015A Bonds shall be numbered consecutively upward from AR-1.

(b) The Series 2015A Bonds shall bear interest from the most recent interest payment date to which interest has been paid or provided for, or, if no interest has been paid, from the Delivery Date of the Series 2015A Bonds. The Series 2015A Bonds shall bear interest on the basis of a 360 day year composed of twelve 30 day months payable each January 1, April 1, July 1 and October 1, beginning January 1, 2016. The Series 2015A Bonds shall mature in the principal amount and on the date and bear interest at the rates set forth below:

Maturity Date

Principal Amount

Interest Rate Through and

Including December 27, 2016

Interest Rate

From and After December 28, 2016

October 1, 2050 $14,510,000 4.00% 7.25%

(c) There is hereby authorized to be issued hereunder and secured hereby an issue of Bonds designated as the “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B.” The Series 2015B Bonds shall be numbered consecutively upward from BR-1.

(d) The Series 2015B Bonds shall bear interest from the most recent interest payment date to which interest has been paid or provided for, or, if no interest has been paid, from the Delivery Date of the Series 2015B Bonds. The Series 2015B Bonds shall bear interest on the basis of a 360 day year composed of twelve 30 day months payable each January 1, April 1, July 1 and October 1, beginning January 1, 2016. The Series 2015B Bonds shall mature in the principal amount and on the date and bear interest at the rate set forth below:

Maturity Date Principal Amount Interest Rate

October 1, 2025 $1,315,000 8.00%

(e) The Series 2015 Bonds shall be issued in Authorized Denominations and shall be dated as of the Delivery Date. Notwithstanding anything to the contrary contained herein, any Beneficial Holder of Series 2015A Bonds or Series 2015B Bonds shall be allowed to purchase, transfer or sell Bonds in multiples of $5,000 as long as, upon completion of such purchase, transfer or sale, the Beneficial Holder owns at least $25,000 of principal amount of Series 2015A Bonds or Series 2015B Bonds, as applicable. The Series 2015 Bonds are subject to prior redemption as herein set forth and shall be substantially in the form and tenor hereinabove recited with appropriate variations, omissions, and insertions as are permitted or required by this Bond Indenture.

(f) The principal of and premium, if any, on the Series 2015 Bonds shall be payable in lawful money of the United States of America at the Payment Office of the Bond Trustee, or at the designated corporate trust office of its successor, upon presentation and surrender of the Series 2015 Bonds. Payment of interest on any Series 2015 Bond shall be made to the Person

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who is the registered owner thereof at the close of business on the Regular Record Date for such Interest Payment Date by check mailed by the Bond Trustee on such Interest Payment Date to such registered owner at his or her address as it appears on the registration records kept by the Bond Trustee or by wire transfer of same day funds upon receipt by the Bond Trustee prior to the Regular Record Date of a written request by a registered owner of $1,000,000 or more in aggregate principal amount of Bonds. The CUSIP number and appropriate dollar amounts for each CUSIP number shall accompany all payments of principal, premium, if any, and interest on the Series 2015 Bonds. Any such interest not so timely paid or duly provided for shall cease to be payable to the Person who is the registered owner of such Series 2015 Bond at the close of business on the Regular Record Date and shall be payable to the Person who is the registered owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Bond Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of the Series 2015 Bonds not less than ten days prior thereto by first class postage prepaid mail to each such registered owner as shown on the registration records, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. Alternative means of payment of interest may be used if mutually agreed upon between the owners of any Series 2015 Bonds and the Bond Trustee. All such payments shall be made in lawful money of the United States of America.

Notwithstanding the foregoing, payments of the principal of and premium, if any, and interest on any Bonds that are subject to the book entry system as provided in Article II of this Bond Indenture shall be made in accordance with the rules, regulations and procedures established by the Securities Depository in connection with the book entry system.

Section 2.04 Execution of Bonds, Signatures. The Bonds shall be executed on behalf of the Issuer by its Chair, Treasurer or Secretary. The signatures of such officers may be in facsimile. In case any officer who shall have signed any of the Bonds shall cease to hold such office and any of such Bonds shall have been authenticated by the Bond Trustee or delivered or sold, such Bonds with the signatures thereto affixed may, nevertheless, be authenticated by the Bond Trustee, and delivered, and may be sold by the Issuer, as though the person or persons who signed such Bonds had remained in office.

Section 2.05 Registration and Exchange of Bonds; Persons Treated as Owners; Restrictions.

(a) The Issuer shall cause books for the registration and for the transfer of the Bonds as provided in this Bond Indenture to be kept by the Bond Trustee which is hereby appointed the bond registrar of the Issuer for the Bonds. Upon surrender for transfer of any fully registered Bond at the Payment Office of the Bond Trustee, duly endorsed for transfer or accomplished by an assignment duly executed by the registered owner or his attorney duly authorized in writing, the Issuer shall execute and the Bond Trustee shall authenticate and deliver in the name of the transferee or transferees a new fully registered Bond or Bonds of the same series and a like aggregate principal amount and maturity for the same series and a like principal amount and maturity.

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(b) The Issuer shall execute and the Bond Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously Outstanding. The execution by the Issuer of any fully registered Bond of any denomination shall constitute full and due authorization of such denomination and the Bond Trustee shall thereby be authorized to authenticate and deliver such Bond.

(c) The Bond Trustee shall not be required to transfer or exchange any Bond after the mailing of notice calling such Bond or any portion thereof for redemption has been given as herein provided, nor during the period beginning at the opening of business fifteen days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing except for Bondholders of $1,000,000 or more in aggregate principal amount of the Bonds.

(d) As to any Bond, the Person in whose name the same shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of principal of or interest on any Bond shall be made only to or upon the written order of the registered owner thereof or his legal representative, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums paid.

(e) The Bond Trustee shall require the payment by any Bondholder requesting exchange or transfer of any tax or other governmental charge required to be paid with respect to such exchange or transfer.

(f) Notwithstanding any other provision hereof, the Bonds may only be transferred, in whole or in part, in connection with a sale to or through a broker/dealer only to (i) any Accredited Investor (within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended) or Qualified Institutional Buyer (within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended), (ii) any bank, savings institution or insurance company (whether acting in a trustee or custodial capacity for any Accredited Investor or Qualified Institutional Buyer or on its own behalf), or (iii) any trust or custodial arrangement each of the beneficial owners of which is an Accredited Investor or Qualified Institution Buyer. By acceptance of a Bond, each Beneficial Holder shall be deemed to have certified that it is an Accredited Investor or a Qualified Institutional Buyer and acknowledged that the Bond may only be transferred to a Beneficial Holder that is an Accredited Investor or a Qualified Institutional Buyer. The Issuer, in its sole discretion, may remove such limitation without notice to or consent of any Owner.

Section 2.06 Lost, Stolen, Destroyed, and Mutilated Bonds. Upon receipt by the Bond Trustee of evidence satisfactory to it of the ownership of and the loss, theft, destruction, or mutilation of any Bond and, in the case of a lost, stolen, or destroyed Bond, of indemnity satisfactory to it, and upon surrender and cancellation of the Bond if mutilated, (i) the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Bond of the same series, date and maturity as the lost, stolen, destroyed or mutilated Bond in lieu of such lost, stolen, destroyed, or mutilated Bond or (ii) if such lost, stolen, destroyed, or mutilated Bond shall have matured or have been called for redemption, in lieu of executing and delivering a new Bond as aforesaid, the Issuer may pay such Bond. Any such new Bond shall bear a number not

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contemporaneously Outstanding. The applicant for any such new Bond may be required to pay all expenses and charges of the Issuer and of the Bond Trustee in connection with the issue of such new Bond. All Bonds shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing conditions are exclusive with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Bonds, negotiable instruments, or other securities. If, after the delivery of such new Bond, a bona fide purchaser of the original Bond in lieu of which such duplicate Bond was issued presents for payment such original Bond, the Obligor or the Bond Trustee shall be entitled to recover upon such new Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Obligor or the Bond Trustee in connection therewith.

Section 2.07 Delivery of Series 2015 Bonds. The Issuer shall execute and deliver to the Bond Trustee and the Bond Trustee shall authenticate the Series 2015 Bonds and deliver them to the initial purchasers thereof as directed by the Issuer and as hereinafter in this Section provided.

Prior to the delivery by the Bond Trustee of any of the Series 2015 Bonds there shall be filed with and delivered to the Bond Trustee at least:

(i) A Bond Resolution authorizing the execution and delivery of the Loan Agreement and this Bond Indenture and the issuance of the Series 2015 Bonds.

(ii) Original executed counterparts of the Loan Agreement, this Bond Indenture, the Supplemental Indenture No. 1 and the Master Indenture.

(iii) The Series 2015 Notes, duly executed and authenticated and duly assigned and payable to the Bond Trustee.

(iv) A request and authorization to the Bond Trustee on behalf of the Issuer and signed by an Issuer Representative to authenticate and deliver the Series 2015 Bonds to the purchasers therein identified upon payment to the Bond Trustee but for the account of the Issuer of a sum specified in such request and authorization, together with instructions as to the disposition of the proceeds of the Series 2015 Bonds.

(v) An Opinion of Bond Counsel to the effect that the Series 2015 Bonds have been duly and validly authorized, issued and delivered and constitute valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, that the interest payable on the Series 2015A Bonds is excludable from gross income for federal income tax purposes and that each of the instruments to which the Issuer is a party has been duly and validly authorized, executed and delivered by the Issuer and constitutes the legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to customary qualifications on enforceability.

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(vi) A lender’s title insurance policy on the Premises (as defined in the Master Indenture) issued by Chicago Title Agency, Inc., or such other title insurance in the amount of $15,825,000, and designating the Master Trustee as the insured named in Schedule A thereto as approved by the Underwriter.

(vii) an Opinion of Counsel to Obligor, addressed to the Bond Trustee, who may rely upon the owner’s title policy or a search of the records of the Secretary of State or other applicable public entities, to the effect, among other matters, that the liens and security interests created by the Loan Agreement, the Master Indenture and the Deed of Trust have been duly created and perfected, and that the appropriate records for the filing of financing statements do not disclose any security interests, except Permitted Encumbrances, taking priority over the liens and security interests created by the Master Indenture, the Deed of Trust and the Loan Agreement in form and substance satisfactory to the Underwriter, Bond Counsel, the Issuer and the Bondholder Representative.

(viii) an Opinion or Opinions of Counsel to the Obligor, to the effect, among other matters, that the Loan Agreement, Series 2015 Notes, the Regulatory Agreement, the Tax Agreement, the Master Indenture, the Supplemental Indenture No. 1, the Deed of Trust, the Control Agreement and the Continuing Disclosure Agreement have been duly authorized, executed and delivered by the Obligor and are enforceable against the Obligor, subject to bankruptcy and equitable principles in form and substance satisfactory to the Underwriter, Bond Counsel, the Issuer and the Bondholder Representative.

(ix) Internal Revenue Service Form 8038 with respect to the Series 2015A Bonds completed by the Issuer from information supplied by the Obligor pursuant to Section 2.2(k) of the Loan Agreement.

(x) Payment of the Issuer’s Fees and Expenses due upon delivery of the Series 2015 Bonds or evidence that such payment has been made to the Issuer and payment of the initial fees of the Bond Trustee and the expenses (including attorneys’ fees) of the Bondholder Representative.

(xi) A certificate of the Bondholder Representative regarding the Series 2015 Bonds in the form attached hereto as Exhibit B.

(xii) Such other documents and opinions of counsel as the Issuer, the Underwriter, Bond Counsel or the Bondholder Representative may reasonably request.

Section 2.08 Bond Trustee’s Authentication Certificate. The Bond Trustee’s authentication certificate upon the Bonds shall be substantially in the form appended to the forms of the Series 2015A Bonds and the Series 2015B Bonds attached hereto as Exhibit A-1 and

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Exhibit A-2, respectively. No Bond shall be secured hereby or entitled to the benefit hereof, or shall be valid or obligatory for any purpose, unless the certificate of authentication, substantially in such form, has been duly executed by the Bond Trustee; and such certificate of the Bond Trustee upon any Bond shall be conclusive evidence and the only competent evidence that such Bond has been authenticated and delivered hereunder. The Bond Trustee’s certificate of authentication shall be deemed to have been duly executed by it if manually signed by an authorized signatory of the Bond Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds issued hereunder.

Section 2.09 Issuance of Additional Bonds. Additional Bonds are hereby authorized to be issued hereunder for the purposes set forth in Section 3.01(b) hereof. The issuance of any Additional Bonds hereunder is subject to the prior written consent of the Bondholder Representative. If the Obligor requests the issuance of any Additional Bonds, it shall file with the Issuer, the Bond Trustee and the Bondholder Representative a certificate specifying the amount of Additional Bonds to be issued, the series to be issued and its priority, and the purpose for such issuance.

Thereupon, the Issuer may request the authentication and delivery of such Additional Bonds; provided that the Obligor and the Issuer shall have entered into an amendment to the Loan Agreement, which is subject to the approval of the Bondholder Representative, to provide, among other things, (i) that the Project shall include the additional facilities, if any, being financed by the Additional Bonds, (ii) for delivery of Notes entitled to the benefit and security of the Master Indenture and the Deed of Trust in an amount at least sufficient to pay principal of, premium, if any, and interest on the Additional Bonds when due, and (iii) for such additional covenants and conditions as the Issuer and the Obligor deem desirable. If consented to by the Bondholder Representative, all Additional Bonds shall be secured in the same manner as and rank on a parity with the Series 2015 Bonds (unless issued as Subordinate Bonds), but shall bear such date or dates, bear such interest rate or rates, have such maturity dates, redemption dates, options and premiums, and be issued at such prices as shall be approved in writing by the Issuer and the Obligor. Upon the execution and delivery of appropriate supplements to this Bond Indenture and the Master Indenture and amendments to the Loan Agreement and the Deed of Trust, if any, the Issuer may execute and deliver to the Bond Trustee, and the Bond Trustee shall authenticate, such Additional Bonds and deliver them to the initial purchasers thereof as directed by the Issuer.

Section 2.10 Requirements for Authentication and Delivery of Additional Bonds. Whenever requesting the authentication and delivery under this Article II of any Additional Bonds the Issuer shall furnish the Bond Trustee the following:

(a) Obligor’s Certificate. A certificate of the Obligor stating (i) that no default exists under the Loan Agreement, the Master Indenture or this Bond Indenture, (ii) that the Obligor approves the issuance and delivery of such Additional Bonds, (iii) that the Obligor has received the prior written consent of the Bondholder Representative to the issuance of any Additional Bonds, and (iv) any other matters to be approved by the Obligor pursuant to the Loan Agreement and this Section 2.10.

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(b) Bond Resolution. A Bond Resolution authorizing the issuance of the Additional Bonds and the execution and delivery of the amendment to the Loan Agreement and a supplement to this Bond Indenture.

(c) Amendment to the Loan Agreement. An original executed counterpart of the amendment to the Loan Agreement, consented to by the Bondholder Representative.

(d) Supplemental Bond Indenture. An indenture supplemental hereto, approved by the Bondholder Representative, designating the new series to be created and prescribing expressly or by reference with respect to the Bonds of such series:

(1) the principal amount of the Bonds of such series,

(2) the text of the Bonds of such series,

(3) the maturity date or dates thereof,

(4) the place or places where principal, premium, if any, and interest are to be paid and where the Bonds are to be registerable, transferable, or exchangeable,

(5) the rate or rates of interest and the date from which, and the date or dates on which, interest is payable,

(6) provisions as to redemption,

(7) provisions (if any) as to exchangeability,

(8) any other provisions necessary to describe and define such series within the provisions and limitations of this Bond Indenture, and

(9) any other provisions and agreements in respect thereof provided, or not prohibited, by this Bond Indenture.

(e) Supplement to Master Indenture. Original executed counterparts of a supplement to the Master Indenture, consented to by the Bondholder Representative, authorizing the execution and delivery of an additional Note or Notes.

(f) Additional Notes. A Note or Notes executed by the Obligor which shall:

(1) require payment or payments of principal of, premium, if any, and interest in amounts and at times sufficient, together with any other funds available therefor, to permit the payments of principal of, premium, if any, and interest on the Additional Bonds, taking into account any mandatory sinking fund requirements (pursuant to this Bond Indenture) which are required in respect of the related bonds, and

(2) require each payment on the Note to be made on or before the due date for the corresponding payment to be made on the Additional Bonds.

(g) [Reserved].

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(h) Government Approvals. An approval of the issuance of the Additional Bonds by any governmental entity or officer with jurisdiction over the Additional Bonds.

(i) Opinion as to Instruments Furnished Bond Trustee, Etc. Opinion or Opinions of Counsel acceptable to the Bond Trustee that:

(1) all instruments furnished to the Bond Trustee conform to the requirements of this Bond Indenture and constitute sufficient authority hereunder for the Bond Trustee to authenticate and deliver the Additional Bonds then applied for,

(2) all laws and requirements with respect to the form and execution by the Issuer of the supplement to this Bond Indenture, the amendment to the Loan Agreement, and the execution and delivery by the Issuer of the Additional Bonds then applied for have been complied with,

(3) the Issuer has corporate power to issue such Additional Bonds and has taken all necessary action for that purpose,

(4) the Additional Bonds are valid and binding in accordance with their terms and are secured by the lien of this Bond Indenture equally and ratably with all other Bonds theretofore issued and then Outstanding hereunder,

(5) the extent to which the interest on the Outstanding Bonds is excludable from the gross income of the recipients thereof under the Code will not be impaired by the issuance of the Additional Bonds then applied for, and

(6) the conditions of the Master Indenture to the issuance of the additional Note or Notes referred to in paragraph (f) of this Section have been satisfied, such additional Note or Notes and the related supplement to the Master Indenture are valid and binding in accordance with their terms and the additional Note or Notes are entitled to the benefits of the Master Indenture.

Section 2.11 Cancellation and Destruction of Bonds By the Bond Trustee. Except as provided in Section 7.01 hereof, whenever any Outstanding Bonds shall be delivered to the Bond Trustee for the cancellation thereof pursuant to this Bond Indenture, upon payment of the principal amount or interest represented thereby or for replacement pursuant to Section 2.05 hereof, such Bonds shall be promptly cancelled and treated in accordance with the Bond Trustee’s standard retention policies. In the event of destruction of the Bonds by the Bond Trustee, a certificate of destruction evidencing such destruction shall be furnished by the Bond Trustee to the Issuer and the Obligor upon written request.

Section 2.12 Book Entry Only System. The Bonds shall be initially issued in the form of a single fully registered Bond for each maturity of each series of the Bonds registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 2.13 hereof, all of the outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC.

With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Bond Trustee shall have no responsibility or obligation to any participant in DTC

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(a “DTC Participant”) or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds, except as provided in this Bond Indenture. Without limiting the immediately preceding sentence, the Issuer and the Bond Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a Bondholder, as shown on the registration books, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a Bondholder as shown in the registration books, of any amount with respect to principal of, premium, if any, or interest on, the Bonds. Notwithstanding any other provision of this Bond Indenture to the contrary, the Issuer and the Bond Trustee shall be entitled to treat and consider the person in whose name each Bond is registered in the registration books as the absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Bond Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective owners, as shown in the registration books as provided in this Bond Indenture, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer’s obligations with respect to payment of principal of, premium, if any, and interest on, the Bonds to the extent of the sum or sums so paid. No person other than an owner, as shown in the registration books, shall receive a Bond certificate evidencing the obligation of the Issuer to make payments of principal, premium, if any, and interest, pursuant to this Bond Indenture. Upon delivery by DTC to the Bond Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Bond Indenture with respect to payment of interest to the registered owner at the close of business on the Record Date, the word “Cede & Co.” in this Bond Indenture shall refer to such new nominee of DTC.

Section 2.13 Successor Securities Depository; Transfers Outside Book Entry Only System.

(a) In the event that the Obligor, with the consent of the Bondholder Representative, determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC (the “DTC Letter”) and that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Issuer, at the direction of the Obligor, with the consent of the Bondholder Representative, shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities Exchange Act of 1934, as amended, notify DTC and DTC Participants, identified by DTC, of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants, identified by DTC, of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants, identified by DTC, having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the registration books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds shall designate, in accordance with the provisions of this Bond Indenture.

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(b) Upon the written consent of the Bondholder Representative, or, if there is no Bondholder Representative, 100 percent of the Beneficial Holders of the Bonds, the Bond Trustee, in accordance with the DTC Letter, shall withdraw the Bonds from DTC, and authenticate and deliver Bonds fully registered to the assignees of DTC or its nominee. If the request for such withdrawal is not the result of any Issuer action or inaction, such withdrawal, authentication and delivery shall be at the cost and expense (including costs of printing, preparing and delivering such Bonds) of the Persons requesting such withdrawal, authentication and delivery.

Section 2.14 Payments to Cede & Co. Notwithstanding any other provision of this Bond Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on, such Bond and all notices, transfers and deliveries with respect to such Bond shall be made and given, respectively, in the manner provided in the DTC Letter and the regulations and procedures of DTC.

Section 2.15 Temporary Bonds. Pending preparation of definitive Series 2015 Bonds, the Issuer may issue, in lieu of definitive Series 2015 Bonds, one or more temporary printed or typewritten Series 2015 Bonds in authorized denominations, of substantially the tenor recited above. At the request of the Issuer, the Trustee shall authenticate definitive Series 2015 Bonds in exchange for and upon surrender of an equal principal amount of temporary Series 2015 Bonds of the same series, maturity and interest rate. Until so exchanged, temporary Series 2015 Bonds shall have the same rights, remedies and security hereunder as definitive Series 2015 Bonds. Temporary Series 2015 Bonds shall be numbered consecutively upward for each series from TAR-1 and TBR-1, respectively.

ARTICLE III

REVENUES AND FUNDS

Section 3.01 Application of Proceeds of Series 2015 Bonds and Other Moneys.

(a) The Issuer will sell and cause to be delivered to the initial purchasers thereof the Series 2015 Bonds and will deliver the proceeds thereof to the Bond Trustee for application as follows:

(i) Deposit, into the Cost of Issuance Fund, the amounts specified in the request and authorization to the Bond Trustee described in Section 2.07(iv).

(ii) Deposit, into the Series 2015A Funded Interest Subaccount and the Series 2015B Funded Interest Subaccount of the Funded Interest Account of the Construction Fund, the amounts specified in the request and authorization to the Bond Trustee described in Section 2.07(iv).

(iii) Deposit, into the Series 2015A Project Subaccount and the Series 2015B Project Subaccount of the Project Account of the Construction Fund, the

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amount specified in the request and authorization to the Bond Trustee described in Section 2.07(iv).

In accordance with Section 4.1 of the Loan Agreement, on or before the Delivery Date, the Obligor has delivered to the Bond Trustee other legally available moneys in the amount of $1,900,000.00 for deposit into the Gilbert Holdback Subaccount of the Project Account of the Construction Fund ($254,512.25) and for transfer to the Master Trustee ($1,645,487.75) for deposit in the Working Capital Fund (as defined in the Master Indenture).

(b) The Issuer agrees to authorize the issuance of Additional Bonds upon the terms and conditions provided herein and in Sections 2.09 and 2.10. Additional Bonds may be issued to provide funds (i) to pay the Cost of financing, refinancing, acquiring, providing, constructing, enlarging, remodeling, renovating, improving, furnishing or equipping and refinancing the acquiring, constructing, equipping or completing any Project, (ii) to the extent permitted by law, to refund any Bonds theretofore issued and then Outstanding under this Bond Indenture or (iii) for any combination of such purposes. In the event of the issuance of Additional Bonds for any such purposes, the amount of Additional Bonds issued may include the costs of the issuance and sale of the Additional Bonds, capitalized interest for such period allowed by law, reserve funds and such other costs reasonably related to the financing as shall be agreed upon by the Obligor and the Issuer.

(c) If the Obligor is not in default hereunder or under the Loan Agreement, the Issuer agrees, on request of the Obligor, from time to time, to use its reasonable efforts to issue the amount of Additional Bonds specified by the Obligor; provided that the terms of such Additional Bonds, the purchase price to be paid therefor and the manner in which the proceeds thereof are to be disbursed shall have been approved in writing by the Obligor and the Bondholder Representative, and provided further that (1) the Obligor and the Issuer shall have entered into an amendment to the Loan Agreement, which is consented to by the Bondholder Representative, to provide, among other things, that the Project shall include the facilities, if any, being financed by the Additional Bonds, for additional loan payments in an amount at least sufficient to pay principal of, premium, if any, and interest on the Additional Bonds when due, and (2) the Obligor and the Master Trustee shall have entered into a supplement to the Master Indenture, consented to by the Bondholder Representative, whereby the Obligor issues a Note or Notes securing payment of the principal of, premium, if any, and interest on the Additional Bonds. The Issuer agrees to comply with Sections 2.09 and 2.10 with respect to the issuance of Additional Bonds. No Additional Bonds shall be issued without the prior written consent of the Bondholder Representative.

Section 3.02 Creation of the Bond Fund. There is hereby created by the Issuer and ordered established with the Bond Trustee a trust fund to be designated as the “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project) Bond Fund” (the “Bond Fund”). There are hereby created by the Issuer and ordered established with the Bond Trustee four separate accounts within the Bond Fund to be designated as the Senior Principal Account, the Senior Interest Account, the Subordinate Principal Account and the Subordinate Interest Account, respectively. Moneys on deposit in the Senior Principal Account shall be used to pay the principal of and premium, if any, on the Senior Bonds, when due and payable. Moneys on deposit in the Senior Interest Account shall be used to pay the interest on

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the Senior Bonds. Moneys on deposit in the Subordinate Principal Account shall be used to pay the principal of and premium, if any, on the Subordinate Bonds, when due and payable. Moneys on deposit in the Subordinate Interest Account shall be used to pay the interest on the Subordinate Bonds.

Section 3.03 Payments into the Bond Fund.

(a) There shall be deposited into the Senior Principal Account and the Senior Interest Account, as and when received, (i) all payments on the Senior Notes, (ii) all other moneys required to be deposited therein pursuant to the Loan Agreement and (iii) all other moneys received by the Bond Trustee when accompanied by directions that such moneys are to be paid into the Senior Principal Account or the Senior Interest Account. There also shall be retained or deposited in the Senior Principal Account or the Senior Interest Account all interest and other income received on investments or moneys required to be transferred thereto, in accordance with Section 6.02 hereof. The Issuer hereby covenants and agrees that so long as any of the Senior Bonds are Outstanding it will deposit, or cause to be deposited, into the Senior Principal Account or the Senior Interest Account for its account sufficient sums from revenues and receipts derived from the Loan Agreement for such purpose promptly to meet and pay the principal of, premium, if any, and interest on the Senior Bonds as the same become due and payable.

(b) Subject to the subordination provisions of this Bond Indenture, there shall be deposited into the Subordinate Principal Account and the Subordinate Interest Account, as and when received, (i) all payments on the Subordinate Notes, (ii) all other moneys required to be deposited therein pursuant to the Loan Agreement and (iii) all other moneys received by the Bond Trustee when accompanied by directions that such moneys are to be paid into the Subordinate Principal Account or the Subordinate Interest Account. There also shall be retained or deposited in the Subordinate Principal Account or the Subordinate Interest Account all interest and other income received on investments or moneys required to be transferred thereto, in accordance with Section 6.02 hereof. The Issuer hereby covenants and agrees that so long as any of the Subordinate Bonds are Outstanding it will deposit, or cause to be deposited, into the Subordinate Principal Account or the Subordinate Interest Account for its account sufficient sums from revenues and receipts derived from the Loan Agreement for such purpose promptly to meet and pay the principal of, premium, if any, and interest on the Subordinate Bonds as the same become due and payable.

Section 3.04 Use of Moneys in the Senior Principal Account and the Senior Interest Account.

(a) Except as provided in Sections 3.13 and 8.05 hereof, moneys in the Senior Principal Account and the Senior Interest Account shall be used solely for the payment of the principal of, premium, if any, and interest on the Senior Bonds.

(b) Except as provided in Sections 3.13 and 8.05 hereof and subject to the subordination provisions of this Bond Indenture, moneys in the Subordinate Principal Account and the Subordinate Interest Account shall be used solely for the payment of the principal of, premium, if any, and interest on the Subordinate Bonds.

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Section 3.05 Custody of the Bond Fund. The Bond Fund shall be in the custody of the Bond Trustee but in the name of the Issuer, and the Issuer hereby authorizes and directs the Bond Trustee to withdraw sufficient funds from the Principal Account or the Interest Account of the Bond Fund to pay the principal of, premium, if any, and interest on the Bonds as the same come due and payable, which authorization and direction the Bond Trustee hereby accepts.

Section 3.06 Construction Fund.

(a) There is hereby created and established with the Bond Trustee a trust fund designated as the “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project) Construction Fund” (the “Construction Fund”). There are hereby created by the Issuer and ordered established with the Bond Trustee two separate accounts within the Construction Fund to be designated as the “Funded Interest Account” (and therein two separate subaccounts to be designated as the “Series 2015A Funded Interest Subaccount” and the “Series 2015B Funded Interest Subaccount”) and the “Project Account” (and therein three separate subaccounts to be designated as the “Series 2015A Project Subaccount,” the “Series 2015B Project Subaccount” and the “Gilbert Holdback Subaccount”). Moneys in the accounts in the Construction Fund shall be used to pay Costs of the Project or as hereinafter provided. Under no circumstances shall moneys in the Construction Fund be used to pay Cost of Issuance. In connection with the issuance of Additional Bonds, separate subaccounts of the Project Account and the Funded Interest Account shall be established to the extent proceeds of such Additional Bonds shall be deposited therein and disbursed by the Trustee pursuant to a supplemental indenture.

(b) On the last Business Day immediately preceding each Interest Payment Date up to and including the date the Project is placed in service, the Bond Trustee shall transfer funds from the Series 2015A Funded Interest Subaccount of the Funded Interest Account to the Senior Interest Account of the Bond Fund to pay interest on the Series 2015A Bonds due on such Interest Payment Date and accrued up to and including the date the Project is placed in service, without submission of any requisition. After the Completion Date, amounts held in the Series 2015A Funded Interest Subaccount of the Funded Interest Account shall be used within 90 days (1) for any Qualified Project Cost, (2) to redeem or defease Series 2015A Bonds in accordance with the terms of this Indenture and the Tax Agreement or (3) for any other permissible purpose if accompanied by an Opinion of Bond Counsel.

On the last Business Day immediately preceding each Interest Payment Date, the Bond Trustee shall transfer funds from the Series 2015B Funded Interest Subaccount of the Funded Interest Account to the Senior Interest Account of the Bond Fund to pay interest on the Series 2015B Bonds due on such Interest Payment Date without submission of any requisition.

(c) Payments and disbursements from the Series 2015A Project Subaccount, the Series 2015B Project Subaccount and the Gilbert Holdback Subaccount of the Project Account of the Construction Fund shall be made in accordance with this Article III and Article IV of the Loan Agreement. Within three Business Days of receipt of the required certificates, the Bond Trustee shall pay the amount requested to the extent that the Obligor is entitled to payment pursuant to the Loan Agreement.

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After delivery of the Completion Certificate and until Stabilization occurs, the Bond Trustee shall retain $197,116.75 (the “Development Fee Holdback”) in the Project Account to the extent such amount is then on deposit therein. After Stabilization has occurred, the Development Fee Holdback shall be disbursed as described in the first paragraph of this subsection (c).

After delivery of the Completion Certificate and making provision for the Development Fee Holdback as described above, the Bond Trustee shall transfer any amounts remaining in the Project Account to the Senior Principal Account of the Bond Fund to be used to pay principal on the Series 2015A Bonds.

(d) If an Event of Default occurs under this Bond Indenture, and the Bond Trustee declares the principal of all Bonds and the interest accrued thereon to be due and payable, no moneys may be paid out of the Construction Fund by the Bond Trustee during the continuance of such an Event of Default; provided, however, that if such an Event of Default shall be waived and such declaration shall be rescinded by the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, or, if there is no Bondholder Representative, the holders and owners of the Bonds pursuant to the terms of this Bond Indenture, the full amount of any such remaining moneys in the Construction Fund may again be disbursed by the Bond Trustee in accordance with the provisions of the Loan Agreement and this Bond Indenture.

Section 3.07 Completion Certificate. At such time as the Obligor determines that (i) construction of the Project has been completed and (ii) it has received payment for all disbursement requests submitted pursuant to Section 4.6(a) of the Loan Agreement (other than the disbursement request relating to the development fee to be paid with the Development Fee Holdback described in Section 3.06(c) hereof), it shall deliver the Completion Certificate to the Bond Trustee.

Section 3.08 [Reserved].


Section 3.10 Nonpresentment of Bonds. In the event that any Bonds shall not be presented for payment when the principal thereof or interest thereon becomes due, either at maturity, the date fixed for redemption thereof, or otherwise, if funds sufficient for the payment thereof shall have been deposited into the Bond Fund or otherwise made available to the Bond Trustee for deposit therein as provided in Section 3.03 hereof, all liability of the Issuer to the owner or owners thereof for the payment of such Bonds shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Bond Trustee to hold such fund or funds, without liability for interest thereon, for the benefit of the owner or owners of such Bonds, who shall thereafter be restricted exclusively to such fund or funds for any claim of whatever nature on his or their part under this Bond Indenture or on, or with respect to, said Bond, and all such funds shall remain uninvested. If any Bond shall not be presented for payment within the period of two years following the date of final maturity of such Bond, the Bond Trustee shall, to the extent required by law, transfer such funds to the state treasury of the state in which the principal office of the Bond Trustee is located, in which case the owner of such Bonds shall look only to such state for payment, or, in the alternative, to the extent

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permitted by law, the Bond Trustee shall, upon request in writing by the Obligor, return such funds to the Obligor free of any trust or lien and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Obligor. In either event, the Bond Trustee shall have no further responsibility with respect to such moneys or payment of such Bonds. Thereafter, the Bondholders shall be entitled to look only to the Obligor for payment, and then only to the extent of the amount so repaid by the Bond Trustee. The Obligor shall not be liable for any interest on any sums paid to it.

Section 3.11 Bond Trustee’s and Paying Agents’ Fees, Charges, and Expenses. Pursuant to the provisions of the Loan Agreement, the Obligor has agreed to pay to the Bond Trustee and to each Paying Agent, commencing with the effective date of the Loan Agreement and continuing until the principal of, premium, if any, and interest on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the provisions of this Bond Indenture, the reasonable and necessary fees and expenses (including attorneys’ fees) of the Bond Trustee and each Paying Agent, as and when the same become due, upon the submission by the Bond Trustee and each Paying Agent of a statement therefor.

Section 3.12 Moneys to be Held in Trust. All moneys required to be deposited with or paid to the Bond Trustee under any provision of this Bond Indenture (except moneys in the Rebate Fund) shall be held by the Bond Trustee in trust for the purposes specified in this Bond Indenture, and except for moneys deposited with or paid to the Bond Trustee for the redemption of Bonds for which the notice of redemption has been duly given, shall, while held by the Bond Trustee, constitute part of the Trust Estate and be subject to the lien hereof.

Section 3.13 Repayment to the Obligor from the Funds. Any amounts remaining in the Bond Fund or Construction Fund after payment in full of the Bonds (or after making provision for such payment), the fees and expenses of the Bond Trustee and the Paying Agents (including attorneys’ fees, if any), the Administration Expenses, the expenses of the Bondholder Representative, and all other amounts required to be paid hereunder and under the Loan Agreement, including amounts payable to the U.S. Treasury, shall be paid to the Obligor upon the termination of the Loan Agreement.

Section 3.14 Rebate Fund.

(a) A special Rebate Fund is hereby established by the Issuer. The Rebate Fund shall be for the sole benefit of the United States of America and shall not be subject to the claim of any other Person, including without limitation the Bondholders. The Rebate Fund is established for the purpose of complying with Section 148 of the Code and the Regulations promulgated pursuant thereto. The money deposited in the Rebate Fund, together with all investments thereof and investment income therefrom, shall be held in trust and applied solely as provided in this Section. The Rebate Fund is not a portion of the Trust Estate and is not subject to the lien of this Bond Indenture. Notwithstanding the foregoing, the Bond Trustee with respect to the Rebate Fund is afforded all the rights, protections and immunities otherwise accorded to it hereunder.

(b) Within 55 days after the close of each fifth “Bond Year,” the Obligor shall deliver to the Bond Trustee a computation in the form of a certificate of an officer of the Obligor of the amount of “Excess Earnings,” if any, for the period beginning on the date of delivery of the Tax

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Exempt Bonds and ending at the close of such “Bond Year” and the Obligor shall pay to the Bond Trustee for deposit into the Rebate Fund an amount equal to the difference, if any, between the amount then in the Rebate Fund and the Excess Earnings so computed. The term “Bond Year” means with respect to the Tax Exempt Bonds each one year period ending on the anniversary of the date of delivery of the Tax Exempt Bonds or such other period as may be elected by the Issuer in accordance with the Regulations and notice of which election has been given to the Bond Trustee. If, at the close of any Bond Year, the amount in the Rebate Fund exceeds the amount that would be required to be paid to the United States of America under paragraph (d) below if the Tax Exempt Bonds had been paid in full, such excess may, at the request of the Obligor, be transferred from the Rebate Fund and paid to the Obligor.

(c) In general, “Excess Earnings” for any period of time means the sum of:

(i) the excess of:

(A) the aggregate amount earned during such period of time on all “Nonpurpose Investments” (including gains on the disposition of such Obligations) in which “Gross Proceeds” of the issue are invested (other than amounts attributable to an excess described in this subparagraph (c)(i)), over

(B) the amount that would have been earned during such period of time if the “Yield” on such Nonpurpose Investments (other than amounts attributable to an excess described in this subparagraph (c)(i)) had been equal to the yield on the issue, plus

(ii) any income during such period of time attributable to the excess described in subparagraph (c)(i) above.

The term Nonpurpose Investments, Gross Proceeds, Issue Date and Yield shall have the meanings given to such terms in Section 148 of the Code and the Regulations promulgated pursuant to such section.

(d) The Bond Trustee shall, as directed in writing by the Obligor, pay to the United States of America at least once every five years, to the extent that funds are available in the Rebate Fund or otherwise provided by the Obligor, an amount that ensures that at least 90 percent of the Excess Earnings from the date of delivery of the Tax Exempt Bonds to the close of the period for which the payment is being made will have been paid not later than 60 days after such period. The Bond Trustee shall pay to the United States of America not later than 60 days after the Tax Exempt Bonds have been paid in full as directed by the Obligor in writing, to the extent that funds are available in the Rebate Fund or otherwise provided by the Obligor, 100 percent of the amount then required to be paid under Section 148(f) of the Code as a result of Excess Earnings. The Bond Trustee shall provide the Issuer with a copy of any such payments to the United States of America.

(e) The amounts to be computed, paid, deposited or disbursed under this Section shall be determined by the Obligor acting on behalf of the Issuer within 30 days after each Bond Year after the date of issuance of each issue or series of Tax Exempt Bonds. By such date, the Obligor shall also notify, in writing, the Bond Trustee and the Issuer of the determinations the

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Obligor has made and the payment to be made pursuant to the provisions of this section. Upon written request of the Issuer or any registered owner of Tax Exempt Bonds, the Obligor shall furnish to such party a certificate (supported by reasonable documentation, which may include calculation by Bond Counsel or by some other service organization) showing compliance with this Section and other applicable provisions of Section 148 of the Code.

(f) The Bond Trustee shall maintain a record of the periodic determinations by the Obligor of the Excess Earnings for a period beginning on the first anniversary date of the issuance of the Tax Exempt Bonds and ending on the date six years after the final retirement of the Tax Exempt Bonds. Such records shall state each such anniversary date and summarize the manner in which the Excess Earnings, if any, was determined.

(g) If the Bond Trustee shall declare the principal of the Tax Exempt Bonds and the interest accrued thereon immediately due and payable as the result of an Event of Default specified in this Bond Indenture, or if the Tax Exempt Bonds are optionally or mandatorily prepaid or redeemed prior to maturity as a whole in accordance with their terms, any amount remaining in any of the funds shall be transferred to the Rebate Fund to the extent that the amount therein is less than the Excess Earnings computed by the Obligor as of the date of such acceleration or redemption, and the balance of such amount shall be used immediately by the Bond Trustee for the purpose of paying principal of, redemption premium, if any, and interest on the Tax Exempt Bonds when due. In furtherance of such intention, the Issuer hereby authorizes and directs its Chair, Treasurer or Secretary to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which may be permitted by the Code as are consistent with the purpose for the issuance of the Tax Exempt Bonds.

(h) The requirements contained in this Section relating to the computation and payment of Excess Earnings shall not be applicable if all Gross Proceeds of the Tax Exempt Bonds are expended in compliance with Section 1.148-7 of the Regulations.

(i) Notwithstanding any of the provisions of this Section, the Bond Trustee shall have no duty or responsibility with respect to the Rebate Fund except to follow the specific written instructions of the Obligor.

Section 3.15 Cost of Issuance Fund. There is hereby created and established with the Bond Trustee a trust fund designated as the “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project) Cost of Issuance Fund” (the “Cost of Issuance Fund”). The Bond Trustee shall disburse moneys in the Cost of Issuance Fund as provided in Article IV of the Loan Agreement, without further direction, authorization or approval. Moneys in the Cost of Issuance Fund may be used only for payment of the Cost of Issuance. On January 27, 2016, any moneys remaining in the Cost of Issuance Fund shall be transferred to the Series 2015B Project Subaccount of the Project Account of the Construction Fund and used to pay Costs of the Project and thereafter no such moneys shall be used to pay Cost of Issuance. The Cost of Issuance Fund shall then be closed.

Any provision hereof to the contrary notwithstanding, the Bond Trustee is authorized and directed to pay the Costs of Issuance described in Exhibit C attached hereto in addition to any

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other Costs of Issuance requisitioned pursuant to Article IV of the Loan Agreement, without requiring further review, direction or approval by any party, upon receipt of invoices therefor.

ARTICLE IV

COVENANTS OF THE ISSUER

Section 4.01 Performance of Covenants: Authority. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Bond Indenture, in any and every Bond and in all proceedings of the Board of Directors pertaining hereto; provided, however, that except for the covenant of the Issuer set forth in Section 4.02 hereof relating to payment of the Bonds, the Issuer shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Obligor or by the Bond Trustee, or shall have received the instrument to be executed and at the option of the Issuer shall have received from the party requesting such execution assurance satisfactory to the Issuer that the Issuer shall be reimbursed for its reasonable expenses incurred or to be incurred in connection with taking such action or executing such instrument. The Issuer covenants that it is duly authorized under the laws of the State of Arizona, including particularly and without limitation the Act, to issue the Series 2015 Bonds and to execute this Bond Indenture, and to pledge the revenues and receipts hereby pledged, and to assign its rights under and pursuant to the Loan Agreement and the Series 2015 Notes in the manner and to the extent herein set forth, that all action on its part and to the extent herein set forth, that all action on its part for the issuance of the Series 2015 Bonds and the execution and delivery of this Bond Indenture has been duly and effectively taken and will be duly taken as provided herein, and that the Series 2015 Bonds in the hands of the owners thereof are and will be valid and enforceable limited obligations of the Issuer according to the import hereof, except as enforcement thereof and hereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting the rights of creditors and by the application of general principles of equity, if such remedies are pursued.

Section 4.02 Payments of Principal, Premium, If Any, and Interest. The Issuer will promptly pay or cause to be paid the principal of, premium, if any, and interest on all Bonds issued hereunder according to the terms hereof. The principal, premium, if any, and interest payments are payable solely from revenues and other amounts derived from any Notes issued in order to secure Bonds issued under this Bond Indenture, and from the other security pledged hereby, which revenues and security are hereby specifically pledged to the payment thereof in the manner and to the extent herein specified. Nothing in the Bonds or in this Bond Indenture shall be considered or construed as pledging any funds or assets of the Issuer other than those pledged hereby.

Section 4.03 Supplemental Indentures: Recordation of Bond Indenture and Supplemental Indentures. The Issuer will execute and deliver all indentures supplemental hereto, and will cause this Bond Indenture, the Loan Agreement, and all supplements hereto and thereto, as well as all security instruments and financing statements relating thereto, to be filed in each office required by law in order to publish notice of the liens created by this Bond Indenture and the Loan Agreement. The Bond Trustee, at the Obligor’s expense, will cause all continuation statements and all supplements to any financing statement or continuation statement and other

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instruments as may be required, at all times to be recorded, registered and filed in such manner and in such places as may be required by law in order fully to preserve and protect the security of the Bondholders and all rights of the Bond Trustee hereunder.

Section 4.04 Lien of Bond Indenture. The Issuer hereby agrees not to create any lien having priority or preference over the lien of this Bond Indenture upon the Trust Estate or any part thereof, other than the security interest granted by it to the Bond Trustee, except as otherwise specifically provided in Article VIII hereof. The Issuer agrees that no obligations the payment of which is secured by payments or other moneys or amounts derived from the Loan Agreement and the other sources provided herein will be issued by it except in accordance with Sections 2.09 and 2.10 of this Bond Indenture.

Section 4.05 Rights Under the Loan Agreement. The Issuer will observe all of the obligations, terms and conditions required on its part to be observed or performed under the Loan Agreement. The Issuer agrees that wherever in the Loan Agreement it is stated that the Issuer will notify the Bond Trustee, give the Bond Trustee some right or privilege, or in any way attempts to confer upon the Bond Trustee the ability for the Bond Trustee to protect the security for payment of the Bonds, that such part of the Loan Agreement shall be as though it were set out in this Bond Indenture in full.

The Issuer agrees that the Bond Trustee as assignee of the Loan Agreement may enforce, in its name or in the name of the Issuer, all rights of the Issuer and all obligations of the Obligor under and pursuant to the Loan Agreement for and on behalf of the Bondholders, whether or not the Issuer is in default hereunder.

Section 4.06 Tax Covenants.

(a) The Issuer covenants and agrees that until the final maturity of the Tax Exempt Bonds of any issue, based upon the Obligor’s covenants in Section 4.9 of the Loan Agreement, it will not take any action, use any money on deposit in any fund or account maintained in connection with the Tax Exempt Bonds of such issue, whether or not such money was derived from the proceeds of the sale of the Tax Exempt Bonds of such issue or from any other source, in a manner that would cause the Tax Exempt Bonds of any issue to be arbitrage bonds, within the meaning of Section 148 of the Code. In the event the Obligor notifies the Issuer that it is necessary to restrict or limit the yield on the investment of moneys held by the Bond Trustee pursuant to this Bond Indenture, or to use such moneys in any certain manner to avoid the Tax Exempt Bonds of any issue being considered arbitrage bonds, the Issuer at the written direction and expense of the Obligor shall deliver to the Bond Trustee appropriate written instructions of the Issuer, in which event the Bond Trustee shall take such action as instructed to restrict or limit the yield on such investment or to use such moneys in accordance with such instructions.

(b) The Issuer shall not knowingly use any proceeds of Tax Exempt Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take any other action or actions, that would result in any of the Tax Exempt Bonds being treated other than as an obligation described in Section 103(a) of the Code.

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(c) The Issuer will not knowingly take any action that would result in all or any portion of the Tax Exempt Bonds being treated as federally guaranteed within the meaning of Section 149(b)(2) of the Code.

(d) For purposes of this Section, the Issuer’s compliance shall be based solely on acts or omissions by the Issuer, and no acts, omissions or directions of the Obligor, the Bond Trustee or any other Persons shall be attributable to the Issuer.

Section 4.07 Change in Law. To the extent that published rulings of the Internal Revenue Service, or amendments to the Code or the Regulations modify the covenants of the Issuer that are set forth in this Bond Indenture or that are necessary for interest on any issue of the Tax Exempt Bonds to be excludable from gross income for federal income tax purposes, the Issuer, upon receiving the written Opinion of Bond Counsel to such effect, will comply, at the expense of the Obligor, with such modifications and direct the Bond Trustee to take such action as may be required to comply with such modifications.

ARTICLE V

REDEMPTION OF BONDS

Section 5.01 Optional Redemption of Series 2015 Bonds.

(a) The Series 2015A Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole at any time during the Stepped Coupon Call Period at the redemption price equal to the principal amount of the Series 2015A Bonds, together with accrued interest to the date of redemption, without premium.

(b) The Series 2015 Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole or in part on October 1, 2017 or on any date thereafter, at the redemption prices (expressed as percentages of the principal amount of such Series 2015 Bonds to be redeemed) set forth below, together with accrued interest to the date of redemption:

Redemption Dates Redemption Prices October 1, 2017 – September 30, 2019 106% October 1, 2019 – September 30, 2020 105% October 1, 2020 – September 30, 2021 104% October 1, 2021 – September 30, 2022 103% October 1, 2022 – September 30, 2023 102% October 1, 2023 – September 30, 2024 101% October 1, 2024 and thereafter 100%

Section 5.02 Sinking Fund Redemption.

(a) The Series 2015A Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2015A Bonds, the Issuer shall cause

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to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on October 1 of each of the following years (after credit as provided below) the following principal amounts of Series 2015A Bonds, plus accrued interest to the redemption date:


2019 $ 5,000 2035 $ 415,000 2020 5,000 2036 445,000 2021 5,000 2037 475,000 2022 5,000 2038 510,000 2023 5,000 2039 550,000 2024 5,000 2040 590,000 2025 5,000 2041 630,000 2026 220,000 2042 675,000 2027 235,000 2043 725,000 2028 255,000 2044 780,000 2029 275,000 2045 835,000 2030 290,000 2046 895,000 2031 315,000 2047 960,000 2032 335,000 2048 1,030,000 2033 360,000 2049 1,105,000 2034 385,000 2050* 1,185,000

________________ * maturity

(b) On or before the 30th day prior to each sinking fund payment date, the Bond Trustee shall proceed to select for redemption (by lot in such manner as the Bond Trustee may determine) from all Series 2015A Bonds Outstanding which are subject to payment on such date a principal amount of such Series 2015A Bonds equal to the aggregate principal amount of such Series 2015A Bonds redeemable with the required sinking fund payment, and shall call such Series 2015A Bonds or portions thereof ($5,000 or any integral multiple thereof such that the Outstanding Series 2015A Bonds remain in Authorized Denominations) for redemption from the sinking fund on the next October 1, and give notice of such call. At the option of the Obligor to be exercised by delivery of a written certificate to the Bond Trustee on or before the 45th day next preceding any sinking fund redemption date, it may (A) deliver to the Bond Trustee for cancellation Series 2015A Bonds or portions thereof subject to payment on such sinking fund redemption date in an aggregate principal amount desired by the Obligor or (B) specify a principal amount of such Series 2015A Bonds or portions thereof subject to payment on such sinking fund redemption date, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Bond Trustee at the request of the Issuer and not theretofore applied as a credit against any sinking fund redemption obligation. Each such Series 2015A Bond or portion thereof so delivered or previously redeemed shall be credited by the Bond Trustee at 100 percent of the principal amount thereof against the obligation to redeem Series 2015A Bonds on the next succeeding or any other sinking fund redemption date designated in writing by the Obligor. Any excess shall be credited against the next sinking fund redemption obligation to redeem Series 2015A Bonds. In the event that the Obligor shall avail itself of the provisions of clause (A) of the second sentence of this paragraph,

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the certificate required by the second sentence of this paragraph shall be accompanied by the Series 2015A Bonds or portions thereof to be canceled.

(c) The Series 2015B Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2015B Bonds, the Issuer shall cause to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on October 1 of each of the following years (after credit as provided below) the following principal amounts of Series 2015B Bonds, plus accrued interest to the redemption date:


2019 $150,000 2023 $200,000 2020 160,000 2024 215,000 2021 170,000 2025* 235,000 2022 185,000

________________ * maturity

(d) On or before the 30th day prior to each sinking fund payment date, the Bond Trustee shall proceed to select for redemption (by lot in such manner as the Bond Trustee may determine) from all Series 2015B Bonds Outstanding a principal amount of such Series 2015B Bonds equal to the aggregate principal amount of such Series 2015B Bonds redeemable with the required sinking fund payment, and shall call such Series 2015B Bonds or portions thereof ($5,000 or any integral multiple thereof such that the Outstanding Series 2015B Bonds remain in Authorized Denominations) for redemption from the sinking fund on the next October 1, and give notice of such call. At the option of the Obligor to be exercised by delivery of a written certificate to the Bond Trustee on or before the 45th day next preceding any sinking fund redemption date, it may (A) deliver to the Bond Trustee for cancellation Series 2015B Bonds or portions thereof in an aggregate principal amount desired by the Obligor or (B) specify a principal amount of Series 2015B Bonds or portions thereof, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Bond Trustee at the request of the Issuer, upon the direction of the Obligor, and not theretofore applied as a credit against any sinking fund redemption obligation. Each such Series 2015B Bond or portion thereof so delivered or previously redeemed shall be credited by the Bond Trustee at 100 percent of the principal amount thereof against the obligation to redeem Series 2015B Bonds on the next succeeding or any other sinking fund redemption date designated in writing by the Obligor. Any excess shall be credited against the next sinking fund redemption obligation to redeem Series 2015B Bonds. In the event that the Obligor shall avail itself of the provisions of clause (A) of the second sentence of this paragraph, the certificate required by the second sentence of this paragraph shall be accompanied by the Series 2015B Bonds or portions thereof to be canceled.

Section 5.03 Method of Selection of Bonds in Case of Partial Redemption. Unless otherwise specifically stated herein, if fewer than all of the Outstanding Series 2015 Bonds that are stated to mature on different dates are called for redemption at one time, those Bonds which are called shall be called in inverse order of the maturities of the Bonds of that Series to be redeemed. If fewer than all of the Bonds of a single maturity are to be redeemed, the selection of

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Bonds to be redeemed, or portions thereof, in amounts equal to $5,000 or any integral multiples thereof, shall be made either (a) by lot by the Bond Trustee in any manner which the Bond Trustee may determine or (b) by pro ration calculated using the each individual holder’s total principal amount of Series 2015 Bonds held divided into the total principal amount of the Series 2015 Bonds multiplied by the total amount of funds utilized for the partial redemption, with the method of redemption to be determined by the Bondholder Representative or if none exists then by the holders of at least 66 2/3% of the aggregate principal amount of the Series 2015 Bonds then outstanding; provided that the Bond Trustee shall select Series 2015 Bonds for redemption so as to assure that after such redemption no Registered Owner shall retain Series 2015 Bonds in an aggregate amount less than $25,000; and provided further that, if less than all of an Outstanding Bond of one maturity in a Book-Entry System is to be called for redemption, the Bond Trustee shall give notice to the Depository or the nominee of the Depository that is the Registered Owner of such Bond, and the selection of the beneficial ownership interest in that Bond to be redeemed shall be by lot or pro ration calculated using each individual holder’s total principal amount of Series 2015 Bonds held divided into the total principal amount of the Series 2015 Bonds multiplied by the total amount of funds utilized for the partial redemption, with the method of redemption to be determined by the Bondholder Representative or if none exists then by the holders of at least 66 2/3% of the aggregate principal amount of the Series 2015 Bonds then outstanding. In the case of a partial redemption of Bonds each unit of face value of principal thereof equal to $5,000 (each such $5,000 unit is hereinafter referred to as a “Unit”) shall be treated as though it were a separate Bond in the amount of such Unit. If it is determined that one or more, but not all of the Units represented by a Bond are to be called for redemption, then upon notice of redemption of Unit or Units of Bonds, the Registered Owner of that Bond shall surrender the Bond to the Bond Trustee (a) for payment of the redemption price of the Unit or Units of Bonds called for redemption (including without limitation, the interest accrued to the date fixed for redemption and any premium); and (b) for issuance, without charge to the Registered Owner thereof, of a new Bond or Bonds of the same Series, aggregating a principal amount equal to the unmatured and unredeemed portion of, and bearing interest at the same rate and maturing on the same date as, the Bond surrendered. The Obligor shall provide the Bond Trustee with a payment schedule upon any partial redemption pursuant to Section 5.01(b), 5.08, or 5.09 hereof.

Section 5.04 Notice of Redemption. Series 2015 Bonds shall be called for redemption by the Bond Trustee as herein provided upon receipt by the Issuer and the Bond Trustee at least 45 days (or such lesser period to which the Issuer and the Bond Trustee may agree) prior to the redemption date of a certificate of the Obligor specifying the series and principal amount of Series 2015 Bonds to be called for redemption, the applicable redemption price or prices and the provision or provisions of this Bond Indenture pursuant to which such Series 2015 Bonds are to be called for redemption. The provisions of the preceding sentence shall not apply to the redemption of Series 2015 Bonds pursuant to the sinking fund provided in Section 5.02 hereof, and such Series 2015 Bonds shall be called for redemption by the Bond Trustee without the necessity of any action by the Obligor or the Issuer. In case of every redemption, the Bond Trustee shall cause notice of such redemption to be given by mailing by first class mail, postage prepaid, a copy of the redemption notice to the Bondholder Representative and to the owners of the Series 2015 Bonds designated for redemption in whole or in part, at their addresses as the same shall last appear upon the registration books, in each case not more than 60 nor less than 20 days prior to the redemption date. In addition, notice of redemption shall be sent by first class or

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registered mail, return receipt requested, or by overnight delivery service (1) contemporaneously with such mailing: (A) to any owner of $1,000,000 or more in principal amount of Series 2015 Bonds and (B) to at least one information service of national recognition that disseminates redemption information with respect to municipal bonds and (C) to the Issuer; and (2) to any securities depository registered as such pursuant to the Securities Exchange Act of 1934, as amended, that is an owner of Series 2015 Bonds to be redeemed so that such notice is received at least two days prior to such mailing date. An additional notice of redemption shall be given by certified mail, postage prepaid, mailed not less than 60 nor more than 90 days after the redemption date to any owner of Series 2015 Bonds selected for redemption that has not surrendered the Series 2015 Bonds called for redemption, at the address as the same shall last appear upon the registration books.

All notices of redemption shall state:

(1) the redemption date,

(2) the redemption price,

(3) the identification, including complete designation (including series) and issue date of the Series 2015 Bonds and the CUSIP number (and in the case of partial redemption, certificate number and the respective principal amounts, interest rates and maturity dates) of the Series 2015 Bonds to be redeemed,

(4) that on the redemption date the redemption price will become due and payable upon each such Series 2015 Bonds, and that interest thereon shall cease to accrue from and after said date,

(5) the name and address of the Bond Trustee and any paying agent for such Series 2015 Bonds, including the place where such Series 2015 Bonds are to be surrendered for payment of the redemption price and a telephone number at which the Bond Trustee may be contacted, and

(6) if applicable, that such notice is conditional and subject to deposit of moneys with the Bond Trustee not later than the redemption date and shall be of no effect unless such moneys are so deposited.

Provided, however, that failure to give any such notice, or any defect therein, shall not affect the validity of any proceedings for the redemption of such Series 2015 Bonds.

Section 5.05 Bonds Due and Payable on Redemption Date; Interest Ceases to Accrue. On or before the redemption date specified in the notice of redemption, an amount of money sufficient to redeem all Series 2015 Bonds called for redemption at the appropriate redemption price, including accrued interest to the date fixed for redemption, shall be deposited with the Bond Trustee. If at the time of mailing of notice of any optional redemption moneys sufficient to redeem all of the Series 2015 Bonds called for redemption are not on deposit with the Bond Trustee, such notice may state that is conditional in that it is subject to the deposit of moneys with the Bond Trustee not later than the redemption date, and such notice shall be of no effect

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unless such moneys are so deposited. On the redemption date the principal amount of each Series 2015 Bond to be redeemed, together with the accrued interest thereon to such date and redemption premium, if any, shall become due and payable; and from and after such date, notice having been given and deposit having been made in accordance with the provisions of this Article V, then, notwithstanding that any Series 2015 Bonds called for redemption shall not have been surrendered, no further interest shall accrue on any such Series 2015 Bonds. From and after such date of redemption (such notice having been given and such deposit having been made), the Series 2015 Bonds to be redeemed shall not be deemed to be Outstanding hereunder, and the Issuer shall be under no further liability in respect thereof.

Section 5.06 Cancellation. All Bonds which have been redeemed shall be cancelled by the Bond Trustee and retained as provided in Section 2.10 hereof.

Section 5.07 Partial Redemption of Fully Registered Bonds. Upon surrender of any fully registered Bond for redemption in part only, the Issuer shall execute and the Bond Trustee shall authenticate and deliver to the owner thereof, at the expense of the Obligor, a new Bond or Bonds of the same series and of the same maturity of Authorized Denominations in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered.

Section 5.08 Extraordinary Optional Redemption. The Bonds shall be subject to optional redemption by the Issuer at the direction of the Obligor prior to their scheduled maturities, in whole or in part (proportionally among each series) at a redemption price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the redemption date on any date following the occurrence of any of the following events:

(1) in case of damage or destruction to, or condemnation of, any property, plant, and equipment of any Obligated Group Member, to the extent that the net proceeds of insurance or condemnation award exceed the Threshold Amount and the Obligor has determined not to use such net proceeds or award to repair, rebuild or replace such property, plant, and equipment; or

(2) as a result of any changes in the Constitution or laws of the State of Arizona or of the United States of America or of any legislative, executive, or administrative action (whether state or federal) or of any final decree, judgment, or order of any court or administrative body (whether state or federal), the obligations of the Obligor under the Loan Agreement have become, as established by an Opinion of Counsel, void or unenforceable in each case in any material respect in accordance with the intent and purpose of the parties as expressed in the Loan Agreement.

Section 5.09 Special Mandatory Redemption. The Tax Exempt Bonds of each series are subject to mandatory redemption in whole, or in part at any time if such partial redemption will preserve the exemption from federal income taxation of interest on the remaining Tax Exempt Bonds Outstanding of such series, at a redemption price equal to the principal amount thereof together with unpaid interest accrued to the date fixed for redemption, and without premium, if (i) a final decree or judgment of any federal court, in which the Obligor participates

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to the extent it deems sufficient, or (ii) a final action by the Internal Revenue Service, in proceedings in which the Obligor participates to the extent it deems sufficient, determines that the interest paid or payable on any such Tax Exempt Bonds to other than, as provided in the Code, a “substantial user” of the Project or a “related person” is or was includable in the gross income of the owner thereof for federal income tax purposes under the Code, as a result of the failure by the Obligor to observe or perform any covenant, condition, or agreement on its part to be observed or performed under the Loan Agreement or the inaccuracy of any representation by the Obligor under the Loan Agreement; provided, however, that no decree or judgment by any court or action by the Internal Revenue Service shall be considered final unless the Registered Owner involved in such proceeding or action (A) gives the Obligor and the Bond Trustee prompt written notice of the commencement thereof and (B), if the Obligor agrees to pay all expenses in connection therewith and to indemnify such Registered Owner against all liabilities in connection therewith, offers the Obligor the opportunity to control the defense thereof. Any such redemption shall be made on a date determined by the Obligor not more than 180 days after the time of such final decree, judgment or action. The Obligor shall give the Issuer and the Trustee not less than 45 days written notice of such date.

Section 5.10 Purchase in Lieu of Redemption.

(a) The Series 2015 Bonds are subject to purchase in lieu of redemption by the Obligor prior to their respective maturity dates at any time in whole or in part, if the following conditions are satisfied:

(i) The Obligor and the Bondholder Representative negotiate and agree upon a purchase price that is communicated in writing to the Bond Trustee;

(ii) Upon written notice to the Bond Trustee as described in (i) above, the Obligor shall direct the Bond Trustee to purchase certain Series 2015 Bonds and will provide funds to the Bond Trustee for deposit in the Bond Fund in the amount necessary to pay the purchase price of the Series 2015 Bonds selected by the Bondholder Representative in excess of that required to fully satisfy the next scheduled interest and principal payments due on the selected Series 2015 Bonds, and will provide an amount the Bond Trustee may require to cover its accrued and anticipated fees and expenses;

(iii) The Bond Trustee confirms that the amount provided for by the Obligor pursuant to (ii) above is sufficient to warrant such purchase at the purchase price agreed to by the Obligor and the Bondholder Representative pursuant to (i) above; and

(iv) The Beneficial Holders of the Series 2015 Bonds shall severally indemnify and hold harmless the Bond Trustee from and against any and all liability, claims, or losses arising out of, by virtue of, or in connection with, the tender of bonds, up to the amount of the value of the Series 2015 Bonds tendered, except in the case of negligence, willful misconduct, or bad faith on the part of the Bond Trustee.

(b) As Series 2015 Bonds are purchased pursuant to this provision, such purchase of Series 2015 Bonds will be considered to have satisfied, in whole or in part, the next succeeding

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scheduled sinking fund payment requirements as set forth in this Bond Indenture. Once purchased such Series 2015 Bonds shall be delivered to the Bond Trustee and cancelled.

Section 5.11 Redemption in Full. If all of the Series 2015 Bonds are redeemed pursuant to the terms hereunder, then a pro rata portion of the Annual Issuer’s Fee is due and payable on such date of redemption.

ARTICLE VI

INVESTMENTS

Section 6.01 Investment of Bond Fund and Construction Fund. Any moneys held as part of the Bond Fund and Construction Fund shall be invested or reinvested by the Bond Trustee at the written request and direction of the Obligor (upon which the Bond Trustee is entitled to rely) in Permitted Investments. The Bond Trustee may make any and all investments permitted by the provisions of this Section through its trust department. In order to comply with the directions of the Obligor, the Bond Trustee may sell or present for redemption, or may otherwise cause liquidation prior to their maturities, any of the obligations in which funds have been invested, and the Bond Trustee shall not be liable for any loss or penalty of any nature resulting therefrom. In order to avoid loss in the event of any need for funds, the Obligor may instruct the Bond Trustee, in lieu of a liquidation or redemption of investments in the fund or account needing funds, to exchange such investment for investments in another fund or account that may be liquidated at no, or at reduced, loss. The Bond Trustee shall be under no liability for interest on any moneys received hereunder unless specifically agreed to in writing. Notwithstanding anything to the contrary in this Section 6.01, (i) the Obligor shall not direct the Bond Trustee to purchase any Premium Security unless the written instructions of the Obligor to make such purchase set forth the amount of premium on such Premium Security, and (ii) the Obligor shall not direct the Bond Trustee to sell any Premium Security, unless prior to such sale, the Obligor has directed the Trustee as to the amount of realized premium on such Premium Security to be transferred from the Funded Interest Account to the account in which such Premium Security was held.

Section 6.02 Allocation and Transfers of Investment Income. Any investments in any Fund or Account shall be held by or under the control of the Bond Trustee and shall be deemed at all times a part of the Fund or Account from which the investment was made. Any loss resulting from such investments shall be charged to such Fund or Account. The Bond Trustee shall not be liable for any loss or penalty resulting from any investment made in accordance with Section 6.01 at the direction of the Obligor or for the Bonds becoming “arbitrage bonds” by reason of any such investment. Any interest or other gain from any fund from any investment or reinvestment pursuant to Section 6.01 hereof shall be allocated and transferred as follows:

(a) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Funded Interest Account of the Construction Fund or the Project Account of the Construction Fund shall be credited to the Funded Interest Account of the Construction Fund until such Funded Interest Account of the Construction Fund expires, and thereafter, to the Interest Account of the Bond Fund.

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(b) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Principal Account and the Interest Account of the Bond Fund shall be credited at least semiannually to the Interest Account.

The Bond Trustee shall sell and reduce to cash a sufficient portion of such investments whenever the cash balance in any fund is insufficient for the purposes of such fund.

Section 6.03 Valuation of Permitted Investments. Accounting and valuation of Permitted Investments in any Fund or Account will be performed as follows:

(a) On a monthly basis the Bond Trustee shall furnish to the Obligor a full and complete statement of all receipts and disbursements of Permitted Investments in any Fund and Account covering such period.

(b) The Bond Trustee shall also furnish on or before April 1 and October 1 of each year a statement of the assets contained in each Fund and Account. Assets will be valued at market value as of March 31 and September 30, respectively, by the Bond Trustee in such statement in accordance with the normal valuation procedures of the Bond Trustee.

(c) Notwithstanding the provisions hereinabove, the Issuer acknowledges that to the extent regulations of the Comptroller of the Currency or any other regulatory entity grants the Issuer the right to receive brokerage confirmations of the security transactions as they occur, the Issuer specifically waives receipt of such confirmations to the extent permitted by law. In connection with the reports provided in (a) and (b) above, the Bond Trustee will furnish the Obligor periodic cash transaction statements, which include the detail for all investment transactions made by the Bond Trustee hereunder.

ARTICLE VII

DISCHARGE OF BOND INDENTURE

Section 7.01 Discharge of the Bond Indenture. If, when the Bonds secured hereby shall become due and payable in accordance with their terms or otherwise as provided in this Bond Indenture and the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Bonds shall be paid, or provision shall have been made for the payment of the same, together with all other sums payable hereunder (including but not limited to the Administration Expenses, rebate amounts owed to the United States of America, and the fees and expenses of the Bond Trustee and any Paying Agent, and the expenses of the Bondholder Representative), then the right, title and interest of the Bond Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Issuer to the Bondholders shall thereupon cease, terminate and become void and be discharged and satisfied. The Bond Trustee shall provide written notice to the Issuer and the Bondholder Representative of payment of the Bonds and all other sums payable hereunder and discharge of this Bond Indenture. In such event, upon the written request of the Issuer or of the Obligor, and upon receipt of an Opinion of Counsel to the effect that all conditions precedent herein provided relating to the satisfaction and discharge of this Bond Indenture have been complied with, the Bond Trustee shall execute such documents as may be reasonably required by the Issuer and shall turn over to the Obligor any surplus in the Bond Fund and Construction Fund.

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All Outstanding Bonds of any one or more series shall prior to the maturity or redemption date thereof be deemed to have been paid within the meaning and with the effect expressed in this Section if (i) in case said Bonds are to be redeemed on any date prior to their maturity, the Obligor shall have given to the Bond Trustee in form satisfactory to it irrevocable written instructions to give on a date in accordance with the provisions of Section 5.04 hereof notice of redemption of such Bonds on said redemption date, such notice to be given in accordance with the provisions of Section 5.04 hereof, (ii) there shall have been deposited with the Bond Trustee (or another Paying Agent) either moneys in an amount which shall be sufficient, or Government Obligations which shall not contain provisions permitting the redemption thereof at the option of the issuer, or any other Person other than the holder thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Bond Trustee or any Paying Agent at the same time (including the Bond Fund), shall be sufficient, in the opinion of an independent certified public accountant, to pay when due the principal of, premium, if any, and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof, as the case may be, and (iii) in the event that said Bonds are not by their terms subject to redemption within the next 45 days, the Obligor shall have given the Bond Trustee in form satisfactory to it irrevocable written instructions to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to Section 5.04 hereof, a notice to the owners of such Bonds that the deposit required by subclause (ii) above has been made with the Bond Trustee (or another depository) and that said Bonds are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of, premium, if any, and interest on said Bonds. Any deposit made pursuant to this paragraph shall, if such Bonds are Tax-Exempt Bonds, be accompanied by an Opinion of Bond Counsel to the effect that such deposit will not adversely affect the exclusion of interest on such Bonds from the gross income of the holders thereof for federal income tax purposes. Neither the Government Obligations nor moneys deposited with the Bond Trustee pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on said Bonds; provided any such cash received from such principal or interest payments on such Government Obligations deposited with the Bond Trustee, if not then needed for such purpose, shall, at the written direction of the Obligor, either (1) be reinvested, to the extent practicable, in Government Obligations of the type described in clause (ii) of this paragraph maturing at the times and in amounts sufficient to pay when due the principal of, premium, if any, and interest to become due on said Bonds on or prior to such redemption date or maturity date thereof, as the case may be or (2) be used to pay principal and/or interest on the Bonds. At such time as any Bond shall be deemed paid as aforesaid, it shall no longer be secured by or entitled to the benefits of this Bond Indenture, except for the purpose of any payment from such moneys or Government Obligations deposited with the Bond Trustee and the purpose of transfer and exchange pursuant to Section 2.05 hereof.

The release of the obligations of the Issuer under this Section shall be without prejudice to the rights of the Bond Trustee to be paid reasonable compensation for all services rendered by it hereunder and all its reasonable and necessary expenses, charges and other disbursements incurred on or about the administration of the trust hereby created and the performance of its powers and duties hereunder.

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ARTICLE VIII

DEFAULTS AND REMEDIES

Section 8.01 Events of Default. If any of the following events occur, it is hereby defined as and shall be deemed an “Event of Default”:

(a) Default in the payment of the principal of or premium, if any, on any Senior Bond when the same shall become due and payable, whether at the stated maturity thereof, or upon proceedings for redemption or as required by the sinking fund provisions hereof or otherwise.

(b) Default in the payment of any installment of interest on any Senior Bond when the same shall become due and payable.

(c) If no Senior Bonds are then Outstanding, default in the payment of the principal of or premium, if any, on any Subordinate Bond when the same shall become due and payable, whether at the stated maturity thereof, or upon proceedings for redemption or as required by the sinking fund provisions hereof or otherwise.

(d) If no Senior Bonds are then Outstanding, default in the payment of any installment of interest on any Subordinate Bond when the same shall become due and payable.

(e) Declaration under the Master Indenture that the principal of, and accrued interest on, any Obligation issued thereunder is immediately due and payable.

(f) Failure by the Issuer in the performance or observance of any other of the covenants, agreements or conditions in its part in this Bond Indenture or in the Bonds contained, which failure shall continue for a period of 60 days after written notice specifying such failure and requesting that it be remedied, is given to the Issuer, the Obligor and the Bondholder Representative by the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, or to the Issuer, the Obligor and to the Bond Trustee by the Bondholder Representative or, if there is no Bondholder Representative, the Significant Holders; provided that such failure is the result of the failure of the Obligor to perform its obligations under the Loan Agreement.

Section 8.02 Remedies on Events of Default. Upon the occurrence of an Event of Default, and whether or not principal of and interest on the Bonds have been accelerated, the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, shall have the following rights and remedies:

(a) The Bond Trustee shall, in the event that the payment of the principal of and accrued interest on any Note relating to a series of Bonds issued under this Bond Indenture has been declared due and payable immediately by the Master Trustee, by notice in writing given to the Issuer and the Obligor, with the consent of or at the direction of the Bondholder Representative, declare the principal amount of all Bonds then Outstanding and the interest accrued thereon to be immediately due and payable and said principal and interest shall thereupon become immediately due and payable. Upon any declaration of acceleration hereunder, the Bond Trustee shall give notice to the Bondholders in the same manner as a notice

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of redemption under Article V hereof, stating the date upon which the Notes and the Bonds shall be payable.

The provisions of the preceding paragraph, however, are subject to the condition that if, after the payment of the principal of, and accrued interest on, the Notes and the Bonds has been declared due and payable immediately, the declaration of the acceleration of the Notes shall be annulled in accordance with the provisions of the Master Indenture, the declaration of the acceleration of the Bonds shall be automatically annulled, and the Bond Trustee shall promptly give written notice of such annulment to the Issuer and the Obligor and notice to Bondholders in the same manner as a notice of redemption under Article V hereof; but no such annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereon.

(b) The Bond Trustee may, with the consent or at the direction of the Bondholder Representative, by mandamus, or other suit, action or proceeding at law or in equity, enforce the rights of the Bondholders, and require the Issuer or the Obligor or both of them to carry out the agreements with or for the benefit of the Bondholders and to perform its or their duties under the Act, the Loan Agreement and this Bond Indenture.

(c) The Bond Trustee may, with the consent of or at the direction of the Bondholder Representative, by action or suit in equity, require the Issuer to account as if it were the trustee of an express trust for the Bondholders but any such judgment against the Issuer shall be enforceable only against the funds and accounts hereunder in the hands of the Bond Trustee.

(d) The Bond Trustee may, with the consent of or at the direction of the Bondholder Representative, by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders.

(e) The Bond Trustee may, with the consent of or at the direction of the Bondholder Representative, upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate upon a showing of good cause with such powers as the court making such appointment may confer.

No right or remedy is intended to be exclusive of any other right or remedy, but each and every such right or remedy shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.

If any Event of Default shall have occurred and if requested by the Bondholder Representative or, if there is no Bondholder Representative, the Significant Holders and indemnified as provided in Section 9.01(m) hereof (except the remedy under Section 8.02(a) above, for which no indemnity may be required), the Bond Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Section as it, being advised by counsel, shall deem most expedient in the interests of such Bondholders. In the event there is no Bondholder Representative and the Bond Trustee shall receive inconsistent or conflicting requests and indemnity from two or more groups of owners of Outstanding Bonds, each

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representing less than the Majority Holders, the Bond Trustee, in its sole discretion, may determine what action, if any, shall be taken.

Section 8.03 Majority Holders May Control Proceedings. Anything in this Bond Indenture to the contrary notwithstanding the Bondholder Representative and, if there is no Bondholder Representative, the Majority Holders shall have the right, at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Bond Trustee, to direct the time, method, and place of conducting all proceedings, to be taken in connection with the enforcement of the terms and conditions of this Bond Indenture, or for the appointment of a receiver, and any other proceedings hereunder; provided that such direction shall not be otherwise than in accordance with the provisions hereof and provided, further, that notwithstanding anything to the contrary in this Bond Indenture, the Issuer shall have the sole ability to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of Section 5.07 of the Loan Agreement. The Bond Trustee shall not be required to act on any direction given to it pursuant to this Section until indemnity as set forth in Section 9.01(m) hereof is provided to it.

Section 8.04 Rights and Remedies of Bondholders. No owner of any Bond shall have any right to institute any suit, action, or proceeding in equity or at law for the enforcement of this Bond Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other applicable remedy hereunder, unless a default has occurred of which the Bond Trustee has been notified as provided in Section 9.01 hereof, or of which by said Section it is deemed to have notice, nor unless such default shall have become an Event of Default and the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders shall have made written request to the Bond Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit, or proceeding in their own names, nor unless they have also offered to the Bond Trustee indemnity as provided in Section 9.01(m) hereof, nor unless the Bond Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit, or proceeding in its own name; and such notification, request, and offer of indemnity are hereby declared in every case at the option of the Bond Trustee to be conditions precedent to the execution of the powers and trusts of this Bond Indenture, and to any action or cause of action for the enforcement of this Bond Indenture, or for the appointment of a receiver or for any other remedy hereunder; it being understood and intended that no one or more owners of the Bonds shall have the right in any manner whatsoever to affect, disturb, or prejudice the lien of this Bond Indenture by his, her, its, or their action or to enforce any right hereunder except in the manner herein provided and that all proceedings at law or in equity shall be instituted, had, and maintained in the manner herein provided and for the equal benefit of the owners of all Bonds then Outstanding, subject to any subordination provisions herein. Nothing in this Bond Indenture contained shall, however, affect or impair the right of any owner of Bonds to enforce the payment of the principal of, premium, if any, or interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of, premium, if any, and interest on each of the Bonds to the respective owners of the Bonds at the time and place, from the source and in the manner herein, and in the Bonds expressed, subject to any subordination provisions herein.

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Section 8.05 Application of Moneys.

(a) Unless otherwise directed by the Bondholder Representative, subject to the provisions of subparagraph (c) hereof, all moneys received by the Bond Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of (1) the costs and expenses of the administration of the Trust Estate, (2) the expenses, liabilities, and advances incurred or made by the Bond Trustee, (3) the fees and reasonable legal expenses and other advances of the Bond Trustee, the Issuer and the Bondholder Representative, and (4) the expenses of the Issuer in carrying out the terms of this Bond Indenture or the Loan Agreement be deposited into the Bond Fund and thereafter shall be deposited, to the extent of any deficiency of required amounts in the Rebate Fund, in the Rebate Fund. Subject to the provisions of Section 3.08(b) hereof, all moneys so deposited into the Bond Fund and all moneys held in or deposited into the Bond Fund during the continuance of an Event of Default and available for payment of the Bonds under the provisions of Section 3.04 hereof shall (after payment of the fees and expenses of the Bond Trustee) be applied as follows:

(i) Unless the principal of all of the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied:

First: To the payment to the Persons entitled thereto of all installments of interest then due on the Senior Bonds in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; and

Second: To the payment to the Persons entitled thereto of the unpaid principal of any of the Senior Bonds which shall have become due (other than Senior Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Bond Indenture), in the order of their due dates, with interest on such Senior Bonds from the respective dates upon which they become due at the rate of interest borne by such Senior Bonds and, if the amount available shall not be sufficient to pay in full Senior Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto, without any discrimination or privilege; and

Third: To the payment to the Persons entitled thereto of all installments of interest then due on the Subordinate Bonds in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; and

Fourth: To the payment to the Persons entitled thereto of the unpaid principal of any of the Subordinate Bonds which shall have become due (other than Subordinate Bonds called for redemption for the payment of which moneys

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are held pursuant to the provisions of this Bond Indenture), in the order of their due dates, with interest on such Subordinate Bonds from the respective dates upon which they become due at the rate of interest borne by such Subordinate Bonds and, if the amount available shall not be sufficient to pay in full Subordinate Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto, without any discrimination or privilege; and

(ii) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied:

First: To the payment of the principal and interest then due and unpaid upon all of the Senior Bonds (together with interest on overdue installments of principal at the rate of interest borne by each Senior Bond), without preference or priority of principal over interest, any other installment of interest, or of any Senior Bond over any other Senior Bond ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege; and

Second: To the payment of the principal and interest then due and unpaid upon all of the Subordinate Bonds (together with interest on overdue installments of principal at the rate of interest borne by each Subordinate Bond), without preference or priority of principal over interest, any other installment of interest, or of any Subordinate Bond over any other Subordinate Bond ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege.

(iii) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article then, subject to the provisions of paragraph (ii) of this Section in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of the foregoing paragraph (i) of this Section.

(c) Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time, as the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the deposit of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any unpaid Bond until such unpaid Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid.

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(d) Whenever all of the Bonds and interest thereon have been paid under the provisions of this Section and all expenses and fees of the Bond Trustee and the Paying Agents and all Administration Expenses and payments to the United States of America have been paid, any balance remaining in any funds shall be paid to the Obligor as provided in Section 3.13 hereof.

Section 8.06 Bond Trustee May Enforce Rights Without Bonds. All rights of action and claims under this Bond Indenture or any of the Bonds Outstanding hereunder may be enforced by the Bond Trustee without the possession of any of the Bonds or the production thereof in any trial or proceedings relative thereto; and any suit or proceeding instituted by the Bond Trustee shall be brought in its name as Bond Trustee, without the necessity of joining as plaintiffs or defendants any owners of the Bonds and any recovery of judgment shall be for the ratable benefit of the owners of the Bonds, subject to the provisions of this Bond Indenture.

Section 8.07 Bond Trustee to File Proofs of Claim in Receivership, Etc. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, or other judicial proceedings affecting the Obligor, the Bond Trustee shall, to the extent permitted by law, be entitled to file such proofs of claims and other documents as may be necessary or advisable in order to have claims of the Bond Trustee and of the Bondholders allowed in such proceedings for the entire amount due and payable by the Issuer under this Bond Indenture or by the Obligor at the date of the institution of such proceedings and for any additional amounts which may become due and payable by it after such date, without prejudice, however, to the right of any Bondholder to file a claim in his, her or its own behalf.

No provision of this Bond Indenture empowers the Bond Trustee to authorize, consent to, accept or adopt on behalf of any Bondholder any plan or reorganization, arrangement, adjustment or composition affecting any of the rights of any Bondholders, or authorizes the Bond Trustee to vote in respect of the claim in any proceeding described in this Section.

In the event the Bond Trustee incurs expenses or renders services in any proceedings affecting the Obligor and described in this Section, the expenses so incurred and compensation for services so rendered are intended to constitute expenses of administration under the United States Bankruptcy Code or equivalent law.

Section 8.08 Delay or Omission No Waiver. No delay or omission of the Bond Trustee, the Bondholder Representative or of any Bondholder to exercise any right or power accruing upon any default or Event of Default shall exhaust or impair any such right or power or shall be construed to be a waiver of any such default or Event of Default, or acquiescence therein; and every power and remedy given by this Bond Indenture may be exercised from time to time and as often as may be deemed expedient.

Section 8.09 Discontinuance of Proceedings on Default, Position of Parties Restored. In case the Bond Trustee shall have proceeded to enforce any right under this Bond Indenture, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Bond Trustee, then and in every such case the Issuer and the Bond Trustee shall be restored to their former positions and rights hereunder with respect to the

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Trust Estate, and all rights, remedies, and powers of the Bond Trustee shall continue as if no such proceedings had been taken.

Section 8.10 Enforcement of Rights. The Bond Trustee, as pledgee and assignee for security purposes of all the right, title, and interest of the Issuer in and to the Loan Agreement (except for the rights of the Issuer to receive indemnification and payments, if any, under Sections 5.7, 7.5, 7.9 and 9.5 of the Loan Agreement, to give or receive notices, approvals, consents and other communications, to inspect the Project or related records, and to limited liability) and the Assigned Notes shall, upon compliance with applicable requirements of law and except as otherwise set forth in this Article VIII, be the sole real party in interest in respect of, and shall have standing, exclusive of owners of Bonds to enforce each and every right granted to the Issuer under the Loan Agreement and under the Assigned Notes. The Issuer and the Bond Trustee hereby agree, without in any way limiting the effect and scope thereof, that the pledge and assignment hereunder to the Bond Trustee of any and all rights of the Issuer in and to the Assigned Notes and the Loan Agreement shall constitute an agency appointment coupled with an interest on the part of the Bond Trustee which, for all purposes of this Bond Indenture, shall be irrevocable and shall survive and continue in full force and effect notwithstanding the bankruptcy or insolvency of the Issuer or its default hereunder or on the Bonds. Subject to Section 9.01 hereof, in exercising such right and the rights given the Bond Trustee under this Article VIII, the Bond Trustee shall take such action as, in the judgment of the Bond Trustee, would best serve the interests of the Bondholders, taking into account the provisions of the Master Indenture, together with the security and remedies afforded to owners of Assigned Notes.

Section 8.11 Undertaking for Costs. All parties to this Bond Indenture agree, and each Holder of any Bond by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Bond Indenture, or in any suit against the Bond Trustee for any action taken or omitted by it as Bond Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Bond Trustee, to any suit instituted by any Bondholder, or group of Bondholders, holding in aggregate more than 10 percent in principal amount of the Outstanding Bonds, or to any suit instituted by a Bondholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Bond on or after the respective maturities thereof expressed in such Bond (or, in the case of redemption, on or after the redemption date).

Section 8.12 Waiver of Events of Default. The Bond Trustee may, with the consent of the Bondholder Representative, waive any Event of Default hereunder and its consequences, and shall do so upon the written request of the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders; provided, however, if there is no Bondholder Representative, that the Bond Trustee may not waive an Event of Default described in subparagraph (a) or (b) of Section 8.01 hereof without the written consent of the registered owners of all Bonds then Outstanding; and provided, further, that notwithstanding anything to the contrary in this Bond Indenture, the Issuer shall have the sole ability to waive any Event of

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Default in connection with the covenants and obligations of the Obligor under Section 5.7 of the Loan Agreement.

ARTICLE IX

CONCERNING THE BOND TRUSTEE AND PAYING AGENTS

Section 9.01 Duties of the Bond Trustee. The Bond Trustee hereby accepts the trust imposed upon it by this Bond Indenture and agrees to perform said trusts, but only upon and subject to the following express terms and conditions, and no implied covenants or obligations shall be read into this Bond Indenture against the Bond Trustee:

(a) The Bond Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Bond Indenture. In case an Event of Default has occurred (which has not been cured) the Bond Trustee shall exercise such of the rights and powers vested in it by this Bond Indenture and use the same degree of care and skill in its exercise as a corporate trustee would exercise or use under similar circumstances.

(b) The Bond Trustee may execute any of the trusts or powers hereof and perform any of its duties hereunder, either directly or by or through attorneys, agents, receivers, or employees, and the Bond Trustee shall not be responsible for any misconduct or negligence on the part of any receiver, agent or attorney appointed with due care by it hereunder, and shall be entitled to act upon an Opinion of Counsel concerning all matters of trust hereof and the duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers, and employees as may reasonably be employed in connection with the trust hereof. The Bond Trustee may act upon an Opinion of Counsel and shall not be responsible for any loss or damage resulting from any action or nonaction taken by or omitted to be taken in good faith in reliance upon such Opinion of Counsel.

(c) The Bond Trustee shall not be responsible for any recital herein or in the Bonds (except in respect to the certificate of authentication by the Bond Trustee endorsed on the Bonds and the acceptance of the trusts hereunder).

(d) The Bond Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder or the proceeds thereof, or for any moneys disbursed by the Bond Trustee in accordance with this Bond Indenture. The Bond Trustee makes no representations as to the validity in respect of the Issuer or the sufficiency of this Bond Indenture or the Bonds. The Bond Trustee is not a party to, is not responsible for, and makes no representations with respect to matters set forth in any preliminary official statement, or similar document prepared and distributed in connection with the sale of the Bonds. The Bond Trustee may become the owner of the Bonds with the same rights which it would have if not Bond Trustee.

(e) The Bond Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram, teletransmission or other paper or document reasonably believed to be genuine and correct and to have been signed or sent by the proper person or persons. Additionally, the Bond Trustee may, in its sole discretion, seek confirmation of any of the above by telephone call-back procedure, and the parties hereto acknowledge and

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agree that such a procedure (or a similar security procedure) is reasonable and appropriate. Any request or direction of the Issuer or the Obligor mentioned herein shall be sufficiently evidenced by a written request, order, or consent signed in the name of the Issuer or Obligor, by the Issuer Representative or Obligor, as the case may be. Any action taken by the Bond Trustee pursuant to this Bond Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bonds shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in place thereof.

(f) As to the existence or nonexistence of any fact or matter or as to the sufficiency or validity of any instrument, paper, or proceeding, the Bond Trustee shall be entitled to rely and shall be protected in acting or refraining to act upon a certificate signed on behalf of the Issuer or the Obligor by the Issuer Representative or Obligor Representative or such other person as may be designated for such purpose by a duly authorized certification as sufficient evidence of the facts therein contained, and prior to the occurrence of a default of which the Bond Trustee has been notified as provided in subsection (h) of this Section, or of which by said subsection it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction, or action is necessary or expedient, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same.

(g) The permissive right of the Bond Trustee to do things enumerated in this Bond Indenture shall not be construed as a duty (except as otherwise herein provided) and the Bond Trustee shall not be answerable for other than its own negligence or willful misconduct, except that:

(1) the Bond Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bond Trustee was negligent in ascertaining the pertinent facts;

(2) the Bond Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Holders relating to the time, method, and place of conducting any proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee, under this Bond Indenture; and

(3) the Bond Trustee shall not be liable if the Bond Trustee reasonably relies in good faith upon an Officer’s Certificate delivered pursuant to this Bond Indenture or an Opinion of Counsel.

(h) The Bond Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except (i) defaults under Section 8.01(a), (b), (c), (d) or (f) hereof and (ii) default under Section 8.01(e) hereof for which the Bond Trustee has received written notice from the Master Trustee, unless the Bond Trustee shall be specifically notified in writing of such default by the Issuer or by the Majority Holders and all notices or other instruments required by this Bond Indenture to be delivered to the Bond Trustee, must, in order to be effective, be delivered to a Responsible Officer at the designated corporate trust office of the Bond Trustee,

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and in the absence of such notice so delivered, the Bond Trustee may conclusively assume there is no default except as aforesaid.

(i) All moneys received by the Bond Trustee shall, until used or applied or invested as herein provided, be held in trust in the manner and for the purposes for which they were received, but need not be segregated from other funds except to the extent required by this Bond Indenture or law.

(j) At any and all reasonable times the Bond Trustee and its duly authorized agents, attorneys, experts, engineers, accountants, and representatives shall have the right, but shall not be required, to inspect any Project, including all books, papers, and records of the Issuer and the Obligor pertaining to any Project and the Bonds.

(k) The Bond Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises, and no provision of this Bond Indenture shall require the Bond Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have grounds for believing that repayment of such funds or indemnity satisfactory against such risk or liability is not assured to it.

(l) Notwithstanding anything in this Bond Indenture contained, the Bond Trustee shall have the right, but shall not be required, to demand in respect of the authentication of any Bonds, the withdrawal of any cash, or any action whatsoever within the purview of this Bond Indenture, any showings, certificates, opinion, appraisals, or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required, as a condition of such action by the Bond Trustee deemed desirable for the purpose of establishing the right of the Issuer to the authentication of any Bonds, the withdrawal of any cash, or the taking of any other action by the Bond Trustee.

(m) Before taking any action under this Section or Article VIII hereof, the Bond Trustee may require that indemnity reasonably satisfactory to it be furnished to it for the reimbursement of its fees, costs, liabilities and all expenses (including attorneys’ fees) which it may incur and to protect it against all liability, except liability which may result from its negligence or willful misconduct, by reason of any action so taken.

(n) Except as provided in Section 9.01(a) above, it shall not be the duty of the Bond Trustee, except as expressly provided herein, to see that any duties or obligations imposed herein or in the Loan Agreement upon the Issuer, the Obligor, or other Persons are performed, and the Bond Trustee shall not be liable or responsible because of the failure of the Issuer, the Obligor, or other Persons to perform any act required of them pursuant to the terms of this Bond Indenture.

(o) In acting or omitting to act pursuant to the provisions of the Loan Agreement, the Bond Trustee shall be entitled to and be protected by the rights and immunities accorded to it by the terms of this Bond Indenture.

(p) In the event there is no Bondholder Representative and the Bond Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of holders of Bonds,

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each representing less than the Majority Holders, the Bond Trustee, in its sole discretion, may determine what action, if any, shall be taken.

(q) The Bond Trustee’s immunities and protections from liability in connection with the performance of its duties under this Bond Indenture shall extend to the Bond Trustee’s officers, directors, agents and employees. Such immunities and protections, together with the Bond Trustee’s right to compensation, shall survive the Bond Trustee’s resignation or removal and final payment of the Bonds.

(r) In no event shall the Bond Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Bond Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

Section 9.02 Fees and Expenses of Bond Trustee and Paying Agent. The Issuer agrees, but solely from any funds received from the Obligor pursuant to the Loan Agreement,

(a) to pay to the Bond Trustee, each Paying Agent and all other agents their reasonable and necessary fees for services rendered hereunder as and when the same become due and all expenses (including attorneys’ fees) reasonably and necessarily made or incurred by the Bond Trustee, such Paying Agent or such other agent in connection with such services as and when the same become due as provided in Section 3.11 hereof; and

(b) to reimburse the Bond Trustee upon its request for all reasonable expenses, disbursements, and advances incurred or made by the Bond Trustee in accordance with any provisions of this Bond Indenture (including the reasonable compensation, expenses, and disbursements of its agents and counsel), except any such expense, disbursement, or advance as may be attributable to the negligence or bad faith of the Bond Trustee.

As security for the performance of the obligations of the Issuer under this Section, the Bond Trustee shall be secured under this Bond Indenture by a lien subject and subordinate to the Bonds, in the case of money held for the credit of the Construction Fund, and otherwise prior to the Bonds, and for the payment of the expenses and reimbursements due hereunder, the Bond Trustee shall have the right to use and apply any trust funds held by it hereunder, unless held or required to be held in the Construction Fund or the Rebate Fund.

Section 9.03 Resignation or Replacement of Bond Trustee. The present or any future Bond Trustee may resign by giving to the Issuer, the Obligor, the Bondholder Representative and each Bondholder 30 days’ notice of such resignation. Such resignation shall not be effective until such time as a successor Bond Trustee shall have accepted its appointment. The present or any future Bond Trustee may be removed (a) at any time by an instrument in writing executed by the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders or (b) if an Event of Default hereunder has not occurred and is continuing, by an instrument in writing executed by the Obligor.

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In case the present or any future Bond Trustee shall at any time resign or be removed or otherwise become incapable of acting, a successor may be appointed by the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders by an instrument or concurrent instruments signed by such Bondholders, or their attorneys in fact duly appointed; provided that the Issuer may, by an instrument executed by order of the Board of Directors, appoint a successor acceptable to the Bondholder Representative until a new successor shall be appointed by the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders as herein authorized. The Issuer upon making such appointment shall forthwith give notice thereof to the Bondholder Representative and, as provided herein, to each Bondholder and to the Obligor, which notice may be given concurrently with the notice of resignation given by any resigning Bond Trustee. Any successor so appointed by the Issuer shall immediately and without further act be superseded by a successor appointed in the manner above provided by the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders. In the event that the Issuer does not so act within thirty days after notice of resignation or after removal, the Bond Trustee shall have the right to petition a court of competent jurisdiction to appoint a successor Bond Trustee.

Every successor Bond Trustee shall always be a bank, banking corporation or trust company with trust powers in good standing, qualified to act hereunder, and having a combined capital and surplus of not less than $50,000,000. Any successor appointed hereunder shall execute, acknowledge, and deliver to the Issuer and the predecessor Bond Trustee an instrument accepting such appointment hereunder and thereupon such successor shall, without any further act, deed, or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its predecessor in the trust hereunder with like effect as if originally named as Bond Trustee herein; but the Bond Trustee retiring shall, nevertheless, on the written demand of its successor, execute and deliver an instrument conveying and transferring to such successor, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the predecessor, who shall, upon payment of the expenses, charges and other disbursements which are due and owing to it pursuant to Sections 3.11 and 9.02 hereof, duly assign, transfer and deliver to the successor all properties and moneys held by it under this Bond Indenture. Should any instrument in writing from the Issuer be required by any successor for more fully and certainly vesting in and confirming to it all of such estates, properties, rights, powers, and trusts, the Issuer shall, on request of such successor, make, execute, acknowledge, and deliver the deeds, conveyances, and necessary instruments in writing.

The notices herein provided for shall be given by mailing a copy thereof to the Obligor, the Bondholder Representative and the registered owners of the Bonds at their addresses as the same shall last appear on the registration books. The instruments evidencing the resignation or removal of the Bond Trustee and the appointment of a successor hereunder, together with all other instruments provided for in this Section shall be filed and/or recorded by the successor Bond Trustee in each recording office where this Bond Indenture shall have been filed and/or recorded.

Section 9.04 Conversion, Consolidation or Merger of Bond Trustee. Any bank, banking corporation or trust company into which the Bond Trustee merges or is consolidated, or to which it (or a receiver on its behalf) may sell or transfer its corporate trust business as a whole, or substantially as a whole, shall be the successor of the Bond Trustee under this Bond Indenture

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with the same rights, powers, duties, and obligations and subject to the same restrictions, limitations, and liabilities as its predecessor, all without the execution or filing of any papers or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any of the Bonds to be issued hereunder shall have authenticated, but not delivered, any successor Bond Trustee may adopt the certificate of any predecessor Bond Trustee, and deliver the same as authenticated; and, in case any of such Bonds shall not have been authenticated, any successor Bond Trustee may authenticate such Bonds in the name of such successor Bond Trustee.

Section 9.05 Designation and Succession of Paying Agent. The Bond Trustee and any other banks or trust companies, if any, designated as Paying Agent or Paying Agents in any supplemental indenture providing for the issuance of Additional Bonds, shall be the Paying Agent or Paying Agents for the applicable series of Bonds.

Any bank or trust company with or into which any Paying Agent may be merged or consolidated, or to which the assets and business of such Paying Agent may be sold, shall be deemed the successor of such Paying Agent for the purposes of this Bond Indenture. If the position of Paying Agent shall become vacant for any reason, the Issuer shall, within thirty days thereafter, appoint such bank or trust company as shall be specified by the Obligor to fill such vacancy; provided, however, that if the Issuer shall fail to appoint such Paying Agent within said period, the Bond Trustee shall make such appointment.

The Paying Agents, if any, shall enjoy the same protective provisions in the performance of their duties hereunder as are specified in Section 9.01 hereof with respect to the Bond Trustee insofar as such provisions may be applicable.

Section 9.06 Voting Rights with Respect to Series 2015 Notes. The Issuer hereby assigns and grants to the Bond Trustee, and the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, shall exercise for the benefit of the Bondholders, the power to execute all waivers, directions, consents, instructions, approvals, and other exercises of the voting rights of a holder and owner of the Series 2015 Notes, which power shall be irrevocable so long as such Series 2015 Notes shall be pledged hereunder. The Bond Trustee shall exercise such power with respect to any of the Series 2015 Notes when and as, but only when and as, directed to do so by written direction of the Bondholder Representative or, if there is no Bondholder Representative, the owners of a majority in aggregate principal amount of the Outstanding Bonds of the related series.

Section 9.07 Report to the Issuer.

(a) As long as the Bonds are Outstanding, the Bond Trustee shall prepare and submit a written report to the Issuer and the Bondholder Representative on or before September 1st of each year, commencing September 1, 2016, stating the principal amount of Bonds that are Outstanding as of June 30 of that year.

(b) The Issuer may by advance written notice to the Bond Trustee also request that the Bond Trustee provide other information at such other times while the Bonds are Outstanding

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as is necessary to allow the Issuer to comply with the requirements of the Arizona Department of Revenue in accordance with Arizona Revised Statutes Sections 35-501 and 35-502.

ARTICLE X

SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THE LOAN AGREEMENT

Section 10.01 Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and the Bond Trustee may, without the consent of, or notice to, the Bondholders, but with the consent of the Bondholder Representative, enter into such indentures or agreements supplemental hereto (which supplemental indentures or agreements shall thereafter form a part hereof) for any one or more or all of the following purposes:

(a) To add to the covenants and agreements in this Bond Indenture contained other covenants and agreements thereafter to be observed for the protection or benefit of the Bondholders.

(b) To cure any ambiguity, or to cure, correct, or supplement any defect or inconsistent provision contained in this Bond Indenture, or to make any provisions with respect to matters arising under this Bond Indenture or for any other purpose if such provisions are necessary or desirable and do not, in the judgment of the Bond Trustee, adversely affect the interests of the owners of Bonds.

(c) To subject to this Bond Indenture additional revenues, properties, or collateral.

(d) To qualify this Bond Indenture under the Trust Indenture Act of 1939, if such be hereafter required in the Opinion of Counsel.

(e) To set forth the terms and conditions of Additional Bonds issued pursuant to Sections 2.09 and 2.10 hereof.

(f) To satisfy any requirements imposed by a rating agency if necessary to maintain the then current rating on the Bonds.

(g) To maintain the extent to which the interest on the Tax Exempt Bonds is not includable in the gross income of the recipients thereof, if in the Opinion of Bond Counsel such supplemental indenture or agreement is necessary.

Section 10.02 Supplemental Indentures Requiring Consent of Majority Holders. Exclusive of supplemental indentures covered by Section 10.01 hereof, the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders shall have the right, from time to time, to consent to and approve the execution by the Issuer and the Bond Trustee of such indenture or indentures supplemental hereto as shall be deemed necessary or desirable by the Issuer for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in this Bond Indenture; provided, however, that without the consent of the owners of all the Bonds at the time

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Outstanding nothing herein contained shall permit, or be construed as permitting any of the following:

(a) An extension of the maturity of, or a reduction of the principal amount of, or a reduction of the rate of, or extension of the time of payment of interest on, or a reduction of a premium payable upon any redemption of, any Bond, without the consent of the owner of such Bond.

(b) The deprivation of the owner of any Bond then Outstanding of the lien created by this Bond Indenture (other than as originally permitted hereby).

(c) A privilege or priority of any Bond or Bonds, over any other Bond (other than as originally permitted hereby).

(d) A reduction in the aggregate principal amount of the Bonds required for consent to any supplemental indenture.

Upon the execution of any supplemental indenture pursuant to the provisions of this Section, this Bond Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties, and obligations under this Bond Indenture of the Issuer, the Bond Trustee and all owners of Bonds then Outstanding shall thereafter be determined, exercised, and enforced hereunder, subject in all respects to such modifications and amendments.

If at any time the Issuer shall request the Bond Trustee to enter into such supplemental indenture for any of the purposes of this Section, the Bond Trustee shall, upon being satisfactorily indemnified with respect to costs, fees and expenses (including attorneys’ fees), cause notice of the proposed execution of such supplemental indenture to be mailed to the Bondholder Representative and, as provided herein, to the registered owners of the Bonds at their addresses as the same last appear on the registration books. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the designated office of the Bond Trustee for inspection by all Bondholders. If, within 60 days or such longer period as shall be prescribed by the Issuer following the giving of such notice, the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof.

Section 10.03 Execution of Supplemental Indenture. The Bond Trustee, with the consent of or at the direction of the Bondholder Representative, is authorized to join with the Issuer in the execution of any such supplemental indenture and to make further agreements and stipulations which may be contained therein, but the Bond Trustee shall not be obligated to enter into any such supplemental indenture which affects its rights, duties, or immunities under this Bond Indenture. The Bond Trustee shall receive, and shall be fully protected in relying upon, an

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Opinion of Counsel stating that the execution and delivery of a supplemental indenture is authorized or permitted by this Bond Indenture and has been effected in compliance with the provisions hereof. In connection with a supplemental indenture entered into pursuant to Section 10.01(b) hereof, the Bond Trustee may in its discretion determine whether or not in accordance with such provision the Bondholders would be affected by modification or amendment of this Bond Indenture, and any such determination shall be binding and conclusive upon the Issuer, the Obligor, and Bondholders. The Bond Trustee may receive an Opinion of Counsel as conclusive evidence as to whether the Bondholders would be so affected by any such modification or amendment to this Bond Indenture.

Any supplemental indenture executed in accordance with the provisions of this Article shall thereafter form a part of this Bond Indenture; and all the terms and conditions contained in any such supplemental indenture as to any provision authorized to be contained therein shall be deemed to be part of this Bond Indenture for any and all purposes. In case of the execution and delivery of any supplemental indenture, express reference may be made thereto in the text of the Bonds issued thereafter, if any, if deemed necessary or desirable by the Bond Trustee.

Section 10.04 Consent of Obligor. Anything herein to the contrary notwithstanding, a supplemental indenture under this Article shall not become effective unless and until the Obligor shall have consented in writing to the execution and delivery of such supplemental indenture unless the Obligor is in default under the Loan Agreement or an Event of Default has occurred and is continuing, in which case no consent of the Obligor shall be required. The Bond Trustee shall cause notice of the proposed execution of any supplemental indenture together with a copy of the proposed supplemental indenture to be mailed to the Obligor at least 15 days prior to the proposed date of execution of such supplemental indenture.

Section 10.05 Amendments, Etc., of the Loan Agreement Not Requiring Consent of Bondholders. The Issuer and the Bond Trustee shall, without the consent of or notice to the Bondholders, but with the consent of the Bondholder Representative, consent to any amendment, change, or modification of the Loan Agreement as may be required (i) by the provisions of the Loan Agreement and this Bond Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission, (iii) in connection with the issuance of Additional Bonds as herein provided, (iv) to satisfy any requirements imposed by a rating agency if necessary to maintain the then current rating on the Bonds, (v) to maintain the extent to which the interest on the Tax-Exempt Bonds is not includable in the gross income of the recipients thereof for federal income tax purposes, if in the Opinion of Bond Counsel such amendment is necessary, and (vi) in connection with any other change therein which does not adversely affect the Bond Trustee or the owners of the Bonds.

Section 10.06 Amendments, Etc., of the Loan Agreement Requiring Consent of Bondholders. Except for the amendments, changes, or modifications as provided in Section 10.05 hereof, neither the Issuer nor the Bond Trustee shall consent to any other amendment, change, or modification of the Loan Agreement without the giving of notice to and the written approval or consent of the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders given and procured as provided in Section 10.02 hereof. If at any time the Issuer and the Obligor shall request the consent of the Bond Trustee to any such proposed amendment, change, or modification of the Loan Agreement, the Bond Trustee shall,

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upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change, or modification to be given in the same manner as provided in Section 10.02 hereof. Such notice shall briefly set forth the nature of such proposed amendment, change, or modification and shall state that copies of the instrument embodying the same are on file at the designated office of the Bond Trustee for inspection by all Bondholders.

In executing any amendment, change or modification of the Loan Agreement, the Bond Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution and delivery of such amendment, change, modification of the Loan Agreement is authorized or permitted by this Bond Indenture and the Loan Agreement and has been effected in compliance with the provisions of this Bond Indenture and the Loan Agreement. The Bond Trustee may, but shall not be obligated to, enter into any such amendment, change, or modification which affects the Bond Trustee’s own rights, duties or immunities. In connection with any amendment, change or modification in connection with Section 10.05(vii), the Bond Trustee may in its discretion determine whether or not in accordance with such provision the Bond Trustee or the Bondholders would be prejudiced by such amendment, change, modification. Any such determination shall be binding and conclusive on the Issuer, the Obligor, and the Bondholders. The Bond Trustee may receive an Opinion of Counsel as conclusive evidence as to whether the Bondholders would be so affected by any such amendment, change, or modification of the Loan Agreement.

Section 10.07 Bondholder Representative’s Consent. So long as there is a Bondholder Representative, a supplemental indenture or an amendment under this Article shall not become effective unless and until the Bondholder Representative consents in writing to the execution and delivery of such supplemental indenture or amendment.

ARTICLE XI

MISCELLANEOUS

Section 11.01 Evidence of Signature of Bondholders and Ownership of Bonds. Any request, consent, or other instrument which this Bond Indenture may require or permit to be signed and executed by the Bondholders may be in one or more instruments of similar tenor, and shall be signed or executed by such Bondholders in person or by their attorneys appointed in writing. Proof of the execution of any such instrument or of an instrument appointing any such attorney, or of the ownership of Bonds shall be sufficient (except as otherwise herein expressly provided) if made in the following manner, but the Bond Trustee may, nevertheless, in its discretion, require further or other proof in cases where it deems the same desirable:

(a) The fact and date of the execution by any Bondholder or his attorney of such instrument may be proved by the certificate of any officer authorized to take acknowledgments in the jurisdiction in which he purports to act that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before a notary public.

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(b) The ownership of any fully registered Bond and the amount and numbers of such Bonds and the date of holding the same shall be proved by the registration books of the Issuer kept by the Bond Trustee.

Any request or consent of the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done by the Issuer or the Bond Trustee in accordance therewith.

Section 11.02 No Personal Liability. No recourse under or upon any obligation, covenant or agreement contained in this Bond Indenture, or in any Bond hereby secured, or under any judgment obtained against the Issuer, or by the enforcement of any assessment or by any legal or equitable preceding by virtue of any constitution or statute or otherwise or under any circumstances, under or independent of this Bond Indenture, shall be had against any officer, director, agent or employee, as such, past, present or future, of any of the Issuer or the Bond Trustee, either directly or through the Issuer, or otherwise, for the payment for or to the Issuer or any receiver thereof, or for or to the holder of any Bond issued hereunder or otherwise of any sum that may be due and unpaid by the Issuer upon any such Bond. Any and all personal liability of every nature, whether at common law or in equity, or by statute or by constitution or otherwise, of any such person to respond by reason of any act or omission on his part or otherwise, for the payment for or to the Issuer or any receiver thereof or for or to the holder of any Bond issued hereunder or otherwise, of any sum that may remain due and unpaid upon the Bonds hereby secured or any of them, is hereby expressly waived and released as a condition of and consideration for the execution of this Bond Indenture and the issue of such Bonds.

Section 11.03 Limited Obligation. THE BONDS, THE PREMIUM, IF ANY, AND THE INTEREST THEREON ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM THE TRUST ESTATE. THE BONDS DO NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER OR THE STATE, OR OF ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER OR THE STATE. THE BONDS WILL NOT CONSTITUTE, DIRECTLY OR INDIRECTLY, OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE CREDIT OF THE ISSUER, BUT WILL BE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES DESCRIBED HEREIN, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING POWER.

Section 11.04 Role of Issuer.

(a) Notwithstanding anything to the contrary contained herein or in any of the Bonds, the Financing Instruments or in any other instrument or document executed by or on behalf of the Issuer in connection herewith, (i) the Issuer shall have no obligation to take action under the Loan Agreement, this Bond Indenture, the Bonds or such other instruments or documents, unless the Issuer is reasonably requested in writing by an appropriate person to take such action and is provided with indemnity and assurances satisfactory to it of payment of or reimbursement for

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any expenses (including attorneys’ fees) in such action, (ii) neither the Issuer nor any director, officer, employee or agent of the Issuer shall be personally liable to the Obligor, the credit facility provider, if any, the Bond Trustee, the holders of the Bonds or any other person for any action taken by the Issuer or by its directors, officers, agents or employees or for any failure to take action under this Bond Indenture, the Loan Agreement, the Bonds or such other instruments or documents, except that the Issuer agrees to take, or to refrain from taking, any action if so required by an injunction or if required to comply with any final judgment for specific performance, and (iii) any judgment rendered against the Issuer for breach of its obligations under this Bond Indenture, the Loan Agreement, the Bonds or such other instruments or documents, shall be payable solely from the revenues derived by the Issuer under the Loan Agreement and this Bond Indenture, and no personal liability or charge payable directly or indirectly from the general funds of the Issuer shall arise therefrom.

(b) No agreements or provisions contained in this Bond Indenture nor any agreement, covenant or undertaking by the Issuer contained in any document executed by the Issuer in connection with the Project or the issuance, sale and delivery of the Bonds shall give rise to any pecuniary liability of the Issuer or a charge against its general credit, or shall obligate the Issuer financially in any way except with respect to the application of revenues therefrom and the proceeds of the Bonds. No failure of the Issuer to comply with any term, condition, covenant or agreement herein shall subject the Issuer or its directors, officers, employees, agents or counsel to liability for any claim for damages, costs or other financial or pecuniary charge except to the extent that the same can be paid or recovered from the Loan Agreement or revenues therefrom that have been pledged to payment of the Bonds or proceeds of the Bonds. Nothing herein shall preclude a proper party in interest from seeking and obtaining, to the extent permitted by law, specific performance against the Issuer for any failure to comply with any term, condition, covenant or agreement herein; provided, that (i) prior to the official filing of any petition or complaint against the Issuer, provision shall have been made in an manner satisfactory to the Issuer, for payment of its costs and expenses relating to any such petition or complaint and (ii) no costs, expenses, damages or other monetary relief shall be recoverable from the Issuer or its officers, directors, employees, agent and counsel except as may be payable from the Loan Agreement or revenues therefrom that have been pledged to payment of the Bonds or the proceeds of the Bonds.

(c) Nothing herein shall preclude a proper party in interest from seeking and obtaining to the extent permitted by law, specific performance against the Issuer for any failure to comply with any term, condition, covenant or agreement herein; provided, that no costs, expenses or other monetary relief shall be recoverable from the Issuer or its members, trustees, officers, directors, employees, agents and counsel, except as may be payable from the Loan Agreement or revenues therefrom that have been pledged to payment of the Bonds or the proceeds of the Bonds.

(d) The Issuer shall be under no obligation to institute any suit or to take any remedial proceeding in the Event of a Default under this Bond Indenture or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of any of the trusts hereby created or in the enforcement of any rights and powers hereunder, including, without limitation, its acceptance or possession of a Project or any component thereof, until it shall be indemnified to its satisfaction against any and all reasonable

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costs, expenses, outlays and reasonable counsel fees and other reasonable disbursements, and against all liability. The Issuer nevertheless may, in its sole discretion, but is not required to, begin suit, or appear in and defend suit, or do anything else in its judgment proper to be done by it as such Issuer, without indemnity, and in such case the Issuer shall be entitled to reimbursement from any money under this Bond Indenture and, subject to the prior rights of the Trustee, shall be entitled to a preference therefor over any Bonds Outstanding hereunder.

(e) The Issuer shall be entitled to advice of counsel concerning all matters under this Bond Indenture and its duties under this Bond Indenture and the Financing Instruments. The Issuer may in all cases pay such reasonable compensation to such attorneys, agents and receivers and shall be entitled to reimbursement from the Obligor for all such compensation paid. The Issuer may act upon the opinion or advice of counsel, accountants, or such other professionals as the Issuer deems necessary and selected by it in the exercise of reasonable care. The Issuer shall not be responsible for any loss or damage resulting from any action or nonaction based on its good faith reliance upon such opinion or advice.

(f) The permissive right of the Issuer to do things enumerated in this Bond Indenture or in the other Financing Instruments to which the Issuer is a party shall not be construed as duties until specifically undertaken by the Issuer. The Issuer shall only be responsible for the performance of the duties expressly set forth in this Bond Indenture and in the other Financing Instruments to which it is a party and shall not be answerable for other than its willful misconduct in the performance of those express duties.

(g) The Issuer shall be protected in acting upon any Opinion of Counsel, notice, request, consent, direction, requisition, certificate, order, affidavit, letter, or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons and which is not contrary to the express terms of this Bond Indenture or the other Financing Instruments. Any action taken by the Issuer pursuant thereto upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond as shown on the Bond Register will be conclusive and binding upon all future owners or holders of the same Bonds and upon Bonds issued in exchange therefor or in place of such Bonds.

Section 11.05 Parties Interested Herein. With the exception of rights herein expressly conferred on the Obligor, nothing in this Bond Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person other than the Issuer, the Bond Trustee, the Paying Agents, the Bondholder Representative, and the owners of the Bonds, any right, remedy, or claim under or by reason of this Bond Indenture, and any covenants, stipulations, promises, and agreements in this Bond Indenture contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Bond Trustee, the Paying Agents, the Bondholder Representative, and the owners of the Bonds.

Section 11.06 Titles, Headings, Etc. The titles and headings of the articles, Sections, and subdivisions of this Bond Indenture have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.

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Section 11.07 Severability. In the event any provision of this Bond Indenture shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 11.08 Governing Law. This Bond Indenture shall be governed and construed in accordance with the laws of the State of Arizona.

Section 11.09 Execution of Counterparts. This Bond Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 11.10 Notices. Any notice, request or other communication under this Bond Indenture shall be given in writing and shall be deemed to have been given by either party to the other party at the addresses shown below upon any of the following dates:

(a) The date of notice by telefax, telecopy, or similar telecommunications or an email as an attached scanned PDF document;

(b) Three Business Days after the date of the mailing thereof, as shown by the post office receipt if mailed to the other party hereto by registered or certified mail;

(c) The date of the receipt thereof by such other party if not given pursuant to (a) or (b) above.

Issuer: Arizona Health Facilities Authority 2025 North 3rd Street, Suite 180 Phoenix, Arizona 85004 Attention: Executive Director Email: [email protected] Telephone: (602) 375-2770 Telecopy: (602) 375-2804

Obligor: Gilbert AL Partners, LP 6370 LBJ Freeway, Suite 276 Dallas, Texas 75240 Attention: Dustin Pridmore Email: [email protected] Telephone: (469) 619-5435 Telecopy: (972) 385-0029

with a copy to: Powell Coleman & Arnold LLP 8080 North Central Expressway, Suite 1380 Dallas, Texas 75206 Attention: Brian P. DeVoss Email: [email protected] Telephone: (214) 890-7122 Telecopy: (214) 373-8768

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Bond Trustee: Wilmington Trust, National Association 25 South Charles Street, 11th Floor Baltimore, Maryland 21201 Attention: Corporate Trust Department Email: [email protected] Telephone: (410) 545-2193 Telecopy: (410) 244-4236

If to the Bondholder Representative: Greenwich Investment Management Inc.

200 First Stamford Place Stamford, Connecticut 06902 Attention: L. George Rieger Email: [email protected] Telephone: (203) 625-5316 Facsimile: (203) 862-4527

With a copy to: Robinson & Cole, LLP 280 Trumbull Street Hartford, Connecticut 06103 Attention: Edward J. Samorajczyk, Jr. Email: [email protected] Telephone: (860) 275-8207 Facsimile: (860) 275-8299

The Issuer, the Obligor, the Bondholder Representative or the Bond Trustee may, by notice hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.

Notwithstanding the foregoing, notices to the Bond Trustee shall be effective only upon receipt.

Section 11.11 Payments Due on Holidays. If the date for making any payment or the last day for performance of any act or the exercising of any right, as provided in this Bond Indenture, shall be a legal holiday or a day on which banking institutions in the city in which the designated corporate trust office of the Bond Trustee is located or New York, New York, are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed with the same force and effect as if done on the nominal date provided in this Bond Indenture.

Section 11.12 Contractual Interpretation. The parties acknowledge that they have read and fully understand the terms of this Bond Indenture, have consulted with such attorneys, accountants, advisors, or other professionals as they have deemed appropriate prior to executing this Bond Indenture with adequate opportunity and time for review thereof, and are fully aware of its contents and of its legal effect. Accordingly, this Bond Indenture shall not be construed

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against any party on the grounds that such party drafted this Bond Indenture and instead, this Bond Indenture shall be interpreted as though drafted equally by all parties.

Section 11.13 Continuing Disclosure. Pursuant to the Continuing Disclosure Agreement, the Obligated Group has undertaken all responsibility for compliance with continuing disclosure requirements, and the Issuer shall have no liability to the Holders of the Bonds or any other person with respect to such disclosure matters. The Obligated Group covenants and agrees in the Loan Agreement that it will comply with and carry out all of its obligations under the provisions of the Continuing Disclosure Agreement, to the extent provided therein. Notwithstanding any other provision of this Bond Indenture, failure of the Obligated Group or the Dissemination Agent to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default.

Section 11.14 Notice of A.R.S. Section 38-511 - Cancellation. Notice is hereby given of the provisions of Arizona Revised Statutes Section 38-511. By this reference, the provisions of said statute are incorporated herein to the extent of their applicability to contracts of the nature of this Bond Indenture pursuant to the laws of the State of Arizona.

Section 11.15 Bondholder Representative.

(a) All notices to the Beneficial Holders represented by a Bondholder Representative shall be provided to such Bondholder Representative in lieu of providing such notice to the Beneficial Holders that such Bondholder Representative represents.

(b) All notices, certificates, reports, requisitions or other communications given hereunder or under any of the Financing Instruments to or from the Bond Trustee and not otherwise provided to the Beneficial Holders or Bondholder Representative shall also be given to the Bondholder Representative to the extent that one exists.

(c) Where the consent or waiver is required of either the Bondholders or the Beneficial Holders, the Bondholder Representative may issue such consent or waiver on behalf of the Beneficial Holders that it represents. In such cases where a requisite percentage of either Bondholders or Beneficial Holders is required, and the Bondholder Representative certifies to the Bond Trustee that it represents at least the requisite percentage, the Bond Trustee does not have to wait for consents or waivers from the remaining percentage of Beneficial Holders or Bondholders before taking the particular action.

(d) Notwithstanding any provision to the contrary contained therein, any notice, request, consent, direction, waiver, approval, agreement or other action of the Bondholder Representative shall constitute and have the same effect as a notice, request, consent, direction, waiver, approval, agreement, or other action of the Beneficial Holders represented by the Bondholder Representative.

(e) Except as required under subsection (c) of this Section, if under any provision hereof any action is to be taken only with the consent, direction or approval of the Bondholder Representative and if, at the time such consent, direction or approval would otherwise be called for, the Bondholder Representative does not then represent a majority of the Beneficial Holders

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of the Bonds then Outstanding, then the consent or approval of the Bondholder Representative shall not be required.

(f) In addition to any other consents or directions required from the Bondholder Representative, when the Bondholder Representative represents the Beneficial Holders of at least 66 2/3 percent of the aggregate principal amount of the Bonds at the time Outstanding then the Bondholder Representative’s consent shall be required for each of the following: (i) Supplemental Indentures and amendments under Article X hereof, and (ii) amendments to the Loan Agreement or any of the other Financing Instruments.

Section 11.16 Acceptance and Acknowledgement by Each Beneficial Owner. By acceptance of the Series 2015 Bonds, each beneficial owner of such Bonds acknowledges and agrees that (i) the Bondholder Representative will act on its behalf with respect to all matters arising under or in connection with the Series 2015 Bonds as provided herein, and (ii) the Bond Trustee shall have no obligation or liability as a result of following the direction of the Bondholder Representative, except for its gross negligence or intentional or willful misconduct.

[The remainder of this page is intentionally left blank; signature page follows.]

[SIGNATURE PAGE TO INDENTURE OF TRUST]

IN WITNESS WHEREOF, ARIZONA HEALTH FACILITIES AUTHORITY has caused this Bond Indenture to be executed on its behalf by its authorized representative, and WILMINGTON TRUST, NATIONAL ASSOCIATION has caused this Bond Indenture to be executed on its behalf by its duly authorized officer to evidence its acceptance of the trusts hereby created, all as of the date first above written.

ARIZONA HEALTH FACILITIES AUTHORITY

By: Name: Title:

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Bond Trustee

By: Authorized Signature

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EXHIBIT A-1

FORM OF SERIES 2015A BONDS

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

THE BENEFICIAL OWNERSHIP INTEREST IN THIS BOND MAY BE TRANSFERRED IN WHOLE OR IN PART IN CONNECTION WITH A SALE TO OR THROUGH A BROKER/DEALER ONLY TO (I) ANY ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (II) ANY BANK, SAVINGS INSTITUTION OR INSURANCE COMPANY (WHETHER ACTING IN A TRUSTEE OR CUSTODIAL CAPACITY FOR ANY ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER OR ON ITS OWN BEHALF), OR (III) ANY TRUST OR CUSTODIAL ARRANGEMENT EACH OF THE BENEFICIAL OWNERS OF WHICH IS AN ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER. THE BENEFICIAL HOLDER OF THIS BOND CERTIFIES THAT IT IS AN ACCREDITED INVESTOR OR A QUALIFIED INSTITUTIONAL BUYER AND, BY ACCEPTANCE OF THIS BOND, ACKNOWLEDGES THAT THIS BOND MAY ONLY BE TRANSFERRED TO A BENEFICIAL HOLDER THAT IS AN ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER.

STATE OF ARIZONA

ARIZONA HEALTH FACILITY AUTHORITY FIRST MORTGAGE REVENUE BOND

(MARIPOSA POINT OF GILBERT PROJECT) SERIES 2015A

No. AR-1 $14,510,000

Maturity Date

Dated Date

Interest Rate Through and

Including December 27, 2016

Interest Rate

From and After December 28, 2016

CUSIP No.

October 1, 2050 October 27, 2015 4.00% 7.25% 040507 PY5

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT: FOURTEEN MILLION FIVE HUNDRED TEN THOUSAND DOLLARS

ARIZONA HEALTH FACILITIES AUTHORITY (the “Issuer”), a political subdivision and instrumentality of the State of Arizona (the “State”) duly created and existing pursuant to the

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Constitution of the State and Title 36, Chapter 4.2, Arizona Revised Statutes (the “Act”), for value received, promises to pay, from the sources described herein, to the registered owner specified above, or registered assigns, the principal amount specified above, on the maturity date specified above (unless this Bond shall have been called for prior redemption) and to pay, from such sources, interest on said sum on January 1, April 1, July 1 and October 1 of each year, commencing January 1, 2016, at the interest rate specified above, until payment of the principal hereof has been made or provided for. This Bond will bear interest from the most recent interest payment date to which interest has been paid or provided for, or, if no interest has been paid, from the Dated Date set forth above.

THIS BOND, THE PREMIUM, IF ANY, AND THE INTEREST HEREON IS A SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM THE SOURCES PROVIDED IN THE MASTER INDENTURE, THE BOND INDENTURE, THE LOAN AGREEMENT AND THE SERIES 2015A NOTE (ALL AS DEFINED HEREIN). THIS BOND DOES NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER OR THE STATE. THIS BOND WILL NOT CONSTITUTE, DIRECTLY OR INDIRECTLY, OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE CREDIT OF THE ISSUER, BUT WILL BE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES DESCRIBED HEREIN, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING POWER.

This Bond and the series of bonds of which it is a part have been issued under and pursuant to a resolution duly adopted by the Issuer pursuant to the laws of the State and the Act. This Bond is a limited obligation of the Issuer payable solely from the revenues, receipts and resources of the Issuer pledged to its payment and not from any other revenues, funds or assets of the Issuer.

The principal of and premium, if any, on this Bond are payable upon the presentation and surrender hereof at the designated corporate trust office of Wilmington Trust, National Association, as trustee, or at the designated corporate trust office of its successor in trust (the “Bond Trustee”) under an Indenture of Trust, dated as of October 1, 2015 (the “Bond Indenture”), by and between the Issuer and the Bond Trustee. Interest on this Bond will be paid on each interest payment date (or, if such interest payment date is not a business day, on the next succeeding business day), by check or draft mailed to the person in whose name this Bond is registered (the “registered owner”) in the registration records of the Issuer maintained by the Bond Trustee at the address appearing thereon at the close of business on the fifteenth day of the calendar month next preceding such interest payment date (the “Regular Record Date”) or by wire transfer of same day funds upon receipt by the Bond Trustee prior to the Regular Record Date of a written request by a registered owner of $1,000,000 or more in aggregate principal amount of Bonds. The CUSIP number and appropriate dollar amounts for each CUSIP number shall accompany all payments of principal of, redemption premium, if any, and interest on the Bonds. Any such interest not so timely paid or duly provided for shall cease to be payable to the

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person who is the registered owner hereof at the close of business on the Regular Record Date and shall be payable to the person who is the registered owner hereof at the close of business on a Special Record Date, for the payment of any defaulted interest. Such Special Record Date shall be fixed by the Bond Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of such Bonds not less than ten days prior to such Special Record Date. Alternative means of payment of interest may be used if mutually agreed upon between the owner of this Bond and the Bond Trustee, as provided in the Bond Indenture. All such payments shall be made in lawful money of the United States of America without deduction for the services of the Bond Trustee.

Any terms used herein and not otherwise defined shall have the meanings given such terms in the Bond Indenture.

This Bond shall be issued pursuant to a book entry system administered by The Depository Trust Company (together with any successor thereto, “Securities Depository”). The book entry system will evidence beneficial ownership of the Bonds with transfers of ownership effected on the register held by the Securities Depository pursuant to rules and procedures established by the Securities Depository. So long as the book entry system is in effect, transfer of principal, interest and premium payments, and provisions of notices or other communications, to beneficial owners of the Bonds will be the responsibility of the Securities Depository as set forth in the Bond Indenture.

This Bond is one of a duly authorized issue of bonds of the Issuer dated October 27, 2015, known as “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A” (the “Series 2015A Bonds”) issued in an aggregate principal amount of $14,510,000 for the purpose of providing funds to be loaned to Gilbert AL Partners, LP, a Texas limited partnership (the “Obligor”), to be used, together with the proceeds of the Series 2015B Bonds (defined below), to finance the costs of an assisted living and memory care facility located in the Town of Gilbert, Arizona (the “Project”), fund a portion of the interest on the Series 2015 Bonds (defined below), fund a working capital fund and pay the costs of issuance of the Series 2015 Bonds.

To provide for its loan repayment obligations, the Obligor has issued its Gilbert AL Partners, LP Series 2015A Note (the “Series 2015A Note”) under a Loan Agreement, dated as of October 1, 2015, between the Issuer and the Obligor (the “Loan Agreement”). The Series 2015A Note is issued pursuant to a Master Trust Indenture, dated as of October 1, 2015, between the Obligor and Wilmington Trust, National Association, as master trustee (the “Master Trustee”), and a Supplemental Indenture Number 1, dated as of October 1, 2015 between the Obligor and the Master Trustee (collectively, the “Master Indenture”). Pursuant to the Master Indenture, the Obligor has pledged and granted a security interest in the Gross Revenues (as defined in the Master Indenture) to the Master Trustee to secure the Series 2015 Note. As additional security for its obligations under the Master Indenture, including its payment obligations on the Series 2015 Note, the Obligor has granted a lien on certain of its facilities pursuant to a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, dated as of October 1, 2015, executed by the Obligor, as trustor, for the benefit of the Master Trustee. The Issuer, on behalf of the Obligor, has simultaneously issued its First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with

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the Series 2015A Bonds, the “Series 2015 Bonds”) under the Bond Indenture which are payable on a parity with the Series 2015A Bonds and secured by a note issued under the Master Indenture on a parity with the Series 2015A Note (the “Series 2015B Note”). Additional obligations on a parity with the Series 2015A Note and the Series 2015B Note may be issued pursuant to the Master Indenture and additional obligations subordinate to the Series 2015A Note and the Series 2015B Note may be issued under the Master Indenture, subject to the conditions and terms contained therein, and the payments on such additional obligations will also be secured by such lien and pledge.

This Bond and the claims for interest hereon are payable only out of the revenues derived by the Issuer pursuant to the Loan Agreement. The Series 2015 Bonds are issued under and are equally and ratably secured and are entitled to the protection given by the Bond Indenture.

NO RECOURSE WILL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THIS BOND AGAINST ANY PAST, PRESENT, OR FUTURE OFFICER, DIRECTOR, EMPLOYEE, COUNSEL, ADVISOR OR AGENT OF THE ISSUER, OR OF ANY SUCCESSOR TO THE ISSUER, AS SUCH, EITHER DIRECTLY OR THROUGH THE ISSUER OR ANY SUCCESSOR TO THE ISSUER, PURSUANT TO ANY RULE OF LAW OR EQUITY, STATUTE, OR CONSTITUTION OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE, AND ALL SUCH LIABILITY OF ANY SUCH OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL, ADVISORS OR AGENTS, AS SUCH, IS HEREBY EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF AND CONSIDERATION FOR THE EXECUTION AND ISSUANCE OF THIS BOND.

Subject to the prior written consent of the Bondholder Representative, additional series of bonds (the “Additional Bonds”) may be issued by the Issuer in accordance with the limitations and conditions of the Bond Indenture, which Additional Bonds may be in all respects on a parity with the Series 2015 Bonds or subordinate to the Series 2015 Bonds. Such Additional Bonds may be issued at different times, in various principal amounts and denominations, may mature at different times, may bear interest at different rates, may be redeemable at different prices and may otherwise vary as provided in the Bond Indenture. The Series 2015 Bonds and such Additional Bonds are herein collectively called the “Bonds.” Reference is hereby made to the Bond Indenture and all indentures supplemental thereto and the Master Indenture for a description of the revenues pledged, the nature and extent of the security, the rights, duties, and obligations of the Issuer, the Bond Trustee and the owners of the Bonds, and the terms and conditions upon which the Bonds are, and are to be, secured.

The Series 2015A Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole at any time between December 28, 2016 and January 27, 2017, inclusive, at the redemption price equal to the principal amount of the Series 2015A Bonds, together with accrued interest to the date of redemption, without premium.

The Series 2015A Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole or in part on October 1, 2017 or on any date thereafter, at the redemption prices (expressed as percentages of the principal amount of

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such Series 2015A Bonds to be redeemed) set forth below, together with accrued interest to the date of redemption:


The Series 2015A Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2015A Bonds, the Issuer shall cause to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on October 1 of each of the following years (after credit as provided below) the following principal amounts of Series 2015A Bonds, plus accrued interest to the redemption date:


2019 $ 5,000 2035 $ 415,000 2020 5,000 2036 445,000 2021 5,000 2037 475,000 2022 5,000 2038 510,000 2023 5,000 2039 550,000 2024 5,000 2040 590,000 2025 5,000 2041 630,000 2026 220,000 2042 675,000 2027 235,000 2043 725,000 2028 255,000 2044 780,000 2029 275,000 2045 835,000 2030 290,000 2046 895,000 2031 315,000 2047 960,000 2032 335,000 2048 1,030,000 2033 360,000 2049 1,105,000 2034 385,000 2050* 1,185,000

________________ * maturity

At the option of the Obligor to be exercised by delivery of a written certificate to the Bond Trustee on or before the 45th day next preceding any sinking fund redemption date, it may (i) deliver to the Bond Trustee for cancellation Series 2015A Bonds or portions thereof subject to payment on such sinking fund redemption date in an aggregate principal amount desired by the Obligor, or (ii) specify a principal amount of Series 2015A Bonds or portions thereof subject to payment on such sinking fund redemption date, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Bond Trustee at

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the request of the Issuer and not theretofore applied as a credit against any sinking fund redemption obligation. Any such Series 2015A Bonds shall be credited against the next succeeding or any other sinking fund redemption date designated in writing by the Obligor.

The Series 2015 Bonds shall be subject to optional redemption by the Issuer at the direction of the Obligor prior to their scheduled maturities, in whole or in part (proportionally among each series) at a redemption price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the redemption date on any date following the occurrence of any of the following events:

(1) in case of damage or destruction to, or condemnation of, any property, plant, and equipment of any Obligated Group Member, to the extent that the net proceeds of insurance or condemnation award exceed the Threshold Amount (as defined in the Master Indenture) and the Obligor has determined not to use such net proceeds or award to repair, rebuild or replace such property, plant, and equipment; or


The Series 2015A Bonds are subject to mandatory redemption in whole, or in part at any time if such partial redemption will preserve the exemption from federal income taxation of interest on the remaining Series 2015A Bonds Outstanding, at a redemption price equal to the principal amount thereof together with unpaid interest accrued to the date fixed for redemption, and without premium, if (i) a final decree or judgment of any federal court, in which the Obligor participates to the extent it deems sufficient, or (ii) a final action by the Internal Revenue Service, in proceedings in which the Obligor participates to the extent it deems sufficient, determines that the interest paid or payable on any such Series 2015A Bonds to other than, as provided in the Internal Revenue Code of 1986, as amended (the “Code”), a “substantial user” of the Project or a “related person” is or was includable in the gross income of the owner thereof for federal income tax purposes under the Code, as a result of the failure by the Obligor to observe or perform any covenant, condition, or agreement on its part to be observed or performed under the Loan Agreement or the inaccuracy of any representation by the Obligor under the Loan Agreement; provided, however, that no decree or judgment by any court or action by the Internal Revenue Service shall be considered final unless the registered owner involved in such proceeding or action (A) gives the Obligor and the Bond Trustee prompt notice of the commencement thereof and (B), if the Obligor agrees to pay all expenses in connection therewith and to indemnify such registered owner against all liabilities in connection therewith, offers the Obligor the opportunity to control the defense thereof. Any such redemption shall be made on a date determined by the Obligor not more than 180 days after the time of such final decree, judgment or action. The Obligor shall give the Issuer and the Bond Trustee not less than 45 days written notice of such date.

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If fewer than all of the Outstanding Series 2015 Bonds that are stated to mature on different dates are called for redemption at one time, those Bonds which are called shall be called in inverse order of the maturities of the Bonds of that series to be redeemed. If fewer than all of the Bonds of a single maturity are to be redeemed, the selection of Bonds to be redeemed, or portions thereof, in amounts equal to $5,000 or any integral multiples thereof, shall be made either (a) by lot or (b) by pro ration, as provided in the Bond Indenture; provided that the Bond Trustee shall select Series 2015 Bonds for redemption so as to assure that after such redemption no registered owner shall retain Series 2015 Bonds in an aggregate amount less than $25,000.

Notice of the call for any redemption shall be given by the Bond Trustee by sending a copy of the redemption notice by mail not more than 60 nor less than 20 days prior to the redemption date to the registered owner of each Series 2015A Bond to be redeemed as shown on the registration records kept by the Bond Trustee, as provided in the Bond Indenture. All Series 2015A Bonds or portions thereof called for redemption will cease to bear interest after the specified redemption date, provided funds for their payment are on deposit at the place of payment at that time. Redemption of Series 2015A Bonds may be conditioned upon the deposit of moneys with the Bond Trustee in an amount sufficient to pay the redemption price of such Series 2015A Bonds.

The Series 2015A Bonds are also subject to purchase in lieu of optional redemption as described in the Bond Indenture.

The Series 2015A Bonds are issuable as fully registered Bonds in denominations of $25,000 and integral multiples of $5,000 in excess thereof and are exchangeable for an equal aggregate principal amount of fully registered Series 2015A Bonds of the same maturity of other authorized denominations at the aforesaid office of the Bond Trustee but only in the manner and subject to the limitations and on payment of the charges provided in the Bond Indenture.

This Bond is fully transferable by the registered owner hereof in person or by his or her duly authorized attorney on the registration books kept at the principal office of the Bond Trustee upon surrender of this Bond together with a duly executed written instrument of transfer satisfactory to the Bond Trustee. Upon such transfer a new fully registered Series 2015A Bond of authorized denomination or denominations for the same aggregate principal amount and maturity will be issued to the transferee in exchange herefor, all upon payment of the charges and subject to the terms and conditions set forth in the Bond Indenture.

The Bond Trustee will not be required to transfer or exchange any Series 2015A Bond after the mailing of notice calling such Series 2015A Bond or any portion thereof for redemption has been given as herein provided, nor during the period beginning at the opening of business 15 days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing.

The Issuer and the Bond Trustee shall deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of making payment (except to the extent otherwise provided hereinabove and in the Bond Indenture with respect to Regular and Special Record Dates for the payment of interest) and for all other purposes, and neither the Issuer nor the Bond Trustee shall be affected by any notice to the contrary. The principal of,

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premium, if any, and interest on this Bond shall be paid free from and without regard to any equities between the Obligor and the original or any intermediate owner hereof, or any setoffs or counterclaims.

The owner of this Bond shall have no right to enforce the provisions of the Bond Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Bond Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Bond Indenture. In case an event of default under the Bond Indenture shall occur, the principal of all of the Bonds at any such time Outstanding under the Bond Indenture may, with the consent of or at the direction of the Bondholder Representative, be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in the Bond Indenture. The Bond Indenture provides that such declaration may in certain events be waived by the Bond Trustee, with the consent of the Bondholder Representative, or the owners of a requisite principal amount of the Bonds Outstanding, if there is no Bondholder Representative, under the Bond Indenture.

To the extent permitted by, and as provided in, the Bond Indenture, modifications or amendments of the Bond Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Issuer and of the owners of the Bonds may be made with the consent of the Issuer, the Bond Trustee and the Bondholder Representative and, in certain instances, of not less than a majority in aggregate principal amount of the Bonds then Outstanding; provided, however, that no such modification or amendment shall be made which will affect the terms of payment of the principal of, premium, if any, or interest on any of the Bonds, which are unconditional. Any such consent by the owner of this Bond shall be conclusive and binding upon such owner and upon all future owners of this Bond and of any Bond issued upon the transfer or exchange of this Bond whether or not notation of such consent is made upon this Bond.

By acceptance of this Bond, each beneficial owner of such Bond acknowledges and agrees that the Bondholder Representative will act on its behalf with respect to all matters arising under or in connection with the Bonds as provided in the Bond Indenture.

IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Bond Indenture and issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law.

THIS BOND shall not be entitled to any benefit under the Bond Indenture, or any indenture supplemental thereto, or become valid or obligatory for any purpose until the Bond Trustee shall have manually signed the certificate of authentication hereon.

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IN WITNESS WHEREOF, the Arizona Health Facilities Authority has caused this Bond to be signed in its name and on its behalf by the manual or facsimile signature of the Chair of the Board of the Issuer and to be dated the date stated above.


By: Chair

CERTIFICATE OF AUTHENTICATION

This is one of the Series 2015A Bonds referred to in the within mentioned Bond Indenture.

Date of Authentication: October 27, 2015

WILIMINGTON TRUST NATIONAL ASSOCIATION, as Bond Trustee

By: Authorized Signatory

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ASSIGNMENT

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

(Social Security or Federal Taxpayer Identification Number)

(Please print or typewrite Name and Address, including Zip Code, of Assignee)

the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints the Bond Trustee under the Bond Indenture as registrar and attorney to register the transfer of the within bond on the books kept for registration thereof, with full power of substitution in the premises.

Date:

Signature guaranteed by:

NOTICE: Signature of the registered owner must be guaranteed by an eligible guarantor institution pursuant to Securities and Exchange Rule 17Ad-15.

NOTICE: The signature of the registered owner to this assignment must correspond with the name as it appears on the face of the within bond in every particular, without alteration or enlargement or any change whatsoever.

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EXHIBIT A-2

FORM OF SERIES 2015B BONDS

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

THE BENEFICIAL OWNERSHIP INTEREST IN THIS BOND MAY BE TRANSFERRED IN WHOLE OR IN PART IN CONNECTION WITH A SALE TO OR THROUGH A BROKER/DEALER ONLY TO (I) ANY ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (II) ANY BANK, SAVINGS INSTITUTION OR INSURANCE COMPANY (WHETHER ACTING IN A TRUSTEE OR CUSTODIAL CAPACITY FOR ANY ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER OR ON ITS OWN BEHALF), OR (III) ANY TRUST OR CUSTODIAL ARRANGEMENT EACH OF THE BENEFICIAL OWNERS OF WHICH IS AN ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER. THE BENEFICIAL HOLDER OF THIS BOND CERTIFIES THAT IT IS AN ACCREDITED INVESTOR OR A QUALIFIED INSTITUTIONAL BUYER AND, BY ACCEPTANCE OF THIS BOND, ACKNOWLEDGES THAT THIS BOND MAY ONLY BE TRANSFERRED TO A BENEFICIAL HOLDER THAT IS AN ACCREDITED INVESTOR OR QUALIFIED INSTITUTIONAL BUYER.

STATE OF ARIZONA

ARIZONA HEALTH FACILITY AUTHORITY FIRST MORTGAGE REVENUE BOND

(MARIPOSA POINT OF GILBERT PROJECT) TAXABLE SERIES 2015B

No. BR-1 $1,315,000

Maturity Date Dated Date Interest Rate CUSIP No.

October 1, 2025 October 27, 2015 8.00% 040507 PZ2 REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT: ONE MILLION THREE HUNDRED FIFTEEN THOUSAND DOLLARS

ARIZONA HEALTH FACILITIES AUTHORITY (the “Issuer”), a political subdivision and instrumentality of the State of Arizona (the “State”) duly created and existing pursuant to the Constitution of the State and Title 36, Chapter 4.2, Arizona Revised Statutes (the “Act”), for value received, promises to pay, from the sources described herein, to the registered owner specified above, or registered assigns, the principal amount specified above, on the maturity date specified above (unless this Bond shall have been called for prior redemption) and to pay, from

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such sources, interest on said sum on January 1, April 1, July 1 and October 1 of each year, commencing January 1, 2016, at the interest rate specified above, until payment of the principal hereof has been made or provided for. This Bond will bear interest from the most recent interest payment date to which interest has been paid or provided for, or, if no interest has been paid, from the Dated Date set forth above.

THIS BOND, THE PREMIUM, IF ANY, AND THE INTEREST HEREON IS A SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM THE SOURCES PROVIDED IN THE MASTER INDENTURE, THE BOND INDENTURE, THE LOAN AGREEMENT AND THE SERIES 2015B NOTE (ALL AS DEFINED HEREIN). THIS BOND DOES NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER OR THE STATE. THIS BOND WILL NOT CONSTITUTE, DIRECTLY OR INDIRECTLY, OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE CREDIT OF THE ISSUER, BUT WILL BE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES DESCRIBED HEREIN, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING POWER.

This Bond and the series of bonds of which it is a part have been issued under and pursuant to a resolution duly adopted by the Issuer pursuant to the laws of the State and the Act. This Bond is a limited obligation of the Issuer payable solely from the revenues, receipts and resources of the Issuer pledged to its payment and not from any other revenues, funds or assets of the Issuer.

The principal of and premium, if any, on this Bond are payable upon the presentation and surrender hereof at the designated corporate trust office of Wilmington Trust, National Association, as trustee, or at the designated corporate trust office of its successor in trust (the “Bond Trustee”) under an Indenture of Trust, dated as of October 1, 2015 (the “Bond Indenture”), by and between the Issuer and the Bond Trustee. Interest on this Bond will be paid on each interest payment date (or, if such interest payment date is not a business day, on the next succeeding business day), by check or draft mailed to the person in whose name this Bond is registered (the “registered owner”) in the registration records of the Issuer maintained by the Bond Trustee at the address appearing thereon at the close of business on the fifteenth day of the calendar month next preceding such interest payment date (the “Regular Record Date”) or by wire transfer of same day funds upon receipt by the Bond Trustee prior to the Regular Record Date of a written request by a registered owner of $1,000,000 or more in aggregate principal amount of Bonds. The CUSIP number and appropriate dollar amounts for each CUSIP number shall accompany all payments of principal of, redemption premium, if any, and interest on the Bonds. Any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner hereof at the close of business on the Regular Record Date and shall be payable to the person who is the registered owner hereof at the close of business on a Special Record Date, for the payment of any defaulted interest. Such Special Record Date shall be fixed by the Bond Trustee whenever moneys become available for payment of the defaulted

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interest, and notice of the Special Record Date shall be given to the registered owners of such Bonds not less than ten days prior to such Special Record Date. Alternative means of payment of interest may be used if mutually agreed upon between the owner of this Bond and the Bond Trustee, as provided in the Bond Indenture. All such payments shall be made in lawful money of the United States of America without deduction for the services of the Bond Trustee.

Any terms used herein and not otherwise defined shall have the meanings given such terms in the Bond Indenture.

This Bond shall be issued pursuant to a book entry system administered by The Depository Trust Company (together with any successor thereto, “Securities Depository”). The book entry system will evidence beneficial ownership of the Bonds with transfers of ownership effected on the register held by the Securities Depository pursuant to rules and procedures established by the Securities Depository. So long as the book entry system is in effect, transfer of principal, interest and premium payments, and provisions of notices or other communications, to beneficial owners of the Bonds will be the responsibility of the Securities Depository as set forth in the Bond Indenture.

This Bond is one of a duly authorized issue of bonds of the Issuer dated October 27, 2015, known as “Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B” (the “Series 2015B Bonds”) and issued in an aggregate principal amount of $1,315,000 for the purpose of providing funds to be loaned to Gilbert AL Partners, LP, a Texas limited partnership (the “Obligor”), to be used, together with the proceeds of the Series 2015A Bonds (defined below), to finance the costs of an assisted living and memory care facility located in the Town of Gilbert, Arizona (the “Project”), fund a portion of the interest on the Series 2015 Bonds (defined below), fund a working capital fund and pay the costs of issuance of the Series 2015 Bonds.

To provide for its loan repayment obligations, the Obligor has issued its Gilbert AL Partners, LP Series 2015B Note (the “Series 2015B Note”) under a Loan Agreement, dated as of October 1, 2015, between the Issuer and the Obligor (the “Loan Agreement”). The Series 2015B Note is issued pursuant to a Master Trust Indenture, dated as of October 1, 2015, between the Obligor and Wilmington Trust, National Association, as master trustee (the “Master Trustee”), and a Supplemental Indenture Number 1, dated as of October 1, 2015 between the Obligor and the Master Trustee (collectively, the “Master Indenture”). Pursuant to the Master Indenture, the Obligor has pledged and granted a security interest in the Gross Revenues (as defined in the Master Indenture) to the Master Trustee to secure the Series 2015B Note. As additional security for its obligations under the Master Indenture, including its payment obligations on the Series 2015B Note, the Obligor has granted a lien on certain of its facilities pursuant to a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, dated as of October 1, 2015, executed by the Obligor, as trustor, for the benefit of the Master Trustee. The Issuer, on behalf of the Obligor, has simultaneously issued its First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds” and, together with the Series 2015B Bonds, the “Series 2015 Bonds”) under the Bond Indenture which are payable on a parity with the Series 2015B Bonds and secured by a note issued under the Master Indenture on a parity with the Series 2015B Note (the “Series 2015A Note”). Additional obligations on a parity with the Series 2015A Note and the Series 2015B Note may be issued pursuant to the Master

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Indenture and additional obligations subordinate to the Series 2015A Note and the Series 2015B Note may be issued under the Master Indenture, subject to the conditions and terms contained therein, and the payments on such additional obligations will also be secured by such lien and pledge.

This Bond and the claims for interest hereon are payable only out of the revenues derived by the Issuer pursuant to the Loan Agreement. The Series 2015 Bonds are issued under and are equally and ratably secured and are entitled to the protection given by the Bond Indenture.

NO RECOURSE WILL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THIS BOND AGAINST ANY PAST, PRESENT, OR FUTURE OFFICER, DIRECTOR, EMPLOYEE, COUNSEL, ADVISOR OR AGENT OF THE ISSUER, OR OF ANY SUCCESSOR TO THE ISSUER, AS SUCH, EITHER DIRECTLY OR THROUGH THE ISSUER OR ANY SUCCESSOR TO THE ISSUER, PURSUANT TO ANY RULE OF LAW OR EQUITY, STATUTE, OR CONSTITUTION OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE, AND ALL SUCH LIABILITY OF ANY SUCH OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL, ADVISORS OR AGENTS, AS SUCH, IS HEREBY EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF AND CONSIDERATION FOR THE EXECUTION AND ISSUANCE OF THIS BOND.

Subject to the prior written consent of the Bondholder Representative, additional series of bonds (the “Additional Bonds”) may be issued by the Issuer in accordance with the limitations and conditions of the Bond Indenture, which Additional Bonds may be in all respects on a parity with the Series 2015 Bonds or subordinate to the Series 2015 Bonds. Such Additional Bonds may be issued at different times, in various principal amounts and denominations, may mature at different times, may bear interest at different rates, may be redeemable at different prices and may otherwise vary as provided in the Bond Indenture. The Series 2015 Bonds and such Additional Bonds are herein collectively called the “Bonds.” Reference is hereby made to the Bond Indenture and all indentures supplemental thereto and the Master Indenture for a description of the revenues pledged, the nature and extent of the security, the rights, duties, and obligations of the Issuer, the Bond Trustee and the owners of the Bonds, and the terms and conditions upon which the Bonds are, and are to be, secured.

The Series 2015B Bonds are subject to optional redemption prior to maturity by the Issuer at the written direction of the Obligor in whole or in part on October 1, 2017 or on any date thereafter, at the redemption prices (expressed as percentages of the principal amount of such Series 2015B Bonds to be redeemed) set forth below, together with accrued interest to the date of redemption:

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The Series 2015B Bonds are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2015B Bonds, the Issuer shall cause to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on October 1 of each of the following years (after credit as provided below) the following principal amounts of Series 2015B Bonds, plus accrued interest to the redemption date:


2019 $150,000 2023 $200,000 2020 160,000 2024 215,000 2021 170,000 2025* 235,000 2022 185,000

________________ * maturity

At the option of the Obligor to be exercised by delivery of a written certificate to the Bond Trustee on or before the 45th day next preceding any sinking fund redemption date, it may (i) deliver to the Bond Trustee for cancellation Series 2015B Bonds or portions thereof subject to payment on such sinking fund redemption date in an aggregate principal amount desired by the Obligor, or (ii) specify a principal amount of Series 2015B Bonds or portions thereof subject to payment on such sinking fund redemption date, which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Bond Trustee at the request of the Issuer and not theretofore applied as a credit against any sinking fund redemption obligation. Any such Series 2015B Bonds shall be credited against the next succeeding or any other sinking fund redemption date designated in writing by the Obligor.

The Series 2015 Bonds shall be subject to optional redemption by the Issuer at the direction of the Obligor prior to their scheduled maturities, in whole or in part (proportionally among each series) at a redemption price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the redemption date on any date following the occurrence of any of the following events:

(1) in case of damage or destruction to, or condemnation of, any property, plant, and equipment of any Obligated Group Member, to the extent that the net proceeds of insurance or condemnation award exceed the Threshold Amount (as defined in the Master Indenture), and the Obligor has determined not to use such net proceeds or award to repair, rebuild or replace such property, plant, and equipment; or

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If fewer than all of the Outstanding Series 2015 Bonds that are stated to mature on different dates are called for redemption at one time, those Bonds which are called shall be called in inverse order of the maturities of the Bonds of that series to be redeemed. If fewer than all of the Bonds of a single maturity are to be redeemed, the selection of Bonds to be redeemed, or portions thereof, in amounts equal to $5,000 or any integral multiples thereof, shall be made either (a) by lot or (b) by pro ration, as provided in the Bond Indenture; provided that the Bond Trustee shall select Series 2015 Bonds for redemption so as to assure that after such redemption no registered owner shall retain Series 2015 Bonds in an aggregate amount less than $25,000.

Notice of the call for any redemption shall be given by the Bond Trustee by sending a copy of the redemption notice by mail not more than 60 nor less than 20 days prior to the redemption date to the registered owner of each Series 2015B Bond to be redeemed as shown on the registration records kept by the Bond Trustee, as provided in the Bond Indenture. All Series 2015B Bonds or portions thereof called for redemption will cease to bear interest after the specified redemption date, provided funds for their payment are on deposit at the place of payment at that time. Redemption of Series 2015B Bonds may be conditioned upon the deposit of moneys with the Bond Trustee in an amount sufficient to pay the redemption price of such Series 2015B Bonds.

The Series 2015B Bonds are also subject to purchase in lieu of optional redemption as described in the Bond Indenture.

The Series 2015B Bonds are issuable as fully registered Bonds in denominations of $25,000 and integral multiples of $5,000 in excess thereof and are exchangeable for an equal aggregate principal amount of fully registered Series 2015B Bonds of the same maturity of other authorized denominations at the aforesaid office of the Bond Trustee but only in the manner and subject to the limitations and on payment of the charges provided in the Bond Indenture.

This Bond is fully transferable by the registered owner hereof in person or by his or her duly authorized attorney on the registration books kept at the principal office of the Bond Trustee upon surrender of this Bond together with a duly executed written instrument of transfer satisfactory to the Bond Trustee. Upon such transfer a new fully registered Series 2015B Bond of authorized denomination or denominations for the same aggregate principal amount and maturity will be issued to the transferee in exchange herefor, all upon payment of the charges and subject to the terms and conditions set forth in the Bond Indenture.

The Bond Trustee will not be required to transfer or exchange any Series 2015B Bond after the mailing of notice calling such Series 2015B Bond or any portion thereof for redemption has been given as herein provided, nor during the period beginning at the opening of business 15

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days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing.

The Issuer and the Bond Trustee shall deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of making payment (except to the extent otherwise provided hereinabove and in the Bond Indenture with respect to Regular and Special Record Dates for the payment of interest) and for all other purposes, and neither the Issuer nor the Bond Trustee shall be affected by any notice to the contrary. The principal of, premium, if any, and interest on this Bond shall be paid free from and without regard to any equities between the Obligor and the original or any intermediate owner hereof, or any setoffs or counterclaims.

The owner of this Bond shall have no right to enforce the provisions of the Bond Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Bond Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Bond Indenture. In case an event of default under the Bond Indenture shall occur, the principal of all of the Bonds at any such time Outstanding under the Bond Indenture may, with the consent of or at the direction of the Bondholder Representative, be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in the Bond Indenture. The Bond Indenture provides that such declaration may in certain events be waived by the Bond Trustee, with the consent of the Bondholder Representative, or the owners of a requisite principal amount of the Bonds Outstanding, if there is no Bondholder Representative, under the Bond Indenture.

To the extent permitted by, and as provided in, the Bond Indenture, modifications or amendments of the Bond Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Issuer and of the owners of the Bonds may be made with the consent of the Issuer, the Bond Trustee and the Bondholder Representative and, in certain instances, of not less than a majority in aggregate principal amount of the Bonds then Outstanding; provided, however, that no such modification or amendment shall be made which will affect the terms of payment of the principal of, premium, if any, or interest on any of the Bonds, which are unconditional. Any such consent by the owner of this Bond shall be conclusive and binding upon such owner and upon all future owners of this Bond and of any Bond issued upon the transfer or exchange of this Bond whether or not notation of such consent is made upon this Bond.

By acceptance of this Bond, each beneficial owner of such Bond acknowledges and agrees that the Bondholder Representative will act on its behalf with respect to all matters arising under or in connection with the Bonds as provided in the Bond Indenture.

IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Bond Indenture and issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law.

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THIS BOND shall not be entitled to any benefit under the Bond Indenture, or any indenture supplemental thereto, or become valid or obligatory for any purpose until the Bond Trustee shall have manually signed the certificate of authentication hereon.

IN WITNESS WHEREOF, the Arizona Health Facilities Authority has caused this Bond to be signed in its name and on its behalf by the manual or facsimile signature of the Chair of the Board of the Issuer and to be dated the date stated above.


By: Chair

CERTIFICATE OF AUTHENTICATION

This is one of the Series 2015B Bonds referred to in the within mentioned Bond Indenture.

Date of Authentication: October 27, 2015

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Bond Trustee

By: Authorized Signatory

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ASSIGNMENT

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

(Social Security or Federal Taxpayer Identification Number)

(Please print or typewrite Name and Address, including Zip Code, of Assignee)

the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints the Bond Trustee under the Bond Indenture as registrar and attorney to register the transfer of the within bond on the books kept for registration thereof, with full power of substitution in the premises.

Date:

Signature guaranteed by:

NOTICE: Signature of the registered owner must be guaranteed by an eligible guarantor institution pursuant to Securities and Exchange Rule 17Ad-15.

NOTICE: The signature of the registered owner to this assignment must correspond with the name as it appears on the face of the within bond in every particular, without alteration or enlargement or any change whatsoever.

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EXHIBIT B

FORM OF CERTIFICATE OF BONDHOLDER REPRESENTATIVE

The undersigned, an Officer of Greenwich Investment Management, Inc. (the “Bondholder Representative”), does hereby represent and agree, as follows:

1. The Bondholder Representative is the duly elected representative of the owners of 100% in outstanding aggregate principal amount of the $14,510,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”) and the $1,315,000 First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”) of the Arizona Health Facilities Authority (the “Issuer”), which Series 2015 Bonds have been issued and delivered on the date of this Certificate.

2. The Bondholder Representative is delivering this Certificate on behalf of the current owners of the Series 2015 Bonds and all other owners from time to time represented by the Bondholder Representative (the “Owners”).

3. Each Owner has been informed that the Series 2015 Bonds are not general obligations of the Issuer, but are special, limited obligations payable and secured solely as provided for in certain legal documents to which reference is made in Schedule I attached hereto and made a part hereof (the “Bond Documents”).

4. Each Owner has full power and authority to carry on its or his/her business as now conducted.

5. Each Owner is (a) a bank as defined in section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) or a savings and loan association or other institution as defined in Section 3(a)(5) of the Securities Act whether acting in its individual or fiduciary capacity; or (b) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or (c) an insurance company as defined in Section 2(13) of the Exchange Act; or (d) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), or a business development company as defined in Section 2(a)(48) of the Investment Company Act; or (e) a Small Business Investment Company licensed by the Small Business Administration under Section 301(c) or Section 301(d) of the Small Business Investment Act of 1958, as amended; or (f) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivision for the benefit or its employees, if investment decisions are made by a plan fiduciary which is a bank, savings and loan association, insurance company, or registered investment advisor and the plan establishes fiduciary principles the same as or similar to those contained in Sections 404-407 of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); or (g) an employee benefit plan within the meaning of ERISA if investment decisions are made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely

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by persons that are accredited investors; or (h) any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000; or (i) the trustee of a trust whose securities are registered pursuant to an effective registration statement under the Securities Act.

6. Each Owner has retained the Bondholder Representative to advise and represent the Owner regarding the purchase and sale of securities such as the Series 2015 Bonds. Each Owner has the ability to bear the economic risks of an investment in the Series 2015 Bonds, and is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, or a “qualified institutional buyer” as that term is defined under Rule 144A of the Securities and Exchange Commission.

7. Each Owner is not now, and has never been controlled by, or under common control, with Gilbert AL Partners, LP, a Texas limited partnership (the “Obligor”). The Obligor has never been, and is not now, controlled by any Owner. The Bondholder Representative is not aware of any Owner entering into any arrangements with the Obligor or with any affiliate of the Obligor in connection with the Series 2015 Bonds, other than as disclosed to the Issuer, Piper Jaffray & Co., as underwriter of the Series 2015 Bonds, Wilmington Trust, National Association, as trustee under the indenture pursuant to which the Series 2015 Bonds are issued (the “Bond Trustee”), and Wilmington Trust, National Association, as trustee under the master trust indenture pursuant to which the Obligor has pledged assets to secure payment of the Series 2015 Bonds (the “Master Trustee”).

8. Neither the Issuer nor the Bond Trustee have undertaken or will undertake steps to ascertain the accuracy or completeness of the information furnished to the Bondholder Representative or any Owner with respect to the Obligor, the Series 2015 Bonds or the project financed by the Series 2015 Bonds (the “Project”). Neither the Bondholder Representative nor any Owner has relied or will rely upon the Issuer, the Bond Trustee or the Master Trustee in any way with regard to the accuracy or completeness of such information furnished to the Bondholder Representative or any Owner in connection with the purchase by the Owners of the Series 2015 Bonds, nor have any such parties made any representation to the Bondholder Representative or any Owner with respect to that information.

9. The Bondholder Representative is sufficiently knowledgeable and experienced in financial and business matters, including the purchase and ownership of municipal and other taxable and tax-exempt debt obligations, to be able to evaluate the risks and merits of the investment represented by the purchase of the Series 2015 Bonds, and it is capable of and has made its own investigation of the Obligor and the Project on behalf of the Owners in connection with its decision for the Owners to purchase the Series 2015 Bonds.

10. The Series 2015 Bonds are purchased by every Owner for the purpose of investment and each Owner intends to hold the Series 2015 Bonds for its own account as a long-term investment, without a current view to any distribution or sale of the Series 2015 Bonds. Each Owner has been informed that it may need to bear the risks of this investment for an indefinite time, since any sale prior to maturity may not be possible.

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11. Each Owner has been informed that the Series 2015 Bonds will not be listed on any stock or other securities exchange and were issued without registration under the provisions of the Securities Act, or any state securities laws, and the Series 2015 Bonds may not be resold, transferred, pledged or hypothecated, in whole or in part, unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from registration is available. Each Owner has been informed that the Series 2015 Bonds do not carry any rating from any rating service. Each Owner has been informed that, unless the Issuer is informed that the Series 2015 Bonds have an investment grade rating, the Series 2015 Bonds may be transferred only to an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act, a “qualified institutional buyer” as that term is defined under Rule 144A of the Securities and Exchange Commission, or a broker-dealer of securities.

Dated this 27th day of October, 2015.

GREENWICH INVESTMENT MANAGEMENT, INC., as Bondholder Representative

By: _______________________________________ Its: _______________________________________

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SCHEDULE I

TO CERTIFICATE OF BONDHOLDER REPRESENTATIVE

BOND DOCUMENTS

1. Indenture of Trust, dated as of October 1, 2015, between the Issuer and the Bond Trustee

2. Loan Agreement, dated as of October 1, 2015, between the Issuer and the Obligor

3. Master Trust Indenture, dated as of October 1, 2015 (the “Master Indenture”), between the Obligor, as the sole initial Member of the Obligated Group (both as defined in the Master Indenture), and the Master Trustee

4. Supplemental Indenture Number 1, dated as of October 1, 2015, between the Obligor, as Obligated Group Representative (as defined in the Master Indenture) and the Master Trustee

5. Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing, dated as of October 1, 2015, executed by the Obligor, as trustor, in favor of the Master Trustee, as beneficiary, and Chicago Title Agency, Inc., as trustee, to be recorded in Maricopa County, Arizona

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EXHIBIT C

COSTS OF ISSUANCE PAYABLE AT CLOSING

See Cost of Issuance Disbursement Request No. 1 pursuant to the Loan Agreement which includes all Costs of Issuance disbursed on the Delivery Date of the Series 2015 Bonds.


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and


LOAN AGREEMENT

DATED AS OF OCTOBER 1, 2015

RELATING TO



Series 2015A




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TABLE OF CONTENTS

Page


Section 1.1 Definitions................................................................................................................1 Section 1.2 Rules of Construction. ...........................................................................................12

ARTICLE II REPRESENTATIONS

Section 2.1 Representations by the Issuer.................................................................................13 Section 2.2 Representations by the Obligor ..............................................................................14

ARTICLE III TERM OF LOAN AGREEMENT

Section 3.1 Term of this Loan Agreement ................................................................................16

ARTICLE IV ISSUANCE OF THE BONDS; CONSTRUCTION

OF THE PROJECT; DISBURSEMENT

Section 4.1 Agreement to Issue Bonds; Application of Bond Proceeds and Other Moneys ...................................................................................................................16

Section 4.2 Agreement to Construct Project .............................................................................16 Section 4.3 Cost of Construction ..............................................................................................16 Section 4.4 Plans; Modifications of the Projects ......................................................................17 Section 4.5 Compliance with Regulatory Requirements ..........................................................17 Section 4.6 Requests for Disbursements ...................................................................................17 Section 4.7 [Reserved] ..............................................................................................................18 Section 4.8 Modification of Disbursements ..............................................................................18 Section 4.9 Tax Covenants. ......................................................................................................18 Section 4.10 Allocation of, and Limitation on, Expenditures for the Project .............................20 Section 4.11 Disposition of Series 2015 Project .........................................................................21 Section 4.12 Written Procedures.................................................................................................21

ARTICLE V LOAN OF BOND PROCEEDS;

NOTES; PROVISION FOR PAYMENT

Section 5.1 Loan of Bond Proceeds ..........................................................................................21 Section 5.2 Repayment of Loan ................................................................................................21 Section 5.3 Credits ....................................................................................................................22 Section 5.4 Notes ......................................................................................................................23 Section 5.5 Payment of Bond Trustee’s and Paying Agent’s Fees and Expenses ....................23 Section 5.6 [Reserved] ..............................................................................................................23 Section 5.7 Payment of Administration Expenses ....................................................................23


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Section 5.8 Payees of Payments................................................................................................23 Section 5.9 Obligations of Obligor Hereunder Unconditional .................................................23

ARTICLE VI MAINTENANCE AND INSURANCE

Section 6.1 Maintenance and Modifications of Projects by Obligor ........................................24 Section 6.2 Insurance ................................................................................................................24

ARTICLE VII SPECIAL COVENANTS

Section 7.1 No Warranty of Merchantability, Condition or Suitability by the Issuer ..............24 Section 7.2 Right of Access to the Project and Information .....................................................25 Section 7.3 Nonsectarian Use ...................................................................................................25 Section 7.4 Further Assurances.................................................................................................25 Section 7.5 Indemnification ......................................................................................................25 Section 7.6 Authority of Obligor Representative .....................................................................30 Section 7.7 Authority of Issuer Representative ........................................................................31 Section 7.8 No Personal Liability .............................................................................................31 Section 7.9 Fees and Expenses .................................................................................................31 Section 7.10 Exculpatory Provision ............................................................................................31 Section 7.11 Annual Compliance Certificate ..............................................................................32

ARTICLE VIII ASSIGNMENT AND LEASING

Section 8.1 Assignment and Leasing by Obligor......................................................................32 Section 8.2 Assignment and Pledge by Issuer ..........................................................................33

ARTICLE IX FAILURE TO PERFORM COVENANTS

AND REMEDIES THEREFOR

Section 9.1 Failure to Perform Covenants ................................................................................33 Section 9.2 Remedies for Failure to Perform ............................................................................33 Section 9.3 Discontinuance of Proceedings ..............................................................................33 Section 9.4 No Remedy Exclusive............................................................................................34 Section 9.5 Agreement to Pay Attorneys’ Fees and Expenses .................................................34 Section 9.6 Waivers ..................................................................................................................34

ARTICLE X PREPAYMENT OF NOTES

Section 10.1 General Option to Prepay Notes ............................................................................34


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Section 10.2 Conditions to Exercise of Option ...........................................................................35

ARTICLE XI MISCELLANEOUS

Section 11.1 Notices ...................................................................................................................35 Section 11.2 Binding Effect ........................................................................................................37 Section 11.3 Severability ............................................................................................................37 Section 11.4 Amounts Remaining in Funds ...............................................................................37 Section 11.5 Amendments, Changes, and Modifications ...........................................................37 Section 11.6 Execution in Counterparts ......................................................................................37 Section 11.7 Payment..................................................................................................................37 Section 11.8 Governing Law ......................................................................................................37 Section 11.9 No Pecuniary Liability of Issuer ............................................................................37 Section 11.10 Payments Due on Holidays ....................................................................................37 Section 11.11 Notice of A.R.S. Section 38-511 - Cancellation ....................................................38 Section 11.12 Survival of Covenants ............................................................................................38 Section 11.13 Usury, Total Interest ..............................................................................................38 Section 11.14 Bondholder Representative ....................................................................................39 Section 11.15 Benefit of Loan Agreement ...................................................................................40 Section 11.16 No Liability for Consents, Approvals or Appointments ........................................40 Section 11.17 Bondholder Representative ....................................................................................40

EXHIBIT A: SERIES 2015 PROJECT DESCRIPTION

EXHIBIT B: FORM FOR POST-CERTIFICATE OF OCCUPANCY PROJECT ACCOUNT DISBURSEMENT

EXHIBIT C: FORM FOR COST OF ISSUANCE DISBURSEMENT

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LOAN AGREEMENT

THIS LOAN AGREEMENT dated as of October 1, 2015, between ARIZONA HEALTH FACILITIES AUTHORITY, a political subdivision and instrumentality of the State of Arizona (the “Issuer”), and GILBERT AL PARTNERS, LP, a limited partnership duly organized and existing under the laws of the State of Texas (the “Obligor”),

W I T N E S S E T H:

WHEREAS, the Issuer is authorized under the Act (as defined herein) to issue bonds for the purpose of improving health care for residents of the State of Arizona (the “State”) by providing less expensive financing for one or more health care facilities, including the Project (as defined herein), operated and maintained by participating facilities such as the Obligor; and

WHEREAS, the Issuer has determined to issue (i) Arizona Health Facilities First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”), in the aggregate principal amount of $14,510,000, and (ii) Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together, with the Series 2015A Bonds, the “Series 2015 Bonds”), in the aggregate amount of $1,315,000, pursuant to the Bond Indenture (hereinafter defined) and the Act, for the purpose of making a loan to the Obligor which the Obligor has represented will be used for the acquisition, construction and equipping by the Obligor of an assisted living and memory care facility, consisting of approximately 49 assisted living units and approximately 30 memory care units, and related improvements as more particularly described on Exhibit A hereto (the “Project”), to be located in the Town of Gilbert, Arizona; and

WHEREAS, pursuant to this Loan Agreement, the Issuer has agreed to issue the Series 2015 Bonds and to use the proceeds of the Series 2015 Bonds to fund a loan to the Obligated Group (the “Loan”), and the Obligor has agreed to (i) apply the proceeds of the Loan as more specifically provided herein and in the Bond Indenture to pay a portion of the costs of the acquisition, construction and equipping of the Project, (ii) make payments sufficient to pay the principal of, premium, if any, and interest on the Series 2015 Bonds when due (whether at maturity, by redemption, acceleration or otherwise), and (iii) observe the other covenants and agreements and make the other payments set forth herein; and

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto formally covenant, agree and bind themselves as follows:


Section 1.1 Definitions. The following terms, except where the context indicates otherwise, shall have the respective meanings set forth below. Terms not otherwise defined herein shall have the meanings give such terms in the Master Indenture.

“Account” means any account established within a Fund.

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“Act” means Title 36, Chapter 4.2 of the Arizona Revised Statutes.

“Additional Bonds” means the one or more series of additional bonds authorized to be issued by the Issuer pursuant to Sections 2.09 and 2.10 of the Bond Indenture.

“Administration Expenses” means the reasonable and necessary fees and expenses, including the Annual Issuer’s Fee and Issuer’s Fees and Expenses, payable to or incurred by the Issuer under or in connection with the Bonds, this Loan Agreement or any other Financing Instruments.

“Affiliate” means, with respect to any Person, any Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first Person. A Person shall be deemed to control another Person for the purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise.

“Annual Issuer’s Fee” means an annual fee in the amount of 6.5 basis points (0.065%) of the principal amount of the Bonds Outstanding, with a minimum annual fee of $2,500, payable without demand to the Issuer in installments, semi-annually in arrears on April 1 and October 1, beginning April 1, 2016, or pro rata upon redemption, for payment of the operational and administrative expenses of the Issuer.

“Assigned Notes” means the Series 2015A Note and the Series 2015B Note and any other Note assigned to the Bond Trustee in accordance with the terms of the Bond Indenture.

“Assurance Agreement” means the Assurance of Construction of Off-Site Improvements for Non-Subdivisions, dated October 6, 2015, from the Obligor and Wilmington Trust, National Association to the Town of Gilbert, Arizona.

“Authorized Denominations” means, (i) with respect to the Series 2015A Bonds and the Series 2015B Bonds, the denomination of $25,000 and integral multiples of $5,000 in excess thereof; and (ii) with respect to any series of Additional Bonds, as provided in the Supplemental Indenture creating such series of Additional Bonds. Notwithstanding the foregoing, any Beneficial Holder of Series 2015A Bonds or Series 2015B Bonds shall be allowed to purchase, transfer or sell such Bonds in multiples of $5,000 as long as, upon completion of such purchase, transfer or sale, the Beneficial Holder owns at least $25,000 of principal amount of Series 2015A Bonds or Series 2015B Bonds, as applicable.

“Beneficial Holder” means, when any Bonds are held in a book-entry only system, the owner of such Bond or portion thereof for federal income tax purposes.

“Board” or “Board of Directors” means the governing body of the Issuer.

“Bond Counsel” means Greenberg Traurig, LLP, and its successors or such other nationally recognized bond counsel as may be selected by the Obligor with the approval of the Issuer, which approval shall be in the sole discretion of the Issuer.

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“Bond Fund” means the Bond Fund created in Section 3.02 of the Bond Indenture.

“Bondholder” or “owner” of the Bonds mean the registered owner of any fully registered Bond.

“Bondholder Representative” initially means Greenwich Investment Management Inc., a registered investment advisor under the Investment Advisors Act of 1940, as amended, and any successors or assigns thereto which shall be designated as the Bondholder Representative by written appointment by a majority of Beneficial Holders, and delivered to the Bond Trustee.

“Bond Indenture” means the Indenture of Trust of even date herewith relating to the Series 2015 Bonds between the Issuer and the Bond Trustee, including any indentures supplemental thereto made in conformity therewith.

“Bond Purchase Agreement” means the Bond Purchase Agreement among the Issuer, the Obligor and the Underwriter.

“Bond Resolution” means a resolution duly adopted by the Board of Directors.

“Bond Trustee” means Wilmington Trust, National Association, being the registrar, the paying agent and the trustee under the Bond Indenture, or any successor corporate trustee.

“Bonds” means the Series 2015 Bonds and any Additional Bonds issued pursuant to the Bond Indenture.

“Business Day” means any day on which banks in the city in which the designated corporate trust office of the Bond Trustee is located or, if different, New York, New York, are not authorized to be closed for commercial banking purposes.

“Claim” shall mean any claim, lawsuit, cause of action and other legal action and proceeding of whatever nature brought against (whether by way of direct action, counter claim, cross action or impleader) any Indemnified Party, even if groundless, false, or fraudulent, so long as the claim, lawsuit, cause of action or other legal action or proceeding is alleged or determined, directly or indirectly, to arise out of, to result from, to relate to or to be based upon, in whole or in part: (i) the issuance of the Bonds, (ii) the duties, activities, acts or omissions (EVEN IF NEGLIGENT) of any Person in connection with the issuance of the Bonds, or the obligations of the various parties arising under the Bond Indenture, this Loan Agreement or the Master Indenture, or (iii) the duties, activities, acts or omissions (EVEN IF NEGLIGENT) of any Person in connection with the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Projects or any part thereof.

“Closing Date” means the date on which a series of Bonds is delivered to the purchaser or purchasers thereof and payment is received by the Bond Trustee.

“Code” means the Internal Revenue Code of 1986, as amended.

“Completion Certificate” means a certificate of the Obligor delivered pursuant to Section 3.07 of the Bond Indenture.

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“Completion Date” means the date specified in the Completion Certificate as the date of completion or termination.

“Construction Disbursement Agreement” means the Construction Disbursement and Monitoring Agreement, dated as of October 1, 2015, among the Obligor, the Construction Monitor and the Bond Trustee.

“Construction Fund” means the construction fund created under Section 3.06 of the Bond Indenture.

“Construction Monitor” means zumBrunnen, Inc. or any other firm engaged in construction management and oversight for the Project, selected by the Obligor, and approved by the Bondholder Representative.

“Continuing Disclosure Agreement” means the Disclosure Dissemination Agreement, dated as of October 1, 2015, between the Obligor and the Dissemination Agent.

“Control Agreement” has the meaning given such term in the Master Indenture.

“Cost” or “Costs” as applied to a Project means and includes any and all costs of such project permitted by the Act and, without limiting the generality of the foregoing, shall include the following:

(a) the cost of construction;

(b) the costs of acquisition of property, including rights in land and other property, both real and personal and improved and unimproved;

(c) the cost of demolishing, removing or relocating any buildings or structures on lands so acquired, including the cost of acquiring any lands to which such buildings or structures may be moved or relocated;

(d) the cost of all machinery and equipment, financing charges, interest prior to and during construction, and, for a reasonable period after completion of construction, the cost of engineering and architectural surveys, plans and specifications;

(e) the cost of consultant and legal services, other expenses necessary or incident to determining the feasibility or practicability of constructing such project, administrative and other expenses necessary or incident to the construction of such project, and the financing of the construction thereof, including reimbursement to any state or other governmental agency that would be costs of the Project had they been made directly by the local agency; and

(f) for purposes of the last sentence of Section 4.6(a), initial operating expenses and other working capital expenditures that are directly related to the Series 2015 Project, other than administrative fees or expenses to be paid to the Manager or the Developer.

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“Cost of Issuance” means all costs and expenses incurred by the Issuer or the Obligor in connection with the issuance and sale of the Bonds, including without limitation (i) reasonable fees and expenses of accountants, attorneys, engineers and financial advisors, (ii) materials, supplies, and printing and engraving costs, (iii) recording and filings fees and (iv) rating agency fees.

“Cost of Issuance Fund” means the cost of issuance fund created under Section 3.15 of the Bond Indenture.

“Deed of Trust” means the Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, dated as of October 1, 2015, executed by the Obligor, as trustor, in favor of Chicago Title Agency, Inc., as trustee, for the benefit of the Master Trustee, relating to the Series 2015 Project.

“Delivery Date” means the date the Bonds are delivered to the initial purchasers against payment therefor.

“Dissemination Agent” means Wilmington Trust, National Association, and its successors and assigns.

“Electronic Means” means telecopy, facsimile transmission, e-mail transmission or other similar electronic means of communication providing evidence of transmission, including a telephonic communication confirmed by any other method set forth in this definition.

“Event of Default” means those defaults specified in Section 8.01 of the Bond Indenture.

“Fitch” means Fitch Inc. and its successors and their assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligor by notice to the Bond Trustee.

“Financing Instruments” means the Master Indenture, the Deed of Trust, the Control Agreement, the Bond Indenture, the Series 2015 Bonds, this Loan Agreement, the Regulatory Agreement, the Assurance Agreement, the Continuing Disclosure Agreement and the Tax Agreement.

“Funded Interest Account” means the account of such name in the Construction Fund created in Section 3.06 of the Bond Indenture.

“Funds” means the Bond Fund and the Construction Fund.

“Government Obligations” means direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, including (in the case of direct obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and holds the underlying Government Obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually

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against the obligor of the underlying Government Obligations; and (c) the underlying Government Obligations are held in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated.

“Indemnified Party” shall mean the Issuer, its past, present and future directors, officers, employees, counsel, advisors and agents, individually and collectively, and any successor to any of such Persons.

“Indemnified Persons” means the Indemnified Parties, the Bond Trustee and the Bondholder Representative.

“Interest Payment Date” means (i) as to the Series 2015 Bonds, each January 1, April 1, July 1 and October 1, commencing January 1, 2016, or, if such day is not a business day, the immediately succeeding business day in the years during which the Series 2015 Bonds are Outstanding under the provisions of the Bond Indenture, and (ii) as to Additional Bonds, the periods specified in the applicable Supplemental Indenture on which interest on such Additional Bonds is to be paid.

“Issuer” means the Arizona Health Facilities Authority, a political subdivision and instrumentality duly created and existing pursuant to the laws and constitution of the State, and its successors and assigns.

“Issuer Representative” means the Chair, Vice Chair, Treasurer, Secretary or Executive Director of the Issuer and any other person or persons designated, from time to time, to act on behalf of the Issuer by a certificate containing the specimen signature(s) of such person or persons, signed by one of the above-listed representatives, and furnished to the Obligor and the Bond Trustee.

“Issuer’s Fees and Expenses” means the fees and expenses, if any, payable to or incurred by the Issuer under or in connection with the Bonds or any of the other Financing Instruments, and including but not limited to any fees and expenses of counsel to the Issuer.

“Living Units” has the meaning given such term in the Master Indenture.

“Loan” means proceeds of the Bonds made available to or for the benefit of the Obligor pursuant to the terms and conditions of the Bond Indenture and this Loan Agreement.

“Loan Agreement” means this Loan Agreement and any amendments and supplements hereto made in conformity herewith and with the Bond Indenture.

“Losses” means losses, costs, damages, expenses, judgments, and liabilities of whatever nature (including, but not limited to, reasonable attorney’s, accountant’s and other professional’s fees, litigation and court costs and expenses, amounts paid in settlement and amounts paid to discharge judgments and amounts payable by an Indemnified Persons to any other Person under any arrangement providing for indemnification of that Person) directly or indirectly resulting from arising out of or relating to one or more Claims.

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“Majority Holders” means (i) for purposes of the Master Indenture, (a) so long as any of the Senior Obligations are Outstanding, the Holders of not less than a majority in aggregate principal amount the then Outstanding Senior Obligations and (b) if no Senior Obligations are then Outstanding, the Holders of not less than a majority in aggregate principal amount of the Outstanding Subordinate Obligations, and (ii) for purposes of the Bond Indenture, (a) so, long as any Senior Bonds are Outstanding, the Holders of not less than a majority in aggregate principal amount of the then Outstanding Senior Bonds and (b) if no Senior Bonds are then Outstanding, the Holders of not less than a majority in aggregate principal amount of the Subordinate Bonds.

“Master Indenture” means the Master Trust Indenture, dated as of October 1, 2015, between the Obligor and the Master Trustee, including any supplements or amendments thereto and modifications thereof.

“Master Trustee” means Wilmington Trust, National Association, a national banking association, as trustee under the Master Indenture, and its successors as trustee thereunder.

“Moody’s” means Moody’s Investors Service and its successors and their assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligor by notice to the Bond Trustee.

“Notes” means the Series 2015 Notes and any other note payable to the Issuer issued under the Master Indenture pursuant to this Loan Agreement.

“Obligated Group Members” has the meaning given such term in the Master Indenture.

“Obligated Group Representative” and “Obligor” means (i) Gilbert AL Partners, LP, a limited partnership existing under the laws of the State of Texas, and (ii) any surviving, resulting or transferee entity.

“Obligor Representative” means any manager of the general partner of the Obligor and any other person or persons designated, from time to time, to act on behalf of the Obligor by a certificate containing the specimen signature(s) of such person or persons, signed by one of the managers of the general partner of the Obligor, and furnished to the Issuer, the Bond Trustee and the Bondholder Representative.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by legal counsel selected by the Obligor and acceptable to the Issuer and the Bond Trustee who shall be nationally recognized in matters pertaining to the validity of obligations of governmental issuers and the exemption from federal income taxation of interest on such obligations.

“Opinion of Counsel” means an opinion in writing signed by an attorney or firm of attorneys, acceptable to the Bond Trustee, who may be counsel to the Obligor or other counsel.

“Outstanding” means, as of any particular time, all Bonds which have been duly authenticated and delivered by the Bond Trustee under the Bond Indenture, except:

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(a) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation after purchase in the open market or because of payment at or redemption prior to maturity;

(b) Bonds for the payment or redemption of which cash funds (or Government Obligations to the extent permitted in Section 7.01 of the Bond Indenture) shall have been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity or redemption date of any such Bonds); provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Bond Trustee, shall have been filed with the Bond Trustee and provided further that prior to such payment or redemption, the Bonds to be paid or redeemed shall be deemed to be Outstanding for the purpose of transfers and exchanges under Section 2.05 of the Bond Indenture; and

(c) Bonds in lieu of which other Bonds have been authenticated under Section 2.06 of the Bond Indenture.

“Paying Agent” means any bank or trust company, including the Bond Trustee, designated pursuant to the Bond Indenture to serve as a paying agency or place of payment for the Bonds, and any successor designated pursuant to the Bond Indenture.

“Payment Office” with respect to the Bond Trustee or other Paying Agent means the office maintained by the Bond Trustee or any affiliate of the Bond Trustee or of another Paying Agent for the payment of interest and principal on the Bonds.

“Permitted Investments” has the meaning assigned to such term in the Master Indenture.

“Person” means an individual, association, unincorporated organization, corporation, limited liability company, partnership, joint venture, business trust or a government or an agency or a political subdivision thereof, or any other entity.

“Premium Security” means any Permitted Investment purchased or to be purchased at a premium from funds in the Project Account.

“Project” means any project permitted by the Act to be financed or refinanced by Bonds.

“Project Account” means the account of such name in the Construction Fund created in Section 3.06 of the Bond Indenture.

“Qualified Project Costs” means the actual costs incurred to acquire, construct and equip the Series 2015 Project which (i) are incurred not more than 60 days prior to May 13, 2015, being the date on which the Issuer first declared its “official intent” (within the meaning of Treasury Regulations Section 1.150-2) with respect to the Series 2015 Project (other than preliminary expenditures with respect to the Project in an amount not exceeding 20 percent of the aggregate principal amount of the Series 2015A Bonds), (ii) are (A) chargeable to the Series 2015 Project’s capital account or would be so chargeable either with a proper election by the Obligor or but for a proper election by the Obligor to deduct such costs, within the meaning of

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Treasury Regulations Section 1.103-8(a)(1), and if charged or chargeable to the Series 2015 Project’s capital account are or would have been deducted only through an allowance for depreciation or (B) made for the acquisition of land, to the extent allowed in Section 147(c) of the Code and (iii) are made exclusively with respect to “qualified residential rental project” within the meaning of Section 142(d) of the Code; provided, however, that (i) costs of issuance shall not be deemed to be Qualified Project Costs; (ii) fees, charges or profits payable to the Obligor or a “related person” (within the meaning of Section 147 of the Code) shall not be deemed to be Qualified Project Costs; (iii) interest during the construction of the Series 2015 Project shall be allocated between Qualified Project Costs and other costs and expenses of the Series 2015 Project; (iv) interest following the date the Series 2015 Project is placed in service in accordance with applicable Code provisions shall not constitute Qualified Project Costs; (v) letter of credit fees and municipal bond insurance premiums which represent a transfer of credit risk shall be allocated between Qualified Project Costs and other costs and expenses to be paid from the proceeds of the Series 2015A Bonds; and (vi) letter of credit fees and municipal bond insurance premiums which do not represent a transfer of credit risk (including, without limitation, letter of credit fees payable to a “related person” to the Obligor) shall not constitute Qualified Project Costs. As used herein, the term “preliminary expenditures” includes architectural, engineering, surveying, soil testing and similar costs that were incurred prior to commencement of acquisition, construction or equipping of the Series 2015 Project, but does not include land acquisition, site preparation or similar costs incident to commencement of construction the Series 2015 Project. The Trustee shall have no obligation to determine what constitutes Qualified Project Costs.

“Qualified Project Period” has the meaning assigned to such term in the Regulatory Agreement.

“Rating Agency” means Fitch, Moody’s or Standard & Poor’s, and any successor thereto.

“Rebate Fund” means that special fund established in the name of the Issuer with the Bond Trustee pursuant to Section 3.14 of the Bond Indenture.

“Registered Owner” or “Owners” means the person or persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Bond Trustee for that purpose in accordance with the terms of the Bond Indenture.

“Regular Record Date” means for the Series 2015 Bonds the 15th day of the month preceding each regularly scheduled interest payment date therefor, and for Additional Bonds shall be the day established by the supplement to the Bond Indenture relating to such Additional Bonds.

“Regulations” means the applicable proposed, temporary or final Income Tax Regulations promulgated under the Code or, to the extent applicable to the Code, under the Internal Revenue Code of 1954, as such regulations may be amended or supplemented from time to time.

“Regulatory Agreement” means the Land Use Restriction Agreement, dated as of October 1, 2015, by and among the Issuer, the Bond Trustee and the Obligor.

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“Responsible Officer” when used with respect to the Bond Trustee means an officer in the corporate trust department of the Bond Trustee having direct responsibility for administration of the Bond Indenture.

“Securities Depository” means The Depository Trust Company, New York, New York, and any successor thereto as permitted by the Bond Indenture.

“Senior Bonds” means the Series 2015 Bonds and any other series of Additional Bonds issued under the Bond Indenture, payable and secured on a pari passu basis with the Series 2015 Bonds.

“Senior Interest Account” means the applicable account or accounts in the Bond Fund created in Section 3.02 of the Bond Indenture.

“Senior Principal Account” means the applicable account or accounts in the Bond Fund created in Section 3.02 of the Bond Indenture.

“Series 2015 Bonds” means, together, the Series 2015A Bonds and the Series 2015B Bonds.

“Series 2015 Notes” means, together, the Series 2015A Note and the Series 2015B Note.

“Series 2015 Project” means the Project described in Exhibit A hereto.

“Series 2015A Bonds” means the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A, issued pursuant to the Bond Indenture.

“Series 2015A Funded Interest Subaccount” means the subaccount of such name in the Funded Interest Account created in Section 3.06 of the Bond Indenture.

“Series 2015A Note” means the Gilbert AL Partners, LP Senior Series 2015A Note relating to the Series 2015A Bonds and issued by the Obligor pursuant to the Supplemental Indenture No. 1.

“Series 2015A Project Subaccount” means the subaccount of such name in the Project Account created in Section 3.06 of the Bond Indenture.

“Series 2015B Bonds” means the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B, issued pursuant to the Bond Indenture.

“Series 2015B Funded Interest Subaccount” means the subaccount of such name in the Funded Interest Account created in Section 3.06 of the Bond Indenture.

“Series 2015B Note” means the Gilbert AL Partners, LP Senior Series 2015B Note relating to the Series 2015B Bonds and issued by the Obligor pursuant to the Supplemental Indenture No. 1.

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“Series 2015B Project Subaccount” means the subaccount of such name in the Project Account created in Section 3.06 of the Bond Indenture.

“Significant Holders” means (i) for purposes of the Master Indenture (a) so long as any Senior Obligations are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Senior Obligations, and (b) if no Senior Obligations are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Subordinate Obligations and (ii) for purposes of the Bond Indenture (a) so long as any Senior Bonds are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Senior Bonds, and (b) if no Senior Bonds are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Subordinate Bonds.

“Special Record Date” means a special date fixed to determine the names and addresses of owners of Series 2015 Bonds for purposes of paying interest on a special interest payment date for the payment of defaulted interest, all as further provided in Section 2.03 of the Bond Indenture and for Additional Bonds shall be the day established by the supplement to the Bond Indenture relating to such Additional Bonds.

“Stabilization” means the percentage occupancy of Living Units is equal to or greater than 85 percent.

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business and its successor and their assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligor by notice to the Bond Trustee.

“Stepped Coupon Call Period” means the period from December 28, 2016 to January 27, 2017, inclusive, during which the Obligor may exercise the optional redemption pursuant to Section 5.1(a) of the Bond Indenture.

“Subordinate Interest Account” means the applicable account or accounts in the Bond Fund created in Section 3.02 of the Bond Indenture.

“Subordinate Bonds” means any series of Additional Bonds payable and secured on a subordinate basis to the Series 2015 Bonds.

“Subordinate Principal Account” means the applicable account or accounts in the Bond Fund created in Section 3.02 of the Bond Indenture.

“Supplemental Indenture” means any supplemental indenture supplementing or amending the Bond Indenture.

“Supplemental Indenture No. 1” means the Supplemental Indenture Number 1, dated as of October 1, 2015, by the Obligor executed and delivered to the Master Trustee, supplemental to the Master Indenture, providing for the issuance of the Series 2015 Notes and certain other obligations.

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“Tax Agreement” means, collectively, the Arbitrage and Tax Certificate, dated the Closing Date, executed by the Issuer and the Bond Trustee, and the Proceeds Certificate, dated the Closing Date, executed by the Obligor.

“Tax Exempt Bonds” means the Series 2015A Bonds and any Additional Bonds, the interest on which is intended to be excludable from the gross income of the owners thereof for federal income tax purposes.

“Taxable Bonds” means the Series 2015B Bonds and any Additional Bonds, the interest on which is intended to be includable in the gross income of the owners thereof for federal income tax purposes.

“Threshold Amount” shall have the meaning given such term in the Master Indenture.

“Trust Estate” means the property pledged and assigned to the Bond Trustee pursuant to the granting clauses of the Bond Indenture.

“Underwriter” means Piper Jaffray & Co.

Certain additional terms are defined in Section 4.9, Section 7.5 and Section 11.13 hereof.

Section 1.2 Rules of Construction.

(a) Every “request,” “order,” “demand,” “application,” “appointment,” “notice,” “statement,” “certificate,” “consent,” “direction” or similar action under this Loan Agreement by any party must be in writing and signed by a duly authorized representative of such party with a duly authorized signature.

(b) All references in this Loan Agreement to “counsel fees,” “attorney’s fees” or the like mean and include fees and disbursements allocable to in-house or outside counsel, whether or not suit is instituted, and including fees and disbursements preparatory to and during any proceedings of a governmental or regulatory body, judicial or administrative hearing, trial and appeal and in any bankruptcy or arbitration proceedings.

(c) Whenever the word “includes” or “including” is used, such word means “includes or including by way of example and not limitation.”

(d) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the reasonable discretion of the party whose approval, consent or acceptance is required except to the extent otherwise specified herein.

(e) For purposes hereof, the Issuer shall not be deemed to have knowledge of any fact or the occurrence of any event unless and until its authorized officer has written notice thereof or actual knowledge thereof.

(f) Any headings preceding the texts of the several Articles and Sections of this Loan Agreement, and any table of contents appended to copies hereof, shall be solely for convenience

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of reference and shall not constitute a part of this Loan Agreement, nor shall they affect its meaning, construction or effect.

(g) Whenever the Issuer is named or referred to, it shall be deemed to include its successors and assigns whether so expressed or not. All of the covenants, stipulations, obligations, and agreements by or on behalf of, and other provisions for the benefit of, the Issuer contained in this Loan Agreement shall bind and inure to the benefit of such successors and assigns and shall bind and inure to the benefit of any officer, board, commission, issuer, agency or instrumentality to whom or to which there shall be transferred by or in accordance with law any right, power or duty of the Issuer, or of its successors or assigns, the possession of which is necessary or appropriate in order to comply with any such covenants, stipulations, obligations, agreements or other provisions hereof.

(h) References to, or agreements or undertakings herein by the Issuer and the Obligor shall not constitute any joint obligation of the Issuer and such other Persons, but, insofar as the Issuer is concerned, shall be deemed to be a separate, several and individual reference, undertaking or agreement of the Issuer. Nothing herein shall be deemed to create any partnership, joint undertaking, agreement or liability between the Issuer and any other Persons.

ARTICLE II

REPRESENTATIONS

Section 2.1 Representations by the Issuer. The Issuer represents that:

(a) The Issuer is a political subdivision and instrumentality of the State, created and existing pursuant to the Constitution and laws of the State. By proper corporate action, and in accordance with the Act, the Issuer has duly authorized the execution and delivery of the Series 2015 Bonds, the Bond Indenture, this Loan Agreement, the Tax Agreement and the Regulatory Agreement, which constitute valid, legal, binding and enforceable obligations of the Issuer (subject to bankruptcy, insolvency or credit rights laws generally, and principles of equity generally) without offset, defense, or counterclaim.

(b) The Issuer has full power and authority under the laws of the State of Arizona (including, in particular, the Act) to enter into the transactions contemplated by this Loan Agreement and to carry out its obligations hereunder.

(c) The execution and delivery of the Series 2015 Bonds, the Bond Indenture, this Loan Agreement, the Tax Agreement and the Regulatory Agreement, the consummation of the transactions contemplated hereby and thereby, or the fulfillment of or compliance with the terms and conditions or provisions of those documents do not conflict with or constitute a breach of or default under the Act or, to the best knowledge of the Issuer, under the terms, conditions or provisions of any constitutional provisions or statutes of the State of Arizona or any agreement or commitment to which the Issuer is a party or by which the Issuer is bound.

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(d) Except as otherwise provided in the Bond Indenture, the Issuer will not create any debt, lien or charge upon, or make any pledge or assignment of or create any encumbrance upon the Trust Estate, other than the pledge and assignment thereof under the Bond Indenture.

(e) The Issuer proposes to issue the Series 2015 Bonds in order to finance the Costs of the Series 2015 Project, to pay capitalized interest on the Series 2015 Bonds, to fund a working capital fund and to pay a portion of the Cost of Issuance. The Issuer will issue, execute and deliver the Series 2015 Bonds upon the terms and conditions set forth in the Bond Indenture and will lend the proceeds of the issuance of the Series 2015 Bonds to the Obligor to finance the Project in accordance with this Loan Agreement. The Series 2015 Bonds shall be in the principal amount, mature, bear interest, be subject to redemption prior to maturity, be secured, and have such other terms and conditions as are set forth in the Bond Indenture.

(f) The Series 2015 Bonds are to be issued under and secured by the Bond Indenture pursuant to which the Issuer’s interest in this Loan Agreement and in the Series 2015 Notes, and the revenues and receipts derived by the Issuer from the Series 2015 Notes, will be pledged and assigned to the Bond Trustee as security for payment of the principal of, premium, if any, and interest on the Series 2015 Bonds.

(g) To the best knowledge of the Issuer, there are no actions, suits or proceedings pending or threatened against or affecting the Issuer, or involving the validity or enforceability of the Series 2015 Bonds, the Bond Indenture, this Loan Agreement, the Tax Agreement, the Regulatory Agreement or the priority of the liens thereof, if any, at law or in equity, or before any governmental authority, or that, if adversely determined, would impair the ability of the Issuer to perform each and every one of their respective obligations under such documents.

(i) To the best knowledge of the Issuer, all consents, approvals, authorizations, orders or filings of or with any court or governmental agency or body, if any, required for the execution, delivery and performance by the Issuer of the Financing Instruments to which it is a party have been obtained or made.

Section 2.2 Representations by the Obligor. The Obligor represents that:

(a) The Obligor is a limited liability organized and in good standing under the laws of the State of Texas, is in good standing and duly authorized to do business in the State of Arizona, has the power to enter into this Loan Agreement and the other Financing Instruments, and by proper action has duly authorized the execution and delivery of this Loan Agreement and the other Financing Instruments.

(b) Neither the execution and delivery of this Loan Agreement or any of the other Financing Instruments, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Loan Agreement or any of the other Financing Instruments, conflict with or result in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Obligor is now a party or by which it is bound or constitute a default under any of the foregoing.

(c) The Obligated Group will operate the Series 2015 Project, or cause it to be operated, as a “project” within the meaning of the Act to the expiration or sooner termination of

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this Loan Agreement as provided herein, and a “qualified residential rental project” within the meaning of Section 142(d) of the Code, which shall include any regulation, advice, guidance, procedure or administrative rulings promulgated thereunder, until the end of the “qualified project period.”

(d) The Series 2015 Project is a “project” within the meaning of the Act, and the Obligor agrees and undertakes that only eligible persons will be permitted to use the facilities constituting a part of the Series 2015 Project or to enjoy or benefit from any of the services to be rendered in connection with a part of such Series 2015 Project.

(e) The Obligor agrees to protect, preserve and defend its interest in the Series 2015 Project and its title thereto, to appear and defend said interest and title in any action or proceeding affecting or purporting to affect the Series 2015 Project.

(f) No event of default or any event which, with the giving of notice or the lapse of time, or both, would constitute an event of default under the Master Indenture has occurred.

(g) The Obligor is not in default in the payment of the principal of or interest on any of its indebtedness for borrowed money and is not in default under any instrument under and subject to which any indebtedness has been incurred, and no event has occurred and is continuing under the provision of any such agreement that with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder.

(h) To the knowledge of the Obligor, there is no litigation at law or in equity or any proceeding before any governmental agency involving the Obligor pending or, to the knowledge of the Obligor, threatened in which any liability of the Obligor is not adequately covered by insurance or for which adequate reserves are not provided or for which any judgment or order would have a material adverse effect upon the business or assets of the Obligor or affect its existence or authority to do business, the operation of the Series 2015 Project, the validity of the Financing Instruments or the performance of the Obligor’s obligations thereunder.

(i) The Obligor has obtained all consents, approvals, authorizations and orders of any governmental or regulatory authority (“Consents”) that are required to be obtained by the Obligor as a condition precedent to the issuance of the Series 2015 Bonds, the financing of the Series 2015 Project, and the execution and delivery of the Financing Instruments. The Obligor has obtained all Consents that, to its knowledge, are obtainable to date for the performance by the Obligor of its obligations hereunder and thereunder, or required as of the date hereof for the operation of the Series 2015 Project. The Obligor will obtain when needed all other Consents required for the performance of its obligations under the Financing Instruments, and for the operation of the Series 2015 Project, and has no reason to believe that all such Consents cannot be promptly obtained when needed.

(j) To the best of the Obligor’s knowledge, information and belief, all of the documents, instruments and written information supplied by or on behalf of the Obligor, which have been reasonably relied upon by Bond Counsel in rendering their opinion with respect to the exclusion from gross income of the interest on the Tax Exempt Bonds for federal income tax purposes, are true and correct in all material respects, do not contain any untrue statement of a

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material fact and do not omit to state any material fact necessary to be stated therein to make the information provided therein, in light of the circumstances under which such information was provided, not misleading.

(k) The Obligor has furnished to the Issuer all information necessary for the Issuer to file an IRS Form 8038 with respect to the Tax Exempt Bonds, and all of such information is and will be on the date of filing, true, complete and correct.

(l) Neither any information, exhibit or report furnished to the Issuer, the Bondholder Representative, or the Underwriter by the Obligor in connection with the negotiation of this Loan Agreement or any of the other Financing Instruments, nor any of the representations contained herein or therein contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

ARTICLE III TERM OF LOAN AGREEMENT

Section 3.1 Term of this Loan Agreement. Subject to Section 7.13(c) and Section 11.12 herein, this Loan Agreement shall remain in full force and effect from the date of delivery hereof until such time as all of the Bonds shall have been fully paid or provision made for such payment pursuant to the Bond Indenture and all reasonable and necessary fees and expenses of the Bond Trustee and the Issuer’s Fees and Expenses accrued and to accrue through final payment of the Bonds and all of the Bonds have been paid.

ARTICLE IV

ISSUANCE OF THE BONDS; CONSTRUCTION OF THE PROJECT; DISBURSEMENTS

Section 4.1 Agreement to Issue Bonds; Application of Bond Proceeds and Other Moneys. The Issuer will sell and cause to be delivered to the initial purchasers thereof the Series 2015 Bonds and will deliver the proceeds thereof to the Bond Trustee for disposal as described in Section 3.01 of the Bond Indenture. In addition, on or before the Delivery Date of the Series 2015 Bonds, the Obligor has delivered other legally available moneys in the amount of $1,900,000.00 to the Bond Trustee for application as described in Section 3.01 of the Bond Indenture

Section 4.2 Agreement to Construct Project. The Obligor shall cause the Project to be acquired, constructed, and improved with due diligence and pursuant to the requirements of the applicable laws of the State of Arizona.

Section 4.3 Cost of Construction. The Obligor represents and warrants that it will use its best efforts to construct or cause the construction of the Project at a price which will permit completion of the Project within the amount of the funds to be deposited in the Construction Fund and within the amount of other available funds of the Obligor.

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Section 4.4 Plans; Modifications of the Projects. The Obligor hereby covenants and agrees that no changes or modifications, or substitutions, deletions, or additions shall be made with respect to the Project (a) if such change disqualifies such Project under the Act or under the bylaws of the Issuer or (b) without the reasonable approval of the Bondholder Representative.

Section 4.5 Compliance with Regulatory Requirements. The Obligor agrees that the Project shall be constructed strictly in accordance with all applicable ordinances and statutes, and in accordance with the requirements of all regulatory authorities, and any rating or inspection organization, bureau, association, or office having jurisdiction, and it will furnish to the Issuer all information necessary for the Issuer to comply with all of the foregoing and all laws, regulations, orders and other governmental requirements.

Section 4.6 Requests for Disbursements.

(a) The Obligor shall be entitled to disbursements of moneys from the Series 2015A Project Subaccount to pay Qualified Project Costs of the Series 2015 Project in compliance with Section 4.9 herein, from the Gilbert Holdback Account to pay Costs relating to the Series 2015 Project of the type described in the Assurance Agreement and from the Series 2015B Project Subaccount to pay all other Costs relating to the Series 2015 Project. Other than requests for disbursements described in the last sentence of this Section 4.6(a), requests for disbursements by the Obligor are to be made and shall be disbursed upon delivery by the Obligor to the Bond Trustee of a disbursement request form substantially in the form attached as “Exhibit A” to the Construction Disbursement Agreement, executed by the Obligor setting forth the nature of the amounts to be paid and the name of the payee and certifying, among other things, that the amounts being paid from Series 2015A Bond proceeds comply with the covenants contained in Section 4.9 hereof, and approved by the Construction Monitor. A copy of the approval by the Construction Monitor shall be provided to the Bondholder Representative. Notwithstanding anything in this Loan Agreement or the Bond Indenture to the contrary, after receipt of a certificate of occupancy with respect to the Series 2015 Project, the Obligor shall be entitled to disbursements of moneys in an aggregate amount not to exceed $500,000 from the Series 2015A Project Subaccount to pay Costs described in subparagraph (f) of the definition thereof that are not Qualified Project Costs, if the Obligor delivers to the Bond Trustee a disbursement request form substantially in the form attached hereto as Exhibit B, that is executed by the Obligor and accompanied by an Opinion of Bond Counsel permitting such disbursement and a copy of such request and opinion is provided to the Bondholder Representative.

(b) The Obligor shall be entitled to disbursement of moneys in the Cost of Issuance Fund to pay the Cost of Issuance. Except as provided below, the Obligor shall request disbursements from the Cost of Issuance Fund on the form attached hereto as Exhibit C to pay Cost of Issuance, and to reimburse itself for Cost of Issuance paid by the Obligor, upon presentation to the Bond Trustee of a request for disbursement signed by the Obligor, but in no event more often than four times a month. Any provision hereof to the contrary notwithstanding, the Obligor hereby authorizes and directs the Bond Trustee to pay the Costs of Issuance described on Exhibit C attached to the Bond Indenture in addition to any other Costs of Issuance requisitioned pursuant to this Section 4.6, without further review, direction or approval by any party, upon receipt of the invoices therefor.

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(c) Notwithstanding the foregoing, the Obligor shall make no request for disbursement of moneys from the Construction Fund for payment of Cost of Issuance.


Section 4.8 Modification of Disbursements. The making of any disbursement or any part of a disbursement shall not be deemed an approval or acceptance by the Bond Trustee of the work theretofore done.

Section 4.9 Tax Covenants.

(a) The Obligor covenants to take such action as is required of it so that the Tax Exempt Bonds are, and to refrain from any action which would cause the Tax Exempt Bonds to not be, obligations described in Section 103(a) of the Code, the interest on which is not includable in the “gross income” of the holder (other than the income of a “substantial user” of the Series 2015 Project or a “related person” within the meaning of Section 147(a) of the Code) for purposes of federal income taxation. In particular, but not by way of limitation thereof, the Obligor covenants as follows:

(i) to take such action to assure that the Tax Exempt Bonds are “exempt facility bonds”, as defined in Section 142(a) of the Code, at least 95 percent of the proceeds of which are used to provide “qualified residential rental projects” (within the meaning of said Section 142(a)(7) of the Code) or property functionally related and subordinate to such facilities;

(ii) to comply with the terms and conditions of the Regulatory Agreement including, without limiting the generality of any other covenant contained herein,

(A) assuring that at all times within the Qualified Project Period that 20 percent of the residential units at the Series 2015 Project will be occupied by persons whose income is 50 percent or less of area median gross income,

(B) obtaining annually from each tenant of a residential unit described in subsection (A) above, a certification of income to currently determine income compliance with the foregoing, and

(C) assuring that none of the residential units in the Series 2015 Project will be used for a purpose other than residential rental or that none of the units will be used as owner occupied residences within the meaning of Section 143 of the Code;

(iii) to refrain from taking any action that would result in the Tax Exempt Bonds being “federally guaranteed” within the meaning of Section 149(b) of the Code;

(iv) to refrain from using any portion of the proceeds of the Tax Exempt

Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in Section 148(b)(2) of the Code) which produces a materially higher yield than the yield on the Tax Exempt Bonds over

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the term of the Tax Exempt Bonds, other than investment property acquired with proceeds of the Tax Exempt Bonds invested for a reasonable temporary period equal to 3 years or less from the date the Tax Exempt Bonds are issued until such proceeds are needed for the purpose for which the Tax Exempt Bonds are issued,

(A) amounts invested in a bona fide debt service fund, within the meaning of Section 1.148-1(b) of the Regulations, and

(B) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the stated principal amount (or, in the case of Tax Exempt Bonds issued at a discount the issue price) of the Tax Exempt Bonds;

(v) to otherwise restrict the use of the proceeds of the Tax Exempt Bonds or amounts treated as proceeds of the Tax Exempt Bonds, as may be necessary, to satisfy the requirements of Section 148 of the Code (relating to arbitrage);

(vi) to use no more than 2 percent of the gross proceeds of the Tax Exempt Bonds for the payment of costs of issuance;

(vii) to use no portion of the proceeds of the Tax Exempt Bonds to provide any airplane, sky box or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises;

(viii) to comply with the limitations imposed by Section 147(c) of the Code (relating to the limitation on the use of proceeds to acquire land) and Section 147(d) of the Code (relating to restrictions on the use of Tax Exempt Bond proceeds to acquire existing buildings, structures or other property);

(ix) to immediately remit to the Bond Trustee for deposit in the Rebate Fund any deficiency with respect to the Rebate Amount as defined in and as required by the Bond Indenture; and

(x) to provide to the Bond Trustee, at such time as required by the Bond Trustee, all information required by the Bond Trustee with respect to Nonpurpose Investments not held in any fund under the Bond Indenture.

(b) The Issuer hereby represents and covenants as follows:

(i) the Issuer will, at the expense of the Obligor, comply with, and make all filings required by, all effective rules, rulings or Regulations promulgated by the Department of the Treasury or the Internal Revenue Service with respect to the obligations such as the Tax Exempt Bonds, if any;

(ii) the Issuer will not take any action related to the Series 2015 Project, the Tax Exempt Bonds or the proceeds of the Tax Exempt Bonds that is not provided for in

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this Loan Agreement or the Bond Indenture without the written consent of the Obligor and an Opinion of Bond Counsel; and

(iii) The Issuer agrees to submit such closing documents for the Tax Exempt Bonds, in accordance with the rules of the Arizona Commerce Authority, as may be necessary, or to take such other action as reasonably required, to cause the Arizona Commerce Authority to provide a certificate or other evidence of the allocation of State Volume Cap as required under Section 146 of the Code.

(b) No person, or any related party, as defined in section 1.150-1 of the Treasury Regulations, from whom the Issuer or the Obligor may acquire obligations, shall, pursuant to an arrangement, formal or informal, purchase Tax Exempt Bonds in an amount related to the amount of the obligations to be acquired from such person by the Issuer of the Obligor.

For purposes of the foregoing, the Issuer and the Obligor understand that the term “proceeds” includes “disposition proceeds” as defined in the Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of the refunded bonds expended prior to the date of issuance of the Tax Exempt Bonds. It is the understanding of the Issuer, the Obligor and the Bond Trustee that the covenants contained in this Section are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Tax Exempt Bonds, the Issuer and the Tax Exempt Bonds will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the Opinion of Bond Counsel, will not adversely affect the exclusion of interest on the Tax Exempt Bonds from gross income for federal income tax purposes. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Tax Exempt Bonds, the Issuer and the Obligor agree to comply with the additional requirements to the extent necessary, in the Opinion of Bond Counsel, to preserve the exclusion of interest on the Tax Exempt Bonds from gross income for federal income tax purposes. In furtherance of such intention, the Issuer hereby authorizes and directs the Issuer Representative to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which may be permitted by the Code as are consistent with the purpose for the issuance of the Tax Exempt Bonds.

Section 4.10 Allocation of, and Limitation on, Expenditures for the Project. The Obligor covenants to account for the expenditure of sale proceeds and investment earnings to be used for the Cost of the Series 2015 Project on its books and records by allocating proceeds to expenditures within 18 months of the Delivery Date. The foregoing notwithstanding, the Obligor shall not expend sale proceeds or investment earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Tax Exempt Bonds, or (2) the date the Tax Exempt Bonds are retired, unless the Obligor obtains an Opinion of Bond Counsel that such expenditure will not adversely affect the tax-exempt status of the interest on the Tax Exempt Bonds. For purposes hereof, the Obligor shall not be obligated to comply with this covenant if it obtains an opinion of Bond Counsel that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest.

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Section 4.11 Disposition of Series 2015 Project. The Obligor covenants that the property constituting the Series 2015 Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the Obligor of cash or other compensation, unless the Bondholder Representative consents thereto (provided that such consent shall not be required if the Bonds are to be redeemed in full or otherwise paid in full in connection with any such disposition) and the Obligor obtains an Opinion of Bond Counsel that such sale or other disposition will not adversely affect the exclusion of interest on the Tax Exempt Bonds from the gross income of the owners thereof for federal income tax purposes.

Section 4.12 Written Procedures.

(a) The Obligor (i) has designated Gilbert AL GP, LLC, a Texas limited liability company and the general partner of the Obligor (the “General Partner”), as the Person who will contact the Issuer and its counsel in the event of any change of use of any portion of the Series 2015 Project within 15 days of such change in use event, and (ii) will provide, within 60 days of such date, a rebate report or a letter (prepared by a certified public accountant, nationally recognized rebate consultant or Bond Counsel) stating that a rebate report is not required.

(b) The Issuer has designated its Chair and its Executive Director as the persons who (i) will receive notice by the Person described in the preceding paragraph of any change of use of the Series 2015 Project and who will determine, upon consultation with Bond Counsel, whether to take any remedial action or any other remedy available at law to ensure that the tax-exempt status of the Tax Exempt Bonds is preserved following such change of use, and (ii) will receive the aforementioned rebate report or letter stating that such report is not required.

ARTICLE V

LOAN OF BOND PROCEEDS; NOTES; PROVISION FOR PAYMENT

Section 5.1 Loan of Bond Proceeds. The Issuer hereby agrees to loan to the Obligor the proceeds of the Bonds to provide for the financing and refinancing of the Costs of each Project. The Obligor hereby agrees to repay the Loan pursuant to the conditions set forth in Section 5.2 hereof.

Section 5.2 Repayment of Loan.

(a) Anything to the contrary in this Loan Agreement notwithstanding, the Obligor shall make loan payments with respect to the Series 2015 Bonds in accordance with the Bond Indenture and this Loan Agreement directly to the Bond Trustee for deposit in the appropriate account of the Bond Fund:

(i) on the last Business Day of each month, commencing in October 2015, one-third of the interest on the Outstanding Series 2015 Bonds due on the next Interest Payment Date; and

(ii) on the last Business Day of each month, commencing in November 2018, one-twelfth of the principal of the Outstanding Series 2015 Bonds due on the next October 1; and

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(iii) on the date on which any principal of, premium, if any or interest on any Series 2015 Bond is payable (other than that provided for by the payments described in clauses (i) and (ii) above), an amount sufficient to cause the amount available in the Bond Fund for payment of such amounts to equal the amount due with respect to such Series 2015 Bond on such date.

The Borrower is not required to make monthly payments of interest for deposit or transfer into the applicable Interest Account of the Bond Fund with respect to a particular series of Bonds, including but not limited to the Series 2015 Bonds, so long as amounts held in any subaccount of the Funded Interest Account of the Construction Fund for such series of Bonds are sufficient to pay interest due with respect to such series of Bonds on the immediately succeeding Interest Payment Date.

Section 5.3 Credits. Any amount in the accounts of the Bond Fund held for the Senior Bonds at the close of business of the Bond Trustee on the day immediately preceding any payment date on the Senior Notes in excess of the aggregate amount then required to be contained in such account of the Bond Fund pursuant to Section 5.2 hereof shall be credited against the payments due by the Obligor on such next succeeding principal or interest payment date on the Senior Notes on a pro rata basis. Any amount in the accounts of the Bond Fund held for the Subordinate Bonds at the close of business of the Bond Trustee on the day immediately preceding any payment date on the Subordinate Notes in excess of the aggregate amount then required to be contained in such account of the Bond Fund pursuant to Section 5.2 hereof shall, after giving effect to the subordination provisions in the Bond Indenture and the Master Indenture, be credited against the payments due by the Obligor on such next succeeding principal or interest payment date on the Subordinate Notes on a pro rata basis.

In the event that all of the Senior Bonds or the Subordinate Bonds then Outstanding are called for redemption, any amounts contained in the Senior Principal Account and the Senior Interest Account of the Bond Fund, or the Subordinate Principal Account and the Subordinate Interest Account of the Bond Fund, at the close of business of the Bond Trustee on the day immediately preceding such redemption date shall, after giving effect to the subordination provisions in the Bond Indenture and the Master Indenture, be credited against the payments due by the Obligor on the Senior Obligations or the Subordinate Obligations, respectively.

The principal amount of the Series 2015 Bonds to be applied by the Bond Trustee as a credit against any sinking fund payment pursuant to Section 5.02 of the Bond Indenture shall be credited against the obligation of the Obligor with respect to payment of installments of principal of the Series 2015 Notes, as described in the Supplemental Indenture No. 1.

The cancellation by the Bond Trustee of any Series 2015 Bonds purchased by the Obligor, or of any Series 2015 Bonds redeemed or purchased by the Issuer through funds other than funds received on the Series 2015 Notes, shall constitute payment of a principal amount of the Series 2015 Notes equal to the principal amount of the Series 2015 Bonds so cancelled. Upon receipt of written notice from the Bond Trustee of such cancellation, the Master Trustee shall at the request of the Obligor endorse on the Series 2015 Notes such payment of such principal amount thereof.

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Section 5.4 Notes. Concurrently with the sale and delivery by the Issuer of each series of the Series 2015 Bonds, the Obligor shall execute and deliver the Series 2015 Notes of the related series, substantially in the forms set forth in the Supplemental Indenture No. 1. The Series 2015A Note shall secure solely the Series 2015A Bonds and the Series 2015B Note shall secure solely the Series 2015B Bonds. Concurrently with the sale and delivery by the Issuer of any Additional Bonds, the Master Indenture shall be supplemented to reflect the issuance of the additional Notes referred to below, and to make any other changes, amendments or modifications which, in the opinion of the parties thereto, may be necessary or appropriate. Concurrently with the sale and delivery by the Issuer of any Additional Bonds, the Obligor shall execute and deliver one or more additional Notes payable to the Bond Trustee for the account of the Issuer in substantially the form set forth in the Master Indenture. The additional Notes shall:

(a) require payment or payments of principal, premium, and interest in amounts and at times sufficient, together with any other funds available therefor, to permit the payments of principal, premium, if any, and interest on the related Additional Bonds, taking into account any mandatory sinking fund requirements (pursuant to the Bond Indenture) which are required in respect of the related Additional Bonds, and

(b) require each payment on the Notes to be made on or before the due date for the corresponding payment to be made on the related Additional Bonds of the Issuer.

Section 5.5 Payment of Bond Trustee’s and Paying Agent’s Fees and Expenses. The Obligor agrees to pay the reasonable and necessary fees and expenses (including attorney’s fees) of the Bond Trustee and any Paying Agents as and when the same become due, upon submission by the Bond Trustee or any Paying Agent of a statement therefor.


Section 5.7 Payment of Administration Expenses. In consideration of the agreement of the Issuer to issue the Bonds and loan the proceeds thereof to provide financing for the Project, the Obligor hereby agrees to pay Administration Expenses and any and all costs paid or incurred by the Issuer in connection with the financing or refinancing of any Project, whenever incurred, including out of pocket expenses and compensation in connection with the issuance of Bonds, including, without limitation, reasonable sums for reimbursement of the fees and expenses incurred by the Issuer’s financial advisors, consultants and legal counsel in connection with such Project and the issuance of the Bonds.

Section 5.8 Payees of Payments. The payments under Section 5.7 hereof for Administration Expenses and other costs of the Issuer shall be paid directly to the Issuer for its own use. The payments on the Series 2015 Notes pursuant to Section 5.2 hereof shall be paid in funds immediately available at the Payment Office of the Bond Trustee, directly to the Bond Trustee for the account of the Issuer and shall be deposited into the appropriate account of the Bond Fund. The payments to be made to the Bond Trustee and the Paying Agent under Section 5.5 hereof shall be paid directly to the Bond Trustee and the Paying Agent for their own use.

Section 5.9 Obligations of Obligor Hereunder Unconditional. The obligations of the Obligor to make the payments required in Section 5.2 hereof shall be absolute and unconditional.

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The Obligor will not suspend or discontinue, or permit the suspension or discontinuance of, any payments provided for in Section 5.2 hereof for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to any Project, commercial frustration of purpose, any change in the tax or other laws or administrative rulings of or administrative actions by the United States of America or the State of Arizona or any political subdivision of either, or any failure of the Issuer to perform and observe any agreement, whether express or implied, or any duty, liability, or obligation arising out of or connected with this Loan Agreement, whether express or implied. Nothing contained in this Section shall be construed to release the Issuer from the performance of any agreements on its part herein contained; and in the event the Issuer shall fail to perform any such agreement, the Obligor may institute such action against the Issuer as the Obligor may deem necessary to compel performance, provided that no such action shall violate the agreements on the part of the Obligor contained herein and the Issuer shall not be required to pay any costs, expenses, damages or any amounts of whatever nature except for amounts received pursuant to this Loan Agreement. Nothing herein shall be construed to impair the Obligor’s right to institute an independent action for any claim that it may have against the Issuer, the Bond Trustee, any Bondholder or any other third party. The Obligor may, however, at its own cost and expense and in its own name or in the name of the Issuer, prosecute or defend any action or proceedings or take any other action involving third persons which the Obligor deems reasonably necessary in order to secure or protect this right of possession, occupancy, and use hereunder, and in such event the Issuer hereby agrees to cooperate fully with the Obligor.

ARTICLE VI

MAINTENANCE AND INSURANCE

Section 6.1 Maintenance and Modifications of Projects by Obligor. The Obligor may, at its own expense, cause to be made from time to time any additions, modifications or improvements to the Project provided such additions, modifications or improvements are consented to by the Bondholder Representative and do not impair the character of the Project as a “project” within the meaning of the Act or a “qualified residential rental project” within the meaning of the Code, or impair the extent of the exclusion of interest on the Tax Exempt Bonds from gross income for federal income tax purposes.

Section 6.2 Insurance. Throughout the term of this Loan Agreement, the Obligor will, at its own expense, provide or cause to be provided insurance against loss or damage to the Project in accordance with the terms of the Master Indenture.

ARTICLE VII

SPECIAL COVENANTS

Section 7.1 No Warranty of Merchantability, Condition or Suitability by the Issuer. The Issuer makes no warranty, either express or implied, as to the condition of any Project or that any Project will be suitable for the Obligor’s purposes or needs. Without limiting the effect

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of the preceding sentence, it is expressly agreed that in connection with each sale or conveyance pursuant to this Loan Agreement (i) the Issuer makes NO WARRANTY OF MERCHANTABILITY and (ii) THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION CONTAINED HEREIN.

Section 7.2 Right of Access to the Project and Information.

(a) The Obligor agrees that the Issuer, the Bond Trustee, the Bondholder Representative and any of their duly authorized agents shall have the right at all reasonable times upon reasonable notice to the Obligor to examine and inspect the Project to determine that the Obligor is in compliance with the terms and conditions of this Loan Agreement; provided that any such inspection will be conducted in a manner that will minimize any intrusion on the operations of the Project.

(b) The Obligor agrees, whenever requested by the Issuer or the Bondholder Representative, to provide and certify or cause to be provided and certified such information concerning the Obligor, its finances and operations, the Project and other topics as the Issuer or the Bondholder Representative considers necessary or desirable to (i) provide adequate information to prospective purchasers of Bonds necessary to satisfy, in the Issuer’s or the Bondholder Representative’s discretion, then existing disclosure requirements or requests for the resale of the Bonds in the secondary market, (ii) enable the Issuer to make any reports required by law, governmental regulation or the Bond Indenture or (iii) to keep itself informed about the Obligor, its operations, or the Project.

Section 7.3 Nonsectarian Use. The Obligor agrees that no proceeds of the Bonds will be used to construct, acquire or install any portion of the Project which is intended to be used or which will be used for sectarian purposes.

Section 7.4 Further Assurances. The Issuer and the Obligor agree that they will, from time to time, execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the intention of or facilitating the performance of this Loan Agreement.

Section 7.5 Indemnification.

(a) THE OBLIGOR AGREES THAT IT WILL AT ALL TIMES PAY, PROTECT, INDEMNIFY AND HOLD HARMLESS EACH OF THE INDEMNIFIED PARTIES AGAINST ANY AND ALL LOSSES, INCLUDING LOSSES AS A RESULT OF THE NEGLIGENT ACTS OR OMISSIONS OF ANY INDEMNIFIED PARTY (OTHER THAN LOSSES RESULTING FROM FRAUD, WILLFUL MISCONDUCT OR THEFT ON THE PART OF THE INDEMNIFIED PARTY CLAIMING INDEMNIFICATION), LIABILITIES, DAMAGES, COSTS, EXPENSES (INCLUDING ATTORNEY’S FEES), CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS AND JUDGMENTS OF ANY NATURE (COLLECTIVELY REFERRED TO HEREIN AS THE “LIABILITIES”) IN ANY MANNER RELATING TO AND/OR ARISING FROM: (I) ANY INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO THE PROJECT IN OR UPON THE PROJECT, OR GROWING OUT OF OR CONNECTED WITH THE USE, NONUSE, CONDITION OR OCCUPANCY OF

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THE PROJECT; (II) VIOLATION OR ANY BREACH OR ANY AGREEMENT OR CONDITION OF THIS LOAN AGREEMENT OR ANY OF THE FINANCING INSTRUMENTS; (III) A VIOLATION BY THE OBLIGOR OF ANY CONTRACT, AGREEMENT OR RESTRICTION RELATING TO THE PROJECT; (IV) ANY ACT, OR FAILURE TO ACT, BY THE OBLIGOR OR NEGLIGENCE OF THE OBLIGOR OR ANY OF ITS AGENTS, CONTRACTORS, SERVANTS, EMPLOYEES OR LICENSEES; (V) ANY VIOLATION OF ANY ENVIRONMENTAL LAW, RULE OR REGULATION WITH RESPECT TO, OR THE RELEASE OF ANY TOXIC SUBSTANCE FROM, THE PROJECT DURING THE PERIOD IN WHICH THE OBLIGOR IS IN POSSESSION OR CONTROL OF THE PROJECT; (VI) A VIOLATION BY THE OBLIGOR OF ANY LAW, ORDINANCE OR REGULATION AFFECTING THE PROJECT OR THE OWNERSHIP, OCCUPANCY OR USE THEREOF; (VII) ANY STATEMENT OR INFORMATION CONTAINED IN THE BOND INDENTURE, THIS LOAN AGREEMENT, THE REGULATORY AGREEMENT, THE TAX AGREEMENT, ANY OTHER FINANCING INSTRUMENTS OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE BONDS AND THE PROCEEDINGS RELATING TO THEIR ISSUANCE AND SALE, OR ANY DOCUMENTS IN CONNECTION WITH THE CONTINUING DISCLOSURE AGREEMENT, IF ANY, WHICH IS MISLEADING, UNTRUE OR INCORRECT IN ANY MATERIAL RESPECT, OTHER THAN INFORMATION FURNISHED BY THE ISSUER; (VIII) THE FINANCING, CONSTRUCTION, ACQUISITION, EQUIPPING AND INSTALLATION OF THE PROJECT OR THE FAILURE TO CONSTRUCT, ACQUIRE, EQUIP OR INSTALL THE PROJECT; (VIII) ANY PROCEEDING CONCERNING THE VALIDITY OR ENFORCEABILITY OF THE BONDS OR THE TAX EXEMPTION OF THE TAX EXEMPT BONDS OR THE INTEREST THEREON; (IX) TO THE EXTENT NOT PREVIOUSLY MENTIONED, ANY CLAIMS WHATSOEVER ASSERTING ANY OF THE FOREGOING, REGARDLESS OF THE LACK OF MERIT THEREOF; AND (X) THE COSTS INCURRED IN CONNECTION WITH ANY CLAIMS, INVESTIGATIONS, GOVERNMENTAL OR REGULATORY ACTIONS, PROCEEDINGS OR INQUIRIES RELATING IN ANY WAY TO THE BONDS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR BY THE BOND INDENTURE.

(b) THE OBLIGOR ALSO SHALL INDEMNIFY THE BOND TRUSTEE FOR, AND TO DEFEND AND HOLD IT HARMLESS AGAINST, ANY LOSS, LIABILITY, CLAIMS OR DEMANDS OR EXPENSES (INCLUDING ATTORNEY’S FEES) INCURRED WITHOUT NEGLIGENCE OR BAD FAITH ON ITS PART, ARISING OUT OF OR IN CONNECTION WITH THE ACCEPTANCE OR ADMINISTRATION OF THE TRUST CREATED UNDER THE BOND INDENTURE OR THE PERFORMANCE OF ITS DUTIES UNDER THE BOND INDENTURE, INCLUDING THE COSTS AND EXPENSES OF DEFENDING ITSELF AGAINST ANY CLAIM OR LIABILITY IN CONNECTION WITH THE EXERCISE OR PERFORMANCE OF ANY OF ITS POWERS OR DUTIES UNDER THE BOND INDENTURE. THE BOND TRUSTEE MAY ENFORCE ITS RIGHTS UNDER THE PRECEDING SENTENCE AS A THIRD PARTY BENEFICIARY OF THIS LOAN AGREEMENT.

(c) NONE OF THE INDEMNIFIED PARTIES SHALL BE LIABLE TO THE OBLIGOR FOR, AND THE OBLIGOR HEREBY RELEASES EACH OF THEM FROM, ALL LIABILITY TO THE OBLIGOR FOR, ALL INJURIES, DAMAGES OR DESTRUCTION TO ALL OR ANY PART OF ANY PROPERTY OWNED OR CLAIMED BY THE OBLIGOR

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THAT DIRECTLY OR INDIRECTLY RESULT FROM, ARISE OUT OF OR RELATE TO THE DESIGN, CONSTRUCTION, OPERATION, USE, OCCUPANCY, MAINTENANCE OR OWNERSHIP OF ANY PROJECT OR ANY PART THEREOF, EVEN IF SUCH INJURIES, DAMAGES OR DESTRUCTION DIRECTLY OR INDIRECTLY RESULT FROM, ARISE OUT OF OR RELATE TO, IN WHOLE OR IN PART, ONE OR MORE ACTS OR OMISSIONS, INCLUDING ACTS OR OMISSIONS CONSTITUTING NEGLIGENCE ON THE PART OF ANY INDEMNIFIED PARTY (BUT NOT INCLUDING ACTS OR OMISSIONS CONSTITUTING FRAUD, WILLFUL MISCONDUCT OR THEFT ON THE PART OF THE INDEMNIFIED PARTY CLAIMING RELEASE) IN CONNECTION WITH THE ISSUANCE OF ANY SERIES OF THE BONDS OR IN CONNECTION WITH ANY PROJECT.

(d) THE OBLIGOR ALSO AGREES TO INDEMNIFY, PROTECT, DEFEND, AND HOLD HARMLESS THE INDEMNIFIED PERSONS AND THE MEMBERS OF THEIR BOARDS OF DIRECTORS OR COMMISSIONERS, THEIR OFFICERS, ATTORNEYS, ACCOUNTANTS, FINANCIAL ADVISORS AND STAFF FROM AND AGAINST THE LIABILITIES (I) IN ANY MANNER WHATSOEVER ARISING FROM OR RELATING TO ANY ERRORS OR OMISSIONS IN INFORMATION PROVIDED TO THE ISSUER IN CONNECTION WITH ANY LEGAL PROCEEDINGS OR OTHER OFFICIAL ACTIONS OF THE ISSUER PERTAINING TO THE BONDS, (II) IN ANY MANNER WHATSOEVER ARISING FROM OR RELATING TO ANY FRAUD OR MISREPRESENTATIONS OR OMISSIONS CONTAINED IN INFORMATION PROVIDED TO THE ISSUER OR THE BOND TRUSTEE IN CONNECTION WITH THE PROCEEDINGS OF THE ISSUER RELATING TO THE ISSUANCE OF THE BONDS OR THE CONTINUING DISCLOSURE AGREEMENT, IF ANY, (III) IN ANY WAY ARISING FROM OR RELATING TO THE EXECUTION OR PERFORMANCE OF THIS LOAN AGREEMENT OR OTHER FINANCING INSTRUMENTS BY THE OBLIGOR, THE ISSUANCE OR SALE OF THE BONDS, ACTIONS TAKEN UNDER THE BOND INDENTURE, ACTIONS TAKEN UNDER THE CONTINUING DISCLOSURE AGREEMENT, IF ANY, OR ANY OTHER CAUSE WHATSOEVER PERTAINING TO THE FINANCING OF THE PROJECT WITH THE PROCEEDS OF THE BONDS AND THE ISSUER’S APPROVAL UNDER THE ACT, SPECIFICALLY INCLUDING, BUT NOT LIMITED TO, THE DEFENSE OF THE VALIDITY OF THE BONDS OR TAX EXEMPTION OF THE INTEREST ON THE TAX EXEMPT BONDS; OR (IV) ANY STATEMENT OR INFORMATION RELATING TO THE OBLIGOR, ITS BUSINESS OR PROPERTIES CONTAINED IN ANY FINAL OFFICIAL STATEMENT OR PROSPECTUS FURNISHED TO PURCHASERS OF ANY BONDS THAT IS UNTRUE OR INCORRECT IN ANY MATERIAL RESPECT AND ANY OMISSION RELATING TO THE OBLIGOR, ITS BUSINESS OR PROPERTIES FROM ANY OFFICIAL STATEMENT OR PROSPECTUS OF ANY STATEMENT OR INFORMATION WHICH SHOULD BE CONTAINED IN IT FOR THE PURPOSE FOR WHICH IT IS TO BE USED OR WHICH IS NECESSARY TO MAKE THE STATEMENT IN IT NOT MISLEADING IN ANY MATERIAL RESPECT, IF THE FINAL OFFICIAL STATEMENT OR PROSPECTUS IS APPROVED IN WRITING BY THE OBLIGOR.

(e) Each Indemnified Person, as appropriate, shall reimburse the Obligor for payments made by the Obligor pursuant to this Section to the extent of any proceeds, net of all expenses of collection, actually received by it from any other source (but not from the proceeds

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of any claim against any other Indemnified Person) with respect to any Loss to the extent necessary to prevent a recovery of more than the Loss by such Indemnified Person with respect to such Loss. At the request and expense of the Obligor, each Indemnified Person shall claim or prosecute any such rights of recovery from other sources (other than any claim against another Indemnified Person) and such Indemnified Person shall assign its rights to such rights of recovery from other sources (other than any claim against another Indemnified Person), to the extent of such required reimbursement, to the Obligor.

(f) It is the intention of the parties hereto that the Indemnified Persons shall not incur pecuniary liability or expense (specifically including, but not limited to, expenses incurred in defending any claim, action, lawsuit, or administrative or other legal proceeding) by reason of, arising out of, or relating to (i) the terms of this Loan Agreement or other Financing Instruments, or (ii) by reason of, arising out of, or relating to the undertakings required of the Indemnified Persons in connection with the issuance of the Bonds, the execution of the Bond Indenture, the performance of any act required of the Indemnified Persons by this Loan Agreement or other Financing Instruments, as applicable, or the performance of any act requested of the Indemnified Persons by the Obligor or in any way arising from the transaction of which this Loan Agreement or any other Financing Instruments, as applicable, is a part or arising in any manner in connection with the Project; nevertheless, if the Indemnified Persons should incur any such pecuniary liability, then in such event the Obligor shall indemnify and hold harmless the Indemnified Persons against all claims by or on behalf of any Person, arising out of the same, and all costs and expenses incurred in connection with any such claim or in connection with any action or proceeding brought thereon, and upon notice from the Indemnified Persons, the Obligor shall defend such Indemnified Persons in any such action or proceeding.

(g) In case any Claim shall be brought or, to the knowledge of any Indemnified Person, threatened against any Indemnified Person in respect of which indemnity may be sought against the Obligor, such Indemnified Person promptly shall notify the Obligor in writing; provided, however, that any failure so to notify shall not relieve the Obligor of its obligations under this Section.

(h) The Obligor shall have the right to assume the investigation and defense of all Claims, including the employment of counsel and the payment of all expenses, with counsel reasonably satisfactory to the Indemnified Party, with full power to litigate, compromise or settle the same; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Person shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Person unless (i) the employment of such counsel has been specifically authorized by the Obligor, in writing, (ii) the Obligor has failed after receipt of notice of such Claim to assume the defense and to employ counsel, or (iii) the named parties to any such action (including any impleaded parties) include both an Indemnified Person and the Obligor, and the Indemnified Person shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Obligor (in which case, if such Indemnified Person notifies the Obligor in writing that it elects to employ separate counsel at the Obligor’s expense, the Obligor shall not have the right to assume the defense of the action on behalf of such Indemnified Person; provided, however, that the Obligor shall not, in connection with any

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one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegation or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Indemnified Parties, which firm shall be designated in writing by the Indemnified Parties; and provided, further, that if the Obligor shall have failed to assume the defense of such action and shall have failed to employ counsel therefor reasonably satisfactory to the Indemnified Party within a reasonable time after notice of commencement of such action, such reasonable fees and expenses incurred by the Indemnified Party in conducting its own defense shall be borne by the Obligor). The duty of the Obligor to defend each Indemnified Party under this Section 7.5 shall commence from the time the claim is known of, and such duty shall exist and continue regardless of the merits of the claim.

(i) Each Indemnified Person shall cooperate with the Obligor, and the Obligor shall cooperate with each Indemnified Person, in the defense of any action or Claim. The Obligor shall not be liable for any settlement of any action or Claim without the Obligor’s consent but, if any such action or Claim is settled with the consent of the Obligor or there be final judgment for the plaintiff in any such action or with respect to any such Claim, the Obligor shall indemnify and hold harmless the Indemnified Parties from and against any Loss by reason of such settlement or judgment to the extent provided in Subsection (a). In addition, the Obligor agrees that if either party initiates any action, suit or other proceeding with respect to any Claim, in which the Indemnified Person is named or joined as a party, the Obligor will pay to and reimburse to the Indemnified Person the full amount of all reasonable fees and expenses incurred by the Indemnified Person with respect to the Indemnified Person’s defense of or participation in such action, suit or other proceeding.

(j) Notwithstanding anything to the contrary contained herein or in any of the Bonds, the Bond Indenture, or in any other instrument or document executed by or on behalf of the Issuer in connection herewith, (i) Issuer shall have no obligation to take action under this Loan Agreement, the Bonds, other Financing Instruments or such other instruments or documents, unless the Issuer is reasonably requested in writing by an appropriate person to take such action and is provided with indemnity and assurances satisfactory to it of payment of or reimbursement for any expenses (including attorneys’ fees) in such action, (ii) none of the Issuer, any board member, officer or employee of the Issuer or any agent of the Issuer relating to the Bonds or the Project shall be personally liable to the Obligor, the Bond Trustee or any other person for any action taken by Issuer or by its board members, officers, employees or agents relating to the Bonds or the Project or for any failure to take action under this Loan Agreement, the Bond, the other Financing Instruments or such other instruments or documents, except that the Issuer agrees to take, or to refrain from taking, any action if so required by an injunction or if required to comply with any final judgment for specific performance; and (iii) any judgment rendered against the Issuer for breach of its obligations under this Loan Agreement, the Bonds, the other Financing Instruments, or such other instruments or documents, shall be payable solely from the Revenues derived from the Project by the Issuer under this Loan Agreement, the Bond Indenture or other Financing Instruments, as applicable, and no other personal liability or charge payable directly or indirectly from the general funds of the Issuer shall arise therefrom.

(k) Notwithstanding anything to the contrary contained herein or in any of the Bonds, this Loan Agreement, or other Financing Instrument or in any other instrument or document

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executed by or on behalf of the Issuer in connection herewith, no stipulation, covenant, agreement or obligation contained herein or therein shall be deemed or construed to be a stipulation, covenant, agreement, or obligation of any present or future member, officer, employee or agent of the Issuer, or of any incorporator, member, director, trustee, officer, employee or agent of any successor to the Issuer, in any such person’s individual capacity, and no such person, in his individual capacity, shall be liable personally for any breach or non-observance of or for any failure to perform, fulfill or comply with any such stipulations, covenants, agreements or obligations, nor shall any recourse be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or on any such stipulation, covenant, agreement, or obligation, against any such person, in his individual capacity, either directly or through the Issuer or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such person, in his individual capacity, is hereby expressly waived and released.

(l) In the Issuer accepting the provisions for the Obligor to indemnify the Issuer from claims of third parties, and in the Obligor agreeing to make such indemnities, as provided herein, the Issuer intends to retain, and does not waive, the limits and scope of sovereign immunity enjoyed by the Issuer as provided pursuant to State law with respect to such claims, as well as all other immunities, defenses, and privileges the Issuer may enjoy with respect to such claims under State or federal law. By the same token, it is intended that the Obligor be able, and the Obligor may assert, with respect to claims for which indemnity is provided by the Obligor to the Issuer, the Issuer’s sovereign immunity under State law with respect to such claims, as well as all other immunities, defenses, and privileges the Issuer may enjoy with respect to such claims as may be provided under State of federal law.

(m) The provisions of this Section shall survive the termination of this Loan Agreement, and the obligations of the Obligor hereunder shall apply to Losses or Claims under Subsection (a) whether asserted prior to or after the termination of this Loan Agreement. In the event of failure by the Obligor to observe the covenants, conditions and agreements contained in this Section, any Indemnified Person may take any action at law or in equity to collect amounts then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Obligor under this Section. The obligations of the Obligor under this Section shall not be affected by any assignment or other transfer by the Issuer of its rights, titles or interests under this Loan Agreement to the Bond Trustee pursuant to the Bond Indenture and will continue to inure to the benefit of the Indemnified Parties after any such transfer. The provisions of this Section shall be cumulative with and in addition to any other agreement by the Obligor to indemnify any Indemnified Person.

Section 7.6 Authority of Obligor Representative. Whenever under the provisions of this Loan Agreement the approval of the Obligor is required, or the Issuer or the Bond Trustee are required to take some action at the request of the Obligor, such approval or such request shall be made by the Obligor Representative unless otherwise specified in this Loan Agreement and the Issuer or the Bond Trustee shall be authorized to act on any such approval or request and the Obligor shall have no complaint against the Issuer or the Bond Trustee as a result of any action taken.

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Section 7.7 Authority of Issuer Representative. Whenever under the provisions of this Loan Agreement the approval of the Issuer is required, or the Obligor or the Bond Trustee is required to take some action at the request of the Issuer, such approval or such request shall be made by the Issuer Representative unless otherwise specified in this Loan Agreement and the Obligor or the Bond Trustee shall be authorized to act on any such approval or request and the Issuer shall have no complaint against the Obligor or the Bond Trustee as a result of any such action taken.

Section 7.8 No Personal Liability. No covenant, agreement or obligation contained in the Bonds or the Financing Instruments shall be deemed to be the covenant, agreement or obligation of any director, officer, agent or employee of the Issuer, the Bond Trustee, the Bondholder Representative, or the Obligor in his or her individual capacity, and neither the Board of Directors, the governing body of the Obligor, the Bond Trustee, the Bondholder Representative, or the State of Arizona, nor any official of the State of Arizona, nor any authorized representative of the Issuer executing the Bonds, the Bond Indenture or this Loan Agreement shall be liable personally thereon or be subject to any personal liability or accountability with respect thereto, whether by virtue of any constitution, statute or rule of law, or by the enforcement or any assessment or penalty, or otherwise.

Section 7.9 Fees and Expenses. The Obligor agrees to pay promptly upon demand therefor all costs paid, incurred or charged by the Issuer, the Bond Trustee or the Bondholder Representative in connection with the Bonds, including without limitation, (i) all fees, including the Annual Issuer’s Fee, required to be paid to the Issuer with respect to the Bonds, (ii) all out of pocket expenses and Cost of Issuance (including reasonable fees and expenses of attorneys employed by the Issuer, the Bond Trustee or the Bondholder Representative) reasonably incurred by the Issuer, the Bond Trustee or the Bondholder Representative in connection with the issuance of the Bonds and (iii) all out of pocket expenses (including reasonable fees and expenses of attorneys employed by the Issuer, the Bond Trustee or the Bondholder Representative) reasonably incurred by the Issuer, the Bond Trustee or the Bondholder Representative in connection with the enforcement of any of its rights or remedies or the performance of its duties under the Bond Indenture, this Loan Agreement or the other Financing Instruments or in connection with any request to waive, amend or modify any of the terms of the Loan Agreement or any of the other Financing Instruments, or to provide any consents hereunder or thereunder.

Section 7.10 Exculpatory Provision. In the exercise of the powers of the Issuer, its officers, the Bond Trustee and the Bondholder Representative, under the Financing Instruments, the Issuer, the Bond Trustee and the Bondholder Representative shall not be accountable to the Obligor for any action taken or omitted by it or its officers in good faith and believed by it or them to be authorized or within their discretion or rights or powers conferred on them. The Issuer, the Bond Trustee, the Bondholder Representative and their officers shall be protected in its or their acting upon any paper or document believed by it or them to be genuine, and it and they may conclusively rely upon the advice of counsel and may (but need not) require further evidence of any fact or matter before taking any action.

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Section 7.11 Annual Compliance Certificate. The Obligor will deliver to the Bond Trustee, the Bondholder Representative and the Issuer within six weeks after the end of each Fiscal Year a certificate executed by an Obligor Representative stating that:

(i) A review of the activities of the Obligor during such Fiscal Year and of performance pursuant to this Loan Agreement has been made under his or her supervision; and

(ii) He or she is familiar with the provisions of this Loan Agreement, the Regulatory Agreement and the Tax Agreement, and to the best of his or her knowledge, based on such review and familiarity, the Obligor has fulfilled all of its obligations pursuant hereto and thereto throughout the Fiscal Year, and there have been no defaults under this Loan Agreement, the Regulatory Agreement or the Tax Certificate or, if there has been a default in the fulfillment of any such obligation in such Fiscal Year, specifying each such default known to him or her and the nature and status thereof and the actions taken or being taken to correct such default.

ARTICLE VIII

ASSIGNMENT AND LEASING

Section 8.1 Assignment and Leasing by Obligor. This Loan Agreement may be assigned, and all or any portion of any Project may be leased by the Obligor without the consent of either the Issuer or the Bond Trustee, but with the consent of the Bondholder Representative, provided that each of the following conditions is complied with:

(a) No assignment or leasing shall relieve the Obligor from primary liability for any of its obligations hereunder, and in the event of any such assignment or leasing the Obligor shall continue to remain primarily liable for payment of the loan payments and other payments specified in Article V hereof and for performance and observance of the other covenants and agreements contained herein; provided that if the Obligor withdraws from the Obligated Group (as defined in the Master Indenture) and is released from its obligations on the Notes by the Master Trustee pursuant to the Master Indenture, the Obligor shall also be released from its liability for its obligations hereunder, including payment of the loan payments and other payments specified in Article V hereof and the performance and observance of the other covenants and agreements contained herein.

(b) The assignee or lessee shall assume in writing the obligations of the Obligor hereunder to the extent of the interest assigned or leased, provided that the provisions of this subsection shall not apply to a lease of a portion of any Project or an operating contract for the performance by others of health care or medical services on or in connection with any Project, or any part thereof.

(c) The Obligor shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Issuer and the Bond Trustee a true and complete copy of each such assumption of obligations and assignment or lease of any Project, as the case may be.

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Section 8.2 Assignment and Pledge by Issuer. Solely pursuant to the Bond Indenture, the Issuer may assign its interest in and pledge any moneys receivable under the Notes and this Loan Agreement (except in respect of certain rights to indemnification and for Administration Expenses, indemnification and payment of attorneys’ fees and expenses pursuant to Sections 5.7, 7.5, 7.9 and 9.5 hereof) to the Bond Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds. The Obligor consents to such assignment and pledge.

ARTICLE IX

FAILURE TO PERFORM COVENANTS AND REMEDIES THEREFOR

Section 9.1 Failure to Perform Covenants. Upon failure of the Obligor to pay when due any payment (other than failure to make any payment on any Notes, subject to the priority thereof under the Master Indenture, which default shall have no grace period) required to be made under this Loan Agreement or to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder, and continuation of such failure for a period of 60 days after written notice, specifying such failure and requesting that it be remedied, is given to the Obligor by the Issuer or the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, the Issuer or the Bond Trustee, with the consent of or at the direction of the Bondholder Representative, shall have the remedies provided in Section 9.2 hereof.

Section 9.2 Remedies for Failure to Perform. Upon the occurrence of a failure of the Obligor to perform as provided in Section 9.1 hereof, the Issuer or the Bond Trustee, as assignee or successor of the Issuer, upon compliance with all applicable law, with the consent of or at the direction of the Bondholder Representative, may take any one or more of the following steps:

(a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Issuer, and require the Obligor to carry out any agreements with or for the benefit of the Bondholders and to enforce performance and observance of any duty, obligation, agreement or covenant of the Obligor under the Act or this Loan Agreement; or

(b) by action or suit in equity require the Obligor to account as if it were the trustee of an express trust for the Issuer; or

(c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer; or

(d) upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate upon a showing of good cause with such powers as the court making such appointment may confer.

Section 9.3 Discontinuance of Proceedings. In case any proceeding taken by the Issuer or the Bond Trustee on account of any failure to perform under Section 9.1 shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Issuer or the Bond Trustee, then and in every case the Issuer and the Bond Trustee shall be

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restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Issuer and the Bond Trustee shall continue as though no such proceeding had been taken.

Section 9.4 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer or the Bond Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Bond Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than notice required in Section 9.1 hereof. Such rights and remedies given the Issuer hereunder shall also extend to the Bond Trustee and the holders of the Bonds, subject to the Bond Indenture.

Section 9.5 Agreement to Pay Attorneys’ Fees and Expenses. In the event the Issuer, the Bond Trustee or the Bondholder Representative should employ attorneys or incur other expenses for the enforcement of performance or observance of any obligation or agreement on the part of the Obligor herein or in the Bond Indenture contained, the Obligor agrees that it will on demand therefor pay to the Issuer, the Bond Trustee or the Bondholder Representative, as the case may be, the reasonable fee of such attorneys and such other reasonable expenses incurred by the Issuer, the Bond Trustee or the Bondholder Representative.

Section 9.6 Waivers. In the event any agreement contained in this Loan Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach waived and shall not be deemed to waive any other breach hereunder. The Bondholder Representative may direct the Issuer or the Bond Trustee, acting on the Issuer’s behalf, to waive any breach by the Obligor hereunder (other than a failure to observe the covenants contained in Section 5.7 hereof). In view of the assignment of the Issuer’s rights in and under this Loan Agreement to the Bond Trustee under the Bond Indenture, the Issuer shall have no power to waive any failure to perform under Section 9.1 hereunder without the consent of the Bond Trustee, given at the direction of or with the consent of the Bondholder Representative (other than a failure to observe the covenants contained in Section 5.7 hereof, which may be waived by the Issuer without the consent of the Bond Trustee).

ARTICLE X

PREPAYMENT OF NOTES

Section 10.1 General Option to Prepay Notes. The Obligor shall have and is hereby granted the option, as permitted under the Bond Indenture, exercisable at any time to prepay all or any portion of its payments due or to become due on any or all of the Notes by depositing with the Bond Trustee for payment into the Bond Fund an amount of money or Government Obligations the principal and interest on which when due, will be equal to an amount sufficient to pay the principal of, premium, if any, and interest on any portion of the Bonds then Outstanding under the Bond Indenture, without penalty. The exercise of the option granted by

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this Section shall not be cause for redemption of Bonds unless such redemption is permitted at that time under the provisions of the Bond Indenture and the Obligor specifies the date for such redemption. In the event the Obligor prepays all of its payments due and to become due on all the Notes by exercising the option granted by this Section, including amounts payable to the U.S. Treasury, and upon payment of all reasonable and necessary fees and expenses of the Bond Trustee, the Issuer, any Paying Agent and the Bondholder Representative accrued and to accrue through final payment of the Bonds called for redemption as a result of such prepayment and of all Administration Expenses through final payment of the Bonds called for redemption as a result of such prepayment, this Loan Agreement shall terminate; provided that no such termination shall occur unless all of the Bonds are no longer Outstanding.

Section 10.2 Conditions to Exercise of Option. To exercise the option granted in Section 10.1 hereof, the Obligor shall give written notice to the Bond Trustee which shall specify therein the date of such redemption, which date shall be not less than 45 days (or such lesser period to which the Bond Trustee may agree) from the date the notice is mailed.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Notices. Any notice, request or other communication under this Loan Agreement shall be given in writing and shall be deemed to have been given by either party to the other party at the addresses shown below upon any of the following dates:

(a) The date of notice by telefax, telecopy, similar telecommunications or an email as an attached scanned PDF document;

(b) Three Business Days after the date of the mailing thereof, as shown by the post office receipt if mailed to the other party hereto by registered or certified mail;

(c) The date of the receipt thereof by such other party if not given pursuant to (a) or (b) above.

The address for notice for each of the parties shall be as follows:

Issuer: Arizona Health Facilities Authority 2025 North 3rd Street, Suite 180 Phoenix, Arizona 85004 Attention: Executive Director Email: [email protected] Telephone: (602) 375-2770 Telecopy: (602) 375-2804

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Obligor: Gilbert AL Partners, LP 6370 LBJ Freeway, Suite 276 Dallas, Texas 75240 Attention: Dustin Pridmore Email: [email protected] Telephone: (469) 619-5435 Telecopy: (972) 385-0029

with a copy to: Powell Coleman & Arnold LLP 8080 North Central Expressway, Suite 1380 Dallas, Texas 75206 Attention: Brian P. DeVoss Email: [email protected] Telephone: (214) 890-7122 Telecopy: (214) 373-8768

Bond Trustee: Wilmington Trust, National Association 25 South Charles Street, 11th Floor Baltimore, Maryland 21201 Attention: Corporate Trust Department Email: [email protected] Telephone: (410) 545-2193 Telecopy: (410) 244-4236


200 First Stamford Place Stamford, Connecticut 06902 Attention: L. George Rieger Email: [email protected] Telephone: (203) 625-5316 Facsimile: (203) 862-4527

With a copy to: Robinson & Cole, LLP 280 Trumbull Street Hartford, Connecticut 06103 Attention: Edward J. Samorajczyk, Jr. Email: [email protected] Telephone: (860) 275-8207 Facsimile: (860) 275-8299

The Issuer, the Obligor, the Bondholder Representative or the Bond Trustee may, by notice hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.

Notwithstanding the foregoing, notices to the Bond Trustee shall be effective only upon receipt.

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Section 11.2 Binding Effect. This Loan Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Obligor, and their respective successors and assigns, subject, however, to the limitations contained in Sections 8.1, 8.2, and 11.9 hereof.

Section 11.3 Severability. In the event any provision of this Loan Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 11.4 Amounts Remaining in Funds. It is agreed by the parties hereto that any amounts remaining in the Bond Fund and the Construction Fund upon expiration or sooner termination of this Loan Agreement, after payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Bond Indenture), the fees, charges, and expenses of the Bond Trustee, the Issuer and the Paying Agent in accordance with the Bond Indenture, the Administration Expenses and all other amounts required to be paid under this Loan Agreement and the Bond Indenture, shall belong to and be paid to the Obligor.

Section 11.5 Amendments, Changes, and Modifications. Except as otherwise provided in this Loan Agreement or in the Bond Indenture, subsequent to the initial issuance of Bonds and prior to their payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Bond Indenture), this Loan Agreement may not be effectively amended, changed, modified, altered, or terminated without the written consent of the Bond Trustee, given at the direction of or with the consent of the Bondholder Representative.

Section 11.6 Execution in Counterparts. This Loan Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 11.7 Payment. At such time as the principal of, premium, if any, and interest on all Bonds Outstanding under the Bond Indenture shall have been paid, or shall be deemed to be paid, in accordance with the Bond Indenture, and all other sums payable by the Obligor under this Loan Agreement shall have been paid, the Notes shall be deemed to be fully paid and shall be delivered by the Bond Trustee to the Obligor.

Section 11.8 Governing Law. This Loan Agreement shall be governed and construed in accordance with the law of the State of Arizona.

Section 11.9 No Pecuniary Liability of Issuer. No provision, covenant, or agreement contained in this Loan Agreement, or any obligations herein imposed upon the Issuer, or the breach thereof, shall constitute an indebtedness of the Issuer within the meaning of any Arizona constitutional provision or statutory limitation or shall constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit. In making the agreements, provisions, and covenants set forth in this Loan Agreement, the Issuer has not obligated itself except with respect to the application of the Trust Estate.

Section 11.10 Payments Due on Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Loan Agreement, shall be a legal holiday or a day on which banking institutions in the city in which the designated corporate trust office of the Bond Trustee is located or New York, New York, are

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authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed with the same force and effect as if done on the nominal date provided in this Loan Agreement.

Section 11.11 Notice of A.R.S. Section 38-511 - Cancellation. Notice is hereby given of the provisions of Arizona Revised Statutes Section 38-511. By this reference, the provisions of said statute are incorporated herein to the extent of their applicability to contracts of the nature of this Loan Agreement pursuant to the laws of the State of Arizona.

Section 11.12 Survival of Covenants. Subject to Section 7.13(c), all covenants, agreements, representations and warranties made by the Obligor in this Loan Agreement, the Bond Indenture, the Notes and the Bonds, and in any certificates or other documents or instruments delivered pursuant to this Loan Agreement or the Bond Indenture, shall survive the execution and delivery of this Loan Agreement, and the Bond Indenture and the Notes and shall continue in full force and effect until the Bonds and the Notes are paid in full and all of the Obligor’s other payment obligations (including without limitation the indemnification obligation under Section 7.5 and the obligations under Sections 5.5, 5.7 and 9.5 hereof) under this Loan Agreement, the Bond Indenture, the Notes and the Bonds are satisfied. All such covenants, agreements, representations and warranties shall be binding upon any successor and assigns of the Obligor.

Section 11.13 Usury, Total Interest. In no event shall the aggregate amounts contracted for, demanded, charged, or collected in connection herewith which are deemed “interest” exceed the Lawful Rate. The term “Lawful Rate” shall mean the highest lawful rate of interest applicable to the Notes pursuant to laws of the State of Arizona. It is expressly stipulated and agreed to be the intent of the Obligated Group and the Issuer at all times to comply with the applicable law governing the Lawful Rate or amount of interest payable on or in connection with the Notes (or applicable United States federal law to the extent that it permits the Issuer to contract for, demand, charge, take, reserve, or receive a greater amount of interest than under law of the State). If the applicable law, as judicially interpreted from time to time, shall ever render usurious any amount called for under this Loan Agreement, the Notes, or under any of the other Financing Instruments or contracted for, demanded, charged, taken, reserved, or received with respect to the Notes, or if acceleration of the maturity of the Notes or if any prepayment by the Obligated Group results in the Obligated Group having paid any interest in excess of that permitted by law, then it is the Obligated Group’s and the Issuer’s express intent that all excess amounts theretofore collected by the Issuer be credited on the principal balance of the Notes (or, if the Notes have been or would thereby be paid in full, the excess refunded to the Obligated Group), and the provisions of the Notes and the other Financing Instruments immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity of Notes does not include the right to accelerate any interest which has not otherwise accrued on the date of acceleration, and the Issuer does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to the Issuer for the use, forbearance, or detention of the Indebtedness (as defined in the Master Indenture) evidenced hereby shall, to the extent permitted by applicable

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law, be amortized, prorated, allocated, and spread throughout the full term of such Indebtedness until payment in full so that the rate or amount of interest on the account of such Indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained in the Notes or in any other Financing Instruments that permit the compounding of interest, including, without limitation, any provision by which any accrued interest is added to the principal amount of the Notes, the total amount of interest that the Obligated Group is obligated to pay and the Issuer is entitled to receive with respect to the Notes shall not exceed the amount calculated on a simple (i.e., noncompounded) interest basis at the Lawful Rate on principal amounts actually advanced to or for the account of the Obligated Group, so long as such advances remain outstanding, including all current and prior advances and any advances made pursuant to the Financing Instruments (such as the payment of taxes, insurance premiums, and similar expenses or costs). This Loan Agreement is also subject to the condition that amounts paid hereunder representing late payment or penalty charges or the like shall only be payable to the extent permitted by law.


(a) All notices to the Beneficial Holders represented by a Bondholder Representative shall be provided to such Bondholder Representative in lieu of providing such notice to the Beneficial Owners that such Bondholder Representative represents.

(b) All notices, certificates, reports, requisitions or other communications given hereunder or under any of the Financing Instruments to or from the Issuer or the Obligor and not otherwise provided to the Beneficial Holders or Bondholder Representative shall also be given to the Bondholder Representative to the extent that one exists.

(c) Where the consent or waiver is required of either the Bondholders or the Beneficial Holders, the Bondholder Representative may issue such consent or waiver on behalf of the Beneficial Holders that it represents. In such cases where a requisite percentage of either Bondholders or Beneficial Holders is required, and the Bondholder Representative certifies to the Bond Trustee that it represents at least the requisite percentage, the Bond Trustee does not have to wait for consents or waivers from the remaining percentage of Beneficial Holders or Bondholders before taking the particular action.

(d) Notwithstanding any provision to the contrary contained therein, any notice, request, consent, direction, waiver, approval, agreement, or other action of the Bondholder Representative shall constitute and have the same effect as a notice, request, consent, direction, waiver, approval, agreement, or other action of the Beneficial Holders represented by the Bondholder Representative.

(e) Except as required under subsection (c) of this Section, if under any provision hereof any action is to be taken only with the consent, direction or approval of the Bondholder Representative and if, at the time such consent, direction or approval would otherwise be called for, the Bondholder Representative does not then represent a majority of the Beneficial Holders of the Bonds then Outstanding, then the consent or approval of the Bondholder Representative shall not be required.

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Section 11.15 Benefit of Loan Agreement. The Issuer and the Obligor agree that this Loan Agreement is executed in part to induce the purchase by others of the Series 2015 Bonds and for the further securing of the Series 2015 Bonds, and accordingly that this Loan Agreement and all covenants and agreements on the part of the Issuer and the Obligor and the representations of the Issuer and the Obligor contained herein are hereby declared to be for the benefit of, and to the extent applicable, shall be binding upon, the parties hereto, the Master Trustee, the Bond Trustee, the Bondholder Representative and the holders from time to time of the Series 2015 Bonds, and their successors and assigns, and may be enforced as provided in the Master Indenture and the Bond Indenture on behalf of the Bondholders by the Master Trustee and the Bond Trustee, as applicable, as consented to or as directed by the Bondholder Representative as provided therein.

Section 11.16 No Liability for Consents, Approvals or Appointments. Whenever any provision herein provides for the giving of consent or direction of the Issuer or of the Bondholder Representative, the Issuer and the Bondholder Representative shall not be liable to the Obligor, the Master Trustee, the Bond Trustee or any beneficial owner of the Series 2015 Bonds for the giving of such consent or direction or for withholding such consent or direction. The Issuer and the Bondholder Representative shall have no liability for approvals or appointments which are required to be made by it under the Master Indenture, the Bond Indenture, this Loan Agreement or any related documents. The Master Trustee and the Bond Trustee, when acting or refraining from action under this Loan Agreement, are afforded all the indemnification, liability and other protections afforded to the Master Trustee and the Bond Trustee under the Master Indenture and the Bond Indenture, as applicable.

Section 11.17 Bondholder Representative. The Bondholder Representative or, if there is no Bondholder Representative, the registered owners of more than 50 percent in aggregate principal amount of the Series 2015 Bonds then outstanding, shall have the right at any time, to the extent permitted by law, to direct, by an instrument or document or instruments or documents in writing executed and delivered to the Obligor and the Bond Trustee, the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Loan Agreement, the Series 2015 Notes, the Series 2015 Bonds, the Deed of Trust, and the other Financing Instruments, or the appointment of a receiver or any other proceedings hereunder, in accordance with the terms hereof and of the Bond Indenture.

[The remainder of this page is intentionally left blank; signature page follows.]

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[SIGNATURE PAGE TO LOAN AGREEMENT]

IN WITNESS WHEREOF, the Issuer and the Obligor have caused this Loan Agreement to be executed in their respective corporate names, all as of the date first above written.

ARIZONA HEALTH FACILITY AUTHORITY

By: Name: Title:

GILBERT AL PARTNERS, LP, a Texas limited partnership

By: GILBERT AL GP, LLC, a Texas limited liability company, its sole General Partner

By: Name: Title: Manager

A-1

EXHIBIT A

SERIES 2015 PROJECT DESCRIPTION

The Series 2015 Project consists of the acquisition, construction, installation and equipping of an assisted living and memory care facility to be known as “Mariposa Point of Gilbert” which will contain approximately 49 assisted living units, approximately 30 memory care units and related common areas, consisting of the acquisition of approximately 6 acres of land, the construction of a single-story building containing approximately 63,000 square feet, and the acquisition and installation of related facilities, fixtures, furnishings and equipment, to be located on the western portion of land at 1505 East Willis Road (which is at the southwest corner of Val Vista Drive and Willis Road) in Gilbert, Arizona, and to be owned by Gilbert AL Partners, LP, a Texas limited partnership, and managed initially by Surpass Senior Living, LLC, a Texas limited liability company.

B-1

EXHIBIT B

FORM FOR POST-CERTIFICATE OF OCCUPANCY PROJECT ACCOUNT DISBURSEMENT

NO. _________

Wilmington Trust, National Association 25 South Charles Street, 11th Floor Baltimore, Maryland 21201 Attention: Jay Smith, Corporate Trust Department

Re: Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A and Taxable Series 2015B (collectively, the “Bonds”)

Gentlemen:

This request for disbursement is submitted to you pursuant to the last sentence of Section 4.6(a) of the Loan Agreement (the “Loan Agreement”), dated as of October 1, 2015, between the Arizona Health Facilities Authority and Gilbert AL Partners, LP (the “Obligor”) relating to the above-captioned Bonds. The undersigned Obligor Representative hereby requests that the following amounts be transferred from the ____________ Subaccount of the Project Account to the following payees for the following Costs:

Payee Amount Description Wiring Instructions

The undersigned Obligor Representative hereby states and certifies that:

(i) The Obligor has received a certificate of occupancy with respect to the Series 2015 Project.

(ii) These Costs are described in subparagraph (f) of the definition of “Costs”.

(iii) These Costs are valid costs under the Act.

(iv) No part of these Costs has been included in any other requisition certificate previously filed with the Bond Trustee under the provisions of the Bond Indenture or reimbursed to the Obligor from proceeds of the Series 2015 Bonds.

(v) The aggregate of Costs requisitions pursuant to this certificate and all previous certificates submitted pursuant to the last sentence of Section 4.6(a) of the Loan Agreement is not more than $500,000.

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(vi) The representations and warranties contained in the Loan Agreement, the Regulatory Agreement (as defined in the Loan Agreement) and the Tax Agreement (as defined in the Loan Agreement) are true and correct in all material respects as of the date hereof with the same effect as if made on this date.

(vii) No event has occurred and is continuing which constitutes an Event of Default or would, with the passage of time or the giving of notice, or both, constitute an Event of Default under the Financing Instruments.

Attached hereto and made a part hereof are (i) a copy of the certificate of occupancy received for the Series 2015 Project and (ii) the Opinion of Bond Counsel required to be submitted with this requisition certificate under the last sentence of Section 4.6(a) of the Loan Agreement.

Capitalized terms used but not defined herein have the meanings assigned to such terms in the Loan Agreement.

Date:

GILBERT AL PARTNERS, LP, as Obligor By: Obligor Representative

copy: Greenwich Investment Management, Inc., as Bondholder Representative

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C-1

EXHIBIT C

FORM FOR COST OF ISSUANCE DISBURSEMENT

NO. _________

Wilmington Trust, National Association 25 South Charles Street, 11th Floor Baltimore, Maryland 21201 Attention: Jay Smith, Corporate Trust Department

Re: Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A and Taxable Series 2015B (collectively, the “Bonds”)

Gentlemen:

This request for disbursement is submitted to you pursuant to Section 4.6 of the Loan Agreement (the “Loan Agreement”), dated as of October 1, 2015, between the Arizona Health Facilities Authority and Gilbert AL Partners, LP (the “Obligor”) relating to the above-captioned Bonds. You are hereby requested to make disbursements from the Cost of Issuance Fund in accordance with the attached invoices (or a list thereof with payment instructions) for the payment of Cost of Issuance, as defined and provided in the Loan Agreement.

Date:

GILBERT AL PARTNERS, LP, as Obligor By: Obligor Representative


[THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK]

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MASTER TRUST INDENTURE

between

GILBERT AL PARTNERS, LP, as the Obligated Group Representative and an Obligated Group Member,

and

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Master Trustee

_________________

Dated as of October 1, 2015

ii

TABLE OF CONTENTS

Page

ARTICLE I DEFINITION OF TERMS, CONSTRUCTION

AND CERTAIN GENERAL PROVISIONS

Section 1.01 Definition of Terms................................................................................................. 8 Section 1.02 Compliance Certificates and Reports .................................................................... 29 Section 1.03 Form of Documents Delivered to Master Trustee ................................................ 30 Section 1.04 Acts of Holders of Obligations. ............................................................................ 31 Section 1.05 Notices, etc., to Master Trustee, Bondholder Representative and

Obligated Group Members ................................................................................... 31 Section 1.06 Notices to Holders of Obligations; Waiver ........................................................... 32 Section 1.07 Notices to Rating Agencies ................................................................................... 32 Section 1.08 Effect of Headings and Table of Contents ............................................................ 33 Section 1.09 Successors and Assigns ......................................................................................... 33 Section 1.10 Separability Clause ............................................................................................... 33 Section 1.11 Governing Law ..................................................................................................... 33

ARTICLE II THE OBLIGATIONS

Section 2.01 Series and Amount of Obligations. ....................................................................... 33 Section 2.02 Appointment of Obligated Group Representative ................................................ 34 Section 2.03 Execution and Authentication of Obligations ....................................................... 34 Section 2.04 Supplement Creating Obligations ......................................................................... 34 Section 2.05 Conditions to Issuance of Obligations Hereunder ................................................ 35 Section 2.06 List of Holders of Obligations .............................................................................. 36 Section 2.07 Optional and Mandatory Redemption ................................................................... 36 Section 2.08 Mutilated, Destroyed, Lost and Stolen Obligations .............................................. 36 Section 2.09 Cancellation .......................................................................................................... 37

ARTICLE III FUNDS AND ACCOUNTS

Section 3.01 Revenue Fund ....................................................................................................... 37 Section 3.02 Working Capital Fund........................................................................................... 39 Section 3.03 [Reserved]. ............................................................................................................ 40 Section 3.04 [Reserved]. ............................................................................................................ 40 Section 3.05 Investment of Funds .............................................................................................. 40 Section 3.06 Allocation and Transfers of Investment Income. .................................................. 40 Section 3.07 Master Trustee Relieved From Responsibility ..................................................... 40


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ARTICLE IV COVENANTS OF THE OBLIGATED GROUP MEMBERS

Section 4.01 Title to Trust Estate and Mortgaged Property; Lien of this Indenture and Deed of Trust; Deposit of Gross Revenues and Control Agreement ............. 40

Section 4.02 Further Assurances................................................................................................ 41 Section 4.03 Recording and Filing............................................................................................. 41 Section 4.04 Payment of Principal, Premium and Interest ........................................................ 42 Section 4.05 Payment of Taxes and Other Claims .................................................................... 43 Section 4.06 Maintenance of Properties .................................................................................... 43 Section 4.07 Existence; Status of Obligated Group Members. .................................................. 44 Section 4.08 Preservation of Qualifications............................................................................... 44 Section 4.09 Additions to Facilities ........................................................................................... 44 Section 4.10 Insurance ............................................................................................................... 44 Section 4.11 Rates and Charges. ................................................................................................ 45 Section 4.12 Damage or Destruction ......................................................................................... 46 Section 4.13 Condemnation ....................................................................................................... 48 Section 4.14 Other Provisions with Respect to Net Proceeds ................................................... 49 Section 4.15 Financial Statements, Etc. ..................................................................................... 50 Section 4.16 Permitted Additional Indebtedness ....................................................................... 53 Section 4.17 Securing Permitted Indebtedness .......................................................................... 54 Section 4.18 Calculation of Debt Service and Debt Service Coverage. .................................... 55 Section 4.19 Sale or Lease of Property ...................................................................................... 56 Section 4.20 Liens on Property .................................................................................................. 58 Section 4.21 Management and Operating Agreements .............................................................. 58 Section 4.22 Environmental Covenants; Compliance with Environmental Laws ..................... 59 Section 4.23 GMP Contract – Change Orders ........................................................................... 61 Section 4.24 Approval of Consultants. ...................................................................................... 61 Section 4.25 Non-Compete Covenant........................................................................................ 62 Section 4.26 Amendment of Financing Instruments .................................................................. 62 Section 4.27 Real Property Liens ............................................................................................... 62 Section 4.28 Management Fees ................................................................................................. 62 Section 4.29 Exclusivity ............................................................................................................ 62

ARTICLE V MERGER, CONSOLIDATION, SALE OR CONVEYANCE

Section 5.01 Merger, Consolidation, Sale or Conveyance. ....................................................... 63

ARTICLE VI MEMBERSHIP IN THE OBLIGATED GROUP

Section 6.01 Admission of Obligated Group Members ............................................................. 65 Section 6.02 Obligated Group Members ................................................................................... 67 Section 6.03 Withdrawal of Obligated Group Members ........................................................... 67 Section 6.04 Successor Obligated Group Representative .......................................................... 68


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ARTICLE VII REMEDIES OF THE MASTER TRUSTEE AND HOLDERS OF SECURED OBLIGATIONS IN EVENT OF DEFAULT

Section 7.01 Events of Default .................................................................................................. 68 Section 7.02 Acceleration of Maturity; Rescission and Annulment; Subordinate

Remedies ............................................................................................................... 70 Section 7.03 Subordination of Subordinate Obligations to Senior Obligations. ....................... 71 Section 7.04 [Reserved] ............................................................................................................. 72 Section 7.05 [Reserved] ............................................................................................................. 72 Section 7.06 Incidents of Sale .................................................................................................... 72 Section 7.07 Collection of Indebtedness and Suits for Enforcement by Master

Trustee................................................................................................................... 73 Section 7.08 Master Trustee May File Proofs of Claim ............................................................ 74 Section 7.09 Master Trustee May Enforce Claims Without Possession of

Obligations ............................................................................................................ 74 Section 7.10 Application of Money Collected ........................................................................... 75 Section 7.11 Limitation on Suits ................................................................................................ 75 Section 7.12 Unconditional Right of Holders of Obligations to Receive Payment ................... 76 Section 7.13 Restoration of Rights and Remedies ..................................................................... 76 Section 7.14 Rights and Remedies Cumulative ......................................................................... 76 Section 7.15 Delay or Omission Not Waiver ............................................................................. 76 Section 7.16 Control by Holders of Obligations ........................................................................ 76 Section 7.17 Waiver of Defaults ................................................................................................ 77 Section 7.18 Undertaking for Costs ........................................................................................... 77 Section 7.19 Waiver of Stay or Extension Laws ....................................................................... 77

ARTICLE VIII CONCERNING THE MASTER TRUSTEE

Section 8.01 Duties and Liabilities of Master Trustee. .............................................................. 78 Section 8.02 Notice of Defaults ................................................................................................. 79 Section 8.03 Certain Rights of Master Trustee .......................................................................... 79 Section 8.04 Not Responsible For Recitals or Issuance of Obligations .................................... 81 Section 8.05 Master Trustee or Registrar May Own Obligations .............................................. 81 Section 8.06 Money to Be Held in Trust ................................................................................... 81 Section 8.07 Compensation and Expenses of Master Trustee and Bondholder

Representative ....................................................................................................... 81 Section 8.08 Corporate Master Trustee Required; Eligibility ................................................... 82 Section 8.09 Resignation and Removal; Appointment of Successor. ........................................ 82 Section 8.10 Acceptance of Appointment by Successor ........................................................... 83 Section 8.11 Merger or Consolidation ....................................................................................... 84 Section 8.12 Master Trustee as Related Bond Trustee .............................................................. 84

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v

ARTICLE IX SUPPLEMENTS AND AMENDMENTS

Section 9.01 Supplements Without Consent of Holders of Obligations .................................... 84 Section 9.02 Supplements With Consent of Majority Holders of Obligations .......................... 85 Section 9.03 Execution of Supplements .................................................................................... 86 Section 9.04 Effect of Supplement ............................................................................................ 86 Section 9.05 Obligations May Bear Notation of Changes ......................................................... 86 Section 9.06 Amendments of Deeds of Trust Not Requiring Consent of Holders .................... 86 Section 9.07 Amendments of Deeds of Trust With Consent of Majority Holders of

Obligations ............................................................................................................ 87 Section 9.08 Bondholder Representative’s Consent to Supplements and

Amendments ......................................................................................................... 87

ARTICLE X SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

Section 10.01 Satisfaction and Discharge of Indenture ............................................................... 87 Section 10.02 Obligations Deemed Paid ..................................................................................... 88 Section 10.03 Application of Trust Money.................................................................................. 88 Section 10.04 Payment of Related Bonds .................................................................................... 89

ARTICLE XI MISCELLANEOUS PROVISIONS

Section 11.01 No Personal Liability ............................................................................................ 89 Section 11.02 Arizona Contract ................................................................................................... 89 Section 11.03 Legal Holidays ...................................................................................................... 89 Section 11.04 Benefits of Provisions of Indenture and Obligations ............................................ 89 Section 11.05 Execution in Counterparts ..................................................................................... 90 Section 11.06 UCC Financing Statements ................................................................................... 90 Section 11.07 Bondholder Representative. .................................................................................. 90 Section 11.08 Notices to and Effect of Actions by Bondholder Representative ......................... 90 Section 11.09 Acceptance and Acknowledgement by Each Beneficial Owner ........................... 91 Section 11.10 Inspections; Books and Records ........................................................................... 91

EXHIBITS

EXHIBIT A: Initial Deed of Trust

6

MASTER TRUST INDENTURE

THIS MASTER TRUST INDENTURE, dated as of October 1, 2015 (this “Indenture”), between GILBERT AL PARTNERS, LP, a Texas limited partnership, as the initial Obligated Group Member and as the Obligated Group Representative (the “Obligor” and the “Obligated Group Representative”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association, as trustee (the “Master Trustee”),

W I T N E S S E T H:

WHEREAS, all capitalized terms used herein and not otherwise defined have the meanings ascribed to them in Article I of this Indenture; and

WHEREAS, the Obligor is authorized and deems it necessary and desirable to enter into this Indenture for the purpose of providing for the issuance of Obligations from time to time by the Obligor or other Persons electing to become Obligated Group Members to finance or refinance the acquisition, construction and equipping of assisted living and memory care facilities or other facilities operated and maintained by the Obligated Group Members, or for other lawful and proper purposes; and

WHEREAS, all acts and things necessary to constitute this Indenture a valid indenture and agreement according to its terms have been done and performed, the Obligor has duly authorized the execution and delivery of this Indenture, and the Obligor, in the exercise of the legal right and power invested in it, executes this Indenture and proposes to make, execute, issue and deliver Obligations hereunder; and

WHEREAS, the Master Trustee agrees to accept and administer the trusts created hereby,

GRANTING CLAUSES

NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, to secure the payment of the Outstanding Obligations and the performance of the covenants therein and herein contained and to declare the terms and conditions on which the Outstanding Obligations are secured, and in consideration of the premises, of the purchase of the Obligations by the Holders thereof, and of the sum of One Dollar ($1.00) to the Obligated Group Members in hand paid by the Master Trustee at or before the execution and delivery hereof, the receipt and sufficiency of which are hereby acknowledged, the Obligated Group Members by these presents do hereby grant, bargain, sell, alien, remise, release, convey, assign, transfer, hypothecate, pledge, set over, and confirm to the Master Trustee, forever, all and singular the following described properties, and grant a security interest therein for the purposes herein expressed, to wit:

GRANTING CLAUSE FIRST

All revenue, accounts receivable, and Gross Revenues of the Obligated Group Members, including without limitation rights to receive payments from third party payors such as Medicare and Medicaid, but except and excluding all such items, whether now owned or hereafter acquired by the Obligated Group Members, which by their terms or by reason of applicable law would become void or voidable if granted, assigned, or pledged hereunder by the Obligated Group

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Members, or which cannot be granted, pledged, or assigned hereunder without the consent of other parties whose consent is not secured, or without subjecting the Master Trustee to a liability not otherwise contemplated by the provisions hereof, or which otherwise may not be, or are not, hereby lawfully and effectively granted, pledged, and assigned by the Obligated Group Members, provided that the Obligated Group Members may subject to the lien hereof any such excepted property, whereupon the same shall cease to be excepted property; and

GRANTING CLAUSE SECOND

Any amounts on deposit from time to time in the Deposit Account or any fund or account created hereunder, subject to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein; and

GRANTING CLAUSE THIRD

Any and all property of every kind or description which may from time to time hereafter be sold, transferred, conveyed, assigned, hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to, or deposited with the Master Trustee as additional security by the Obligated Group or anyone on its part or with its written consent, or which pursuant to any of the provisions hereof or may come into the possession of or control of the Master Trustee or a receiver appointed pursuant to Article VII hereof, as such additional security; and the Master Trustee is hereby authorized to receive any and all such property as and for additional security for the payment of the Obligations, and to hold and apply all such property subject to the terms hereof,

TO HAVE AND TO HOLD, IN TRUST, WITH THE POWER OF SALE, all said property, rights, privileges, and franchises of every kind and description, real, personal, or mixed, hereby and hereafter (by supplemental instrument or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, hypothecated, pledged, set over, or confirmed as aforesaid, or intended, agreed, or covenanted so to be, together with all the appurtenances thereto appertaining (said properties, rights, privileges, leasehold, and franchises including any cash and securities hereafter deposited or required to be deposited with the Master Trustee (other than any such cash and securities which are specifically stated herein not to be deemed part of the Trust Estate) being herein collectively referred to as the “Trust Estate”) unto the Master Trustee and its successors and assigns forever;

SUBJECT AND SUBORDINATE, HOWEVER, to the Permitted Encumbrances;

BUT IN TRUST, NEVERTHELESS, first, for the equal and proportionate benefit and security of the Holders from time to time of all of the Outstanding Senior Obligations without any priority of any such Senior Obligations over any other such Senior Obligations except as herein otherwise expressly provided; and second, on an immediately subordinate basis to the Outstanding Senior Obligations, for the equal and proportionate benefit and security of the Holders from time to time of all of the Outstanding Subordinate Obligations without priority of any such Subordinate Obligations over any other such Subordinate Obligations except as herein otherwise expressly provided;

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UPON CONDITION that, if the Obligated Group Members or their successors or assigns shall well and truly pay, or cause to be paid, the Outstanding Obligations according to the true intent and meaning thereof, or there shall be deposited with the Master Trustee such amounts in such form in order that none of the Obligations shall remain Outstanding as herein defined and provided, and shall pay or cause to be paid to the Master Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon the full and final payment of all such sums and amounts secured hereby or upon such deposit, the rights, titles, liens, security interests, and assignments herein granted shall cease, determine, and be void and this grant shall be released by the Master Trustee in due form at the expense of the Obligated Group Members, except only as herein provided; otherwise this grant to be and shall remain in full force and effect;

UPON FURTHER CONDITION as to any property included in the Trust Estate that, upon Request of the Obligated Group Representative accompanied by an Officer’s Certificate and an Opinion of Counsel to the effect that the conditions precedent for the disposition of such property set forth in Section 4.19 hereof have been satisfied, the rights, titles, liens, security interests and assignments herein granted shall cease, determine and be void as to such property only and this grant shall be released by the Master Trustee as to such property in due form at the expense of the Obligated Group Members;

ALL THINGS NECESSARY to make this Indenture a valid agreement and contract for the security of the Obligations in accordance with the terms of such Obligations and this Indenture have been done;

IT IS HEREBY COVENANTED AND DECLARED that the Trust Estate is to be held and applied by the Master Trustee, subject to the further covenants, conditions, and trusts hereinafter set forth, and the Obligated Group Members do hereby covenant and agree to and with the Master Trustee, for the equal and proportionate benefit of all Holders of the Obligations except as herein otherwise expressly provided; and

THIS INDENTURE FURTHER WITNESSETH and it is expressly declared that all Obligations issued and secured hereunder are to be issued, authenticated and delivered and all said rights hereby pledged and assigned are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed and the Obligated Group Members have agreed and covenanted, and do hereby agree and covenant, with the Master Trustee for the equal and proportionate benefit of the respective holders from time to time of the Obligations, subject to the priorities set forth herein, as follows:

ARTICLE I

DEFINITION OF TERMS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS

Section 1.01 Definition of Terms. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

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In General:

(1) this “Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof;

(2) all references in this instrument designated “Articles,” “Sections,” and other subdivisions are to the designated Articles, Sections and other subdivisions of this instrument as originally executed. The words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section, or other subdivision;

(3) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular number; and

(4) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles applied in accordance with Section 1.02 of this Indenture.

“Act” when used with respect to any Holder of Obligations has the meaning specified in Section 1.04.

“Additional Indebtedness” means Indebtedness incurred by any Member subsequent to the issuance of the Series 2015 Notes that is authorized to be incurred pursuant to this Indenture and the Financing Instruments.

“Additional Obligation” means any evidence of Indebtedness or evidence of any repayment obligation under any Interest Rate Agreement issued after the issuance of the Series 2015 Notes, which is authorized to be issued by a Member pursuant to this Indenture and the Financing Instruments and which has been authenticated by the Master Trustee pursuant to Section 2.03 hereof.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” when used with respect to any specified Person means the power to direct the policies of such Person, directly or indirectly, whether through the power to appoint and remove its directors, the ownership of voting securities, by contract, or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Architect” means ARRIVE Architecture Group, LLC, a Texas limited liability company, or any firm of recognized independent architects appointed by the Obligor to whom the Master Trustee and the Bondholder Representative make no reasonable objection.

“Authorized Representative” shall mean, with respect to the Obligated Group Representative and each Obligated Group Member, its respective chief executive officer or president, or any other person or persons designated an Authorized Representative thereof by an

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Officer’s Certificate of the Obligated Group Representative or the Obligated Group Member, signed by the respective Designated Officer and delivered to the Master Trustee.

“Balloon Indebtedness” means Long-Term Indebtedness, 25 percent or more of the original principal of which matures during any consecutive 12 month period, if such maturing principal amount is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such 12-month period so that, following such amortization, the principal amount maturing during such 12-month period will be less than 25 percent of such original principal amount.

“Board Resolution” of any specified Person means a copy of a resolution certified by the Person responsible for maintaining the records of the Governing Body of such Person to have been duly adopted by the Governing Body of such Person and to be in full force and effect on the date of such certification, and delivered to the Master Trustee.

“Bond Counsel” means Greenberg Traurig, LLP, and its successors or such other nationally recognized bond counsel as may be selected by the Obligor.

“Bond Indenture” means the Indenture of Trust, dated as of October 1, 2015, between the Issuer and the Bond Trustee, relating to the Series 2015 Bonds.

“Bond Trustee” means Wilmington Trust, National Association, as trustee under the Bond Indenture.

“Bondholder Representative” initially means Greenwich Investment Management Inc., a registered investment advisor under the Investment Advisors Act of 1940, as amended, and any successors or assigns thereto which shall be designated as the Bondholder Representative by written appointment by a majority of the beneficial owners of the Series 2015 Bonds, and delivered to the Master Trustee and the Bond Trustee.

“Book Value” when used with respect to Property of a Member, means the value of such Property, net of accumulated depreciation and amortization, as reflected in the most recent audited financial statements of such Member that have been prepared in accordance with generally accepted accounting principles, and when used with respect to Property of all Members, means the aggregate of the values of such Property, net of accumulated depreciation and amortization, as reflected in the most recent audited combined financial statements of the Obligated Group prepared in accordance with generally accepted accounting principles, provided that such aggregate shall be calculated in such a manner that no portion of the value of any Property of any Member is included more than once.

“Business Day” means any day on which banks in the city in which the designated corporate trust office of a Related Bond Trustee is located or, if different, New York, New York, are not authorized or required to be closed for commercial banking purposes.

“Capital Additions” means all property or interests in property, real, personal and mixed (a) which constitute additions, improvements or extraordinary repairs to or replacements of all or any part of the Mortgaged Property and (b) the cost of which is properly capitalized under generally accepted accounting principles.

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“Capitalized Lease” means any lease of real or personal property which, in accordance with generally accepted accounting principles, is required to be capitalized on the balance sheet of the lessee.

“Capitalized Rentals” means, as of the date of determination, the amount at which the aggregate Net Rentals due and to become due under a Capitalized Lease under which a Person is a lessee would be reflected as a liability on a balance sheet of such Person.

“Cash and Investments” means the sum of cash, cash equivalents, and marketable securities of the Obligated Group Members, including without limitation board-designated assets, but excluding (a) trustee-held funds (other than funds held in the Working Capital Fund), (b) donor-restricted funds and (c) any funds pledged or otherwise subject to a security interest for debt other than the Obligations, as shown on the most recent audited or unaudited financial statements of the Obligated Group.

“Code” means the Internal Revenue Code of 1986, as amended from time to time and the corresponding provisions, if any, of any successor internal revenue laws of the United States.

“Consent,” “Order,” and “Request” of any specified Person mean, respectively, a written consent, order, or request signed in the name of such Person by its general partner, managing member or manager, the chairman of the Governing Body, the president, a vice president, the treasurer, an assistant treasurer or the chief financial officer of such Person or any other person or persons designated by an Officer’s Certificate and delivered to the Master Trustee.

“Construction Index” means the most recent issue of the “Dodge Construction Index for U.S. and Canadian Cities” with reference to the city in which the subject property is located (or, if such Index is not available for such city, with reference to the city located closest geographically to the city in which the subject property is located), or, if such Index is no longer published or used by the federal government in measuring costs under Medicare or Medicaid programs, such other index which is certified to be comparable and appropriate by the Obligated Group Representative in an Officer’s Certificate delivered to the Master Trustee and which other index is acceptable to the Master Trustee.

“Construction Monitor” means zumBrunnen, Inc. or any other firm engaged in construction management and oversight for the Project, selected by the Obligor, and approved by the Bondholder Representative.

“Consultant” means a professional consulting, accounting, investment banking or commercial banking firm or individual selected by the Obligated Group Representative and acceptable to the Bondholder Representative having the skill and experience necessary to render the particular report required and having a favorable reputation for such skill and experience, which firm or individual does not control any Member of the Obligated Group or any Affiliate thereof and is not controlled by or under common control with any Member of the Obligated Group or any Affiliate thereof.

“Contractor” means Summit dck, LLC, a Delaware limited liability company.

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“Contributions” means the aggregate amount of all contributions, grants, gifts, bequests and devises actually received in cash or marketable securities by any Person in the applicable fiscal year of such Person and any such contributions, grants, gifts, bequests and devises originally received in a form other than cash or marketable securities by any Person which are converted in such fiscal year to cash or marketable securities.

“Control Agreement” means the deposit account control agreement, among the Depository Bank, as depository bank, the Master Trustee, and the Obligated Group Representative, relating to the Deposit Account to be entered into pursuant to Section 4.01 hereof, or any other similar agreement, in each case as approved by the Bondholder Representative.

“Credit Facility” means any letter of credit, bond insurance policy, guaranty, line of credit, surety bond or similar credit facility securing the repayment of any Indebtedness of any Obligated Group Member.

“Current Value” means (i) with respect to Property, Plant and Equipment: (a) the aggregate fair market value of such Property, Plant and Equipment as reflected in the most recent written report of an appraiser selected by the Obligated Group Representative and acceptable to the Bondholder Representative and, in the case of real property, who is a member of the American Institute of Real Estate Appraisers (MAI), delivered to the Master Trustee (which report shall be dated not more than three years prior to the date as of which Current Value is to be calculated) increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Current Value is to be calculated, minus the fair market value (as reflected in such most recent appraiser’s report) of any Property, Plant and Equipment included in such report but disposed of since the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Current Value is to be calculated; plus (b) the Book Value of any Property, Plant and Equipment acquired since the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such acquisition to the date as of which Current Value is to be calculated, minus (c) the Book Value of any such Property, Plant and Equipment acquired since the last such report but disposed of; and (ii) with respect to any other Property, the fair market value of such Property.

“Days Cash on Hand” means, as of the date of calculation, the amount determined by dividing (a) the amount of Cash and Investments on such date by (b) the quotient obtained by dividing Expenses (including interest on Indebtedness but excluding provisions for bad debt amortization, depreciation or any other non-cash expenses) as shown on the most recent annual audited financial statements (or, with respect to any calculation of Days Cash on Hand as of any December 31, as reflected in the unaudited trailing twelve month financial statements for the period ending such December 31, as derived from the quarterly financial statements delivered pursuant to Section 4.15(b)(ii) hereof), by 365.

“Debt Service Coverage Ratio” means, for any period, the ratio of (a) Income Available for Debt Service received during such period to (b) the Maximum Annual Debt Service Requirement on the date of calculation on Long-Term Indebtedness. For the purposes of

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calculating the Debt Service Coverage Ratio for any period during which the interest on any Long-Term Indebtedness is being funded from the proceeds thereof, the Maximum Annual Debt Service Requirement relating to the interest on such Indebtedness shall be disregarded for such period, and the Income Available for Debt Service shall not include interest on any funds established with the proceeds of such Indebtedness. For the purposes of calculating the Debt Service Coverage Ratio for any period which includes the last date to which interest on such Long-Term Indebtedness is being capitalized under generally accepted accounting principles or is being paid from the proceeds thereof (the “Capitalized Interest End Date”), the numerator and the denominator of the Debt Service Coverage Ratio shall be calculated as the aggregate of the amounts determined in accordance with the provisions hereof for the respective periods before and after the Capitalized Interest End Date.

“Debt Service Requirements” means, with respect to the period of time for which calculated, the aggregate of the payments required to be made during such period in respect of (i) principal of Long-Term Indebtedness (whether at maturity, as a result of mandatory sinking fund redemption, mandatory prepayment or otherwise), (ii) interest on outstanding Long-Term Indebtedness and (iii) payments on Capitalized Leases; provided that: (a) the amount of such payments for a future period shall be calculated in accordance with the assumptions contained in Section 4.18 hereof; (b) interest shall be excluded from the determination of the Debt Service Requirements to the extent that Funded Interest is available to pay such interest; (c) principal of Indebtedness shall be excluded from the determination of Debt Service Requirements to the extent that amounts are on deposit in an irrevocable escrow and such amounts (including, where appropriate, the earnings or other increment to accrue thereon) are required to be applied to pay such principal and such amounts so required to be applied are sufficient to pay such principal; and (d) principal of Indebtedness due in its final year shall be excluded from the determination of Debt Service Requirements to the extent moneys were initially deposited and are on deposit as of the date of calculation in a debt service reserve fund which requires that moneys on deposit in the debt service reserve fund be used to pay a principal payment in the final year of such Indebtedness, and except for the payment to be received from such debt service reserve fund, the Indebtedness would have had approximately level debt service.

“Debt Service Reserve Fund” means the debt service reserve fund established in any Related Bond Indenture to secure payment of any series of Related Bonds.

“Deed of Trust” means each individually, and “Deeds of Trust” means, collectively, (1) the deed of trust, security agreement, assignment of rents and leases and fixture filing identified on Exhibit A attached hereto and incorporated herein by reference, as originally executed and as amended and modified from time to time in accordance with its terms and (2) any deed of trust or leasehold deed of trust, mortgage or leasehold mortgage, security agreement, assignment of rents and leases and fixture filing or similar instrument encumbering the Property, Plant and Equipment for the benefit of Holders executed and delivered in accordance with Sections 5.01(a)(v) or 6.01(d)(v) hereof.

“Defeasance Obligations” means:

(1) Direct obligations of the United States of America or obligations to the full and prompt payment of which the full faith and credit of the United States of

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America is pledged or evidences of ownership of proportionate interests in future interest and principal payments on such obligations held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor on such obligations, and which underlying obligations are not available to satisfy any claim of the custodian or any Person claiming through the custodian or to whom the custodian may be obligated; and

(2) Obligations issued or guaranteed by the following instrumentalities or agencies of the United States of America:

(i) Federal Home Loan Bank System;

(ii) Export-Import Bank of the United States;

(iii) Federal Financing Bank;

(iv) Farmers Home Administration;

(v) Federal Home Loan Mortgage Corporation;

(vi) Federal Housing Administration;

(vii) Federal National Mortgage Association; and

(viii) Any other agency or instrumentality of the United States of America created by an Act of Congress which is substantially similar to the foregoing in its legal relationship to the United States of America; and

(3) Obligations described in Section 103(a) of the Code, provision for the payment of the principal of (and premium, if any) and interest on which shall have been made by the irrevocable deposit at least 123 days preceding the date of determination with a bank or trust company acting as a trustee or escrow agent for holders of such obligations of money, or obligations described in clause (1) above, the maturing principal of and interest on which, when due and payable, without reinvestment will provide money, sufficient to pay when due the principal of (and premium, if any) and interest on such obligations, and which money, or obligations described in clause (1) above, are not available to satisfy any other claim, including any claim of the trustee or escrow agent or any claim of any Person claiming through the trustee or escrow agent or any claim of any Person to whom the Person on whose behalf such irrevocable deposit was made, the trustee, or the escrow agent may be obligated, whether arising out of the insolvency of the Person on whose behalf such irrevocable deposit was made, the trustee or escrow agent or otherwise.

“Delivery Date” means the date the Series 2015 Bonds are delivered to the initial purchaser against payment therefor.

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“Deposit Account” means the deposit account to be established by the Obligated Group Representative at the Depository Bank into which the Members have covenanted to deposit the Gross Revenues, or any other deposit account subject to a Control Agreement.

“Depository Bank” means J.P. Morgan Chase Bank, N.A., or any other depository bank holding a Deposit Account.

“Designated Officer” means the general partner, managing member, manager or chairman of the Governing Body, executive director, president, any vice president, the treasurer, any assistant treasurer, secretary or assistant secretary of a Member or the Obligated Group Representative, respectively, or any other person or persons so designated by an Officer’s Certificate delivered to the Master Trustee.

“Encumbered” means, with respect to Property, subject to a Lien.

“Environmental Law(s)” means any and all federal, state and local laws, regulations, or administrative guidelines relating to Hazardous Materials.

“Event of Default” has the meaning set forth in Article VII hereof.

“Expenses” means, for any period, the aggregate of all expenses calculated under generally accepted accounting principles, including without limitation any accrual for taxes, assessments and insurance, incurred by the Person or group of Persons involved during such period, and the fees, expenses and indemnity payments owing to a Related Issuer pursuant to a Related Loan Agreement, but excluding (a) interest on Long-Term Indebtedness, (b) depreciation and amortization, (c) extraordinary expenses, losses on the sale of assets other than in the ordinary course of business and losses on the extinguishment of debt or termination of pension plans, (d) any expenses resulting from a forgiveness of or the establishment of reserves against Indebtedness of an Affiliate which does not constitute an extraordinary expense, (e) losses resulting from any reappraisal, revaluation or write down of assets other than bad debts, (f) non-cash expenses or losses, and (g) any development, marketing, operating, or management fees that have been deferred from the year in which they were originally due.

“Facilities” means all land, leasehold interests and buildings and all fixtures and equipment (as defined in the Uniform Commercial Code or equivalent statute in effect in the state where such fixtures or equipment are located) of a Person.

“Feasibility Report” means a report prepared and signed by a Consultant setting forth for a forecast period not exceeding five Fiscal Years from the later of the date of the issuance of the Long-Term Indebtedness in question, or the completion of the Capital Additions financed with such Long-Term Indebtedness: (i) forecasted financial statements prepared on the same basis as the Obligated Group’s audited financial statements; and (ii) a full explanation of the assumptions and rationale used in preparing such forecasts, including that such forecasts have taken into account the projected utilization of the Obligated Group’s Facilities, the rates and charges to patients and residents and such other data and information as may be necessary to support the forecasted financial statements; which shall be accompanied by an opinion of such Consultant that the underlying assumptions provide a reasonable basis for such forecast.

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“Fiscal Year” means any 12 month period beginning on January 1 of any calendar year and ending on December 31 of such calendar year, or such other consecutive 12 month period selected by the Obligated Group Representative as the fiscal year for the Members.

“Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative, with written notice to the Master Trustee.

“Funded Interest” means amounts irrevocably deposited in an escrow or other trust account to pay interest on Long-Term Indebtedness or Related Bonds and interest earned on amounts irrevocably deposited in an escrow or other trust account to the extent such interest earned is required to be applied to pay interest on Long-Term Indebtedness or Related Bonds.

“General Partner” means Gilbert AL GP, LLC, a Texas limited liability company, the general partner of the Obligor.

“GMP Contract” shall mean the AIA Document A102TM-2007 Standard Form of Agreement Between Owner and Contractor, dated September 16, 2015, between the Obligor and the Contractor, as supplemented and amended from time to time, and acceptable to the Bondholder Representative, relating to the Project.

“Governing Body” of a Person means the members, board of directors, the board of trustees or similar group in which the right to exercise the powers of corporate members, directors or trustees is vested, and with respect to the Obligor means the General Partner.

“Government Obligations” means direct obligations of the United States of America or obligations the full and timely payment of the principal of and interest on which is unconditionally guaranteed by the United States of America.

“Gross Revenues” means all receipts, revenues, rentals, income, insurance proceeds (including, without limitation, all Medicaid, Medicare and other third party payments), condemnation awards, entrance fees and other moneys received by or on behalf of any Obligated Group Member, including (without limitation) revenues derived from (a) the ownership, operation or leasing of any portion of the Facilities of an Obligated Group Member (including, without limitation, fees payable by or on behalf of residents of the Facilities of an Obligated Group Member) and all rights to receive the same (other than the right to receive Medicaid and Medicare payments), whether in the form of accounts, general intangibles or other rights, and the proceeds of such accounts, general intangibles and other rights, whether now existing or hereafter coming into existence or whether now owned or held or hereafter acquired, and (b) gifts, grants, bequests, donations and contributions heretofore or hereafter made that are legally available to meet any of the obligations of the Obligated Group Member incurred in the financing, operation, maintenance or repair of any portion of its Facilities; provided, however, that there shall be excluded from Gross Revenues (i) any amounts received by an Obligated Group Member as a billing agent for another entity, except for fees received for serving as billing agent, (ii) gifts, grants, bequests, donations and contributions to an Obligated Group

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Member heretofore or hereafter made, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use of payments required under this Indenture and (iii) all deposits made by residents or prospective residents that are required to be held in escrow pending actual occupancy of a unit. If such calculation of Gross Revenues is being made with respect to the Obligated Group, any such revenues attributable to transactions between any Member and any other Member should be excluded.

“Guaranty” means all obligations of a Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any Primary Obligor in any manner, whether directly or indirectly, including but not limited to obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any Property constituting security therefor; (b) to advance or supply funds: (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain working capital or other balance sheet condition; (c) to purchase securities or other Property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the Primary Obligor to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof.

“Hazardous Materials” means, without limitation, asbestos, gasoline, petroleum products, explosives, radioactive materials, polychlorinated biphenyls, chemical liquids, or solid, liquid or gaseous materials, or related or similar materials, or any other substance or material defined as a hazardous or toxic substance, material or waste by any applicable federal, state or local law, ordinance, rule, regulation, administrative order or administrative guideline.

“Holder” means the registered owner of any Obligation.

“Income Available for Debt Service” means for any period, the excess of Revenues over Expenses of the Person or group of Persons involved.

“Indebtedness” means, for any Person, (a) all Guaranties by such Person, (b) all liabilities (exclusive of reserves such as those established for deferred taxes or litigation) recorded or required to be recorded as such on the audited financial statements of such Person in accordance with generally accepted accounting principles, and (c) all obligations for the payment of money incurred or assumed by such Person (i) due and payable in all events or (ii) if incurred or assumed primarily to assure the repayment of money borrowed or credit extended, due and payable upon the occurrence of a condition precedent or upon the performance of work, possession of Property as lessee, rendering of services by others or otherwise; provided that Indebtedness shall not include the joint and several liability of any Member on Indebtedness issued by another Member, or any obligation to repay entrance fees or moneys deposited by residents or others with a Member as security for or as prepayment of the cost of care or any rights of residents of life care, elderly housing or similar facilities to endowment or similar funds deposited by or on behalf of such residents.

“Independent Counsel” means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent legal counsel for any Member, the Master Trustee or any Related Bond Trustee.

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“Initial Testing Period” means the first Fiscal Year following the earlier of (a) Stabilization or (b) the Fiscal Year ending December 31, 2019.

“Insurance Consultant” means McQueary Henry Bowles Troy LLP or any other person or firm who in the case of an individual is not an employee or officer of any Member or any Affiliate thereof and which, in the case of a firm, does not control any Member of the Obligated Group or any Affiliate thereof and is not controlled by or under common control with any Member of the Obligated Group or any Affiliate thereof, appointed by the Obligated Group Representative, and acceptable to the Bondholder Representative, qualified to survey risks and to recommend insurance coverage for nursing homes or health care facilities and services of the type involved, and having a favorable reputation for skill and experience in such surveys and such recommendations, and which may include a broker or agent with whom any Member transacts business.

“Interest Rate Agreement” means an interest rate exchange, hedge or similar agreement, expressly identified in an Officer’s Certificate of the Obligated Group Representative delivered to the Master Trustee as being entered into in order to hedge or adjust the interest payable on or interest rate risk of all or a portion of any Indebtedness, which agreement may include, without limitation, an interest rate swap, a forward or futures contract or an option (e.g. a call, put, cap, floor or collar) and which agreement does not constitute an obligation to repay money borrowed, credit extended or the equivalent thereof, and which agreement has been consented to by the Bondholder Representative.

“Interest Rate Agreement Obligation” means an Obligation expressly identified in an Officer’s Certificate of the Obligated Group Representative delivered to the Master Trustee as being issued to secure payments under an Interest Rate Agreement; provided that (i) except as provided in Section 1.04(b), the regularly scheduled or periodic payments owed to a counterparty under an Interest Rate Agreement that is secured by an Interest Rate Agreement Obligation will be treated as interest payments on a Senior Obligation hereunder, and (ii) termination payments, settlement payments, or other payments not included in the preceding clause (i) owed to a counterparty under an Interest Rate Agreement that is secured by an Interest Rate Agreement Obligation will be treated as payments on a Subordinate Obligation hereunder.

“Issuer” means the Arizona Health Facilities Authority, a political subdivision and instrumentality duly created and existing pursuant to the laws and constitution of the State of Arizona, and its successors and assigns.

“Lien” means any mortgage, pledge or lease of, security interest in or lien, charge or encumbrance on any Property of the Person involved in favor of, or which secures any obligation to, any Person, and any Capitalized Lease under which any Member is lessee.

“Liquidity Facility” means a written commitment to provide money to purchase or retire any Indebtedness if (i) on the date of delivery of such Liquidity Facility, the unsecured Long-Term Indebtedness or claims paying ability of the provider of such Liquidity Facility or its parent holding company, guarantor or other controlling entity is rated at least “A” by a least one of the Rating Agencies and (ii) as of any particular date of determination, no amount realized under such Liquidity Facility for the payment of the principal or the purchase or redemption

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price of such Indebtedness (exclusive of amounts realized for the payment of accrued interest on such Indebtedness) shall be required to be repaid by the obligor on such Indebtedness for a period of at least one year.

“Living Unit” means each assisted living bed (including memory support beds) in the Project.

“Loan Agreement” means the Loan Agreement, dated as of October 1, 2015, between the Issuer and the Obligor relating to the Series 2015 Bonds, as such Loan Agreement may from time to time be amended or supplemented.

“Long-Term Indebtedness” means, with respect to any Person, (a) all Indebtedness of such Person for money borrowed, credit extended, incurred or assumed which is not Short Term; and (b) Capitalized Rentals under Capitalized Leases entered into by the Person; provided, however, that Indebtedness that could be described by more than one of the foregoing categories shall not in any case be considered more than once for the purpose of any calculation made pursuant to this Indenture.

“Majority Holders” means (a) so long as any of the Senior Obligations are then Outstanding, the Holders of not less than a majority in aggregate principal amount of the Outstanding Senior Obligations, and (b) if no Senior Obligations are then Outstanding, the Holders of not less than a majority in aggregate principal amount of the Outstanding Subordinate Obligations.

“Management Agreement” means the Management Agreement, dated September 9, 2015, between the Obligor and the Manager, as it may from time to time be supplemented or amended, and acceptable to the Bondholder Representative.

“Manager” means Surpass Senior Living, LLC, a Texas limited liability company, and its successors and assigns under the Management Agreement.

“Master Trustee” means Wilmington Trust, National Association, as trustee hereunder, and any successor in trust appointed pursuant to Article VIII hereof.

“Maturity” when used with respect to any Indebtedness means the date on which the principal of such Indebtedness or any installment thereof becomes due and payable as therein provided, whether at the Stated Maturity thereof or by declaration of acceleration, call for redemption, or otherwise.

“Maximum Annual Debt Service Requirement” means the largest total Debt Service Requirements for the current or any succeeding Fiscal Year, excluding the Debt Service Requirements on any series of Related Bonds for which a Debt Service Reserve Fund exists, for the 12 month period ending on the date of final Stated Maturity of such series of Related Bonds.

“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,

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“Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative, with written notice to the Master Trustee.

“Mortgaged Property” means the real property and personal property of the Members which is subject to the Lien and security interest of the Deed of Trust pursuant to any of the granting clauses of the Deed of Trust.

“Net Proceeds” means, when used with respect to any insurance (other than the proceeds of business interruption insurance) or condemnation award or sale consummated under threat of condemnation, the gross proceeds from the insurance or condemnation award or sale with respect to which that term is used less all expenses (including attorney’s fees, adjuster’s fees and any expenses of the Obligated Group or the Master Trustee) incurred in the collection of such gross proceeds.

“Net Rentals” means all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the Property other than upon termination of the lease for a default thereunder) payable under a lease or sublease of real or personal Property excluding any amounts required to be paid by the lessee (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Net Rentals for any future period under any so called “percentage lease” shall be computed on the basis of the amount reasonably estimated to be payable thereunder for such period, but in any event not less than the amount paid or payable thereunder during the immediately preceding period of the same duration as such future period; provided that the amount estimated to be payable under any such percentage lease shall in all cases recognize any change in the applicable percentage called for by the terms of such lease.

“Non-Recourse Indebtedness” means any Indebtedness the liability for which is effectively limited to Property, Plant and Equipment (other than the Mortgaged Property), with no recourse, directly or indirectly, to any other Property of any Member or the Gross Revenues.

“Obligated Group” means, collectively, all of the Obligated Group Members.

“Obligated Group Member” or “Member” means the Obligor and any other Person who has satisfied the requirements set forth in this Indenture for becoming an Obligated Group Member and its successors until any such Person or a successor Person satisfies the requirements set forth in this Indenture for ceasing to be an Obligated Group Member.

“Obligated Group Representative” means the Obligor, or any successor Obligated Group Representative appointed pursuant to Section 6.04 hereof.

“Obligation” means any promissory note, guaranty, lease, contractual agreement to pay money or other obligation of any Obligated Group Member which is authenticated and delivered pursuant to this Indenture and which is entitled to the benefits of this Indenture. Obligations include Senior Obligations and Subordinate Obligations.

“Obligation Register” means the register of ownership of the Obligations to be maintained pursuant to this Indenture.

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“Obligor” means Gilbert AL Partners, LP, a Texas limited partnership, and any and all successors thereto in accordance with this Indenture.

“Occupied” means a Living Unit for which the monthly service fee has been paid for the most recent month.

“Officer’s Certificate” means a certificate signed, in the case of a certificate delivered by a Member of the Obligated Group, by such Member’s general partner, managing member or manager, the chief executive officer, the chief financial officer, the chief operating officer, the president, any vice president, director of finance or any other Authorized Representative of such Member or, in the case of a certificate delivered by any other Person, by the general partner, managing member, manager, president, chief executive officer, chief financial officer or any other officer, representative or agent authorized to sign by resolution of the Governing Body of such Person, in either case whose authority to execute such certificate shall be evidenced to the satisfaction of the Master Trustee.

“Opinion of Bond Counsel” means a written opinion of Bond Counsel.

“Opinion of Counsel” means a written opinion of counsel who may (except as otherwise expressly provided herein) be counsel to any Obligated Group Member and shall be reasonably acceptable to the Master Trustee.

“Outstanding” when used with respect to Obligations means, as of the date of determination, all Obligations theretofore authenticated and delivered under this Indenture, except:

(1) Obligations theretofore cancelled and delivered to the Master Trustee or delivered to the Master Trustee for cancellation;

(2) Obligations for whose payment or redemption money (or Defeasance Obligations to the extent permitted by Section 10.02 of this Indenture) shall have theretofore been deposited with the Master Trustee or any Paying Agent for such Obligations in trust for the Holders of such Obligations pursuant to this Indenture; provided, that, if such Obligations are to be redeemed, notice of such redemption has been duly given or waived pursuant to this Indenture or irrevocable provision for the giving of such notice satisfactory to the Master Trustee has been made pursuant to this Indenture; and

(3) Obligations upon transfer of or in exchange for or in lieu of which other Obligations have been authenticated and delivered pursuant to this Indenture;

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Obligations have given any request, demand, authorization, direction, notice, consent, or waiver hereunder, (i) Obligations owned by any Obligated Group Member or any Affiliate of any Obligated Group Member and (ii) Interest Rate Agreement Obligations (except as provided in Section 1.04(b)) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Master Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, or waiver, only Obligations that the

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Master Trustee knows to be so owned by any Obligated Group Member or any Affiliate of any Obligated Group Member shall be so disregarded. Obligations so owned by any Obligated Group Member or any Affiliate of any Obligated Group Member that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Master Trustee the pledgee’s right so to act with respect to such Obligations and that the pledgee is not an Obligated Group Member or an Affiliate of any Obligated Group Member.

“Paying Agent” means any Person authorized by the Obligated Group Representative to pay any Obligations on behalf of the Obligated Group.

“Percentage of Units Occupied” means the percentage determined by dividing the number of Occupied Living Units by the total number of Living Units in the Project.

“Permitted Encumbrances” means this Indenture, the Deeds of Trust, and, as of any particular date:

(a) Liens arising by reason of good faith deposits with a Member in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Member to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Member to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pensions or profit sharing plans or other social security plans or programs, or to share in the privileges or benefits required for corporations participating in such arrangements;

(b) any Lien described in (i) Exhibit B to the initial Deed of Trust or (ii) the comparable exhibit to an additional Deed of Trust, provided that no such Lien may be extended, renewed or modified without the prior written consent of the Bondholder Representative;

(c) leases which relate to Property of the Obligated Group which is of a type that is customarily the subject of such leases, such as office space for physicians and educational institutions, food service facilities, gift shops, commercial, beauty shop, banking, radiology, other similar specialty services, pharmacy and similar departments or employee rental apartments; and any leases, licenses or similar rights to use Property whereunder a Member is lessee, licensee or the equivalent thereof, or leases of equipment or other items or facilities entered into in the ordinary course of business, upon fair and reasonable terms no less favorable to the lessee or licensee than would obtain in a comparable arm’s length transaction;

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(d) Liens for taxes and special assessments which are not then delinquent, or if then delinquent are being contested in accordance with Section 4.05 hereof;

(e) utility, access and other easements and rights of way, restrictions, encumbrances and exceptions which do not materially adversely affect the value of, or materially interfere with or materially impair the operation of the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof;

(f) any mechanic’s, laborer’s, materialman’s, broker’s, appraiser’s, supplier’s or vendor’s Lien or right in respect thereof if payment is not yet due under the contract in question or has been due for less than 60 days, or if such Lien is being contested in accordance with the provisions of this Indenture;

(g) such Liens, defects, irregularities of title and encroachments on adjoining property as normally exist with respect to property similar in character to the Property involved and which do not materially adversely affect the value of, or materially interfere with or materially impair the operation of, the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof;

(h) zoning laws and similar restrictions which are not violated by the Property affected thereby;

(i) statutory rights under Section 291, Title 42 of the United States Code, as a result of what are commonly known as Hill Burton grants, and similar rights under other federal statutes or statutes of the state in which the Property involved is located;

(j) all right, title and interest of the state where the Property involved is located, municipalities and the public in and to tunnels, bridges and passageways over, under or upon a public way;

(k) Liens on or in Property given, granted, bequeathed or devised by the owner thereof existing at the time of such gift, grant, bequest or devise, provided that (i) such Liens consist solely of restrictions on the use thereof or the income therefrom or (ii) such Liens secure Indebtedness which is not assumed by any Member and such Liens attach solely to the Property (including the income therefrom) which is the subject of such gift, grant, bequest or devise;

(l) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which any Member shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall be in existence;

(m) Liens on moneys deposited by patients or others with a Member as security for or as prepayment of the cost of patient care or any rights of residents of life care, elderly housing or similar facilities to endowment, prepayment or similar funds deposited by or on behalf of such residents;

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(n) Liens on Property due to rights of third party payors for recoupment of excess reimbursement paid;

(o) such Liens as are required to be granted by Section 20-1805, Arizona Revised Statutes, as amended;

(p) any Lien or other right of any resident to the use and occupancy of any unit; or

(q) such Liens, covenants, conditions and restrictions, if any, which do not secure Indebtedness and which are other than those of the type referred to above, and which do not and will not, so far as can reasonably be foreseen by the Obligated Group, materially adversely affect the value of, or materially interfere with or materially impair the operation of, the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof.

“Permitted Investments” means dollar denominated investments, to the extent permitted by law, in any of the following:

(a) Government Obligations;

(b) direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; consolidated debt obligations and letter of credit-backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation (“FHLMCs”); debentures of the Federal Housing Administration; mortgage-backed securities (except stripped mortgage securities which are valued greater than par on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association (“FNMAs”), participation certificates of the General Services Administration; guaranteed mortgage-backed securities and guaranteed participation certificates of the Government National Mortgage Association (“GNMAs”); guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit-backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing & Urban Development; guaranteed Title XI financings of the U.S. Maritime Administration; and other Resolution Funding Corporation securities;

(c) direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, “A-” or better by Moody’s and “A3” or better by Standard & Poor’s or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, “A” or better by Moody’s and “A” or better by Standard & Poor’s;

(d) commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, “P-1” by Moody’s and “A-1” or better by Standard & Poor’s;

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(e) federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank, including a branch office of a foreign bank which branch office is located in the United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a short-term “Bank Deposit” rating of “P-1” by Moody’s and a rating of “A-1” or better by Standard & Poor’s;

(f) deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3 million, provided such deposits are continuously and fully insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation;

(g) investments in money-market funds rated “AAAm” or “AAAm-G” by Standard & Poor’s;

(h) repurchase agreements collateralized by Federal Securities, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors’ Protection Corporation jurisdiction or any commercial bank insured by the Federal Deposit Insurance Corporation, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated “P-1” or “A3” or better by Moody’s and “A-1” or “A-” or better by Standard & Poor’s, provided: (a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by an independent third party acting solely as agent (“Agent”) and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (iii) a bank approved in writing for such purpose by the Obligated Group shall have received written confirmation from such Agent that it holds such securities, free and clear of any lien, as agent for the Obligated Group; and (c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Obligated Group; and (d) the repurchase agreement has a term of 180 days or less, and the Obligated Group or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103 percent; and

(i) investment agreements with any bank, registered broker/dealer, insurance company or any other financial institution or corporation, or any subsidiary thereof with a senior unsecured credit rating of, or claims paying ability of, at least “A3” by Moody’s or “A-” by Standard & Poor’s or “A-” by Fitch (the credit rating may be at the parent or subsidiary level).

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The Master Trustee shall be entitled to assume that any investment which at the time of purchase is a Permitted Investment remains a Permitted Investment thereafter, absent receipt of written notice or information to the contrary. To the extent such investment is no longer a Permitted Investment, the Obligated Group Representative shall promptly provide the Master Trustee written notice of such status and the Master Trustee shall proceed to invest such amounts pursuant to Section 3.03 herein.

“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof or any other entity.

“Place of Payment” for a series of Obligations means a city or political subdivision designated as such pursuant to this Indenture or a Supplement.

“Premises” means the real property described in Exhibit A to any Deed of Trust.

“Primary Obligor” means the Person who is primarily obligated on an obligation which is guaranteed by another Person.

“Project” means the Facilities financed with the proceeds of the Series 2015 Bonds and other legally available moneys of the Obligated Group Members and more particularly described on Exhibit A to the Loan Agreement.

“Property” means any and all assets of a Person, any land, leasehold interests, buildings, machinery, equipment, hardware, and inventory of the Person wherever located and whether now owned or hereafter acquired, any and all rights, titles and interests in and to any and all fixtures, and property whether real or personal, tangible or intangible and wherever situated and whether now owned or hereafter acquired and shall include all cash, investments, funds, endowments, revenues, receipts or other moneys, or right to receive any of the same, including, without limitation, Gross Revenues, accounts, accounts receivable, the Premises, the Facilities, the Property, Plant and Equipment, the Project, contract rights and general intangibles, and all proceeds of all of the foregoing.

“Property, Plant and Equipment” means all Property of each Member which is classified as property, plant and equipment under generally accepted accounting principles.

“Rating Agency” means Moody’s, Standard & Poor’s or Fitch.

“Related Bond Indenture” means any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued.

“Related Bond Trustee” means the trustee and its successor in the trust created under any Related Bond Indenture.

“Related Bonds” means the revenue bonds or other obligations issued by any state, territory or possession of the United States or any municipal corporation or political subdivision formed under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof (“governmental issuer”),

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pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to any Obligated Group Member in consideration of the execution, authentication and delivery of an Obligation to or for the order of such governmental issuer.

“Related Issuer” means the issuer of any issue of Related Bonds.

“Related Loan Agreement” means any loan agreement, financing agreement, credit agreement or other comparable instrument entered into in connection with a series of Related Bonds.

“Related Senior Bonds” means the Series 2015 Bonds and any other series of Related Bonds payable and secured by a Senior Obligation.

“Required Information Recipient” means the Master Trustee, each Related Bond Trustee, the Bondholder Representative, the Electronic Municipal Market Access System maintained by the Municipal Securities Rulemaking Board and all holders who hold $500,000 or more of Related Bonds and request such reports in writing (which written request shall include a certification as to such ownership).

“Responsible Officer” when used with respect to the Master Trustee means the officer in the corporate trust department or comparable department of the Master Trustee having direct responsibility for administration of this Indenture.

“Revenue Fund” means the Revenue Fund created by Section 3.01 hereof.

“Revenues” means, for any period, (a) in the case of any Person providing assisted living and/or memory care services, the sum of (i) net rental unit revenues and resident service revenues, plus (ii) other operating revenues, plus (iii) non-operating revenues (other than Contributions, income derived from the sale of assets not in the ordinary course of business, any gain from the extinguishment of debt or other extraordinary item, earnings which constitute Funded Interest or earnings on amounts which are irrevocably deposited in escrow to pay the principal of or interest on Indebtedness, but including investment income), plus (iv) Unrestricted Contributions, and (b) in the case of any other Person, gross revenues less sale discounts and sale returns and allowances, as determined in accordance with generally accepted accounting principles; but excluding in either case (i) any unrealized gain or loss resulting from changes in the valuation of investment securities or unrealized changes in the value of derivative investments, (ii) any gains on the sale or other disposition of fixed or capital assets not in the ordinary course, (iii) earnings resulting from any reappraisal, revaluation or write up of fixed or capital assets, (iv) any revenues recognized from deferred revenues related to entrance fees and (v) insurance (other than business interruption) and condemnation proceeds; provided, however, that if such calculation is being made with respect to the Obligated Group, such calculation shall be made in such a manner so as to exclude any revenues attributable to transactions between any Member and any other Member. For purposes of calculations under this Indenture, an Unrestricted Contribution from an Affiliate shall be treated as being made during the period of such calculation so long as the Unrestricted Contribution is made prior to the date the applicable certificate is required to be delivered with respect to such calculation.

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“Senior Obligations” means the Series 2015 Notes and any other Obligation issued hereunder, with the consent of the Bondholder Representative, on a pari passu basis with the Series 2015 Notes.

“Series 2015 Bonds” means, together, the Series 2015A Bonds and the Series 2015B Bonds.

“Series 2015 Notes” means, together, the Series 2015A Note and the Series 2015B Note.

“Series 2015A Bonds” means the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A.

“Series 2015A Note” means the Obligor’s Senior Series 2015A Note relating to the Series 2015A Bonds issued under the Supplemental Indenture Number 1.

“Series 2015B Bonds” means the Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B.

“Series 2015B Note” means the Obligor’s Senior Series 2015B Note relating to the Series 2015B Bonds issued under the Supplemental Indenture Number 1.

“Short Term,” when used in connection with Indebtedness, means having an original maturity less than or equal to one year and not renewable at the option of the debtor for a term greater than one year beyond the date of original issuance.

“Significant Holders” means (a) so long as any Senior Obligations are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Senior Obligations, and (b) if no Senior Obligations are then Outstanding, the Holders of 25 percent or more in aggregate principal amount of the Outstanding Subordinate Obligations.

“Stabilization” means the percentage occupancy of Living Units is equal to or greater than 85 percent.

“Stabilized Year” means the first full Fiscal Year following the Fiscal Year in which Stabilization occurs.

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Standard & Poor’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative, with written notice to the Master Trustee.

“Stated Maturity” when used with respect to any Indebtedness or any installment of interest thereon means any date specified in the instrument evidencing such Indebtedness or such installment of interest as a fixed date on which the principal of such Indebtedness or any installment thereof or the fixed date on which such installment of interest is due and payable.

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“Subordinate Indebtedness” means any promissory note, guaranty, lease, contractual agreement to pay money or other obligation meeting the requirements of Section 4.16(a)(ii).

“Subordinate Obligations” means any Obligation issued hereunder on a basis subordinate to the Senior Obligations, including but not limited to any Interest Rate Agreement Obligations securing termination payments, settlement payments, or other payments that are not regularly scheduled or periodic payments owed to a counterparty under an Interest Rate Agreement.

“Supplement” means an indenture supplemental to, and authorized and executed pursuant to the terms of, this Indenture.

“Supplemental Indenture Number 1” means the Supplemental Indenture Number 1, dated as of October 1, 2015, between the Obligor, as an Obligated Group Member and as the Obligated Group Representative, and the Master Trustee.

“Threshold Amount” means the greater of (a) 3 percent of Book Value or, at the option of the Obligated Group Representative, the Current Value of the Property, Plant and Equipment of the Obligated Group or (b) $1,000,000 plus an amount equal to $1,000,000 multiplied by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from its level as of January 1, 2015.

“Trust Estate” has the meaning given to such term in the Granting Clauses hereof.

“Unrestricted Contributions” means Contributions which are not restricted in any way that would prevent their application to the payment of debt service on Indebtedness of the Person receiving such Contributions. For the purposes of calculations hereunder, an Unrestricted Contribution from an Affiliate shall be treated as being made during the period of such calculation so long as the Unrestricted Contribution is made prior to the date the applicable certificate is required to be delivered with respect to such calculation.

“Working Capital Fund” means the fund by that name established pursuant to Section 3.02 of this Indenture.

Section 1.02 Compliance Certificates and Reports. Whenever the amount or date of any of the following is a condition to the taking of any action permitted hereby,

(a) estimated Revenues, Expenses, Cash and Investments and Income Available for Debt Service of any Person for any future Fiscal Year shall be established by a certificate or report of a Consultant stating the amount of such estimated item based upon assumptions provided by such Person and stating that such assumptions are, in the opinion of the Consultant, reasonable;

(b) any of:

(1) Revenues, Expenses, Cash and Investments and Income Available for Debt Service of any Person for any prior Fiscal Year or period,

(2) Maximum Annual Debt Service Requirement of any Person, and

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(3) principal of and interest on any Indebtedness

shall be established by an Officer’s Certificate of the Obligated Group Representative stating the amount of such item and that such amounts have been derived from either the most recent financial statements of the Obligated Group delivered to the Master Trustee pursuant to Section 4.15 hereof or, for any period other than a prior Fiscal Year, from the internally prepared financial statements of the Obligated Group for such period;

(c) the anticipated date of completion of any construction project of any Person shall be established by an Officer’s Certificate of the Obligated Group Representative; and

(d) securities shall include any amounts invested in marketable securities, whether classified as short term or long term assets.

All calculations required to be made hereunder with respect to the Obligated Group shall be made after elimination of intercompany items on a combined basis. The character or amount of any asset, liability or item of income or expense required to be determined or any consolidation, combination or other accounting computation required to be made for the purposes hereof, shall be determined or made in accordance with generally accepted accounting principles in effect on the date hereof, or at the option of the Obligated Group Representative, at the time in effect (provided that such generally accepted accounting principles are applied consistently with the requirements existing either on the date hereof or at the time in effect) except that assets, liabilities, items of income and expenses of Affiliates which are not included in the Obligated Group shall not be taken into account, and except where such principles are inconsistent with the requirements of this Indenture; provided, however, that there shall not be included in any calculation of any item otherwise required to be included in such calculation with respect to any Person which has withdrawn or is withdrawing from the Obligated Group.

Section 1.03 Form of Documents Delivered to Master Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of any officer of a Person may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, in so far as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of a specified Person stating that the information with respect to such factual matters is in the possession of such Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

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Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 1.04 Acts of Holders of Obligations.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of Obligations may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders of Obligations in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Master Trustee, and, where it is hereby expressly required, to the Obligated Group Representative. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders of Obligations signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Master Trustee and the Obligated Group Members, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.

For purposes of all of the consents, approvals, waivers and notices required to be obtained or given under this Indenture, Obligations evidencing or constituting Interest Rate Agreement Obligations shall be treated as Outstanding only in a principal amount equal to any amounts then currently due and payable thereunder.

(c) The ownership of Obligations in registered form shall be proved by the Obligation Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Bondholder Representative or the Holder of any Obligation shall bind every future Holder of the same Obligation and the Holder of every Obligation issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Master Trustee or the Obligated Group Members in reliance thereon, whether or not notation of such action is made upon such Obligation.

Section 1.05 Notices, etc., to Master Trustee, Bondholder Representative and Obligated Group Members. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders of Obligations or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

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(1) the Master Trustee by any Holder of Obligations or by any specified Person shall be sufficient for every purpose hereunder if actually received by the Master Trustee at Wilmington Trust, National Association, 25 South Charles Street, 11th Floor, Baltimore, Maryland 21201, Attention: Corporate Trust Department, or at any other address furnished in writing to the Holders of Obligations, the Bondholder Representative and the Obligated Group Representative by the Master Trustee; or

(2) the Bondholder Representative by the Master Trustee or the Obligated Group Members shall be sufficient for every purpose hereunder if in writing and mailed, first class postage prepaid, to the Bondholder Representative addressed to it at Greenwich Investment Management Inc., 200 First Stamford Place, Stamford, Connecticut 06902, Attention: L. George Rieger, with a copy to Robinson & Cole, LLP, 280 Trumbull Street, Hartford, Connecticut 06103, Attention: Edward J. Samorajczyk, Jr., or at any other address previously furnished in writing to the Master Trustee and the Obligated Group Representative by the Bondholder Representative; or

(3) the Obligated Group Members by the Master Trustee or by any Holder of Obligations shall be sufficient for every purpose hereunder if in writing and mailed, first class postage prepaid, to the Obligated Group Representative addressed to it at Gilbert AL Partners, LP, 6370 LBJ Freeway, Suite 276, Dallas, Texas 75240, Attention: Dustin Pridmore, with a copy to Powell Coleman & Arnold LLP, 8080 North Central Expressway, Suite 1380, Dallas, Texas 75206, Attention: Brian DeVoss, or at any other address previously furnished in writing to the Master Trustee by the Obligated Group Representative.

Section 1.06 Notices to Holders of Obligations; Waiver. Subject to Section 11.08 hereof, where this Indenture provides for notice to Holders of Obligations of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder of such Obligations, at his address as it appears on the Obligation Register, not later than the latest date, and not earlier than the earliest date, prescribed for the transmission of such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Obligations shall be filed with the Master Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

Section 1.07 Notices to Rating Agencies. If any of the Related Bonds are then rated by a Rating Agency, the Obligated Group Representative shall give prompt notice to such Rating Agency of any of the following events:

(a) any Event of Default hereunder;

(b) the incurrence by any Obligated Group Member of any Long-Term Indebtedness;

(c) any addition to or withdrawal from the Obligated Group; and

(d) any Interest Rate Agreement entered into by any Obligated Group Member.

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Section 1.08 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 1.09 Successors and Assigns. All covenants and agreements in this Indenture by the Obligated Group Members shall bind their respective successors and assigns, whether so expressed or not.

Section 1.10 Separability Clause. In case any provision in this Indenture or in the Obligations shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 1.11 Governing Law. This Indenture shall be construed in accordance with and governed by the laws of the State of Arizona.

ARTICLE II

THE OBLIGATIONS

Section 2.01 Series and Amount of Obligations.

(a) Obligations shall be issued under this Indenture in series created by Supplements permitted hereunder. Each series shall be designated to differentiate the Obligations of such series from the Obligations of any other series and shall specify the priority of payment of such Obligation. No Obligation issued hereunder shall be secured on a basis senior to other Obligations except as provided herein for Senior Obligations and Subordinate Obligations; provided, however, that Subordinate Indebtedness may only be secured by Subordinate Obligations hereunder. The number of series of Obligations that may be created under this Indenture is not limited. The aggregate principal amount of Obligations of each series that may be created under this Indenture is not limited except as restricted by Supplement and the provisions of Article IV of this Indenture.

(b) Any Obligated Group Member proposing to incur Indebtedness, other than the Series 2015 Notes, whether evidenced by Obligations issued pursuant to a Supplement or by evidences of Indebtedness issued pursuant to documents other than this Indenture, shall give written notice of its intention to incur such Indebtedness, including in such notice the amount of Indebtedness to be incurred, to the Obligated Group Representative (unless such Obligated Group Member is the Obligated Group Representative) and the other Obligated Group Members. The Obligated Group Representative shall provide the Master Trustee and the Bondholder Representative with a copy of any such notice it gives or receives prior to the date such Indebtedness is to be incurred. Any such Obligated Group Member, other than the Obligated Group Representative, proposing to incur such Indebtedness other than the Series 2015 Notes, shall obtain (i) the written consent of the Obligated Group Representative, which consent shall be evidenced by an Officer’s Certificate of the Obligated Group Representative filed with the Master Trustee or an endorsement to such Indebtedness signed by the Obligated Group Representative and (ii) the written consent of the Bondholder Representative. The Series 2015 Notes are issued simultaneously with the execution and delivery hereof.

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Section 2.02 Appointment of Obligated Group Representative. Each Obligated Group Member, by becoming an Obligated Group Member, irrevocably appoints the Obligated Group Representative as its agent and true and lawful attorney in fact and grants to the Obligated Group Representative (a) full and exclusive power to execute Supplements authorizing the issuance of Obligations or series of Obligations, (b) full and exclusive power to execute Obligations for and on behalf of the Obligated Group and each Obligated Group Member, (c) full and exclusive power to execute Supplements on behalf of the Obligated Group and each Obligated Group Member pursuant to Sections 9.01 and 9.02 hereof, and (d) full power to prepare, or authorize the preparation of, any and all documents, certificates or disclosure materials reasonably and ordinarily prepared in connection with the issuance of Obligations hereunder, or Related Bonds associated therewith, and to execute and deliver such items to the appropriate parties in connection therewith.

Section 2.03 Execution and Authentication of Obligations. All Obligations shall be executed for and on behalf of the Obligated Group and the Obligated Group Members by an Authorized Representative of the Obligated Group Representative. The signature of any such Authorized Representative may be manual or may be mechanically or photographically reproduced on the Obligation. If any Authorized Representative whose signature appears on any Obligation ceases to be such Authorized Representative before delivery thereof, such signature shall remain valid and sufficient for all purposes as if such Authorized Representative had remained in office until such delivery. Each Obligation shall be manually authenticated by an authorized officer of the Master Trustee, without which authentication no Obligation shall be entitled to the benefits hereof.

The Master Trustee’s authentication certificate shall be substantially in the following form:

MASTER TRUSTEE’S AUTHENTICATION CERTIFICATE

This [Obligation] is one of the Obligations referred to in the aforementioned Master Indenture.

Date of Authentication: Master Trustee

By:

Authorized Signatory

Section 2.04 Supplement Creating Obligations. The Obligated Group Representative (on behalf of the Obligated Group Members) and the Master Trustee, with the prior written consent of the Bondholder Representative, may from time to time enter into a Supplement in order to create Obligations hereunder. Each Supplement authorizing the issuance of Obligations shall specify and determine the date of the Obligations, the principal amount thereof, the purposes for which such Obligations are being issued, the form, title, designation, and the manner of numbering or denominations, if applicable, of such Obligations, the date or dates of

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maturity of such Obligations, the rate or rates of interest (or method of determining the rate or rates of interest) and premium, if any, borne by such Obligations, the arrangement for place and medium of payment, the priority of such Obligation, and any other provisions deemed advisable or necessary. Each Obligation shall be issuable, shall be transferable and exchangeable and shall be subject to redemption as specified in this Indenture and in the Supplement. Any Obligation to be held by a Related Bond Trustee in connection with the issuance of Related Bonds shall be in the principal amount equal to the aggregate principal amount of such Related Bonds and shall be registered in the name of the Related Bond Trustee as assignee of the Related Issuer. Unless an Obligation has been registered under the Securities Act of 1933, as amended (or similar legislation subsequently enacted), each such Obligation shall be endorsed with a legend which shall read substantially as follows: “This [describe Obligation] has not been registered under the Securities Act of 1933 or any state securities law (or any such similar subsequent legislation);” provided, however, such legend shall not be required if the Master Trustee is provided with an Opinion of Counsel to the effect that such legend is not required.

To the extent that any Indebtedness, Interest Rate Agreement, or other obligation which is intended to be entitled to the benefits of this Indenture is not in the form of a promissory note, an Obligation in the form of a promissory note may be issued hereunder and pledged as security for the payment of such Indebtedness, Interest Rate Agreement, or other obligation in lieu of directly incurring such Indebtedness, Interest Rate Agreement, or other obligation as an Obligation hereunder. Nevertheless, Obligations may be issued hereunder to evidence any type of Indebtedness, including without limitation any Indebtedness in a form other than a promissory note, and any Interest Rate Agreement may be authenticated as an Obligation hereunder.

A Supplement and the Obligations issued thereunder may contain, as applicable, provisions relating to a Credit Facility or Liquidity Facility, as well as any and all compatible provisions necessary in order to make the Obligations meet the requirements of an issuer of any Credit Facility or Liquidity Facility. Similarly, a Supplement may provide for Obligations to be issued in fixed or variable rate forms, as the case may be, with such tender and redemption provisions as may be deemed necessary for the issuance thereof and provide for the execution of required documents necessary for such purposes.

Each Supplement entered into for the issuance of Obligations shall specify whether such Obligations shall be Senior Obligations or Subordinate Obligations and, subject to such priority, may specifically subordinate payment, remedies and any other provisions of the Obligations issued thereunder to the provisions of any other Obligations.

Section 2.05 Conditions to Issuance of Obligations Hereunder. With respect to Obligations created hereunder, simultaneously with or prior to the execution, authentication and delivery of Obligations pursuant to this Indenture:

(a) The Obligated Group Representative (on behalf of the Obligated Group Members) and the Master Trustee, with the written consent of the Bondholder Representative, shall have entered into a Supplement as provided in Section 2.04 hereof, and all requirements and conditions to the issuance of such Obligations set forth in the Supplement and in this Indenture, including, without limitation, the provisions of Section 4.16 hereof (provided that such provisions shall not be applicable to the Series 2015 Notes), shall have been complied with and

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satisfied, as provided in an Officer’s Certificate of the Obligated Group Representative, a copy of which shall be delivered to the Master Trustee and the Bondholder Representative; and

(b) The Obligated Group Representative shall have delivered to the Master Trustee an Opinion of Counsel to the effect that (1) registration of such Obligations under the Securities Act of 1933, as amended, and qualification of this Indenture and the Supplement under the Trust Indenture Act of 1939, as amended, is not required, or, if such registration or qualification is required, that all applicable registration and qualification provisions of said acts have been complied with, and (2) this Indenture, the Supplement and the Obligations are valid, binding and enforceable obligations of each of the Obligated Group Members in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance and other laws affecting creditors’ rights generally, usual equity principles and other customary exclusions.

Section 2.06 List of Holders of Obligations. The Master Trustee shall keep on file at its office the Obligation Register which shall consist of a list of the names and addresses of the Holders of all Obligations. At reasonable times and under reasonable regulations established by the Master Trustee, the Obligation Register may be inspected and copied by any Obligated Group Member, the Holder of any Obligation or the authorized representative thereof, provided that the ownership by such Holder and the authority of any such designated representative shall be evidenced to the satisfaction of the Master Trustee.

Section 2.07 Optional and Mandatory Redemption. Obligations of each series shall be subject to optional and mandatory redemption, purchase, tender or prepayment in whole or in part and may be redeemed, purchased, tendered or prepaid prior to maturity, as provided in the Supplement creating such series, but not otherwise.

Section 2.08 Mutilated, Destroyed, Lost and Stolen Obligations. If (i) any mutilated Obligation is surrendered to the Master Trustee, or the Obligated Group Representative and the Master Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Obligation, and (ii) there is delivered to the Master Trustee such security or indemnity as may be required by the Master Trustee to save it and the Obligated Group Representative harmless, then, in the absence of notice to the Obligated Group Representative or the Master Trustee that such Obligation has been acquired by a bona fide purchaser, the Obligated Group Representative shall execute and upon its request the Master Trustee shall authenticate and deliver in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Obligation, a new Obligation of like tenor, priority, series, interest rate and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Obligation has become or is about to become due and payable, the Obligated Group Representative in its discretion may, instead of issuing a new Obligation, pay such Obligation.

Upon the issuance of any new Obligation under this Section, the Obligated Group Representative and the Master Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Master Trustee) connected therewith.

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Every new Obligation issued pursuant to this Section in lieu of any destroyed, lost or stolen Obligation shall constitute an original additional contractual obligation of the maker thereof, whether or not the destroyed, lost or stolen Obligation shall be at any time enforceable by anyone, and shall be entitled to all the benefits and security of this Indenture equally and proportionately with any and all other Obligations duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Obligations.

Section 2.09 Cancellation. All Obligations surrendered for payment, redemption, transfer or exchange shall, if delivered to any Person other than the Master Trustee, be delivered to the Master Trustee and, if not already canceled or required to be otherwise delivered by the terms of the Supplement authorizing the series of Obligations of which such Obligation is a part, shall be promptly canceled by it. The Obligated Group Representative may at any time deliver to the Master Trustee for cancellation any Obligations previously authenticated and delivered hereunder, which the Obligated Group Representative may have acquired in any manner whatsoever, and all Obligations so delivered shall be promptly canceled by the Master Trustee. No Obligations shall be authenticated in lieu of or in exchange for any Obligations canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Obligations held by the Master Trustee shall be treated by the Master Trustee in accordance with its current document retention policies.

ARTICLE III

FUNDS AND ACCOUNTS

Section 3.01 Revenue Fund.

(a) Pursuant to Section 4.01 hereof, the Obligated Group has agreed to deposit all Gross Revenues into the Deposit Account. The Master Trustee shall establish and maintain a separate fund to be known as the “Revenue Fund – Gilbert AL Partners, LP” (the “Revenue Fund”) into which the Master Trustee shall deposit all amounts received from the Depository Bank pursuant to the Control Agreement.

(b) Except as provided in subsection (c) below, on or before the last Business Day during each calendar month on which payment of principal of, premium if any, or interest on any Obligations are due (including installments of any such payments), the Master Trustee shall, in accordance with the Control Agreement, direct the Depository Bank to (i) transfer to the Master Trustee from the Deposit Account for deposit to the Revenue Fund an amount equal to the total amount of principal of, premium if any, and interest due on the Obligations due by such date (less any credits received against such amount) and (ii) transfer the balance in the Deposit Account on such date, if any, to an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto. The Master Trustee shall use the amounts deposited into the Revenue Fund pursuant to this subsection (b) to pay, on behalf of the Obligated Group, the payments of principal of, premium, if any, and interest on the Obligations then due. The Master Trustee shall transfer any amounts remaining in the Revenue

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Fund after all payments required by the preceding sentence during each calendar month have been made, within two Business Days, to an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto.

(c) Upon (i) the occurrence of an Event of Default under Section 7.01(a) of this Indenture and continuation thereof for a period of five days, or (ii) the occurrence of an Event of Default under Section 7.01(b) of this Indenture and continuation thereof for a period of five days, but only if no Senior Obligations are then Outstanding, in each case with the consent of or direction of the Bondholder Representative, the Master Trustee shall, in accordance with the Control Agreement, direct the Depository Bank to transfer to the Master Trustee for deposit to the Revenue Fund all amounts in the Deposit Account (except to the extent otherwise provided by or inconsistent with any instrument creating any Permitted Encumbrances) beginning on the first Business Day following such five-day period and on the last Business Day of each month thereafter, until no such default under Sections 7.01(a) or 7.01(b) of this Indenture, as applicable, then exists. On the last Business Day of each calendar month in which any amounts from the Deposit Account have deposited into the Revenue Fund pursuant to this subsection (c), the Master Trustee shall withdraw and pay or deposit from the amounts on deposit in the Revenue Fund the following amounts in the order indicated unless otherwise directed by the Bondholder Representative (but not with respect to paragraph First, or the fees, expenses and advances of the Issuer, required indemnities, and the reasonable fees and expenses of the Issuer’s counsel and advisors):

First: To the payment of all amounts due the Master Trustee under this Indenture;

Second: To the payment of all amounts due the Issuer under the Loan Agreement, any Related Loan Agreement entered into with the Issuer in connection with a series of Related Senior Bonds, or this Indenture, including, without limitation, the fees, expenses and advances of the Issuer, required indemnities and the reasonable fees and expenses of the Issuer’s counsel and advisors;

Third: To the payment of the amounts then due and unpaid upon Senior Obligations ratably, without preference or priority of any kind, according to the amounts due and payable on such Senior Obligations;

Fourth: To an operating account designated by the Obligated Group Representative (which shall not be subject to the lien of this Indenture), the amount necessary to pay the Expenses due or expected to become due in the following month as set forth in the then-current annual budget provided pursuant to Section 4.15(b)(v);

Fifth: To restore any deficiency in any Debt Service Reserve Fund established for Related Bonds secured by a Senior Obligation under each Related Bond Indenture for such Related Bonds on a pro rata basis;

Sixth: To the payment of the amounts then due and unpaid upon Subordinate Obligations ratably, without preference or priority of any kind, according to the amounts due and payable on such Subordinate Obligations;

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Seventh: To restore any deficiency in any Debt Service Reserve Fund established for Related Bonds secured by a Subordinate Obligation under each Related Bond Indenture for such Related Bonds on a pro rata basis;

Eighth: To the payment of the amounts then due and unpaid upon any Indebtedness not constituting or secured by Obligations, in respect of which or for the benefit of which such money has been collected; and

Ninth: To an account designated by the Obligated Group Representative for allocation and disbursement to the Members entitled thereto.

(d) The money deposited to the Revenue Fund, together with all investments thereof and investment income therefrom, shall be held in trust and applied solely as provided in this Section and in Section 7.10 hereof. Pending disbursements of the amounts on deposit in the Revenue Fund, the Master Trustee shall promptly invest and reinvest such amounts in accordance with Section 3.05 and Section 3.06 hereof. All such investments shall mature or be redeemable without penalty at such time as may be necessary to make payments from the Revenue Fund; provided, however, no investment shall have a maturity greater than 91 days from date of purchase.

(e) Except as described in this Section 3.01, each Obligated Group Member shall be entitled to full possession and use of its Gross Revenues.

Section 3.02 Working Capital Fund.

(a) The Master Trustee shall establish and maintain a separate fund to be known as the “Working Capital Fund – Gilbert AL Partners, LP” (the “Working Capital Fund”). The Master Trustee shall deposit into the Working Capital Fund all amounts transferred by the Obligor to the Master Trustee on the Delivery Date with instructions to deposit such amounts into the Working Capital Fund.

(b) All moneys received by the Master Trustee and held in the Working Capital Fund shall be trust funds under the terms of this Indenture for the benefit of all of the Obligations outstanding hereunder (except as otherwise provided) and shall not be subject to lien or attachment of any creditor of any Member of the Obligated Group. Such moneys shall be held in trust and applied in accordance with the provisions of this Indenture.

(c) Amounts on deposit in the Working Capital Fund shall be disbursed by the Master Trustee to or for the account of the Obligor within three Business Days of receipt by the Master Trustee of an Officer’s Certificate of the Obligor to the effect that (i) such moneys will be used to pay (A) costs of completion of the Project, but, if and only if, the Construction Fund under the Related Bond Indenture in relation to the Project is completely disbursed, (B) lease-up and operating expenses of the Project, (C) the costs of needed repairs to the Project, (D) the costs of capital improvements to the Project required by law or regulation, (E) judgments against the Obligor, or (F) amounts due on any Senior Obligations of the Obligor, (ii) such moneys are anticipated to be expended in the calendar month following the month in which such Officer’s Certificate is submitted, together with an itemized budget describing the uses for which such

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moneys are needed and the amount needed for each such use and (iii) the Obligor has insufficient operating funds to make payments for such uses.

(d) The Master Trustee shall release all amounts on deposit in the Working Capital Fund to the Obligor and close such fund upon receipt of an Officer’s Certificate from the Obligor in form reasonably satisfactory to the Bondholder Representative to the effect that the Debt Service Coverage Ratio for the immediately preceding 12 calendar months was not less than 1.00. Any amounts so released shall not be subject to Section 4.19 hereof; provided that such amounts may not be used to pay any fees of the Developer prior to Stabilization.



Section 3.05 Investment of Funds. Any moneys held by the Master Trustee hereunder as part of any fund or account established under this Indenture shall be invested or reinvested by the Master Trustee in Permitted Investments upon the receipt of an Obligated Group Representative Request (upon which the Master Trustee is entitled to rely). Any Permitted Investments may be purchased from or sold to the Master Trustee or any of its affiliates.

Section 3.06 Allocation and Transfers of Investment Income.

(a) Any investments in any fund or account shall be held by the Master Trustee and shall be deemed at all times a part of the fund or account from which the investment was made. Any loss resulting from such investments shall be charged to such fund or account.

(b) Any interest or other gain from any fund or account from any investment or reinvestment (other than the Revenue Fund) shall be treated in accordance with the provisions of the Supplement that establishes such fund or account. Any interest or other gain on any investment or reinvestment of the Revenue Fund shall remain in and be part of the Revenue Fund and be applied as described in Section 3.01 above.

Section 3.07 Master Trustee Relieved From Responsibility. The Master Trustee shall be fully protected in relying upon any Obligated Group Representative Request relating to investments in any fund, and shall not be liable for any losses or prepayment penalties as a result of complying with any such Obligated Group Representative Request, and shall not be required to ascertain any facts with respect to such Request.

ARTICLE IV

COVENANTS OF THE OBLIGATED GROUP MEMBERS

Section 4.01 Title to Trust Estate and Mortgaged Property; Lien of this Indenture and Deed of Trust; Deposit of Gross Revenues and Control Agreement. On the date of execution of this Indenture, the Obligated Group Members have good and indefeasible title to the Trust Estate and the Mortgaged Property free and clear of any liens, charges, encumbrances, security interests and adverse claims whatsoever except Permitted Encumbrances described in clause (b)(i) of the definition thereof. Each Obligated Group Member covenants that, after the date of execution of

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this Indenture, it will not grant any pledge of or lien on the Trust Estate or the Mortgaged Property other than Permitted Encumbrances. Each Obligated Group Member represents that it has the right to mortgage and otherwise pledge the Trust Estate and the Mortgaged Property, as applicable, and will warrant and defend to the Master Trustee, the title and the lien of this Indenture and the Deeds of Trust as a valid and enforceable mortgage thereon or pledge thereof, as applicable, subject to Permitted Encumbrances. This Indenture and the Deeds of Trust constitute or will constitute, as applicable, a valid and subsisting mortgage of and lien on the Trust Estate and the Mortgaged Property, as applicable, all in accordance with the terms hereof, subject to Permitted Encumbrances.

Each of the Obligated Group Members agrees that upon receipt of any Gross Revenues it will immediately remit the same to the Depository Bank for deposit into the Deposit Account and application in accordance with the Control Agreement and this Indenture. In order to perfect the first priority lien on and security interest in the Gross Revenues granted by the Obligated Group to the Master Trustee, the Obligated Group Representative will establish the Deposit Account, and on or before [January 8, 2016], the Obligated Group Representative and the Master Trustee will enter into the Control Agreement acceptable to the Bondholder Representative, pursuant to which the Depository Bank will agree to transfer all or a portion, as applicable, of the Gross Revenues to the Master Trustee each month for deposit in the Revenue Fund and for application in accordance with the provisions of Section 3.01 hereof. The Obligated Group Representative hereby agrees not to close the Deposit Account subject to the Control Agreement or transfer the Deposit Account without the prior written consent of the Bondholder Representative.

Section 4.02 Further Assurances. Each Obligated Group Member, upon the request of Master Trustee and the Bondholder Representative, will execute, acknowledge, deliver and record and/or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purpose of this Indenture and to subject the Trust Estate and/or the Mortgaged Property to the liens and security interests of this Indenture and the Deed of Trust, as applicable.

Section 4.03 Recording and Filing. The Obligated Group Representative shall cause the Deed of Trust and all amendments and supplements hereto and substitutions therefor to be recorded, filed, re-recorded and refiled in such manner and in such places as are necessary to protect the mortgage of and lien on the portion of the Mortgaged Property subject to the Deed of Trust, and will pay all such recording, filing, re-recording and refiling taxes, fees and other charges. Additionally, the Obligated Group Representative hereby authorizes the Master Trustee at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements with or without the signature of any of the Obligated Group Members as authorized by applicable law, as applicable to all or part of the Mortgaged Property and/or the Trust Estate. For purposes of such filings, the Obligated Group Members agree to furnish any information requested by the Master Trustee promptly upon request by the Master Trustee. The Obligated Group Members also ratify their authorization for the Master Trustee to have filed any like initial financing statements, amendments thereto and continuation statements, if filed prior to the date of this Indenture or the Deed of Trust. The Obligated Group Members hereby irrevocably constitute and appoint the Master Trustee and any officer or agent of the Master Trustee, with full power of substitution, as their true and lawful attorneys in fact with full

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irrevocable power and authority in the place and stead of the Obligated Group Members or in the Obligated Group Members’ names to execute in the Obligated Group Members’ names any documents and otherwise to carry out the purposes of this Section 4.03, to the extent that the Obligated Group Members’ authorization above is not sufficient. To the extent permitted by law, the Obligated Group Members hereby ratify all acts said attorneys in fact have lawfully done in the past or shall lawfully do or cause to be done in the future by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable. Furthermore, the Deed of Trust shall also constitute a “fixture filing” for the purpose of Article 9 of the Arizona Uniform Commercial Code against all of the Mortgaged Property which is or to become fixtures. Information concerning the security interest therein granted may be obtained at the addresses of the Obligated Group Representative and the Master Trustee as set forth in Section 1.05 of this Indenture. The Obligated Group Representative’s identification number assigned by its state of formation is correctly set forth in Section 4.07 of this Indenture. The Obligated Group Representative shall promptly notify the Master Trustee of any change in its organizational identification number.

Notwithstanding the foregoing, the Master Trustee shall not be responsible for and makes no representation (i) as to existence, genuineness, value or protection of any collateral included in the Trust Estate or the Mortgaged Property, (ii) for the legality, effectiveness or sufficiency of any security document, except to the extent that the Master Trustee’s execution of any security document is necessary for the legality or effectiveness thereof, or (iii) for the creation, perfection, priority, sufficiency or protection of any liens securing the Obligations. The Master Trustee shall not be responsible for filing any financing statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any lien or security interest in the collateral included in the Trust Estate.

Section 4.04 Payment of Principal, Premium and Interest. The Obligated Group Representative, on behalf of the Obligated Group Members, will duly and punctually pay (or cause the Master Trustee to pay pursuant to Section 3.01 of this Indenture) the principal of (and premium, if any) and interest on the Obligations in accordance with the terms of the Obligations and this Indenture.

Each Obligated Group Member hereby jointly, severally and unconditionally guarantees the full and timely payment of all Outstanding Obligations which such Person has not created or otherwise made (and on which such Person is not otherwise primarily liable) in accordance with the terms thereof, whether at Stated Maturity, declaration of acceleration, call for redemption or otherwise. Such guaranty shall not be affected, modified or impaired upon the happening from time to time of any event, other than the payment of such Obligations (or provision therefor), including, without limitation, any of the following, whether or not with notice to, or the consent of, the guarantor:

(a) the waiver, compromise, settlement, release or termination by any Person of the obligations evidenced by such Obligations or any covenant or security in support thereof;

(b) the failure to give notice to the guarantor of the occurrence of an event of default under the terms and provisions of this Indenture or any agreement under which such Obligations are created, assumed, guaranteed or secured;

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(c) any failure, omission, or delay on the part of the Master Trustee, the Bondholder Representative or the Holder of such Obligations to enforce, assert or exercise any right, power or remedy conferred on the Master Trustee, the Bondholder Representative or such Holder in this Indenture or any other agreement under which such Obligations are created, assumed, guaranteed or secured;

(d) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement under bankruptcy or similar laws, composition with creditors or readjustment of, or other similar proceedings affecting any such guarantor or any other obligor on Obligations;

(e) the invalidity, irregularity, illegality, unenforceability, or lack of value of, or any defect in any of the Obligations so guaranteed or any collateral security therefor; or

(f) to the extent permitted by law, any event or action that would, in the absence of this Section, result in the release or discharge by operation of laws of such guarantor from the performance or observance of any obligation, covenant, or agreement contained in this Indenture.

Section 4.05 Payment of Taxes and Other Claims. Each Obligated Group Member will pay or discharge or cause to be paid or discharged before the same shall become delinquent, (1) all taxes, assessments, and other governmental charges lawfully levied or assessed or imposed upon it or upon its income, profits, or property, and (2) all lawful claims for labor, materials, and supplies which, if unpaid, might by law become a lien upon its Property; provided, however, that no such Person shall be required to pay and discharge or cause to be paid and discharged any such tax, assessment, governmental charge, or claim to the extent that the amount, applicability, or validity thereof shall currently be contested in good faith by appropriate proceedings and such Person shall have established and shall maintain adequate reserves on its books for the payment of the same.

Section 4.06 Maintenance of Properties. Each Obligated Group Member will cause all its Property, Plant and Equipment used or useful in the conduct of its business to be maintained and kept in good condition, repair, and working order and supplied with all necessary equipment, ordinary wear and tear, casualty, condemnation, and acts of God excepted. Each Obligated Group Member will cause to be made all necessary repairs, renewals, replacements, betterments, and improvements thereof, all as in the judgment of the Obligated Group Representative may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that subject to compliance with the other provisions of this Indenture, nothing in this Section shall prevent any such Person from discontinuing the operation and maintenance of any of its Property, Plant and Equipment if such discontinuance is, in the judgment of such Person (and in the opinion of the Governing Body of such Person if the property involved is any substantial part of the properties of such Person taken in the aggregate), desirable in the conduct of its business and not disadvantageous in any material respect to the Holders of the Obligations.

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Section 4.07 Existence; Status of Obligated Group Members.

(a) Subject to Section 5.01, each Obligated Group Member will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory), and franchises; provided, however, that no Person shall be required to preserve any right or franchise if the Governing Body of such Person shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders of the Obligations.

(b) The Obligor’s exact legal name is correctly set forth at the beginning of this Indenture, and the Obligor is an organization of the type specified in the first paragraph of this Indenture. The Obligor is formed or incorporated in or organized under the laws of the State of Texas, and has an organizational identification number of 802184135 assigned by the Secretary of State of the State of Texas. The Obligor will not cause or permit any change to be made in its name or identity unless the Obligor shall have first notified the Master Trustee in writing of such change at least 30 days prior to the effective date of such change, and shall have first taken all action required by the Master Trustee for the purpose of perfecting or protecting the lien and security interest of the Master Trustee. The place where the Obligor keeps its books and records, including recorded data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics, has been for the preceding two months and will continue to be the address of the Obligor set forth in Section 1.05 hereof (unless the Obligor notifies the Master Trustee and the Bondholder Representative in writing at least 30 days prior to the date of such change).

Section 4.08 Preservation of Qualifications. Each Obligated Group Member will not allow any permit, right, license, franchise or privilege so long as it is necessary for the ownership or operation of the Project as an assisted living and memory care facility to lapse or be forfeited. If an Obligated Group Member is or becomes a provider of services under and a participant in the Medicare program or any successor program thereto or any program by a federal, state or local government providing for payment or reimbursement for services rendered for health care, such Obligated Group Member shall use its commercially reasonable efforts to remain fully qualified as a provider of services and a participant in such program; provided, however, that no Obligated Group Member shall be required to maintain any such qualification if (i) the Governing Board of such Person shall determine that the maintenance of such qualification is not in the best economic interest of such Person and (ii) at least 30 days prior to the discontinuance of such qualification, such Person shall notify the Required Information Recipients of such proposed discontinuance and shall provide the Required Information Recipients with a written explanation of the basis for such determination.

Section 4.09 Additions to Facilities. Any additions, improvements and extensions to the Facilities and repairs, renewals and replacements thereof, including (without limitation) any capital improvements, shall upon their acquisition become part of the Facilities.

Section 4.10 Insurance. Each Member shall maintain, or cause to be maintained at its sole cost and expense, insurance with respect to its Property, the operation thereof and its business against such casualties, contingencies and risks (including but not limited to public liability and employee dishonesty) and in amounts not less than is customary in the case of

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entities engaged in the same or similar activities and similarly situated and as is adequate to protect its Property and operations.

The Obligated Group Representative shall annually review the insurance each Member maintains as to whether such insurance is customary and adequate. In addition, the Obligated Group Representative shall, at least once every two Fiscal Years with respect to commercial insurance and at least once every Fiscal Year with respect to self-insurance (commencing with its Fiscal Year ending December 31, 2016), cause a certificate of an Insurance Consultant or Insurance Consultants to be delivered to the Master Trustee and the Bondholder Representative within 120 days of the end of the applicable Fiscal Year which indicates that the insurance then being maintained by the Members meets the standards described above. The Obligated Group Representative shall cause copies of the certificates of the Insurance Consultant or Insurance Consultants to be delivered promptly to the Master Trustee and the Bondholder Representative. The Obligated Group or any Member may self-insure if the Insurance Consultant or Insurance Consultants determine(s) that such self-insurance meets the standards set forth in the first sentence of this paragraph and is prudent under the circumstances; provided, however, that no Member of the Obligated Group shall self-insure any of its Property, Plant and Equipment.

Naming of the Master Trustee as an insured or additional insured under any insurance policy, or the furnishing to the Master Trustee of information relating thereto, shall not impose upon the Master Trustee any responsibility or duty to approve the form of such policy, the qualifications of the company issuing same or any other matters relating thereto.

The Master Trustee shall not be liable or responsible for the failure of any Obligated Group Member to maintain insurance hereunder, nor shall it be responsible for any loss due to the insufficiency of such insurance or by reason of any insurer to pay the full amount of any loss against which it may have insured an Obligated Group Member, the Master Trustee or any other Person.

Section 4.11 Rates and Charges.

(a) Each Member covenants and agrees to operate all of its Facilities on a revenue producing basis and to charge such fees and rates for its Facilities and services and to exercise such skill and diligence, including obtaining payment for services provided, as to provide income from its Property together with other available funds sufficient to pay promptly all payments on its Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it hereunder to the extent permitted by law. Each Member further covenants and agrees that it will from time to time as often as necessary and to the extent permitted by law, revise its rates, fees and charges in such manner as may be necessary or proper to comply with the provisions of this Section.

The Members covenant and agree that the Obligated Group Representative will calculate the Debt Service Coverage Ratio of the Obligated Group for each Fiscal Year, based on audited financial statements, in each case commencing with the Initial Testing Period, and will deliver a copy of such calculation to the Persons to whom such report is required to be delivered under Section 4.15.

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(b) If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.00, the Obligated Group Representative, at the Obligated Group’s expense, shall, at the request of the Bondholder Representative, engage a Consultant within 30 days following the applicable calculation described in the second paragraph of subparagraph Section 4.11 to make recommendations with respect to the rates, fees and charges of the Members and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase such Debt Service Coverage Ratio to at least 1.00 for the following Fiscal Year.

(c) Within 60 days of the actual engagement of a Consultant as provided in Section 4.23 hereof, the Obligated Group Representative shall cause a copy of the Consultant’s report and recommendations, if any, to be filed with each Member and each Required Information Recipient. Each Member shall follow each recommendation of the Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Obligated Group Representative) and permitted by law. This Section shall not be construed to prohibit any Member from serving any class or classes of resident without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the other requirements of this Section.

(d) Unless otherwise directed by the Bondholder Representative, if the Obligated Group fails to achieve a Debt Service Coverage Ratio of 1.00 for any Fiscal Year commencing with the Initial Testing Period, such failure shall not constitute an Event of Default under this Indenture if (i) the Obligated Group takes all action necessary to comply with the procedures set forth above for preparing a report and adopting a plan and (ii) follows each recommendation contained in such report to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Obligated Group Representative) and permitted by law.

Section 4.12 Damage or Destruction. Each Member agrees to notify the Master Trustee and the Bondholder Representative immediately in the case of the destruction of its Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, the Net Proceeds of which are estimated to exceed the Threshold Amount. If such Net Proceeds do not exceed the Threshold Amount, such Net Proceeds may be paid directly to the Member suffering such casualty or loss. The Members covenant that they will expend or contract to expend an amount not less than the amount of any such Net Proceeds within 24 months after receipt thereof to (i) repair, replace or restore the damaged or destroyed Facilities, (ii) acquire or construct additional capital assets for any one or more Members, or (iii) repay the principal portion of any Indebtedness incurred by any one or more Members of the Obligated Group to acquire or construct capital assets or refinance Indebtedness incurred for such purpose, in each case as consented to by the Bondholder Representative.

In the event such Net Proceeds exceed the Threshold Amount, the Member suffering such casualty or loss shall within 12 months after the date on which the Net Proceeds are finally determined, elect by written notice to the Master Trustee one of the following three options, in each case as consented to by the Bondholder Representative:

(a) Option A: Repair and Restoration. Such Member may elect to replace, repair, reconstruct, restore or improve any of the Facilities of the Obligated Group or repay

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Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds. In such event an amount equal to the Net Proceeds of any insurance relating thereto shall be deposited, when received, with the Master Trustee and such Member shall proceed forthwith to replace, repair, reconstruct, restore or improve Facilities of the Obligated Group or to acquire additional Facilities and will apply the Net Proceeds of any insurance relating to such damage or destruction received from the Master Trustee to the payment or reimbursement of the costs of such replacement, repair, reconstruction, restoration, or improvement or to the repayment of such Indebtedness. So long as an Event of Default has not occurred and is continuing hereunder, any Net Proceeds of insurance relating to such damage or destruction received by the Master Trustee shall be released from time to time by the Master Trustee to such Member upon the receipt by the Master Trustee of:

(i) financial projections, which may be prepared by management, demonstrating that the Obligated Group will have sufficient funds, including the proceeds of business interruption insurance, to pay all Debt Service Requirements, and pay necessary operating expenses until completion of the replacement, repair, reconstruction, restoration, or improvement;

(ii) the Request of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such replacement, repair, reconstruction, restoration, or improvement and stating that, based on signed construction contracts, such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction, restoration, or improvement; and

(iii) if such expenditures were or are to be made or such Indebtedness was incurred for the construction or renovation of Facilities, the written approval of such Request by an Architect.

It is further understood and agreed that in the event such Member shall elect this Option A, such Member shall complete the replacement, repair, reconstruction, restoration, improvement and acquisition of the Facilities, whether or not the Net Proceeds of insurance received for such purposes are alone sufficient to pay for the same.

(b) Option B: Prepayment of Obligations. Such Member may elect to have all of the Net Proceeds payable as a result of such damage or destruction applied to the prepayment of the Obligations. In such event such Member shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds, when and as received, to the prepayment of Outstanding Obligations in the order of priority set forth in clauses Fourth and Sixth of Section 3.01(c) hereof.

(c) Option C: Partial Restoration and Partial Prepayment of Obligations. Such Member may elect to have a portion of such Net Proceeds applied to the replacement, repair, reconstruction, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds with the remainder of such Net Proceeds to be applied to prepay Outstanding Obligations in the order of priority set

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forth in clauses Fourth and Sixth of Section 3.01(c) hereof, in which event such Net Proceeds to be used for replacement, repair, reconstruction, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) of this Section 4.12 and such Net Proceeds to be used for prepayment of the Obligations shall be applied as set forth in subparagraph (b) of this Section.

Notwithstanding the foregoing, the proceeds of business interruption insurance are not subject to the provisions of this Section. Any Property, Plant or Equipment that replaces, repairs, reconstructs, restores or improves any of the Facilities of the Obligated Group pursuant to Option A or Option C of this Section 4.12 shall thereafter constitute Facilities of the Obligated Group for the purposes of this Indenture.

Section 4.13 Condemnation. The Master Trustee shall cooperate fully with the Members in the handling and conduct of any prospective or pending condemnation proceedings with respect to their Facilities or any part thereof. Each Member hereby irrevocably assigns to the Master Trustee, as its interests may appear, all right, title and interest of such Member in and to any Net Proceeds of any award, compensation or damages payable in connection with any such condemnation or taking, or payment received in a sale transaction consummated under threat of condemnation (any such award, compensation, damages or payment being hereinafter referred to as an “award”), which exceeds the Threshold Amount. Such Net Proceeds shall be initially paid to the Master Trustee for disbursement or use as hereinafter provided. If such Net Proceeds do not exceed the Threshold Amount, such Net Proceeds may be paid to the Member in question. The Members covenant that they will expend or contract to expend an amount not less than the amount of any such Net Proceeds within 24 months of the receipt thereof to (i) restore, replace or repair the condemned Facilities, (ii) acquire or construct additional capital assets, or (iii) repay the principal portion of Indebtedness incurred by one or more Members of the Obligated Group to acquire or construct capital assets or to refinance Indebtedness incurred for such purpose, in each case with the consent of the Bondholder Representative.

In the event such Net Proceeds exceed the Threshold Amount, the Member in question shall within 12 months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, in each case with the consent of the Bondholder Representative:

(a) Option A: Repairs and Improvements. The Member may elect to use the Net Proceeds of the award for restoration or replacement of or repairs and improvements to the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds. In such event, so long as an Event of Default has not occurred and is continuing hereunder, such Member shall have the right to receive such Net Proceeds from the Master Trustee from time to time upon the receipt by the Master Trustee of:

(i) financial projections, which may be prepared by management, demonstrating that the Obligated Group will have sufficient funds, including the proceeds of business interruption insurance, to pay all Debt Service Requirements, and pay necessary operating expenses until completion of the replacement, repair, reconstruction, restoration, or improvement;

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(ii) the Request of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such restoration, replacement, repairs, improvements and acquisitions and stating that, based on signed construction contracts, such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such restoration, replacement, repairs, improvements and acquisition; and

(iii) if such expenditures were or are to be made or such Indebtedness was incurred for the construction or renovation of Facilities, the written approval of such Request by an Architect.

(b) Option B: Prepayment of Obligations. Such Member may elect to have such Net Proceeds of the award applied to the prepayment of the Obligations. In such event such Member shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds, when and as received, to the prepayment of Outstanding Obligations in the order of priority set forth in clauses Fourth and Sixth of Section 3.01(c) hereof.

(c) Option C: Partial Restoration and Partial Prepayment of Obligations. Such Member may elect to have a portion of such Net Proceeds of the award applied to the repair, replacement, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds, with the remainder of such Net Proceeds to be applied to the prepayment of Outstanding Obligations in the order of priority set forth in clauses Fourth and Sixth of Section 3.01(c) hereof, in which event such Net Proceeds to be used for repair, replacement, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) of this Section 4.13 and such Net Proceeds to be used for prepayment of the Obligations shall be applied as set forth in subparagraph (b) of this Section 4.13.

Any Property, Plant or Equipment that replaces, repairs, reconstructs, restores or improves any of the Facilities of the Obligated Group pursuant to Option A or Option C of this Section 4.13 shall thereafter constitute Facilities of the Obligated Group for the purposes of this Indenture.

Section 4.14 Other Provisions with Respect to Net Proceeds. Amounts received by the Master Trustee in respect of any awards shall, at the Request of the Obligated Group Representative, be deposited with the Master Trustee in a special trust account and be invested or reinvested by the Master Trustee as directed in writing by the Obligated Group Representative in Permitted Investments subject to any Member’s right to receive the same pursuant to Section 4.12 and Section 4.13 hereof. If any Member elects to proceed under either Section 4.12(a) or (c) or Section 4.13(a) or (c), as consented to by the Bondholder Representative, any amounts in respect of such Net Proceeds not so paid to such Member shall be used to prepay Outstanding Obligations in the order of priority set forth in clauses Fourth and Sixth of Section 3.01(c) hereof.

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Section 4.15 Financial Statements, Etc.

(a) The Members covenant that they will keep or cause to be kept proper books of records and accounts in which full, true and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Obligated Group in accordance with generally accepted principles of accounting consistently applied except as may be disclosed in the notes to the audited financial statements referred to in subparagraph (b) below. To the extent that generally accepted accounting principles would require consolidation of certain financial information of entities which are not Members of the Obligated Group with financial information of one or more Members, consolidated financial statements prepared in accordance with generally accepted accounting principles which include information with respect to entities which are not Members of the Obligated Group may be delivered in satisfaction of the requirements of this Section 4.15 so long as: (i) supplemental information in sufficient detail to separately identify the information with respect to the Members of the Obligated Group is delivered to the Master Trustee and the Bondholder Representative with the audited financial statements; (ii) such supplemental information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements delivered to the Master Trustee and the Bondholder Representative and, in the opinion of the accountant, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole; and (iii) such supplemental information is used for the purposes hereof or for any agreement, document or certificate executed and delivered in connection or pursuant to this Indenture.

(b) The Obligated Group Representative will furnish or cause to be furnished to each Required Information Recipient, the following:

(i) [Reserved];

(ii) Beginning with the fiscal quarter ending December 31, 2016, quarterly unaudited financial statements of the Obligated Group as soon as practicable after they are available but in no event more than 45 days after the completion of such fiscal quarter, including a combined or combining statement of revenues and expenses and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such fiscal quarter, prepared in reasonable detail and certified, subject to yearend adjustment, in an Officer’s Certificate of the Obligated Group Representative. Such financial statements and calculations shall be accompanied by a comparison to the annual budget provided pursuant to subsection (v) below. Commencing with the earlier of (A) the Stabilized Year or (B) December 31, 2019, the quarterly Officer’s Certificate shall include the Days Cash on Hand. Commencing with the first fiscal quarter which ends not less than 60 days following the issuance of the first certificate of occupancy for the first building in the Project containing Living Units, the quarterly Officer’s Certificate also shall include the Percentage of Units Occupied;

(iii) Within 150 days of the end of each Fiscal Year, an annual audited financial report of the Obligated Group prepared by a firm of certified public accountants, including a combined and an unaudited combining balance sheet as of the end of such Fiscal Year and a combined and an unaudited combining statement of cash flows for such

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Fiscal Year and a combined and an unaudited combining statement of revenues and expenses for such Fiscal Year, showing in each case in comparative form the financial figures for the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing calculations of the Obligated Group’s Debt Service Coverage Ratio for said Fiscal Year and, to the extent required to be reported in the Officer’s Certificate described in subsection (ii) above, the Days Cash on Hand of the Obligated Group at the end of such Fiscal Year, and a statement that such accountants have no knowledge of any default under this Indenture, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof;

(iv) On or before the date of delivery of the financial reports referred to in subsection (iii) above, an Officer’s Certificate of the Obligated Group Representative (A) stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of this Indenture or, if not, specifying all such defaults and the nature thereof, and (B) calculating and certifying the Debt Service Coverage Ratio as of the end of such Fiscal Year to the extent such calculation is required to be calculated in accordance herewith;

(v) Annual budgets for the operations of the Obligated Group for each Fiscal Year, prepared and delivered at least 30 days prior to the start of each such Fiscal Year, and amendments thereof within 30 days after Governing Body approval;

(vi) On or before the date of delivery of the financial reports referred to in subsections (ii) and (iii) above, a management’s discussion and analysis of results for the applicable fiscal period; and

(vii) Such additional information as the Master Trustee or any Related Bond Trustee or the Bondholder Representative may reasonably request concerning any Member in order to enable the Master Trustee or such Related Bond Trustee or the Bondholder Representative to determine whether the covenants, terms and provisions of this Indenture have been complied with by the Members and for that purpose all pertinent books, documents and vouchers relating to the business, affairs and Property (other than resident, donor and personnel records or other records required by law to be maintained as confidential) of the Members shall, to the extent permitted by law, at all times during regular business hours be open to the inspection of such accountant or other agent (who may make copies of all or any part thereof) as shall from time to time be designated by the Master Trustee or such Related Bond Trustee or the Bondholder Representative.

(c) The Members also agree that, within ten days after its receipt thereof, the Obligated Group Representative will file with the Master Trustee and each Required Information Recipient a copy of each Consultant’s report or counsel’s opinion required to be prepared under the terms of this Indenture.

(d) The Obligated Group Representative shall give prompt written notice of a change of accountants by the Obligated Group to the Master Trustee, each Related Bond Trustee and the Bondholder Representative. The notice shall state: (i) the effective date of such change; (ii)

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whether there were any unresolved disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which the accountants claimed would have caused them to refer to the disagreement in a report on the disputed matter, if it was not resolved to their satisfaction; and (iii) such additional information relating thereto as such Related Bond Trustee or the Master Trustee or the Bondholder Representative may reasonably request.

(e) Without limiting the foregoing, each Member will permit, upon reasonable notice, the Master Trustee, any such Related Bond Trustee or the Bondholder Representative (or such persons as they may designate) to visit and inspect, at the expense of such Person, its Property and to discuss the affairs, finances and accounts of the Obligated Group (except with respect to patient, donor or personnel records or other records required by law to be maintained as confidential) with its officers and independent accountants, all at such reasonable times and locations and as often as the Master Trustee, such Related Bond Trustee or the Bondholder Representative may reasonably desire.

(f) The Obligated Group Representative may designate a different Fiscal Year for the Members of the Obligated Group by delivering a notice to the Master Trustee and the Bondholder Representative designating the first and last day of such new Fiscal Year and whether or not there will be any interim fiscal period (the “Interim Period”) of a duration of greater than or less than 12 months preceding such new Fiscal Year. The Members covenant that they will furnish to the Master Trustee and each Related Bond Trustee and the Bondholder Representative , as soon as practicable after they are available, but in no event more than 150 days after the last day of such Interim Period, a financial report for such Interim Period certified by a firm of nationally or regionally recognized independent certified public accountants selected by the Obligated Group Representative covering the operations of the Obligated Group for such Interim Period and containing a combined balance sheet as of the end of such Interim Period and a combined statement of changes in fund balances and changes in financial position for such Interim Period and a combined statement of revenues and expenses for such Interim Period, showing in each case in comparative form the financial figures for the comparable period in the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing a calculation of the Obligated Group’s Debt Service Coverage Ratio for the Interim Period and the Days Cash on Hand and Percentage of Units Occupied of the Obligated Group at the end of such Interim Period, and a statement that such accountants have no knowledge of any default under this Indenture, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default).

(g) Delivery of such reports, information and documents described in this Section 4.15 to the Master Trustee is for informational purposes only, and the Master Trustee’s receipt thereof shall not constitute notice to it of any information contained therein or determinable from information contained therein, including compliance by the Obligated Group or the Members with any of its or their covenants hereunder, as to which the Master Trustee is entitled to rely exclusively on Officer’s Certificates, except to the extent that such reports, information and documents furnished pursuant to subsections (b)(iii), (b)(iv), or (f), above specify a default or Event of Default.

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Section 4.16 Permitted Additional Indebtedness. So long as any Obligations are outstanding, the Obligated Group will not incur any Additional Indebtedness (whether or not incurred through the issuance of Additional Obligations) other than as permitted in this Indenture.

(a) Long-Term Indebtedness. If no Event of Default shall have occurred and then be continuing, an Obligated Group Member may incur or assume additional Long-Term Indebtedness for such lawful purposes of such Obligated Group Member as shall be specified in reasonable detail in a certified resolution of the Governing Body of such Obligated Group Member; provided that, on or before the date on which any Long-Term Indebtedness, whether secured or unsecured, is to be incurred or assumed, the Obligated Group Representative shall deliver to the Master Trustee and the Bondholder Representative:

(i) Limit Based on Forecasted Debt Service Coverage. Except as provided in paragraphs (ii) and (iii) below, (A) a Feasibility Report stating that the Debt Service Coverage Ratio, as forecasted for the first two full Fiscal Years following the later of (x) the estimated completion of the development, marketing, acquisition, construction, renovation or replacement being paid for with the proceeds of such Long-Term Indebtedness or (y) the first two full Fiscal Years following the Fiscal Year in which average occupancy of assisted living and memory care facilities being financed with the proceeds of such additional Long-Term Indebtedness is forecasted to reach 85 percent, provided that such average occupancy of 85 percent is forecasted to occur no later than during the fourth full Fiscal Year following the incurrence of such Long-Term Indebtedness or is forecasted to be at least 1.00, and (B) an Officer’s Certificate showing that the Debt Service Coverage Ratio was at least 1.00 for the immediately preceding two Fiscal Years.

(ii) Subordinate Indebtedness. In lieu of the requirements of paragraph (i) above, Subordinate Indebtedness may be incurred so long-as all Subordinate Indebtedness is expressly subordinate to the Senior Obligations in accordance with the provisions of this Indenture and payments are permitted no more often than quarterly and:

(A) No payment may be made in any quarter on any Subordinate Indebtedness unless: (i) the Debt Service Coverage Ratio of the Obligated Group for the immediately preceding two Fiscal Years shall equal or exceed 1.25 percent after giving effect to the proposed payment for the preceding quarterly evaluation date; (ii) there is no deficiency in any Debt Service Reserve Fund; (iii) the Days Cash on Hand of the Obligated Group, after giving effect to such payment, will be not less than 180; and (iv) no Event of Default has occurred and is continuing; and

(B) Payments not permitted to be paid on Subordinate Indebtedness pursuant to the preceding paragraphs will be deferred without additional interest, until all of the conditions described above have been met for payment on such Subordinate Indebtedness.

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(iii) Non-Recourse Indebtedness. In lieu of the requirements of paragraphs (i) and (ii) above, Non-Recourse Indebtedness may be incurred without limit.

(b) Short-Term Indebtedness. The Obligated Group may, from time to time, incur, assume or allow to remain Outstanding at any time Short-Term Indebtedness in any amount up to 15 percent of Revenues of the Obligated Group for the preceding Fiscal Year. Any such Short-Term Indebtedness must, for a period of at least 30 consecutive days during each Fiscal Year, be less than 3 percent of Revenues for the preceding Fiscal Year. Short-Term Indebtedness in excess of such 3 percent limit shall be permitted to remain Outstanding only if permitted to exist under this Indenture as Long-Term Indebtedness.

(c) Other Provisions. Each Member covenants that prior to, or as soon as reasonably practicable after, the incurrence of Indebtedness by such Member for money borrowed or credit extended, or the equivalent thereof, after the date of issuance of the Series 2015 Notes, it will deliver to the Master Trustee and the Bondholder Representative an Officer’s Certificate which identifies the Indebtedness incurred, identifies the subsection of this Section 4.16 pursuant to which such Indebtedness was incurred, demonstrates compliance with the provisions of such subsection and attaches a copy of the instrument evidencing such Indebtedness.

Each Member agrees that, prior to incurring Additional Indebtedness for money borrowed from or credit extended by entities other than Related Issuers, sellers of real or personal property for purchase money debt, lessors of such property or banks or other institutional lenders, it will provide the Master Trustee and the Bondholder Representative with an opinion of Independent Counsel acceptable to the Master Trustee and the Bondholder Representative to the effect that, to such Counsel’s knowledge, such Member has complied in all material respects with all applicable state and federal laws regarding the sale of securities in connection with the incurrence of such Additional Indebtedness (including the issuance of any securities or other evidences of indebtedness in connection therewith).

Section 4.17 Securing Permitted Indebtedness. As long as no Event of Default has occurred and is continuing, any Indebtedness permitted to be incurred or assumed as provided in Section 4.16 may be secured only as hereinafter provided:

(a) Senior Obligations. The Obligated Group may secure Long-Term Indebtedness incurred or assumed pursuant to Section 4.16(a), other than pursuant to Sections 4.16(a)(ii) or (a)(iii), as a Senior Obligation equally and ratably secured with all other Senior Obligations, issued under this Indenture, only as to the Gross Revenues and not with respect to any other security, unless consented to by the Bondholder Representative.

(b) Other Secured Long-Term Indebtedness. Any Long-Term Indebtedness incurred pursuant to Section 4.16 that has not been secured as provided under subsection (a) above may be secured as a Subordinate Obligation or by a purchase money security interest in fixtures and equipment made part of the Mortgaged Property or by a security interest given to refinance a purchase money security interest. Such Long-Term Indebtedness may not be secured by the Mortgaged Property or as otherwise prohibited herein.

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(c) Notwithstanding anything to the contrary contained herein or in any of the other Financing Instruments, the Obligor shall not, directly or indirectly, create, incur, assume or suffer to exist any Lien on or with respect to any of its real property, including without limitation its Facilities, the Mortgaged Property, and the Project, without the prior written consent of the Bondholder Representative.

Section 4.18 Calculation of Debt Service and Debt Service Coverage.

(a) For the purpose of determining the interest rate on Long-Term Indebtedness which bears interest at a variable rate, such interest rate shall be assumed to be: (1) for the purpose of determining whether such Long-Term Indebtedness may be incurred, the rate estimated by a Consultant to be in effect on debt of comparable terms and creditworthiness at the time of such incurrence; or (2) for the purpose of Long-Term Indebtedness Outstanding and Debt Service Coverage Ratios, the higher of (a) the average interest rate on such Long-Term Indebtedness for the preceding calendar year or (b) the rate then in effect on such Long-Term Indebtedness.

(b) [Reserved].

(c) For the purpose of determining the Debt Service Requirements on that portion of Long-Term Indebtedness which constitutes Balloon Indebtedness, at the option of the Obligated Group Representative (and in lieu of the provisions of the preceding paragraph, if applicable):

(i) If such Balloon Indebtedness is less than 5 percent of Revenues for the Fiscal Year preceding the date it is incurred, the Debt Service Requirements on such Long-Term Indebtedness shall be deemed to be those if such Long-Term Indebtedness were amortized over a term of 15 years, based on level payments of principal and interest, using an interest rate estimated by a Consultant to be in effect on debt of comparable terms and creditworthiness;

(ii) If the Debt Service Coverage Ratio for the preceding Fiscal Year was at least 1.00 and Days Cash on Hand at the end of the last Fiscal Year, and as of the most recent fiscal quarter, was at least 180, the Debt Service Requirements on such Long-Term Indebtedness shall be deemed to be those which would be payable if such Long-Term Indebtedness were amortized over a term of 20 years, based on level payments of principal and interest, using an interest rate estimated by a Consultant to be in effect on debt of comparable terms and creditworthiness;

(iii) If the Obligated Group received an enforceable commitment for funding new Long-Term Indebtedness to repay such prior Indebtedness, the Debt Service Requirements shall be deemed to be those of the new Long-Term Indebtedness obligation;

(iv) If such Long-Term Indebtedness is secured by a letter of credit or other similar security in an amount at least equal to the principal amount of such Long-Term Indebtedness, the Debt Service Requirements shall be deemed to be those which will become due from the Obligated Group assuming such letter of credit or other security is

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drawn upon to pay such Long-Term Indebtedness at any maturity of such Balloon Indebtedness; or

(v) If such Long-Term Indebtedness does not meet any of the requirements of subparagraphs (i), (ii), (iii), or (iv) above, or if such Balloon Indebtedness matures within 12 months of the date of calculation, the Debt Service Requirements shall include the full amount of principal stated to be due in any year on such Long-Term Indebtedness.

(d) For the purpose of determining whether any particular Guaranty may be incurred, it shall be assumed that 100 percent of the Indebtedness guaranteed is Long-Term Indebtedness of the guarantor under such Guaranty. For the purpose of calculating any historical Debt Service Requirements, the guarantor’s Debt Service Requirements under a Guaranty shall be deemed to be the actual amount paid on such Guaranty by the guarantor. For any other purpose, a guarantor shall be considered liable only for 100 percent of the annual Debt Service Requirement on the Indebtedness guaranteed.

(e) Each Member may elect to have Indebtedness issued pursuant to one provision of Section 4.16 reclassified as having been incurred under another provision of Section 4.16, by demonstrating compliance with such other provision on the assumption that such Indebtedness is being reissued on the date of delivery of the materials required to be delivered under such other provision. From and after such demonstration, such Indebtedness shall be deemed to have been incurred under the provision with respect to which such compliance has been demonstrated until any subsequent reclassification of such Indebtedness.

(f) Anything herein to the contrary notwithstanding, any portion of any Indebtedness of any Member for which an Interest Rate Agreement has been obtained by such Member may be deemed to bear interest for the period of time that such Interest Rate Agreement is in effect at a net rate which takes into account the interest payments made by such Member on such Indebtedness and the payments made or received by such Member on such Interest Rate Agreement, as determined by such Member in its sole discretion; provided that, the long term credit rating of the provider of such Interest Rate Agreement (or any guarantor thereof) is in one of the three highest rating categories of any Rating Agency (without regard to any refinements of gradation of rating category by numerical modifier or otherwise) or is at least as high as that of the Obligated Group. In addition, so long as any Indebtedness is deemed to bear interest at a rate taking into account an Interest Rate Agreement, (i) such Interest Rate Agreement shall be taken into account in determining whether such Indebtedness (or portion thereof corresponding to the notional amount of the Interest Rate Agreement) is treated as fixed or variable rate Indebtedness, and (ii) any payments made by a Member on such Interest Rate Agreement shall be excluded from Expenses and any payments received by a Member on such Interest Rate Agreement shall be excluded from Revenues, in each case, for all purposes of this Indenture.

Section 4.19 Sale or Lease of Property. Subject to the restrictions set forth in the final paragraph of this Section 4.19, each Member agrees that it will not sell, lease, donate, transfer or otherwise dispose (including without limitation any involuntary disposition) of Property (either real or personal property, including Cash and Investments) unless the Obligated Group Representative determines that the Property has been sold, leased, donated, transferred or otherwise disposed of in one or more of the following transfers or other dispositions of Property:

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(a) In return for other Property of equal or greater value and usefulness;

(b) In the ordinary course of business upon fair and reasonable terms;

(c) To any Person, if prior to such sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate of a Member stating that, in the judgment of the signer, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property;

(d) Upon fair and reasonable terms no less favorable to the Member than would be obtained in a comparable arm’s length transaction;

(e) (i) The Property sold, leased, donated, transferred or otherwise disposed of does not, for any consecutive 12 month period, exceed 6 percent of the total Book Value or, at the option of the Obligated Group Representative, the Current Value of all Property of the Obligated Group, (ii) the Debt Service Coverage Ratio was not less than 1.30:1 for the last Fiscal Year for which audited financial statements have been delivered to the Master Trustee, and (iii) as of the end of the last fiscal quarter for which financial statements have been delivered to the Master Trustee as required under Section 4.15 hereof, the Obligated Group had not less than 130 Days Cash on Hand after giving effect to the transaction. If the Debt Service Coverage Ratio as calculated above is not less than 1.30:1, the foregoing percentage of the total Book Value or Current Value may be increased as follows under the following conditions:

(A) to 8 percent, if Days Cash on Hand would not be less than 150 after the effect of such sale, lease, donation, transfer or other disposition of assets; or

(B) to 9.5 percent, if Days Cash on Hand would not be less than 180 after the effect of such sale, lease, donation, transfer or other disposition of assets; or

(C) to 12 percent, if Days Cash on Hand would not be less than 210 after the effect of such sale, lease, donation, transfer or other disposition of assets; or

(f) To any Person if such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on the Obligations.

For avoidance of doubt, it is understood that this Section 4.19 does not prohibit: (i) any transfer of cash by a Member in payment of any of its obligations, indebtedness and liabilities, the incurrence of which obligation, indebtedness or liability did not or would not, either immediately or with the giving of notice, the passage of time or both, result in the occurrence of an Event of Default; (ii) investments in marketable securities; (iii) the making of loans to residents for their financial assistance; or (iv) the expenditure by the Obligated Group of the proceeds of gifts, grants, bequests, donations or contributions heretofore or hereafter made which are designated by the donor at the time made for certain specific purposes other than described in clauses (i), (ii) and (iii) of this sentence.

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For purposes of this Section 4.19, payments by the Obligated Group of any development, marketing, operating, or other subordinated fees that have been deferred from the year in which they were originally due as a result of subordination will not be treated as a disposition of Property.

In connection with any sale, lease, donation, transfer or other disposition of Property, to the extent the Member of the Obligated Group receives Property in return for such sale, lease or disposition, the Property which is sold, leased or disposed of shall be treated, for purposes of the provisions of this Section 4.19, as having been transferred in satisfaction of the provisions of Subsection (a) above to the extent of the fair market value of the Property received by the Member of the Obligated Group. The Member shall be required, however, to satisfy the conditions contained in one of the other provisions of this Section 4.19 with respect to the remaining value of such Property in excess of the fair market value of the Property received by the Member in return therefor prior to any such sale, lease or other disposition.

Each Member further agrees that it will not sell, lease, donate, transfer or otherwise dispose of Property (A) which could reasonably be expected at the time of such sale, lease, donation or disposition to result in a reduction of the Debt Service Coverage Ratio for the Obligated Group such that the Master Trustee would be obligated to require the Obligated Group to retain a Consultant pursuant to Section 4.11 hereof, or (B) if a Consultant has been retained in the circumstances described in Section 4.11 hereof, such action, in the opinion of such Consultant, will have an adverse effect on the Income Available for Debt Service of the Obligated Group.

The rendering of any service, the making of any loan or gift, the extension of any credit or any other transaction, with any Affiliate shall be permitted if there is compliance with any of Subsections (a) through (f) above or if such transaction is pursuant to the reasonable requirements of such Member’s activities and upon fair and reasonable terms no less favorable to it than would obtain in a comparable arm’s length transaction with a person not an Affiliate.

Notwithstanding anything in this Section 4.19 to the contrary, so long as any of the Series 2015 Notes are Outstanding, no Member may sell, lease, donate, transfer or otherwise dispose of all or any portion of the Project, including, without limitation, the Premises, without the prior written consent of the Bondholder Representative or, if there is no Bondholder Representative, the prior unanimous written consent of the Holders of the Series 2015 Notes.

Section 4.20 Liens on Property. Each Member covenants that it will not create or permit to be created or remain and, at its cost and expense, promptly discharge or terminate all Liens on its Property or any part thereof which are not Permitted Encumbrances.

Section 4.21 Management and Operating Agreements.

(a) The Obligated Group Members will not change the Architect, Contractor, Construction Monitor, or Manager without the prior written consent of the Bondholder Representative, and shall make such persons reasonably available to the Bondholder Representative to discuss the Project.

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(b) The Obligated Group Representative shall provide to the Bondholder Representative, the Master Trustee and the Bond Trustee from time to time as requested by the Issuer, the Bondholder Representative, the Master Trustee and the Bond Trustee, certified copies of every architectural, construction management, construction monitor, management, operating and other similar agreement to which any Member is a party covering all or substantially all of the Project. Each such agreement shall be in form and substance acceptable to the Bondholder Representative and shall be subordinate and subject to the lien of this Indenture and the other Financing Instruments.

(c) The Obligated Group Representative agrees to provide at least 30 days (or such lesser time as the Issuer and the Bondholder Representative may accept) prior written notice to the Issuer and the Bondholder Representative of any change, modification, termination or expiration of any such contract or agreement.

Section 4.22 Environmental Covenants; Compliance with Environmental Laws.

(a) The Obligated Group Members represent and warrant that, to the best of their knowledge, after due inquiry and investigation, except as previously disclosed in writing to the Bondholder Representative, (i) there are no Hazardous Materials on the Obligated Group Members’ Property, except those in compliance with all applicable federal, state and local laws, ordinances, rules and regulations, (ii) no owner or occupant nor any prior owner or occupant of such Property has received any notice or advice from any governmental agency or any source whatsoever with respect to Hazardous Materials on, from or affecting such Property and (iii) there are no claims, litigation, administrative or other proceedings, whether actual or threatened, or judgments or orders relating to the location of Hazardous Material on such Property or on the surrounding areas.

(b) The Obligated Group Members covenant and represent that all action heretofore and hereafter taken by the Obligated Group Members to operate and maintain the Obligated Group Members’ Property and to maintain the Project, have been and will be in full compliance with this Indenture, the Bond Indenture and the other Financing Instruments, and will comply in all material respects with all pertinent laws, ordinances, rules, regulations and orders applicable to the Obligated Group Members; and in connection with the operation, maintenance, repair and replacement of the Obligated Group Members’ Property that they shall comply in all material respects with all applicable ordinances, laws, rules, regulations and orders of the United States of America, the state, or any municipality.

(c) The Obligated Group Members covenant and represent that the Obligated Group Members’ Property will be in compliance in all material respects with all applicable zoning, subdivision, building, land use, environmental and similar laws and ordinances and in compliance with all Environmental Laws; and that it shall not take any action which would cause such Property or any part thereof to be in violation of such laws, ordinances or Environmental Laws.

(d) The Obligated Group Members hereby covenant to comply with, and to cause their respective officers, directors, members, shareholders, partners, agents, servants and employees and each tenant and other occupant and user of the Property, and the officers,

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directors, members, shareholders, partners, agents, servants and employees of such tenants, occupants and users to comply with, each and every Environmental Law applicable to the Obligated Group Members, the Obligated Group Members’ Property and each such tenant, occupant or user with respect to such Property. Specifically, but without limitation, with respect to the Obligated Group Members’ Property:

(i) the Obligated Group Members shall obtain and maintain (and cause each tenant, occupant and user to obtain and maintain) all permits, certificates, licenses and other consents and approvals required by each Environmental Law from time to time applicable to the Obligated Group Members, each and every part of the Property and/or the conduct of any business thereat or related thereto;

(ii) the Obligated Group Members shall not cause any release on or off the Property and will not suffer or permit any release, or the presence of Hazardous Materials, in, on or at the Property (except in compliance with all applicable Environmental Laws);

(iii) if the Obligated Group Members cause a release on or off the Property, or if a release occurs on the Property, the Obligated Group Members shall promptly effect the clean-up of any resulting contamination in accordance with and as required by the provisions of all applicable Environmental Laws; and

(iv) within 30 days after the date that any lien is filed against the Property or any part thereof under any Environmental Law, the Obligated Group Members shall cause such lien to be discharged or bonded or otherwise secured to the Master Trustee’s and the Bondholder Representative’s satisfaction.

(e) Notwithstanding any provision of this Indenture or any other Financing Instrument to the contrary, neither the execution by the Obligated Group Members, nor the execution or acceptance by the Master Trustee, of this Indenture nor any provision of this Indenture or any other loan documents shall create or confer upon the Master Trustee any obligation to (a) cure any failure by the Obligated Group Members to comply with any Environmental Law, (b) take any actions or complete any actions taken, or expend any sums, to cure any failure by the Obligated Group Members to comply with any Environmental Law or (c) compel, enjoin or otherwise cause the Obligated Group Members to do any of the same; nor shall the execution by the Obligated Group Members, or the execution or acceptance by the Master Trustee, of this Indenture, or the existence or the exercise of any provision hereof or of any other loan documents, operate to place upon the Master Trustee any responsibility for the operation, control, care, management or repair of the Property, or any responsibility for, or any right, power or ability to control or direct the storage, transportation, release, removal, containment, encapsulation, remediation, monitoring, or other disposition of any Hazardous Materials.

(f) The provisions of this Section shall survive any satisfaction, release, discharge or reconveyance of this Indenture and the Obligated Group Members shall continue to be obligated to indemnify each indemnified party with respect to any breach by the Obligated Group Members of any of such provisions pursuant to the terms hereof for so long as such indemnified party may be liable for or subject to any claim, liability, damage, loss, order, penalty, fine, cost,

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charge or expense arising out of or related to any matter for which such indemnified party is indemnified under this Indenture.

Section 4.23 GMP Contract – Change Orders. The Obligor shall not submit or accept any change order or construction change directive or otherwise take any action under the GMP Contract, without the consent of the Bondholder Representative or, if there is no Bondholder Representative, not less than a majority of the Holders of the Series 2015 Notes, that would increase the guaranteed maximum price of the Project by more than $500,000.

Section 4.24 Approval of Consultants.

(a) If at any time the Members of the Obligated Group are required to engage a Consultant under the provisions of this Indenture (other than with respect to the calculations required by Sections 4.16 and 4.18 hereof, to which the provisions of this Section 4.24 shall not apply), such Consultant shall be engaged in the manner set forth in this Section 4.24.

(b) Upon selecting a Consultant as required under the provisions of this Indenture, the Obligated Group Representative will notify the Master Trustee and the Bondholder Representative of such selection. If there is no Bondholder Representative, the Master Trustee shall, as soon as practicable but in no case longer than five Business Days after receipt of notice, notify the holders of all Obligations outstanding under this Indenture of such selection. Such notice by the Obligated Group Representative and by the Master Trustee shall (i) include the name of the Consultant and a brief description of the Consultant, (ii) state the reason that the Consultant is being engaged including a description of the covenant(s) of this Indenture that require the Consultant to be engaged, and (iii) state that the Bondholder Representative or, if there is no Bondholder Representative, the holder of the Obligation will be deemed to have consented to the selection of the Consultant named in such notice unless the Bondholder Representative or, if there is no Bondholder Representative, such Obligation holder submits an objection to the selected Consultant in writing (in a manner acceptable to the Master Trustee) to the Master Trustee within 20 days of the date that the notice is sent to the Bondholder Representative or, if applicable, the holder of the Obligation. No later than two Business Days after the end of the 20-day objection period, the Master Trustee shall notify the Obligated Group if the Bondholder Representative has objected or, if there is no Bondholder Representative, of the number of objections. If the Bondholder Representative has not objected or, if there is no Bondholder Representative, 66.6 percent or more in aggregate principal amount of the Holders of the Outstanding Senior Obligations (or, if no Senior Obligations are Outstanding, the Subordinate Obligations) have been deemed to have consented to the selection of the Consultant or have not responded to the request for consent, the Obligated Group Representative shall engage the Consultant within five Business Days. If the Bondholder Representative has objected or, if there is no Bondholder Representative, 33.4 percent or more in aggregate principal amount of the Holders of the Outstanding Senior Obligations (or, if no Senior Obligations are Outstanding, the Subordinate Obligations) have objected to the Consultant selected, the Obligated Group Representative shall select another Consultant which may be engaged upon compliance with the procedures of this Section 4.24.

(c) When the Master Trustee notifies the Holders of Obligations of such selection, the Master Trustee will also request any Related Bond Trustee to send a notice containing the

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information required by subparagraph (b) above to the owners of all of the Related Bonds outstanding. Such Related Bond Trustee shall, as the Holder of an Obligation securing such Related Bonds, consent or object to the selection of the Consultant in accordance with the response of the owners of such Related Bonds.

The 20-day notice period described in subparagraph (b) above may be extended by the Master Trustee in order to permit each Related Bond Trustee to give the owners of the Related Bonds 20 days to respond to the notice given by the Related Bond Trustee. By acceptance of an Obligation securing any Related Bonds, the Related Bond Trustee agrees to comply with the provisions of this Section 4.23.

Section 4.25 Non-Compete Covenant. Each of the Members of the Obligated Group covenants that none of it or any of its general partners, members, managers or other principals will own or operate a competing assisted living or memory care facility within a five mile radius of the Project while the Series 2015 Bonds are Outstanding.

Section 4.26 Amendment of Financing Instruments. The Obligated Group Members shall not amend or supplement this Indenture, any of the other Financing Instruments, or any of the documents executed by it in connection with the foregoing, without the prior written consent of the Bondholder Representative.

Section 4.27 Real Property Liens. Notwithstanding anything to the contrary contained herein or in any of the other Financing Instruments, the Obligated Group shall not, directly or indirectly, create, incur, assume or suffer to exist any Lien on or with respect to any of its real property, including without limitation its Facilities, the Mortgaged Property, and the Project, without the prior written consent of the Bondholder Representative.

Section 4.28 Management Fees. While any Series 2015 Bonds are Outstanding, the payment of any fees or other compensation to the Manager shall be subordinate, in all respects, to the payment of principal of, premium, if any, and interest on, and all other payments due with respect to, the Series 2015 Bonds and the Series 2015 Notes, as and when the same shall have become due and payable.

Section 4.29 Exclusivity. The Obligated Group Members covenant that for any project sponsored or developed by the Obligated Group Members, from the Delivery Date to December 31, 2017, the Obligated Group Members shall, directly or through any underwriter or placement agent, provide to Greenwich Investment Management, Inc. the exclusive right to cause the purchase, on behalf of its clients, of any obligations issued on behalf of the Obligated Group Members to finance such project; provided, however, that the foregoing shall not obligate either the Obligated Group Members or Greenwich Investment Management, Inc., to commit to or to enter into a transaction relating to the same if such parties do not agree to the terms of such financing.

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ARTICLE V

MERGER, CONSOLIDATION, SALE OR CONVEYANCE

Section 5.01 Merger, Consolidation, Sale or Conveyance.

(a) Subject to the restrictions set forth in the final paragraph of this Section 5.01(a), each Member agrees that it will not merge into, or consolidate with, one or more Persons which are not Members, or allow one or more of such Persons to merge into it, or sell or convey all or substantially all of its Property to any Person who is not a Member, unless consented to by the Bondholder Representative and unless:

(i) Any successor entity to such Member (including without limitation any purchaser of all or substantially all the Property of such Member) is an entity organized and existing under the laws of the United States of America or a state thereof and shall execute and deliver to the Master Trustee and the Bondholder Representative an appropriate instrument, satisfactory to the Master Trustee and the Bondholder Representative, containing the agreement of such successor entity to assume, jointly and severally, the due and punctual payment of the principal of, premium, if any, and interest on all Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept and performed by such Member;

(ii) Immediately after such merger or consolidation, or such sale or conveyance, no Member would be in default in the performance or observance of any covenant or condition of any Related Loan Agreement, any Deed of Trust or this Indenture;

(iii) The Master Trustee and the Bondholder Representative receives an Officer’s Certificate showing that immediately after such merger, consolidation, sale or conveyance, the Debt Service Coverage Ratio of the Obligated Group for the most recent Fiscal Year for which financial statements that have been reported upon by independent certified public accountants are available would be not less than 1.00 or that such Debt Service Coverage Ratio of the Obligated Group is greater than the Debt Service Coverage Ratio of the Obligated Group was for such Fiscal Year prior to such merger or consolidation, sale or conveyance; provided that in lieu of such Officer’s Certificate, the Obligated Group Representative may deliver to the Master Trustee a Feasibility Report or Officer’s Certificate necessary to support the incurrence of one dollar of Long-Term Indebtedness pursuant to Section 4.16(a)(i), after giving effect to such merger or consolidation; and

(iv) If all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then-existing law the consummation of such merger, consolidation, sale or conveyance would not adversely affect the validity of such Related Bonds or any exemption from federal or state income taxation of interest payable on such Related Bonds otherwise entitled to such exemption.

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(v) The Master Trustee receives a duly executed and delivered Deed of Trust (or amendment to an existing Deed of Trust) encumbering the Property, Plant and Equipment of the successor entity, for the benefit of the Master Trustee, subject only to Permitted Encumbrances as provided herein.

Notwithstanding the foregoing in this Section 5.01(a), so long as any of Series 2015 Notes are Outstanding, no Member may merge into, or consolidate with, one or more Persons which are not Members, or allow one or more of such Persons to merge into it, or sell or convey the Project, including, without limitation, the Premises, to any Person who is not a Member without the prior written consent of the Bondholder Representative or, if there is no Bondholder Representative, the prior unanimous written consent of the Holders of the Series 2015 Notes. Furthermore, so long as any of the Series 2015 Notes are Outstanding, the Obligor shall not:

(1) permit any transfer, including, without limitation, any pledge, hypothecation or encumbrance, of any direct or indirect ownership interest in the General Partner nor permit any other general partner to be admitted as a partner of the Obligor without the prior written consent of the Bondholder Representative or, if there is no Bondholder Representative, a majority of the Holders of the Series 2015 Notes, and

(2) cause the Project to be managed by any Person other than Surpass Senior Living, LLC, a Texas limited liability company, except (A) in any event and at any time the substitute manager and management agreement are approved by the prior written consent of the Bondholder Representative or, if there is no Bondholder Representative, a majority of the Holders of the Series 2015 Notes, or (B) in the event the Manager is terminated pursuant to the terms of the Management Agreement, in which case the Obligated Group Representative shall (y) appoint a successor Manager (the “Acting Manager”), which shall be the acting Manager on a temporary basis for a period of 75 days (the “Temporary Period”) and notify the Master Trustee and the Bondholder Representative of the termination of the Manager and the appointment of the Acting Manager and (z) if there is no Bondholder Representative, immediately direct the Master Trustee to send written notice to the Holders of the Series 2015 Notes notifying such Holders of the termination of the Manager and the appointment of the Acting Manager. The Acting Manager shall become the successor Manager at the conclusion of the Temporary Period, unless the Bondholder Representative or, if there is no Bondholder Representative, a majority of the Holders of the Series 2015 Notes object to the Acting Manager continuing as the successor Manager on or before the date 60 days after the Bondholder Representative receives notice of the same or, if there is no Bondholder Representative, after the Master Trustee delivers the notice described in Section 5.01(a)(2)(B)(z). If the Bondholder Representative or if a majority of the Holders of the Series 2015 Notes, as applicable, object to the Acting Manager continuing as the successor Manager, then the Obligated Group Representative shall repeat the procedure set forth in this Section 5.01(a)(2)(B) until such time as a successor Manager is appointed in accordance with this Section 5.01(a)(2)(B).

(b) In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for its predecessor, with the same effect as if it had been named herein as such Member. Each

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successor, assignee, surviving, resulting or transferee entity of a Member must agree to become, and satisfy the conditions described in Section 6.01 hereof to becoming, a Member of the Obligated Group prior to any such succession, assignment or other change in such Member’s status. Any successor entity to such Member thereupon may cause to be signed and may issue in its own name Obligations hereunder and the predecessor entity shall be released from its obligations hereunder and under any Obligations, if such predecessor entity shall have conveyed all Property owned by it (or all such Property shall be deemed conveyed by operation of law) to such successor entity. All Obligations so issued by such successor entity hereunder shall in all respects have the same legal rank and benefit under this Indenture as Obligations theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Obligations had been issued hereunder by such prior Member without any such consolidation, merger, sale or conveyance having occurred.

(c) In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate.

(d) The Master Trustee may rely upon an opinion of Independent Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of this Section and that it is proper for the Master Trustee under the provisions of this Indenture to join in the execution of any instrument required to be executed and delivered by the Master Trustee.

ARTICLE VI

MEMBERSHIP IN THE OBLIGATED GROUP

Section 6.01 Admission of Obligated Group Members. Any other Person may become a Member of the Obligated Group if:

(a) Such Person is a business entity;

(b) Such Person shall execute and deliver to the Master Trustee and the Bondholder Representative a Supplement in a form acceptable to the Master Trustee and the Bondholder Representative which shall be executed by the Master Trustee and the Obligated Group Representative, containing the agreement of such Person (i) to become a Member of the Obligated Group and thereby to become subject to compliance with all provisions of this Indenture and (ii) unconditionally and irrevocably (subject to the right of such Person to cease its status as a Member of the Obligated Group pursuant to the terms and conditions of Section 6.03 hereof) to jointly and severally make payments upon each Obligation;

(c) The Obligated Group Representative and each Member and the Bondholder Representative each shall have approved the admission of such Person to the Obligated Group; and

(d) The Master Trustee shall have received

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(i) an Officer’s Certificate of the Obligated Group Representative which (A) demonstrates that immediately upon such Person becoming a Member of the Obligated Group, the Debt Service Coverage Ratio of the Obligated Group for the two most recent Fiscal Years for which financial statements that have been reported upon by independent certified public accountants are available, after adjustment for the addition of the new Member, would be not less than 1.00, or that such Debt Service Coverage Ratio of the Obligated Group with such Person is greater than the Debt Service Coverage Ratio of the Obligated Group was for such Fiscal Year without such Person becoming a Member of the Obligated Group, (B) states that prior to and immediately after such Person becoming a Member of the Obligated Group, no Event of Default exists hereunder and no event shall have occurred which with the passage of time or the giving of notice, or both, would become such an Event of Default; and (C) states that prior to and immediately after such Person becoming a Member of the Obligated Group, the Members would not be in default in the performance or observance of any covenant or condition to be performed or observed hereunder; provided that in lieu of the requirements of clause (A), the Obligated Group Representative may deliver to the Master Trustee a Feasibility Report or Officer’s Certificate necessary to support the incurrence of one dollar of Long-Term Indebtedness pursuant to Section 4.16(a)(i) or (ii), after giving effect to the admission of such Person to the Obligated Group; and provided further that in making the calculation called for by clause (A) above and the immediately preceding proviso, (x) there shall be excluded from Revenues any Revenues generated by Property of such Person transferred or otherwise disposed of by such Person since the beginning of the Fiscal Year during which such Person’s entry into the Obligated Group occurs and (y) there shall be excluded from Expenses any Expenses related to Property of such Person transferred or otherwise disposed of by such Person since the beginning of the Fiscal Year during which such Person’s entry into the Obligated Group occurs;

(ii) an opinion of Independent Counsel in form and substance reasonably acceptable to the Master Trustee and the Bondholder Representative to the effect that the instrument described in Section 6.01(b) above and any Deed of Trust described in Section 6.01(d)(v) below has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement of the Obligated Group Representative and such Person, enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity;

(iii) evidence from each Rating Agency then maintaining a rating on any series of Related Bonds to the effect that the admission of such Person to the Obligated Group will not result in a lowering, withdrawal or suspension of the rating assigned by such Rating Agency to such series of Related Bonds; and

(iv) if all amounts due or to become due on all Related Bonds have not been paid to the holders thereof and provision for such payment has not been made in such manner as to have resulted in the defeasance of all Related Bond Indentures, an Opinion of Bond Counsel to the effect that under then-existing law the consummation of such transaction would not adversely affect the validity of any Related Bonds or any

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exemption from federal or state income taxation of interest payable on such Related Bonds otherwise entitled to such exemption; and

(v) a duly executed and delivered Deed of Trust encumbering the Property, Plant and Equipment owned by such new Member, subject only to Permitted Encumbrances.

Each successor, assignee, surviving, resulting or transferee entity of a Member must agree to become, and satisfy the above described conditions to becoming, a Member of the Obligated Group prior to any such succession, assignment or other change in such Member’s entity status.

Section 6.02 Obligated Group Members. Upon any Person’s becoming an Obligated Group Member as provided in Section 6.01:

(a) the Master Trustee, at the direction of or with the consent of the Bondholder Representative, may pursue any remedies consequent upon an Event of Default against any Obligated Group Member, or all of them, without notice to, demand upon or joinder of (and without in any way releasing) any of the others, or against any one or more or all of them at the same time or at different times;

(b) any right of contribution or right acquired by subrogation by any Obligated Group Member against any other Obligated Group Member arising out of the payment of Indebtedness shall be subordinated to the rights of the Master Trustee and the Holders of Obligations; and

(c) each Obligated Group Member shall designate the Obligated Group Representative as its attorney in fact with full power of substitution to perform, satisfy, and discharge every obligation, covenant, duty or liability to be performed on the part of the Obligated Group Member hereunder.

Section 6.03 Withdrawal of Obligated Group Members. Each Member covenants that it will not take any action, corporate or otherwise, which would cause it or any successor thereto with which it is merged or consolidated under the terms of this Indenture to cease to be a Member of the Obligated Group unless prior to cessation of such status there is delivered to the Master Trustee and the Bondholder Representative:

(a) if all amounts due or to become due on all Related Bonds have not been paid to the holders thereof and provision for such payment has not been made in such manner as to have resulted in the defeasance of all Related Bond Indentures, an Opinion of Bond Counsel to the effect that, under then existing law, the cessation by the Member of its status as a Member will not adversely affect the validity of any Related Bond or any exemption from federal or state income taxation of interest payable on such Related Bonds otherwise entitled to such exemption;

(b) an Officer’s Certificate of the Obligated Group Representative to the effect that (i) immediately after such cessation the Debt Service Coverage Ratio of the Obligated Group for the two most recent Fiscal Years for which financial statements that have been reported upon by independent certified public accountants are available, after adjustment for the removal of the Member, would be not less than 1.00 or that such Debt Service Coverage Ratio of the Obligated

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Group is greater than the Debt Service Coverage Ratio of the Obligated Group was for such Fiscal Year prior to such cessation; and (ii) prior to and immediately after such cessation, no Event of Default exists hereunder and no event has occurred which with the passage of time or the giving of notice, or both, would become such an Event of Default; provided that in lieu of the requirements of (i), the Obligated Group Representative may deliver to the Master Trustee and the Bondholder Representative a Feasibility Report or Officer’s Certificate necessary to support the incurrence of one dollar of Long-Term Indebtedness pursuant to Section 4.16(a)(i), after giving effect to the withdrawal of such Member from the Obligated Group;

(c) evidence from each Rating Agency then maintaining a rating on any series of Related Bonds to the effect that the cessation of such status will not result in a lowering, withdrawal or suspension of the rating assigned by such Rating Agency to such series of Related Bonds; and

(d) a consent in writing from the Obligated Group Representative and each Member and the Bondholder Representative to the withdrawal by the withdrawing Member.

Upon compliance with the conditions contained in this Section 6.03, the Master Trustee shall execute any documents reasonably requested by the withdrawing Member to evidence the termination of such Member’s obligations hereunder (including without limitation termination of the pledge of such member’s Gross Revenues) under any Supplements and under all Obligations (including without limitation release and reconveyance of the Deeds of Trust encumbering such Member’s Property, Plant and Equipment for the benefit of the Master Trustee).

Section 6.04 Successor Obligated Group Representative. Gilbert AL Partners, LP, a Texas limited partnership, shall serve as the Obligated Group Representative until such time as Gilbert AL Partners, LP either (i) withdraws from the Obligated Group in accordance with this Article VI or (ii) delivers to the Master Trustee and the Bondholder Representative its resignation as the Obligated Group Representative. Gilbert AL Partners, LP covenants to fulfill all of the duties of the Obligated Group Representative under this Indenture. Gilbert AL Partners, LP agrees that it shall not withdraw from the Obligated Group or resign as Obligated Group Representative until Gilbert AL Partners, LP has appointed another Obligated Group Representative acceptable to the Bondholder Representative and such successor Obligated Group Representative has accepted its duties in writing. Each Obligated Group Member by becoming an Obligated Group Member acknowledges that the Obligated Group Representative has certain powers and duties under this Indenture, including, but not limited to, binding all Obligated Group Members to joint and several liability on all Obligations issued hereunder, and authorizes the Obligated Group Representative to exercise such powers and carry out such duties.

ARTICLE VII

REMEDIES OF THE MASTER TRUSTEE AND HOLDERS OF SECURED OBLIGATIONS IN EVENT OF DEFAULT

Section 7.01 Events of Default. “Event of Default,” as used herein, shall mean any of the following events, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in

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compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:

(a) default in the payment of any Senior Obligation when it becomes due and payable and the continuance of such default beyond the period of grace, if any, provided in the instrument creating such Senior Obligation; or

(b) if no Senior Obligations are then Outstanding, default in the payment of any Subordinate Obligation when it becomes due and payable and the continuance of such default beyond the period of grace, if any, provided in the instrument creating such Subordinate Obligation; or

(c) any Obligated Group Member shall fail duly to observe or perform any other covenant or agreement (other than a covenant or agreement whose performance or observance is elsewhere in this Section specifically dealt with) on the part of such Person contained in this Indenture for a period of 45 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Obligated Group Representative by the Master Trustee at the direction of or with the consent of the Bondholder Representative, or to the Obligated Group Representative and the Master Trustee by the Bondholder Representative or, if there is no Bondholder Representative, the Significant Holders; provided that if any such default can be cured by such Obligated Group Member but cannot be cured within the 45 day curative period described above, it shall not constitute an Event of Default if corrective action is instituted by such Obligated Group Member within such 45 day period and diligently pursued until the default is corrected; or

(d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging any Obligated Group Member a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization or arrangement of any Obligated Group Member under the Federal Bankruptcy Code or any other similar applicable Federal or state law, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of any Obligated Group Member or of its Property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed for a period of 90 days; or

(e) any Obligated Group Member shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the institution of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under the Federal Bankruptcy Code or any other similar applicable Federal or state law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of it or of its Property, or shall make assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or action shall be taken by the Governing Body of any Obligated Group Member in furtherance of any of the aforesaid purposes; or

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(f) any Obligated Group Member shall fail to pay or make provision for payment of any recourse Indebtedness having a principal balance of not less than $500,000 and the continuance of such failure beyond the applicable grace period, if any; or

(g) the Master Trustee has received written notice that an event of default, as therein defined, under any instrument under which Senior Obligations may be incurred or secured, or under any Related Bond Indenture for Related Bonds secured by a Senior Obligation, has occurred and is continuing beyond the applicable period of grace, if any; or

(h) if no Senior Obligations are then Outstanding, the Master Trustee has received written notice that an event of default, as therein defined, under any instrument under which Subordinate Obligations may be incurred or secured, or under any Related Bond Indenture for Related Bonds secured by a Subordinate Obligation, has occurred and is continuing beyond the applicable period of grace, if any; or

(i) if the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00 for any Fiscal Year, if directed by the Bondholder Representative; or

(j) if an event of default shall occur under any Deed of Trust or other security instrument provided to the Master Trustee from, on behalf of or for the benefit of any Member of the Obligated Group (including, if applicable, the expiration of any grace period provided therein).

Section 7.02 Acceleration of Maturity; Rescission and Annulment; Subordinate Remedies. If an Event of Default occurs and is continuing, then and in every such case the Master Trustee (subject to Section 7.16), at the direction of or with the consent of the Bondholder Representative, or, if there is no Bondholder Representative, the Significant Holders (or, in the case of any Event of Default described in subparagraphs (g) or (h) of Section 7.01 above resulting in the loss of any exclusion from gross income of interest on, or the invalidity of, any Indebtedness secured by a pledge of such Obligations, the Significant Holders of such Outstanding Obligations of the affected series) may declare the principal of all the Obligations to be due and payable immediately, by a notice in writing to the Obligated Group Representative and all of the Holders of Obligations (which shall be given by the Master Trustee) and to the Master Trustee (if such declaration is made by the Bondholder Representative or, if there is no Bondholder Representative, by the Significant Holders), and upon any such declaration such principal shall become immediately due and payable.

At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Master Trustee as hereinafter in this Article provided, the Bondholder Representative of, if there is no Bondholder Representative, the Majority Holders of the affected Outstanding Obligations, by written notice to the Obligated Group Representative and the Master Trustee, may rescind and annul such declaration and its consequences if:

(a) one or more Obligated Group Members has paid or deposited with the Master Trustee a sum sufficient to pay:

(1) all overdue installments of interest on all Obligations,

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(2) the principal of (and premium, if any, on) any Obligations which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Obligations, and

(3) all sums paid or advanced by the Master Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Master Trustee, its agents and its counsel; and

(b) all Events of Default, other than the non-payment of the principal of Obligations which have become due solely by such acceleration, have been cured or waived as provided in Section 7.17.

No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 7.03 Subordination of Subordinate Obligations to Senior Obligations.Notwithstanding any other provision to the contrary in this Master Indenture or otherwise, the right of the Subordinate Obligations to be secured by the lien and security interests created by this Master Indenture is subject in all respects to the prior payment of the Senior Obligations, in each case as the same become due. Until the principal of and interest on the Senior Obligations have been paid, if there are insufficient funds available for payment of the interest on the Subordinate Obligations when due or if there are insufficient funds for payment of the principal of Subordinate Obligations at maturity or upon redemption, an Event of Default shall not be deemed to have occurred under the Subordinate Obligations and this Master Indenture. The Master Trustee shall not exercise any remedial action under this Master Indenture or otherwise on behalf of the Holders of any Subordinate Obligations until such time as all amounts with respect to Senior Obligations have been paid in full.

(b) Each Holder of the Subordinate Obligations is deemed to have agreed to all the subordination provisions set forth in this Master Indenture, including, without limitation, the following:

(i) General Subordination. To the extent the payment of the Subordinate Obligations is made subordinate to any of the Senior Obligations, the payment of the Subordinate Obligations is expressly made subordinate and subject in right of payment to the prior payment in cash or cash equivalents of all Senior Obligations. No payments of principal, premium (if any) or interest in respect of the Subordinate Obligations shall be made at any time:

(1) when any payment in respect of a Senior Obligation is due and owing; or

(2) when there is a deficiency in the Debt Service Reserve Fund.

No payment in respect of any Subordinate Obligation shall be accepted by any Holder of a Subordinate Obligation in violation of the provisions of this Master Indenture.

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(c) Standstill. No Holder of a Subordinate Obligation shall exercise any remedies under this Master Indenture or otherwise in respect of any Subordinate Obligation or exercise any creditors’ rights in respect of any Subordinate Obligation, including, without limitation, the filing of any involuntary bankruptcy petition, with respect to the Members of the Obligated Group or any Collateral or other Property until such time as the Senior Obligations have been finally and indefeasibly paid in full in cash.



Section 7.06 Incidents of Sale. Upon any sale of any of the Mortgaged Property, whether made under the power of sale given by the Deed of Trust or pursuant to judicial proceedings, to the extent permitted by law:

(a) the Master Trustee is hereby irrevocably appointed the true and lawful attorney of each Member, in its name and stead, to make all necessary documents and instruments of assignment and transfer of the property thus sold; and for that purpose it may execute all necessary documents, and instruments of assignment and transfer, and may substitute one or more persons, firms, or corporations with like power, each Member hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof; but if so requested by the Master Trustee or by any purchaser, any Member shall ratify and confirm any such sale or transfer by executing and delivering to the Master Trustee or to such purchaser or purchasers all proper documents, instruments of assignment and transfer, and release as may be designated in any such request;

(b) rights, titles, interests, claims, and demands whatsoever, either at law or in equity or otherwise, of the Members of, in, and to the property so sold shall be divested and such sale shall be a perpetual bar both at law and in equity against each of the Members and their respective successors and assigns, and against any and all persons claiming or who may claim the property sold or any part thereof by, through or under the Members or their respective successors and assigns; and

(c) receipt of the Master Trustee or of the officer making such sale shall be a sufficient discharge to the purchaser or purchasers at such sale for his or their purchaser money and such purchaser or purchasers and his or their assigns or personal representative shall not, after paying such purchase money and receiving such receipt, be obligated to see to the application of such purchase money, or be in any wise answerable for any loss, misapplication, or non-application thereof.

Upon a sale of substantially all the Mortgaged Property, whether made under the power of sale granted by the Deeds of Trust or pursuant to judicial proceedings, the Obligated Group Representative will permit, to the extent permitted by law, the purchaser thereof and its successors and assigns to take and use the names of the Members and to carry on business under such name or any variant thereof and to use and employ any and all other trade names, brands, and trademarks of the Members; and in such event, upon written request of such purchaser, its

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successors, or its assigns, any Member will, at the expense of the purchaser, change its name in such manner as to eliminate any similarity.

Section 7.07 Collection of Indebtedness and Suits for Enforcement by Master Trustee. The Obligated Group Members covenant (subject to any notice and grace periods contained herein) that if:

(i) default is made in the payment of any installment of interest on any Obligation when such interest becomes due and payable, or

(ii) default is made in the payment of the principal of (or premium, if any, on) any Obligation at the maturity or due date thereof,

each Obligated Group Member will, upon demand of the Master Trustee, at the direction of or with the consent of the Bondholder Representative, pay to it, for the benefit of the Holders of such Obligations, the whole amount then due and payable on such Obligations for principal, redemption premium, if any, and interest, with interest at the rate borne by the Obligations upon the overdue principal and redemption premium, if any; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Master Trustee, its agents and counsel.

If the Obligated Group Members fail to pay any of the foregoing amounts forthwith upon demand, the Master Trustee, in its own name and as trustee of an express trust, at the direction of or with the consent of the Bondholder Representative, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Obligated Group Members or any other obligor upon the Obligations and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Obligated Group Members or any other obligor upon the Obligations, wherever situated.

If an Event of Default occurs and is continuing, the Master Trustee may, at the direction of or with the consent of the Bondholder Representative, subject to the provisions of Section 7.16:

(a) proceed to protect and enforce its rights and the rights of the Master Trustee under this Indenture and of the Holders of Obligations by such appropriate judicial proceedings as the Master Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other legal, equitable, or other remedy, as the Master Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Master Trustee and of the Holders; or

(b) exercise any and all remedies under the Deeds of Trust.

Anything in this Indenture to the contrary notwithstanding, the Master Trustee shall not be required to foreclose under the Deeds of Trust or to bid at any foreclosure sale if, in the Master Trustee’s reasonable judgment, such action would subject it to personal liability, expense

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or loss, including the cost of investigation, removal or other remedial action with respect to the environmental condition of the Premises.

Section 7.08 Master Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition, or other judicial proceeding relative to the Obligated Group Members or any other obligor upon the Obligations or the property of the Obligated Group Members or of such other obligor or their creditors, the Master Trustee (irrespective of whether the principal of the Obligations shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Master Trustee shall have made any demand on the Obligated Group Members for the payment of overdue principal, premium, or interest or other payment) shall be entitled and empowered, by intervention in such proceeding or otherwise, at the direction of or with the consent of the Bondholder Representative,

(i) to file and prove a claim for the whole amount of principal, redemption premium, if any, and interest or other payment owing and unpaid in respect of the Obligations and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Master Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Master Trustee, its agents and counsel which shall be deemed an administrative claim) and of the Holders of Obligations allowed in such judicial proceeding, and

(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any receiver, assignee, trustee, liquidator, sequestrator, custodian, or other similar official in any such judicial proceeding is hereby authorized by each Holder of Obligations to make such payments to the Master Trustee, and in the event that the Master Trustee shall consent to the making of such payments directly to the Holders of Obligations, to pay to the Master Trustee any amount due to it for the reasonable compensation, expenses, disbursements, and advances of the Master Trustee, its agents and counsel, and any other amounts due the Master Trustee under this Indenture which shall be deemed an administrative claim.

Nothing herein contained shall be deemed to authorize the Master Trustee to authorize or consent to or accept or adopt on behalf of any Holder of Obligations any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Holder thereof, or to authorize the Master Trustee to vote in respect of the claim of any Holder of Obligations in any such proceeding.

Section 7.09 Master Trustee May Enforce Claims Without Possession of Obligations. All rights of action and claims under this Indenture or the Obligations may be prosecuted and enforced by the Master Trustee without the possession of any of the Obligations or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Master Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements, and advances of the Master Trustee, its agents and counsel, be for the benefit of

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the Holders of the Obligations in the priority set forth herein in respect of which such judgment has been recovered.

Section 7.10 Application of Money Collected. Any money collected by the Master Trustee pursuant to this Article and any proceeds of any sale (after deducting the costs and expenses of such sale, including a reasonable compensation to the Master Trustee, its agents and its counsel, and any taxes, assessments, or liens prior to the lien of this Indenture, except any thereof subject to which such sale shall have been made), whether made under any power of sale granted in the Deeds of Trust or pursuant to judicial proceedings, together with, in the case of any entry or sale as otherwise provided herein or in the Deeds of Trust, any other sums then held by the Master Trustee as part of the Trust Estate, shall be deposited in the Revenue Fund created by this Indenture, shall be applied in the order specified in Section 3.01, at the date or dates fixed by the Master Trustee and, in case of the distribution of such money on account of principal and redemption premium, if any, upon presentation of the Obligations and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid.

In the event the Master Trustee incurs expenses or renders services in any proceedings which result from the occurrence or continuance of an Event of Default under Sections 7.01(e) or 7.01(f) hereof, or from the occurrence of any event which, by virtue of the passage of time, would become such an Event of Default, the expenses so incurred and compensation for services so rendered are intended to constitute expenses of administration under the United States Bankruptcy Code or equivalent law.

Section 7.11 Limitation on Suits. No Holder of any Obligation shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(a) such Holder has previously given written notice to the Master Trustee of a continuing Event of Default;

(b) the Bondholder Representative or, if there is no Bondholder Representative, the Significant Holders shall have made written request to the Master Trustee to institute proceedings in respect of such Event of Default in its own name as Master Trustee hereunder;

(c) such Holder or Holders have offered to the Master Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Master Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such written request has been given to the Master Trustee during such 60 day period by the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders; it being understood and intended that no one or more Holders of Senior Obligations or Subordinate Obligations shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Senior Obligations or Subordinate Obligations, respectively, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal

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and ratable benefit of all the Holders of Senior Obligations or Subordinate Obligations, respectively.

Section 7.12 Unconditional Right of Holders of Obligations to Receive Payment. Notwithstanding any other provision in this Indenture, but subject to the priority of Senior Obligations and the Subordinate Obligations, the Holder of any Obligation shall have the right which is absolute and unconditional to receive payment on such Obligation as expressed in such Obligation and, as provided herein, to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

Section 7.13 Restoration of Rights and Remedies. If the Master Trustee or any Holder of Obligations has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Master Trustee or to such Holder of Obligations, then and in every such case the Obligated Group Members, the Master Trustee and the Holders of Obligations shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Master Trustee and the Holders of Obligations shall continue as though no such proceeding had been instituted.

Section 7.14 Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Master Trustee, the Bondholder Representative or to the Holders of Obligations is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 7.15 Delay or Omission Not Waiver. No delay or omission of the Master Trustee, the Bondholder Representative or of any Holder of any Obligation to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Master Trustee, to the Bondholder Representative or to the Holders of Obligations may be exercised from time to time, and as often as may be deemed expedient, by the Master Trustee, by the Bondholder Representative or by the Holders of Obligations, as the case may be.

Section 7.16 Control by Holders of Obligations. The Bondholder Representative and, if there is no Bondholder Representative, the Majority Holders shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Master Trustee or exercising any trust or power conferred on the Master Trustee, provided that:

(a) such direction shall not be in conflict with any rule of law or with this Indenture,

(b) the Master Trustee may take any other action deemed proper by the Master Trustee, with the consent of the Bondholder Representative, which is not inconsistent with such direction; and

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(c) the Master Trustee shall not be required to act on any direction given to it pursuant to this Section until indemnity as set forth in Section 8.03(e) hereof is provided to it by such Holders.

Any provision of this Indenture to the contrary notwithstanding, the Master Trustee shall not be obligated to take title to any real property included in the Mortgaged Property.

Section 7.17 Waiver of Defaults. The Bondholder Representative may on behalf of the Holders of all the Obligations waive any default hereunder and its consequences. If there is no Bondholder Representative, the Majority Holders may on behalf of the Holders of all the Obligations waive any default hereunder and its consequences, except a default:

(a) in the payment of the principal of any Obligation ranking on the same or a higher level as the Obligations of the Majority Holders, or

(b) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Obligation affected.

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Section 7.18 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Obligation by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or the Deed of Trust, or in any suit against the Master Trustee for any action taken or omitted by it as Master Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Master Trustee, to any suit instituted by any Holder of Obligations, or group of Holders of Obligations, holding in the aggregate more than 10 percent in principal amount of the Outstanding Obligations, or to any suit instituted by any Holder of Obligations for the enforcement of the payment of any Obligation on or after the respective Stated Maturities or due dates expressed in such Obligation (or, in the case of redemption, on or after the redemption date).

Section 7.19 Waiver of Stay or Extension Laws. Each Obligated Group Member covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each Obligated Group Member (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay, or impede the execution of any power herein granted to the Master Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

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ARTICLE VIII

CONCERNING THE MASTER TRUSTEE

Section 8.01 Duties and Liabilities of Master Trustee.

(a) Except during the continuance of an Event of Default, the Master Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Master Trustee.

(b) In case any Event of Default has occurred and is continuing, the Master Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a reasonably prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(c) No provision of this Indenture shall be construed to relieve the Master Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except, that:

(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;

(2) the Master Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Master Trustee was negligent in ascertaining the pertinent facts;

(3) the Master Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Holders relating to the time, method, and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred upon the Master Trustee, under this Indenture;

(4) no provision of this Indenture shall require the Master Trustee to expend or risk its funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have grounds for believing that the repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it; and

(5) in the absence of bad faith on its part, the Master Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Master Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Master Trustee, the Master Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.

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(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Master Trustee shall be subject to the provisions of this Section.

(e) In no event shall the Master Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Master Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

Section 8.02 Notice of Defaults. Within 30 days after the occurrence of any default hereunder of which the Master Trustee is deemed to have knowledge as provided in Section 8.03(h) hereof, the Master Trustee shall transmit by mail to the Bondholder Representative and, except as provided herein, to all Holders of Obligations, notice of such default, unless such default shall have been cured or waived; provided, however, that except in the case of a default in the payment of any Obligations, the Master Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Master Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Obligations. For the purposes of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.

Section 8.03 Certain Rights of Master Trustee. Except as otherwise provided in Section 8.01:

(a) The Master Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, bond, debenture, coupon, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties and shall not be required to verify the accuracy of any information or calculations required to be included therein or attached thereto;

(b) Any request or direction of any Person mentioned herein shall be sufficiently evidenced by a Request of such Person; and any resolution of the Governing Body of any Person may be evidenced to the Master Trustee by a Board Resolution of such Person;

(c) Whenever in the administration of this Indenture the Master Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering, or omitting any action hereunder, the Master Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s Certificate;

(d) The Master Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e) The Master Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Obligations pursuant to the provisions of this Indenture, unless such Holders shall have provided

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to the Master Trustee security or indemnity satisfactory to it against the costs, expenses, and liabilities which might be incurred by it in connection with such request or direction;

(f) The Master Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, bond, debenture, coupon, or other paper or document but the Master Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Master Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Obligated Group Members and each other obligor on the Obligations, personally or by agent or attorney;

(g) The Master Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Master Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care hereunder;

(h) The Master Trustee shall not be deemed to have knowledge of any default (as defined in Section 8.02 hereof) hereunder, except an Event of Default under Section 7.01(a), (b), (c), (g), (h), (i), (j) or (k) hereof, unless a Responsible Officer has actually received notice of such default in writing from any Obligated Group Member or the Holder of any Obligation, referencing the Obligations and describing such default;

(i) The permissive right of the Master Trustee to do things enumerated in this Indenture shall not be construed as a duty (except as otherwise herein provided). It shall not be the duty of the Master Trustee, except as herein provided, to see that any duties or obligations herein imposed upon any Obligated Group Member or any other Person are performed, and the Master Trustee shall not be liable or responsible for the failure of any Obligated Group Member or any other Person to perform any act required of it or them by this Indenture;

(j) The Master Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture;

(k) In the event there is no Bondholder Representative and the Master Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders of Obligations, each representing an amount less than the Majority Holders, the Master Trustee, in its sole discretion, may determine what action, if any, shall be taken, subject to the other provisions and requirements of this Indenture;

(l) The Master Trustee’s immunities and protections from liability in connection with the performance of its duties under this Indenture shall extend to the Master Trustee’s officers, directors, agents and employees, and such immunities and protections, together with the Master Trustee’s right to compensation, shall survive the Master Trustee’s resignation or removal and final payment of the Obligations; and

(m) Except for information provided by the Master Trustee concerning the Master Trustee, the Master Trustee shall have no responsibility for any information in any offering memorandum or other disclosure material distributed with respect to the Obligations, and the

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Master Trustee shall have no responsibility for compliance with any state or federal securities laws in connection with the Obligations.

Section 8.04 Not Responsible For Recitals or Issuance of Obligations. The recitals contained herein and in the Obligations (other than the certificate of authentication on such Obligations) shall be taken as the statements of the Obligated Group Members, and the Master Trustee assumes no responsibility for their correctness. The Master Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Obligations. The Master Trustee shall not be accountable for the use or application by the Obligated Group Members of any of the Obligations or of the proceeds of such Obligations. The Master Trustee is not a party to, and is not responsible for, and makes no representation with respect to matters set forth in any preliminary official statement, official statement, or similar document prepared and distributed in connection with the transactions contemplated in this Indenture.

Section 8.05 Master Trustee or Registrar May Own Obligations. The Master Trustee, any Paying Agent, registrar, or any other agent of the Obligated Group Members, in its individual or any other capacity, may become the owner or pledgee of Obligations and may otherwise deal with the Obligated Group Members with the same rights it would have if it were not Master Trustee, Paying Agent, Obligation registrar, or such other agent.

Section 8.06 Money to Be Held in Trust. All money received by the Master Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Master Trustee shall be under no liability for interest on any money received by it hereunder other than such interest as it expressly agrees to pay.

Section 8.07 Compensation and Expenses of Master Trustee and Bondholder Representative. The Obligated Group Members agree:

(a) to pay to the Master Trustee from time to time reasonable compensation for all services rendered by it hereunder;

(b) to reimburse each of the Master Trustee and the Bondholder Representative upon its request for all reasonable expenses, disbursements and advances incurred or made by the Master Trustee or the Bondholder Representative in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements, of its agents and counsel) except any such expense, disbursement, or advance as may arise from its negligence or bad faith;

(c) each Obligated Group Member shall indemnify the Master Trustee (and its agents) for, and hold it harmless against, any and all loss, liability, damage, claims or expense incurred by it without negligence or willful misconduct on its part, arising out of and in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder; and

(d) in the case of any claim indemnified by the Obligated Group Members hereunder that is covered by a policy of insurance maintained by or on behalf of the Obligated Group

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Members, the Master Trustee agrees to cooperate, at the Obligated Group Members’ expense, with the insurers in the exercise of their rights to investigate, defend or compromise such claim as may be required to retain the benefits of such insurance with respect to such claim.

Section 8.08 Corporate Master Trustee Required; Eligibility. There shall at all times be a Master Trustee hereunder which shall be a banking corporation, bank or trust company organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state banking authority, and having a corporate trust office in the State of Arizona or in New York, New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Master Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign promptly in the manner and with the effect hereinafter specified in this Article.

Section 8.09 Resignation and Removal; Appointment of Successor.

(a) No resignation or removal of the Master Trustee and no appointment of a successor Master Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Master Trustee under Section 8.10.

(b) The Master Trustee may resign at any time by giving written notice thereof to the Obligated Group Representative and the Bondholder Representative. If an instrument of acceptance by a successor Master Trustee shall not have been delivered to the Master Trustee within 30 days after the giving of such notice of resignation, the resigning Master Trustee may petition any court of competent jurisdiction for the appointment of a successor Master Trustee.

(c) The Master Trustee may be removed (i) if no Event of Default has occurred and is continuing under this Indenture, then by act of the Obligated Group Representative, with the consent of the Bondholder Representative, delivered to the Master Trustee and (ii) at any time by the act of the Bondholder Representative or, if there is no Bondholder Representative, by the Act of the Majority Holders, delivered to the Master Trustee and to the Obligated Group Representative.

(d) If at any time:

(1) the Master Trustee shall cease to be eligible under Section 8.08 and shall fail to resign after written request therefor by the Obligated Group Representative or by the Bondholder Representative or, if there is no Bondholder Representative, any such Holder of Obligations, or

(2) the Master Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Master Trustee or of its property shall be appointed or any public officer shall take charge or control of the Master Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

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then, in any such case, (A) the Obligated Group Representative, with the consent of the Bondholder Representative, by written request may remove the Master Trustee, or (B) the Bondholder Representative or, if there is no Bondholder Representative, subject to Section 7.18, any Holder of Obligations who has been a bona fide Holder of an Obligation for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Master Trustee and the appointment of successor Master Trustee.

(e) If the Master Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Master Trustee for any cause, the Obligated Group Representative, by an Obligated Group Representative Request, shall promptly appoint a successor Master Trustee acceptable to the Bondholder Representative. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Master Trustee shall be appointed by the Bondholder Representative or, if there is no Bondholder Representative, by Act of the Majority Holders delivered to the Obligated Group Representative and the retiring Master Trustee, the successor Master Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Master Trustee and supersede the successor Master Trustee appointed by the Obligated Group Representative. If no successor Master Trustee shall have been so appointed by the Obligated Group Representative, the Bondholder Representative, or the Majority Holders and accepted appointment in the manner hereinafter provided, the Master Trustee or the Bondholder Representative or, if there is no Bondholder Representative, any Holder of Obligations who has been a bona fide Holder of an Obligation for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Master Trustee.

(f) The Obligated Group Representative shall give notice of each resignation and each removal of the Master Trustee and each appointment of a successor Master Trustee by mailing written notice of such event by first class mail, postage prepaid, to the Bondholder Representative and, except as provided herein, the registered Holders of Obligations at their addresses as shown in the Obligation Register. Each notice shall include the name and address of the designated corporate trust office of the successor Master Trustee.

Section 8.10 Acceptance of Appointment by Successor. Every successor Master Trustee appointed hereunder shall execute, acknowledge and deliver to the Obligated Group Representative and to the retiring Master Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Master Trustee shall become effective and such successor Master Trustee, without any further act, deed, or conveyance, shall become vested with all the rights, powers, trusts, and duties of the retiring Master Trustee; but, on request of the Obligated Group Representative or the successor Master Trustee, such retiring Master Trustee shall, upon payment of its charges and the amounts due to it hereunder, execute and deliver an instrument transferring to such successor Master Trustee all the rights, powers, and trusts of the retiring Master Trustee, and shall duly assign, transfer, and deliver to the successor Master Trustee all property and money held by such retiring Master Trustee hereunder. Upon request of any such successor Master Trustee, the Obligated Group Representative shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Master Trustee all such rights, powers, and trusts.

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No successor Master Trustee shall accept its appointment unless at the time of such acceptance such successor Master Trustee shall be qualified and eligible under this Article. The indemnity provided for in Section 8.07(c) herein shall continue to be binding upon the Members of the Obligated Group for the benefit of the retiring or removed Master Trustee.

Section 8.11 Merger or Consolidation. Any entity into which the Master Trustee may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Master Trustee shall be a party, or any entity succeeding to all or substantially all of the corporate trust business of the Master Trustee, shall be the successor Master Trustee hereunder, provided such entity shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Obligations shall have been authenticated, but not delivered, by the Master Trustee then in office, any successor by merger or consolidation to such authenticating Master Trustee may adopt such authentication and deliver the Obligations so authenticated with the same effect as if such successor Master Trustee had itself authenticated such Obligations.

Section 8.12 Master Trustee as Related Bond Trustee. The Master Trustee may serve as Related Bond Trustee under any Related Bond Indenture so long as the Master Trustee is the Related Bond Trustee for all outstanding Related Bonds. If an entity other than the Master Trustee becomes a Related Bond Trustee, the Master Trustee hereby agrees to promptly resign from its role as Master Trustee or Related Bond Trustee, at its option, on its own motion and a successor Master Trustee or Related Bond Trustee, as appropriate, shall be appointed and qualified as set forth in Section 8.09 hereof or in the Related Bond Indenture.

ARTICLE IX

SUPPLEMENTS AND AMENDMENTS

Section 9.01 Supplements Without Consent of Holders of Obligations. Without the consent of the Holders of any Obligations, but with the consent of the Bondholder Representative, each Obligated Group Member, when authorized by a Board Resolution, and the Master Trustee at any time may enter into one or more Supplements for any of the following purposes:

(a) to evidence the succession of another Person to an Obligated Group Member, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of an Obligated Group Member as permitted by this Indenture or to evidence additions to, or withdrawals from, membership in the Obligated Group in accordance with the provisions of Article VI hereof;

(b) to add to the covenants of the Obligated Group Members for the benefit of the Holders of Obligations, or to surrender any right or power herein conferred upon the Obligated Group Members, or to add to the Events of Default enumerated in Section 7.01;

(c) to cure any ambiguity or to correct or supplement any provision herein that may be inconsistent with any other provision herein, or to make any other provision with respect to

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matters or questions arising under this Indenture that shall not be inconsistent with this Indenture, provided such action shall not adversely affect the interests of the Holders of Obligations;

(d) to modify or supplement this Indenture in such manner as may be necessary or appropriate to qualify this Indenture or any Supplement under the Trust Indenture Act of 1939 as then amended, or under any similar Federal or state statute or regulation, including provisions whereby the Master Trustee accepts such powers, duties, conditions and restrictions hereunder and the Obligated Group Members undertake such covenants, conditions or restrictions additional to those contained in this Indenture as would be necessary or appropriate so to qualify this Indenture; provided, however, that nothing herein contained shall be deemed to authorize inclusion in this Indenture or in any Supplements provisions referred to in Section 316(a)(2) of said Trust Indenture Act or any corresponding provision provided for in any similar statute hereafter in effect;

(e) to create and provide for the issuance of Obligations as permitted hereunder;

(f) to increase or maintain any credit rating assigned to any series of Related Bonds by a Rating Agency so long as no Obligation issued hereunder shall be secured on a basis senior to other Obligations, except as provided herein;

(g) to make any amendment to any provision of this Indenture or to any Supplement which is only applicable to Obligations issued thereafter or which will not apply so long as any Obligation then Outstanding remains Outstanding; and

(h) to make any other change that, in the opinion of the Master Trustee, will not adversely affect the interest of the Holders of the Obligations.

Section 9.02 Supplements With Consent of Majority Holders of Obligations. With the consent of the Bondholder Representative or, if there is no Bondholder Representative, of the Majority Holders, by Act of such Majority Holders delivered to the Obligated Group Representative and the Master Trustee, each Obligated Group Member, when authorized by a Board Resolution, and the Master Trustee may enter into Supplements for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations under this Indenture; provided, however, that no such Supplement shall, without the consent of the Bondholder Representative and the Holder of each Outstanding Obligations affected thereby:

(a) change the Stated Maturity or due date of the principal of, or any installment of interest on, or other payment on any Obligations or any date for mandatory redemption thereof, or reduce the principal amount or other payment amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any Place of Payment where, or the coin or currency in which, any Obligations or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date), or

(b) reduce the percentage in principal amount of the Outstanding Obligations, the consent of whose Holders is required for any such Supplement, or the consent of whose Holders

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is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or

(c) modify any of the provisions of this Section or Section 7.17, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Obligation affected thereby.

It shall not be necessary for any Act of Holders of Obligation under this Section to approve the particular form of any proposed Supplement, but it shall be sufficient if such Act shall approve the substance thereof.

Section 9.03 Execution of Supplements. In executing, or accepting the additional trusts created by, any Supplement permitted by this Article or the modifications thereby of the trusts created by this Indenture the Master Trustee shall receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such Supplement is authorized or permitted by this Indenture and that all conditions precedent thereto have been complied with. In connection with the execution and delivery of a Supplement pursuant to Section 9.01(c) or (h), the Master Trustee may determine whether or not in accordance with such Section the Holders of the Obligations would be affected by such Supplement, and any such determination shall be binding and conclusive on the Members of the Obligated Group, and the Holders of the Obligations. The Master Trustee may receive and be entitled to rely upon an Opinion of Counsel as conclusive evidence as to whether the Holders of the Obligations would be so affected by any such Supplement. The Master Trustee may, but shall not (except to the extent required in the case of a Supplement entered into under Section 9.01(d)) be obligated to, enter into any such Supplement which affects the Master Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Section 9.04 Effect of Supplement. Upon the execution of any Supplement under this Article, this Indenture shall, with respect to each series of Obligations to which such Supplement applies, be modified in accordance therewith, and such Supplement shall form a part of this Indenture for all purposes, and every Holder of Obligations thereafter or (except to the extent provided pursuant to Section 9.01(g)) theretofore authenticated and delivered hereunder shall be bound thereby.

Section 9.05 Obligations May Bear Notation of Changes. Obligations authenticated and delivered after the execution of any Supplement pursuant to this Article may bear a notation in form approved by the Master Trustee as to any matter provided for in such Supplement. If the Obligated Group Representative or the Master Trustee shall so determine, new Obligations so modified as to conform, in the opinion of the Master Trustee and the Obligated Group Representative, to any such Supplement may be prepared and executed by the applicable Obligated Group Member and authenticated and delivered by the Master Trustee in exchange for Obligations then Outstanding.

Section 9.06 Amendments of Deeds of Trust Not Requiring Consent of Holders. Without the consent of the Holders of any Obligations, but with the consent of the Bondholder Representative, the Master Trustee may consent to any amendment, change or modification of any Deed of Trust as may be required (a) by the provisions of the Deed of Trust or this

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Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission, (c) to provide for the release in accordance with the provisions of the Deeds of Trust of any Property subject to the Lien of such Deed of Trust; or (d) in connection with any other change therein that is not to the adverse prejudice of the Master Trustee nor materially adversely affects the interests of the Holders.

Section 9.07 Amendments of Deeds of Trust With Consent of Majority Holders of Obligations. Except for the amendments, changes or modifications referred to in Section 9.06 hereof, the Master Trustee shall not consent to any other amendment, change or modification of any Deed of Trust without the consent of the Bondholder Representative or, if there is no Bondholder Representative, the Majority Holders, subject to the same limitations set forth in Section 9.02 hereof.

It shall not be necessary for any Act of Holders of Obligation under this Section to approve the particular form of any proposed amendment, change or modification, but it shall be sufficient if such Act shall approve the substance thereof.

Section 9.08 Bondholder Representative’s Consent to Supplements and Amendments. So long as there is a Bondholder Representative, a Supplement or an amendment under this Article shall not become effective unless and until the Bondholder Representative consents in writing to the execution and delivery of such Supplement or amendment.

ARTICLE X

SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

Section 10.01 Satisfaction and Discharge of Indenture. If at any time the Obligated Group Members shall have paid or caused to be paid the principal of (and premium, if any), interest on and other payments on all the Obligations Outstanding hereunder, as and when the same shall have become due and payable, and if the Obligated Group Members shall also pay or provide for the payment of all other sums payable hereunder by each Obligated Group Member then this Indenture shall cease to be of further effect (except as to (1) rights of registration of transfer and exchange, (2) substitution of mutilated, defaced, or apparently destroyed, lost or stolen Obligations, (3) rights of Holders to receive payments on their Obligations, (4) the rights, remaining obligations, if any, and immunities of the Master Trustee hereunder and (5) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Master Trustee payable to all or any of them) and the Master Trustee, on the Obligated Group Representative’s Request accompanied by an Officer’s Certificate and an Opinion of Counsel (both to the effect that all conditions precedent in this Indenture relating to the satisfaction and discharge of this Indenture have been satisfied) and at the cost and expense of the Obligated Group Representative, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Obligated Group Members to the Master Trustee under Section 8.07 and, if funds shall have

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been deposited with the Master Trustee pursuant to Section 10.02, the obligations of the Master Trustee under Section 10.03 shall survive.

Section 10.02 Obligations Deemed Paid. Obligations of any series shall be deemed to have been paid if (a) (1) in case such Obligations are to be redeemed on any date prior to their Stated Maturity, the Obligated Group Representative by Obligated Group Representative Request shall have given to each of the Master Trustee and the Bondholder Representative in form satisfactory to it irrevocable instructions to give notice of redemption of such Obligations on said redemption date, (2) there shall have been deposited with the Master Trustee either money sufficient, or Defeasance Obligations the principal of and the interest on which will provide money sufficient without reinvestment (as established by an Officer’s Certificate delivered to the Master Trustee accompanied by a report of an independent certified public accountant or accountants setting forth the calculations upon which such Officer’s Certificate is based), to pay when due the principal of (and premium, if any) and interest due and to become due on said Obligations on and prior to the redemption date or Stated Maturity thereof, as the case may be, and (3) in the event said Obligations are not by their terms subject to redemption within the next 45 days, the Obligated Group Representative by Obligated Group Representative Request shall have given the Master Trustee in form satisfactory to it irrevocable instructions to give a notice to the Holders of such Obligations that the deposit required by (2) above has been made with the Master Trustee and that said Obligations are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which money is to be available for the payment of the principal of (and premium, if any) and interest on said Obligations or (b) such Obligations are delivered to the Master Trustee by the Related Bond Trustee together with instructions from the Obligated Group Representative directing the Master Trustee to retire and cancel such Obligations.

Section 10.03 Application of Trust Money. The Defeasance Obligations and money deposited with the Master Trustee pursuant to Section 10.02 and principal or interest payments on any such Defeasance Obligations shall be held in trust, shall not be sold or reinvested, and shall be applied by it, in accordance with the provisions of the Obligations and this Indenture, to the payment, either directly or through any Paying Agent (including the Obligated Group Representative acting as Paying Agent) as the Master Trustee may determine, to the Persons entitled thereto, of the principal, redemption premium, if any, and interest for whose payment such money or Defeasance Obligations were deposited; provided that, upon delivery to the Master Trustee of an Officer’s Certificate (accompanied by the report of an independent certified public accountant or accountants setting forth the calculations upon which such Officer’s Certificate is based) establishing that the money and Defeasance Obligations on deposit following the taking of the proposed action will be sufficient for the purposes described in clause (2) of Section 10.02, any money received from principal or interest payments on Defeasance Obligations deposited with the Master Trustee or the proceeds of any sale of such Defeasance Obligations, if not then needed for such purpose, shall, upon Obligated Group Representative Request be reinvested, to the extent practicable, in other Defeasance Obligations or disposed of as requested by the Obligated Group Representative. For purposes of any calculation required by this Article, any Defeasance Obligation which is subject to redemption at the option of its issuer, the redemption date for which has not been irrevocably established as of the date of such calculation, shall be assumed to cease to bear interest at the earliest date on which such

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obligation may be redeemed at the option of the issuer and the principal of such obligation shall be assumed to be received at its stated maturity.

Section 10.04 Payment of Related Bonds. Notwithstanding any other provision of this Article X, no Obligation will be considered paid or deemed to have been paid unless the Related Bonds, if any, have been paid or deemed paid pursuant to the Related Bond Indenture.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01 No Personal Liability. No recourse under this Indenture or any Obligations shall be had against any officer, director, agent or employee, as such, past, present, or future, of any Obligated Group Member, any Affiliate, the Master Trustee or the Bondholder Representative or of any successor corporation; it being expressly understood that this Indenture and the obligations incurred hereunder are solely obligations of the entities named herein as obligors, and that no personal liability whatever shall attach to such persons or any of them, under this Indenture or any Obligations; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such person because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants, or agreements contained in this Indenture or in any Obligations are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Obligations.

Section 11.02 Arizona Contract. This Indenture and the Obligations shall be deemed to be contracts made under the laws of the State of Arizona, and for all purposes shall be construed in accordance with the laws of said State applicable to contracts made and to be performed in said State.

Section 11.03 Legal Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, shall be a legal holiday or a day on which banking institutions in Phoenix, Arizona are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed with the same force and effect as if done on the nominal date provided in this Indenture.

Section 11.04 Benefits of Provisions of Indenture and Obligations. Nothing in this Indenture or in the Obligations, expressed or implied, shall give or be construed to give any Person, other than the parties hereto and the Bondholder Representative, and the Holders of such Obligations, any legal or equitable right, remedy, or claim under or in respect of this Indenture, or under any covenant, condition, and provision herein contained; all its covenants, conditions, and provisions being for the sole benefit of the parties hereto, the Bondholder Representative, and the Holders of such Obligations.

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Section 11.05 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

Section 11.06 UCC Financing Statements. The Members of the Obligated Group hereby expressly grant to the Master Trustee the full right and authority to record, file, re-record and re-file any Uniform Commercial Code financing statement, continuation statement or amendment and any other agreement or instrument in such manner and in such places that may be required by law or are necessary to maintain any security interest granted by the Obligated Group to the Master Trustee pursuant to this Indenture and the Deeds of Trust. Notwithstanding anything to the contrary contained herein, the Master Trustee shall not be responsible for any initial filings or recordings of any financing statements or instruments or the information contained therein (including the exhibits thereto), the perfection of any such security interests or liens, or the accuracy of sufficiency of any description of collateral in such filings or instruments, and unless the Master Trustee shall have been notified by the Obligated Group that any such initial filing, recording or description of collateral was or has become defective, the Master Trustee shall be fully protected in relying on such initial filing, recording and descriptions in filing or recording any financing statements, or continuation statements, amendments or other agreements or instruments pursuant to this Section. The Obligated Group shall be responsible for and shall pay any reasonable expenses, including legal fees incurred under this section.


(a) All notices, certificates, reports, requisitions or other communications given hereunder or under or in connection with any Obligation or other Financing Instrument (as defined in the Loan Agreement) to or from the Master Trustee and not otherwise provided to the Bondholder Representative shall also be given to the Bondholder Representative to the extent that one exists.

(b) If under any provision hereof any action is to be taken only with the consent, direction or approval of the Bondholder Representative and if, at the time such consent, direction or approval would otherwise be called for, the Bondholder Representative does not then represent a majority of the Beneficial Holders of the Series 2015 Bonds then Outstanding, then the consent or approval of the Bondholder Representative shall not be required.

(c) In addition to any other consents or directions required from the Bondholder Representative hereunder, when the Bondholder Representative represents the Beneficial Holders of at least 66 2/3 percent of the aggregate principal amount of the Series 2015 Bonds at any time Outstanding then the Bondholder Representative’s consent shall be required for each of the following: (i) any Supplement or amendment under Articles IX hereof, and (ii) any amendments or supplements to any Deed of Trust, Bond Indenture, Loan Agreement, or any of the other Financing Instruments (as defined in the Loan Agreement).

Section 11.08 Notices to and Effect of Actions by Bondholder Representative. Notwithstanding any provision to the contrary contained herein, any notice, request, consent, direction, waiver, approval, agreement, or other action of the Bondholder Representative shall constitute and have the same effect as a notice, request, consent, direction, waiver, approval,

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agreement, or other action of the owners of the Series 2015 Bonds, as represented by the Bondholder Representative, and, so long as there is a Bondholder Representative with respect to a Bond, notices shall be given to such Bondholder Representative and not to the registered owners or to the beneficial owners represented by such Bondholder Representative, other than any notices of redemption. A copy of any notice given to or sent by the Master Trustee or any person hereunder shall also be provided to the Bondholder Representative.

Section 11.09 Acceptance and Acknowledgement by Each Beneficial Owner. By acceptance of the Series 2015 Bonds, each beneficial owner of such Bonds acknowledges and agrees that (i) the Bondholder Representative will act on its behalf with respect to all matters arising under or in connection with the Series 2015 Bonds as provided herein, and (ii) the Master Trustee shall have no obligation or liability as a result of following the direction of the Bondholder Representative, except for its gross negligence or intentional or willful misconduct.

Section 11.10 Inspections; Books and Records. The Bondholder Representative, and the Master Trustee and any of their agents or consultants shall have the right to enter upon, inspect and examine the Obligor’s Property at any time and from time to time during reasonable hours upon reasonable advance notice. The Obligor will keep proper books, records and accounts, in which complete and accurate entries shall be made of all transactions relating to the Obligor and the Project, which books, records and accounts shall be made available for inspection and examination by the Bondholder Representative and the Master Trustee and any of their agents or consultants, to the extent permitted by law, at any time and from time to time during reasonable hours upon reasonable advance notice. Such books and records shall include, without limitation, as they relate to the Project, all plans and specifications, construction contracts, performance and payment bonds, and licenses and permits.

[The remainder of this page is intentionally blank; signature page follows.]

[SIGNATURE PAGE TO MASTER TRUST INDENTURE]

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by persons thereunto duly authorized, as of the day and year first above written.

GILBERT AL PARTNERS, LP, as the initial Obligated Group Member and as the Obligated Group Representative

By: Gilbert AL GP, LLC, a Texas limited liability

company, its sole general partner By: _________________, Manager

WILMINGTON TRUST, NATIONAL

ASSOCIATION, as Master Trustee By: ________________________________________

Authorized Signatory

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A-1

EXHIBIT A

INITIAL DEED OF TRUST

1. Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, dated as of October 1, 2015, executed by the Obligor, as trustor, in favor of Chicago Title Agency, Inc., as trustee, for the benefit of Wilmington Trust, National Association, in its capacity as master trustee, relating to the Project.



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When Recorded Mail To:

GREENBERG TRAURIG, LLP 2375 East Camelback Road Suite 700 Phoenix, Arizona 85016 Attention: Brigitte Finley Green

DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES, AND FIXTURE FILING

GILBERT AL PARTNERS, LP, as Trustor

to

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Beneficiary

and

CHICAGO TITLE AGENCY, INC., as Trustee

Dated as of October 1, 2015

TABLE OF CONTENTS

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ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS

AND AGREEMENTS OF THE TRUSTOR

Section 1.01. Payment of Secured Obligations .......................................................................... 5 Section 1.02. Title; Priority; Permitted Encumbrances; Authority ............................................ 5 Section 1.03. Maintenance; Repair; Alterations ........................................................................ 5 Section 1.04. Required Insurance .............................................................................................. 5 Section 1.05. Delivery of Insurance Policies; Payment of Premiums ....................................... 5 Section 1.06. Insurance Proceeds ............................................................................................... 6 Section 1.07. Assignment of Policies Upon Foreclosure ........................................................... 6 Section 1.08. Expenses; Indemnification; Waiver of Set-Off and Recoupment ........................ 6 Section 1.09. Taxes and Impositions ......................................................................................... 8 Section 1.10. Utilities ................................................................................................................. 9 Section 1.11. Actions Affecting Mortgaged Estate ................................................................... 9 Section 1.12. Actions by the Beneficiary and/or the Trustee To Preserve

Mortgaged Estate ........................................................................................... 10 Section 1.13. Survival of Warranties ....................................................................................... 10 Section 1.14. Eminent Domain ................................................................................................ 10 Section 1.15. Additional Security ............................................................................................ 11 Section 1.16. No Additional Liens ........................................................................................... 11 Section 1.17. Successors and Assigns ...................................................................................... 11 Section 1.18. Inspections ......................................................................................................... 11 Section 1.19. Liens ................................................................................................................... 12 Section 1.20. Restrictions Affecting Title ................................................................................ 12 Section 1.21. Further Assurances............................................................................................. 12 Section 1.22. Performance of Covenants ................................................................................. 12 Section 1.23. Notification of Event of Default Under Deed of Trust ...................................... 13 Section 1.24. Organization; Due Authorization ....................................................................... 13 Section 1.25. Liabilities; Compliance With Other Instruments ............................................... 13 Section 1.26. Enforceability ..................................................................................................... 13 Section 1.27. Pending Litigation .............................................................................................. 13 Section 1.28. Compliance With Law ....................................................................................... 14 Section 1.29. After-Acquired Property .................................................................................... 14 Section 1.30. Transfer of Interests in the Trustor or Mortgaged Estate ................................... 14 Section 1.31. Lease Provisions ................................................................................................ 14 Section 1.32. Defeasance Terminates Lien .............................................................................. 14

ARTICLE II ENVIRONMENTAL MATTERS

Section 2.01. Environmental Matters....................................................................................... 15


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ARTICLE III ASSIGNMENT OF RENTS AND LEASES

Section 3.01. Assignment of Revenues.................................................................................... 15 Section 3.02. Collection Upon Default .................................................................................... 15 Section 3.03. Statutory Rights ................................................................................................. 16

ARTICLE IV SECURITY AGREEMENT

Section 4.01. Creation of Security Interest .............................................................................. 16 Section 4.02. Warranties; Representations and Covenants of the Trustor ............................... 17

ARTICLE V EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT

Section 5.01. Events of Default ............................................................................................... 17 Section 5.02. Acceleration Upon Default; Additional Remedies ............................................ 18 Section 5.03. Exercise of Power of Sale .................................................................................. 20 Section 5.04. Appointment of Receiver ................................................................................... 21 Section 5.05. Remedies Not Exclusive .................................................................................... 21 Section 5.06. Possession of Mortgaged Estate......................................................................... 22 Section 5.07. Relief from Stay ................................................................................................. 22 Section 5.08. Cash Collateral ................................................................................................... 22 Section 5.09. Rights and Remedies.......................................................................................... 23

ARTICLE VI MISCELLANEOUS

Section 6.01. Governing Law .................................................................................................. 23 Section 6.02. Waiver of Rights ................................................................................................ 23 Section 6.03. Limitation of Interest ......................................................................................... 26 Section 6.04. Notices ............................................................................................................... 26 Section 6.05. Captions ............................................................................................................. 27 Section 6.06. Invalidity of Certain Provisions; Conflicting Provisions ................................... 27 Section 6.07. Subrogation ........................................................................................................ 28 Section 6.08. Change in Ownership ......................................................................................... 28 Section 6.09. Assignment of the Beneficiary’s Interest ........................................................... 28 Section 6.10. Time Is of the Essence ....................................................................................... 28 Section 6.11. Obligations of the Trustor .................................................................................. 28 Section 6.12. Immunity of Individuals .................................................................................... 29 Section 6.13. Amendments, Changes and Modifications ........................................................ 29

ARTICLE VII TRUSTEE

Section 7.01. Resignation of the Trustee ................................................................................. 29 Section 7.02. Successor Trustee............................................................................................... 29


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Section 7.03. Separate and Co-Trustees .................................................................................. 29 Section 7.04. Liability of the Trustee ....................................................................................... 30 Section 7.05. Payment of the Trustee’s Compensation ........................................................... 30 EXHIBIT A LEGAL DESCRIPTION EXHIBIT B TITLE EXCEPTIONS

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DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES, AND FIXTURE FILING

THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES, AND FIXTURE FILING (this “Deed of Trust”) is made as of October 1, 2015, by GILBERT AL PARTNERS, LP, a Texas limited partnership, as trustor (the “Trustor”), whose mailing address is 6370 LBJ Freeway, Suite 276, Dallas, Texas 75240, in favor of CHICAGO TITLE AGENCY, INC., an Arizona corporation, as trustee (the “Trustee”), whose mailing address is 6710 North Scottsdale Road, Suite 100, Scottsdale, Arizona 85253, for the benefit of WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, in its capacity as master trustee for the Obligations (as defined below), as beneficiary (the “Beneficiary”), whose mailing address is 25 South Charles Street, 11th Floor, Baltimore, Maryland 21201. All capitalized terms not defined herein shall have the meanings given to such terms in the Master Indenture (as defined below).

PRELIMINARY STATEMENTS

A. The Trustor and the Beneficiary, as master trustee, have entered into that certain Master Trust Indenture, dated as of October 1, 2015 (the Master Indenture”), pursuant to which the Trustor, as representative of the Members of the Obligated Group (both as defined in the Master Indenture) (the “Obligated Group Representative”), has all requisite corporate power and is authorized to enter into supplements to the Master Indenture (each a “Supplement” and, collectively, the “Supplements”) to provide for the issuance from time to time of obligations constituting the joint and several obligations of the Obligated Group (the “Obligations”) to finance or refinance the acquisition, construction, renovation, equipping or improvement of assisted living and memory care facilities or other lawful and proper corporate purposes.

B. Pursuant to a Supplement entitled Supplemental Indenture Number 1, dated as of October 1, 2015 (“Supplement No. 1”), between the Obligated Group Representative and the Beneficiary, as master trustee, the Obligated Group Representative issued an obligation designated “Gilbert AL Partners, LP Senior Series 2015A Note” in the aggregate principal amount of $14,510,000 (the “Series 2015A Note”) and an obligation designated “Gilbert AL Partners, LP Senior Series 2015B Note” in the aggregate principal amount of $1,315,000 (the “Series 2015B Note” and, together with the Series 2015A Note, the “Series 2015 Notes”) to secure the Obligated Group Representative’s obligations arising under that certain Loan Agreement, dated as of October 1, 2015, between the Arizona Health Facilities Authority (the “Issuer”), a political subdivision and instrumentality of the State of Arizona (the “State”) in accordance with the provisions of the Constitution of the State and under Title 36, Chapter 4.2 of Arizona Revised Statutes, and the Obligated Group Representative, as borrower, pursuant to which the Obligated Group Representative borrowed the proceeds of the Issuer’s $14,510,000 aggregate principal amount First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A and $1,315,000 aggregate principal amount First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B, which were issued pursuant to that certain Indenture of Trust, dated as of October 1, 2015, between the Issuer and Wilmington Trust, National Association, as bond trustee, to among other things, finance the assisted living and memory care facilities that are the subject of this Deed of Trust (the “Facilities”). The

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Master Indenture, the Supplements (including Supplement No. 1) and the Obligations (including the Series 2015 Notes) are collectively referred to herein as the “Financing Documents.”

C. To secure payment of all amounts required to be made by the Members of the Obligated Group under the Financing Documents and the performance of the other obligations of the Members under the Financing Documents, the Trustor has agreed to deliver this Deed of Trust, pursuant to which the Trustor is granting a first priority lien on and security interest in the Facilities.

GRANTING CLAUSES

FOR GOOD AND VALUABLE CONSIDERATION, including, without limitation, the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, the Trustor hereby irrevocably creates a security interest in, warrants, grants, bargains, sells, transfers, conveys and assigns to the Trustee and to its assigns forever, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY, for the benefit and security of the Beneficiary, under and subject to the terms and conditions hereinafter set forth, all of the Trustor’s estate, right, title and interests in, to and under any and all of the following property whether now or hereafter owned, erected or acquired, together with all cash and noncash proceeds thereof, which may be referred to herein as the “Mortgaged Estate”:

LAND

The real property located in the County of Maricopa, State of Arizona, described in Exhibit A attached hereto and by this reference incorporated herein (the “Land”);

IMPROVEMENTS

Any and all buildings, structures, fixtures and improvements, including, without limitation, the fixtures, attachments and other articles attached to such buildings, structures and improvements on the Land (collectively, the “Improvements” and, together with the Land, the “Real Property”);

EQUIPMENT

All goods, furniture, furnishings, equipment, supplies and other tangible personal property owned by the Trustor, whether in the possession of the Trustor, warehousemen, bailees or any other person (collectively, the “Equipment”);

RENTS AND DERIVATIVE INTERESTS

All rents, issues, profits, revenues, royalties, income and other benefits derived from the Real Property, the Intangibles (as defined below) and the Equipment and the operation thereof, and any and all entitlements, warrants, gifts, donations, grants, and bequests, to the extent allowed by the terms thereof, regardless of the source (collectively, the “Revenues”); all estate, right, title and interest of the Trustor in and to all leases and subleases covering the Real Property or any portion thereof now or hereafter existing or entered into, including, without limitation, all cash and security deposits, advance rentals and deposits or payments of similar nature; all right,

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title and interest of the Trustor in and to all options to purchase or lease the Real Property or any portion thereof or interest therein, and any greater estate therein now owned or hereafter acquired; all interests, estate or other claims, both in law and in equity, which the Trustor now has or may hereafter acquire in the Real Property or any portion thereof or interest therein; all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, and all tenements, hereditaments and appurtenances thereof and thereto, all right, title and interest of the Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Real Property and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Real Property (all of the foregoing in this paragraph being, collectively, the “Derivative Interests”);

INTANGIBLES

All of the Trustor’s interest in all existing and future accounts, contract rights, general intangibles, files, books of account, plans, specifications, agreements, permits, licenses and certificates necessary or desirable in connection with the acquisition, ownership, leasing, construction, operation, furnishing, equipping, servicing or management of the Real Property (whether now existing or entered into or obtained after the date hereof), all existing and future names under or by which the Real Property or any portion thereof may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all existing and future telephone numbers and listings, advertising and marketing materials, trademarks, tradenames, licenses, patents, copyrights and good will in any way relating to the Real Property or any portion thereof (collectively, the “Intangibles”);

CLAIMS AND AWARDS

All the estate, interest, right, title, other claim or demand, including, without limitation, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which the Trustor now has or may hereafter acquire in the Real Property, the Equipment, the Derivative Interests, or the Intangibles and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole or any part of the Real Property, the Equipment, the Derivative Interests, or the Intangibles including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages (collectively, the “Claims and Awards”); and

PROCEEDS

All of the rents, revenues, issues, profits, products and proceeds of any and all of the foregoing.

A first lien security interest is granted by this Deed of Trust in that portion of the Mortgaged Estate that constitutes personalty pursuant to and as set forth in Article IV hereof.

TO HAVE AND TO HOLD the Mortgaged Estate hereby granted or mortgaged or intended to be granted or mortgaged, unto the Trustee, and its permitted successors and assigns.

PROVIDED, HOWEVER, that these presents are upon the condition that, if the Secured Obligations (as defined below) shall be paid when due, and if the Trustor shall keep, perform and

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observe all and singular the obligations, covenants, agreements and provisions in this Deed of Trust expressed to be kept, performed by and observed by or on the part of the Trustor, then this Deed of Trust and the estate and rights hereby granted shall cease, determine and be void, but otherwise shall be and remain in full force and effect.

THIS DEED OF TRUST SHALL SECURE THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS:

(i) Payment of indebtedness evidenced by the Obligations and all replacements, renewals, amendments, extensions, substitutions and modifications thereof bearing interest and being payable as provided therein;

(ii) Payment of all indebtedness and performance of all obligations and covenants of the Members of the Obligated Group under the Master Indenture and the Supplements and each agreement of the Members of the Obligated Group incorporated by reference therein or herein, or contained therein or herein;

(iii) Payment of all of the principal of, premium, if any, and interest on any future advances under the Obligations, the Master Indenture and the Supplements, this Deed of Trust, and any other instrument or other document given to evidence or further secure the payment and performance of any of the obligations thereunder;

(iv) Payment of all other indebtedness and performance of all other obligations and covenants of the Members of the Obligated Group contained in any Financing Document, together with any other document or instrument given to evidence or further secure the payment and performance of any obligation secured hereby or thereby;

(v) Payment of all sums advanced by the Beneficiary to protect the Mortgaged Estate, with interest thereon at the highest rate permitted by any of the Financing Documents or the Related Bond Indentures from the date of advance by the Beneficiary to the date of payment by the Obligated Group; and

(vi) Payment of all other sums, with interest thereon, which may hereafter be owed by the Members of the Obligated Group or their respective successors or assigns pursuant to the Financing Documents to the Beneficiary or its successors or assigns.

The indebtedness and the obligations secured by this Deed of Trust that are described in (i) through (vi) above may be referred to herein collectively as the “Secured Obligations.”

It is the intention of the Trustor that the Mortgaged Estate shall secure all of the Secured Obligations presently or hereafter owed, and that the priority of the security interest created by this Deed of Trust for all such Secured Obligations shall be controlled by the time of proper recording of this Deed of Trust. In addition, this Deed of Trust shall also secure unpaid balances of advances made with respect to the Mortgaged Estate for the payment of taxes, assessments, insurance premiums, costs or any other advances incurred for the protection of the Mortgaged Estate, together with interest thereon until paid at the highest rate permitted by any of the Financing Documents or the Related Bond Indentures, all as contemplated in this Deed of Trust, all of which shall constitute a part of the Secured Obligations. This paragraph shall serve as

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notice to all persons who may seek or obtain a lien on the Mortgaged Estate subsequent to the date of recording of this Deed of Trust, that until this Deed of Trust is released, any debt owed by the Members of the Obligated Group under any Financing Document, including, without limitation, advances made subsequent to the recording of this Deed of Trust, shall be secured with the priority afforded this Deed of Trust as recorded.

ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS

AND AGREEMENTS OF THE TRUSTOR

The Trustor hereby represents, warrants, covenants and agrees:

Section 1.01. Payment of Secured Obligations. The Trustor hereby grants this Deed of Trust to secure the payment and performance when due of the Secured Obligations. The consideration received by the Trustor to execute and deliver this Deed of Trust and the liens and security interests created herein are sufficient and will provide a direct economic benefit to the Trustor.

Section 1.02. Title; Priority; Permitted Encumbrances; Authority. The Trustor has indefeasible title in fee simple to the Mortgaged Estate, which is free from any encumbrance that is superior to the encumbrance of this Deed of Trust except as provided below. This Deed of Trust constitutes a valid first lien upon and security interest in the Mortgaged Estate, subject only to (i) the matters set forth as special (non-preprinted) exceptions in the lender’s policy of title insurance to be provided to the Beneficiary in connection with this Deed of Trust, which matters are set forth on Exhibit B attached hereto and (ii) the other Permitted Encumbrances. The Trustor has the full right, power and authority to execute and deliver this Deed of Trust and to make the conveyances and grant the interests and security contemplated hereby.

Section 1.03. Maintenance; Repair; Alterations. The Trustor shall keep, maintain, operate, repair and alter the Mortgaged Estate pursuant to and to the extent set forth in the Master Indenture as relating to the Facilities.

Section 1.04. Required Insurance. The Trustor shall provide, maintain and keep at all times in force those policies of insurance required in the Master Indenture.

Section 1.05. Delivery of Insurance Policies; Payment of Premiums.

(a) All policies of insurance shall be issued by companies and in amounts as required by the provisions of the Master Indenture.

(b) In the event the Trustor fails to provide, maintain, keep in force or deliver and furnish to the Beneficiary evidence of the policies of insurance required by the Master Indenture, the Beneficiary, with the consent of or at the direction of the Bondholder Representative, may procure such insurance or single-interest insurance for such risks covering the Beneficiary’s interest, and the Trustor will pay all premiums thereon promptly upon demand by the Beneficiary, and until such payment is made by the Trustor the amount of all such premiums, together with interest thereon at the rate set forth in the Master Indenture, shall be secured by this Deed of Trust.

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(c) Upon occurrence of an Event of Default, the Beneficiary, at the direction of or with the consent of the Bondholder Representative, shall apply any sums or amounts received pursuant hereto, or as Revenues or income of the Mortgaged Estate or otherwise, as required under the Master Indenture. The receipt, use or application of any such sums by the Beneficiary hereunder shall not be construed to affect the maturity of any Secured Obligation or any of the rights or powers of the Beneficiary under the terms of the Financing Documents or any of the obligations of the Trustor or any guarantor under the Financing Documents.

Section 1.06. Insurance Proceeds. After the occurrence of any casualty to the Mortgaged Estate or any part thereof, the Trustor shall give prompt written notice thereof to the Beneficiary, the Bondholder Representative and each insurer and promptly submit a claim to such insurer(s) for payment of insurance proceeds. Proceeds of all insurance awards (collectively, the “Insurance Proceeds”) shall be held and disbursed as provided in the Master Indenture. Notwithstanding the application of Insurance Proceeds to the payment of a portion of the Secured Obligations, any unpaid portion of the Secured Obligations shall remain in full force and effect, and the Trustor shall not be excused in the payment thereof. If any act or occurrence of any kind or nature shall result in damage to or loss or destruction of the Mortgaged Estate, the Trustor shall give immediate notice thereof to the Beneficiary and the Bondholder Representative.

Except as provided below, nothing contained in this Deed of Trust shall be deemed to excuse the Trustor from repairing or maintaining the Mortgaged Estate as provided in Section 1.03 hereof. The application or release by the Beneficiary of any Insurance Proceeds shall not cure or waive any Event of Default or notice of default under this Deed of Trust or invalidate any act done pursuant to such notice.

Section 1.07. Assignment of Policies Upon Foreclosure. In the event of the foreclosure of this Deed of Trust, or other transfer of title to the Mortgaged Estate, or any part thereof, by nonjudicial foreclosure sale or deed in lieu of foreclosure, the purchaser of the Mortgaged Estate, or such part thereof, shall succeed to all of the Trustor’s rights, including, without limitation, any rights to unexpired insurance and unearned or returnable premiums, in and to all insurance policies required by Section 1.04, subject to limitations on assignment of blanket policies, and limited to such rights as relate to the Mortgaged Estate or such part thereof. If the Beneficiary acquires title to the Mortgaged Estate, or any part thereof, in any manner, it shall thereupon (as between the Trustor and the Beneficiary) become the sole and absolute owner of the insurance policies, and all proceeds payable thereunder with respect to the Mortgaged Estate, or such part thereof, required by Section 1.04, with the sole right to collect and retain all unearned or returnable premiums thereon with respect to the Mortgaged Estate, or such part thereof, if any.

Section 1.08. Expenses; Indemnification; Waiver of Set-Off and Recoupment.

(a) The Trustor shall pay or reimburse the Beneficiary, the Trustee and the Bondholder Representative for all reasonable expenses incurred by the Beneficiary, the Trustee or the Bondholder Representative before and after the date of this Deed of Trust with respect to any and all transactions contemplated by this Deed of Trust including, without limitation, the preparation of any document reasonably required hereunder or any amendment, modification,

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restatement or supplement to this Deed of Trust, the delivery of any consent, non-disturbance agreement or similar document in connection with this Deed of Trust or the enforcement of any of the Beneficiary’s or the Trustee’s rights. Such expenses shall include, without limitation, all reasonable title and conveyancing charges, recording and filing fees and taxes, mortgage taxes, intangible personal property taxes, escrow fees, revenue and tax stamp expenses, privilege taxes, use taxes, insurance premiums (including, without limitation, title insurance premiums), title search and title bringdown charges, brokerage commissions, finders’ fees, placement fees, court costs, surveyors’, photographers’, appraisers’, architects’, engineers’, consulting professionals’, accountants’, and attorneys’ fees and disbursements.

(b) If (i) any sale (or prerequisite to a sale), action or proceeding shall be commenced by the Beneficiary or the Trustee (including, without limitation, any sale of the Mortgaged Estate, or any action to foreclose this Deed of Trust or to collect the Secured Obligations), or any action or proceeding is commenced to which the Beneficiary or the Trustee is made a party, or in which it becomes necessary to defend or uphold the rights granted by this Deed of Trust (including, without limitation, any proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Trustor or any other person or entity obligated hereunder), or in which the Beneficiary or the Trustee is served with any legal process, action, proceeding, filing, discovery notice or subpoena, and (ii) in each of the foregoing instances such action or proceeding in any manner relates to or arises out of this Deed of Trust, the Master Indenture or the Obligations or acceptance of a guaranty from a guarantor of the Secured Obligations or any of the transactions contemplated by this Deed of Trust and such action or proceeding does not relate to or arise out of the successful allegation of the gross negligence, breach of trust or willful misconduct of the Beneficiary or the Trustee as applicable, then the Trustor will immediately reimburse or pay to the Beneficiary and the Trustee all of the fees and expenses that have been or may be incurred by the Beneficiary and the Trustee, respectively, with respect to the foregoing (including, without limitation, reasonable counsel fees and disbursements), together with interest thereon at the highest rate of interest born by any of the Obligations, and any such sum and the interest thereon shall be included in the Secured Obligations and have the full benefit of this Deed of Trust, prior to any right, or title to, interest in or claim upon the Mortgaged Estate attaching or accruing to this Deed of Trust, and shall be deemed to be secured by this Deed of Trust. In any action or proceeding to sell the Mortgaged Estate, to foreclose this Deed of Trust, or to recover or collect the Secured Obligations, the provisions of law respecting the recovering of costs, disbursements and allowances shall prevail unaffected by this covenant.

(c) The Trustor shall defend, protect, indemnify and hold harmless each of the Beneficiary, the Trustee and the Bondholder Representative and each of their respective affiliates, and the respective shareholders, directors, officers, partners, members, managers, agents and employees of each of the Beneficiary, the Trustee and the Bondholder Representative and each of their respective affiliates for, from and against all claims, obligations, liens, judgments, actions, suits, costs, damages, losses and liabilities (including, without limitation, reasonable attorneys’ fees and expenses) arising out of or based upon any matter related to this Deed of Trust, the Mortgaged Estate or the occupancy, ownership, maintenance or management of the Mortgaged Estate by the Trustor, including, without limitation, any claims based on the alleged acts or omissions of any employee or agent of the Trustor except for such damages successfully alleged to have been incurred due to the gross negligence, breach of trust or willful misconduct of the Beneficiary, the Trustee or the Bondholder Representative or their respective

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affiliates, directors, officers, agents or employees, it being the intent to provide indemnification for the active, or passive negligence of any of the foregoing indemnified parties. This indemnification shall be in addition to any other liability that the Trustor may otherwise have to the Beneficiary, the Trustee or the Bondholder Representative. The indemnifications contained herein are separate and independent obligations of the Trustor that shall survive any release, foreclosure or other satisfaction of this Deed of Trust, and such indemnifications shall not be subject to any anti-deficiency defense (including, without limitation, any defense raised pursuant to A.R.S. §33-814).

(d) The Trustor waives any and all right to claim or recover against the Beneficiary, its officers, employees, agents and representatives, for loss of or damage to the Trustor, the Mortgaged Estate, the Trustor’s property or the property of others under the Trustor’s control from any cause insured against or required to be insured against by the provisions of this Deed of Trust except for such damages incurred due to the gross negligence, breach of trust or willful misconduct of the Beneficiary.

(e) All sums payable by the Trustor under this Deed of Trust shall be paid without notice, demand, counterclaim, cross-claim setoff, recoupment, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the Secured Obligations of the Trustor hereunder shall in no way be released, discharged or otherwise affected by reason of (i) any damage to or destruction of or any condemnation or similar taking of the Mortgaged Estate or any part thereof, (ii) any restriction or prevention of or interference with any use of the Mortgaged Estate or any part thereof, (iii) any title defect or encumbrance or any eviction from the Mortgaged Estate or any part thereof by title paramount or otherwise, (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Trustor, or any action taken with respect to this Deed of Trust by any trustee or receiver of the Trustor, or by any court, in any such proceeding, or (v) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not the Trustor shall have actual or constructive notice or knowledge of any of the foregoing. To the extent permitted by law, the Trustor waives all rights now or hereafter conferred by statute, law, or in equity, or otherwise to any abatement, suspension, deferment, diminution or reduction of any Secured Obligation. Notwithstanding the above, the Trustor may maintain a separate suit regarding such matters.

Section 1.09. Taxes and Impositions.

(a) Subject to paragraphs (d) and (e) of this Section 1.09, the Trustor agrees to pay, before the same become past due, all real and personal property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever that are assessed or imposed upon the Mortgaged Estate or any part thereof, or become due and payable, and that create, may create or appear to create a lien upon the Mortgaged Estate or any part thereof, or upon any personal property, equipment or other facility used in the operation or maintenance thereof (all of which taxes, assessments and other governmental and nongovernmental charges of like nature are hereinafter referred to as “Impositions”); provided however, that if, by law, any such Imposition is payable, or may at the option of the taxpayer be paid, in installments, the Trustor may pay the same together with any accrued interest and fees on the unpaid balance of such Imposition in installments before the same become past due and

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before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such installment and interest.

(b) If at any time after the date hereof there shall be assessed or imposed (i) a tax or assessment on the Mortgaged Estate or any part thereof in lieu of or in addition to the Impositions payable by the Trustor pursuant to subparagraph (a) hereof, or (ii) a license fee, tax or assessment imposed on the Beneficiary and measured by or based in whole or in part upon the amount of the outstanding Secured Obligations, then all such taxes, assessments or fees shall be deemed to be included within the term “Impositions” as defined in subparagraph (a) hereof, and the Trustor shall pay and discharge the same as herein provided with respect to the payment of Impositions.

(c) Subject to the provisions of subparagraph (d) of this Section 1.09, the Trustor covenants to furnish the Beneficiary within 30 days after the date upon which any such Imposition becomes due and payable by the Trustor, official receipts of the appropriate taxing authority, or other proof satisfactory to the Beneficiary, evidencing the payment thereof.

(d) Subject to the applicable state law provisions, the Trustor shall have the right before any delinquency occurs to contest or object to the amount or validity of any Imposition by appropriate legal proceedings, but this shall not be deemed or construed in any way as relieving, modifying, or extending the Trustor’s covenant to pay any such Imposition at the time and in the manner provided in this Section 1.09, unless the Trustor has given prior written notice to the Beneficiary of the Trustor’s intent to so contest or object to an Imposition, and unless, at the Beneficiary’s sole option, (i) the Trustor shall demonstrate to the Beneficiary’s satisfaction that the legal proceedings shall conclusively operate to prevent the sale of the Mortgaged Estate, or any part thereof, (ii) the Trustor shall diligently and in good faith pursue such contest, (iii) the Trustor shall furnish a good and sufficient bond or surety in an amount equal to 125 percent of the contested Imposition, and (iv) the Trustor shall have provided a good and sufficient undertaking as may be required or permitted by law to accomplish a stay of such proceedings.

(e) The Trustor covenants and agrees not to suffer, permit or initiate the joint assessment of the real and personal property, or any other procedure whereby the lien of the real property taxes and the lien of the personal property taxes shall be assessed, levied or charged to the Mortgaged Estate as a single lien.

Section 1.10. Utilities. The Trustor shall pay when due all utility charges that are incurred for the benefit of the Mortgaged Estate or any part thereof or which may become a charge or lien against the Mortgaged Estate for gas, electricity, water or sewer services furnished to the Mortgaged Estate and all other taxes, assessments or charges of a similar nature, whether public or private, affecting the Mortgaged Estate or any portion thereof, whether or not such taxes, assessments or charges are liens thereon.

Section 1.11. Actions Affecting Mortgaged Estate. The Trustor shall appear in and contest any action or proceeding purporting to affect the title of the Trustor in the Mortgaged Estate or any part thereof or security hereof or the rights or powers of the Beneficiary or the Trustee; and the Trustor shall pay all costs and expenses, including, without limitation, cost of

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evidence of title and reasonable attorneys’ fees, in any such action or proceeding in which the Beneficiary or the Trustee may appear.

Section 1.12. Actions by the Beneficiary and/or the Trustee To Preserve Mortgaged Estate. If an Event of Default has occurred and is continuing, the Beneficiary, with the consent of or at the direction of the Bondholder Representative, and without notice to, or demand upon, the Trustor and without releasing the Trustor from any Secured Obligation, may make or do the same in such manner and to such extent as the Beneficiary may deem necessary to protect the security hereof. In connection therewith (without limiting its general powers), the Beneficiary, with the consent of or at the direction of the Bondholder Representative, shall have, and is hereby given the right, but not the obligation (i) to enter upon and take possession of the Mortgaged Estate, (ii) to direct the Trustor to terminate any management agent, if any, and to employ such management agent as the Beneficiary may determine in its sole and absolute discretion, provided that the Trustor receives an opinion of Bond Counsel that the hiring of such management agent will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2015A Bonds, (iii) to make additions, alterations, repairs and improvements to the Mortgaged Estate that it may consider necessary or proper to keep the Mortgaged Estate in good condition and repair, (iv) to appear and participate in any action or proceeding affecting or that may affect the security hereof or the rights or powers of the Beneficiary or the Trustee, (v) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt that affects the security of this Deed of Trust or which may be or become prior or superior hereto, and (vi) in exercising such powers, to pay necessary expenses, including, without limitation, employment of counsel or other necessary or desirable consultants. Any such costs and expenses incurred by the Beneficiary and any such amounts paid by the Beneficiary shall be secured hereby with the same priority afforded this Deed of Trust as recorded. The Trustor shall immediately upon demand therefor by the Beneficiary pay all of the foregoing costs and expenses incurred by the Beneficiary in connection with the exercise by the Beneficiary of the foregoing rights, including, without limitation, costs of evidence of title, court costs, appraisals, surveys and reasonable attorneys’ fees provided, however, that the Trustor shall not be liable to pay for any such costs or expenses incurred by the Beneficiary due to the gross negligence, willful misconduct or breach of trust of the Beneficiary or its affiliates, directors, officers, agents or employees.

Section 1.13. Survival of Warranties. The Trustor shall fully and faithfully satisfy and perform the Secured Obligations. All representations, warranties and covenants of the Trustor contained herein shall remain continuing obligations, warranties and representations of the Trustor during any time when any portion of the obligations secured by this Deed of Trust remain outstanding.

Section 1.14. Eminent Domain. Should the Mortgaged Estate, or any part thereof or interest therein, be taken or damaged by reason of any public improvement or condemnation proceeding, or in any other manner (“Condemnation”), or should the Trustor receive any notice or other information regarding such proceeding, the Trustor shall give prompt written notice thereof to the Beneficiary and the Bondholder Representative. The Beneficiary, with the consent of or at the direction of the Bondholder Representative, may participate in any such Condemnation proceedings, and the Trustor shall from time to time deliver to the Beneficiary all instruments requested by the Beneficiary to permit such participation. The Trustor shall, at its

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expense, diligently prosecute any such proceedings and shall consult with the Beneficiary and its attorneys and experts, and cooperate with it in the carrying on or defense of any such proceedings. All proceeds of Condemnation awards or proceeds of sale in lieu of Condemnation with respect to the Mortgaged Estate and all judgments, decrees and awards for injury or damage to the Mortgaged Estate or any part thereof or interest therein shall be paid to the Trustor or the Beneficiary as provided in Section 4.13 of the Master Indenture, and if to the Beneficiary, shall be applied first to all reasonable costs and expenses incurred by the Beneficiary in obtaining the proceeds. The balance of proceeds, if any, shall be applied as directed by the Trustor or the Issuer in accordance with the provisions of the Master Indenture.

The Trustor hereby assigns and transfers to the Beneficiary, and agrees to execute such further assignments of, all such proceeds, judgments, decrees and awards as the Beneficiary, with the consent of or at the direction of the Bondholder Representative, may request. The Beneficiary, with the consent of or at the direction of the Bondholder Representative, is hereby authorized, in the name of the Trustor, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award. The Trustor hereby authorizes, directs and empowers the Beneficiary, at its option and with notice to the Trustor, on the Trustor’s behalf, or on behalf of the successors or assigns of the Trustor, to adjust, compromise, claim, collect and receive such proceeds and to give proper receipts and acquittances therefor. The Beneficiary shall not be, in any event or circumstance, liable or responsible for failure to collect or exercise diligence in the collection of any proceeds, judgments, decrees or awards unless such failure is due to the Beneficiary’s gross negligence, willful misconduct or breach of trust.

Section 1.15. Additional Security. In the event the Beneficiary at any time holds additional security for any of the Secured Obligations, it may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently with or after any sale is made hereunder.

Section 1.16. No Additional Liens. Except for the Permitted Encumbrances, the Trustor shall not further encumber the Mortgaged Estate or any portion thereof (including, without limitation, secured transactions under the Uniform Commercial Code in effect in the State (the “UCC”)).

Section 1.17. Successors and Assigns. Subject to the limitations on transfer of the Mortgaged Estate contained herein or on any other limitations on transfer or changes of ownership of the Trustor contained in any of the Financing Documents, this Deed of Trust applies to, inures to the benefit of and binds the Trustor, the Trustee, the Beneficiary, their heirs, legatees, devisees, administrators, executors, successors and assigns. The covenants and agreements of the Trustor contained herein shall apply to and be binding upon any successor owner of the Mortgaged Estate or any part thereof.

Section 1.18. Inspections. The Beneficiary and the Bondholder Representative, or their respective agents, representatives or workmen, are authorized to enter upon notice of two Business Days to the Trustor at any reasonable time upon or in any part of the Mortgaged Estate for the purpose of inspecting the same and all books, records and documents relating thereto, and for the purpose of performing any of the acts it is authorized to perform under the terms of any of the Financing Documents; provided, however, that no prior notice is required if the Beneficiary

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or the Bondholder Representative reasonably believes that the value of any of the Mortgaged Estate would be impaired during such notice period.

Section 1.19. Liens. The Trustor shall pay and promptly discharge, at the Trustor’s cost and expense, all liens, encumbrances and charges upon the Mortgaged Estate, or any part thereof or interest therein, other than the Permitted Encumbrances. The Trustor shall have the right to contest in good faith the validity of any such lien, encumbrance or charge, provided the Trustor shall first deposit with the Beneficiary a bond or other security reasonably satisfactory to the Beneficiary in an amount equal to 125 percent of the amount of the claim plus costs (including, without limitation, attorneys’ fees) and interest and provided further that the Trustor shall thereafter diligently and in good faith proceed to cause such lien, encumbrance or charge to be removed and discharged. If the Trustor shall fail so to discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of the Beneficiary, the Beneficiary may, but shall not be obligated to, discharge the same, either, by paying the amount claimed to be due, or by procuring the discharge of such lien, either, by depositing in court a bond in the amount claimed or otherwise giving security for such claim, or in such manner as is or may be prescribed by law. Any cost incurred by the Beneficiary in connection with any such payment or discharge shall be secured hereby and shall be immediately due and payable without notice or demand.

Section 1.20. Restrictions Affecting Title. The Trustor shall perform when due all obligations required to be performed by the Trustor by the provisions of any agreement affecting title to the Mortgaged Estate or any part thereof.

Section 1.21. Further Assurances. The Trustor shall, upon the execution and delivery hereof and thereafter from time to time, take such actions as the Beneficiary or the Bondholder Representative may request to cause this Deed of Trust, each supplement and amendment to such instrument and financing statements with respect thereto and each instrument of further assurance (collectively, the “Recordable Documents”) to be filed, registered and recorded as may be required by law to publish notice and maintain the first lien or security interest, as applicable, hereof upon the Trust Estate and to publish notice of and protect the validity of the Recordable Documents. The Trustor shall take all action and do all things that it is authorized by law to take and do, and cooperate with the Beneficiary as the Beneficiary deems necessary or desirable, to insure the release of all encumbrances against the Mortgaged Estate, except the Permitted Encumbrances. So long as any Secured Obligations shall remain unpaid, the Trustor shall execute, acknowledge, where appropriate, and deliver from time to time promptly at the request of the Beneficiary all such instruments and documents as in the opinion of the Beneficiary are necessary or desirable to preserve the first priority lien created by this Deed of Trust. If Trustor shall fail or refuse to execute, acknowledge, where appropriate, and deliver such instruments and documents to preserve the first priority lien created by this Deed of Trust within ten Business Days following a written request by the Beneficiary, the Trustor irrevocably constitutes and appoints the Beneficiary as its attorney-in-fact to execute and deliver such instruments, it being stipulated that such power of attorney is coupled with an interest and is irrevocable and binding.

Section 1.22. Performance of Covenants. The Trustor shall faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Financing Documents and in all of its proceedings pertaining to this Deed of Trust.

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Section 1.23. Notification of Event of Default Under Deed of Trust. The Trustor agrees to notify the Beneficiary and the Bondholder Representative immediately in writing of any default by the Trustor in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Trustor set forth in this Deed of Trust. The Trustor shall also notify the Beneficiary and the Bondholder Representative in writing of any event or condition that with the lapse of time or the giving of notice would constitute an Event of Default.

Section 1.24. Organization; Due Authorization. The Trustor is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas and has the requisite power, authority and legal right to carry on the business conducted by it and to engage in the transactions contemplated by the Financing Documents to which it is a party. The execution and delivery of the Financing Documents to which it is a party and the performance and observance of the provisions thereof have all been authorized by all necessary actions of the Trustor.

Section 1.25. Liabilities; Compliance With Other Instruments. The Trustor has no liabilities regarding the Mortgaged Estate except those hereunder and those otherwise contemplated or permitted by this Deed of Trust and the Financing Documents, none of which are delinquent. The Trustor is not in default (i) in the payment of any taxes levied or assessed against it or its assets, (ii) under any applicable statute, rule, order or regulation of any governmental authority, (iii) under this Deed of Trust or any of the Financing Documents to which it is a party, or (iv) under any other agreement to which it is a party or by which it or any of its properties are bound.

Neither the execution and delivery of this Deed of Trust or any of the Financing Documents to which the Trustor is a party, nor the consummation of the transactions herein or therein contemplated nor compliance with the terms and provisions hereof or thereof, conflicts with or results or will result in a breach of any of the terms, conditions or provisions of the articles of incorporation of the Trustor, any law, order, rule, regulation, writ, injunction, judgment, or decree of any court or governmental authority, or any agreement or instrument to which the Trustor is a party or by which it or any of its properties are bound, or constitutes or will constitute a default thereunder, or result or will result in the creation or imposition of any lien of any nature whatsoever upon any of its property or assets pursuant to the terms of any such agreement or instrument except the liens created or permitted by the Financing Documents to which it is a party.

Section 1.26. Enforceability. This Deed of Trust and each of the Financing Documents to which the Trustor is a party have been duly executed and delivered by the Trustor and constitute legal, valid and binding obligations of the Trustor enforceable in accordance with their respective terms, except as the enforceability (but not the validity thereof) may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

Section 1.27. Pending Litigation. To the Trustor’s current, actual knowledge, there are no proceedings pending or, to the knowledge of the Trustor threatened, against or affecting the Trustor or any part of the Mortgaged Estate in any court or before any governmental authority or arbitration board or tribunal that if adversely determined would materially and adversely affect

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the properties, business, prospects, profits or condition (financial or otherwise) of the Trustor or the right or ability of the Trustor to enter into this Deed of Trust or the Financing Documents to which it is a party, and if any such proceedings are subsequently initiated or threatened then the Trustor will promptly provide written notice to the Beneficiary. To the Trustor’s current, actual knowledge, the Trustor is not in default with respect to any order of any court or governmental authority or arbitration board or tribunal.

Section 1.28. Compliance With Law. To the current, actual knowledge of the Trustor, the Trustor and the Mortgaged Estate are in compliance with all laws, ordinances, governmental rules or regulations to which it is subject, including, without limitation, the Occupational Safety and Health Act of 1970, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, and all laws, ordinances, governmental rules or regulations relating to environmental protection the violation of which would materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Trustor or the Mortgaged Estate.

Section 1.29. After-Acquired Property. All right, title and interest of the Trustor in and to all improvements, alterations, substitutions, restorations and replacements of, and all additions and appurtenances to, the Mortgaged Estate, hereafter acquired by or released to the Trustor, immediately upon such acquisition or release and without any further granting by the Trustor, shall become part of the Mortgaged Estate and shall be subject to the lien hereof fully, completely and with the same effect as though now owned by the Trustor and specifically described in the Granting Clauses hereof. The Trustor shall execute and deliver to the Trustee and/or the Beneficiary any further assurances, mortgages, grants, conveyances and assignments thereof as the Trustee may reasonably require to subject the same to the lien hereof.

Section 1.30. Transfer of Interests in the Trustor or Mortgaged Estate. Except in accordance with the terms and restrictions of the Master Indenture, and except for the Permitted Encumbrances, the Trustor shall not, by operation of law or otherwise, sell, convey, alienate, transfer, grant, bargain, mortgage, encumber or assign ownership or control of all or any interest in the Trustor or any part of the Mortgaged Estate or any interest therein.

Section 1.31. Lease Provisions. Any lease of all or any part of the Mortgaged Estate by the Trustor permitted under this Deed of Trust or the Master Indenture, other than a lease by any resident of the Mortgaged Property, shall contain a provision obligating such lessee to enter into a subordination, attornment and nondisturbance agreement with the Beneficiary, in form and substance reasonably satisfactory to the Beneficiary.

Section 1.32. Defeasance Terminates Lien. Upon payment and performance in full of all of the Secured Obligations and defeasance of all Outstanding Obligations in accordance with the Master Indenture, the lien of this Deed of Trust upon the Mortgaged Estate shall cease, and the Beneficiary (or the Trustee at the direction of the Beneficiary) shall execute and deliver to the Trustor at the Trustor’s sole cost and expense all documents necessary to effect such a release.

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ARTICLE II ENVIRONMENTAL MATTERS

Section 2.01. Environmental Matters. The Trustor hereby incorporates and reaffirms those covenants and representations contained in Section 4.22 of the Master Indenture (including, without limitation, its covenant to provide certain environmental indemnifications) as an integral part of this Deed of Trust; provided, however, that the environmental indemnifications contained in the Master Indenture and incorporated herein by reference are separate and independent obligations of the Trustor that shall survive any release, foreclosure or other satisfaction of this Deed of Trust, and such indemnifications shall not be subject to any anti-deficiency defense (including, without limitation, any defense raised pursuant to A.R.S. §33-814).

ARTICLE III ASSIGNMENT OF RENTS AND LEASES

Section 3.01. Assignment of Revenues. The Trustor hereby absolutely assigns and transfers to the Beneficiary all the Revenues of the Mortgaged Estate and hereby gives to and confers upon the Beneficiary the right, power and authority to collect such Revenues. The Trustor irrevocably appoints the Beneficiary its true and lawful attorney-in-fact, at the option of the Beneficiary, at any time and from time to time, to take possession and control of the Mortgaged Estate and to demand, receive and enforce payment, to give receipts, releases and satisfaction, and to sue, in the name of the Trustor or the Beneficiary, for all such Revenues and apply the same to the Secured Obligations; provided, however, that the Trustor shall have a license to possess and control the Mortgaged Estate and to collect such Revenues (but not more than one month in advance) which is revocable at any time upon an Event of Default by the Trustor under any of the Financing Documents. The assignment of the Revenues of the Mortgaged Estate in this Article III is intended to be an absolute assignment from the Trustor to the Beneficiary and not merely the passing of a security interest.

While the assignment made in this Deed of Trust is present, direct and continuing, the execution and delivery hereof shall not in any way impair or diminish the obligations of the Trustor under the provisions of any lease nor shall any of the obligations contained in any lease be imposed upon the Beneficiary.

Section 3.02. Collection Upon Default. Upon and during the continuation of any Event of Default under any of the Financing Documents, the Beneficiary may, with the consent of or at the direction of the Bondholder Representative, at any time without notice, either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the Secured Obligations (i) enter upon and take possession of the Mortgaged Estate, or any part thereof, and in its own name sue for or otherwise collect such Revenues, including, without limitation, those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including, without limitation, attorneys’ fees, upon any Secured Obligations, and in such order as the Beneficiary may determine, and (ii) prepare and submit any applications or other documentation as necessary in order to permit the Beneficiary to collect the Revenues. The collection of such Revenues, or the entering upon and taking possession of the Mortgaged Estate,

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shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default.

The Beneficiary shall not be liable to the Trustor, anyone claiming under or through the Trustor or anyone having an interest in the Mortgaged Estate by reason of anything done or left undone by the Beneficiary hereunder, except to the extent of the Beneficiary’s gross negligence or willful actions or omissions.

Section 3.03. Statutory Rights. The Beneficiary, in addition to and not in limitation of any of the foregoing or any other remedies provided in this Deed of Trust or otherwise available under applicable law, shall have all of the rights provided under the laws of the State, including, without limitation, all of the rights set forth in A.R.S. §33-702B (as amended, supplemented or supplanted) regarding enforcement of the assignment of Revenues and leases contained herein.

ARTICLE IV SECURITY AGREEMENT

Section 4.01. Creation of Security Interest. With respect to any portion of the Mortgaged Estate that constitutes personal property or fixtures (including, without limitation, all after-acquired property) governed by the UCC, this Deed of Trust shall constitute a security agreement between the Trustor as the debtor and the Beneficiary as the secured party, and the Trustor hereby grants to the Beneficiary a security interest in such portion of the Mortgaged Estate (such portion being the “Personalty”). Cumulative of all other rights of the Beneficiary hereunder, the Beneficiary shall have all of the rights conferred upon a secured party by the UCC. The Trustor authorizes the Beneficiary to file all financing statements, amendments to financing statements or continuation statements that may from time to time be required by the Beneficiary to establish and maintain the validity and priority of the security interest of the Beneficiary, or any modification thereof, and the Trustor shall deliver any searches required by the Beneficiary to confirm such validity and priority (the cost of which shall be paid by the Trustor). The Beneficiary may exercise any or all of the remedies of a secured party available to it under the UCC with respect to such property, and it is expressly agreed that if upon an Event of Default the Beneficiary should proceed to dispose of such property in accordance with the provisions of the UCC, ten days’ written notice by the Beneficiary to the Trustor shall be deemed to be reasonable notice under any provision of the UCC requiring such notice; provided, however, that the Beneficiary may at its option dispose of such property in accordance with the Beneficiary’s rights and remedies with respect to the real property pursuant to the provisions of this Deed of Trust, in lieu of proceeding under the UCC.

The Trustor shall give advance notice in writing to the Beneficiary of any proposed change in the Trustor’s name, identity, state of organization or business form or structure and will execute and deliver to the Beneficiary, prior to or concurrently with the occurrence of any such change, all additional financing statements that the Beneficiary may reasonably require to establish and maintain the validity and priority of the Beneficiary’s security interest with respect to any of the Mortgaged Estate described or referred to herein.

Some of the items of the Mortgaged Estate described herein are goods that are or are to become fixtures related to the Real Property, and it is intended that as to those goods, this Deed

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of Trust shall be effective as a financing statement filed as a fixture filing from the date of its filing for recording in the real estate records of the county in which the Mortgaged Estate is situated. Information concerning the security interest created by this instrument may be obtained from the Beneficiary, as secured party, at the address of the Beneficiary stated in Section 6.04 of this Deed of Trust. The mailing address of the Trustor, as debtor, is as stated in Section 6.04 of this Deed of Trust.

Section 4.02. Warranties; Representations and Covenants of the Trustor. The Trustor hereby warrants, represents and covenants, with respect to the Personalty, as follows:

(a) except for the security interest granted hereby, the Trustor is, and as to any of the Personalty to be acquired after the date hereof will be, the sole owner of the Personalty, free from any adverse lien, security interest, encumbrance or adverse claims thereon of any kind whatsoever except for the Permitted Encumbrances (including, without limitation, purchase money liens as permitted by the Master Indenture). The Trustor will notify the Beneficiary of, and will defend the Personalty against, all prohibited claims and demands of all persons at any time claiming the same or any interest therein;

(b) except as permitted by the Master Indenture, the Trustor will not lease, sell, convey or in any manner transfer the Personalty (except the Personalty transferred in the ordinary course of business and replaced by property of a similar nature and having at least the same value as the Personalty replaced) without the prior written consent of the Beneficiary;

(c) the Personalty is not used or bought for personal, family or household purposes;

(d) the Personalty will be kept on or at the Facilities and the Trustor will not remove the Personalty from the Facilities without the prior written consent of the Beneficiary, except in the ordinary course of business such portions or items of personal property that are consumed or worn out in ordinary usage, all of which shall be promptly replaced by the Trustor with new items of equal or greater quality; and

(e) all covenants and obligations of the Trustor contained herein relating to the Mortgaged Estate shall be deemed to apply to the Personalty whether or not expressly referred to herein.

ARTICLE V EVENTS OF DEFAULT

AND REMEDIES UPON DEFAULT

Section 5.01. Events of Default. Any one or more of the following events shall be deemed an event of default hereunder (each, an “Event of Default”):

(a) failure by the Members of the Obligated Group to pay the amounts required to be paid under the Master Indenture or under the Obligations when due, subject to any applicable notice or cure periods provided therein; or

(b) failure by the Trustor to perform or observe any covenant, condition or agreement contained in this Deed of Trust (other than the monetary obligations described in paragraph (a)

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above) and such failure shall continue for 45 days after written notice from the Beneficiary, with the consent of or at the direction of the Bondholder Representative, of such failure and requesting that it be remedied shall have been given to the Trustor provided, with respect to any such failure covered by this subsection (b), no Event of Default shall be deemed to have occurred so long within such 45-day period the Trustor shall have informed the Beneficiary of the plan to cure and, if such plan is acceptable to the Beneficiary, with the consent of or at the direction of the Bondholder Representative, a course of action adequate to remedy such failure shall have been commenced; or

(c) the occurrence of a default or an event of default by the Members of the Obligated Group under any Financing Document, subject to any applicable notice or cure periods provided therein.

Section 5.02. Acceleration Upon Default; Additional Remedies. Upon the occurrence of an Event of Default (which default is not cured within any applicable cure period) the Beneficiary may, with the consent of or at the direction of the Bondholder Representative, pursue any one or more of the following remedies:

(a) Declare all or any portion of the Secured Obligations to be due and payable, and the same shall thereupon become due and payable without any presentment, demand, protest or notice of any kind except as otherwise provided herein.

(b) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon and take possession of the Mortgaged Estate or any part thereof and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Mortgaged Estate, or part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Mortgaged Estate, take any action described in Article II, III or IV hereof, sue for or otherwise collect the Revenues, the Claims and Awards, the Intangibles or the Equipment, including, without limitation, those past due and unpaid, and apply the same, less costs and expenses of operation and collection including, without limitation, reasonable attorneys’ fees, upon any Secured Obligations, all in such order as the Beneficiary may determine. The entering upon and taking possession of the Mortgaged Estate, the taking of any action described in Article II, III or IV hereof, the collection of such Revenues, such Claims and Awards, such Intangibles or such Equipment and the application thereof as aforesaid, shall not cure or waive any default or notice of default or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession of the Mortgaged Estate or the collection, receipt and application of the Revenues, issues or profits, the Claims and Awards, the Intangibles or the Equipment, the Beneficiary shall be entitled to exercise every right provided for in any of the Financing Documents or by law upon occurrence of any Event of Default, including, without limitation, the right to exercise the power of sale herein conferred.

(c) Commence an action to foreclose this Deed of Trust (either judicially or otherwise), appoint a receiver, specifically enforce any of the covenants hereof, or sell the Mortgaged Estate or any portion thereof pursuant to the power of sale herein conferred.

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(d) Exercise any or all of the remedies available to a secured party under the UCC, including, without limitation:

(i) Either personally or by means of a court-appointed receiver, commissioner or other officer, take possession of all or any of the Personalty and exclude therefrom the Trustor and all others claiming under the Trustor, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of the Trustor in respect of the Personalty or any part thereof. In the event the Beneficiary demands or attempts to take possession of the Personalty in the exercise of any rights under any of the Financing Documents, the Trustor promises and agrees to promptly turn over and deliver complete possession thereof to the Beneficiary;

(ii) Without notice to or demand upon the Trustor, make such payments and do such acts as the Beneficiary may deem necessary to protect its security interest in the Personalty, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien that is prior to or superior to the security interest granted hereunder and, in exercising any such powers or authority, to pay all expenses incurred in connection therewith;

(iii) Require the Trustor to assemble the Personalty or any portion thereof, at a place designated by the Beneficiary and reasonably convenient to both parties, and promptly to deliver such Personalty to the Beneficiary, or an agent or representative designated by it. The Beneficiary, and its agents and representatives, shall have the right to enter upon any or all of the Mortgaged Estate to exercise the Beneficiary’s rights hereunder;

(iv) Sell, lease or otherwise dispose of the Personalty at public sale, with or without having the Personalty at the place of sale, and upon such terms and in such manner as the Beneficiary may determine. The Beneficiary may be a purchaser at any such sale; and

(v) Unless the Personalty is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Beneficiary shall give the Trustor at least ten days’ prior written notice of the time and place of any public sale of the Personalty or other intended disposition thereof. Such notice may be mailed to the Trustor at the address set forth at the beginning of this Deed of Trust and shall be deemed to be given on the date of mailing thereof.

Any sale made pursuant to the provisions of this subsection (d) shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of all or a portion of the remainder of the Mortgaged Estate under power of sale as provided herein upon giving the same notice with respect to the sale of the Personalty hereunder as is required for such sale of the remainder of the Mortgaged Estate under power of sale, and such sale shall be deemed to be pursuant to a security agreement covering both real and personal property under the UCC.

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(e) Exercise any other rights or remedies that may now or hereafter be available to the Beneficiary under this Deed of Trust or the Financing Documents or pursuant to applicable law or in equity.

(f) If held by the Beneficiary, surrender the insurance policies maintained pursuant to Section 1.05, collect the unearned insurance premiums and apply such sums as a credit on the Secured Obligations in such priority and proportion as the Beneficiary in its sole discretion shall deem proper, and in connection therewith, the Trustor hereby appoints the Beneficiary as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable) for the Beneficiary to collect such insurance premiums.

Section 5.03. Exercise of Power of Sale. If following and during the continuation of an Event of Default, the Beneficiary, with the consent of or at the direction of the Bondholder Representative, elects to sell the Trustor’s interest in the Mortgaged Estate by exercise of the power of sale herein contained, the Beneficiary shall notify the Trustee in the manner then required by law.

Upon receipt of such notice from the Beneficiary and at the direction of the Beneficiary, with the consent of or at the direction of the Bondholder Representative, the Trustee shall cause to be given, recorded, published and delivered such notices of default and/or notices of sale as may then be required by law and/or by this Deed of Trust. The Trustee shall, only at the direction of the Beneficiary, with the consent of or at the direction of the Bondholder Representative, and without demand on the Trustor, after such time as may then be required by law after such notice of default and/or notice of sale having been given as required by law, sell the Mortgaged Estate at the time and place of sale fixed by it in such notice of sale, either as a whole, or in separate lots or parcels or items as the Beneficiary shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States of America payable at the time of sale, or as otherwise may then be required by law. The Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, the Trustor, the Trustee or the Beneficiary, may purchase at such sale. The Beneficiary may “credit bid” all or any portion of the Secured Obligations at such sale.

As may be permitted by law, after deducting all costs, fees and expenses of the Trustee and of this Deed of Trust, including, without limitation, costs of evidence of title in connection with sale and any reasonable attorneys’ fees and expenses incurred by the Trustee, the Trustee shall apply the proceeds of sale (i) first, to payment of all actual out-of-pocket costs, fees and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred by the Beneficiary in exercising the power of sale or foreclosing this Deed of Trust, (ii) second, in accordance with the provisions of Section 4.04 of the Master Indenture to the extent of the indebtedness outstanding under the Obligations, and (iii) third, the balance, if any, to those persons legally entitled thereto.

The Trustee may in the manner provided by law postpone sale of all or any portion of the Mortgaged Estate.

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Section 5.04. Appointment of Receiver. If an Event of Default (which is not cured within any applicable cure period) shall have occurred and is continuing, the Beneficiary, with the consent of or at the direction of the Bondholder Representative, as a matter of right and without notice to the Trustor or anyone claiming under the Trustor, and without regard to the value of the Mortgaged Estate or the interest of the Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Mortgaged Estate and the Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases (including, without limitation, the power to (i) take possession of the Mortgaged Estate, (ii) operate, manage, repair, improve, market, lease or sell the Mortgaged Estate, (iii) collect Revenues related to the Mortgaged Estate, (iv) terminate or modify any existing agreements or contracts related to the Mortgaged Estate, or (v) enter into new agreements or contacts related to the Mortgaged Estate), and all the powers and duties of the Beneficiary in case of entry as provided in Section 5.02(b) and shall continue as such and exercise all such powers until the date of confirmation of sale of the Mortgaged Estate unless such receivership is sooner terminated. The Trustor waives any requirement of the posting of a bond in connection with the appointment of a receiver. The Beneficiary shall, in addition to and not in limitation of any of the foregoing or any other remedies provided in this Deed of Trust or otherwise available under applicable law, have all of the rights provided under the laws of the State.

Section 5.05. Remedies Not Exclusive. The Beneficiary, with the consent of or at the direction of the Bondholder Representative, shall be entitled to enforce payment and performance of any Secured Obligation hereby and to exercise all rights and powers under this Deed of Trust or under any Financing Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the Secured Obligations that may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect the Beneficiary’s right to realize upon or enforce any other security now or hereafter held by the Beneficiary, it being agreed that the Beneficiary shall be entitled to enforce this Deed of Trust and any other security now or hereafter held by the Beneficiary in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to the Beneficiary is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by this Deed of Trust or any of the Financing Documents to the Beneficiary, or to which the Beneficiary may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Beneficiary. The Beneficiary may pursue inconsistent remedies and pursue remedies in the alternative.

The acceptance by the Beneficiary of any sum after the same is due shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums hereby secured or to declare a default as herein provided. The acceptance by the Beneficiary of any sum in an amount less than the sum then due shall be deemed an acceptance on account only and upon condition that it shall not constitute a waiver of the obligation of the Trustor to pay the entire sum then due, and failure of the Trustor to pay such entire sum then due shall be and continue to be an Event of Default notwithstanding such acceptance of such amount on account, as aforesaid.

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The Beneficiary or the Trustee shall be, at all times thereafter and until the entire sum then due shall have been paid, and notwithstanding the acceptance by the Beneficiary thereafter of further sums on account, or otherwise, entitled to exercise all rights in this instrument conferred upon them or either of them, and the right to proceed with a sale under any notice of default, or an election to sell, or the right to exercise any other rights or remedies hereunder, shall in no way be impaired, whether any of such amounts are received prior or subsequent to such proceeding, election or exercise. Consent by the Beneficiary to any action or inaction of the Trustor that is subject to consent or approval of the Beneficiary hereunder shall not be deemed a waiver of the right to require such consent or approval to future or successive actions or inactions.

Section 5.06. Possession of Mortgaged Estate. In the event of a trustee’s sale or foreclosure sale hereunder and after the time of such sale, and the Trustor occupies the portion of the Mortgaged Estate so sold, or any part thereof, the Trustor shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either tenant or landlord, at a reasonable rental per day based upon the value of the portion of the Mortgaged Estate so occupied, such rental to be due and payable daily to the purchaser. An action of unlawful detainer shall lie if the tenant holds over after a demand in writing for possession of such Mortgaged Estate and related premises. This Deed of Trust and a trustee’s deed shall constitute a lease and agreement under which the tenant’s possession arose and continued. The Trustor agrees to pay any costs and expenses (including, without limitation, attorneys fees and costs and court costs) incurred by the Beneficiary in connection with any action to remove the Trustor from possession of the Mortgaged Estate. Nothing contained in this Deed of Trust shall be construed to constitute the Beneficiary as a “mortgagee in possession” in the absence of its taking actual possession of the Mortgaged Estate pursuant to the powers granted herein.

Section 5.07. Relief from Stay. In the event that the Trustor commences a case under the Bankruptcy Code or is the subject of an involuntary case that results in an order for relief under the Bankruptcy Code, subject to court approval, the Beneficiary shall thereupon be entitled and the Trustor irrevocably consents to relief from any stay imposed by Section 362 of the Bankruptcy Code on or against the exercise of the rights and remedies otherwise available to the Beneficiary as provided in the Financing Documents and the Trustor hereby irrevocably waives its rights to object to such relief. In the event the Trustor shall commence a case under the Bankruptcy Code or any successor provision thereof or is the subject of an involuntary case that results in an order for relief under the Bankruptcy Code, the Trustor hereby agrees that no injunctive relief against the Beneficiary shall be sought under Section 105 or other provisions of the Bankruptcy Code by the Trustor or other person or entity claiming through the Trustor, nor shall any extension be sought of the stay provided by Section 362 of the Bankruptcy Code.

Section 5.08. Cash Collateral. To the fullest extent allowed by applicable law, the Trustor hereby acknowledges and agrees that in the event that the Trustor commences a case under the Bankruptcy Code or is the subject of an involuntary case that results in an order for relief under the Bankruptcy Code: (a) that all of the Revenues are, and shall for purposes be deemed to be, “proceeds, product, offspring, rents, or profits” of the Real Property covered by the lien of this Deed of Trust, as such quoted terms are used in Section 552(b) of the Bankruptcy Code; (b) that in no event shall the Trustor assert, claim or contend that any portion of the Revenues are, or should be deemed to be, “accounts” or “accounts receivable” within the

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meaning of the Bankruptcy Code and/or applicable state law; (c) that the Revenues are and shall be deemed to be in any such bankruptcy proceeding “cash collateral” of the Beneficiary as that term is defined in Section 363 of the Bankruptcy Code; and (d) that the Beneficiary has valid, effective, perfected, enforceable and “choate” rights in and to the Revenues without any further action required on the part of the Beneficiary to enforce or perfect its rights in and to such cash collateral, including, without limitation, providing notice to the Trustor under Section 546(b) of the Bankruptcy Code.

Section 5.0. Rights and Remedies. The exercise of any rights and remedies by the Beneficiary hereunder shall be subject, in any and all respects, to the written consent of or the written direction of the Bondholder Representative, notwithstanding anything to the contrary contained herein.

ARTICLE VI MISCELLANEOUS

Section 6.01. Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws and judicial decisions of the State without regard to its conflict of laws principles, except as such laws may be preempted by any federal rules, regulations and laws. The Trustor expressly acknowledges and agrees that any judicial action to interpret or enforce the terms of this Deed of Trust shall be brought and maintained in the Superior Court of the State in and for the County where the Land is located, the United States District Court in and for the District of Arizona or any United States Bankruptcy Court in any case involving or having jurisdiction over the Trustor or the Mortgaged Estate.

Section 6.02. Waiver of Rights.

A. General Waivers. To the extent permitted by law, the Trustor waives the benefit of all laws now existing or that hereafter may be enacted (i) providing for any appraisement before sale of any portion of the Mortgaged Estate, or (ii) in any way extending the time for the enforcement of the collection of the Secured Obligations or creating or extending a period of redemption from any sale made in collecting the Secured Obligations. To the full extent the Trustor may do so under the laws of the State, the Trustor agrees that the Trustor will not at any time insist upon, plea, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension, redemption or homestead exemption, and the Trustor, for the Trustor, the Trustor’s representatives, successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Estate, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, homestead exemption, notice of election to mature or declare due the whole of the Secured Obligations and marshaling in the event of foreclosure of the liens hereby created. If any law referred to in this Section and now in force, of which the Trustor, the Trustor’s heirs, devisees, representatives, successors and assigns or other person might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. The Trustor expressly waives and relinquishes any and all rights, remedies and defenses that the Trustor may have or be able to assert by reason of the laws of the State pertaining to the rights, remedies and defenses of sureties.

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B. Specific State Waivers.

(a) The Deed of Trust Act. For purposes of A.R.S. §§33-801 through 821 (the “Deed of Trust Act”), the Trustor herein shall be the “Trustor” (as defined in the Deed of Trust Act). The Beneficiary and the Trustee shall have all rights, benefits and remedies conferred or contemplated by the Deed of Trust Act. Notwithstanding the foregoing, the Beneficiary may, at its option in its sole discretion, elect to foreclose this Deed of Trust judicially as authorized by A.R.S. §33-807. In addition to, and not in limitation of, any other remedy provided in or available under this Deed of Trust, the Beneficiary shall have all rights set forth in A.R.S. §33-702B (as amended, supplemented or supplanted) regarding enforcement of the assignment of the Revenues contained herein.

(b) Waivers. It is the Trustor’s intention that the obligations of the Members of the Obligated Group to pay and perform each and all of the Secured Obligations secured by this Deed of Trust be governed according to the express, bargained-for-terms hereof and of the Financing Documents. The interest rate and terms applicable to the Obligations and the other Financing Documents have (or will have) been negotiated and agreed to by the Related Bond Issuers and the Beneficiary upon that basis. Therefore, to the fullest extent allowable under law, the Trustor hereby expressly waives all provisions of State law (including, without limitation, those specifically referenced below) that might otherwise be construed, contrary to the terms of this Deed of Trust or the Financing Documents, to limit the liability of the Trustor with respect to the Secured Obligations, and hereby expressly agrees that no such provision of law shall be applicable to such obligations. To that end and to the fullest extent permitted under the laws of the State, the Trustor expressly:

(i) agrees that the amount of any unpaid or unperformed Secured Obligations remaining following any sale of collateral (herein referred to as the “Deficiency”) shall be determined solely by the purchase price (whether cash, credit bid, or otherwise, and net of all costs and expenses of and relating to the sale) actually received for such collateral, and, as a material inducement to making the loan evidenced (or to be evidenced) by the Obligations, agrees that, notwithstanding A.R.S. §§12-1566, 33-725, 33-727 and 33-814, the successful bid amount made at any judicial or non-judicial foreclosure sale will be conclusively deemed to constitute the “fair market value” of the collateral sold and that the bid amount will be binding against the Trustor in any proceeding to determine or contest the fair market value of the collateral;

(ii) waives all provisions of A.R.S. §33-814 that purport to limit the time within which an action upon a Deficiency may be commenced, or to eliminate any Deficiency if such an action is not commenced within such time limits, and agrees that such provisions shall not apply to any Deficiency following a trustee’s sale under this Deed of Trust;

(iii) agrees that if, notwithstanding the foregoing express intention and agreement of the Trustor to the contrary, the provisions of A.R.S. §33-814 are held by a court to be applicable, then:

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(A) for purposes of A.R.S. §33-814(B), the 90-day period within which an action for a deficiency judgment may be brought shall not begin until the date of the last trustee’s sale or other nonjudicial or judicial foreclosure sale of any real or personal property collateral under any Deed of Trust that secures the Obligations, whether such collateral is located within or outside of the State;

(B) the phrase “full satisfaction of the obligation” in A.R.S. §33-814(D) shall be construed to refer solely to the obligation of the Trustor to repay the site-specific monetary indebtedness evidenced by the Obligations and not to any separate and independent obligations (1) of the Trustor that are created by this Deed of Trust (including, without limitation, any covenants, agreements or indemnities that are expressly stated to survive any foreclosure hereof) or that are created under or evidenced or secured by any Financing Document executed in connection herewith, regardless of whether such separate and independent obligations are secured hereby by virtue of any cross-collateralization or cross-default provisions or otherwise, or (2) of any other person that is directly, indirectly or contingently liable with respect to the Secured Obligations (all such separate and independent obligations being referred to herein as the “Separate Obligations”); and

(C) notwithstanding any application of A.R.S. §33-814(D) to limit or bar any action against the Trustor with respect to the monetary indebtedness evidenced by the Obligations following a trustee’s sale or sales of the entire Mortgaged Estate such section shall not be applicable to, or in any way limit or impede any action with respect to, such Separate Obligations or any collateral that might now or hereafter be given by the Trustor as security therefor;

(iv) to the fullest extent permitted under the laws of the State, waives all equitable rights of redemption other than those in A.R.S. §33-726;

(v) waives all rights of reinstatement following acceleration of the obligations secured by this Deed of Trust, including, without limitation, any which might otherwise be available under A.R.S. §33-813, it being agreed that the Trustor has bargained for the notice and cure rights given to the Trustor pursuant to Section 5.01 hereof and under the Financing Documents; that such rights provide the Trustor with sufficient opportunity to prevent acceleration following a breach or default which could become an Event of Default; and that the Trustor has agreed in return to waive any further right of reinstatement following acceleration should no cure be timely made;

(vi) waives all rights of redemption the Trustor might otherwise have under State law with respect to the Mortgaged Estate or any other collateral, whether by statute, by subrogation or otherwise, including, without limitation, any rights under A.R.S. §§12-1281 through 12-1283;

(vii) waives and agrees not to assert any and all rights, benefits and defenses that might otherwise be available under the provisions of A.R.S. §§12-1641

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through 12-1646, 44-141, 44-142 or 47-3605, or Arizona Rules of Civil Procedure Rule 17(f); and

(viii) agrees to be and remain liable for the Secured Obligations, and agrees (including, without limitation, as contemplated by A.R.S. §§12-1566(E) and 33-814(C) with respect to a guaranty) that this Deed of Trust may be enforced (and sale had hereunder or judgment given hereon) at any time and independent of any other action or judgment, all regardless of whether, or when, a trustee’s or foreclosure sale of any collateral given by Trustor or any other person is held or any other nonjudicial or judicial action to realize upon collateral, or against Trustor or any other person obligated with respect to the Secured Obligations, is commenced, maintained, concluded, continued or discontinued.

The statutes referred to above in this section shall include any further statutes amending, supplementing or supplanting same. The waivers and agreements contained in this section and elsewhere in this Deed of Trust are given by the Trustor knowingly and voluntarily and upon advice of counsel.

Section 6.03. Limitation of Interest. All agreements between the Trustor and the Beneficiary, whether now existing or hereafter arising and whether written or oral, are expressly limited so that in no contingency or event whatsoever shall the amount paid as interest, or agreed to be paid, to the Beneficiary for the use, forbearance, or detention of the money to be loaned pursuant to the Obligations or otherwise, or for the performance or payment of any covenant or obligation contained herein, exceed the maximum amount permissible under applicable law. If from any circumstance whatsoever fulfillment of any provision hereof at the time performance of such provision shall be due shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstance the Beneficiary or holder of the Obligations shall ever receive as interest under the Obligations or this Deed of Trust or otherwise anything of value that would exceed interest at the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under the Obligations or on account of other Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of the Obligations and such other Secured Obligations, such excess shall be refunded to the Trustor, or other evidence of Secured Obligations, if other than the Trustor. All sums paid or agreed to be paid to the Beneficiary for the use, forbearance, or detention of the Secured Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such obligations until payment in full so that the rate of interest on account of Secured Obligations is uniform throughout the term thereof. The terms and provisions of this paragraph shall control all agreements between the Trustor, or the maker of the Obligations, or other evidence of Secured Obligations, if other than the Trustor, and the Beneficiary.

Section 6.04. Notices. Unless otherwise required by law, whenever the Beneficiary or the Trustor shall desire to give or serve any notice, demand, request or other communication with respect to this Deed of Trust, each such notice, demand, request or other communication shall be in writing and shall be deemed to have been given if sent by hand delivery, overnight courier or certified mail, postage prepaid, addressed to the following mailing addresses:

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If to the Trustor: Gilbert AL Partners, LP 6370 LBJ Freeway, Suite 276 Dallas, Texas 75240 Attention: Dustin Pridmore Telephone: (469) 619-5435 Facsimile: (972) 385-0029

with a copy to: Powell Coleman & Arnold LLP 8080 North Central Expressway, Suite 1380 Dallas, Texas 75206 Attention: Brian P. DeVoss Telephone: (214) 890-7122 Facsimile: (214) 373,8768

If to the Beneficiary: Wilmington Trust, National Association 25 South Charles Street, 11th Floor Baltimore, Maryland 21201 Attention: Corporate Trust Department Telephone: (410) 545-2193 Facsimile: (410) 244-4236

If to the Trustee: Chicago Title Agency, Inc. 6710 North Scottsdale Road, Suite 100 Scottsdale, Arizona 85253


200 First Stamford Place Stamford, Connecticut 06902 Attention: L. George Rieger Telephone: (203) 625-5316 Facsimile: (203) 862-4527

Any party may at any time change its address for such notices by delivering to the other parties hereto, as aforesaid, a notice of such change.

A copy of any request, demand, direction, report, certificate, certification, contract, document, notice, requisition, delivery or other communication to or from any of the parties hereunder and not otherwise provided to the Bondholder Representative shall also be given to the Bondholder Representative.

Section 6.05. Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust.

Section 6.06. Invalidity of Certain Provisions; Conflicting Provisions. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the Secured Obligations, or if the lien is invalid or unenforceable as to any part of the Mortgaged Estate, the unsecured or partially

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secured portion of the Secured Obligations shall be completely paid prior to the payment of the remaining and secured portion of the Secured Obligations, and all payments made on such obligations, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid on and applied to the full payment of that portion of the Secured Obligations that is not secured or fully secured by the lien of this Deed of Trust.

Section 6.07. Subrogation. To the extent that proceeds of the Series 2015 Notes or advances under this Deed of Trust are used to pay any outstanding lien, charge or prior encumbrance against the Mortgaged Estate, such proceeds or advances have been or will be advanced by the Beneficiary at the Trustor’s request, and the Beneficiary shall be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether said liens, charges or encumbrances are released of record.

Section 6.08. Change in Ownership. If the ownership of the Mortgaged Estate or any part thereof or interest therein becomes vested in a person other than the Trustor owning the same on the date hereof, the Beneficiary may, without notice to the Trustor, deal with such successor or successors in interest with reference to this Deed of Trust and the Secured Obligations in the same manner as with the Trustor without in any way vitiating or discharging the Trustor’s liability hereunder or upon the Secured Obligations. No sale of the Mortgaged Estate, and no forbearance on the part of the Beneficiary, and no extension of the time for the payment of the Secured Obligations, given by the Beneficiary, shall operate to release, discharge, modify, change or affect the original liability, if any, of the Trustor or the liability of any guarantors or sureties of the Trustor, either in whole or in part; provided that the Trustor may be released from its original liability under this Deed of Trust upon transfer of the entire Mortgaged Estate with the written consent of the Beneficiary and as permitted under the Financing Documents.

Section 6.09. Assignment of the Beneficiary’s Interest. It is expressly agreed that any and all terms of this Deed of Trust, the Financing Documents and all other agreements, documents, instrument or certificates made or executed by the Trustor or others in favor of the Beneficiary, and all rights, powers, privileges, options and remedies conferred upon the Beneficiary herein and therein, shall inure to and be for the benefit of, and may be exercised by, the Beneficiary and its successors and assigns, and the words “the Beneficiary” shall also mean and include the successor or successors and the assign or assigns of the Beneficiary and its successors and assigns. The Trustor hereby specifically grants unto the Beneficiary the right and privilege, at the Beneficiary’s option, with the consent of the Bondholder Representative, to transfer and assign to any third person all or any part of the Beneficiary’s rights to receive funds or payments hereunder; provided, however, if the Beneficiary makes any such transfer or assignment, the Beneficiary shall give the Trustor written notice thereof.

Section 6.10. Time Is of the Essence. Time is of the essence under this Deed of Trust and the Financing Documents.

Section 6.11. Obligations of the Trustor. The obligations of the Trustor to make payments hereunder and under the Obligations and the Master Indenture and to perform and observe all agreements on its part contained herein and therein shall be absolute and

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unconditional. Until this Deed of Trust is terminated or payment in full of all Obligations is made or is provided for in accordance with the Master Indenture, the Trustor (i) will not suspend or discontinue any payments under the Master Indenture or neglect to perform any of its duties required thereunder or hereunder, (ii) will perform and observe all of its obligations set forth in the Master Indenture, this Deed of Trust and the Obligations, and (iii) except as provided herein, will not terminate the Master Indenture or this Deed of Trust for any cause.

Section 6.12. Immunity of Individuals. No recourse shall be had for the payment of the principal of or premium, if any, or interest on the Obligations or Related Bonds or for any claim based thereon or under the Master Indenture, the Related Supplements, this Deed of Trust or the other Financing Documents or upon any obligation, covenant or agreement herein against any past, present or future officer, director, trustee, member, employee or agent of the Trustor, whether directly or indirectly and all such liability of any such individual as such is hereby expressly waived and released as a condition of and in consideration for the execution hereof and the issuance of the Obligations.

Section 6.13. Amendments, Changes and Modifications. This Deed of Trust may only be amended, changed, modified, altered or terminated as provided in the Master Indenture.

ARTICLE VII TRUSTEE

Section 7.01. Resignation of the Trustee. The Trustee may resign and be discharged of the trusts created hereby by giving notice of its resignation to the Beneficiary, the Bondholder Representative and the Trustor (or any subsequent owner of the Trustor’s interest in the Mortgaged Estate) specifying the date (not less than 90 days after such notice) when such resignation shall take effect. Such resignation shall take effect on the earlier of the date so specified or the appointment and acceptance of a successor trustee pursuant to Section 7.02.

Section 7.02. Successor Trustee. The Trustee may be removed at any time by notice from the Beneficiary, with the consent of or at the direction of the Bondholder Representative. If the Trustee shall have given notice of its intention to resign, shall resign, be removed or otherwise be incapable of acting, or if the Trustee shall be taken under the control of any public officer or a receiver appointed by a court, or be adjudged a bankrupt or insolvent, then a successor may be appointed by the Beneficiary, with the consent of or at the direction of the Bondholder Representative. The Trustor shall notify the Beneficiary of any such appointment by the Trustor, but any successor trustee so appointed by the Trustor shall immediately and without further act be superseded by a successor trustee appointed by the Beneficiary as above provided. As used in this Section 7.02, the Trustor shall mean and include any subsequent owner of the Trustor’s interest in the Mortgaged Estate.

Section 7.03. Separate and Co-Trustees. If it deems such to be necessary or prudent, the Trustee shall have the power to appoint one or more persons to act as separate trustees or co-trustees, jointly with the Trustee, of any of the property subject to the lien hereof, and any such person shall be such separate trustee or co trustee, with such powers and duties as shall be specified in such instrument. Such separate trustee or co-trustee, upon acceptance of such trust, shall be vested with the estates or property specified in such instrument, either jointly with the

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Trustee, or separately as may be provided therein, such to all the trusts, conditions and provisions of this Deed of Trust; and every such instrument shall be filed with the Trustee.

Section 7.04. Liability of the Trustee. No person or entity serving as the Trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder.

Section 7.05. Payment of the Trustee’s Compensation. The Trustor shall pay or cause to be paid the compensation to which the Trustee is entitled hereunder, if any, and all proper disbursements and expenses incurred by the Trustee hereunder, if any.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the Trustor has caused this Deed of Trust to be duly executed on the day and year set forth in the acknowledgment attached hereto and effective on the date first written above.

GILBERT AL PARTNERS, LP, a Texas limited partnership

By: GILBERT AL GP, LLC, a Texas limited liability company, its sole General Partner

By: Name: Title: Manager

STATE OF ____________ ) ) ss:

COUNTY OF __________ )

This instrument was acknowledged before me on the _____ day of __________, 2015, by ___________, a manager of Gilbert AL GP, LLC, a Texas limited liability company, sole General Partner of Gilbert AL Partners, LP, a Texas limited partnership, on behalf of the limited liability company on behalf of the limited partnership.

Notary Public

My Commission Expires:

A-1

EXHIBIT A

LEGAL DESCRIPTION

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B-1

EXHIBIT B

TITLE EXCEPTIONS



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APPENDIX D

PROPOSED FORM OF BOND COUNSEL OPINION

October 27, 2015 Arizona Health Facilities Authority Phoenix, Arizona

Re: $14,510,000 Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A and $1,315,000 Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the sale and issuance by the Arizona Health Facilities Authority (the “Issuer”) of $14,510,000 in aggregate principal amount of Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Series 2015A (the “Series 2015A Bonds”), and $1,315,000 in aggregate principal amount of Arizona Health Facilities Authority First Mortgage Revenue Bonds (Mariposa Point of Gilbert Project), Taxable Series 2015B (the “Series 2015B Bonds” and, together with the Series 2015A Bonds, the “Series 2015 Bonds”). The Series 2015 Bonds are issuable as fully registered bonds in the denomination of $25,000 and any integral multiple of $5,000 in excess thereof. The Series 2015 Bonds are dated the date hereof and otherwise shall be dated as provided in the Indenture of Trust, dated as of October 1, 2015 (the “Bond Indenture”), between the Issuer and Wilmington Trust, National Association, as trustee (the “Bond Trustee”). The Series 2015 Bonds are subject to extraordinary, mandatory and optional redemption by the Issuer prior to maturity at the times, in the manner and upon the terms provided in the Bond Indenture.

The Issuer will lend the proceeds from the sale of the Series 2015 Bonds to Gilbert AL Partners, LP, a Texas limited partnership (the “Obligor”), pursuant to a Loan Agreement, dated as of October 1, 2015 (the “Loan Agreement”), between the Issuer and the Obligor and will be used by the Obligor, together with other available funds, to (i) finance the cost of an assisted living and memory care facility located in the Town of Gilbert, Arizona (the “Project”), (ii) fund capitalized interest on the Series 2015 Bonds, (iii) fund a working capital fund, and (iv) pay the cost of issuance of the Series 2015 Bonds.

The Series 2015 Bonds and the interest thereon are payable solely out of the loan payments to be made by the Obligor to the Issuer pursuant to the Loan Agreement, except to the extent otherwise provided in the Bond Indenture and the Loan Agreement. The Obligor is the sole initial member of an obligated group (the “Obligated Group”) and is party to a Master Trust Indenture, dated as of October 1, 2015 (the “Master Indenture”), with Wilmington Trust, National Association, as master trustee (the “Master Trustee”). Pursuant to the Master Indenture and a Supplemental Indenture Number 1, dated as of October 1, 2015 (the “Supplemental Master Indenture”), between the Obligor and the Master Trustee, the Obligor has executed and delivered

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Arizona Health Facilities Authority Page 2

to the Issuer two promissory notes of even date herewith (the Series 2015A Note and the Series 2015B Note, collectively referred to as, the “Notes”) in a principal amount equal to the aggregate principal amount of the Series 2015 Bonds to secure the Obligor’s repayment obligations under the Loan Agreement and, thereby, secure payment of the Series 2015 Bonds. The obligations of the Obligated Group under the Master Indenture and the Notes are further secured by a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, dated as of October 1, 2015 (the “Deed of Trust”), executed by the Obligor for the benefit of the Master Trustee. The Obligor has agreed in the Loan Agreement and in the Land Use Restriction Agreement, dated as of October 1, 2015 (the “Land Use Restriction Agreement”), among the Issuer, the Bond Trustee and the Obligor to certain covenants, pursuant to which the Project is to be occupied by low-income residents within the meaning of Section 142(d) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Series 2015 Bonds are payable solely from the Trust Estate described in the Bond Indenture, including (i) all income and revenues derived from or for the account of the Obligor by and for the account of the Issuer pursuant to the terms of the Loan Agreement (except any reimbursements or indemnity payments payable to the Issuer), including the Loan Payments, and (ii) all money and securities held by the Bond Trustee from time to time in specified trust funds (excluding the Rebate Fund) under the Bond Indenture.

In connection with the issuance of the Series 2015 Bonds, we have examined the following:

a. Certified copies of the resolutions adopted by the Board of Directors of the Issuer on July 15, 2015 and September 2, 2015, in connection with the issuance by the Issuer of the Series 2015 Bonds pursuant to the provisions of Title 36, Chapter 4.2, Arizona Revised Statutes, as amended (the “Act”).

b. Executed counterparts of the Bond Indenture.

c. Executed counterparts of the Loan Agreement.

d. Executed counterparts of the Master Indenture and the Supplemental Master Indenture.

e. Executed counterparts of the Deed of Trust.

f. Executed counterparts of the Land Use Restriction Agreement.

g. Certificates of representatives of the Obligor and the Issuer.

h. Such other documents and showings and related matters of law as we have deemed relevant and necessary in rendering this opinion.

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In such an examination, we have examined originals (or copies certified or otherwise identified to our satisfaction) of the foregoing and have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies and the accuracy of the statements contained in such documents. As to any facts material to our opinion, we have, when relevant facts were not independently established, relied upon the aforesaid documents.

From such examination, we are of the opinion that pursuant to the laws of the State of Arizona and of the United States of America in force and effect on the date hereof:

1. The Issuer is designated by law as a political subdivision and instrumentality of the State of Arizona. Pursuant to the Act, the Issuer is empowered to issue the Series 2015 Bonds and to loan the proceeds thereof to the Obligor pursuant to the Loan Agreement for the purposes described hereinabove, and to assign and pledge to the Bond Trustee the interest of the Issuer in the Loan Agreement (other than certain indemnification rights and certain fees and expenses of the Issuer), including amounts payable by the Obligor thereunder, from which amounts the Series 2015 Bonds are payable.

2. The Loan Agreement and the Bond Indenture have been duly authorized by all necessary action on the part of the Issuer, have been duly executed and delivered by authorized officers of the Issuer, and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitute the legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their respective terms, except to the extent limited by bankruptcy, reorganization or other similar laws affecting creditors’ rights generally and by the availability of equitable remedies, and except to the extent that the enforcement of the indemnification provisions of the Loan Agreement may be limited by federal or state securities laws.

3. The Series 2015 Bonds have been duly authorized by all necessary action on the part of the Issuer, have been duly executed by authorized officers of the Issuer, and issued by the Issuer and constitute the legal, valid and binding limited obligation of the Issuer enforceable in accordance with their terms, except to the to the extent limited by bankruptcy, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies, and are payable from, and secured by an agreement and pledge by the Issuer to the Bond Trustee of, the amounts to be received by the Issuer pursuant to the Loan Agreement (other than certain indemnification rights and certain fees and expenses of the Issuer). The Series 2015 Bonds are not secured by an obligation or pledge of any taxing power or moneys raised thereby and are not a debt of, and do not constitute a pledge of the faith and credit of, the State of Arizona or any political subdivision thereof. The Series 2015 Bonds are special, limited obligations of the Issuer, payable solely as aforesaid. The Series 2015 Bonds do not constitute a debt or indebtedness of the Issuer or any political subdivision of the State of Arizona within the meanings of any provision or limitation of the Constitution or the laws of the State of

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Arizona and do not constitute or give rise to a pecuniary liability of the Issuer or any political subdivision of the taxing powers, if any. The Issuer has no taxing powers.

4. Under existing statutes, regulations, rulings and court decisions, interest on the Series 2015A Bonds is excludable from gross income for federal income tax purposes except for interest on any Series 2015A Bond for any period during which such Series 2015A Bond is held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code. Interest on the Series 2015A Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is not taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on certain corporations.

5. Under the laws of the State of Arizona, as presently enacted and construed, interest on the Series 2015 Bonds is exempt from Arizona state income tax.

In rendering the opinion in paragraph number 4 above, we are relying, without independent investigation, upon certifications, representations and warranties by the Issuer and the Obligor as to compliance with the requirements of the Code that must be met on and after the issuance of the Series 2015 Bonds in order that interest on the Series 2015A Bonds not be included in gross income for federal income tax purposes. Failure to meet such requirements may cause interest on the Series 2015A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2015 Bonds. The Issuer in the Bond Indenture and the Tax Certificate and the Obligor in the Loan Agreement, the Land Use Restriction Agreement and the Proceeds Certificate have covenanted to comply with all applicable requirements of the Code to maintain the excludability from gross income of the holders thereof for federal income tax purposes of interest on the Series 2015A Bonds. Other provisions of the Code may give rise to adverse federal income tax consequences to particular holders of the Series 2015A Bonds. The scope of the foregoing opinions is limited to matters addressed above and no opinion is expressed hereby regarding other federal tax consequences that may arise due to ownership of the Series 2015A Bonds.

Except as stated in the above paragraphs 4 and 5, we express no opinion as to any other tax consequences regarding the Series 2015 Bonds or regarding any federal or state tax consequences of acquiring, carrying, owning, or disposing of the Series 2015 Bonds. Owners of the Series 2015 Bonds should consult their tax advisors regarding the applicability of any federal or state tax consequences of owning the Series 2015 Bonds.

This opinion is qualified to the extent that the enforceability of the Series 2015 Bonds and the Bond Indenture, respectively, may be limited by general principles of equity which may permit the exercise of judicial discretion, and by bankruptcy, insolvency, moratorium, reorganization or similar laws relating to the enforcement of creditors’ rights generally, now or hereafter in effect.

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In rendering the foregoing opinions, we have assumed the accuracy and truthfulness of all public records and of all certifications, documents and other proceedings examined by us that have been executed or certified by public officials acting within the scope of their official capacities and have not verified the accuracy or truthfulness thereof. We have also assumed the genuineness of the signatures appearing upon such public records, certifications, documents and proceedings.

We have not been engaged nor have we undertaken to review or verify and therefore, except to the limited extent set forth in our supplemental opinion dated of even date herewith, express no opinion as to the accuracy, adequacy, fairness or completeness of any official statement or other offering materials relating to the Series 2015 Bonds. In addition, other than as expressly set forth herein, we have not passed upon and therefore express no opinion as to the compliance by the Issuer, the Obligor or any other party involved in this financing, or the necessity of such parties complying, with any federal or state registration requirements or security statutes, regulations or rulings with respect to the offer and sale of the Series 2015 Bonds. We express no opinion as to the title to or the sufficiency of the real or personal property referred to in the Master Indenture, the Loan Agreement or the Deed of Trust or otherwise of the description of the properties owned by the Obligor or the priority of any liens, charges or encumbrances on the properties owned by the Obligor.

This opinion represents our legal judgment based upon our review of the law and the facts we deem relevant to render such opinion and is not a guarantee of a result. This opinion is given as of the date hereof, and we assume no obligation to review or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Respectfully submitted,

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