health and educational facilities authority of the state of missouri · 2019. 1. 11. · lutheran...

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PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 10, 2019

NEW ISSUE Rating: “BBB”Book-Entry Only See “RATING” herein

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), (i) the interest on the Series 2019 Bonds is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax, (ii) the interest on the Series 2019 Bonds is exempt from Missouri income taxation by the State of Missouri and (iii) the Series 2019 Bonds have not been designated as “qualified tax‑exempt obligations” within the meaning of Section 265(b)(3) of the Code. See the caption “TAX MATTERS” in this Official Statement.

$93,910,000*HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

OF THE STATE OF MISSOURISENIOR LIVING FACILITIES REVENUE BONDS

(LUTHERAN SENIOR SERVICES PROJECTS)SERIES 2019

consisting of:$68,420,000*

Senior Living Facilities Revenue Bonds(Lutheran Senior Services Projects)

Series 2019A

$25,490,000*Senior Living Facilities Revenue Bonds

(Lutheran Senior Services Projects)Series 2019B

Dated: Date of Delivery Due: February 1, as shown inside

The Health and Educational Facilities Authority of the State of Missouri (the “Authority”) is issuing its $68,420,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019A (the “Series 2019A Bonds”) and $25,490,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019B (the “Series 2019B Bonds” and, together with the Series 2019A Bonds, the “Series 2019 Bonds”). The Series 2019A Bonds will be issued and secured under a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019A Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019A Bond Trustee”). The Series 2019B Bonds will be issued and secured under a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019B Bond Indenture” and, together with the Series 2019A Bond Indenture, the “Bond Indentures” and each a “Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019B Bond Trustee”). Hereinafter, the term “Bond Trustee” refers to either the Series 2019A Bond Trustee or the Series 2019B Bond Trustee, or both, depending on the context.

The proceeds of the Series 2019A Bonds will be loaned to Lutheran Senior Services, a Missouri legislatively chartered corporation (the “Institution”), pursuant to a Loan Agreement dated as of February 1, 2019 (the “Series 2019A Loan Agreement”) to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019A Bonds, (iii) fund capitalized interest on the Series 2019A Bonds, and (iv) pay certain costs related to the issuance of the Series 2019A Bonds. Except as described in this Official Statement, the Series 2019A Bonds will be payable solely from and secured by a pledge of payments to be made under the Series 2019A Loan Agreement and the Series 2019A Master Note (defined herein) issued by the Institution, as obligated group agent (the “Obligated Group Agent”) under a Master Indenture (defined herein) by and among the Institution, the other members of the Obligated Group and UMB Bank, n.a., as successor master trustee (the “Master Trustee”).

The proceeds of the Series 2019B Bonds will be loaned to Institution pursuant to a Loan Agreement dated as of February 1, 2019 (the “Series 2019B Loan Agreement” and, together with the Series 2019A Loan Agreement, the “Loan Agreements” and each a “Loan Agreement”) to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019B Bonds, (iii) fund capitalized interest on the Series 2019B Bonds, and (iv) pay certain costs related to the issuance of the Series 2019B Bonds. Except as described in this Official Statement, the Series 2019B Bonds will be payable solely from and secured by a pledge of payments to be made under the Series 2019B Loan Agreement and the Series 2019B Master Note (defined herein) issued by the Obligated Group Agent under the Master Indenture.

The sources of payment of, and security for, the Series 2019 Bonds are more fully described in this Official Statement.

The Series 2019 Bonds are issued only as fully registered bonds, and when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Series 2019 Bonds. Purchases of the Series 2019 Bonds will be made in book‑entry form, in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof. Purchasers will not receive certificates representing their interests in the Series 2019 Bonds purchased. So long as Cede & Co. is the registered owner of the Series 2019 Bonds, as nominee of DTC, references herein to the bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (herein defined) of the Series 2019 Bonds. Principal of, redemption premium, if any, and interest on the Series 2019 Bonds will be paid from moneys available therefor under the related Bond Indenture by the Bond Trustee. So long as DTC or its nominee, Cede & Co., is the bondowner, such payments will be made directly to such bondowner. DTC is expected, in turn, to remit such principal and interest to the Participants (defined herein) for subsequent disbursement to the Beneficial Owners. Interest on the Series 2019 Bonds will be payable February 1 and August 1 of each year beginning August 1, 2019.

THE SERIES 2019 BONDS WILL BE SUBJECT TO OPTIONAL, MANDATORY AND EXTRAORDINARY OPTIONAL REDEMPTION, AS MORE FULLY DESCRIBED HEREIN.

THE SERIES 2019 BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY. THE SERIES 2019 BONDS ARE PAYABLE SOLELY OUT OF THE LOAN PAYMENTS DERIVED BY THE AUTHORITY UNDER THE RELATED LOAN AGREEMENT AND THE RELATED SERIES 2019 MASTER NOTE AND AS OTHERWISE PROVIDED IN THE RELATED BOND INDENTURE.

THE SERIES 2019 BONDS SHALL NOT CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF. THE ISSUANCE OF THE SERIES 2019 BONDS SHALL NOT, DIRECTLY, INDIRECTLY, OR CONTINGENTLY, OBLIGATE THE STATE OF MISSOURI OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER.

The Series 2019 Bonds are being offered by Herbert J. Sims & Co., Inc., PNC Capital Markets LLC and UMB Bank, n.a. (collectively, the “Underwriters”) when, as and if issued by the Authority and accepted by the Underwriters, subject to approval of the legality thereof by Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel to the Institution and certain other conditions. Certain legal matters will be passed upon for the Institution and the other members of the Obligated Group by their counsel, Spencer Fane LLP, St. Louis, Missouri; for the Authority by its counsel, Thompson Coburn LLP, St. Louis, Missouri; and for the Underwriters by their counsel, Dentons US LLP, St. Louis, Missouri. Columbia Capital Management, LLC, Overland Park, Kansas, serves as financial advisor to the Authority. It is expected that the Series 2019 Bonds will be available for delivery through the facilities of DTC in New York, New York on or about February __, 2019.

This Cover Page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

The date of this Official Statement is ____________, 2019

* Preliminary, subject to change.

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$93,910,000*

HEALTH AND EDUCATIONAL FACILITIES AUTHORITY OF THE STATE OF MISSOURI

SENIOR LIVING FACILITIES REVENUE BONDS (LUTHERAN SENIOR SERVICES PROJECTS)

SERIES 2019

Maturity, Amounts, Interest Rates, Prices, Yields and CUSIPS†

$68,420,000*

Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects)

Series 2019A

$4,455,000* Serial Bonds

February 1 Year* Amount*

Interest Rate Price Yield CUSIP

2023 2024 2025

$63,965,000* Term Bonds

$_________ ______% Term Bond due February 1, 2029* Priced ________% to Yield ______% CUSIP:



$25,490,000*


Series 2019B

$_________ ______% Term Bond due February 1, 2034*‡ Priced ________% to Yield ______% CUSIP:

* Preliminary, subject to change. † See CUSIP disclosure herein. ‡ Subject to optional redemption at any time, special redemption in connection with receipt of first entrance fees of the project, and mandatory tender for purchase on February 1, 2022 if not fully redeemed prior to such date, as further described herein.

Lutheran Senior Services – Market Coverage in St. Louis

2

2

1

1

3

3

4

4

5

5

— Meramec Bluffs (existing)

— Laclede Groves (existing)

— Mason Pointe (existing)

— Breeze Park (existing)

— Planned Senior Living Community

Note that the radius of each circle from the center point is 5 miles.

Lutheran Senior Services


LSS Corporate Home Office

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REGARDING USE OF THIS OFFICIAL STATEMENT

IN CONNECTION WITH THE OFFERING OF THE SERIES 2019 BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2019 BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

No dealer, broker, sales representative or other person has been authorized by the Authority, any member of the Obligated Group or the Underwriters to give any information or to make any representations other than those contained in this Official Statement 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 Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Series 2019 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The information contained in this Official Statement has been furnished by the members of the Obligated Group, the Authority (in limited part as expressly stated herein), DTC and other sources identified herein which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriters. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the Federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

Neither the Master Trustee nor Bond Trustee has reviewed or participated in the preparation of this Official Statement and neither assumes any responsibility for the nature, contents, accuracy or completeness of the information set forth in this Official Statement. Neither the Master Trustee nor the Bond Trustee has evaluated the risks, benefits, or propriety of any investment in the Series 2019 Bonds and neither makes any representation, and neither has reached any conclusions, regarding the value or condition of any assets pledged or assigned as security for the Series 2019 Bonds, the feasibility of the Project, or the investment quality of the Series 2019 Bonds, about all of which neither the Master Trustee nor the Bond Trustee expresses any opinion and both the Master Trustee and the Bond Trustee expressly disclaim the expertise to evaluate.

The CUSIP numbers are included in this Official Statement for the convenience of the owners and potential owners of the Series 2019 Bonds. No assurance can be given that the CUSIP numbers for the Series 2019 Bonds will remain the same after the date of issuance and delivery of the Series 2019 Bonds. CUSIP is a trademark of the American Bankers Association. The CUSIP numbers are provided by CUSIP Global Services, which operates the CUSIP system on behalf of the American Bankers Association and the Market Intelligence division of S&P Global. These numbers are not intended to create a database and do not serve in any way as a substitute for the CUSIP Service. The CUSIP numbers shown on the inside cover hereof have been assigned to the issue by an organization not affiliated with the Authority, the Underwriters or any member of the Obligated Group and are included for convenience only. Neither the Authority, the Underwriters nor any member of the Obligated Group is responsible for the selection of CUSIP numbers, nor is any representation made as to their correctness on the Series 2019 Bonds or as indicated herein.

THE SERIES 2019 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE BOND INDENTURES AND THE MASTER INDENTURE HAVE NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2019 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAWS OF THE STATES IN WHICH BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAS PASSED UPON THE MERITS OF THE SERIES 2019 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

Forward-Looking Statements

This Official Statement contains disclosures which contain “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current fact, and can be identified by use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” or “continue.” These forward-looking statements are based on the current plans and expectations of the members of the Obligated Group and are subject to a number of known and

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unknown uncertainties and risks, many of which are beyond their control, that could significantly affect current plans and expectations and the future financial position and results of operations of the members of the Obligated Group. These factors include, but are not limited to, (i) the highly competitive nature of the life plan community (“Life Plan Community”) industry, (ii) the efforts of insurers, health care providers and others to contain health care costs, (iii) possible changes in the Medicare and Medicaid programs that may impact reimbursements to health care providers and insurers, (iv) changes in federal, state or local regulations affecting the Life Plan Community industry, (v) the enactment of legislation affecting the Life Plan Community industry, (vi) the ability to attract and retain qualified management and other personnel, including nurses and medical support personnel, (vii) liabilities and other claims asserted against the Obligated Group, (viii) changes in accounting standards and practices, (ix) changes in general economic conditions, (x) future divestitures or acquisitions which may result in additional charges, (xi) changes in revenue mix, (xii) the availability and terms of capital to fund future expansion plans of the Obligated Group and to provide for ongoing capital expenditure needs, (xiii) changes in business strategy or development plans, (xiv) delays in receiving payments as a result of state budget constraints, (xv) the ability to implement shared services and other initiatives and realize decreases in administrative, supply and infrastructure costs, (xvi) the outcome of pending and any future litigation, (xvii) the continuing efforts of the Obligated Group members to monitor, maintain and comply with appropriate laws, regulations, policies and procedures relating to their status as tax-exempt organizations as well as their ability to comply with the requirements of the Medicare and Medicaid programs, (xviii) the ability to achieve expected levels of resident volumes and control the costs of providing services, (xix) results of reviews of their cost reports, and (xx) the ability of the Obligated Group to comply with recently enacted legislation and/or regulations. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of the Obligated Group. Investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Official Statement, including APPENDIX A.

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TABLE OF CONTENTS

SHORT STATEMENT ................................................................................................................................................................ i INTRODUCTION ....................................................................................................................................................................... 1 THE OBLIGATED GROUP ....................................................................................................................................................... 7 PLAN OF FINANCING .............................................................................................................................................................. 8 ANNUAL DEBT SERVICE REQUIREMENTS ........................................................................................................................ 9 THE AUTHORITY ................................................................................................................................................................... 10 THE SERIES 2019 BONDS ...................................................................................................................................................... 11 ADDITIONAL INDEBTEDNESS ............................................................................................................................................ 18 SECURITY FOR THE SERIES 2019 BONDS ......................................................................................................................... 18 BOOK-ENTRY SYSTEM ......................................................................................................................................................... 21 FINANCIAL REPORTING AND CONTINUING DISCLOSURE REQUIREMENTS .......................................................... 23 BONDOWNERS’ RISKS .......................................................................................................................................................... 24 LITIGATION ............................................................................................................................................................................ 45 TAX MATTERS ....................................................................................................................................................................... 45 RATING .................................................................................................................................................................................... 47 FINANCIAL STATEMENTS ................................................................................................................................................... 47 LEGAL MATTERS ................................................................................................................................................................... 47 UNDERWRITING .................................................................................................................................................................... 48 CERTAIN RELATIONSHIPS .................................................................................................................................................. 48 MISCELLANEOUS .................................................................................................................................................................. 48 APPENDIX A – LUTHERAN SENIOR SERVICES AND THE LUTHERAN SENIOR SERVICES OBLIGATED GROUP APPENDIX B – FINANCIAL STATEMENTS OF THE OBLIGATED GROUP AND AFFILIATES APPENDIX C – DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN DOCUMENTS APPENDIX D – FORM OF BOND COUNSEL OPINION APPENDIX E – EXCERPTS OF SELECTED MORTGAGE DOCUMENTS APPENDIX F – EXCERPTS OF SELECTED BANK COVENANTS

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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 Official Statement, which should be read in its entirety. The offering of the Series 2019 Bonds to potential investors is made only by means of the entire Official Statement. No person is authorized to detach this Short Statement from this Official Statement or otherwise to use it without this entire Official Statement. For the definitions of certain words and terms used in this Short Statement, see “DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN DOCUMENTS—DEFINITIONS” in APPENDIX C hereto.

The Authority

The Health and Educational Facilities Authority of the State of Missouri (the “Authority”), is a body politic and corporate and a public instrumentality of the State of Missouri, duly organized and existing under the laws of the State of Missouri. See “THE AUTHORITY” herein.

Plan of Finance

The Authority will issue two series of senior living revenue bonds consisting of its $68,420,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019A (the “Series 2019A Bonds”) and $25,490,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019B (the “Series 2019B Bonds” and, together with the Series 2019A Bonds, the “Series 2019 Bonds”).

Lutheran Senior Services, a Missouri legislatively chartered corporation (the “Institution” or the “Obligated Group Agent”) will use the proceeds of the Series 2019A Bonds to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019A Bonds, (iii) fund capitalized interest on the Series 2019A Bonds, and (iv) pay certain costs related to the issuance of the Series 2019A Bonds. The Institution will use the proceeds of the Series 2019B Bonds to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project , (ii) fund a debt service reserve fund for the Series 2019B Bonds, (iii) fund capitalized interest on the Series 2019B Bonds, and (iv) pay certain costs related to the issuance of the Series 2019B Bonds. See “PLAN OF FINANCING” herein.

The Project

The Project consists of reimbursing or paying the cost of certain health facilities of the Institution and its Affiliates that are located in the State of Missouri and the State of Illinois. A more detailed description of the Project is included in APPENDIX A to this Official Statement under the caption “THE PROJECT”.

The Obligated Group

The members of the Obligated Group are the Institution, The Cole County Lutheran Home Association d/b/a Heisinger Lutheran Home, a Missouri nonprofit corporation (“Heisinger”), Lutheran Senior Services Endowment Fund, a Missouri nonprofit corporation (“LSSEF”), Lutheran Hillside Village, Inc., an Illinois not-for-profit corporation (“Lutheran Hillside Village”), Lutheran Hillside Village Foundation, an Illinois not-for-profit corporation (“LHVF”), Lutheran Retirement Center Association, an Illinois not-for-profit corporation (“LRCA”), Meridian Village Association, an Illinois not-for-profit corporation (“Meridian Village”) and Provident Group, a Missouri nonprofit corporation (“Provident Group”). The Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA, Meridian Village and Provident Group and any future member of the Obligated Group (each, a “Note Obligor”) are collectively referred to herein as the “Obligated Group.” For additional information concerning the Obligated Group and their facilities see APPENDIX A to this Official Statement.


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ii

The Series 2019 Bonds

Redemption. The Series 2019 Bonds are subject to optional, special, extraordinary and mandatory redemption as described herein. See “THE SERIES 2019 BONDS - Redemption Provisions” herein.

Denominations. The Series 2019 Bonds are being issued as fully registered bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof. See “THE SERIES 2019 BONDS - Description of the Series 2019 Bonds” herein.

Registration, Transfers and Exchanges. The Series 2019 Bonds are being issued as fully registered bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof and in the aggregate principal amount of $68,420,000* with respect to the Series 2019A Bonds and $25,490,000* with respect to the Series 2019B Bonds. Purchases of beneficial interests in the Series 2019 Bonds will be made in book-entry form. Purchasers will not receive certificates representing their interests in the Series 2019 Bonds purchased. When issued, the Series 2019 Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York (“DTC”). Transfers of ownership interests in the Series 2019 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. See “BOOK-ENTRY SYSTEM” herein.

Payments. Interest on the Series 2019 Bonds will be payable on each February 1 and August 1, beginning August 1, 2019 (each, an “Interest Payment Date”). So long as any of the Series 2019 Bonds are in book-entry form, the principal, redemption premium, if any, and interest on such Bonds are payable by check or draft mailed, or wire transfer, to Cede & Co. as registered owner thereof and will be redistributed by DTC to the Participants as described herein under the caption “BOOK-ENTRY SYSTEM” herein.

Tax Exemption. Subject to compliance by the Authority and the Obligated Group with certain covenants, in the opinion of Gilmore & Bell, P.C., Bond Counsel to the Institution, under existing law, the interest on the Series 2019 Bonds is excludable from gross income for federal income tax purposes, except as described herein, and is not an item of tax preference for purposes of the federal alternative minimum tax. The interest on the Series 2019 Bonds is exempt from income tax by the State of Missouri. See the caption “TAX MATTERS” herein for a more detailed discussion of some of the federal tax consequences of owning the Series 2019 Bonds.

Security for the Series 2019 Bonds

Limited, Special Obligations. THE SERIES 2019 BONDS SHALL NOT CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF. THE ISSUANCE OF THE SERIES 2019 BONDS SHALL NOT, DIRECTLY, INDIRECTLY, OR CONTINGENTLY, OBLIGATE THE STATE OF MISSOURI OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. SEE THE CAPTION “SECURITY FOR THE SERIES 2019 BONDS” herein.

The Loan Agreements. The proceeds of the Series 2019A Bonds will be loaned to the Institution pursuant to a Loan Agreement dated as of February 1, 2019 (the “Series 2019A Loan Agreement”). The proceeds of the Series 2019B Bonds will be loaned to Institution pursuant to a Loan Agreement dated as of February 1, 2019 (the “Series 2019B Loan Agreement” and, together with the Series 2019A Loan Agreement, the “Loan Agreements” and each a “Loan Agreement”). Each Loan Agreement requires that the Institution make Loan Payments to the Bond Trustee (defined herein), for deposit into the related Debt Service Fund in aggregate amounts sufficient to pay the principal of, redemption premium, if any, and interest on the related Series 2019 Bonds then due. The Institution will receive credits against amounts due as payments under the related Loan Agreement for certain amounts available from other sources including certain earnings on funds held by the Bond Trustee.


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iii

The Bond Indentures. The Series 2019A Bonds will be issued in accordance with the provisions of a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019A Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019A Bond Trustee”). The Series 2019B Bonds will be issued in accordance with the provisions of a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019B Bond Indenture” and, together with the Series 2019A Bond Indenture, the “Bond Indentures” and each, a “Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019B Bond Trustee”). Hereinafter, the term “Bond Trustee” refers to either the Series 2019A Bond Trustee or the Series 2019B Bond Trustee, or both, depending on the context.

Each series of the Series 2019 Bonds and the interest thereon are special, limited obligations of the Authority and will be payable solely from, and secured by, (i) payments or prepayments pursuant to the related Series 2019 Master Note, (ii) payments made under the related Loan Agreement, and (iii) all moneys and securities from time to time held by the Bond Trustee under the terms of the related Bond Indenture. See “SECURITY FOR THE SERIES 2019 BONDS” herein.

Debt Service Reserve Fund. Each Bond Indenture establishes a separate Debt Service Reserve Fund for the related Series 2019 Bonds. For the Series 2019A Bonds, an amount equal to $__________ will be deposited into the related Debt Service Reserve Fund on the date of issuance of the Series 2019A Bonds and such Debt Service Reserve Requirement is subject to reduction only in accordance with the Series 2019A Bond Indenture. For the Series 2019B Bonds, an amount equal to $__________ will be deposited into the related Debt Service Reserve Fund on the date of issuance of the Series 2019B Bonds and such Debt Service Reserve Requirement is not subject to reduction while any Series 2019B Bonds remain outstanding. Such moneys are required to be used by the Bond Trustee whenever, and to the extent that, moneys on deposit in the related Debt Service Fund are insufficient for the purpose of paying interest and principal on the related series of Series 2019 Bonds as the same become due. The Institution is required, pursuant to the terms of each Loan Agreement, to maintain each Debt Service Reserve Fund at an amount equal to the related Debt Service Reserve Requirement. With respect to each series of Series 2019A Bonds, “Debt Service Reserve Requirement” means (a) at the date of original issuance and delivery of the Series 2019A Bonds, $__________, and (b) subsequent to such date, at the option of the Obligated Group Representative and communicated in writing to the Authority and the Bond Trustee, a sum equal to the least of (A) 10% of the then Outstanding aggregate principal amount of such Series 2019A Bonds, (B) the maximum annual debt service on such Series 2019A Bonds in any future fiscal year following such date, or (C) 125% of the average future annual debt service on such Series 2019A Bonds. With respect to the Series 2019B Bonds, “Debt Service Reserve Requirement” means $__________. See “SECURITY FOR THE SERIES 2019 BONDS” herein.

The Master Indenture. The Institution entered into a Master Trust Indenture dated as of February 1, 1992, which has been supplemented and amended in connection with previous financings for the Institution and other members of the Obligated Group (as supplemented and amended from time to time, including by the hereinafter defined Supplemental Master Indenture Nos. 32 and 33, the “Master Indenture”) among the Institution, such other persons as from time to time are members of the Obligated Group and UMB Bank, n.a., as successor master trustee (the “Master Trustee”).

In connection with the issuance of the Series 2019A Bonds, the Institution, as Obligated Group Agent, and the Master Trustee will also enter into a Supplemental Master Trust Indenture No. 32 dated as of February 1, 2019 (the “Supplemental Master Indenture No. 32”), pursuant to which the Obligated Group will issue the Master Indenture Bond Note (Lutheran Senior Services Projects), Series 2019A (the “Series 2019A Master Note”) to evidence and secure the obligations of the Obligated Group to make payments under the Series 2019A Loan Agreement (as defined below). In connection with the issuance of the Series 2019B Bonds, the Institution, as Obligated Group Agent, and the Master Trustee will enter into a Supplemental Master Trust Indenture No. 33 dated as of February 1, 2019 (the “Supplemental Master Indenture No. 33”), pursuant to which the Obligated Group will issue the Master Indenture Bond Note (Lutheran Senior Services Projects), Series 2019B (the “Series 2019B Master Note” and, together with the Series 2019A Master Note, the “Series 2019 Master Notes” and each a “Series 2019 Master Note”) to evidence and secure the obligations of the Obligated Group to make payments under the Series 2019B Loan Agreement (as defined below). The Authority will assign its rights under the Series 2019A Master Note to the Series 2019A Bond Trustee. The Authority will assign its rights under the Series 2019B Master Note to the Series 2019B Bond Trustee.

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The Master Indenture sets forth the general covenants relating to and provides the terms and conditions upon which Indebtedness of the members of the Obligated Group may be incurred and secured. See the captions “SECURITY FOR THE SERIES 2019 BONDS” herein and “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto.

Mortgages. As additional security for Indebtedness secured by Master Notes Outstanding under the Master Indenture, the Institution and other members of the Obligated Group have caused to be executed and delivered for the benefit of all of the holders of Master Notes issued under the Master Indenture on a parity basis deeds of trust and mortgages (collectively the “Mortgages”), on certain real property owned and, as of the effective date of the Mortgages, directly used in conjunction with the operation of licensed senior living communities by members of the Obligated Group (subject to Grantor’s Rights as previously exercised or as may be exercised in the future, the “Mortgaged Property”). In conjunction therewith, the Institution and the other members of the Obligated Group have also executed Supplemental Master Trust Indenture No. 31 dated as of February 1, 2018 (the “Supplemental Master Indenture No. 31”) evidencing and providing for the granting of such Mortgages to the Master Trustee under the Master Indenture as aforesaid. The Supplemental Master Trust Indenture No. 31 includes certain Grantor’s Rights (defined therein) to which the Mortgages shall be subject. Subject to the foregoing Grantor’s Rights and the terms of the Master Indenture (including as supplemented by Supplemental Master Indenture No. 31) and the Mortgages (which permit the release of Mortgaged Property under certain circumstances), the Institution, as Obligated Group Agent under the Master Indenture, has covenanted and agreed under the related Loan Agreement for each series of the Series 2019 Bonds to retain the Mortgages on the Mortgaged Property during any period any such Series 2019 Bonds are Outstanding (each, a “Mortgage Covenant”). Nothing in the Mortgage Covenants shall be deemed to preclude exercise from time to time of any Grantor’s Rights, including, without limitation, modifications, releases and liens relating to the Mortgaged Property and the Mortgages. The Mortgages were required pursuant to covenants entered into in connection with certain prior series of bonds issued for the benefit of Institution and the other members of the Obligated Group. The Mortgages are not required under the Master Indenture. The Mortgaged Property, as of the date of this Official Statement, consists of certain land and buildings at the following senior living communities:

• Breeze Park, Weldon Springs, Missouri; • Laclede Groves, Webster Groves, Missouri; • Meramec Bluffs, Ballwin, Missouri; • Lenoir Woods, Columbia, Missouri; • Richmond Terrace, Richmond Heights, Missouri; • St. Joseph’s Bluffs, Jefferson City, Missouri; • Mason Pointe, Chesterfield, Missouri; • Heisinger Bluffs, Jefferson City, Missouri; • Lutheran Hillside Village, Peoria, Illinois; • Concordia Village, Springfield, Illinois; and • Meridian Village, Glen Carbon, Illinois.

See APPENDIX E – EXCERPTS OF SELECTED MORTGAGE DOCUMENTS.

See the caption “SECURITY FOR THE SERIES 2019 BONDS” for additional information on the security for the Series 2019 Bonds.

Security Interest in Gross Receipts. Pursuant to the Master Indenture, the members of the Obligated Group grant to the Master Trustee, for so long as such member remains a member of the Obligated Group, a security interest in its Gross Receipts, subject to Permitted Liens. See the caption “BONDOWNERS’ RISKS—Limitations on Security Interest in Gross Receipts.” Certain Covenants of the Obligated Group

Collective Obligations. Under the Master Indenture, any Note Obligor may issue Master Notes to evidence or secure Indebtedness (as defined in APPENDIX C hereto). All Note Obligors are jointly and severally liable with respect to the payment of each Master Note issued under the Master Indenture. For a more detailed discussion of entry into or withdrawal from the Obligated Group, see the captions “SUMMARY OF THE MASTER INDENTURE—Persons Becoming Note Obligors” and “Withdrawal From the Obligated Group” in APPENDIX C.

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Rate Covenant. Subject to the limitations and exceptions provided in the Master Indenture, the Obligated Group agrees that it will use its best efforts to maintain for each Fiscal Year the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service of at least 1.10, but in no event shall such ratio be allowed to fall below 1.0. If such level (ratio of 1.10) is not attained for any Fiscal Year, the Master Indenture requires the Obligated Group to retain a Consultant to make recommendations to increase such ratio to the level required by the Master Indenture. Such rate covenant will be deemed satisfied in any Fiscal Year if the Master Trustee receives an Officer’s Certificate confirming that Law or Regulation Circumstances have prevented the Obligated Group from generating sufficient Aggregate Income Available for Debt Service to comply with such rate covenant; provided, however, in no event shall such ratio be less than 1.0. Failure to achieve a ratio of at least 1.0 shall constitute an Event of Default under the Master Indenture. See the captions “DEFINITIONS” and “SUMMARY OF THE MASTER INDENTURE—Rate Covenant” in APPENDIX C.

Incurrence of Additional Indebtedness. Each member of the Obligated Group agrees to restrictions on the incurrence of Additional Indebtedness, as more fully described under the caption “SUMMARY OF THE MASTER INDENTURE—Limitations on the Incurrence of Additional Indebtedness” in APPENDIX C.

Negative Pledge. Each member of the Obligated Group covenants not to create or permit any lien, other than Permitted Liens, upon its Property. See the caption “SUMMARY OF THE MASTER INDENTURE—Limitations on Creation of Liens” in APPENDIX C.

Disposition of Property of Obligated Group Members. Each member of the Obligated Group agrees to restrictions on the disposition of its Property, as more fully described under the caption, “SUMMARY OF THE MASTER INDENTURE—Sale, Lease or Other Disposition of Property” in APPENDIX C.

Liquidity Covenant. Subject to the limitations and exceptions provided in the Master Indenture, the members of the Obligated Group agree that as of the last day of each Fiscal Year, the Obligated Group shall have not less than 120 Days Cash on Hand. If the amount of Days Cash on Hand is less than 120 for any Fiscal Year, the Obligated Group shall deliver an Officer’s Certificate setting forth the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of Days Cash on Hand to at least 120 for future periods. If the Obligated Group has not raised the level of Days Cash on Hand to at least 120 by the last day of the next Fiscal Year, the Obligated Group shall be required to retain a Consultant to make recommendations with respect to rates, fees and other factors affecting financial operations in order to increase the Days Cash on Hand for future periods. See the captions “DEFINITIONS” and “SUMMARY OF THE MASTER INDENTURE—Liquidity Covenant” in APPENDIX C.

Financial Statements

The financial statements of the Obligated Group and Affiliates as of December 31, 2017 and December 31, 2016, included in this Official Statement in APPENDIX B, have been audited by CliftonLarsonAllen LLP, independent certified public accountants.

Financial Reporting and Continuing Disclosure Requirements Financial Reporting. Under the Master Indenture, each member of the Obligated Group covenants that it

will, through the Obligated Group Agent provide to the Master Trustee certain financial information on a quarterly and annual basis. For a description of the financial information require to be provided, see “FINANCIAL REPORTING AND CONTINUING DISCLOSURE” herein and “SUMMARY OF THE MASTER INDENTURE—Filing of Financial Statements, Certificate of No Default, Other Information” in APPENDIX C herein.

Continuing Disclosure Requirements. The Obligated Group has agreed to make certain financial information and operating data available to holders of the Series 2019 Bonds as described under FINANCIAL REPORTING AND CONTINUING DISCLOSURE REQUIREMENTS” herein and “SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT” in APPENDIX C hereto. The Authority shall have no liability to the owners of the Series 2019 Bonds or any other person with respect to the continuing disclosure requirements. See “FINANCIAL REPORTING AND CONTINUING DISCLOSURE REQUIREMENTS” herein and “SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT” in APPENDIX C hereto.

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Bondowners’ Risks

An investment in the Series 2019 Bonds involves a certain degree of risk including those risks set forth under the heading “BONDOWNERS’ RISKS” herein. A prospective bondholder is advised to read “SECURITY FOR THE SERIES 2019 BONDS” and “BONDOWNERS’ RISKS” herein for a discussion of certain risk factors which should be considered in connection with an investment in the Series 2019 Bonds. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. Among other things, careful evaluation should be made of certain factors that may adversely affect the ability of the Obligated Group to generate sufficient revenues to pay expenses of operation, including the principal of, redemption premium, if any, and interest on the Series 2019 Bonds and all other indebtedness of the Obligated Group.

Offering and Delivery of the Series 2019 Bonds

The Series 2019 Bonds are offered when, as and if issued by the Authority and accepted by the Underwriters, subject to prior sale and to withdrawal or modification of the offer without notice. The Series 2019 Bonds in definitive form are expected to delivered to the Bond Trustee on behalf of the Depository Trust Company (“DTC”) under the DTC FAST system of registration on _______, 2019.

Professionals Involved in Offering

Gilmore & Bell, P.C., Kansas City, Missouri, serves as bond counsel with respect to the Series 2019 Bonds. Certain matters will be passed upon for the Authority by its counsel, Thompson Coburn LLP, St. Louis, Missouri; for the Institution and the other members of the Obligated Group by their counsel, Spencer Fane LLP, St. Louis, Missouri; and for the Underwriters by their counsel, Dentons US LLP, St. Louis, Missouri. Columbia Capital Management, LLC, Overland Park, Kansas, serves as financial advisor to the Authority.

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OFFICIAL STATEMENT $93,910,000*

HEALTH AND EDUCATIONAL FACILITIES AUTHORITY OF THE STATE OF MISSOURI

SENIOR LIVING FACILITIES REVENUE BONDS (LUTHERAN SENIOR SERVICES PROJECTS)

SERIES 2019

consisting of:

$68,420,000*


Series 2019A

$25,490,000*


Series 2019B

INTRODUCTION

General

This information is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement and the documents summarized or described herein. The offering of the Series 2019 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used in this Official Statement that are not otherwise defined herein shall have the meanings ascribed thereto in APPENDIX C hereto.

The purpose of this Official Statement, including the cover page, the Short Statement and the appendices, is to set forth certain information concerning (i) the Health and Educational Facilities Authority of the State of Missouri (the “Authority”), (ii) the Authority’s $68,420,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019A (the “Series 2019A Bonds”) and $25,490,000* Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019B (the “Series 2019B Bonds” and, together with the Series 2019A Bonds, the “Series 2019 Bonds”), (iii) the Master Indenture (as defined herein), and (iv) the Obligated Group (as defined herein).

The Series 2019A Bonds will be issued in accordance with the provisions of a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019A Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019A Bond Trustee”). The Series 2019B Bonds will be issued in accordance with the provisions of a Bond Trust Indenture dated as of February 1, 2019 (the “Series 2019B Bond Indenture” and, together with the Series 2019A Bond Indenture, the “Bond Indentures” and each, a “Bond Indenture”) between the Authority and UMB Bank, n.a., as bond trustee (the “Series 2019B Bond Trustee”). Hereinafter, the term “Bond Trustee” refers to either the Series 2019A Bond Trustee or the Series 2019B Bond Trustee, or both, depending on the context. The phrase “related” as used in this Official Statement in connection with references to a Bond Trustee, a Bond Indenture, a Loan Agreement, a Series 2019 Master Note, a trust estate or fund established under a Bond Indenture, or “related Series 2019 Bonds” is used to describe the foregoing as related to the series of Series 2019A Bonds or the series of Series 2019B Bonds separately and independently of the other series.

The Authority

The Authority is a body politic and corporate and a public instrumentality of the State of Missouri (the “State”), created and existing under the Missouri Health and Educational Facilities Authority Act, Chapter 360 of the Revised Statutes of Missouri, as amended (the “Act”). See “THE AUTHORITY” herein.


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The Obligated Group

The members of the Obligated Group are Lutheran Senior Services, a Missouri legislatively chartered corporation (the “Institution”), The Cole County Lutheran Home Association d/b/a Heisinger Lutheran Home, a Missouri nonprofit corporation (“Heisinger”), Lutheran Senior Services Endowment Fund, a Missouri nonprofit corporation (“LSSEF”), Lutheran Hillside Village, Inc., an Illinois not-for-profit corporation (“Lutheran Hillside Village”), Lutheran Hillside Village Foundation, an Illinois not-for-profit corporation (“LHVF”), Lutheran Retirement Center Association, an Illinois not-for-profit corporation (“LRCA”), Meridian Village Association, an Illinois not-for-profit corporation (“Meridian Village”) and Provident Group, a Missouri nonprofit corporation (“Provident Group”). The Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA, Meridian Village, and Provident Group and any future member of the Obligated Group (each, a “Note Obligor”) are collectively referred to herein as the “Obligated Group,” and the Institution is sometimes referred to herein as the “Obligated Group Agent.”

The Institution is the sole member of Heisinger, LRCA and Meridian Village and the sole Class I member of Lutheran Hillside Village. Lutheran Hillside Village is the sole member of LHVF. The Finance Committee of the Institution’s Board of Directors serves as the board of directors of LSSEF. Provident Group’s board of directors is comprised of the Institution’s Board of Directors.

The Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA and Meridian Village have each received rulings from the Internal Revenue Service that it is an organization exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). Provident Group is not an organization exempt from Federal income tax under the Code. The Institution owns and operates certain senior care facilities located in the St. Louis, Missouri metropolitan area and in Columbia, Missouri and Jefferson City, Missouri. Heisinger owns a senior care facility in Jefferson City, Missouri which is managed by the Institution. LSSEF maintains assets that are used by the Institution for benevolent care, clinical pastoral education, future construction and capital improvements and maintenance of an employee revenue sharing and savings plan. Lutheran Hillside Village owns a senior care facility in Peoria, Illinois that is managed by the Institution. LHVF maintains assets that are used by Lutheran Hillside Village to fund benevolent care. LRCA is the owner of the real property located in Springfield, Illinois on which a senior care facility known as Concordia Village (“Concordia Village”) is located. Meridian Village owns the property in Glen Carbon, Illinois on which the senior care facility known as Meridian Village is located. Concordia Village and the Meridian Village facility are managed by the Institution. Provident Group is a development and management company that does not own or operate any senior living facilities. For additional information concerning the Obligated Group and their facilities see APPENDIX A to this Official Statement.

In the future, any other Person that has fulfilled the requirements for entry into the Obligated Group set forth in the hereinafter defined Master Indenture, may become a member of the Obligated Group. All members of the Obligated Group, as the group may from time to time be constituted, are jointly and severally obligated under the Master Indenture with respect to payment of Indebtedness incurred thereunder, including the Master Notes described herein. The Institution, acting as the Obligated Group Agent, is authorized to act for all members of the Obligated Group under the Master Indenture. See the caption “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto.

The members of the Obligated Group own, operate and manage 12 senior living communities located in Missouri and Illinois. These 12 senior living communities include 1,357 independent living units, 312 patio homes, 745 assisted living units and 1,103 nursing beds. The Institution also operates ten affordable housing communities for older adults in Missouri and Illinois. For additional information concerning the Obligated Group and their facilities see APPENDIX A to this Official Statement.

The Master Indenture, Generally

The Institution entered into a Master Trust Indenture dated as of February 1, 1992, which has been supplemented and amended in connection with previous financings for the Institution and other members of the Obligated Group (as supplemented and amended from time to time, including by the hereinafter defined Supplemental Master Indenture Nos. 32 and 33, the “Master Indenture”) among the Institution, such other persons as from time to time are members of the Obligated Group and UMB Bank, n.a., as successor master trustee (the

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“Master Trustee”). The previous financings which will remain outstanding after the issuance of the Series 2019 Bonds and payment of scheduled February 1, 2019 principal payments for such bonds are (1) $50,000,000 of bonds issued by the Authority (the “Series 2000 Bonds”), $31,210,000 of which will be outstanding, (2) $38,300,000 of bonds issued by the Authority (the “Series 2010 Bonds”), $37,015,000 of which will be outstanding, (3) $47,425,000 of bonds issued by the Authority (the “Series 2011 Bonds”), $42,765,000 of which will be outstanding, (4) $79,475,000 of bonds issued by the Authority (the “Series 2014A Bonds”), $74,170,000 of which are outstanding, (5) $50,000,000 of bonds issued by the Authority (the “Series 2014B Bonds”), $50,000,000 of which will be outstanding, (6) $28,755,000 of bonds issued by the Authority (the “Series 2014C Bonds”), $26,755,000 of which will be outstanding, (7) $12,390,000 of bonds issued by the Authority (the “Series 2014D Bonds” and together with the Series 2014A Bonds, the Series 2014B Bonds and the Series 2014C Bonds, the “Series 2014 Bonds”), $9,415,000 of which will be outstanding, (8) $53,320,000 of bonds issued by the Authority (the “Series 2016A Bonds”), $50,485,000 of which will be outstanding, (9) $100,680,000 of bonds issued by the Authority (the “Series 2016B Bonds”), $92,540,000 of which will be outstanding, and (10) $10,520,000 of bonds issued by the Authority (the “Series 2016C Bonds” and, together with the Series 2016A Bonds and the Series 2016B Bonds, the “Series 2016 Bonds”), $9,650,000 of which will be outstanding, all of which were previously issued for the benefit of the Institution and other members of the Obligated Group. The Series 2000 Bonds, the Series 2010 Bonds, the Series 2011 Bonds, the Series 2014 Bonds and the Series 2016 Bonds are collectively herein referred to as the “Prior Bonds”.

Upon issuance of the Series 2019 Bonds and payment of scheduled February 1, 2019 principal payments for the Prior Bonds, the total principal amount of obligations outstanding and secured by Master Notes issued under the Master Indenture will be $517,915,000.*

In connection with the issuance of the Series 2019A Bonds, the Institution, as Obligated Group Agent, and the Master Trustee will also enter into a Supplemental Master Trust Indenture No. 32 dated as of February 1, 2019 (the “Supplemental Master Indenture No. 32”), pursuant to which the Obligated Group will issue the Master Indenture Bond Note (Lutheran Senior Services Projects), Series 2019A (the “Series 2019A Master Note”) to evidence and secure the obligations of the Obligated Group to make payments under the Loan Agreement dated as of February 1, 2019 between the Institution and the Authority (the “Series 2019A Loan Agreement”). In connection with the issuance of the Series 2019B Bonds, the Institution, as Obligated Group Agent, and the Master Trustee will enter into a Supplemental Master Trust Indenture No. 33 dated as of February 1, 2019 (the “Supplemental Master Indenture No. 33”), pursuant to which the Obligated Group will issue the Master Indenture Bond Note (Lutheran Senior Services Projects), Series 2019B (the “Series 2019B Master Note” and, together with the Series 2019A Master Note, the “Series 2019 Master Notes” and each a “Series 2019 Master Note”) to evidence and secure the obligations of the Obligated Group to make payments under the Loan Agreement dated as of February 1, 2019 between the Institution and the Authority (the “Series 2019B Loan Agreement” and, together with the Series 2019A Loan Agreement, the “Loan Agreements” and each a “Loan Agreement”). The Authority will assign its rights under the Series 2019A Master Note to the Series 2019A Bond Trustee. The Authority will assign its rights under the Series 2019B Master Note to the Series 2019B Bond Trustee.

The Master Indenture sets forth the general covenants relating to and provides the terms and conditions upon which Indebtedness of the members of the Obligated Group may be incurred and secured. See the captions “SECURITY FOR THE SERIES 2019 BONDS” herein and “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto.

The Master Indenture requires that the Obligated Group use its best efforts to maintain for each Fiscal Year rates and charges for its facilities such that the Aggregate Income Available for Debt Service of the Obligated Group be at least 1.10 times Maximum Annual Debt Service (as such terms are defined in the Master Indenture) and in no event shall it fall below 1.0 times Maximum Annual Debt Service. If such level (ratio of 1.10) is not attained for any Fiscal Year, the Master Indenture requires the Obligated Group to retain a Consultant to make recommendations to increase such rates to the level required by the Master Indenture. Such rate covenant will be deemed satisfied in any Fiscal Year if the Master Trustee receives an Officer’s Certificate confirming that Law or Regulations Circumstances have prevented the Obligated Group from generating sufficient Aggregate Income Available for Debt Service to comply with such rate covenant; provided, however, in no event shall such rate be less than 1.0. A more


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detailed description of the rate covenant is included in APPENDIX C under the caption “SUMMARY OF THE MASTER INDENTURE—Rate Covenant.”

Members of the Obligated Group may incur Additional Indebtedness upon compliance with the terms and conditions and for the purposes described under the caption “SUMMARY OF THE MASTER INDENTURE—Limitations on Incurrence of Additional Indebtedness” in APPENDIX C hereto. Such indebtedness, if evidenced by a Master Note or a Guaranty issued under the Master Indenture, would constitute a joint and several obligation of each member of the Obligated Group on a parity with the Series 2019 Master Notes. Such indebtedness, if not so evidenced, would constitute a debt solely of the borrower thereof, and not of the entire Obligated Group.

In addition to the covenants of the Obligated Group contained in the Master Indenture, there are certain other covenants binding upon the Institution that are set forth in the Loan Agreement. See the caption “SUMMARY OF THE LOAN AGREEMENTS” in APPENDIX C hereto.

Purpose of the Series 2019 Bonds

The proceeds of the sale of the Series 2019A Bonds will be used by the Authority to make a loan to the Institution to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019A Bonds, (iii) fund capitalized interest on the Series 2019A Bonds, and (iv) pay certain costs related to the issuance of the Series 2019A Bonds.

The proceeds of the sale of the Series 2019B Bonds will be used by the Authority to make a loan to the Institution to (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019B Bonds, (iii) fund capitalized interest on the Series 2019B Bonds, and (iv) pay certain costs related to the issuance of the Series 2019B Bonds.

A description of the uses of the proceeds of the loans is included under the caption “PLAN OF FINANCING” herein.

Security for the Series 2019 Bonds

Each series of the Series 2019 Bonds and the interest thereon are special, limited obligations of the Authority and will be payable solely from, and secured by, (i) payments or prepayments pursuant to the related Series 2019 Master Note, (ii) payments made under the related Loan Agreement, and (iii) all moneys and securities from time to time held by the Bond Trustee under the terms of the related Bond Indenture. See “SUMMARY OF THE BOND INDENTURES—Trust Estate” in APPENDIX C.

Payments on each related Series 2019 Master Note are required to be in an amount sufficient to pay in full, when due, the aggregate principal of, redemption premium, if any, and interest on the related Series 2019 Bonds. The Series 2019 Bonds will not be payable from any other Master Notes (defined herein) issued under the Master Indenture or secured by the funds or accounts securing any other Related Bonds, all as further described under the caption “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto.

The Series 2019 Master Notes will be secured under the Master Indenture on a parity basis with Master Notes previously issued under the Master Indenture and any additional Master Notes issued hereafter under the Master Indenture (collectively, “Master Notes”).

All Master Notes issued under the Master Indenture, including the Series 2019 Master Notes, are secured by a pledge of the Gross Receipts of each member of the Obligated Group to the Master Trustee pursuant to the Master Indenture. The Master Indenture requires that each member of the Obligated Group agree that it will not create or suffer to exist any lien, other than certain Permitted Liens, upon its Property, as further described under the caption “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto.

As additional security for Indebtedness secured by Master Notes Outstanding under the Master Indenture, the Institution and other members of the Obligated Group have caused to be executed and delivered for the benefit of all of the holders of Master Notes issued under the Master Indenture on a parity basis deeds of trust and

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mortgages (collectively the “Mortgages”), on certain real property owned and, as of the effective date of the Mortgages, directly used in conjunction with the operation of licensed senior living communities by members of the Obligated Group (subject to Grantor’s Rights as previously exercised or as may be exercised in the future, the “Mortgaged Property”). In conjunction therewith, the Institution and the other members of the Obligated Group have also executed Supplemental Master Trust Indenture No. 31 dated as of February 1, 2018 (the “Supplemental Master Indenture No. 31”) evidencing and providing for the granting of such Mortgages to the Master Trustee under the Master Indenture as aforesaid. The Supplemental Master Trust Indenture No. 31 includes certain Grantor’s Rights (defined therein) to which the Mortgages shall be subject. Subject to the foregoing Grantor’s Rights and the terms of the Master Indenture (including as supplemented by Supplemental Master Indenture No. 31) and the Mortgages (which permit the release of Mortgaged Property under certain circumstances), the Institution, as Obligated Group Agent under the Master Indenture, has covenanted and agreed under the related Loan Agreement for each series of the Series 2019 Bonds to retain the Mortgages on the Mortgaged Property during any period any such Series 2019 Bonds are Outstanding (each, a “Mortgage Covenant”). Nothing in the Mortgage Covenants shall be deemed to preclude exercise from time to time of any Grantor’s Rights, including, without limitation, modifications, releases and liens relating to the Mortgaged Property and the Mortgages. The Mortgages were required pursuant to covenants entered into in connection with certain prior series of bonds issued for the benefit of Institution and the other members of the Obligated Group. The Mortgages are not required under the Master Indenture. The Mortgaged Property, as of the date of this Official Statement, consists of certain land and buildings at the following senior living communities



See the caption “SECURITY FOR THE SERIES 2019 BONDS” for additional information on the security for the Series 2019 Bonds.

Limited Obligations

Each series of the Series 2019 Bonds and the interest thereon are special, limited obligations of the Authority, payable solely from certain payments derived by the Authority under the related Loan Agreement and the related Series 2019 Master Note and as otherwise provided in the related Bond Indenture, and not from any other fund or source of the Authority, and each series is secured under the related Bond Indenture by a transfer, pledge, and assignment of and a grant of a security interest in certain trust property of the Authority as described therein. The Institution’s obligation to repay the loan made under the related Loan Agreement for each series of the Series 2019 Bonds is evidenced and secured by the related Series 2019 Master Note issued under the Master Indenture. Payments under each related Loan Agreement and the related Series 2019 Master Note are designed to be sufficient, in the aggregate, together with other funds available for such purpose, to pay when due the principal of, premium, if any, and interest on the related Series 2019 Bonds. Pursuant to each Bond Indenture, the Authority will assign to the Bond Trustee, for the benefit and security of the registered owners of the related Series 2019 Bonds issued under the related Bond Indenture, substantially all of the rights of the Authority in the related Loan Agreement and the related Series 2019 Master Note, including all Loan Payments payable thereunder; provided, however, that the Authority’s rights to payment of its fees and expenses and the Authority’s right to indemnification in certain circumstances and other rights expressly set forth in the related Loan Agreement have not been assigned to the related Bond Trustee.

THE SERIES 2019 BONDS SHALL NOT CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING

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OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MISSOURI OR OF ANY POLITICAL SUBDIVISION THEREOF. THE ISSUANCE OF THE SERIES 2019 BONDS SHALL NOT, DIRECTLY, INDIRECTLY, OR CONTINGENTLY, OBLIGATE THE STATE OF MISSOURI OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER.

Financial Information

Included in APPENDIX B to this Official Statement are the audited consolidated financial statements of the Obligated Group and Affiliates (as such term is defined in the APPENDIX A) as of December 31, 2017 and December 31, 2016 and for the years then ended, together with the opinions of CliftonLarsonAllen LLP, independent certified public accountants, thereon. While the financial statements include the financial results of Affiliates who are not members of the Obligated Group, such Affiliates are not liable for any payments to be made pursuant to the Loan Agreements, the Master Indenture or the Series 2019 Master Notes. The Gross Receipts of such Affiliates have not been pledged for the payment of principal, interest or debt service of the Series 2019 Bonds or the Prior Bonds. See “INTRODUCTION” in APPENDIX A for information about the Affiliates that are not members of the Obligated Group. The financial statements included in APPENDIX B hereto are not necessarily indicative of the financial results to be achieved for future periods.

For the fiscal year ended December 31, 2017 members of the Obligated Group accounted for 98.3% of the Obligated Group and Affiliates total consolidated unrestricted operating revenue. As of December 31, 2017, the Obligated Group accounted for 95.3% of the Obligated Group and Affiliates total of net book value of assets.

Bondowners’ Risks

AN INVESTMENT IN THE SERIES 2019 BONDS INVOLVES A CERTAIN DEGREE OF RISK. A BONDOWNER IS ADVISED TO READ “SECURITY FOR THE SERIES 2019 BONDS” AND “BONDOWNERS’ RISKS” HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2019 BONDS. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. Among other things, since the Series 2019 Bonds are payable solely from the revenues of the Obligated Group and other moneys pledged to such payment, careful evaluation should be made of certain factors that may adversely affect the ability of the Obligated Group to generate sufficient revenues to pay expenses of operation, including the principal of redemption premium, if any, and the interest on the Series 2019 Bonds and all other indebtedness of the Obligated Group. See “BONDOWNERS’ RISKS” herein.

Definitions and Summaries

Definitions of certain words and terms used in the body of this Official Statement are set forth in APPENDIX C hereto. Descriptions of the Obligated Group, the Authority and the Series 2019 Bonds are included in the body of this Official Statement and summaries of the Master Indenture, the Bond Indentures, the Loan Agreements and the Continuing Disclosure Agreement are contained in APPENDIX C to this Official Statement. Such information, summaries and descriptions do not purport to be comprehensive or definitive. All references herein to the specified documents are qualified in their entirety by reference to each such document, copies of which are available upon request from the Bond Trustee upon payment by such person of the cost of complying with such request. All references to the Series 2019 Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the aforesaid documents, copies of which are available for inspection at the designated corporate trust office of the Bond Trustee at its office at 2 South Broadway, 6th Floor, St. Louis, Missouri 63102, or during the offering period, at the offices of HJ Sims & Co., Inc, at its office at 11140 Rockville Pike, Suite 630, Rockville, Maryland 20852. The information herein concerning the Obligated Group has been supplied by the Obligated Group and has not been verified by the Underwriters or the Authority, and neither the Underwriters nor the Authority make any representation or warranty, express or implied, as to the accuracy or completeness of such information. The information herein concerning the Authority has been supplied by the Authority and has not been verified by the Underwriters, and the Underwriters make no representation or warranty, express or implied, as to the accuracy or completeness of such information.

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Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change. Neither the Authority nor the Obligated Group has an obligation to provide information on a continuing basis to investors or any other party except as specifically agreed to by the Obligated Group Agent in order to provide certain continuing disclosure and to the extent an amendment or supplement to this Official Statement is required by rules of the Municipal Securities Rulemaking Board (the “MSRB”) or the Securities and Exchange Commission (the “SEC”). See “FINANCIAL REPORTING AND CONTINUING DISCLOSURE REQUIREMENTS” herein and “SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT” in APPENDIX C herein.

THE OBLIGATED GROUP

The Obligated Group is composed of the Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA, Meridian Village and Provident Group. The Institution is a Missouri legislatively chartered corporation. Pursuant to its charter, the Institution is authorized to operate residential facilities and nursing facilities as well as home health and nursing services. The Institution was chartered in 1863. The Institution is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3). See APPENDIX A to this Official Statement for additional information relating to the members of the Obligated Group and their facilities and operations.

Heisinger is a Missouri nonprofit corporation that owns a Life Plan Community consisting of independent living units, assisted living units (including memory care) and skilled nursing facilities operating under the name Heisinger Bluffs (“Heisinger Bluffs”). Heisinger Bluffs is located on the banks of the Missouri River in Jefferson City, Missouri. Heisinger is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

LSSEF is a Missouri nonprofit corporation used by the Institution to fund benevolent care, clinical pastoral education and future construction and capital improvements.

Lutheran Hillside Village is an Illinois not-for-profit corporation that owns a Life Plan Community consisting of independent living units, assisted living units and skilled nursing facilities operating under the name Lutheran Hillside Village. The Lutheran Hillside Village facility is located in Peoria, Illinois. Lutheran Hillside Village is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

LHVF is an Illinois not-for-profit corporation used by Lutheran Hillside Village to fund benevolent care. LHVF is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

LRCA is an Illinois not-for-profit corporation that owns a Life Plan Community consisting of independent living units and assisted living units and skilled nursing facilities located in Springfield, Illinois operating under the name Concordia Village (“Concordia Village”). LRCA is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

Meridian Village is an Illinois not-for-profit corporation that owns a Life Plan Community in Glen Carbon, Illinois consisting of independent living units, assisted living units (including memory care) and skilled nursing facilities operating under the name Meridian Village. Meridian Village is exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

Provident Group is a Missouri nonprofit corporation that operates as a development and management company and does not own or operate any senior living facilities. Although Provident Group is a Missouri nonprofit corporation, it is not exempt from federal income taxation under the Internal Revenue Code Section 501(c)(3).

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PLAN OF FINANCING

General

The proceeds of the Series 2019A Bonds will be used to make a loan to the Institution to: (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019A Bonds, (iii) fund capitalized interest, and (iv) pay certain costs related to the issuance of the Series 2019A Bonds.

The proceeds of the Series 2019B Bonds will be used to make a loan to the Institution to: (i) reimburse or pay a portion of the cost of acquiring, constructing, installing or refinancing the Project (defined herein), (ii) fund a debt service reserve fund for the Series 2019B Bonds, (iii) fund capitalized interest, and (iv) pay certain costs related to the issuance of the Series 2019B Bonds.

For a detailed description of the use of bond proceeds, see “Estimated Sources and Uses of Funds” below.

The Project

The Project (the “Project”) consists of reimbursing or paying the cost of certain health facilities of the Institution and its Affiliates that are located in the State of Missouri and the State of Illinois. A more detailed description of the Project is included in APPENDIX A to this Official Statement under the caption “THE PROJECT.”

Estimated Sources and Uses of Funds

The proceeds of the Series 2019 Bonds and other available funds are expected to be applied as follows:

SOURCES OF FUNDS Par Amount of Series 2019A Bonds Issued Par Amount of Series 2019B Bonds Issued Plus Original Issue Premium Equity Contribution Total Sources

Series 2019A Bonds* $68,420,000

- 3,082,569

2,000,000 $73,502,569

Series 2019B Bonds* -

$25,490,000 -

- $25,490,000

Total*

$68,420,000 25,490,000 3,082,569

2,000,000 $98,992,569

USES OF FUNDS Project Fund Deposits: Mason Pointe Expansion Project Other Capital Projects Funded Interest Debt Service Reserve Fund Issuance Costs(1) Total Uses

$45,320,000 13,200,000 7,405,539 6,732,377

844,653 $73,502,569

$22,680,000 -

1,700,568 796,562

312,870 $25,490,000

$68,000,000 13,200,000 9,106,107 7,528,939

1,157,523 $98,992,569

________________________________ Amounts rounded to the nearest dollar. (1) Including Underwriters’ Discount.


9

ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth the amount required each year for the payment of principal and interest on the Series 2019 Bonds and on the other outstanding Prior Bonds

issued on behalf of Institution and secured by the Master Indenture.

Bond Year Ended

February 1

Series 2019A Bonds

Series 2019B Bonds

Prior Bonds(1)

Principal and Interest

Funded Interest

DSRF Releases(2)

Total Debt Service

Principal Interest Total

Principal Interest Total

2019 $ 30,359,026 2020 30,354,656 2021 30,355,984 2022 30,354,084 2023 30,357,399 2024 30,356,096 2025 30,356,674 2026 30,081,928 2027 29,756,835 2028 29,755,153 2029 29,758,074 2030 29,757,111 2031 29,757,584 2032 29,756,480 2033 29,758,161 2034 29,752,780 2035 29,763,561 2036 29,761,350 2037 29,758,850 2038 29,743,000 2039 29,611,625 2040 27,177,950 2041 26,770,750 2042 23,254,400 2043 13,922,500 2044 13,922,600 2045 9,768,250 2046 9,770,250

TOTAL $753,853,111 ________________________________ Amounts rounded to the nearest dollar. (1) See APPENDIX A - “OUTSTANDING INDEBTEDNESS” (2) Represents the approximate amounts that will be released from Debt Service Reserve Funds over the life of the LSS bonds pursuant to the applicable Debt Service Reserve Fund Requirements. The majority of

the Debt Service Reserve Fund amounts will be released upon the final maturity dates of such bonds.

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THE AUTHORITY

Organization and Powers

The Authority is a body politic and corporate and a public instrumentality duly organized and existing under the laws of the State, including particularly the Act.

The Authority is empowered under the Act to make loans to any participating health or educational institution to finance the cost of health or educational facilities located within or outside of the State, to refinance outstanding obligations, mortgages or advances issued, made or given for the cost of such facilities, and to refund bonds of the Authority issued for such purposes. The Authority may issue its bonds, notes or other obligations for any of its corporate purposes. Missouri law requires that the State shall not be liable in any event for the payment of the principal of or interest on any bonds of the Authority or for the performance of any pledge, mortgage, obligation or agreement undertaken by the Authority and no breach of any such pledge, mortgage, obligation or agreement may impose any pecuniary liability upon the State or any charge upon the general credit or taxing power of the State. The Authority has no taxing power.

Membership

The Act provides that the Authority shall consist of seven members who are to be appointed by the governor of the State with the advice and consent of the State Senate. Each member must be a resident of the State and not more than four members of the Authority may be of the same political party. Initial members were appointed to staggered terms of office and successor members are appointed for terms of five years. Members continue to serve after expiration of their term until a successor is appointed and qualified or they are reappointed.

Members

The current members of the Authority and their offices are as follows:

Jeffrey D. Byrne, Chair and Member. Mr. Byrne, a resident of Kansas City, Missouri, is founder and CEO of Jeffrey Byrne & Associates, Inc., a fundraising and financial development firm specializing in nonprofit organizations. Term as a member expires July 30, 2019.

Thomas E. George, Vice Chair and Member. Mr. George, a resident of St. Louis, Missouri, is the retired President of the International Brotherhood of Electrical Workers (IBEW) Local One in St. Louis. Term as a member expired July 30, 2015.

Sarah R. Maguffee, Treasurer and Member. Ms. Maguffee, a resident of Columbia, Missouri, is an attorney and law clerk to Judge Karen King Mitchell, Missouri Court of Appeals, Western District. Term as a member expired July 30, 2013.

Joseph A. Cavato, Member. Mr. Cavato, a resident of University City, Missouri, is owner of JAC Consulting, LLC, a provider of consulting and advisory services. Term as a member expired July 30, 2013.

Judith W. Scott, Member. Ms. Scott, a resident of Poplar Bluff, Missouri, is the Executive Director of the Three Rivers Community College Foundation. Term as a member expired July 30, 2011.

Under the Act, Mr. Cavato, Mr. George, Ms. Maguffee and Ms. Scott continue to serve as members of the Authority until reappointed or a successor is appointed and qualified.

Executive Director

Michael J. Stanard serves as Executive Director of the Authority. Mr. Stanard has served as Executive Director since 1998.

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Representatives

Columbia Capital Management, LLC, Overland Park, Kansas, serves as financial advisor to the Authority.

Thompson Coburn LLP, St. Louis, Missouri, serves as general counsel to the Authority.

The Authority’s financial advisor and general counsel represent and advise the Authority and not the Institution, the Obligated Group or the owners of the Series 2019 Bonds.

Indebtedness of the Authority

The Authority has previously sold and delivered numerous series of bonds and notes for participating health or educational institutions other than the Institution secured by other instruments separate and apart from the instruments issuing and securing the Series 2019 Bonds. The owners of such bonds and notes have no claim on the assets, funds or revenues of the Authority securing the Series 2019 Bonds and the owners of the Series 2019 Bonds will have no claim on assets, funds or revenues of the Authority securing such other bonds and notes.

With respect to additional indebtedness of the Authority, the Authority intends to enter into separate agreements with participating health or educational institutions in the State other than the Institution for the purpose of providing financing for eligible projects and programs. Issues that may be sold by the Authority in the future for participating health or educational institutions other than the Institution or other members of the Obligated Group will be created under separate and distinct indentures or resolutions and will be secured by instruments, properties and revenues separate from those securing the Series 2019 Bonds.

EXCEPT FOR INFORMATION CONCERNING THE AUTHORITY IN THE SECTIONS OF THIS OFFICIAL STATEMENT CAPTIONED “THE AUTHORITY” AND “LITIGATION – THE AUTHORITY,” NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY THE AUTHORITY AND THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.

THE SERIES 2019 BONDS

Description of the Series 2019 Bonds

The Series 2019 Bonds are being issued as fully registered bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof and in the aggregate principal amount of $68,420,000* with respect to the Series 2019A Bonds and $25,490,000* with respect to the Series 2019B Bonds. Purchases of beneficial interests in the Series 2019 Bonds will be made in book-entry form (as described below under the caption “BOOK-ENTRY SYSTEM”). Purchasers will not receive certificates representing their interests in the Series 2019 Bonds purchased. When issued, the Series 2019 Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York (“DTC”). The Series 2019 Bonds will be dated the date of delivery and bear interest from the date thereof or the most recent Interest Payment Date as hereinafter defined, to which interest has been paid in full at the rates set forth on the inside cover page hereof. The Series 2019 Bonds mature on the dates shown on the inside cover page hereof, subject to optional, special, extraordinary and mandatory redemption and payment prior to maturity as described under the caption “Redemption Provisions” herein.

Payments on the Series 2019 Bonds

Interest on the Series 2019 Bonds is payable on each February 1 and August 1, beginning August 1, 2019 (each, an “Interest Payment Date”). The principal of, redemption premium, if any, and interest (computed on the basis of a 360-day year of twelve 30-day months) on the Series 2019 Bonds are payable in any coin or currency of the United States of America which on the respective dates of payment thereof is legal tender for the payment of public and private debts.


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So long as any of the Series 2019 Bonds are in book-entry form, the principal, redemption premium, if any, and interest on such Bonds are payable by check or draft mailed, or wire transfer, to Cede & Co. as registered owner thereof and will be redistributed by DTC to the Participants as described herein under the caption “BOOK-ENTRY SYSTEM.”

General Provisions of the Series 2019 Bonds when not in Book-Entry

If the Series 2019 Bonds cease to be subject to the DTC or other book-entry system, the Series 2019 Bonds will be transferable by the registered owner thereof or by such owner’s attorney duly authorized in writing upon presentation thereof at the principal corporate trust office of the Bond Trustee and may be exchanged at the principal corporate trust office of the Bond Trustee for a like aggregate principal amount of Series 2019 Bonds of the same maturity of other authorized denominations. The Bond Trustee and the Authority may charge a fee covering taxes and other governmental charges in connection with any exchange, change in registration or transfer of any Series 2019 Bond. The provisions of the related Bond Indenture shall govern the replacement of lost, destroyed or defaced Series 2019 Bonds.

If the Authority determines that DTC is unable to properly discharge its responsibilities or that DTC is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or if the Authority or the Participants (by written notice from those Participants holding not less than 50% of the outstanding Series 2019 Bonds) decide that the continuation of the book-entry system to the exclusion of any Series 2019 Bonds issued to any Bondowner other than Cede & Cede Co. is no longer in the best interests of the Beneficial Owners of the Series 2019 Bonds, the Bond Trustee shall then notify the Bondowners and, upon request of the Bondowners, deliver certificates for the Series 2019 Bonds as described in the Bond Indentures. If certificates for the Series 2019 Bonds are issued, the provisions of the related Bond Indenture will apply to, among other things, the transfer and exchange of Series 2019 Bond certificates and the method of payment of principal and interest on the Series 2019 Bonds, as described in the following paragraphs.

In the event that book-entry system is discontinued, the principal of the Series 2019 Bonds will be payable at the designated corporate trust office of the Bond Trustee for the Series 2019 Bonds and interest on the Series 2019 Bonds payable on any interest payment date shall be payable by check or draft mailed by the Bond Trustee to the registered owners of the Series 2019 Bonds at their addresses as shown on the registration books of the Authority maintained by the Bond Trustee. The interest payable on the Series 2019 Bonds on each interest payment date will be paid to the persons in whose names the Series 2019 Bonds are registered at the close of business on the fifteenth day (whether or not a business day) of the calendar month next preceding the date on which an interest payment on any Series 2019 Bond is to be made.

Redemption Provisions

Optional Redemption.

Series 2019A Bonds. The Series 2019A Bonds shall be subject to redemption and payment prior to maturity, at the option of the Authority, which shall be exercised upon written direction from the Obligated Group Agent, on and after February 1, 20__ in whole or in part on any date, at the respective redemption prices set out below, plus accrued interest thereon to the redemption date:

Redemption Dates Redemption Prices On or after February 1, 20__ but prior to February 1, 20__

___%

On or after February 1, 20__ but prior to February 1, 20__

___%


___%


___%

On or after February 1, 20__ ___%

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Series 2019B Bonds. The Series 2019B Bonds shall be subject to redemption and payment prior to maturity, at the option of the Authority, which shall be exercised upon written direction from the Obligated Group Agent, in whole or in part on any date, at the redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date.

Extraordinary Optional Redemption. In addition to and without limitation of the other redemption provisions of the related Bond Indenture, each series of Series 2019 Bonds is subject to redemption and payment prior to the stated maturity thereof, at the option of the Authority, which shall be exercised upon written direction from the Obligated Group Agent, in whole or in part at any time, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date, without premium, upon the occurrence of any of the following events:

(1) Each series of Series 2019 Bonds shall be subject to redemption and payment in whole or in part prior to the stated maturity thereof by the Authority, upon written instructions from the Obligated Group Agent, on any date, in the event any facility of any member of the Obligated Group shall have been damaged to such extent that in the determination of the Obligated Group Agent (i) such facility cannot be reasonably restored within a period of six months to the condition thereof immediately preceding such damage or destruction, or (ii) the affected member of the Obligated Group is thereby prevented from carrying on its normal operations of the facility for a period of six months, or (iii) the cost of restoration thereof would exceed the net proceeds of insurance carried thereon pursuant to the requirements of the Master Indenture, plus the amount for which the affected member of the Obligated Group is self-insured with respect to the deductible amount; or

(2) Each series of Series 2019 Bonds shall also be subject to redemption and payment in whole prior to the stated maturity thereof by the Authority, upon written instructions from the Obligated Group Agent, on any date if (a) as a result of any changes in the Constitution of the State of Missouri or Illinois or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final direction, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Obligated Group Agent in good faith, the Master Indenture, the related Series 2019 Master Note, the related Loan Agreement or the related Bond Indenture have become void or unenforceable or impossible of performance in accordance with the intent and purposes of the parties as expressed in the Master Indenture, the related Series 2019 Master Note, the related Loan Agreement or the related Bond Indenture; or (b) any unreasonable burden or excessive liability, whether direct or indirect, has been imposed by executive, legislative, judicial or administrative action by any governmental entity upon the Institution or any Note Obligor, including without limitation, federal, state or other property, income or other taxes (but excluding real estate taxes) not being imposed on the date of the related Bond Indenture as evidenced by a certificate of the Obligated Group Agent delivered to the Authority and the related Bond Trustee; or (c) the Obligated Group Agent is required or ordered, by legislative, judicial or administrative action of the United States or of any state thereof, or any agency, department or subdivision thereof, to operate any of the facilities of the Obligated Group in a manner inconsistent with the stated goals, purposes and policies of the Institution or any Note Obligor, or to take any action which the Obligated Group Agent believes to be contrary to the objectives and philosophies of the Institution or any Note Obligor or its successors, and such legislative, judicial or administrative action is applicable to such entity because the Obligated Group Agent is a party to the Master Indenture, the related Loan Agreement and the related Series 2019 Master Note; or

(3) Each series of the Series 2019 Bonds shall be subject to redemption and payment in whole or in part prior to the stated maturity thereof by the Authority, upon written instructions from the Obligated Group Agent, on any date in the event that (A) a Consultant (as defined in the Master Indenture) determines in good faith that continued operation or use of any of the facilities comprising the Project or any part thereof is not financially feasible or is otherwise disadvantageous to the Obligated Group or any Note Obligor; (B) as a result thereof, any Note Obligor determines to sell, lease or otherwise dispose of, or permit alternative use of, such facilities comprising the Project to an unrelated person or entity; and (C) the redemption (which

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may be effected prior to, concurrently with, or after the sale, lease, other disposition or alternative use) is undertaken for the purpose of preventing such sale, lease, other disposition or alternative use from adversely affecting the exclusion of interest on the Series 2019 Bonds from gross income for purposes of federal income taxation under the Internal Revenue Code.

Mandatory Sinking Fund Redemption of the Series 2019 Bonds.

Series 2019A Bonds. The term bond maturing February 1, 20__ bearing interest at ___% (the “20__ Term Bond”) shall be subject to the mandatory redemption and payment prior to maturity pursuant to the mandatory redemption requirements of the Series 2019A Bond Indenture on February 1, 20__ and February 1, 20__, at the principal amount thereof plus accrued interest to the redemption date, without premium. The Loan Payments specified in the Series 2019A Loan Agreement which are to be deposited into the related Debt Service Fund shall be sufficient to redeem, and on February 1 in each of the following years, the following principal amounts of such 20__ Term Bond shall be redeemed:

20__ Term Bond

Year Principal Amount

_____________ * Final maturity

The term bond maturing February 1, 20__ (the “20__ Term Bond”) shall be subject to the mandatory redemption and payment prior to maturity pursuant to the mandatory redemption requirements of the Series 2019A Bond Indenture on February 1, 20__ and on each February 1 thereafter to and including February 1, 20__, at the principal amount thereof plus accrued interest to the redemption date, without premium. The Loan Payments specified in the Series 2019A Loan Agreement which are to be deposited into the related Debt Service Fund shall be sufficient to redeem, and on February 1 in each of the following years, the following principal amounts of such 20__ Term Bond shall be redeemed:

20__ Term Bond Year Principal Amount


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Series 2019B Bonds. The term bond maturing February 1, 20__ bearing interest at ___% (the “20__ Term Bond”) shall be subject to the mandatory redemption and payment prior to maturity pursuant to the mandatory redemption requirements of the Series 2019B Bond Indenture on February 1, 20__ and February 1, 20__, at the principal amount thereof plus accrued interest to the redemption date, without premium. The Loan Payments specified in the Series 2019B Loan Agreement which are to be deposited into the related Debt Service Fund shall be sufficient to redeem, and on February 1 in each of the following years, the following principal amounts of such 20__ Term Bond shall be redeemed:

20__ Term Bond

Year Principal Amount


Separately for each series of Series 2019 Bonds, the Bond Trustee shall, in each year in which the related Term Bonds are to be redeemed pursuant to the mandatory sinking fund redemption provisions of the related Bond Indenture make timely selection of such Term Bonds or portions thereof to be so redeemed and shall give notice thereof as provided in the mandatory sinking fund redemption provisions of the related Bond Indenture without further instructions from the Authority or the Obligated Group Agent. At the option of the Obligated Group Agent, to be exercised on or before the 25th day next preceding each mandatory redemption date, the Obligated Group Agent may (1) deliver to the Bond Trustee for cancellation Term Bonds in the aggregate principal amount desired, (2) furnish to the Bond Trustee funds, together with appropriate instructions, for the purpose of purchasing any Term Bonds in the open market at a price not in excess of 100% of the principal amount thereof, whereupon the Bond Trustee shall use its best efforts to expend such funds for such purposes, or (3) elect to receive a credit in respect to the mandatory redemption obligation under the mandatory sinking fund redemption provisions of the related Bond Indenture for any Term Bonds which prior to such date have been redeemed (other than through the operation of the requirements of the mandatory sinking fund redemption provisions of the Bond Indenture) and cancelled by the Bond Trustee and not theretofore applied as a credit against any redemption obligation under the mandatory sinking fund redemption provisions of the Bond Indenture. Each Term Bond so delivered or previously purchased or redeemed shall be credited at 100% of the principal amount thereof on the obligation to redeem Term Bonds of the same maturity on the next mandatory redemption date applicable to Term Bonds of such maturity that is at least 25 days after receipt by the Bond Trustee of such instructions from the Obligated Group Agent, and any excess of such amount shall be credited on future mandatory redemption obligations for Term Bonds of the same maturity in chronological order or such other order as the Obligated Group Agent may designate, and the principal amount of Term Bonds to be redeemed on such future mandatory redemption dates by operation of the requirements of the mandatory sinking fund redemption provisions of the related Bond Indenture shall be reduced accordingly. If the Obligated Group Agent intends to exercise any option granted by the provisions of clauses (1), (2) or (3) above, the Obligated Group Agent will, on or before the 25th day next preceding the applicable mandatory redemption date, furnish the Bond Trustee a certificate signed by the Obligated Group Agent indicating to what extent the provisions of said clauses (1), (2) and (3) are to be complied with in respect to such mandatory redemption payment.

Selection of Bonds to be Redeemed

Series 2019 Bonds may be redeemed only in authorized denominations.

If less than all Series 2019 Bonds of a series are to be redeemed and paid prior to maturity pursuant to the optional or extraordinary optional redemption provisions of the related Bond Indenture, such Series 2019 Bonds shall be redeemed from the maturity or maturities selected by the Obligated Group Agent. If less than all Series 2019 Bonds of a series of any maturity are to be redeemed, the particular Series 2019 Bonds to be redeemed shall be selected by the Bond Trustee by lot or such other method as the Bond Trustee shall deem fair and appropriate.

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Notice and Effect of Call for Redemption

Unless waived by any Owner of Bonds to be redeemed, official notice of any such redemption shall be given by the Bond Trustee on behalf of the Authority by mailing a copy of an official redemption notice by first class mail to all Bondowners of such series as of the 5th business day prior to such mailing, at least 20 days and not more than 60 days prior to the redemption date to each registered owner of the Series 2019 Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Owner to the Bond Trustee.

All official notices of redemption shall be dated and shall state:

(1) the redemption date,

(2) the redemption price,

(3) the identification (and, in the case of partial redemption, the respective principal amounts) of the Series 2019 Bonds to be redeemed,

(4) that on the redemption date the redemption price will become due and payable upon each such Series 2019 Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and

(5) the place where such Series 2019 Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the designated corporate trust office of the Bond Trustee.

With respect to optional redemptions, such notice may be conditioned on moneys being on deposit with the Bond Trustee on or prior to the redemption date in an amount sufficient to pay the redemption price on the redemption date. If such notice is conditional and either the Bond Trustee receives written notice from the Institution that moneys sufficient to pay the redemption price will not be on deposit on the redemption date, or such moneys are not received on the redemption date, then such notice shall be of no force and effect, the Bond Trustee shall not redeem such Series 2019 Bonds and the Bond Trustee shall give notice, in the same manner in which the notice of redemption was given, that such moneys were not or will not be so received and that such Series 2019 Bonds will not be redeemed.

So long as DTC is effecting book-entry transfers of the Series 2019 Bonds, the Bond Trustee shall provide the notices specified above only to DTC. It is expected that DTC will, in turn, notify the Participants and that the DTC Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of DTC or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Series 2019 Bond (having been mailed notice from the Bond Trustee, DTC, a Participant, or otherwise) to notify the Beneficial Owner of the Series 2019 Bond so affected, shall not affect the validity of the redemption of such Series 2019 Bond.

Failure to give any notice to any Owner or any defect therein, shall not affect the validity of any proceedings for the redemption of any other Series 2019 Bonds. Any notice mailed shall be conclusively presumed to have been duly given and shall become effective upon mailing, whether or not any owner receives such notice.

Purchase in Lieu of Redemption

When Series 2019 Bonds are subject to optional or extraordinary optional redemption pursuant to the related Bond Indenture, such Series 2019 Bonds may be purchased in lieu of redemption, from moneys paid by or on behalf of the Institution, on the applicable redemption date at a purchase price equal to 100% of the principal amount thereof, plus accrued interest thereon to but not including the date of such purchase, upon satisfaction of certain conditions set forth in the related Bond Indenture.

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Purchase Offers by Institution

The Institution may on any date request in writing that the Bond Trustee assist the Institution in communicating a purchase offer of any Series 2019 Bonds or portions thereof identified by the Institution for such offer, in the proposed amounts and with the proposed purchase offer prices and other terms and conditions as determined by the Institution.

Special Redemption of Series 2019B Bonds from 2019 Mason Pointe Independent Living Project First Entrance Fees and Special Purchase

The Series 2019B Bonds are subject to special redemption prior to maturity, in whole or in part on the first day of each February, May, August and November from amounts on deposit with the Bond Trustee in the “Series 2019B Entrance Fee Special Debt Service Fund” (the “Entrance Fees Fund”) established with the Bond Trustee under the Bond Indenture for the Series 2019B Bonds, at a redemption price equal to 100% of the principal amount of the Series 2019B Bonds being redeemed, plus accrued interest thereon to the redemption date, without premium. If less than all Series 2019B Bonds are to be redeemed and paid prior to maturity pursuant to the Series 2019B Bond Indenture, such Series 2019B Bonds shall be redeemed in inverse order of maturity, or, upon written instruction from the Obligated Group Agent, from the maturity or maturities selected by the Obligated Group Agent. If less than all Series 2019B Bonds of any maturity are to be redeemed, the particular Series 2019B Bonds to be redeemed shall be selected by the Bond Trustee by lot or such other method as the Bond Trustee shall deem fair and appropriate.

Pursuant to the Series 2019B Loan Agreement, all 2019 Mason Pointe Independent Living Project Entrance Fees received by the Institution shall be transferred to the Bond Trustee on the first Business Day of each January, April, July and October, commencing on the first Business Day of April in the year 2020, and thereafter for so long as the Series 2019B Bonds remain outstanding. The Institution shall pay to the Bond Trustee all 2019 Mason Pointe Independent Living Project Entrance Fees; provided that no excess transfer is required if amounts on deposit in the Entrance Fees Fund or the related Debt Service Fund, or the related Debt Service Reserve Fund irrevocably designated for payment of the Series 2019B Bonds are sufficient to redeem the Series 2019B Bonds in whole. “2019 Mason Pointe Independent Living Project First Entrance Fees,” as defined in the Series 2019B Bond Indenture, means the first Entrance Fee received by the Institution with respect to any independent living unit constructed at the Mason Pointe facility as part of the 2019 Mason Pointe Independent Living Project and shall not include any Entrance Fees received with respect to such independent living unit subsequent to the first Entrance Fee so received. “Entrance Fee” or “Entrance Fees,” as defined in the Series 2019B Bond Indenture, means an entrance fee received by the Institution or another member of the Obligated Group pursuant to the terms of a residency agreement between a resident of an independent living apartment and the Institution or another member of the Obligated Group but no payment shall constitute an Entrance Fee under this definition with respect to an independent living unit until occupancy of such independent living unit. Entrance Fees shall not include a security deposit, monthly rental or monthly service charge or any similar amount received by the Institution or any other member of the Obligated Group.

Pursuant to the Bond Indenture for the Series 2019B Bonds, on or before the second Business Day of January, April, July and October of each year commencing April in the year 2020, the Bond Trustee shall determine the maximum amount of Series 2019B Bonds that may be redeemed from amounts then on deposit in the Entrance Fees Fund, in any integral multiple of $5,000, at a redemption price equal 100% of the principal amount of the Series 2019B Bonds being redeemed, plus accrued interest thereon to the redemption date, without premium, and the Bond Trustee shall (1) without direction from the Authority or the Institution, give notice of redemption, and (2) redeem the Series 2019B Bonds called for redemption on the first day of the next month.

Any Series 2019B Bonds remaining Outstanding as of February 1, 2022 (the “Special Purchase Date”), that have not been or will not be redeemed as of the Special Purchase Date, shall be subject to mandatory tender by the Owners thereof for purchase by or on behalf of the Institution on the Special Purchase Date at a purchase price equal to 100% of the Series 2019B Bonds being purchased, plus accrued interest thereon to the purchase date, without premium, and the Bond Trustee shall (1) without direction from the Authority or the Institution, give notice of mandatory tender for purchase to the Owners of such Bonds not later than 20 days prior to the Special Purchase Date, and (2) cause such Series 2019B Bonds to be purchased with moneys to be provided to the Bond Trustee by or

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on behalf of the Institution on or prior to the Special Purchase Date in accordance with the Series 2019B Loan Agreement.

No amount received by the Bond Trustee as a particular deposit of 2019 Mason Pointe Independent Living Project Entrance Fees shall remain in the Entrance Fees Fund without application as described herein for a period exceeding twelve (12) months after the date of original deposit of such amount in the Entrance Fees Fund.

Any amounts remaining on deposit in the Entrance Fees Fund when the Series 2019B Bonds are no longer Outstanding shall be transferred by the Bond Trustee to the Institution, so long as the Institution is not in default of any of its obligations under the Series 2019B Loan Agreement or the Master Indenture, after which the Entrance Fees Fund shall be closed. After the Entrance Fees Fund is closed, the Institution may, in the Institution’s sole discretion, use 2019 Mason Pointe Independent Living Project Entrance Fees for any purpose (including without limiting the foregoing, payment, redemption, discharge or defeasance of any other indebtedness of the Institution or the Obligated Group).

No payment by the Institution to the Bond Trustee of a 2019 Mason Pointe Independent Living Project First Entrance Fee with respect to an independent living unit shall be required until occupancy of such independent living unit.

To the extent provided in the Master Indenture, 2019 Mason Pointe Independent Living Project Entrance Fees shall constitute Gross Receipts pledged under the Master Indenture until used to pay principal or interest of Series 2019B Bonds, and at any time an Event of Default has occurred and is continuing under the Master Indenture, any amounts on deposit in the Entrance Fees Fund shall be immediately transferred by the Bond Trustee to or for the control of the Master Trustee of the Obligated Group under the Master Indenture to be available for application pursuant to the Master Indenture (for payment of Notes and Guarantees secured thereunder on a parity basis).

ADDITIONAL INDEBTEDNESS

The Master Indenture permits the Obligated Group to issue Additional Indebtedness secured by Master Notes on a parity with the Series 2019 Master Notes and the other outstanding Master Notes. In addition, the Master Indenture permits individual Note Obligors to issue Additional Indebtedness that is not secured by a Master Note. See “SUMMARY OF THE MASTER INDENTURE—Limitations on the Incurrence of Additional Indebtedness” in APPENDIX C. The issuance of such obligations could adversely affect debt service coverage on the Series 2019 Bonds.

SECURITY FOR THE SERIES 2019 BONDS

Special, Limited Obligations

The Series 2019 Bonds and the interest thereon are special, limited obligations of the Authority, payable (except to the extent paid out of Bond proceeds or the income from the temporary investment thereof and, under certain circumstances, condemnation awards or insurance proceeds) solely out of the Loan Payments and other payments derived by the Authority under the related Series 2019 Master Note and the related Loan Agreement (except for (i) fees and expenses payable to the Authority, the Authority’s right to indemnification and as otherwise expressly set forth in the related Loan Agreement and (ii) amounts payable to the United States Government under Section 148(f) of the Code) as provided in the related Bond Indenture, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the related Trust Estate (as defined in the related Bond Indenture) to the Bond Trustee and in favor of the Owners of the related series of Series 2019 Bonds, as provided in the related Bond Indenture. The Series 2019 Bonds and the interest thereon do not constitute an indebtedness or liability of the State or of any political subdivision thereof within the meaning of any State constitutional provision or statutory limitation and shall not constitute a pledge of the faith and credit of the Authority, the State or of any political subdivision thereof. Neither the issuance of the Series 2019 Bonds nor anything in the Bond Documents shall directly, indirectly, or contingently, obligate the Authority, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The Authority has no taxing power.

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The Master Indenture

Collective Obligations. Under the Master Indenture, the Obligated Group may issue Master Notes to evidence or secure Indebtedness (as defined in APPENDIX C hereto). All members of the Obligated Group are jointly and severally liable with respect to the payment of each Master Note issued under the Master Indenture. For a more detailed discussion of entry into or withdrawal from the Obligated Group, see the caption “SUMMARY OF THE MASTER INDENTURE—Persons Becoming Note Obligors” and “Withdrawal from the Obligated Group” in APPENDIX C.

Security Interest in Gross Receipts. Pursuant to the Master Indenture, each member of the Obligated Group, grants to the Master Trustee, for so long as such member remains a member of the Obligated Group, a security interest in its Gross Receipts, subject to Permitted Liens. See the caption “BONDOWNERS’ RISKS—Limitations on Security in Gross Receipts.”

Rate Covenant. Subject to the limitations and exceptions provided in the Master Indenture, each member of the Obligated Group agrees that it will use its best efforts to maintain for each Fiscal Year rates and charges for its facilities such that the Aggregate Income Available for Debt Service to Maximum Annual Debt Service is at least 1.10 but in no event shall such ratio be allowed to fall below 1.0. If such level (ratio of 1.10) is not attained, the Master Indenture requires the members of the Obligated Group to retain a Consultant to make recommendations to increase such ratio to the level required by the Master Indenture. Such rate covenant will be deemed satisfied in any Fiscal Year if the Master Trustee receives an Officer’s Certificate confirming that Law or Regulations Circumstances have prevented the Obligated Group from generating sufficient Aggregate Income Available for Debt Service to comply with such rate covenant; provided, however, in no event shall such rate be less than 1.0. Failure to achieve a ratio of at least 1.0 shall constitute an Event of Default under the Master Indenture. See the captions “DEFINITIONS” and “SUMMARY OF THE MASTER INDENTURE—Rate Covenant” in APPENDIX C.

Incurrence of Additional Indebtedness. The Obligated Group agrees to restrictions on the incurrence of Additional Indebtedness, as more fully described under the caption “SUMMARY OF THE MASTER INDENTURE—Limitations on the Incurrence of Additional Indebtedness” in APPENDIX C.

Negative Pledge. The Obligated Group covenants not to create or permit any lien, other than Permitted Liens, upon its Property. See the caption “SUMMARY OF THE MASTER INDENTURE—Limitations on Creation of Liens” in APPENDIX C.

Mortgage As additional security for Indebtedness secured by Master Notes Outstanding under the Master Indenture, the Institution and other members of the Obligated Group have caused to be executed and delivered for the benefit of all of the holders of Master Notes issued under the Master Indenture on a parity basis deeds of trust and mortgages (collectively the “Mortgages”), on certain real property owned and, as of the effective date of the Mortgages, directly used in conjunction with the operation of licensed senior living communities by members of the Obligated Group (subject to Grantor’s Rights as previously exercised or as may be exercised in the future, the “Mortgaged Property”). In conjunction therewith, the Institution and the other members of the Obligated Group have also executed Supplemental Master Trust Indenture No. 31 dated as of February 1, 2018 (the “Supplemental Master Indenture No. 31”) evidencing and providing for the granting of such Mortgages to the Master Trustee under the Master Indenture as aforesaid. The Supplemental Master Trust Indenture No. 31 includes certain Grantor’s Rights (defined therein) to which the Mortgages shall be subject. Subject to the foregoing Grantor’s Rights and the terms of the Master Indenture (including as supplemented by Supplemental Master Indenture No. 31) and the Mortgages (which permit the release of Mortgaged Property under certain circumstances), the Institution, as Obligated Group Agent under the Master Indenture, has covenanted and agreed under the related Loan Agreement for each series of the Series 2019 Bonds to retain the Mortgages on the Mortgaged Property during any period any such Series 2019 Bonds are Outstanding (each, a “Mortgage Covenant”). Nothing in the Mortgage Covenants shall be deemed to preclude exercise from time to time of any Grantor’s Rights, including, without limitation, modifications, releases and liens relating to the Mortgaged Property and the Mortgages. The Mortgages were required pursuant to covenants entered into in connection with certain prior series of bonds issued for the benefit of Institution and the other members of the Obligated Group. The Mortgages are not required under the Master Indenture. The Mortgaged Property, as of the date of this Official Statement, consists of certain land and buildings at the following senior living communities:

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Disposition of Property of Obligated Group Members. The Obligated Group agrees to restrictions on the disposition of its Property, as more fully described under the caption, “SUMMARY OF THE MASTER INDENTURE—Sale, Lease or Other Disposition of Property” in APPENDIX C.

Liquidity Covenant. Subject to the limitations and exceptions provided in the Master Indenture, the members of the Obligated Group agree that as of the last day of each Fiscal Year, the Obligated Group shall have not less than 120 Days Cash on Hand. If the amount of Days Cash on Hand is less than 120 for any Fiscal Year, the Obligated Group shall deliver an Officer’s Certificate setting forth the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of Days Cash on Hand to at least 120 for future periods. If the Obligated Group has not raised the level of Days Cash on Hand to at least 120 by the last day of the next Fiscal Year, the Obligated Group shall be required to retain a Consultant to make recommendations with respect to rates, fees and other factors affecting financial operations in order to increase the Days Cash on Hand for future periods. See the captions “DEFINITIONS” and “SUMMARY OF THE MASTER INDENTURE—Liquidity Covenant” in APPENDIX C.

Pledge and Assignment under the Bond Indentures

Under each Bond Indenture, the Authority will pledge and assign to the Bond Trustee, for the benefit of the Owners of the related Series 2019 Bonds, all of its rights under the related Loan Agreement (except for the Authority’s rights to fees, expenses, its rights to indemnification as provided therein and as otherwise expressly set forth therein and except for certain rebate payments made by the Bond Trustee or the Institution to the United States), including such payments, revenues and receipts thereunder as security for the payment of the Series 2019 Bonds and the interest thereon. To evidence the Institution’s obligation to repay the loan of the proceeds of the Series 2019A Bonds, under the Series 2019A Loan Agreement, the Obligated Group Agent will issue and deliver to the Authority and the Authority will assign to the Bond Trustee the Series 2019A Master Note. To evidence the Institution’s obligation to repay the loan of proceeds of the Series 2019B Bonds under the Series 2019B Loan Agreement, the Obligated Group Agent will issue and deliver to the Authority and the Authority will assign to the Bond Trustee the Series 2019B Master Note. Each Series 2019 Master Note will be held by the related Bond Trustee for the sole benefit and security of the Owners of the related series of Series 2019 Bonds. To secure the Obligated Group’s obligations under the Series 2019 Master Notes and any other Master Notes issued under the Master Indenture, the Obligated Group has granted to the Master Trustee under the Master Indenture a security interest in the Gross Receipts of the Obligated Group for the equal and ratable benefit of the Authority, as owner of the Series 2019 Master Notes, and all other owners of other Master Notes issued under the Master Indenture.

Each Bond Indenture establishes a separate Debt Service Reserve Fund for the related Series 2019 Bonds. For the Series 2019A Bonds, an amount equal to $__________ will be deposited into the related Debt Service Reserve Fund on the date of issuance of the Series 2019A Bonds and such Debt Service Reserve Requirement is subject to reduction only in accordance with the Series 2019A Bond Indenture. For the Series 2019B Bonds, an amount equal to $__________ will be deposited into the related Debt Service Reserve Fund on the date of issuance of the Series 2019B Bonds and such Debt Service Reserve Requirement is not subject to reduction while any Series 2019B Bonds remain outstanding. Such moneys are required to be used by the Bond Trustee whenever, and to the

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extent that, moneys on deposit in the related Debt Service Fund are insufficient for the purpose of paying interest and principal on the related series of Series 2019 Bonds as the same become due. The Institution is required, pursuant to the terms of each Loan Agreement, to maintain the related Debt Service Reserve Fund at an amount equal to the related Debt Service Reserve Requirement. With respect to the of Series 2019A Bonds, “Debt Service Reserve Requirement” means (a) at the date of original issuance and delivery of the Series 2019A Bonds, $__________, and (b) subsequent to such date, at the option of the Obligated Group Representative and communicated in writing to the Authority and the Bond Trustee, a sum equal to the least of (A) 10% of the then Outstanding aggregate principal amount of such Series 2019A Bonds, (B) the maximum annual debt service on such Series 2019A Bonds in any future fiscal year following such date, or (C) 125% of the average future annual debt service on such Series 2019A Bonds. With respect to the Series 2019B Bonds, “Debt Service Reserve Requirement” means $__________.

The Loan Agreements

Each Loan Agreement requires that the Institution make Loan Payments to the Bond Trustee for deposit into the related Debt Service Fund in aggregate amounts sufficient to pay the principal of, redemption premium, if any, and interest on the related Series 2019 Bonds then due. The Institution will receive credits against amounts due as payments under the related Loan Agreement for certain amounts available from other sources including certain earnings on funds held by the Bond Trustee.

The Loan Payments and other amounts payable under each Loan Agreement (except for Authority fees, expenses and as otherwise expressly set forth therein and certain rebate payments required to be paid to the United States government) are pledged under the related Bond Indenture for the payment of principal of, redemption premium, if any, and interest on the related series of Series 2019 Bonds, and the rights of the Authority in and to such payments (except for the Authority’s right to its fees, expenses and advances and such rebate payments) are assigned to the Bond Trustee, to secure payments on the related series of Series 2019 Bonds. The Institution agrees to make payments under each Loan Agreement directly to the Bond Trustee. The Loan Payments and other amounts payable by the Institution under each Loan Agreement are absolute and unconditional obligations of the Institution and the Institution is not entitled to any abatement or diminution thereof.

Enforceability

The remedies available upon an Event of Default under the Master Indenture, the Series 2019 Master Notes, the Loan Agreements and the Bond Indentures will, in many respects, be dependent upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code, the remedies specified by the federal bankruptcy code or in the Master Indenture, the Loan Agreements and the Bond Indentures may not be readily available or may be limited. The various legal opinions to be delivered with the Master Indenture, the Series 2019 Master Notes, the Loan Agreements, the Bond Indentures and the Series 2019 Bonds have been and will be qualified as to the enforceability of the various legal instruments by reference to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors and by general principles of equity. In addition, the ability to enforce payment from money or assets which are donor-restricted or subject to a charitable trust may be restricted. See “BONDOWNERS’ RISKS — Bankruptcy” and “— Certain Matters Relating to Enforceability of the Master Indenture” herein.

BOOK-ENTRY SYSTEM

DTC will act as securities depository for the Series 2019 Bonds. The Series 2019 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 Bond certificate will be issued for the Series 2019 Bonds, in the aggregate principal amount of such Bond, and will be deposited with DTC.

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, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of

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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 securities certificates. 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 SEC. More information about DTC can be found at www.dtcc.com.

Purchases of the Series 2019 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2019 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“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 2019 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 certificates representing their ownership interests in the Series 2019 Bonds, except in the event that use of the book-entry system for the Series 2019 Bonds is discontinued.

To facilitate subsequent transfers, all 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 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 2019 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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.

Redemption notices shall be sent to DTC. If less than all of the Series 2019 Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2019 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 Authority 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 the Series 2019 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2019 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 Authority or the Bond Trustee, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by 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, the Bond Trustee, the Institution, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other name as may be requested by an authorized representative of DTC) is the responsibility

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of the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and the disbursement of such payments to the Beneficial Owners shall be the responsibility of the Participants.

THE INFORMATION PROVIDED ABOVE HAS BEEN PROVIDED BY DTC. NO REPRESENTATION IS MADE BY THE AUTHORITY, ANY MEMBER OF THE OBLIGATED GROUP OR THE UNDERWRITERS AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY DTC OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF.

DTC may discontinue providing its services as depository with respect to the Series 2019 Bonds at any time by giving notice to the Authority or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered to the Bondowners.

FINANCIAL REPORTING AND CONTINUING DISCLOSURE REQUIREMENTS

Financial Reporting. Under the Master Indenture, each member of the Obligated Group covenants that it will, through the Obligated Group Agent, provide to the Master Trustee, among other items: (a) quarterly unaudited financial statements of the members of the Obligated Group, including statements of operations and a balance sheet as of the end of such period, that are either separate for each member of the Obligated Group or combined or consolidated for the Institution and including the results for each member of the Obligated Group, within 60 days of the end of each fiscal quarter; and (b) a complete audited annual report for the members of the Obligated Group within 150 days of the end of each Fiscal Year reported upon by a firm of independent certified accountants for such Fiscal Year and containing a balance sheet as of the end of such Fiscal Year and a statement of operations and changes in net assets for such Fiscal Year, and a statement of cash flows for such Fiscal Year, showing in each case in comparative form the financial figures for the preceding Fiscal Year, together with a separate Officers’ Certificate of the Obligated Group Agent containing a calculation of the Income Available for Debt Service for said Fiscal Year and the calculation of Maximum Annual Debt Service for such Fiscal Year. The 150-day requirement may be extended to 165 days if the Obligated Group Agent delivers to the Master Trustee, prior to the end of the 150-day period, an Officer’s Certificate to the effect that the delivery of audited financial statements is delayed due to circumstances beyond the control of the Obligated Group Agent.

Audited financial statements of the members of the Obligated Group shall be prepared in accordance with generally accepted accounting principles and shall include financial data of all Obligated Group members and may include financial data pertaining to such other Persons, as the Obligated Group Agent may determine, that are not members of the Obligated Group but are permitted or required to be included in such audited financial statements under generally accepted accounting principles; provided that (i) such audited financial statements that include financial data of Persons that are not members of the Obligated Group includes unaudited supplemental schedules which contain separate financial statements for the Obligated Group, and (ii) the Obligated Group Agent represents for the period reported in such audited financial statements that the inclusion therein of financial data pertaining to Persons which are not members of the Obligated Group does not materially affect the content thereof from that which represents the financial performance, financial condition or results of only the members of the Obligated Group for such period. The financial data pertaining to Persons that are not members of the Obligated Group shall be deemed not to materially affect the content of the audited financial statements if none of the (a) revenues, (b) income available for debt service, or (c) book value of the total property of such Persons (calculated in the same manner as Revenues, Aggregate Income Available for Debt Service and Book Value of Property of a members of the Obligated Group), in the aggregate, exceed 15% of the (1) Revenues, (2) Aggregate Income Available for Debt Service, or (3) Value of the total Property of all members of the Obligated Group, respectively, for or as of the end of the subject period.

Continuing Disclosure Requirements. Pursuant to the Eleventh Amended and Restated Continuing Disclosure Agreement, the Obligated Group has agreed to provide to the MSRB through its Electronic Municipal Market Access System for municipal securities disclosure the audited financial statements of the Obligated Group and certain operating data of the Obligated Group within 180 days after the end of each Fiscal Year of the Institution. The Obligated Group has also agreed to provide prompt notice to the MSRB of the occurrence of certain events with respect to the Series 2019 Bonds. See “SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT” in APPENDIX C hereto. A continuing disclosure compliance report was obtained from an

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independent third-party disclosure analysis firm in connection with preparation of this Official Statement and indicates, in addition to other content therein, the following compliance failures within the last five years: (i) the audited financial information and operating data for the fiscal year ended December 31, 2016 was not filed on EMMA with the CUSIP number for the Series 2000 Bonds (although timely filed with the CUSIPs for other outstanding bonds), and (ii) notices were not filed regarding two enhanced ratings upgrades for the Series 2000 Bonds (based on the ratings of the letter of credit provider).

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Series 2019 Bonds or to any decision to purchase, hold or sell the Series 2019 Bonds and the Authority will not provide any such information. The Institution has undertaken all responsibilities for any continuing disclosure to Bondowners as described herein and under the caption “SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT” in APPENDIX C hereto, and the Authority shall have no liability to the owners of the Series 2019 Bonds or any other person with respect to SEC Rule 15c2-12.

BONDOWNERS’ RISKS

Set forth herein are certain risk factors that should be considered before any investment in the Series 2019 Bonds is made. These risk factors should not be considered definitive or exhaustive. Certain risks are inherent in the successful development and operation of long term care and retirement facilities such as the facilities of the Obligated Group. Such risks should be considered in evaluating the Obligated Group’s ability to generate sufficient revenues to pay principal of, premium, if any, and interest on the Series 2019 Bonds and all other indebtedness of the Obligated Group 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 Obligated Group’s facilities or the payment of the Series 2019 Bonds.

General Risk Factors

As described herein under the caption “SECURITY FOR THE SERIES 2019 BONDS,” except to the extent that the principal of, premium, if any, and interest on the Series 2019 Bonds may be payable from the proceeds thereof or investment income thereon, such principal, premium, if any, and interest will be payable solely from amounts paid by the Institution under the related Loan Agreement or by the Obligated Group under the related Series 2019 Master Note.

No representation or assurance is given or can be made that revenues will be realized by the Obligated Group (which in the context of this discussion of risk factors, should be understood to include the Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA, Meridian Village and Provident Group, together with future Note Obligors, if any) sufficient to ensure the payments under the Loan Agreements in the amounts and at the times required to pay debt service on the Series 2019 Bonds when due. Some, but not necessarily all of the risk factors that should be considered are discussed in this section; these risk factors should be considered by investors considering any purchase of the Series 2019 Bonds. Neither the Underwriters nor the Authority has made any independent investigation of the extent to which any such factors may have an adverse effect on the revenues of the Obligated Group. The ability of the Obligated Group to generate sufficient revenues may be impacted by a number of factors.

The receipt of future revenues by the Obligated Group will be subject to, among other factors, federal and state policies affecting the senior housing and health care industries (including changes in reimbursement rates and policies), increased competition from other senior housing and health care providers, the capability of the management of the Obligated Group and future economic and other conditions that are impossible to predict. The extent of the ability of the Obligated Group to generate future revenues has a direct effect upon the payment of, principal of, premium, if any, and interest on the Series 2019 Bonds.

Changes to the Obligated Group

The Institution, Heisinger, LSSEF, Lutheran Hillside Village, LHVF, LRCA, Meridian Village and Provident Group are the current members of the Obligated Group. Upon satisfaction of certain conditions in the

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Master Indenture, other corporations can become members of the Obligated Group. See “SUMMARY OF THE MASTER INDENTURE” in APPENDIX C hereto and “INTRODUCTION - The Obligated Group” herein. However, if and when new members are added, the Obligated Group’s financial situation and operations will likely be altered from that of the current Obligated Group alone.

Economic Conditions and Financial Markets

From time to time, the financial sectors of the economies of the United States and other countries have experienced severe disruptions. The health care and senior care sectors were materially adversely affected by the 2008 recession prompting a number of banks and other financial institutions to seek additional capital, including capital provided through the federal government, to merge, and, in some cases, to cease operations. These events collectively led to significant reductions in lending capacity and extension of credit, erosion of investor confidence in the financial sector, and historically aberrant fluctuations in interest rates. This disruption of the credit and financial markets may have negative repercussions upon the national and global economics, including volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business bankruptcies.

The health care and senior care sectors have been materially adversely affected by past market disruption and would likely be materially adversely affected by any future economic recession or financial market disruption. The consequences of past financial market disruptions have generally included, but were not limited to, realized and unrealized investment portfolio losses, reduced investment income, limitations on access to the credit markets and increased borrowing costs. Future financial market disruptions cannot be predicted and there can be no assurance that future financial disruptions will not materially or adversely affect the operations and financial condition of the Obligated Group.

The Obligated Group has significant holdings in a diversified portfolio of investments. Market fluctuations have affected and will continue to affect materially the value of those investments and those fluctuations may be material.

Federal and state budget deficits may negatively affect the health care industry and long-term care residents in a number of ways, including, but not limited to, reductions or delays in Medicare or Medicaid reimbursement or pension benefit cuts. Past federal budgets have included large cuts to the Medicare and Medicaid programs and future federal budgets may make additional cuts. Management is unable to determine what impact, if any, future federal and/or state budget challenges may have on the operations and financial condition of the Obligated Group.

Some of the challenges caused by the disruptions in the credit markets and general economic conditions are further highlighted below. These and other risks may adversely affect members of the Obligated Group and jeopardize their ability to generate revenues and may jeopardize the Institution’s ability to make payments under the Loan Agreements and, consequently, make payments on the Series 2019 Bonds. There can be no assurance that the financial condition of the members of the Obligated Group and/or the utilization of their facilities will not be adversely affected by any of these circumstances.

Early Redemption

Pursuant to the terms of the Bond Indenture, the Series 2019 Bonds are subject to optional, extraordinary, special and mandatory redemption prior to maturity. See the caption “THE SERIES 2019 BONDS—Redemption Provisions” herein.

Potential Changes to Tax Treatment of the Series 2019 Bonds

Proposals to alter or eliminate the exclusion of interest on tax-exempt bonds from gross income for some or all taxpayers have been made in the past and may be made again in the future. The tax reform legislation passed by Congress in December 2017 and signed into law by President Trump effective January 1, 2018, included various changes to provisions of the Code relating to tax-exempt bonds. Future legislative proposals, if enacted, could alter the federal income tax treatment of the Series 2019 Bonds described under the heading “TAX MATTERS” herein.

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Whether or not enacted, such proposals could adversely affect the market value or marketability of the Series 2019 Bonds. Certain legislative proposals, if enacted, could tax all or a portion of the interest on tax-exempt bonds, including the Series 2019 Bonds, for certain taxpayers under the regular income tax, the alternative minimum tax or otherwise, and could apply to bonds issued before, on, or after the date of enactment.

It is unclear whether any legislation will be enacted affecting the tax treatment of interest on the Series 2019 Bonds. If any such legislation is retroactive and applies to tax-exempt bonds previously issued for the benefit of the Obligated Group, including the Series 2019 Bonds, the adoption of any such legislation could adversely affect the market value or marketability of the Series 2019 Bonds and the financial condition of the Obligated Group. In addition, the adoption of any such legislation could increase the cost to the Obligated Group of other outstanding Indebtedness or the financing of future capital needs.

Uncertainty of Revenues

Each series of Series 2019 Bonds is a special, limited obligation of the Authority payable by the Authority solely from payments to be made by the Obligated Group under the related Loan Agreement and on the related Series 2019 Master Note and from certain other funds held by the Bond Trustee under the related Bond Indenture. The ability of the Obligated Group to make payments under the related Loan Agreement and on the related Series 2019 Master Note is dependent upon the generation of revenues by the facilities in the amounts necessary to pay the principal of, premium, if any, and interest thereon, as well as other operating and capital expenses. The success of the facilities of the members of the Obligated Group depends upon: government regulations, the maintenance of high future occupancy levels at the facilities by eligible residents who will be able to pay the entrance fees, monthly service fees and health care fees, the capabilities of the management of the facilities and future economic and other conditions which are unpredictable. Any of these factors may affect revenues and payment of debt service on the Series 2019 Bonds. No representation or assurance can be made that revenues will be realized by the facilities in amounts sufficient to make the required payments on the Series 2019 Bonds.

Failure to Achieve and Maintain Occupancy and Turnover

The economic feasibility of the Obligated Group depends in large part upon the ability of the Obligated Group to maintain substantial occupancy and turnover of residents at its various facilities throughout the term of the Series 2019 Bonds as well as achieve and maintain substantial occupancy on the timetable forecast by management of the Institution. This depends to some extent on factors outside management’s control, such as right of residents to terminate residency agreements, subject to the conditions provided in the residency agreements. Moreover, if (i) a substantial number of residents live beyond the anticipated life expectancies assumed by the Obligated Group; (ii) the permanent transfers to the health care centers are substantially different than assumed by the Obligated Group; or (iii) market changes require a reduction in the amount of the entrance fees payable by new residents, the receipt of additional entrance fees would be curtailed, and, consequently, the revenues of the Obligated Group would be impaired. Such impairment would also result if the Obligated Group is unable to remarket units that become available when residents die, withdraw, or are permanently transferred to the health care center or any other facility. If the Obligated Group fails to achieve and maintain occupancy levels and turnover of residents, there may be insufficient funds to pay the debt service on the Series 2019 Bonds. See “THE PROJECT” in APPENDIX A.

Adequacy of Remedies

There can be no assurance that upon an acceleration the amount of money available will be adequate to repay the Obligated Group’s debt. Furthermore, whatever is realized will be distributed pro rata to all holders of Master Notes under the Master Indenture.

Utilization Demand

Factors that could affect demand for services of the facilities of the members of the Obligated Group include: (i) efforts by insurers and governmental agencies to reduce utilization of skilled nursing home and long-term care facilities by such means as preventive medicine and home health care programs; (ii) advances in

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scientific and medical technology; and (iii) increased or more effective competition from nursing home and long-term care facilities now or hereafter located in the service areas of the Obligated Group’s facilities.

Competition

The facilities of the members of the Obligated Group are located in areas where other continuing care facilities and other competitive facilities exist and may face additional competition in the future as a result of the construction of new housing or continuing care facilities in their respective primary market areas. There may also arise in the future competition from other forms of housing for the elderly or continuing care facilities, some of which may be designed to offer similar facilities, but not necessarily similar services, at lower prices.

Construction Risks

There can be no assurance given that those portions of the Project that involve construction will be completed, or that such portions can be completed for the cost and within the time as set forth in this Official Statement. Failure to complete such portions of the Project, or to complete them in a timely fashion at the estimated cost could adversely affect the ability of the Note Obligors to generate sufficient revenues to continue their planned operations and to make payments with respect to the Series 2019 Bonds. See “THE PROJECT” in APPENDIX A.

Whether or not such portions of the Project will be completed on schedule depends upon a large number of factors, many of which may be beyond the control of the Institution. Such factors include, without limitation, adverse weather, strikes, delays in the delivery of or shortages of materials, delays in the issuance of required building permits, environmental restrictions or similar unknown or unforeseeable contingencies. There can be no assurance that such portions of the Project will conform to construction specifications or state or local regulations. The occurrence of any of the foregoing could result in increases in construction costs or considerable delays in, or complete impossibility of, completion of such portions of the Project, resulting in a failure to achieve anticipated operating results. Although it is anticipated that the proceeds of the Series 2019 Bonds and anticipated investment earnings thereon and certain funds of the Institution, will be sufficient to complete the construction and equipping of such portions of the Project, construction costs could exceed the amounts originally forecast due to a number of factors, including construction delays and changes authorized by the Institution.

Malpractice Claims and Losses

The operations of the facilities of the members of the Obligated Group may be affected by increases in the incidence of malpractice lawsuits against nursing homes and continuing 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. It is not possible at this time to determine either the extent to which malpractice coverage will continue to be available to the Obligated Group or the premiums at which such coverage can be obtained.

State Budgets

Many states, including Illinois and Missouri, face significant financial challenges such as the erosion of tax revenues which may cause shortfalls between state revenue and state spending demands. Current and future state budget challenges may negatively affect the health care industry and facility residents in a number of ways, including, but not limited to, reductions or delays in Medicaid reimbursement or pension benefit cuts. Additionally, Congressional health care reform proposals to cap the federal share of Medicaid expenditures or “block grant” the Medicaid program could further shift rising costs to the states, exacerbating current budget challenges. The financial challenges facing the State of Illinois and the State of Missouri may negatively affect the Obligated Group in a number of ways; however, management of the Institution cannot anticipate these effects at this time. See the captions “BONDOWNERS’ RISKS – Payment for Health Care Services - Health Care Reform” and “Medicare and Medicaid Programs - Illinois.”

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Sale of Personal Residences

It is anticipated that a number of prospective residents of the facilities of the Obligated Group will be required to sell their current homes to pay the entrance fee prior to occupancy or to meet other financial obligations under their residency agreements. If prospective residents encounter difficulties in selling their current homes due to local or national economic conditions affecting the sale of residential real estate, such prospective residents may not have sufficient funds to pay the entrance fee or to meet other financial obligations under their residency agreements, thereby causing a delay in the marketing of newly constructed units or remarketing of vacated units, either of which would have an adverse impact on the revenues of the Obligated Group.

Rights of Residents

The members of the Obligated Group enter into residency agreements with their residents. For more information about the residency agreements, see APPENDIX A – “FACILITIES AND SERVICES OF THE OBLIGATED GROUP – Residency Agreements.” Although these agreements give to each resident a contractual right to use space and not any ownership rights in the respective facilities of the Obligated Group, in the event that the Bond Trustee or the owners of the Series 2019 Bonds seek to enforce any of the remedies provided by the Bond Indentures upon the occurrence of a default or the Master Trustee seeks to enforce remedies under 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 Authority or the owners of the Series 2019 Bonds and a resident of a facility who has fully complied with all the terms and conditions of his or her Residency Agreement.

Organized Resident Activity

The Obligated Group may, from time to time, be subject to pressure from organized groups of residents seeking, among other things, to raise the level of services or to maintain the level of a particular facility’s monthly service fees or other charges without increase. In addition, the Obligated Group may be subject to conflicting pressures from different groups of residents, some of whom may seek an increase in the level of services while others wish to hold down monthly service fees and other charges. No assurance can be given that the Obligated Group will be able to satisfactorily meet the needs of such resident groups.

Additional Indebtedness

The Master Indenture permits the members of the Obligated Group to issue Additional Indebtedness secured by Master Notes on a parity with the other Outstanding Master Notes, including the Series 2019 Master Notes, as well as Additional Indebtedness not secured by Master Notes. See “SUMMARY OF THE MASTER INDENTURE – Limitations on the Incurrence of Additional Indebtedness” in APPENDIX C hereto. In the future the issuance of such obligations could increase the Obligated Group’s debt service and repayment requirements in a manner which would adversely affect debt service coverage on the Series 2019 Bonds.

Amendments to Documents

Certain amendments to the Master Indenture, the Bond Indentures and the Loan Agreements may be made without the consent of the owners of the applicable series of Series 2019 Bonds and other amendments may be made with the consent of the owners of a majority in aggregate principal amount of all outstanding Series 2019 Bonds of a series. Such amendments could affect the security for each Series 2019 Bonds. Certain amendments may be made with the consent of the owners of 100% (in certain circumstances 80%) in aggregate principal amount of all of an outstanding series of Series 2019 Bonds. Such amendments could also affect the security for such Series 2019 Bonds. See the captions “SUMMARY OF THE BOND INDENTURES – Supplemental Bond Indenture Not Requiring Consent of Bondowners,” “– Supplemental Bond Indenture Requiring Consent of Bondowners,” “- Supplemental Loan Agreements Not Requiring Consent Of Bondowners,” “– Supplemental Loan Agreements Requiring Consent Of Bondowners” in APPENDIX C hereto.

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Additionally, court proceedings relating to bond transactions may result in modifications to transaction documents without the consent of the owners of such bonds or related obligations and such modifications may adversely affect the security therefor and the rights and remedies of such owners.

Laws and Regulations Governing Senior Living Facilities

General. Senior living facilities, including those owned by the members of the Obligated Group (“Members”, and each individually a “Member”), are subject to various licensing, permit, certification, accreditation, and other governmental requirements. These include, but are not limited to, requirements relating to state licensing agencies, accreditation organizations, and private payors. Renewal and continuance of certain of these licenses, permits, certifications, accreditations and approvals are based upon inspections, surveys, audits, investigations or other review, some of which may require or include affirmative action or response by the Obligated Group. An adverse determination could result in a loss, fine or reduction in the Obligated Group’s scope of licensure, certification or accreditation, could affect the ability to undertake certain expenditures, or could reduce the payment received or require the repayment of the amounts previously remitted.

Federal and State Fraud and Abuse Laws. In addition to general regulations, the Members are also subject to federal and state laws that govern financial and other arrangements between health care providers providing services to government health care program (e.g. Medicare and Medicaid) beneficiaries. These federal laws, commonly known as the Anti-Kickback Statute, the Stark Law and the False Claims Act, seek to protect the federal health care programs (e.g. Medicare and Medicaid) from fraud and abuse (collectively, the “Federal Healthcare Fraud Laws”). The Medicare and Medicaid programs are discussed in more detail below under “Payment for Health Care Services.” The Federal Healthcare Fraud Laws are complex, heavily enforced and subject to frequent amendment. In addition, qui tam or “whistleblower” lawsuits under the False Claims Act allows private individuals to bring actions on behalf of the government. Violation of the Federal Healthcare Fraud Laws may result in significant financial penalties, fines, exclusion from the federal health care programs and/or criminal liability. The cost of defending such an action, the time and management attention consumed and the facts of a case may dictate settlement. Regardless of the merits of a particular case, a health care provider could experience materially adverse settlement costs, as well as materially adverse costs associated with the implementation of any settlement agreement or corporate integrity agreement. Prolonged and publicized investigations could also damage the reputation and business of a health care provider, regardless of outcome.

Additionally, a number of states, including Missouri and Illinois, have passed health care fraud and abuse laws similar or broader in scope than the Federal Healthcare Fraud Laws. Violation of state fraud and abuse laws may also result in significant financial penalties, fines, exclusion from the federal health care programs and/or criminal liability.

Although each of the Members has a compliance program designed to help ensure material compliance with laws, rules and regulations affecting the health care industry, including the Federal Healthcare Fraud Laws and similar state laws, these policies and procedures may not be wholly effective. If a Member is alleged or found to have violated such laws, rules or regulations or if government health care program payments are suspended due to an allegation of fraud, the Obligated Group’s operations and financial condition could be materially adversely affected. At the present time, management of the Obligated Group is not aware of any pending or threatened claims, investigations or enforcement actions regarding any applicable federal or state statutes which, if determined adversely to the Obligated Group would have a material adverse effect on the financial condition of the Obligated Group.

Federal and State Privacy Laws. As health care providers, the Members are also subject to many federal and state laws that regulate how the Members handle certain patient health information and restrict the use and disclosure of that information, including medical and billing records. Chief among such laws is the federal Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing Omnibus Rule in 2013 (the “HITECH Act”). HIPAA “covered entities” – health plans, health care clearinghouses, and certain health care providers – and their “business associates” must comply with HIPAA. HIPAA applies to “protected health information,” defined generally as individually identifiable health information transmitted or

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maintained in any form or medium (“PHI”). The HIPAA privacy regulations provide individuals with the right to access, amend, and obtain an accounting of their own health information and restrict how and for what purposes providers use and disclose that information. The Members are required to limit disclosures to only the minimum amount of information reasonably necessary to accomplish the intended purpose.

HIPAA’s security regulations require the Members to safeguard the confidentiality, integrity, and availability of electronic PHI that they create, receive, maintain, or transmit. The Members must protect against reasonably anticipated threats or hazards to the security of such information and against the unauthorized use or disclosure of such information. HIPAA provides for the imposition of civil and criminal penalties if PHI is improperly used or disclosed or if HIPAA security requirements are not met. Civil monetary penalties can be for amounts up to approximately $56,000 per violation with a maximum of approximately $1.7 million in a calendar year for violations of the same requirement, with future adjustments for inflation. The HITECH Act strengthened HIPAA enforcement provisions, authorized the United States Department of Health & Human Services to audit providers for HIPAA compliance, and authorized state attorneys general to bring civil actions for HIPAA violations. Regulations that took effect in late 2009 also require business associates to notify covered entities, who in turn must notify affected individuals and government authorities, of data security breaches involving unsecured PHI, and imposed new requirements on HIPAA business associate agreements. The Omnibus Rule also clarified a covered entity’s notification and reporting requirements in the event of a breach of unsecured protected health information. This reporting obligation supplements state laws that also may require notification in the event of a breach of personal information.

In operating their businesses, the Members may be regulated either as a “covered entity” or a “business associate” under HIPAA depending on the circumstances. The Members are also subject to state laws that may be more restrictive than HIPAA and tort claims based on violations of privacy or failure to protect data security. Active enforcement of state and federal privacy and security laws is expected to continue, as well as the associated costs of compliance with these laws. The Members have developed policies, procedures and practices that management of the Obligated Group believes address federal and state privacy and security standards and requirements. However, the Members cannot assure that their potential noncompliance with such privacy and security regulations will not have a material adverse effect on their operations and financial condition.

State Licensure, Certification and Regulation

Certain of the Obligated Group’s facilities are operated as skilled nursing facilities (“SNFs”), independent living facilities and/or assisted living facilities (“ALFs”) providing services, including, but not limited to, long-term care and retirement services. The following paragraphs briefly describe the Obligated Group’s facilities and services that are subject to licensing, certification and/or regulation for the states in which the Members operate. Management of the Obligated Group believes the Members are in compliance with all applicable state licensure and certification requirements and regulations. Failure to comply with any such state-specific licensure and certification requirements or regulations can result in fines, penalties or revocation of licensure, and may have a material adverse effect on the operations or financial condition of the Obligated Group. No assurance can be given as to the effect of existing laws, regulations and standards for licensure or certification, or of any future changes in such laws, regulations and standards, on future operations of the Obligated Group in the states in which it operates.

Illinois Regulations Governing ALFs. The Members’ operation of ALFs in Illinois is subject to regulation by the Illinois Department of Public Health (“IDPH”), which licenses and regulates “assisted living establishments” in Illinois pursuant to the Assisted Living and Shared Housing Act (the “ALSH Act”). Annual licensure and on-site review of an assisted living establishment by the IDPH is required to continue operating ALFs in Illinois. Licensed assisted living establishments in Illinois are subject to regulation with respect to a number of matters including: mandatory services; construction standards; personnel qualifications; sanitation; physical plant and equipment; safety plans; residency agreement requirements; and record keeping and financial requirements.

According to the ALSH Act, for purposes of (i) intravenous therapy or feedings, (ii) gastrostomy feedings, (iii) insertion, sterile irrigation, replacement of catheter (except for routine maintenance of urinary catheters) and (iv) sterile wound care, a licensed health care professional may not be employed by the owner or operator of the establishment, its parent entity, or any other entity with ownership common to either the owner or operator of the establishment or parent entity, including but not limited to an affiliate of the owner or operator of the establishment.

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This provision is not applicable to residents admitted to an ALF under a life care contract if the facility has both an ALF and SNF. Any licensed health care professional providing health-related or supportive services at an ALF must be employed by an entity licensed by the IDPH under the Nursing Home Act or the Home Health, Home Services, and Home Nursing Agency Licensing Act. These provisions of the ALSH Act could have some impact on Members of the Obligated Group who establish or partially own their own home health agency for some portions of services provided to residents.

Illinois Regulations Governing SNFs. The Members’ operation of SNFs in Illinois is subject to regulation by the IDPH’s Bureau of Long-Term Care, which licenses and regulates nursing homes in Illinois pursuant to the Illinois Nursing Home Care Act. Annual licensure and on-site review of nursing homes by the IDPH is required to continue operating SNFs in Illinois. IDPH also assists CMS with certifying these facilities for participation in federal payment reimbursement programs. Illinois’ licensure surveys are generally conducted on-site over a three- to four-day period during which the state’s inspection teams evaluate all aspects of resident care and nursing home procedures and practices, assessing facility compliance with more than 1,500 specific state and federal standards. Samples of specific areas of care reviewed include resident rights, access to care, activities, assessment and care plans, health care and dietary services, housekeeping, staffing, quality of care and quality assurance.

Missouri Regulations Governing ALFs and SNFs. The Members’ operation of ALFs and SNFs in the State of Missouri is subject to regulation by the Missouri Department of Health and Senior Services (“MDHSS”), which licenses such facilities pursuant to the Missouri Omnibus Nursing Home Act (the “Missouri Nursing Home Act”) and its implementing MDHSS regulations. Licensure by MDHSS is required to continue operating ALFs and SNFs in Missouri. Such licensure includes, among other requirements, successful completion of an examination, licensure and periodic renewal, payment of a licensing fee, and fulfilling continuing education and training requirements. Facility licenses are issued for a two-year period unless sooner revoked. MDHSS inspects licensed facilities on a semi-annual basis, at least one of which is unannounced. For SNFs participating in Medicare and Medicaid, MDHSS conducts surveys for certification at the same time it conducts inspections for state licensure; however, certification surveys are required every 9 to 15 months. As required by the Nursing Home Act’s licensing standards, each of the Members’ facilities located in the State of Missouri, as applicable, employs an administrator who is licensed as a nursing home administrator by the Missouri Board of Nursing Home Administrators.

Payment for Health Care Services

Third-Party Payment Programs, Generally. A significant portion of the net resident service revenue of the Obligated Group is derived from third-party payors that reimburse or pay for the services and items provided to residents covered by such third parties, including governmental health care programs (Medicare and Medicaid), and private health plans and insurers, health maintenance organizations, preferred provider organizations and other managed care payors. Many of these third-party payors make payments to the Members at rates that may be determined other than on the basis of the actual costs incurred in providing services and items to residents. Accordingly, there can be no assurance that payments made under these programs will be adequate to cover the actual costs incurred by the Obligated Group in furnishing health care services and items. In addition, the financial performance of the Obligated Group could be adversely affected by the insolvency of, or other delay in receipt of payments from, third-party payors, which provide coverage for services to the Obligated Group’s residents.

Health Care Reform. The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively referred to as the “Affordable Care Act”) has significantly changed the United States health care delivery system, addressing almost all aspects of health care facility and provider operations, including the delivery of health care services, the financing of health care costs, health care provider reimbursement and the legal obligations of health care providers, insurers, employers and consumers. Key changes include cost containment measures, such as reimbursement rate reductions; new payment models which tie reimbursement to quality of care, efficiency and clinical integration initiatives and which may result in lower health care provider reimbursement and utilization changes; fraud and abuse enforcement enhancements; health insurance market reforms; and Medicaid expansion. Additionally, the Affordable Care Act includes a number of initiatives that impact skilled nursing facility reimbursement. Each of these Affordable Care Act initiatives have required health care providers to assess, and potentially alter, their business strategy and practices. While the Affordable Care Act may result in many providers receiving reduced payments for care, millions of previously uninsured Americans have obtained health insurance coverage as a result of the Affordable

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Care Act. There is no assurance that federal payments made as a result of reimbursement reform measures will be sufficient to cover the Obligated Group’s skilled nursing facility costs. In addition, any future Congressional action related to value-based purchasing or adjustments to market based updates could negatively affect the Obligated Group’s revenues. While the Members are currently operating within the framework of the Affordable Care Act, management cannot predict with any reasonable degree of certainty or reliability any ultimate effects of the law and its accompanying regulations on the Obligated Group’s operations or financial condition.

Due to the controversial nature of health care reform generally, implementation of the Affordable Care Act has been and remains politically controversial, making its future uncertain. The Affordable Care Act has continually faced legal and legislative challenges, including repeated repeal efforts, since its enactment. President Donald J. Trump and current Republican leaders of Congress have cited health care reform, and particularly, repeal and replacement of the Affordable Care Act, as a key goal. To that end, Congressional leaders have introduced various Affordable Care Act repeal bills. While no bills wholly repealing the Affordable Care Act have passed both chambers of Congress, a tax reform bill passed in late 2017 (the “Tax Cuts and Jobs Act of 2017”) eliminates a key provision of the Affordable Care Act, known as the “individual mandate” – a requirement that most Americans maintain “minimum essential” health insurance coverage or pay a yearly tax penalty to the federal government. Management cannot predict the impact the elimination of the individual mandate tax penalty, a full repeal or additional piecemeal repeal, or any health care reform replacement legislation would have on the Obligated Group’s operations or financial condition, though such effects could be material. In particular, any legal, legislative or executive action that substantially reduces the number of individuals with health insurance coverage, reduces government program (e.g. Medicare or Medicaid) reimbursement rates, or otherwise significantly alters the health care delivery system or health insurance markets could have a material adverse effect on the Obligated Group’s business or financial condition.

Tax Reform. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 which lowered corporate and individual tax rates and eliminated certain tax preferences and other tax expenditures. The Tax Cuts and Jobs Act of 2017 also repealed effective January 1, 2019 the individual mandate. Such repeal of the individual mandate may result in a higher uninsured rate, which may adversely affect the financial condition of the Obligated Group. The Tax Cuts and Jobs Act of 2017 also eliminates the issuance of tax-exempt bonds to advance refund outstanding tax-exempt bonds. This could materially impact the market price or marketability of the Series 2019 Bonds (and outstanding bonds issued by and on behalf of the Obligated Group) and/or availability of borrowed funds for the Obligated Group, particularly for capital expenditures, as well as the operations, financial position and cash flows of the Obligated Group.

Federal Debt Limit Increase. Through legislation, the federal government has created a debt “ceiling” or limit on the amount of debt that may be issued by the United States Treasury. In the past several years, political disputes have arisen within the federal government related to debt ceiling increase authorization. Any failure by Congress to increase the federal debt ceiling may impact the federal government’s ability to incur additional debt, pay its existing debt, or to satisfy its obligations relating to the Medicare and Medicaid programs. In February 2018, President Trump signed a bill suspending the debt ceiling to March 1, 2019. Management is unable to determine what impact any reinstatement of the debt ceiling or the failure to increase the federal debt ceiling if it is reinstated may have on the operations and financial condition of the Obligated Group, although such impact may be material. Additionally, the market price or marketability of the Series 2019 Bonds in the secondary market may be materially adversely impacted by any failure to increase the federal debt ceiling.

Medicare and Medicaid Programs. Medicare and Medicaid are the commonly used names for health care reimbursement or payment programs governed by certain provisions of the federal Social Security Act. Medicare is an exclusively federal program and Medicaid is a combined federal and state program. Medicare is administered by the Centers for Medicare and Medicaid Services (“CMS”) and provides certain health care benefits to beneficiaries who are 65 years of age or older, blind, disabled or qualify for the End Stage Renal Disease Program. Medicare Part A provides reimbursement under a prospective payment system (“PPS”) for extended-care services furnished to Medicare beneficiaries who are admitted to skilled nursing facilities after at least a three-day stay in an acute care hospital. Generally, coverage under Part A is only available if the need for such services is related to the reason for the hospitalization and the patient is admitted to the nursing facility within thirty days of discharge from the hospital. Further, such coverage is limited to 100 days per “spell of illness”. There is no annual limitation on the number of covered “spells of illness”. The patient must pay a deductible and coinsurance amounts for the twenty-first and each

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of the remaining days of covered care per “spell of illness.” Covered services include supervised nursing care, room and board, social services, physical, speech, and occupational therapies, certain pharmaceuticals and supplies, and other necessary services provided by nursing facilities.

Currently, Medicare payments to skilled nursing facilities are based upon certain resource utilization group (“RUG”) per diem payment rates developed by CMS that provide various levels of reimbursement based upon a patient case-mix classification system. Pursuant to the recently released fiscal year 2019 Skilled Nursing Facility PPS final payment rules (“2019 SNF PPS Rules”), effective October 1, 2019 the RUG payment methodology will be replaced with a revised methodology called the “SNF Patient-Driven Payment Model” (“PDPM”). Reimbursement under the PDPM will be determined based on ICD-10 diagnosis codes and patient characteristics and adjusted based on the services rendered in order to account for varying costs throughout the stay. Per CMS, the goals of the PDPM are to tie payment to patient conditions and needs rather than the volume of services and to reduce provider paperwork burdens. Management cannot predict the effects of the PDPM on the Obligated Group’s operations or financial condition.

The 2019 SNF PPS Rules also finalized updates to the SNF Value-Based Purchasing Program (“SNF VBP Program”) and SNF Quality Reporting Program (“SNF QRP”). As of October 1, 2018, the SNF VBP Program commenced applying either positive or negative incentive payments to services furnished by skilled nursing facilities based on their performance on the program’s readmissions measure during calendar year 2017. Notable updates to the SNF QRP rules include an increase in the number of years of data used to calculate the Medicare Spending per Beneficiary and Discharge to Community measures for purposes of display on the Nursing Home Compare website from one to two years starting in calendar year 2019, and the addition of a quality measure removal factor that permits CMS to consider whether the costs associated with a measure outweigh the benefits of its continued use. Management cannot predict the Obligated Group’s performance under these programs or the corresponding effects on the Obligated Group’s operations or financial condition. See also “–Industry Trend Toward Alternative Payment Models” below.

Medicare Part B provides reimbursement for certain physician services, limited drug coverage, and other outpatient services, such as therapy and other services, outside of a Medicare Part A covered patient stay. Payment for these services is determined according to the Medicare Physician Fee Schedule (“MPFS”). The formula for MPFS payment rate updates was recently replaced by The Medicare Access and CHIP Reauthorization Act, which aligns payment to quality and value measures and participation in alternative payments models.

During the Fiscal Year ended December 31, 2017, approximately 20.13% of the operating revenues of the Obligated Group were derived from Medicare-certified skilled nursing care services. During the ten-month period ended October 31, 2018, approximately 19.79% of the operating revenues of the Obligated Group were derived from Medicare-certified skilled nursing care services.

Medicaid is a state-administered program financed by state funds and matching federal funds and is designed to pay providers for care given to the medically indigent and others who receive federal aid. During the Fiscal Year ended December 31, 2017, approximately 3.40% of the operating revenues of the Obligated Group were derived from the Medicaid program. During the ten-month period ended October 31, 2018, approximately 2.99% of the operating revenues of the Obligated Group were derived from the Medicaid program. Significant changes have been and may continue to be made in the Medicaid program in response to state budgetary constraints and other factors. These changes could have a material adverse impact on the financial condition of the Obligated Group. See APPENDIX A – “RESULTS OF OPERATIONS - SOURCES OF REVENUES.”

The following paragraphs discuss Medicaid reimbursement rules for the states in which the Obligated Group operates.

The Medicaid programs in Missouri and Illinois generally reimburse providers at levels less than the actual costs incurred by the members of the Obligated Group. This shortfall in funding has forced the members of the Obligated Group to use gifts and earnings on endowment funds to cover such shortfalls. As the population continues to age, the number of Medicaid-eligible residents served by the members of the Obligated Group will likely continue to increase, and there can be no assurance that gifts and earnings on endowment funds will remain

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adequate to cover any shortfall. If that should occur, it could adversely impact the ability of the Obligated Group to meets its obligations with respect to the Series 2019 Bonds and other indebtedness of the Obligated Group.

Illinois. In Illinois, Medicaid is administered by the Illinois Department of Healthcare and Family Services (“IDHFS”). The State of Illinois continues to be adversely affected by fiscal considerations that affect the budget for programs such as Medicaid. Historically, federal payments and the amount appropriated by the Illinois General Assembly for payment of Medicaid claims have not been sufficient to reimburse health care providers for their actual costs in providing services to Medicaid patients. Also, the state has routinely failed to pay Medicaid claims on a timely basis due to state budget challenges. The reduction in Medicaid services and programs, as well as any failure by the State to pay Medicaid claims on a timely basis, may have an adverse effect on the Institution’s cash flow and financial condition. Illinois has expanded Medicaid eligibility in accordance with the Affordable Care Act.

Missouri. Missouri’s Medicaid program is called MO HealthNet and is administered through the MO HealthNet division of the Missouri Department of Social Services. MO HealthNet covers, with exceptions, the same services covered by Part A and Part B of the Medicare program. Missouri has not expanded Medicaid eligibility in accordance with the Affordable Care Act.

Medical Assistance Programs. The Missouri medical assistance program provides medical care for persons who are elderly, permanently and totally disabled, or blind.

Nursing Care Facilities. Missouri has two nursing care programs: (1) supplemental nursing care and (2) Medicaid vendor payments. Supplemental nursing care provides monthly cash benefits to supplement the costs of living in a licensed nursing facility or a licensed residential care facility. The supplement also provides eligible persons monthly cash benefits for personal needs unless such needs are being met by Missouri’s Department of Mental Health.

Medicaid vendor payments do not provide a direct cash benefit. Rather, Medicaid pays the participating nursing home directly for nursing care charges above the amount the resident is expected to pay. A resident covered under this program is expected to use all available income to pay for care except for a personal needs standard. The recipient may also keep enough to pay medical insurance premiums. In some cases, the recipient may allot some or all income to a spouse or dependents who remain outside the nursing facility.

Nursing facilities are paid rates that are intended to be adequate to meet costs incurred by efficiently and economically operated facilities to provide services in conformity with state and federal laws, regulations, and quality and safety standards. Prospective per diem rates are established on the basis of the individual Medicaid covered days of care multiplied by the facility’s per diem rate. The per diem rate is the lower of: (a) the Medicare per diem rate; (b) the per diem rate established by the state; or (c) the established long-term care ceiling. Rates may not exceed: (a) rates to private pay patients; or (b) Medicare rates. Rates may be adjusted when there is a global per diem rate adjustment or if qualified, when there is a special per diem rate adjustment. Rates may also be adjusted upon request: (a) under extraordinary circumstances; (b) if there has been an increase in professional service hours; or (c) when additional beds are added. Payment is reduced or withheld if adequate cost reports are not timely submitted.

Home and Community Based Facilities. Missouri also provides home- and community-based services. Individuals who would otherwise be forced to live in nursing homes may be able to stay in their own homes and be provided with homemaker chore or respite care services if they meet certain eligibility requirements. To be eligible, individuals must be 63 years of age or older, have a monthly income below a set limit, need the level of care that would be provided in a nursing facility and have been authorized for homemaker chore or respite care services and meet the general requirements for medical assistance.

Potential Statutory and Regulatory Changes to Medicare and Medicaid. Government revenue sources, such as Medicare and Medicaid, are subject to change due to statutory and regulatory changes, court decisions, administrative rulings, policy interpretations, determinations by Medicare administrative contractors, and government funding restrictions, all of which may materially increase or decrease the rate of program payments to nursing facilities. There is no assurance that payments under these programs will in the future remain at levels

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comparable to the present levels or be sufficient at the present, or in the future, to cover all the operating and fixed costs allocable to Medicare and Medicaid patients.

Due to health care reform as well as continuing political and financial pressures, the legal and regulatory environment surrounding the Medicaid and Medicare programs has been changing and is expected to continue to change. Future changes to Medicare and Medicaid may alter program features including: (1) services eligible for payment; (2) rates of payment; (3) eligibility requirements to participate or qualify for different levels of payment/reimbursement; (4) consequences of violations; (5) rates and requirements relating to additional payments unrelated to services offered to patients; (6) guidelines relating to interactions between the participating healthcare providers, third party payors and the federal and state governments; and (7) payment methodologies.

The federal and state governments have in the past, and may in the future, reduce federal health care program spending (e.g. Medicare and Medicaid spending), either pursuant to budget reductions or in accordance with health care reform laws or efforts. Federal or state budget authorization delays or other challenges may cause Medicare and Medicaid reimbursements to be paid late. Such spending reductions and/or payment delays may have a material adverse effect upon facilities that accept Medicare and Medicaid payments.

Billing Practices. Medicare and Medicaid require that extensive financial information be reported on a periodic basis and in a specific format or content. These requirements are numerous, technical and complex and may not be fully understood or implemented by billing or reporting personnel. With respect to certain types of required information, the False Claims Act may be violated by acting with deliberate ignorance or recklessness in the submission of information to the government even without any specific intent to defraud. New billing systems, new medical procedures and procedures for which there is not clear guidance may all result in liability. Providers participating in Medicare and Medicaid are subject to various government reviews, audits and investigations to verify compliance with applicable payment laws and regulations. CMS and some state Medicaid programs, including Illinois and Missouri, engage a range of third party contractors to conduct extensive reviews of claims data and provide records to evaluate appropriateness of claims submitted for payment. Audit contractors may identify overpayments based on coverage requirements, billing and coding rules or other risk areas. Typically, such contractors can also refer suspected violations of law to government authorities. Adverse determinations from such audits, reviews and investigations can result in criminal or civil liability and may include, for serious or repeated violations, exclusion from participation in the Medicare program. While management of the Obligated Group believes that the Obligated Groups’ billing practices are consistent with Medicare criteria, those criteria are often vague and subject to interpretation and there can be no assurance that aggressive anti-fraud actions will not adversely affect the business of the Obligated Group.

Medicare and Medicaid Conditions of Participation. On October 4, 2016, CMS published a final rule including extensive revisions to the conditions of participation for long-term care facilities that took effect on November 28, 2016 with additional phases becoming effective November 28, 2017 and November 28, 2018. These new regulations will require skilled nursing facilities to review and modify multiple operational and system activities as well as operational and compliance policies and procedures. In addition, the new regulations require periodic new facility wide assessment of resources. Consequently, the new regulations could have a material adverse effect on the Obligated Group. The referenced governmental and private agencies may promulgate additional new regulatory provisions from time to time, and it is not possible to predict the effect of any such future promulgations on the Obligated Group.

Industry Trend Toward Alternative Payment Models. It is generally expected that alternative payment models that condition reimbursement on patient outcome measures (such as the SNF VBP Program discussed above) will become more common and involve a higher percentage of reimbursement amounts. As discussed above, the Affordable Care Act contains a number of health care delivery reform measures intended to promote value-based purchasing in the federal health care programs and commercial third-party payors are increasingly implementing value-based purchasing and other alternative payment models. This rapid volume-to-value reimbursement shift within the health care industry could present financial challenges for the Obligated Group and the employed or contracted clinicians with whom the Obligated Group partners to deliver care, particularly to the extent they are unable to meet targeted measures.

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Increases in Medical Costs

Because the Obligated Group is obligated to provide a majority of its residents with certain medical care, a deviation from the anticipated mortality rate or medical care requirements of the resident population or substantial unanticipated increases in the cost of medical care could have a negative impact on the operations of the Obligated Group. To the extent the Obligated Group is required to provide such medical care on a continuing basis, no assurance can be given that the Obligated Group will have sufficient funds to meet its anticipated obligations. Residents are required to obtain Medicare Part A, Medicare Part B and supplemental insurance satisfactory to the Obligated Group; however, Medicare does not cover the cost of nursing home care except under certain limited circumstances (including up to 100 days of skilled nursing care following a 3-day hospital stay). In addition, the cost of providing healthcare services may increase due to increases in salaries paid to nurses and other healthcare personnel and due to shortages in such personnel which may require payment of increased wages or the use of employment agencies.

Nursing or Other Staff Shortage

The health care industry occasionally experiences a scarcity of nursing personnel, physical and occupational therapists and other trained health care technicians. Currently, nursing shortages are affecting certain geographic areas. These shortages may result in increased costs and lost revenues from time to time due to the need to hire agency nursing personnel at higher rates, increased compensation levels, and the inability to use otherwise available beds as a result of staffing shortages. Such increased costs and lost revenues could adversely affect the operations or financial condition of the Obligated Group. Additionally, a lack of qualified nursing personnel may also result in reduced occupancy or require the Obligated Group to admit residents requiring a lower level of care, both of which could adversely affect operating results.

Environmental Matters

Health care facilities are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations that address, among other things, operations of facilities and properties owned or operated by such facilities. Among the types of regulatory requirements faced by such facilities are: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos; polychlorinated biphenyls, and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the such facility or hospital; requirements for training employees in the proper handling and management of hazardous materials and wastes; and other requirements. In their role as owners and operators of properties or facilities, such facilities may be subject to liability for investigating and remedying any hazardous substances that have come to be located on the property, including any such substances that may have migrated off of the property. Typical operations of such facilities, include, to some extent in various combinations, the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For this reason, operations of such facilities are susceptible to the practical, financial and legal risks associated with compliance with such laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations or increase their cost or both; may result in legal liability, damages, injunctions or fines, or may trigger investigations, administrative proceedings, penalties or other government agency actions. There can be no assurance that 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 Obligated Group.

Corporate Compliance Program

Each member of the Obligated Group has developed and implemented a compliance program for itself which includes a compliance plan to assist all employees in understanding and adhering to the legal and ethical standards that govern the provision of patient care (the “Compliance Plan”). The Compliance Plan has been designed to (i) comply with the standards set forth in the Federal Sentencing Guidelines for Organizational Defendants and (ii) help assure that the members of the Obligated Group act in accordance with its mission, values and known legal duties.

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Antitrust

Enforcement of the antitrust laws against health care providers is becoming more common, and antitrust liability may arise in a wide variety of circumstances, including physician contracting or employment disputes, third-party contracting, employee relations, and joint venture, merger, affiliation and acquisition activities. In some respects, the application of federal and state antitrust laws to health care is still evolving, and enforcement activity by federal and state agencies appears to be increasing. At various times, health care providers may be subject to an investigation by a governmental agency charged with the enforcement of antitrust laws, or may be subject to administrative or judicial action by a federal or state agency or a private party. Violators of the antitrust laws could be subject to criminal and civil enforcement by federal and state agencies, as well as by private litigants.

The ability to consummate mergers, acquisitions or affiliations may also be impaired by the antitrust laws, potentially limiting the ability of health care providers to fulfill their strategic plans. Liability in any of these or other antitrust areas of liability may be substantial, depending on the facts and circumstances of each case.

Interest Rate Swap / Hedging

Currently, the Institution is a party to two interest rate swap agreements related to the Series 2014B Bonds. No other member of the Obligated Group is a party to any interest rate swap or other hedge agreement. The Institution or any other member of the Obligated Group may enter into additional such agreements in the future.

Any interest rate swap or other hedge agreement to which the Institution or any member of the Obligated Group is a party may, at any time, have a negative value to the Obligated Group. If either a swap or other hedge counterparty or the Institution or any member of the Obligated Group terminates such an agreement when the agreement has a negative value to the Obligated Group, the Obligated Group would be obligated to make a termination payment to the counterparty in the amount of such negative value, and such payment could be substantial and potentially materially adverse to the financial condition of the Obligated Group. A counterparty generally may only terminate such an agreement upon the occurrence of defined termination events such as nonpayment by the Obligated Group, a bankruptcy type event, cross default to specified indebtedness or other swaps, other breaches of covenants in such agreements or the withdrawal of the ratings assigned to the Obligated Group’s indebtedness or a downgrade of such ratings below specified levels.

Many swap agreements require each party to provide additional security for its obligations in certain circumstances including without limitation a downgrade of the rating assigned to the long-term Indebtedness issued on its behalf and the occurrence of certain other events. The Master Indenture permits the Obligated Group to grant a security interest and lien on certain collateral for this purpose.

Bankruptcy

If any member of the Obligated Group were to file a petition for relief under the Federal Bankruptcy Code, such filing would constitute an “Event of Default” under the Master Indenture, which would cause an Event of Default under the Loan Agreements permitting the Bond Trustee, under the terms set forth in the Bond Indentures, to accelerate the payment of principal and interest on the Series 2019 Bonds. In such event, the Obligated Group’s revenues and certain of its accounts receivable and other property acquired after the filing (and under certain conditions some or all thereof acquired within 120 days prior to the filing) would not be subject to the security interests created under the Master Indenture. The filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against any member of the Obligated Group and its property and as an automatic stay of any act or proceeding to enforce a lien upon its property. If the bankruptcy court so ordered, the member’s property, including its accounts receivable and proceeds thereof, could be used for the benefit of the member despite the security interest of the Master Trustee therein, provided that “adequate protection” is given to the lienholder.

In a bankruptcy proceeding, the petitioner could file a plan for the adjustment of its debts which modifies the rights of creditors generally, or any class of creditors, secured or unsecured. 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

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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.

Nature of the Income of the Elderly

A large percentage of the monthly income of the residents of the Project will be fixed income derived from pensions and Social Security. In addition, some residents will be liquidating assets in order to pay the monthly and other fees and other residents may have experienced reductions in investment income as a result of the current economic situation. If, due to inflation or otherwise, substantial increases in fees are required to cover increases in operating costs, wages, benefits and other expenses, many residents may have difficulty paying or may be unable to pay such increased fees. The Obligated Group’s inability to collect from residents the full amount of their payment obligations may jeopardize the ability of the Obligated Group to pay amounts due under the Master Indenture.

Uncertainty of Investment Income

The investment earnings of, and accumulations in, certain funds established pursuant to the Bond Indentures have been estimated and are based on assumed interest rates as indicated. While these assumptions are believed to be reasonable in consideration 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 Indentures 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 Indentures.

Risks Related to Tax-Exempt Status

Tax Exemption for Nonprofit Health Care Providers. The possible modification or repeal of certain existing federal income or state tax laws or other loss by a member of the Obligated Group of the present advantages of certain provisions of the federal income or state tax laws could materially and adversely affect the status of the Obligated Group and thereby the revenues of the Obligated Group. Except for Provident Group, each member of the Obligated Group has obtained a determination that it is an exempt organization described in Section 501(c)(3) of the Code. As exempt organizations, these members of the Obligated Group are subject to a number of requirements affecting their operations. The failure of the members of the Obligated Group to remain qualified as exempt organizations would affect the funds available to the Obligated Group for payments to be made under the Series 2019 Master Notes. Failure of the members of the Obligated Group or the Authority to comply with certain requirements of the Code, or adoption of amendments to the Code to restrict the use of tax-exempt bonds for facilities such as those being financed with proceeds of the Series 2019 Bonds, could cause interest on the Series 2019 Bonds to be included in the gross income of owners or former owners for federal income tax purposes. See “Continuing Legal Requirements Regarding The Series 2019 Bonds” below.

It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of nonprofit corporations. There can be, however, no assurance that future changes in the laws and regulations of the federal, state or local governments will not materially and adversely affect the operations and revenues of the Obligated Group or any future members of the Obligated Group by requiring them to pay income, sales or real estate taxes.

The IRS has issued revenue rulings dealing specifically with the manner in which a facility providing residential services to the elderly must operate in order to maintain its exemption as an organization described in Section 501(c)(3). Revenue Ruling 61-72 holds that an organization providing residential services to the elderly qualified for exemption under Section 501(c)(3) where the organization: (i) was dedicated to providing care and housing to aged individuals who otherwise would be unable to provide for themselves without hardship; (ii) rendered, to the extent of its financial ability, services to all or a reasonable proportion of its residents at substantially below actual cost; and (iii) rendered services that ministered to the needs and the relief of hardship or

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distress among the elderly. Revenue Ruling 72-124 holds that an organization will qualify for exemption under Section 501(c)(3) if it meets the elderly’s special needs for housing, healthcare, and financial security. The need for housing will be met if the facility is specifically designed to meet some combination of the physical, emotional, social, religious, and recreational needs of the elderly. The need for health care will be met if the organization provides or arranges for some form of health care. The need for financial security will be met if the organization is committed to an established policy of maintaining in residence any persons who become unable to pay their charges, and the organization provides its services at the lowest feasible cost. Revenue Ruling 79-18 holds that a facility providing residential services to the elderly may admit only those tenants who are able to pay full rental charges, provided that those charges are set at a level that is within the financial reach of a significant segment of the community’s elderly persons and that the organization maintains in residence those tenants who become unable to pay their monthly charges.

The IRS has audit guidelines which implement a policy to scrutinize more closely the activities of health care providers to ensure that they satisfy the requirements for tax-exempt status. Given these audit guidelines and other related pronouncements by the IRS, it may be more difficult for health care providers to maintain their tax-exempt status. Health care providers, such as the members of the Obligated Group, also may be forced to forego otherwise favorable opportunities for certain joint ventures, recruitment and other arrangements to maintain their tax-exempt status or to avoid other sanctions.

Internal Revenue Service Examination Program. In recent years, the IRS has increased the frequency and scope of its examination and other enforcement activity regarding tax-exempt organizations and tax-exempt bonds. Currently, the primary penalties available to the IRS under the Code are the revocation of tax-exempt status of an organization and a determination that interest on tax-exempt bonds is subject to federal income taxation. Although the IRS has not frequently revoked the 501(c)(3) tax-exempt status of nonprofit corporations, it could do so in the future. The Series 2019A Bonds and the Series 2019B Bonds are expected to be treated as a single issue for federal tax purposes. Loss of tax-exempt status by a member of the Obligated Group or improper use of property financed with proceeds of the Series 2019 Bonds could potentially result in loss of the tax exemption of the interest on the Series 2019 Bonds, and defaults in covenants regarding the Series 2019 Bonds could be triggered. Loss of such tax-exempt status could also result in substantial tax liabilities on income of the Obligated Group. In addition, although the IRS has only infrequently taxed the interest received by holders of bonds that were represented to be tax-exempt, the IRS has examined a number of bond issues and concluded that such bond issues did not comply with applicable provisions of the Code and related regulations. No assurance can be given that the IRS will not examine the purchaser, a Bondowner, the Obligated Group or the Series 2019 Bonds. If the Series 2019 Bonds are examined, it may have an adverse impact on their price and marketability. The Series 2019 Bonds are not subject to early redemption other than as stated herein in the event that the IRS determines that the interest on the Series 2019 Bonds is subject to federal income taxation. Based upon covenants, representations and warranties of the Obligated Group as to the use of the proceeds of the Series 2019 Bonds and as to certain factual matters, Bond Counsel will deliver its opinion as of the issue date of the Series 2019 Bonds in the form attached as APPENDIX D. See “TAX EXEMPTION” and “LEGAL MATTERS” herein.

Tax-Exempt Status of the Series 2019 Bonds. The tax-exempt status of the Series 2019 Bonds is based on the continued compliance by the Authority, the members of the Obligated Group and users of property financed or refinanced with proceeds of the Series 2019 Bonds with certain covenants relating generally to restrictions on the use of the facilities financed or refinanced with the proceeds of such Series 2019 Bonds, arbitrage limitations and rebate of certain excess investment earnings to the federal government. Failure to comply with such covenants with respect to the Series 2019 Bonds could cause interest on the Series 2019 Bonds to become subject to federal income taxation retroactive to the original date of issue of the Series 2019 Bonds. In such event, the Series 2019 Bonds are not subject to redemption solely as a consequence thereof, and the principal thereof may not be accelerated by the Bond Trustee. No additional interest or penalty is payable in the event of the taxability of interest on the Series 2019 Bonds. It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of 501(c)(3) organizations. Thus, there can be no assurance that future changes in the laws and regulations of the federal, state or local governments will not materially and adversely affect the operations and revenues of the members of the Obligated Group by requiring them to pay income or real estate taxes.

Proposed Legislation Regarding Limitations or Elimination of Tax-Exempt Status of Bonds. Tax legislation, administrative actions taken by tax authorities, or court decisions may adversely affect the tax-exempt

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status of interest on the Series 2019 Bonds or otherwise prevent Beneficial Owners of the Series 2019 Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Series 2019 Bonds. Prospective investors should consult with their tax advisors on the foregoing matters as they consider an investment in the Series 2019 Bonds. See also, “Potential Changes to Tax Treatment of the Series 2019 Bonds” above.

Below-Market Interest Loans. 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 certain Continuing Care Contracts come within the scope of the continuing care facility safe harbor or within the statute itself. It will have to be determined whether the Continuing Care Contracts involve a “loan” for purposes of Section 7872. Any determination of applicability of Section 7872 could have an adverse effect on the willingness of residents to enter into the Continuing Care Contracts.

Risks Related to Interest Earned on Investment of Entrance Fees

In connection with IRS audits of certain Life Plan Communities facilities not affiliated with the Obligated Group, the IRS has taken the position that entrance fee payments made by residents of such facilities should be considered “replacement proceeds” for the related tax exempt bonds used to finance such facilities, and therefore the income earned on investment of such entrance fees should be yield restricted and subject to IRS rules against arbitrage. The Obligated Group’s Life Plan Communities facilities charge entrance fees which may be subsequently invested. If the IRS’s current position prevails in the referenced audits with respect to the treatment of earnings on invested entrance fees, it could have a material impact on the Obligated Group, although the magnitude of such impact has not been estimated and cannot be determined at this time.

Property Taxes

The real property tax exemptions afforded to certain not for profit health care providers by state and local taxing authorities in Missouri and in Illinois have been subject to increased scrutiny and challenges. These challenges have been based on a variety of grounds, including allegations that the providers were not engaged in sufficient charitable activities. Currently, seven of the Obligated Group’s Life Plan Communities are subject to payment of property tax. There can be no assurance that additional Obligated Group facilities will not be required to pay property taxes in the future or that property taxes currently paid by a facility will not be increased. To the extent that any member of the Obligated Group is required to pay additional property taxes or is subjected to increased property taxes on any of the real property comprising its existing facilities or the Project, such payments could have a material adverse effect on the financial condition of the Obligated Group.

Sales Taxes

The exemption from sales tax granted to the members of the Obligated Group has been subject to increased scrutiny in Illinois. The sales tax exemption once granted to Meridian Village and LRCA (owner of Concordia Village) were not renewed upon expiration. LHV still maintains its sales tax exemption, however, there can be no assurance that LHV will not lose its exemption upon its expiration and be required to pay sales tax in the future. In addition, although Obligated Group management is not aware or any increased scrutiny of sales tax exemption policies in Missouri, there can be no assurance that the Missouri-based members of the Obligated Group will not be required to pay sales tax in the future. To the extent members of the Obligated Group are required to pay sales taxes, such payments could have a material adverse effect on the financial condition of the Obligated Group.

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Labor Relations

Nonprofit health care providers and their employees are under the jurisdiction of the National Labor Relations Board. No employees of any member of the Obligated Group are currently members of unions or receive union wages and benefits. Any unionization of employees or a shortage of qualified professional personnel could cause an increase in payroll costs beyond those projected. Additionally, members of the Obligated Group cannot control the prevailing wage rates in their respective service areas and any increase in such rates will directly affect the costs of their operations.

Cyber Attacks

The Obligated Group relies on information technology (“IT”) systems, including electronic health records, to process, transmit and store sensitive and confidential data, including the PHI and personally identifiable information of its patients and employees, and proprietary and confidential business performance data. Although the Obligated Group routinely monitors and tests the security of its IT systems and processes and implements appropriate security measures, IT systems are often subject to computer viruses, cyber-attacks by hackers, or breaches due to employee error or malfeasance. Cyber-attacks specifically targeting health care providers have been occurring more frequently. Any breach or cyber-attack that compromises patient data could result in negative press and substantial fines or penalties for violation of HIPAA or similar state privacy laws that may harm the Obligated Group’s business or financial condition. Although management is not currently aware of having experienced a material security breach, the Obligated Group’s IT security measures may not be sufficient to prevent cyber-attacks in the future. As cybersecurity threats continue to evolve, the Obligated Group may not be able to anticipate certain attack methods in order to implement effective protective measures and may be required to expend significant additional resources to continue to modify and strengthen security measures, investigate and remediate any vulnerabilities, or invest in new technology designed to mitigate security risks. Additionally, the Obligated Group’s IT systems routinely interface with and rely on third party systems that are also subject to the risks outlined above and may not have or use appropriate controls to protect confidential information. A breach or attack affecting a third-party service provider could harm the Obligated Group’s business or financial condition. Although the Obligated Group has insurance against some cyber risks and attacks, it may not be sufficient to offset the impact of a material loss event.

Nursing Home Star Ratings

CMS implemented an online reporting system that allows consumers to compare ratings information of Medicare and Medicaid participating nursing homes. The ratings are a composite metric consisting of one to five stars (five being the best) and intended to convey the overall performance of over 15,000 nursing homes in the U.S. Ratings are posted to the CMS website on Nursing Home Compare. Each nursing home is rated on three components: (i) health inspection results, (ii) quality measures and (iii) staffing levels. In addition, the nursing home is rated as to overall quality. CMS maintains that its star ratings will provide consumers with an important tool for comparing nursing homes both locally and nationwide. The members of the Obligated Group are unable to determine what impact its rating may have on the demand for services of these communities or the financial condition of the Obligated Group.

Limitations on Security Interest in Gross Receipts

The effectiveness of the Master Indenture and the security interest in Gross Receipts and other property granted therein may be limited by a number of factors, including: (i) provisions prohibiting the direct payment of amounts due to nursing care providers from Medicaid and Medicare programs to persons other than such providers; (ii) state laws affecting the perfection and priority of security interests in proceeds of collateral and in collateral consisting of cash and cash equivalents; (iii) state laws affecting the continuation of perfected and first priority security interests granted by any member of the Obligated Group; (iv) state and federal laws giving super-priority to certain kinds of statutory liens such as tax liens; (v) rights arising in favor of the United States or any agency thereof; (vi) constructive trusts, equitable or other rights impressed or conferred by a federal or state court in the exercise of its equitable jurisdiction; (vii) federal bankruptcy laws which may affect the right of the Master Trustee to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs and the enforceability of the Master Indenture or the security interests granted by any member of the Obligated Group;

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(viii) federal bankruptcy laws which may limit the enforceability of the security interests in the Gross Receipts of a member of the Obligated Group which are earned by a member of the Obligated Group within 90 days preceding and after any effectual institution of bankruptcy proceedings by or against a member of the Obligated Group, (ix) rights of third parties in Gross Receipts converted to cash and not in the possession of the Master Trustee; (x) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code as from time to time in effect; and (xi) nonprofit corporate laws limiting or otherwise affecting the enforceability of the obligations of the members of the Obligated Group under the Master Indenture.

Nature of Facilities

The facilities of the Obligated Group are not comprised of general purpose buildings and generally would not be suitable for industrial or commercial use. Consequently, it could be difficult to find a buyer or lessee for such facilities, and, upon any default, the Master Trustee may not realize the amount of the outstanding Series 2019 Bonds or any other Additional Indebtedness outstanding from the sale or lease of such facilities if it were necessary to proceed against such facilities, pursuant to a judgment, if any against any Note Obligor including in the event of foreclosure under its respective Mortgage.

Certain Matters Relating to Enforceability of the Master Indenture

The obligations of the Obligated Group under the Series 2019 Master Notes will be limited as the obligations of debtors typically are affected by bankruptcy, insolvency, reorganization, moratorium or other similar laws and the application of general principles of creditors’ rights and as additionally described below.

The accounts of the members 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. However, in certain circumstances, the assets of a member of the Obligated Group may not be available for payment of debt service on the Master Notes, including the Series 2019 Master Notes pledged under the Bond Indentures as security for the Series 2019 Bonds. The enforceability of the joint and several obligations described herein of members of the Obligated Group to make payments in respect of the Series 2019 Master Notes (directly or indirectly) may be limited as described in the preceding paragraph and such obligations may not be enforceable against members of the Obligated Group (i) if the purpose for which the Series 2019 Master Notes is issued is not consistent with the charitable purposes of such member of the Obligated Group from which such payment is requested or if, at the time of payment thereunder by such other member which is a tax-exempt organization, the issuer of the Series 2019 Master Notes is not then a tax-exempt organization, (ii) to the extent that specific enforcement or injunctive relief is not available, (iii) if such payments are requested to be made from any moneys or assets which are donor restricted or which are subject to a direct or express or charitable trust which does not permit the use of such moneys or assets for such a payment, (iv) if such payments would result in the cessation or discontinuation of any material portion of the nursing care or related services previously provided by such member of the Obligated Group or (v) if such payments are requested to be made pursuant to any loan violating applicable usury laws. The extent to which the assets of any present or future member of the Obligated Group fall within the category referred to in clause (iii) above cannot now be determined. The amount of such assets which fall within such category could be substantial.

There is no clear precedent in the law as to whether payment of moneys or use of assets by a member of the Obligated Group to provide for the payment of Master Notes, or portions thereof, the proceeds of which Master Notes were not lent or otherwise disbursed to such member, to the extent that such payment or use would render the member insolvent, may be voided by a trustee in bankruptcy in the event of a bankruptcy of such member, or any third party creditors in an action brought pursuant to Missouri fraudulent conveyance statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under Missouri fraudulent conveyance statutes, 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 Missouri 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

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Group to make a payment on a Master Note for which it was not the direct beneficiary, a court might not enforce such obligation to pay in the event it is determined that the member against which payment is sought is analogous to a guarantor of the debt of the member who directly benefited from the borrowing and that sufficient consideration for such member’s guaranty was not received or that the incurrence of such obligation has rendered or will render such member insolvent.

Continuing Legal Requirements Regarding the Series 2019 Bonds

In the event that the Authority or the members of the Obligated Group fail to comply with the requirements of the Code, interest on the Series 2019 Bonds may become includable in gross income for purposes of federal income taxation retroactively to the date of issuance of the Series 2019 Bonds. In such event, the Bond Indentures do not contain any specific provision for redemption of the Series 2019 Bonds nor provide that any additional interest will be paid to the Owners of the Series 2019 Bonds. See the captions “SUMMARY OF THE BOND INDENTURES - Events of Default” and “- Application of Moneys in Event of Default” in APPENDIX C hereto.

Lack of Marketability for the Series 2019 Bonds

There can be no assurance that there will be a secondary market for the Series 2019 Bonds, and the absence of such a market for such bonds could result in investors not being able to resell the Series 2019 Bonds should they need to or wish to do so.

Bond Rating

There is no assurance that the rating assigned to the Series 2019 Bonds at the time of issuance will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for and marketability of the Series 2019 Bonds.

Mortgages

There is no assurance that the Mortgages will remain in effect for all the real property and related senior living communities for which the Mortgages currently are in effect; the Mortgages are subject to Grantor’s Rights (described in APPENDIX E hereto) including certain release provisions. Additionally, no title insurance loan policies have been obtained in connection with the execution and delivery of the Mortgages, so in the event of defective title to Mortgaged Property, there will be no loan policy of title insurance from which to recover any damages.

Certain Risks relating to Direct Purchase Bonds and other Bank-Supported and Bank-Held Debt

Mandatory Tender, Purchase or Redemption Prior to Maturity. As noted in APPENDIX F, the Obligated Group has entered, and may in the future enter, into credit enhancement arrangements or loans with respect to certain bonds, pursuant to which those bonds may be subject to mandatory tender, purchase or redemption prior to maturity at the direction of the applicable bank in certain circumstances including as a result of the bank’s determination not to hold or support such debt beyond the effective term of the bank’s commitment. For example, although the Series 2000 Bonds have a stated maturity date of February 1, 2031, the existing letter of credit for the Series 2000 Bonds includes a stated expiration date of October 1, 2019. Similarly, although the Series 2014B Bonds have a stated maturity of February 1, 2039, the bank purchaser of the Series 2014B Bonds has an option to cause mandatory purchase of such bonds by the Obligated Group on August 3, 2020, although the Series 2014C Bonds have a stated maturity of February 1, 2035, the bank purchaser of the Series 2014C Bonds has an option to cause a mandatory purchase of such bonds by the Obligated Group on February 1, 2025, and although the Series 2016C Bonds are expected to have a stated maturity of February 1, 2037, the bank purchaser of the Series 2016C Bonds has an option to cause a mandatory purchase of such bonds by the Obligated Group on February 1, 2027. If the Obligated Group and the applicable bank do not agree to a renewal or extension of the bank’s commitment to support or hold the applicable debt, the Obligated Group will need to refinance such debt. No assurance can be

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given that the Obligated Group will be successful in renewing or extending the bank’s commitment or in refinancing such debt.

Bank Agreements. As noted in APPENDIX F hereto, the Obligated Group has entered into agreements with banks (a reimbursement agreement for the Series 2000 Bonds and continuing covenant agreements for the Series 2014B Bonds, Series 2014C Bonds, Series 2014D Bonds and the Series 2016C Bonds) that contain certain covenants, including financial covenants and other affirmative and negative covenants, in addition to the covenants contained in the Master Indenture. These additional covenants are solely for the benefit of the applicable bank, and the owners of the Series 2019 Bonds are not entitled to rely on such covenants. The covenants contained in the bank agreements may be waived or amended with the consent of the applicable bank and without the necessity of obtaining the consent of any other party, including the Master Trustee, the Bond Trustee or any owners of the Series 2019 Bonds, and the remedies for covenant violations under the bank agreements are controlled by the applicable bank. For example, under the continuing covenant agreement for the Series 2014D Bonds, the failure of the Obligated Group to maintain a Long-Term Debt Service Coverage Ratio of not less than 1.25 to 1.0 as of the end of each fiscal quarter for the preceding four fiscal quarters could result in an event of default under the Continuing Covenant Agreement for the Series 2014D Bonds and, unless waived by the bank purchaser of the Series 2014D Bonds, such bank, in addition to other remedies, could cause acceleration of the Series 2014D Bonds, and the failure of the Obligated Group to pay the Series 2014D Bonds in full in the event of such acceleration would result in an event of default under the Master Indenture as a failure to make payment of principal due on the related Master Note within five days of the due date thereof. The bank agreements may be amended, terminated or otherwise modified in the future and the Obligated Group may enter into additional bank agreements in the future that contain similar or additional provisions.

See “APPENDIX F – EXCERPTS OF SELECTED BANK COVENANTS” and “APPENDIX C – SUMMARY OF THE MASTER INDENTURE – Events of Default” herein.

Other Possible Risk Factors

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

(1) 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;

(2) Unionization, employee strikes and other adverse labor actions which could result in a substantial increase in expenditures without a corresponding increase in revenues;

(3) Adoption of other federal, state or local legislation or regulations having an adverse effect on the future operating or financial performance of the Obligated Group;

(4) A decline in the population, a change in the age composition of the population or a decline in the economic conditions of the market areas in which the Obligated Group owns facilities;

(5) The cost and availability of energy;

(6) Increased unemployment or other adverse economic conditions in the service areas of the Obligated Group which would increase the proportion of residents who are unable to pay fully for the cost of their health 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 in order to maintain the charitable status of any member of the Obligated Group;

(8) Inflation or other adverse economic conditions;

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

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

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

(12) The occurrence of epidemics, pandemics or natural or man-made disasters that could damage the facilities of any members of the Obligated Group, interrupt utility service to the facilities, or otherwise impair the operation and generation of revenues from said facilities;

(13) Scientific and technological advances that could reduce demand for services offered by the Obligated Group; or

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

LITIGATION

The Authority

There is not now pending or, to the knowledge of the Authority, threatened, against the Authority, any litigation which seeks to restrain or enjoin the issuance or delivery of the Series 2019 Bonds, or questioning or affecting the validity of the Series 2019 Bonds or the proceedings or authority under which the Series 2019 Bonds are to be issued. There is not now pending or, to the knowledge of the Authority, threatened, any litigation against the Authority which in any manner questions the right of the Authority to enter into the Bond Indentures or the Loan Agreements or to secure the Series 2019 Bonds in the manner provided in the Bond Indentures and the Act.

The Obligated Group

Except as otherwise discussed herein, no litigation, proceedings or investigations are pending, or to the knowledge of the members of the Obligated Group, threatened against any member of the Obligated Group except (i) claims or litigation involving professional liability or public liability the probable recoveries of which and estimated costs and expenses of which, in the opinion of counsel to the Obligated Group, will be within the Obligated Group’s applicable insurance policy limits (subject to applicable deductibles) or (ii) litigation involving other types of claims which if adversely determined will not materially or adversely affect the financial condition or operation of any member of the Obligated Group. There is not now pending against the Obligated Group any litigation restraining or enjoining the issuance or delivery of the Series 2019 Bonds or questioning or affecting the validity of the Series 2019 Bonds or the proceedings and authority under which they are to be issued.

TAX MATTERS

The following is a summary of the material federal and State of Missouri income tax consequences of holding and disposing of the Series 2019 Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2019 Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Missouri, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2019 Bonds in the secondary market. Prospective investors are advised to consult their

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own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Series 2019 Bonds.

Opinion of Bond Counsel

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2019 Bonds:

Federal and Missouri Tax Exemption. The interest on the Series 2019 Bonds is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State of Missouri.

Alternative Minimum Tax. Interest on the Series 2019 Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax.

Bank Qualification. The Series 2019 Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b) of the Code.

Bond Counsel’s opinions are provided as of the date of the original issue of the Series 2019 Bonds, subject to the condition that the Authority and the Institution comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2019 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority and the Institution have covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2019 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2019 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2019 Bonds but has reviewed the discussion under the heading “TAX MATTERS.”

Other Tax Consequences

Original Issue Premium. For federal income tax purposes, premium is the excess of the issue price of a Series 2019 Bond over its stated redemption price at maturity. The issue price of a Series 2019 Bond is generally the first price at which a substantial amount of the Series 2019 Bonds of that maturity have been sold to the public. Under Section 171 of the Code, premium on tax-exempt bonds amortizes over the term of the Series 2019 Bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Series 2019 Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner, which will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Series 2019 Bond prior to its maturity. Even though the owner’s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Series 2019 Bond, an owner of the Series 2019 Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2019 Bond (other than in respect of accrued and unpaid interest) and such owner’s adjusted tax basis in the Series 2019 Bond. To the extent a Series 2019 Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2019 Bond has been held for more than 12 months at the time of sale, exchange or retirement.

Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2019 Bonds, and to the proceeds paid on the sale of the Series 2019 Bonds, other than to certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability.

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Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2019 Bonds should be aware that ownership of the Series 2019 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2019 Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2019 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2019 Bonds, including the possible application of state, local, foreign and other tax laws.

RATING

Fitch Ratings has assigned its municipal bond rating of “BBB” (with a “Stable” outlook) to the Series 2019 Bonds. Such rating reflects only the views of Fitch Ratings at the time such rating is given, and the Authority makes no representation as to the appropriateness of such rating. An explanation of the significance of such rating may be obtained only from Fitch Ratings. There is no assurance that the rating will continue for any given period of time or that the rating will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. The Underwriters have no responsibility to bring to the attention of the owners of the Series 2019 Bonds any proposed revision or withdrawal of the ratings on the Series 2019 Bonds. Any such downward change in or withdrawal of such rating may have an adverse effect on the market price of the Series 2019 Bonds.

The rating reflects only the views of Fitch Ratings and an explanation of the significance of such rating may be obtained from Fitch Ratings at One State Street Plaza, New York, New York 10004, telephone: (212) 908-0500 or 1-800-75FITCH. Fitch Ratings is independent of any investment banking firm, bank or similar institution.

FINANCIAL STATEMENTS

Included in APPENDIX B to this Official Statement are the audited consolidated financial statements of the Obligated Group and Affiliates as of December 31, 2017 and December 31, 2016 and for the years then ended, together with the opinions of CliftonLarsonAllen LLP, independent certified public accountants, thereon. While the financial statements include the financial results of Affiliates who are not members of the Obligated Group, such Affiliates are not liable for any payments to be made pursuant to the Loan Agreements, the Master Indenture or the Series 2019 Master Notes. The Gross Receipts of such Affiliates have not been pledged for the payment of principal, interest or debt service of the Series 2019 Bonds or the Prior Bonds. See “INTRODUCTION” in APPENDIX A for information about the Affiliates that are not members of the Obligated Group. The financial statements included in APPENDIX B hereto are not necessarily indicative of the financial results to be achieved for future periods.

LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale of the Series 2019 Bonds are subject to the approving opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel to the Institution. Bond Counsel was not requested to participate and did not participate in the preparation of this Official Statement except as hereinafter noted, and has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained herein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the headings “THE SERIES 2019 BONDS,” “SECURITY FOR THE SERIES 2019 BONDS” and “TAX MATTERS,” and the information contained in APPENDIX C hereto insofar as such portions summarize certain provisions of the Master Indenture, the Series 2019 Bonds, the Bond Indentures, the Loan Agreements, the Continuing Disclosure Agreement and certain tax matters relating to the Series 2019 Bonds. Certain legal matters will be passed upon for the Authority by its counsel, Thompson Coburn LLP, St. Louis, Missouri, and for the Institution and the other members of the Obligated Group by their counsel, Spencer Fane LLP, St. Louis, Missouri. Certain legal matters will be passed upon for the Underwriters by their counsel, Dentons US LLP, St. Louis, Missouri.

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UNDERWRITING

Herbert J. Sims & Co., on behalf of itself, PNC Capital Markets, LLC and UMB Bank, n.a., as the Underwriters, have agreed, subject to certain conditions, to purchase the Series 2019 Bonds from the Authority at a purchase price of $________ (which is equal to the aggregate principal amount of the Series 2019 Bonds, plus original issue premium of $__________ and less an underwriters’ discount of $__________). The bond purchase contract among Herbert J. Sims & Co., as representative of the Underwriters, the Institution and the Authority provides that the Underwriters will purchase all of the Series 2019 Bonds, if any are purchased, and requires the members of the Obligated Group to indemnify the Underwriters and the Authority against losses, claims, damages and liabilities to third parties arising out of any materially incorrect or incomplete statements or information contained in this Official Statement pertaining to the Obligated Group or Affiliates. The initial public offering prices set forth on the inside cover page of this Official Statement may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2019 Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the offering prices set forth on the inside cover page.

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the Underwriters and their respective affiliates may have, from time to time, performed and may in the future perform, various investment banking services for the members of the Obligated Group, for which they may have received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the members of the Obligated Group.

The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of long and/or short positions in such assets, securities and instruments.

CERTAIN RELATIONSHIPS

The law firm of Thompson Coburn LLP, St. Louis, Missouri, serves as general counsel to the Authority and has represented the Authority in connection with the issuance of the Series 2019 Bonds. Thompson Coburn LLP also represents the Underwriters and the Bond Trustee from time to time, but has not done so in connection with the issuance of the Series 2019 Bonds. Thompson Coburn LLP also serves as General Counsel to the Lutheran Church--Missouri Synod, but has not represented such entity in connection with the issuance of the Series 2019 Bonds. Sherri Strand, a Partner at Thompson Coburn LLP, is also on the Board of Directors for the Institution, and Thompson Coburn LLP represents the Institution from time to time, but has not done so in connection with the issuance of the Series 2019 Bonds.

The law firm of Spencer Fane LLP has represented the Institution and the other members of the Obligated Group in connection with the issuance of the Series 2019 Bonds. Spencer Fane LLP also represents the Bond Trustee from time to time, but has not done so in connection with the issuance of the Series 2019 Bonds.

PNC Capital Markets LLC (“PNC”) is serving as a co-manager underwriter for the Series 2019 Bonds. Affiliates of PNC provide various traditional banking services to the Institution.

MISCELLANEOUS

The descriptions, summaries and excerpts herein, and in the Appendices hereto, of the Bond Indentures, the Loan Agreements, the Master Indenture, the Continuing Disclosure Agreement and the Mortgages are brief

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outlines of certain provisions thereof. Such outlines do not purport to be complete; for full and complete statements of such provisions, reference is made to such documents.

The agreement of the Authority with the Owners of each series of Series 2019 Bonds is fully set forth in the related Bond Indenture, and neither any advertisement of the Series 2019 Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers of the Series 2019 Bonds. Statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as such and not as representations of fact. Copies of the documents mentioned under this heading are on file at the office of the Underwriters and, following delivery of the Series 2019 Bonds, will be on file at the principal corporate trust office of the Bond Trustee.

It is anticipated that CUSIP identification numbers will be printed on the Series 2019 Bonds, but neither the failure to print such numbers on any Bond, nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Bonds.

The Cover Page and attached Appendices A, B, C, D, E and F are integral parts of this Official Statement and should be read in their entirety together with all foregoing statements.

EXCEPT FOR INFORMATION CONCERNING THE AUTHORITY IN THE SECTIONS OF THIS OFFICIAL STATEMENT CAPTIONED “THE AUTHORITY” AND “LITIGATION – THE AUTHORITY”, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY THE AUTHORITY AND THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.

LUTHERAN SENIOR SERVICES, as Obligated Group Agent

By: President

APPENDIX A

LUTHERAN SENIOR SERVICES AND THE LUTHERAN SENIOR SERVICES OBLIGATED GROUP

The information contained herein as APPENDIX A to this Official Statement has been obtained from and prepared by Lutheran Senior Services, as Obligated Group Agent.

A- i

TABLE OF CONTENTS APPENDIX A

Page

INTRODUCTION ....................................................................................................................... A-1 MISSION AND STRATEGIC PLAN ......................................................................................... A-5 HISTORY OF LUTHERAN SENIOR SERVICES .................................................................... A-5

Lutheran Charities Association ............................................................................................... A-5 Lutheran Altenheim Society .................................................................................................... A-6 Lutheran Senior Services ......................................................................................................... A-6

LSS OBLIGATED GROUP ........................................................................................................ A-6 GOVERNANCE .......................................................................................................................... A-7

Members .................................................................................................................................. A-7 Directors .................................................................................................................................. A-7 Board Committees ................................................................................................................... A-7

Executive Committee .......................................................................................................... A-8 Operations Committee ......................................................................................................... A-8 Audit Committee ................................................................................................................. A-8 Compensation Committee ................................................................................................... A-8 Chaplaincy Care Committee ............................................................................................... A-8 Nominating Committee ....................................................................................................... A-8 Finance Committee ............................................................................................................. A-8 Retirement Sub-Committee of Finance Committee ............................................................ A-8 Investment Committee ........................................................................................................ A-8

Officers of LSS ........................................................................................................................ A-9 RECENT PROJECTS ................................................................................................................ A-13

Mason Pointe, St. Louis County, Missouri ............................................................................ A-13 THE PROJECT .......................................................................................................................... A-16 FUTURE PLANS ...................................................................................................................... A-20 OUTSIDE OPPORTUNITIES ................................................................................................... A-20 FACILITIES AND SERVICES ................................................................................................. A-21 FACILITIES OF THE AFFILIATES ........................................................................................ A-21 OPERATIONS ........................................................................................................................... A-22 FACILITIES AND SERVICES OF THE OBLIGATED GROUP ............................................ A-23

Life Plan Communities .......................................................................................................... A-23 Facilities that are not Life Plan Communities ....................................................................... A-29 LSS Home and Community Based Services ......................................................................... A-30 Residency Agreements .......................................................................................................... A-32 Pricing Information by Facility ............................................................................................. A-34 Nursing Staff And Other Employees ..................................................................................... A-35 Educational Affiliations ......................................................................................................... A-35 Licenses and Memberships .................................................................................................... A-36

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Risk Management and Insurance ........................................................................................... A-36 Real Property Taxes .............................................................................................................. A-37

RESULTS OF OPERATIONS .................................................................................................. A-37 Sources of Revenues .............................................................................................................. A-39 Financial Records .................................................................................................................. A-39 Fundraising Review ............................................................................................................... A-39

OUTSTANDING INDEBTEDNESS ........................................................................................ A-39 FINANCIAL INFORMATION ................................................................................................. A-41

Obligated Group Summary Statements of Unrestricted Activities (Unaudited) ................... A-42 Obligated Group Historical And Pro Forma Debt Service Coverage .................................... A-43 Obligated Group Historical And Pro Forma Liquidity Ratios ............................................... A-46

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS ................. A-47 Plans and Goals ..................................................................................................................... A-49 Financial Covenants in other Bank Documents .................................................................... A-49

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INTRODUCTION

Lutheran Senior Services is a nonprofit corporation organized in 1858 and chartered by the Missouri legislature in 1863 (“LSS”). The membership of LSS is comprised of member congregations (each, a “Member Congregation,” and collectively, the “Member Congregations”) which are part of The Lutheran Church-Missouri Synod or the Evangelical Lutheran Church in America.

LSS is affiliated with each of the corporations identified below (each an “Affiliate” and collectively, the “Affiliates”):

The Cole County Lutheran Home Association d/b/a Heisinger Lutheran Home (“Heisinger”), Lutheran Hillside Village, Inc. (“Lutheran Hillside Village”), Meridian Village Association (“Meridian”), Lutheran Retirement Center Association d/b/a Concordia Village (“Concordia”), Dunn Road Manor, Inc. (“Dunn Road Manor”), Dunn Road Manor LIHTC, GP (“Dunn Road Manor LIHTC”), Halls Ferry Manor, Inc. (“Halls Ferry Manor”), Hilltop Manor Association, Inc. (“Hilltop Manor”), Mackenzie Place 202, Mackenzie Place 202-II, Mackenzie Place LIHTC GP, LLC (“Mackenzie LIHTC”), Rose Hill House, Inc. (“Rose Hill House”), Rose Hill House II, Inc. (“Rose Hill House II”), Westfield Manor Association (“Westfield Manor”), Lutheran Hillside Village Foundation (“LHVF”), Lutheran Senior Services Endowment Fund (“LSSEF”) and Provident Group (“Provident”). LSS and its Affiliates (in the case of Mackenzie LIHTC and Dunn Road Manor LIHTC, the Affiliates are the general partners in the limited partnerships which actually own the facilities) currently own and operate the following seventeen (17) communities for older adults, all of which are managed by LSS: Breeze Park, Concordia Village, Dunn Road Manor (comprised of two related projects operated together), Halls Ferry Manor, Heisinger Bluffs, Hilltop Manor, Laclede Groves, Lenoir Woods, Lutheran Hillside Village, Mackenzie Place (comprised of four related projects operated together), Meramec Bluffs, Mason Pointe, Meridian Village, Richmond Terrace, Rose Hill House (comprised of two related projects operated together), St. Joseph’s Bluffs (operated as a part of Heisinger Bluffs) and Westfield Manor.

The facilities managed by LSS and owned by LSS or an Affiliate each provide one or more of the following levels of care:

Independent Living: independent apartments or patio homes for older adult residents who do not require any medical supervision or assistance with everyday activities.

Affordable Housing: independent living apartments for low income older adults financed by the U.S. Department of Housing and Urban Development or through the use of Historic Tax Credits or Low Income Housing Tax Credits.

Assisted Living: facilities licensed as a Residential Care Facility (RCF) or Assisted Living Facility (ALF) in Missouri and as Assisted Living Facilities (ALF) in Illinois. This level is geared toward residents who require some level of assistance with the tasks of everyday life, but not constant medical supervision. For the purpose of this APPENDIX A, all will be referred to as “Assisted Living.”

Assisted Living Memory Care: facilities licensed as an Assisted Living Facility, as described above. The same assisted living services are offered in a setting that provides a more secure environment for residents with dementia.

Care Centers: facilities licensed as a Skilled Nursing Facility (SNF) which provide continuous medical supervision to residents. For the purpose of this APPENDIX A, all will be referred to as “Skilled Nursing.”

Skilled Memory Care: beds located in facilities licensed as Skilled Nursing Facilities as described above but with Skilled Nursing services offered in a setting that provides a more secure environment for residents with dementia.

Short Stay Rehab: beds located in facilities licensed as Skilled Nursing Facilities, as described above, but dedicated to physical, occupational and speech therapy services for residents recovering from

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an illness or surgery. These services are typically paid for by Medicare or Managed Care insurance. For the purpose of this APPENDIX A, these beds will be referred to as “Short Stay Rehab.” LSS operates its Short Stay Rehab facilities under the brand name “REACH.”

For the purpose of this APPENDIX A, a community providing Independent Living, Assisted Living and Skilled Nursing on a single campus to residents whose needs may vary as they age is referred to as a “Life Plan Community.”

LSS owns and operates the following eight (8) communities. For a more detailed description of each of these communities, see “FACILITIES AND SERVICES OF THE OBLIGATED GROUP” herein:

Name and Location Description Breeze Park Weldon Spring, Missouri Life Plan Community

Laclede Groves Webster Groves, Missouri Life Plan Community

Meramec Bluffs Ballwin, Missouri Life Plan Community

Lenoir Woods Columbia, Missouri Life Plan Community

Richmond Terrace Richmond Heights, Missouri Assisted Living

St. Joseph’s Bluffs Jefferson City, Missouri (managed with Heisinger Bluffs)

Care Center

Mason Pointe Chesterfield, Missouri

Care Center/Assisted Living

Mackenzie Place Affton, Missouri

Independent Living

Affiliates own the following communities, each of which is managed by LSS. The location of each Affiliate, the community it owns (if applicable), its relationship to LSS, and whether the Affiliate is a Member of the Obligated Group is listed below. For a description of the Obligated Group, see “LSS OBLIGATED GROUP” herein and for a more detailed description of the communities operated by Affiliates that are Members of the Obligated Group, see “FACILITIES AND SERVICES OF THE OBLIGATED GROUP” herein.

Name and Location Description Relationship to LSS Obligated Group?

1. Heisinger Jefferson City, Missouri

Life Plan Community LSS is the sole member Yes

2. Lutheran Hillside Village Peoria, Illinois

Life Plan Community LSS is the sole class I member Yes

3. Concordia Springfield, Illinois

Life Plan Community LSS is the sole member and LSS Directors are directors

Yes

4. Meridian Glen Carbon, Illinois

Life Plan Community LSS is the sole member of Meridian and LSS Directors are directors

Yes

5. Dunn Road Manor Florissant, Missouri

Affordable Housing

LSS Directors are the members and directors No

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6. Dunn Road Manor LIHTC Florissant, Missouri

Affordable Housing

LSS is the sole member No

7. Halls Ferry Manor St. Louis, Missouri

Affordable Housing


8. Hilltop Manor Eureka, Missouri

Affordable Housing


9. Rose Hill House Kirkwood, Missouri

Affordable Housing


10. Rose Hill House II Kirkwood, Missouri

Affordable Housing


11. Westfield Manor Belleville, Illinois

Affordable Housing


12. Mackenzie Place 202 Affton, Missouri

Affordable Housing


13. Mackenzie Place 202-II Affton, Missouri

Affordable Housing


14. Mackenzie LIHTC Affton, Missouri

Affordable Housing

LSS is the sole member No

Mackenzie LIHTC is the general partner of Mackenzie Place LIHTC LP (“Mackenzie LP”), which

was created to facilitate low income housing tax credit financing for certain affordable housing apartments at Mackenzie Place owned by Mackenzie LP and which are managed by LSS.

Dunn Road Manor LIHTC is the general partner of Dunn Road Manor LIHTC LP (“Dunn Road LP”), which was created to facilitate low income housing tax credit financing for certain affordable housing apartments at Dunn Road Manor owned by Dunn Road LP and which are managed by LSS.

LSS is also affiliated with the following entities, which do not directly operate a community but provide support for one or more communities owned and/or operated by LSS. Each of these entities is a member of the Obligated Group:

Name and Location Description Relationship to LSS 1. LHVF

Peoria, Illinois Endowment

Fund Lutheran Hillside Village is the sole member

2. LSSEF St. Louis, Missouri

Endowment Fund

LSS Board Finance Committee are the directors

3. Provident St. Louis, Missouri

Management Company

LSS Directors are the directors

The corporate organizational structure of LSS and its Affiliates, ownership of the facilities and the members of the Obligated Group are reflected in the following organizational chart:


Lutheran Hillside Village

Foundation

The Cole CountyLutheran Assoc.d/b/a Heisinger Lutheran Home

(“Heisinger”)

• Meridian Village

LutheranSenior

Services Endowment Fund

(“LSSEF”)

Lutheran Retirement

Center Association

• Dunn Road Manor

Halls Ferry Manor, Inc.

• Hilltop Manor • The Village at Mackenzie Place

* Breeze Park* Laclede Groves* Lenoir Woods* Building housing 20 Independent Living units at Mackenzie Place* Mason Pointe * Meramec Bluffs* Richmond Terrace* St. Joseph’s Bluffs* Home & Community Based Services* Other Programs

• Concordia Village• Heisinger Bluffs

Rose Hill House, Inc./

Rose Hill House II, Inc.

Dunn Road Manor, Inc.

Dunn Road Manor, LIHTC, LP

Hilltop Manor Association,

Inc.

Mackenzie Place LIHTC, LP

Mackenzie Place 202

Mackenzie Place 202-II

• Rose Hill House• Halls Ferry Manor

Members of Obligated Group

Facilities Owned *

Lutheran Hillside Village,

Inc.

��

• Lutheran Hillside Village

�� Association

Entities Chart

Meridian Village

Association

ProvidentGroup

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MISSION AND STRATEGIC PLAN

Established in 1858, Lutheran Senior Services is known for its exceptional quality and value in senior living and care. LSS offers services and programs that benefit the lives of over 13,000 older adults annually through Life Plan Communities, Affordable Housing, Home & Community Based Services, REACH Short Stay Rehabilitation, and the LSS Living Foundation.

The Christian Mission of LSS is the fundamental belief that guides its Strategic Plan - “Older Adults Living Life to the Fullest.” It is based on John 10:10, a verse in the Bible where Jesus says, “I have come that they may have life and have it to the full.”

The Strategic Plan is reviewed annually and encompasses both the Christian Core Values and Vision Statements of LSS. In formulating the Strategic Plan, LSS spent considerable energy examining the market and competitors, looking at how best to achieve its mission. The Strategic Plan informs everything that LSS does in service to older adults and reflects how it wants to be characterized as an organization.

Christian Core Values

The Christian Core Values of LSS provide a framework for how LSS daily lives out its Christian Mission. These values can be seen in the actions and attitudes of employees.

Faith inspired: We are Faith Inspired to serve as Christ would serve.

People First: We prioritize People First in our decisions and actions.

Service Excellence: We promote Service Excellence in all that we do.

Responsible Stewardship: We wisely manage our resources with Responsible Stewardship.

Generous Hearts: We share our Generous Hearts with others through our gifts and talents.

Vision Statements

Included in the Strategic Plan are three vision statements carefully designed to guide the employees of LSS in understanding what helping “Older Adults Live Life to the Fullest” means in terms of creating and sustaining the communities that LSS strives to provide its residents. The following are the three vision statements:

• The love of Jesus Christ can be seen and recognized in all that we are and do and inspires us to reach out to older adults and their families.

• The older adults we serve will experience the highest possible care and quality of life through an expanding network of supportive services and communities.

• A continued sound financial structure will ensure stability, support a highly qualified workforce, provide benevolent care, and encourage future ministry expansion.

HISTORY OF LUTHERAN SENIOR SERVICES

LUTHERAN CHARITIES ASSOCIATION The Rev. Johann Freidrich Buenger established Lutheran Hospital of St. Louis in 1858, in a house

at Broadway and Geyer (in south St. Louis City). In 1863, the State of Missouri issued a legislative charter incorporating The Society of the German Lutheran Hospital and Asylum of St. Louis, Missouri. A Lutheran orphanage founded on July 13, 1868 was also included in this organization. In 1914, an amendment to the legislative charter changed the name to Lutheran Charities Association of St. Louis, Missouri (“LCA”).

Separately, the Lutheran Convalescent Home Society was formed in 1920 by a group of industrious Lutheran laywomen. These women, with their own funds and personal labor, purchased an old mansion on Taft Avenue in the City of St. Louis and renovated it as a convalescent home. The facility became known

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as the Lutheran Convalescent Home. They staffed the facility, and, as the facility grew, hired additional nurses and other workers.

In 1967, the Lutheran Convalescent Home Society unanimously voted to transfer the Lutheran Convalescent Home to LCA. The Lutheran Convalescent Home then became an off-campus department of Lutheran Hospital. One of the provisions of the transfer agreement required LCA to enlarge the facilities and expand services. After careful study, it was determined that expansion would not be possible on the existing campus. In 1971, LCA purchased the campus known as Laclede Groves and opened a skilled nursing facility on that property. In 1984, LCA sold the assets of Lutheran Hospital and in 1985 changed its name to Lutheran Health Care Association (“LHCA”).

LUTHERAN ALTENHEIM SOCIETY Founded in 1906 as part of the Lutheran Society for Homeless Children and Aged Persons,

Lutheran Altenheim Society (“LAS”) originally operated in an old home on Lafayette Avenue in St. Louis, Missouri, and provided housing for 35 residents. In 1929, a new building was constructed on Halls Ferry Road (in north St. Louis City). Over the years, a 208-bed nursing home was added, and a volunteer program, a casework and counseling program, an arts and crafts department and an activities division were established.

During the 1970’s, LAS developed the Good Neighbor Program, an in-home, non-medical program of services for older adults funded by United Way, covering the City of St. Louis, St. Louis County, and St. Charles County. LAS also entered the affordable housing market. In September 1995, LAS opened Halls Ferry Manor, a HUD Section 202 project in north St. Louis City with 75 units. In October 1995, LAS was awarded a HUD Section 202 project in Kirkwood (in St. Louis County). The project, known as Rose Hill House (67 units), opened in 1998.

LUTHERAN SENIOR SERVICES In 1995, LAS became a sister corporation of LHCA. In 1998, LAS and the parent of both LHCA

and LAS were merged into LHCA and LHCA changed its name to Lutheran Senior Services (“LSS”).

LSS OBLIGATED GROUP

In 1992, LHCA entered into a Master Trust Indenture (as amended, the “Master Indenture”) in connection with financings for the capital needs of LHCA and the other members of the Obligated Group as established pursuant to the terms of the Master Indenture. The current members of the Obligated Group under the Master Indenture are LSS, Heisinger, Lutheran Hillside Village, Concordia, Meridian, LHVF, LSSEF and Provident. The members of the Obligated Group are the only Affiliates that are obligated with respect to bonds and other obligations secured by Master Notes issued under the Master Indenture, including the Series 2019 Bonds. Heisinger Hope Foundation, a Missouri nonprofit corporation, was a member of the Obligated Group, but was merged into LSSEF in 2017, at which time all of its assets were transferred to LSSEF.

The remaining Affiliates - Dunn Road Manor, Dunn Road Manor LIHTC, Halls Ferry Manor, Hilltop Manor, Mackenzie Place 202, Mackenzie Place 202-II, Mackenzie LIHTC, Rose Hill House, Rose Hill House II and Westfield Manor (collectively the “Non-Member Affiliates”) - are NOT members of the Obligated Group. While the facilities and financial results of the Non-Member Affiliates may be described or referenced in this APPENDIX A and are included in the financial statements in APPENDIX B, the Non-Member Affiliates have no liability with respect to the Series 2019 Bonds and other obligations secured by Master Notes, and their assets and revenues are not available to satisfy obligations with respect to the Series 2019 Bonds and other obligations secured by Master Notes.

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GOVERNANCE

MEMBERS Congregations of The Lutheran Church – Missouri Synod and the Evangelical Lutheran Church in

America currently hold membership in LSS. These Member Congregations currently elect 15 out of 16 directors to the LSS Board of Directors (the President of LSS serves as an ex officio, non-voting director). The LSS Board of Directors has the power to appoint up to an additional three board members who are not required to belong to a Member Congregation. At this point, no such appointments have been made.

DIRECTORS The LSS Board of Directors currently consists of 16 members (the “Board”) comprised of men and

women with diverse business and professional backgrounds. The Board has overall responsibility for the management of LSS and its properties, including review and acceptance of operating budgets, capital expenditures, and monitoring of financial condition. The Board approves and monitors all building and expansion programs, defines the fundamental policies and approves long-range plans of LSS. Directors are elected to serve three-year terms without compensation. No director is eligible to serve more than three full consecutive terms.

John R. Kotovsky (as the President of LSS) serves as an ex officio, non-voting member of the Board of Directors. The President has general charge of the affairs of LSS and of each Affiliate.

The name, office held, principal occupation and term of office of each member of the LSS Board is set out below:

NAME OCCUPATION / PROFESSION YEAR TERM

EXPIRES Kathleen T. Mueller Attorney/Partner, Husch Blackwell LLP 2019 Richard J. Bagy, Jr. President, Central Bank 2019 Dan Brown Commercial Banker, Wells Fargo 2021 Rev. Roy Christell Senior Pastor, Living Lord 2020 Diane R. Drollinger President, Nonprofit Services Center 2021 Jeffrey L. Dunn Attorney/Shareholder, Sandberg Phoenix & von Gontard 2021 Scott M. Hartwig Executive VP, Regions Bank 2019 John Komlos Principal, ARCO Construction Company 2020 Rev. John R. Kotovsky President, Lutheran Senior Services N/A Dr. F. Matthew Kuhlmann Physician, Washington University 2021 Harry Mueller Principal, Delta Group Electronics 2019 Gary Olson Retired, Hospital President/CEO 2019 Lisa J. Sombart President, William Tai & Assoc. Consulting Eng. 2019 Sherri C. Strand Attorney/Partner, Thompson Coburn, LLP 2021 Paul N. Tice CIO, Argos Investment Advisors 2020

BOARD COMMITTEES The Board has established the following committees to handle the assigned responsibilities

described below and make recommendations to the Board.

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Executive Committee Bylaws, procedures, structures, membership and scheduling Long range planning Executive performance and compensation

Operations Committee Quality of care services Services and efficiency of all communities and services

Property Committee Property selection Consultant and contractor selection Reduction of maintenance and building costs Acquisition, sale and leasing of property Encumbering and long term lease of property

Audit Committee Reviews audit and tax return filings Selection of external auditors

Compensation Committee Annual review of President’s compensation

Chaplaincy Care Committee Nurture and empower Chaplains

Nominating Committee Produce slate of candidates for election to the Board of Directors

Finance Committee Budgets and financial performance Investments Financing and refinancing of facilities

Retirement Sub-Committee of Finance Committee Retirement Plan Lutheran Senior Services Retirement Match Plan 403(b) Plan

Investment Committee Monitors LSS investments Manages investment consultants Reports to LSS Board of Directors

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OFFICERS OF LSS Name & Position Experience

Rev. John R. Kotovsky President & CEO

Rev. Kotovsky has led Lutheran Senior Services (LSS) as President & CEO since 2007. For the four years prior to assuming this position he served on the LSS Board of Directors. He brings a unique blend of business and ministry experience to leading LSS into the future.

His previous roles include President & CEO for Koch Development Co., Inc. and CFO of The Sansone Group, Inc., both of which are real estate management companies. Early in his career he was Senior Accountant for Arthur Anderson & Co. As a Lutheran pastor, he also served as Pastor of Administration and Christian Education for Community Church of Joy in Phoenix.

Rev. Kotovsky is a graduate of Washington University in St. Louis and holds a Master of Divinity degree from the Lutheran School of Theology at Chicago. He has served on the Board of Directors for various entities, some of which include the Tax Increment Financing Commission of the City of Webster Groves, the Midwest BankCentre Advisory Board, and the Regional Board for Thrivent Financial.

Mr. Gary Anderson Executive Vice President and

Administrative Officer

Mr. Anderson joined LSS in 2014 as Vice President for Clinical Effectiveness and Chief Nursing Officer. Prior to this he served as Senior Vice President of Operations for a large telemedicine group. His experiences also includes past roles as a nursing executive and service line manager in the area of orthopedic, neuroscience, and rehabilitation services.

Mr. Anderson has extensive management experience in program development, clinical design and service lines across several healthcare sectors, including tertiary, community, healthcare systems, and nonprofit organizations. He is a board-certified Fellow of the American College of Healthcare Executives and serves as an adjunct professor in health sciences, offering lectures on clinical process design, program development and project management.

Mr. Anderson is a professional registered nurse in Missouri who holds a diploma of nursing from St. Luke’s Hospital, a BS in nursing from Webster University, and an MHA from the University of Missouri-Columbia.

Mr. Paul Ogier Chief Financial Officer

Mr. Ogier was named Chief Financial Officer in 2006. He is also the co-founder of Provident Group, which became an Affiliate of LSS in 2001. Prior to assuming the role of CFO he served LSS as Vice President of Development and Other Services.

Mr. Ogier’s professional career began in 1981 as a consultant with the national accounting firm of Laventhol & Horwath. He has a vast knowledge of development, operations, and financing, with a special emphasis on project financing. Mr. Ogier has been a leader in the senior housing industry for over 30 years. He has overseen in excess of $750,000,000 of tax exempt financings during his tenure at LSS and with his past clients.

Mr. Ogier currently serves as a board member for LeadingAge Missouri and the Missouri Health Care Association and as Treasurer for NFAC, the board that oversees the Medicaid reimbursement distribution in the State of Missouri. Mr. Ogier has a BS in Finance from Missouri State University and is a Certified Public Accountant (CPA).

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Ms. Lisa Norwine Chief Advancement Officer

Lisa Norwine joined Lutheran Senior Services in May 2016 as its new Vice President of Advancement. Ms. Norwine comes to LSS with a wealth of experience in philanthropy in the St. Louis area and a faith inspired passion for helping older adults.

Her extensive experience includes leading fundraising teams, creating health care philanthropic strategies, developing a grateful patient program, working with senior donors and prospects for planned gifts, volunteer management, grant writing, annual giving programs and strategic planning and budgeting. Prior to joining LSS, Ms. Norwine was the Executive Director of SSM’s St. Louis Foundation, overseeing the philanthropic activities of six hospitals in the St. Louis area.

Ms. Norwine holds a B.S.B.A. in Finance from the University of Missouri-Columbia.

Mr. Mark Schoedel Vice President of

Construction and Capital Projects

Mr. Schoedel was appointed Vice President of Construction and Information Technology in 2006. Prior to that he served as Administrator of Construction and Technology for all LSS entities and Facilities Manager for Lutheran Health Care Association, an LSS predecessor. Before joining LSS, Mr. Schoedel was Director of Operations at Grace Church-St. Louis and an engineer at Monsanto Company.

Mr. Schoedel received a BS in Mechanical Engineering from the University of Missouri-Rolla. He is a registered professional engineer in the State of Missouri and a member of the American Society of Mechanical Engineers. He has overseen over $300 million in construction projects for LSS, developing standards for construction and communities, as well as growing technology and positioning LSS for the future.

Mr. Schoedel served on the board of the Advisory Council for The Salvation Army Adult Rehabilitation Center for 20 years and is currently serving on the Metropolitan Sewer District Rate Commission.

Ms. Colleen Bottens Vice President of Support

Services and Executive Director of Meridian Village

Ms. Bottens currently holds the position of Vice President of Support Services and Executive Director of Meridian Village. In her role as Vice President of Support Services, she leads the Clinical Teams, Affordable Housing, and Home and Community Based Services across LSS. Ms. Bottens joined LSS in 2011 as Executive Director of Meridian Village and continues to lead this community today.

Prior to joining LSS, Ms. Bottens worked for Sunrise Senior Living and Horizon Bay Senior Living in Executive Director roles. She has worked to serve seniors in various capacities for more than 30 years.

Ms. Bottens holds a degree in Social Work from Governors State University. She serves on the Board of Leading Age Illinois as the CCRC Cabinet President.

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Ms. Valerie Cooper Vice President of Operations

and Executive Director of Laclede Groves

As the Vice President of Operations, Ms. Cooper leads the Executive Directors across LSS communities. Additionally, she serves as Executive Director of Laclede Groves and Richmond Terrace. Ms. Cooper has been a licensed nursing home administrator since 1997, with experience providing services including short-term rehab, skilled nursing, memory care, and assisted living. She joined LSS in 2002 and prior to that worked in both for profit and not for profit senior living communities. At Laclede Groves, she oversaw the operations of a $60 million construction and renovation project.

Ms. Cooper has 25 years of experience in the senior living industry in multiple operations roles as well as marketing, social services, and administrative capacities.

Ms. Cooper holds a BS degree in Human Environmental Studies from Southeast Missouri State University and MA in Gerontology from Webster University in St. Louis.

Mr. Josh King Vice President of

Information Technology

Mr. King is the Vice President of Information Technology. He oversees technology to ensure all LSS locations stay connected to hospitals and partnering agencies through multiple platforms and an Electronic Health Records system.

With a background in health information management and IT systems implementation and optimization, Mr. King joined LSS in December 2012 as the Director of Health Information Management. He spent time as the IT Director and interim CIO before being named to his current role in 2017. Before joining LSS, Mr. King worked as the Assistant Director of HIM as PCRMC in Rolla, Missouri.

Mr. King has a BS in Health Information Management from St. Louis University and a Master of Health Administration from the University of Missouri – Columbia. He also holds an RHIA license and is ITIL Certified.

Mr. Brian Reinhold Vice President of Risk, Safety and Corporate Compliance

Mr. Reinhold came to LSS in 2015 as Director of Risk Management and Corporate Compliance. As an attorney, he oversees the LSS programs for risk management and corporate compliance as well as providing legal services and advice to the various departments and leadership throughout the organization.

Mr. Reinhold began practicing law in 2004 in Los Angeles, California. In 2005 he relocated to St. Louis where he worked for one of St. Louis’ largest law firms before opening a private practice in 2010.

He obtained an undergraduate degree in Mechanical Engineering from Brigham Young University and his law degree is from Washington University School of Law. Mr. Reinhold is licensed to practice law in the states of California, Missouri, and Illinois and before the US Patent & Trademark Office.

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Mr. Chad Sneed Vice President of Financial Reporting and Budgeting

Mr. Sneed was named Vice President of Financial Reporting and Budgeting at LSS in 2017.

Mr. Sneed’s professional career began in public accounting in 1995 with a small local CPA firm, then later he worked for CliftonLarsonAllen from 1999 to 2006. In 2006, he joined LSS as Controller. His time at LSS has been focused on developing and improving the financial reporting and budgeting of LSS using business intelligence software.

Mr. Sneed holds a BS degree in Accounting from the University of Missouri and is a Certified Public Account (CPA).

Ms. Rita Vicary Vice President of Marketing, Communications, and Sales

Currently serving as Vice President of Marketing, Communications, and Sales, Ms. Vicary has lead the marketing and sales efforts for LSS since 2009, including the successful marketing, pre-sales, and fill-up of all LSS construction projects in that time. From 2007 to 2009 her role was Administrator of Regional Sales for the Illinois communities, which included directing the marketing, pre-sales, and fill-up of the Concordia Village expansion in Springfield. She joined Lutheran Hillside Village in 1999 to pre-sell the expansion there and was named Director Marketing in 2002.

Ms. Vicary came to the organization from Converse Marketing, Inc., where she was an Account Manager for numerous corporate clients. Prior to joining Converse, Mrs. Vicary served in a variety of roles at Methodist Medical Center of Illinois, including Research and Publications Writer, Public Relations Coordinator, and Marketing Manager. She has been recognized for excellence in the field of marketing as the recipient of the Adam Award for corporate image/public relations advertising and the Master Communicator Award of Achievement. She is a Certified Marketing Professional.

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RECENT PROJECTS

Over the last ten years, LSS has undertaken to update and expand the facilities of each of its Life Plan Communities in order to reposition each community in its respective market to assure that it remains viable and attractive to the community it serves and prospective residents. In April of 2018, this repositioning process for all of its Life Care Communities was completed with the opening of the last phase of the Care Center replacement project at Lenoir Woods in Columbia, Missouri. With the completion of this repositioning of its Life Care Communities, LSS has now focused its efforts on the development of Independent Living apartment units at Mason Pointe, the newest LSS facility, in order to reposition Mason Pointe as a Life Plan Community.

MASON POINTE, ST. LOUIS COUNTY, MISSOURI

In August 2015, LSS entered into an agreement with Mercy Hospital to purchase the assets (including the license for 120 SNF beds) and assume the operation of an existing 120-bed Care Center (the “Mercy Facility”) located on the Mercy Hospital Campus in West St. Louis County (the “Mercy Campus”). LSS operated the Mercy Facility under the name “REACH West County.” As part of that agreement, LSS was granted a lease of the Mercy Facility for a period of up to three years, but terminable by LSS at any time, and LSS agreed that prior to the expiration of that three year period it would relocate the operation of REACH West County to a new site not on the Mercy Campus but within a ten mile radius of the Mercy Campus. Assumption of the operation of the Mercy Facility afforded LSS with a presence in west St. Louis County, an area of the St. Louis market in which LSS had been seeking to establish a stronger presence.

In order to meet its obligation to relocate REACH West County from the Mercy Campus but to retain the geographic presence in west St. Louis County and the required proximity to the Mercy Campus, LSS evaluated numerous sites in west St. Louis County for the construction of a new Care Center to replace the Mercy Facility. In that process, LSS identified an existing Care Center built in the early 2000s which was located just three miles from the Mercy Campus in the heart of West St. Louis County, the area in which LSS had been seeking to establish a stronger presence. This facility included a license for 230 SNF beds and 22 Residential Care Facility beds as well as a certificate of need for 46 ALF beds, 8 acres of contiguous property zoned for the construction of 176 Independent Living units (which had not been constructed) and approximately 23,000 square feet of existing facilities built to provide a large portion of the common facilities needed to support the Independent Living units when constructed.

This facility was built with a high level of finish and with predominantly private rooms. However, shortly after this facility was opened the nonprofit owner encountered significant financial challenges which ultimately caused the owner to seek relief in bankruptcy. The facility was subsequently purchased out of bankruptcy by a for profit organization which operated the facility at significantly less than the licensed capacity and with approximately 55% of the occupied beds serving Medicaid residents.

LSS purchased the facility on February 1, 2016 and renamed it “Mason Pointe.” At the time of the acquisition, Mason Pointe held a license for 230 SNF beds, 22 RCF beds and 46 ALF beds. There were a significant number of rooms that were not licensed at the time of purchase and some of the existing private rooms could also accommodate semi-private occupancy. As a result, using the existing SNF license of Mason Pointe, a portion of the licensed SNF beds acquired in the purchase of the assets of the Mercy Facility and the Certificate of Need for 46 ALF beds acquired in the purchase of Mason Pointe, LSS expects to eventually operate Mason Pointe with a capacity of 240 licensed SNF beds (of which approximately 70% will be private rooms) and 47 licensed ALF beds.

Currently, Mason Pointe has 42 units dedicated to Assisted Living, 46 Skilled Nursing beds dedicated to REACH (short stay rehab) and 170 Skilled Nursing beds dedicated to long term Skilled

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Nursing. The REACH unit has been operating at stabilized occupancy with an average census of 42 for the first 10 months of 2018. The Assisted Living beds are stabilized as well with an occupancy at December 26, 2018 of 96%. The biggest challenge LSS has faced has been with the long term Skilled Nursing care beds. There are currently 170 beds in service dedicated to long term Skilled Nursing care. There is an additional wing of 30 rooms with the capacity for an additional 60 Skilled Nursing care beds which are not in service and not currently considered as available. When the facility was acquired in 2016 there were a total of 108 Medicaid residents in long term care Skilled Nursing beds. That number has gradually decreased to the current level of 80.

The chart below outlines the actual occupancy for the period from January 2018 through December 26, 2018 and budgeted occupancy through December 2019. The spike in occupancy in December 2018 is primarily related to 24 Sisters from the Sisters of the Good Shepherd who have made Mason Pointe their permanent home after closing a Care Center they were operating in the St. Louis area. They expect the number of Sisters residing at Mason Pointe to remain constant for the foreseeable future. It is important to note that 15 of these Sisters are going to be Medicaid beneficiaries and are counted in the current total of 80. The Sisters have expressed an intention to provide financial support to help Mason Pointe’s mission in addition to rent.

Although Mason Pointe has experienced significant operating losses since its acquisition by LSS in February 2016, the increases in occupancy of the Skilled Nursing beds and the improvement in the payor mix of those beds has been gradually reducing those operating losses and LSS believes that by 2020 the operating losses associated with the Mason Pointe licensed care areas will be reduced to approximately $4,000,000. In addition, LSS believes that the construction of 156 Independent Living apartment units at Mason Pointe (see “THE PROJECT-Mason Pointe Project”) will, when those units are occupied,

164 164 164 164 164 164 164 164 162 162 162 170170 170 170 170 170 170 170 170 170 170 170 170 170

109 112 113103 103

109 101 99

107 106 111

139

36 41 39 40 41 4335 32

40 42 4659

72 70 70 69 65 65 67 63 62 63 62

80

140 140 139 139 138 139 140 142 143 145 146 147

82 80 78 76 74 72 72 72 72 72 72 72

58 60 61 63 64 67 68 70 71 73 74 75

0

20

40

60

80

100

120

140

160

180

J A N - 1 8 M A R - 1 8 M A Y - 1 8 J U L - 1 8 S E P - 1 8 N O V - 1 8 J A N - 1 9 M A R - 1 9 M A Y - 1 9 J U L - 1 9 S E P - 1 9 N O V - 1 9

Mason Pointe Long Term Care Occupancy

Total SNF Units in Service Total Occupied SNF UnitsOccupied Private Pay Units Occupied Mediciad UnitsProjected Occupied SNF Units Projected Occupied Medicaid UnitsProjected Occupied Private Pay Units

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generate additional cash flow and also result in increased demand for long term Skilled Nursing Care beds, thus reducing operating losses for the Mason Pointe facility to approximately $3,300,000 by 2023 and resulting in a positive cash flow.

The previous owner of the Mason Pointe facility was party to a collective bargaining agreement with SEIU Healthcare Missouri-Kansas that covered a significant portion of the non-supervisory staff at the facility. This collective bargaining agreement had a one year term ending October 10, 2016. As a successor employer, LSS was subject to the terms of this collective bargaining agreement. This is the first time that LSS or any of its Affiliates has been a party to a collective bargaining agreement. In July 2016, employees at Mason Pointe attempted to file a decertification petition requesting a vote to determine if the employees wished to remain in the union but, the National Labor Relations Board declined to process this petition. The union contract was ultimately decertified by the employees in February 2017, almost a year after LSS acquired Mason Pointe.

Following the decertification of the union, LSS was able to begin to develop the relationship between management, employees and residents typical in LSS facilities. Significant progress in developing these relationships has been made since February 2017 and Mason Pointe now operates more like other LSS communities, but improvements are still being made. The following chart tracks the monthly turnover rate comparing Mason Pointe to the overall LSS average. As indicated, within the last several months, Mason Pointe’s turnover has come down to the LSS average. LSS believes that this is a strong indicator of employee engagement and is ultimately reflected in better service to residents resulting in significantly better resident experiences. This stabilization of the work force coincides with the time when private pay occupancy began to grow.

5.3%5.0%

6.9%

6.4%

5.0%4.7% 4.7%

5.8%

3.3%3.7%

3.0%3.2%

2.4%

3.5%3.3%

3.1%

4.0%3.7%

4.2%

3.1%

3.9%3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18

Mason Pointe Monthly Employee Turnover Percentage

Mason Pointe Turnover LSS Overall Turnover

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Mason Pointe has not only enabled LSS to fulfill its obligation to Mercy Hospital to relocate the residents of REACH West County from the Mercy Campus, but has also provided LSS with the opportunity to develop a new high quality Life Plan Community in West County, an extremely favorable market in which LSS did not previously have a strong presence. Additionally, when fully developed, Mason Pointe will provide coverage to a portion of the St. Louis metropolitan area not currently served by LSS’ existing Life Plan Communities. Because many of the common facilities necessary to support Independent Living units already exist at Mason Pointe, the amount of the additional long term debt (net of entrance fees) required to construct Independent Living apartments at Mason Pointe is expected to be relatively nominal and, as a result, the construction of those Independent Living units at Mason Pointe is currently expected to provide significant economic benefit to LSS.

THE PROJECT

The Project consists of the “Mason Pointe Project,” the “Concordia Village Project,” the “Lutheran Hillside Village Project,” and the “Lenoir Woods, Breeze Park, Meramec Bluffs and Laclede Groves Project,” each of which are described below:

Mason Pointe Project. The Mason Pointe Project consists of the “Mason Pointe Independent Living Project” and the “Mason Pointe Cap-X Project.” The Mason Pointe Independent Living Project includes (i) construction of a 156 unit Independent Living apartment facility (the “Independent Living Facility”) which, in addition to the apartment units, also includes a parking garage, common areas, dining areas and a wellness center and pool and (ii) the renovation and expansion of the existing approximately 26,000 square foot plaza building to renovate and expand the existing facilities in the plaza building to provide additional amenities for the residents of the Independent Living Facility as well as other miscellaneous improvements to the Mason Pointe facilities. The Mason Pointe Cap-X Project includes approximately $3,200,000 in capital expenditures at Mason Pointe unrelated to the Mason Pointe Independent Living Project.

LSS began marketing these planned Independent Living apartments at Mason Pointe in July 2017 and by June 2018 had taken 130 refundable priority deposits. LSS began accepting Residency Agreements in July 2018. The conversion of priority deposits to Residency Agreements has been strong and as of December 3, 2018 LSS had Residency Agreements with 5% deposits on 76 apartments. In addition, at December 3, 2018 LSS had also received Reservation Agreements on an additional 5 apartments. A Residency Agreement requires a payment of 5% of the Entrance Fee, 20% of which is not refundable after 30 days, 40% of which is not refundable once construction has begun (construction commenced in October 2018) and 60% of which is not refundable after the prospective resident is notified that their apartment will be available, which happens 90 days before the apartment is ready for occupancy. The experience of LSS at its other Life Plan Communities is that because prospective residents have financial risk under the Residency Agreement, most prospective residents who have signed a Residency Agreement will occupy the selected Independent Living apartment when it is ready for occupancy. A Reservation Agreement requires a $1,000 refundable deposit to reserve an apartment for 30 days. If a Residency Agreement is not signed within 30 days, the Reservation Agreement is terminated and the deposit is refunded.

The type and size of the apartment units included in the Independent Living Facility, the number of each type of each apartment and the estimated entrance fee and monthly rent for each type of apartment are described in the table below, together with the number of each type of unit currently committed under a Residency Agreement or a Reservation Agreement.

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Number of Units

Number of Reserved Units Type

Size in Square Feet

Estimated Monthly Rent

2020 $ Estimated

Entrance Fee

23 9 1 Bedroom 905 2,600 $320,000

21 13 2 Bedroom 1,140 3,300 $399,000

14 10 2 Bedroom 1,205 3.300 $422,000

8 2 2 Bedroom 1,230 3,300 $422,000

10 5 2 Bedroom 1,285 3,500 $466,000

14 7 2 Bedroom 1,295 3,500 $466,000

18 6 2 Bedroom 1,305 3,500 $456,000

21 7 2 Bedroom 1,385 3,700 $483,000

21 16 3 Bedroom 1,505 3,750 $500,000

6 6 3 Bedroom 1,640 3,900 $570,000

156 81

The following table shows the number of Residency Agreements and Reservation Agreements by

month since LSS began accepting Residency Agreements in July of 2018.

Month Number of

Units Reserved Number of

Cancellations

Net Reservations

for Month

Cumulative Units

Reserved

Cumulative Percentage of Total Units

July 2018 1 1 1 0.64% August 2018 34 34 35 22.44% September 2018 28 28 63 40.38% October 2018 10 10 73 46.79% November 2018 2 2 75 48.08% December 2018 6 6 81 51.92%

The total development costs for the Mason Pointe Independent Living Project are approximately

$68,000,000. The development costs include a contract for construction with BSI Constructors in the amount of $62,215,000, architectural and engineering fees of $1,950,000, furniture, fixtures and equipment in the amount of $2,415,000 and a project contingency of $1,690,000 (which is in addition to the $2,200,000 contingency included in the BSI Contract for construction of the Mason Pointe Independent Living Project described below). LSS expects to receive approximately $60,000,000 in entrance fees when all of the Independent Living apartment units included in the Mason Pointe Independent Living Project have been rented.

LSS has its own in-house development team that oversees all construction. This team is headed by Mark Schoedel, Vice President of Construction and Capital Projects. A mechanical engineer, Mark has overseen LSS construction projects since 1994. The LSS team also includes Jeff Brown, a licensed architect, responsible to oversee and review the work done by outside architects.

Each project is assigned to an LSS project manager. Steve Kienstra is the project manager assigned to the Mason Pointe Project. Steve has been with LSS since 2007. Below is a list of projects exceeding $10 million that Mark Schoedel has overseen. Jeff Brown has also been involved in all of these projects with

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the exception of the 1999 project. Mark has also overseen many smaller projects totaling approximately $145,000,000.

Date Commenced Community Construction Amount 1999 Meramec Bluffs $54,000,000 2003 Meridian Village $12,210,120 2004 Heisinger Bluffs $11,839,256 2008 Meramec Bluffs $10,480,000 2007 Concordia Village $30,833,569 2011 Laclede Groves $48,695,313 2014 Concordia Village $21,019,927 2016 Lutheran Hillside Village $15,825,000 2016 Lenoir Woods $21,800,000 2017 Lenoir Woods $24,850,000

Total $251,553,185

LSS also has an internal sales and marketing team headed by Rita Vicary, Vice President of Marketing, Communications, and Sales. Rita was hired in 1999 as one of the Sales Counselors for the initial pre-sales and fill-up of 154 independent living residences then being constructed at Lutheran Hillside Village. She went on to oversee the pre-sales and fill-up of Concordia Village as Regional Sales Director, and in 2009, was promoted to head the sales effort for all LSS communities.

Rita has built the sales team for Mason Pointe with existing LSS sales personnel who were successful at Meridian Village and Lake Pointe. The team consists of Kelli Gould, Director of Community Sales and Marketing, and Julie Jones, Senior Living Counselor. Kelli Gould came to LSS from the new housing sales industry in 2011, and Julie Jones came to LSS from the new housing sales industry in 2012.

During her tenure, Rita has been responsible for overseeing pre-sales of the following LSS independent living expansions:

Year Opened Community # of Independent Living

Units Months to Stabilized

Occupancy 2009 Concordia Village 92 10 2011 Concordia Village 9 1 2015 Concordia Village 67 3 2013 Laclede Groves 80 3 2017 Lenoir Woods 79 6

The contractor engaged by LSS to construct the Mason Pointe Independent Living Project is BSI Constructors (“BSI”), a St. Louis based general contractor and construction manager. BSI was founded in 1972 as Bannes-Shaughnessy, Inc. and has been known as BSI Constructors since 1989. The contract with BSI for construction of the Mason Pointe Independent Living Project (the “BSI Contract”) has a guaranteed maximum price (a “GMP”) of $62,215,000, which includes a contingency of $2,200,000. The BSI Contract does not contain any provisions for liquidated damages but does contain a provision for shared savings to incentivize BSI to complete the construction of the Mason Pointe Project at a cost less than the GMP.

Dun & Bradstreet rates BSI in the 98th percentile of all businesses in terms of least financial risk compared to an industry average of the 38th percentile with a bonding capacity of over $300 million in aggregate and $150 million for any single project. BSI has also been rated “Best in Class” by its insurance underwriters, was the first general contractor in its region to be admitted into the OSHA Voluntary Protection Program and has been selected as the 2018 General Contractor of the Year in Category A (largest general contractors in the area) from the American Subcontractors Association. BSI’s experience includes a variety of building types and end uses, but it has been involved in over 20 senior living projects totaling

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more than $300 million in the past 10 years. Below is a representative sampling of recent Senior Living Projects:

Client/Owner Project Status Cost St. Paul’s Foundation Renovation & Addition Completed in 2015 $21.0 million

Lutheran Senior Services Concordia Village ILU & Wellness Center Completed in 2015 $21.7 million

St. Andrew’s St. Andrew’s at Francis Place Completed in 2016 $4.2 million St. Andrew’s Willows Building A Completed in 2017 $16.0 million St. John Neumann Associates, LP St. John Neumann Completed in 2016 $3.8 million

Nazareth Living Center St. Joseph’s Home Completed in 2016 $20.0 million Nazareth Living Center AL-60 Phase 1 Under Construction $18.0 million B’nai B’rith Covenant House Covenant Place II Under Construction $23.0 million The Sarah Community Naomi Fitness Center Completed in 2017 $0.4 million St. Andrew’s Resources for Seniors Francis Place Renovations Completed in 2018 $2.8 million

The Sarah Community Veronica House Dining & Kitchen Renovation Completed in 2018 $0.8 million

St. Andrews Renovations to Willows at Brookings Park Under Construction $2.4 million

Concordia Village Project. The Concordia Village Project includes the renovation and expansion of an existing 16 bed Skilled Nursing unit into a new 20 bed Assisted Living Memory Care center with all private rooms, renovation and expansion of an existing 16 bed Skilled Nursing unit into a new 24 bed Skilled Nursing unit with more private rooms and other miscellaneous improvements. The total cost of the Concordia Village Project will be approximately $6,000,000.

The primary motivation for construction of the Assisted Living Memory Care center is to meet the needs of existing residents. Many residents of Concordia Village have needed Assisted Living Memory Care that was not available at Concordia Village and, as a result, those residents had no alternative but to leave the community. LSS believes that the vast majority of the demand for this Memory Care center will be filled from within the community. While there is significant competition in the Springfield area for residents seeking Assisted Living Memory Care, LSS believes that the design of the Concordia Village Project will be competitive and that it will be able to attract residents from the Springfield market area to fill those units not filled from within Concordia Village.

The Skilled Nursing Care unit expansion will eliminate many of the currently existing smaller shared rooms and replace them with private rooms for which there is great demand at Concordia Village. In addition, increasing the size of this unit from 16 to 20 beds will improve staffing efficiency.

LSS believes that the Concordia Village Project will add net revenue to Concordia Village while increasing the ability to serve residents. LSS also believes that it will be able to raise donations to pay for a portion of the anticipated cost of the Assisted Living renovation. The total construction costs are estimated at $6,000,000 and it is expected that about $1,000,000 of the funds will be raised from residents.

Lutheran Hillside Village Project. The Project includes $2,000,000 for capital expenditures at Lutheran Hillside Village in Peoria, Illinois.

Lenoir Woods, Breeze Park, Meramec Bluffs and Laclede Groves Project. The project includes approximately $3,000,000 for capital expenditures at Lenoir Woods in Columbia, Missouri, Breeze Park in Weldon Spring, Missouri, Meramec Bluffs in Ballwin, Missouri and Laclede Groves in Webster Groves, Missouri.

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FUTURE PLANS

In addition to the Mason Pointe Project, Concordia Village Project and Lutheran Hillside Village Project, LSS is also in the early stages of the development of a planned new greenfield Life Plan Community in Lake St. Louis, Missouri to be called Lake Pointe. A summary of the planned levels of care to be developed at Lake Pointe and the phasing of construction of these facilities is set out below. LSS has acquired the property for Lake Pointe and in August 2015 opened a marketing office. However, following the acquisition of the Mason Pointe facility active marketing at Lake Pointe was suspended until the operations at Mason Pointe are stabilized. LSS continues to regard Lake Pointe as an attractive project but intends to reevaluate the entire project following the stabilization of Mason Pointe.

Unit Type Phase 1 Phase 2 Phase 3 Total Units Independent Living Apartments 176 - 73 249 Assisted Living 20 12 - 32 Assisted Living Memory Care 20 4 - 24 Skilled 20 20 - 40 Short Stay Rehab 20 20 - 40 Totals 256 56 73 385

OUTSIDE OPPORTUNITIES

In addition to the repositioning and expansion of existing care facilities and the acquisition, development and construction of new care facilities, in order to both grow existing ministries and to expand the scope of ministry, LSS and its affiliates also evaluate and pursue opportunities for affiliation, joint venture and other arrangements with other organizations as well as opportunities for the acquisition of other organizations or properties, including health care or retirement community properties (collectively, “Outside Opportunities”). If a decision is made to pursue any Outside Opportunity, it will only be done in compliance with any applicable provisions of the Master Indenture and other applicable covenants and agreements by which LSS and its affiliates are bound. However, any Outside Opportunity could adversely affect the operating or other financial covenants of the Obligated Group and/or expand or change the current organizational structure of LSS and its affiliated organizations.

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FACILITIES AND SERVICES

TABLE 1 The following table is a summary of currently in service licensed skilled nursing beds, independent

living (other than affordable housing units), and assisted living facilities owned and operated by LSS and its Affiliates that are members of the Obligated Group.

Facility Name Facility Location Independent

Living Patio

Homes Assisted Living Nursing Total

Laclede Groves Webster Groves, MO 306 54 132 250 742 Breeze Park Weldon Spring, MO 110 30 75 81 296 Meramec Bluffs Ballwin, MO 264 25 78 128 495 Richmond Terrace Richmond Heights, MO - - 83 - 83 Mason Pointe Chesterfield, MO - - 42 216 251 Heisinger Bluffs Jefferson City, MO 65 - 67 53 185 St. Joseph’s Bluffs(1) Jefferson City, MO - - - 57 57 Lenoir Woods Columbia, MO 159 95 68 100 422 Meridian Village Glen Carbon, IL 129 34 68 70 301 Lutheran Hillside Village Peoria, IL 126 48 83 92 349 Concordia Village Springfield, IL 178 26 48 64 314 Mackenzie Place Affton, MO 20 - - - 20 Total 1,357 312 745 1,103 3,515

(1) Managed with Heisinger Bluffs.

FACILITIES OF THE AFFILIATES

TABLE 2 The following table is a summary of the Affordable Housing communities owned by or otherwise

related to the Affiliates not included in the Obligated Group and providing independent living accommodations. Facility Name Facility Location Project Type Independent Living Dunn Road Manor Florissant, MO HUD 202 62 Dunn Road Manor LIHTC Florissant, MO Low Income Housing Tax Credit 36 Halls Ferry Manor St. Louis, MO HUD 202 75 Hilltop Manor Eureka, MO HUD 202 62 Mackenzie Place 202 Affton, MO HUD 202 36 Mackenzie Place 202-II Affton, MO HUD 202 31 Mackenzie Place LIHTC Affton, MO Low Income Housing Tax Credit 34 Rose Hill House Kirkwood, MO HUD 202 67 Rose Hill House II Kirkwood, MO HUD 202 30 Westfield Manor Belleville, IL HUD 202 62 Total 495

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OPERATIONS

The following map shows the locations of the Life Plan Communities owned and operated by LSS and its Affiliates in the Missouri cities of Ballwin, Columbia, Jefferson City, Weldon Spring and Webster Groves, and the Illinois cities of Glen Carbon, Peoria and Springfield. The “Area of Detail” highlights LSS communities that are located in the St. Louis metropolitan area.

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FACILITIES AND SERVICES OF THE OBLIGATED GROUP

LIFE PLAN COMMUNITIES

Laclede Groves (Webster Groves, Missouri) General: Laclede Groves, LSS’ largest Life Plan Community, is located in St. Louis County,

Missouri. The property was purchased in 1971 and Lutheran Convalescent Home (“LCH”), a Skilled Nursing facility was opened on the property shortly thereafter.

Beginning in 1984, an Independent Living apartment complex, Laclede Oaks Manor, was added to the campus. Laclede Oaks Manor is located adjacent to LCH and was built in two phases: phase one, a four story concrete building containing a variety of efficiency, one and two bedroom styles was opened in 1984; and phase two which added additional Independent Living apartments and other amenities was opened in 1988. In 2013, an additional Independent Living apartment complex was opened as well as a new “Town Center” (including fine dining, a bistro, pool, fitness/wellness area, movie theatre, arts and crafts facilities, spa/beauty salon, meeting rooms, marketing suite and offices, physical/occupational therapy space and a clinic) and a significant renovation to the existing skilled nursing facilities was also completed. Laclede Oaks Manor includes a large dining room, recreation rooms, meeting rooms, and banking services.

In 1995, the Village of Laclede Oaks was developed, consisting of 54 patio homes for Independent Living. The homes are two and three bedrooms with furnished kitchen and laundry. The exterior of the homes is a combination of brick and siding. In 1997, three Independent Living apartment buildings, each consisting of 16 two and three bedroom units, were completed.

Also located on the Laclede Groves campus is LSS’ licensed Assisted Living Facility, Laclede Commons. The first phase was opened in 1993 with a second phase completed in 1996. A portion of the apartments in Laclede Commons were subsequently redeveloped as Memory Care apartments for residents with dementia.

Service Area: The basic service area for Laclede Groves is approximately a ten mile radius surrounding the campus. Most residents move to Laclede Groves from south St. Louis County or the immediate surrounding area.

Services: Laclede Groves offers four levels of care to meet residents’ needs:

Independent Living Apartments and Patio Homes. This area consists of 306 Independent Living apartments and 54 patio homes. Services for independent living include a variety of dining venues, security, maintenance, grounds keeping, snow removal, scheduled transportation, emergency response system, social events and activities, bi-weekly housekeeping, and utilities.

Assisted Living Apartments. This area consists of 74 apartments licensed as Assisted Living for residents requiring some assistance with the tasks of everyday life. Services include supportive assistance tailored to meet the individual requirements of each resident, 24-hour support staff, three meals a day in the dining room, security, scheduled transportation, weekly housekeeping, social events and activities, medication administration, emergency response system, maintenance and utilities.

Assisted Living Memory Care Apartments. This area consists of 58 apartments licensed as an Assisted Living Facility. All services provided to assisted living residents are offered in a secure environment for residents with dementia.

Care Center. This area consists of 250 beds licensed as a Skilled Nursing Facility, 64 of which are Medicare certified beds and dedicated for Short Stay Rehab and 96 of which are Medicaid certified beds. Services include three meals per day in dining rooms

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located on each floor and all services provided to Assisted Living residents with the addition of 24-hour skilled nursing care and therapy.

Home health services are available through Lutheran Senior Services Home and Community Based Services department and other local providers.

Breeze Park (Weldon Spring, Missouri) General: Breeze Park is located in St. Charles County. Breeze Park opened in 1996 with 30

Independent Living apartments, 34 patio homes, and 40 Assisted Living apartments. Currently, there are 110 Independent Living apartments, 30 patio homes, 52 Assisted Living beds, 23 Assisted Living Memory Care beds, and 81 Skilled Nursing beds.

Service Area: The primary service area is St. Charles County. However, Breeze Park also serves residents from both west St. Louis County and north St. Louis County.

Services: Breeze Park offers four levels of care to meet residents’ needs. Independent Living Apartments and Patio Homes. This area consists of 110

Independent Living apartments and 30 patio homes. Independent residents receive twice monthly housekeeping services, a point of service dining program with multiple venues, transportation to doctors, stores, etc., planned activity and religious programs, home health care if needed, and barber/beauty services.

Assisted Living Apartments. This area consists of 52 studio apartments licensed as an Assisted Living Facility for residents requiring some assistance with the tasks of everyday life. Residents in this licensed area receive three meals a day, assistance with activities of daily living and medication administration, individualized case management, weekly housekeeping, laundry services, social based activity programs and pastoral care.

Assisted Living Memory Care Apartments. This licensed area consists of 23 apartments licensed as Assisted Living. Residents in this area receive the same assistance as residents of the Assisted Living apartments in an environment that is secure for residents with dementia.

Care Center. This licensed area contains 81 Skilled Nursing beds, all of which are certified for Medicare and 8 of which are also certified for Medicaid. Residents receive three meals daily, and all services provided to assisted living residents with the addition of 24-hour skilled nursing care and therapy services. Twenty of these beds are dedicated for Short Stay Rehab.

Home Health services are available through Lutheran Senior Services Home and Community Based Services department or other local providers.

Meramec Bluffs (Ballwin, Missouri) General: Meramec Bluffs is located on 51 acres in west St. Louis County. The project was

completed in five phases, with the last phase having been completed in March 2014. Meramec Bluffs consists of 25 patio homes, 264 Independent Living apartments, 58 Assisted Living apartments, 20 Assisted Living Memory Care apartments and 128 Skilled Nursing beds.

The licensed assisted living building offers studio and one bedroom apartments, a dining room and private dining room, an activity room, beauty shop, laundry facilities, two health services offices, and several resident/family lounge areas.

The skilled nursing area consists of 128 Skilled Nursing beds and includes a great room area offering dining and activities, and a beauty shop, laundry room, therapy rooms, meeting room, and resident/family lounges.

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Service Area: The basic service area for Meramec Bluffs is a ten-mile radius of the community.

Services: Meramec Bluffs offers five levels of care to meet residents’ needs.

Independent Living Apartments and Patio Homes. This area consists of 264 Independent Living apartments and 25 patio homes. Services for independent living include a meal allowance for use in the main dining room, grill area, and ice cream parlor. Home and lawn maintenance, security, transportation, emergency response system, social events and activities, bi-weekly cleaning, and apartment utilities are also provided.

Assisted Living Apartments. This area consisting of 58 apartments is licensed as an Assisted Living Facility. It offers support to residents not requiring 24-hour medical supervision and instead provides 24-hour staffing, three meals daily, assistance with activities of daily living and medication administration, security, emergency response, transportation, weekly housekeeping, social-based activity programs and pastoral care, maintenance, and utilities.

Assisted Living Memory Care Apartments. The residents in this licensed area consisting of 20 apartments licensed as Assisted Living receive the same assisted living services as listed above, in a secure environment for residents with dementia.

Care Center. This licensed area containing 108 Skilled Nursing care beds includes 40 Medicare certified beds dedicated for Short Stay Rehab and 22 Medicaid certified beds. Residents receive all services provided to assisted living residents with the addition of 24 hour skilled nursing care and therapy services.

Skilled Memory Care. This licensed area contains 20 Skilled Nursing care beds. It provides all of the services of the Care Center in a secure environment for residents with dementia.

Home health services are available through Lutheran Senior Services Home and Community Based Services department and other local providers.

Heisinger Bluffs/St. Joseph’s Bluffs (Jefferson City, Missouri) General: Heisinger Bluffs was established as a result of the vision and gift of Arthur and Lydia

Heisinger. In 1966, the Heisingers made a decision to include a bequest in their will donating their home (a mansion built in 1906) and the surrounding property to establish a “home for the aged in Cole County, Missouri.” The property was sold in several tracts for approximately $300,000. In 1976, part of the proceeds from the sale were used to purchase the current site for developing a “home for the aged.” The site included a large home and approximately five acres of land. From 1976 until 1982, a total of 80 assisted living units were constructed. In January 2002, the decision was made to become part of LSS. This decision has made it possible to move forward with a major expansion of facilities and services. Throughout 2004 and 2005, two phases of construction were completed, adding Assisted Living Memory Care beds, Independent Living apartments, and additional Assisted Living beds. Also, by converting a portion of the original assisted living area, Skilled Nursing beds were added. Heisinger Bluffs now offers a full continuum of care that includes 65 Independent Living apartments, 67 Assisted Living beds (including 20 for Memory Care) and 53 Skilled Nursing beds. This is Jefferson City’s only Life Plan Community.

Effective January 3, 2005, LSS entered into an agreement to manage St. Joseph’s Home, a 27-bed, intermediate care facility (in close proximity to Heisinger Bluffs) in Jefferson City, Missouri. LSS purchased this facility for $2,500,000 in August 2005 and subsequently changed its name to St. Joseph’s Bluffs. LSS subsequently expanded the facilities to include additional Skilled Nursing beds. The operations have been merged with Heisinger Bluffs.

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Service Area: The basic service area for Heisinger Bluffs and St. Joseph’s Bluffs is the Jefferson City area.

Services: Heisinger Bluffs and St. Joseph’s Bluffs collectively offer four levels of care to meet residents’ needs:

Independent Living Apartments. There are 65 Independent Living apartments offering residents a meal plan, bi-weekly housekeeping, educational, recreational and spiritual events, maintenance and lawn care, security, and a 24-hour emergency call system. All utilities, except telephone, and cable, are provided.

Assisted Living Apartments. This licensed area consisting of 47 Assisted Living apartments offers residents three meals daily, medication administration, assistance with activities of daily living, exercise room, social based activities and pastoral care, and heavy housekeeping once a year. All utilities, except telephone, and cable, are provided.

Assisted Living Memory Care Apartments. This level of care consisting of 20 apartments licensed as Assisted Living offers residents three meals daily, a bathroom with shower in each room, a 24-hour nurse call system, assistance with medication administration, assistance with activities of daily living, incontinence care, weekly laundry service, security, individualized case management, social-based activity programs, and pastoral care in a secure environment.

Care Center. This area at Heisinger has 53 Skilled Nursing Care beds with two beds certified for Medicare and 20 certified for Medicaid. The skilled area at St. Joseph’s Bluffs contains an additional 57 Skilled Nursing Care beds includes 48 beds certified for Medicare and of these 25 are dedicated for Short Stay Rehab. Residents receive three meals daily, all services provided in assisted living in addition to 24-hour skilled nursing care and therapy services, a bathroom with shower in each room, social based activities and pastoral care, personal laundry service (at an additional charge), and daily housekeeping.

Lenoir Woods (Columbia, Missouri) General: Lenoir Woods is located on 80 acres in Columbia, Missouri, and was purchased by LSS

on April 6, 2005. The site consists of 95 patio homes, 159 Independent Living apartments, 44 Assisted Living apartments, 24 Assisted Living Memory Care apartments and 100 Skilled Nursing care beds.

Service Area: The basic service area for Lenoir Woods is the Columbia, Missouri, area; however, there are a number of residents who have come to Lenoir from beyond the basic service area to be near family members.

Services: Lenoir Woods offers four levels of care to meet residents’ needs.

Independent Living Apartments and Patio Homes. This area consists of 159 Independent Living apartments and 95 patio homes. Services provided include a dining allowance with multiple dining venues, weekly housekeeping services, interior and exterior maintenance, all utilities (except telephone and cable television service), 24-hour emergency pull cord service and transportation. Residents also receive priority access to assisted living, nursing care, and Alzheimer’s care facilities, and can participate in educational, recreational and spiritual events. Other amenities include access to the coffee and gift shop, library with computer, wellness center, pastoral care services, beauty/barber shop, meeting rooms, and rehabilitation and therapy services.

Assisted Living Apartments. This licensed area consisting of 44 Assisted Living apartments offers 24-hour nursing staff, restaurant-style dining, assistance with the activities of daily living and medication administration, social based activities and pastoral

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care, all utilities (except telephone), weekly housekeeping, personal laundry, transportation, 24-hour monitoring of pull cord system and apartment maintenance.

Assisted Living Memory Care Apartments. This level of care consisting of 24 apartments licensed as Assisted Living offers residents three meals daily, a bathroom with shower in each room, a 24-hour nurse call system, assistance with medication administration, assistance with activities of daily living, incontinence care, weekly laundry service, security, individualized case management, social-based activity programs, and pastoral care in a secure environment.

Care Center. This licensed area consisting of 100 Skilled Nursing care beds includes 42 Medicare certified beds, 30 of which are dedicated for Short Stay Rehab, and 12 Medicaid certified beds. Residents receive three meals daily, private or semi-private rooms, all services provided in assisted living with the addition of 24-hour skilled nursing and therapy services.

Home health services are available through local providers.

Meridian Village (Glen Carbon, Illinois) General: LSS became the sole member of Meridian Village Association, an Illinois not-for-profit

corporation, in 2001 at which time the facilities of Meridian Village consisted of 66 Independent Living apartments and 34 patio homes. Subsequently an additional 63 Independent Living apartments, 54 Assisted Living apartments, 14 Assisted Living Memory Care apartments and 70 Skilled Nursing Care beds have been constructed.

Service Area: The basic service area for Meridian Village is the area within a ten-mile radius of Glen Carbon, Illinois.

Services: Meridian Village offers four levels of care to meet residents’ needs.

Independent Living Apartments and Patio Homes. This area consists of 129 Independent Living apartments and 34 patio homes. The independent retirement building offers one and two bedroom apartments and the following amenities: dining room, private dining room, chapel, multipurpose lounge, crafts area, numerous lounges, a wellness center and a swimming pool. A dining allowance program, home and lawn maintenance, security, transportation, emergency response system, social events and activities, bi-weekly cleaning, and apartment utilities are also provided.

Assisted Living Apartments. The licensed facilities located in the assisted living building consist of 54 apartments licensed as Assisted Living and offer studio, one and two-bedroom apartments, a dining room and private dining room, an activity room, beauty shop, laundry facilities, and several resident/family lounge areas. This facility provides three meals daily, assistance with activities of daily living and medication administration, social based activities and pastoral care, security, emergency response, weekly housekeeping, maintenance and utilities.

Assisted Living Memory Care Apartments. This licensed area consisting of 14 apartments licensed as Assisted Living provides assisted living services in a secure environment for residents with dementia.

Care Center. The area consists of 70 Skilled Nursing beds. All 70 are Medicare certified with 24 of these dedicated for Short Stay Rehab. Twelve beds are certified for Medicaid. This facility has a great room area for dining and activities, a beauty shop, laundry room, therapy rooms, meeting room, and resident/family lounges. Residents

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receive three meals daily, and all services provided in assisted living with the addition of 24-hour skilled nursing and therapy services.

Home health services are available through Lutheran Senior Services Home and Community Based Services and other local providers.

Lutheran Hillside Village (Peoria, Illinois) General: LSS became the sole member of Lutheran Hillside Village, Inc. in February 2007. From

the original 1960 building of dormitory-style housing for independent seniors through several additions, the campus now contains 126 Independent Living apartments, 48 patio homes, 63 Assisted Living apartments, 20 Assisted Living Memory Care apartments, 92 Skilled Nursing beds and a community center featuring a living room, game rooms, a restaurant, café, lounge, private dining room, bar, general store, recreation room, beauty and barber shop, fitness room and a woodworking shop. The majority of this community was part of an expansion placed in service in 2001.

Service Area: The basic service area for Lutheran Hillside Village is Peoria, Illinois and the surrounding communities.

Services: Lutheran Hillside Village offers five levels of care to meet the needs of its residents.

Independent Living Apartments and Patio Homes. This area consists of 126 Independent Living apartment units and 48 patio homes. Independent retirement services include a dining allowance with multiple dining venues, a social based activities program and pastoral care, scheduled transportation, emergency response system, housekeeping and maintenance.

Assisted Living Apartments. Residents in this licensed area which consists of 63 apartments licensed as Assisted Living receive three meals daily, assistance with activities of daily living and medication administration, social based activities, pastoral care and weekly housekeeping.

Assisted Living Memory Care Apartments. This licensed area consists of 20 apartments licensed as Assisted Living. It provides the same services provided to residents of the assisted living apartments, in a secure environment for residents with dementia.

Care Center. This licensed area consists of 92 licensed beds, all of which are certified for Medicare, with 24 dedicated for Short Stay Rehab, and 18 of which are certified for Medicaid. Residents receive all services provided to residents of the assisted living apartments with the addition of 24-hour skilled nursing and therapy services.

Private Duty services are available through local providers.

Concordia Village (Springfield, Illinois) General: Lutheran Retirement Community Association (LRCA) was formed by Lutheran

churches in the Springfield, Illinois area with the express purpose of developing a Life Plan Community. They were successful in acquiring a 40 acre tract of land in Springfield and in 1995 they opened Concordia Village, a 33-unit Independent Living Retirement Community. In 2001, LRCA approached LSS about managing its property and assisting it in expanding Concordia Village into a Life Plan Community. LSS began managing Concordia Village on January 1, 2002 and became its sole member effective January 1, 2005.

In 2009 the community was expanded with the addition of Independent Living apartments, patio homes and an Assisted Living apartment facility. Additional patio homes opened in May 2011 and a skilled nursing facility opened early 2012. In 2015, 67 Independent Living apartments and 3 patio homes were added.

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Service Area: The basic service area for Concordia Village is Springfield, Illinois area and the surrounding communities.

Services: Concordia Village offers three levels of care to meet the needs of its residents:

Independent Living Apartments and Patio Homes. This area consists of 178 Independent Living apartments and 26 patio homes. Independent retirement services include a point of service food program, a social based activities program, pastoral care, scheduled transportation, emergency response system, housekeeping, maintenance and security.

Assisted Living Apartments. Residents in this licensed area which consists of 48 apartments licensed as Assisted Living receive three meals a day, assistance with activities of daily living and medication administration, a social based activities program, pastoral care, scheduled transportation, housekeeping, security, emergency response system and maintenance.

Care Center. This licensed area consists of 64 Skilled Nursing beds, all of which are certified for Medicare, 14 dedicated for Short Stay Rehab, and six of which are certified for Medicaid. Residents receive all services provided to residents of the Assisted Living apartments with the addition of 24-hour skilled nursing and therapy services.

FACILITIES THAT ARE NOT LIFE PLAN COMMUNITIES

Richmond Terrace (Richmond Heights, Missouri) General: Richmond Terrace is licensed by the State of Missouri as an Assisted Living Facility.

The facility is located at 1633 Laclede Station Road in Richmond Heights, Missouri. The facility is licensed for 99 residents and offers 83 living units. The building was originally opened in 1999, with LSS taking ownership in February 2001.

Richmond Terrace is a two-story building, with the unique advantage of offering ground exits on both levels. Richmond Terrace offers seven different living accommodations.

Richmond Terrace’s main dining room has a seating capacity for 90. In addition, Richmond Terrace offers a large activity room, living room with fireplace, television room, general store, and meeting space in the lobby area. There are two health services stations, multiple public restrooms, housekeeping and laundry area, full kitchen facilities, business and administrative offices. A beauty and barbershop are also located on the premises.

Service Area: The basic service area for Richmond Terrace is a five mile radius around the facility. The majority of the admissions to Richmond Terrace are from the surrounding community.

Services: Richmond Terrace provides assistance to residents who can no longer live independently:

Assisted Living Apartments. This licensed area provides minimal assistance with dressing, bathing, grooming, medication assistance, laundry services, three meals per day, and weekly housekeeping. A wide choice of social activities is also offered seven days per week. An alert system is located in each unit’s bedroom and bathroom. Twenty-four hour security service is provided.

Mason Pointe (Chesterfield, Missouri) General: Mason Pointe is licensed by the State of Missouri for both Skilled Nursing and Assisted

Living. The facility is located at 13190 S. Outer Forty Rd. in Chesterfield, Missouri and currently operates

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216 SNF beds (including 46 Short Stay Rehab beds) and 42 Assisted Living beds. LSS began operating this facility in February 2016.

Service Area: The basic service area for Mason Pointe is a five mile radius around the facility. The majority of the admissions to Mason Pointe are from the surrounding community.

Services: Mason Pointe provides 24 hour skilled nursing care as well as assistance with dressing, bathing, grooming, medication assistance, laundry services, three meals per day, and weekly housekeeping. A wide choice of social activities is also offered seven days per week. An alert system is located in each units’ bedroom and bathroom.

Assisted Living Apartments. This licensed area provides minimal assistance with dressing, bathing, grooming, medication assistance, laundry services, three meals per day, and weekly housekeeping. A wide choice of social activities is also offered seven days per week. An alert system is located in each unit’s bedroom and bathroom. Twenty-four hour security service is provided.

Care Center. This licensed area currently consists of 216 Skilled Nursing beds, including 46 Skilled Nursing beds which are dedicated for Short Stay Rehab. Residents receive all services provided to residents of the Assisted Living apartments with the addition of 24-hour skilled nursing and therapy services.

The Village at Mackenzie Place (Affton, Missouri) General: The Village at Mackenzie Place is a community serving low to moderate income seniors

in an independent setting. The project is comprised of four entities, none of which were originally in the Obligated Group. During 2018 a portion of this building’s ownership reverted to Lutheran Senior Services and is now part of the Obligated Group. The Village at Mackenzie Place provides independent housing for 123 residents. The entities and number of units contained within The Village at Mackenzie Place are listed below:

Mackenzie Place 202: 36 independent living units under the HUD 202 program

Mackenzie Place 202-II: 31 independent living units under the HUD 202 program

Mackenzie Place LIHTC: 36 independent living units financed with Low Income Housing Tax Credits

Lutheran Senior Services: 20 independent living units The 20 units currently owned by Lutheran Senior Services were originally financed with Historic

Tax Credits. The tax credit structure required the project to be owned by a for profit entity that was an affiliate of LSS. This requirement expired in 2018 and ownership has reverted to LSS. Only these 20 units owned by LSS are assets included in the Obligated Group.

LSS HOME AND COMMUNITY BASED SERVICES

General: LSS Home and Community Based Services provides programs and/or services to maintain or improve the quality of life of older adults so they can continue to live in their own homes. The services are provided by Lutheran Senior Services Home Health, LSS Private Duty, LSS Hospice Care, the Good Neighbor Program, Outreach Social Services, Volunteer Money Management and Living Safe Technologies.

Service Area: These services are provided to adults age 60 and older or adults, age 50 and older if disabled, living in St. Louis City, St. Louis County, St. Charles County, and Jefferson County, Missouri. The services of Home Health are also available to residents of Madison County, Illinois and the services of

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Living Safe Technologies are available to residents of each community in which LSS or an Affiliate has a facility. Each program provides a variety of services as listed below:

Home Health. Lutheran Senior Services Home Health is licensed by the State of Missouri (and, by reciprocity, the State of Illinois for services to residents of Madison County, Illinois) and is Medicare certified to provide skilled nursing care, physical, occupational and speech therapies, social work, and home health aide assistance. Medical treatment is provided when a patient requires a skilled medical service to treat an illness or injury on an intermittent basis, the necessary care is ordered by a physician and the patient is homebound. These services are provided primarily after discharge from the hospital or skilled nursing facility. Skilled service begins with a comprehensive patient assessment by a registered nurse or physical therapist. After the assessment, a plan of care is developed. Many of these services are reimbursed by Medicare.

LSS Private Duty. LSS Private Duty care is personalized to meet the unique needs of the client. Services may include skilled nursing care, medication set up, bathing and/or dressing assistance, companionship, meal preparation, laundry, errands, shopping, light housekeeping, companion for appointments or travel, and beautician services such as haircuts, shampoo, style, manicures and pedicures. Rates are determined by the level of care required and the hours requested. A three hour minimum is necessary for most services. There is special pricing available for 24-hour, live-in assistance. Payment for services may be available through private insurance, worker’s compensation or self-pay.

LSS Hospice Care. In 2007, LSS received licensure from the State of Missouri to begin operations of a hospice agency in the St. Louis metropolitan area. LSS Hospice Care is a full service-hospice that provides specialized care for people with life-limiting illnesses and supportive services for families. Hospice care may be considered when an individual chooses to no longer undergo medical treatments designed to cure. In addition to pain control and symptom management, the hallmarks of LSS Hospice Care are compassionate spiritual, psychological, and social services that show the love of Jesus Christ for the individual and his or her family. Hospice services are covered by Medicare, Medicaid, and most private insurances. Care is provided in the place that the person calls home, whether that is a private residence, a retirement community, an assisted living facility or a nursing home.

LSS Aging Answers. LSS Aging Answers is a resource to connect seniors with the services they need through our many programs. It includes the Good Neighbor Program, Outreach social Services and Volunteer Money Management.

Good Neighbor Program. The Good Neighbor Program is a financial assistance program for those needing home-based, non-medical services to remain independent. Individuals need to be 60 years or older or 50 years and older with a disability and live in St. Louis City, St. Louis County, St. Charles County or Jefferson County. Individuals are eligible to receive LSS Private Duty services three hours one day per week. The Good Neighbor fund pays $10.00 an hour toward the cost of LSS Private Duty services and the remaining amount is paid by the individual. Individuals must have a clinical need for the services. A clinical need is defined as being unable to perform two or more activities of daily living which include eating, bathing, dressing, toileting, transferring and continence. Also, individuals must demonstrate financial need to receive the assistance. Assets are considered along with an older adult’s income to determine eligibility for the program. All individuals receive a free in-home needs assessment by an Elder Care Specialist in Aging Answers before services begin in order to ensure that all their social service needs are met.

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Outreach Social Services. Outreach Social Services assists in evaluating older adults’ needs and providing information on community resources. Individuals need to be 60 years or older or 50 years and older with a disability and live in St. Louis City, St. Louis County, St. Charles County or Jefferson County. The program’s goal is to enable older adults to maintain or improve their quality of life. Elder Care Specialists provide free phone consultations which address health-related questions, caregiving, senior care options and financial concerns of older adults. Elder Care Specialists also provide care management which includes a comprehensive in-home needs assessment with resource identification. A minimum fee may be charged for the care management services depending on an individual’s income.

Volunteer Money Management. Volunteer Money Management is an interfaith partnership with Jewish Family & Children’s Services and a community partnership with AgeSmart Community resources designed to link volunteers with older adults who need money management assistance in order to maintain their independence. Individuals need to be 60 years or older or 50 years and older with a disability and live in the St. Louis metropolitan area in order to qualify. A volunteer travels to an older adult’s home and assists with sorting, organization and recording monthly bills and statements. A volunteer can also balance the checkbook and reconcile monthly bank statements. There is no charge for this service. All individuals receive a free in-home needs assessment by an Elder Care Specialist in Aging Answers before services begin in order to ensure that all their social service needs are met.

RESIDENCY AGREEMENTS

Independent Living residents at LSS communities must enter into a residency agreement, which, among other things, sets forth qualifications for residency, terms of occupancy, entrance (if applicable) and monthly service fees, refund of deposits and provision of included services. To be accepted for residency, certain age, and financial requirements must be met. Residents of Independent Living communities pay a monthly service fee in facilities offering Assisted Living or Skilled Nursing levels of care and are given priority placement in those facilities if the need arises. Rates are adjusted annually at the first of the year.

Residents may pay a onetime entrance fee upon admission to the Independent Living facility, 50% or 95% of which is refundable on termination of occupancy. Residents also pay a monthly fee during the period of occupancy. Residents who elect the 95% refund option pay a higher monthly fee.

The Independent Living residency agreement may be terminated at any time if a resident: (1) fails to abide by the rules of the community, (2) fails to pay the monthly fees (provided, however, that LSS may, under its Benevolent Care policy, waive or reduce fees for a resident who is unable to pay), (3) is determined to be a safety threat to others or others’ property, or (4) makes false, inaccurate, or incomplete representations or statements in the confidential financial application. A resident may also terminate an agreement at any time with 90 days’ notice. An agreement is terminated by the death of a resident unless the unit is occupied by two persons. The resident’s representative is responsible for the monthly service fee until the unit is vacated.

Assisted Living residents at LSS communities must enter into a residency agreement that, among other things, sets forth qualifications for residency, terms of occupancy, resident’s rights and provisions for included services. To be accepted for residency, certain health and financial requirements must be met. Assisted Living residents pay a monthly service fee that includes most services (supplies, beauty shop, and pharmacy services are billed separately). Rates are usually adjusted annually at the first of the year and if the Assisted Living community also has a Care Center, residents are given priority placement in the Skilled Nursing level of living if the need arises.

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An Assisted Living residency agreement may be terminated at any time if a resident: (1) fails to continue to meet health requirements; (2) fails to abide by the rules of the facility, or (3) fails to pay the monthly fees (provided, however, that LSS may, under its Benevolent Care policy, waive or reduce fees for a resident who is unable to pay). In addition, a resident may terminate an agreement at any time with 30 days’ notice but is responsible for the monthly service fee through the end of the 30 day notice period. An agreement is terminated by the death of a resident.

Residents in an LSS Skilled Nursing facility must enter into an admission agreement that, among other things, sets forth qualification for residency, terms of occupancy, resident’s rights, and provision of included services. To be accepted for residency, certain health and financial requirements must be met.

Residents in the skilled nursing facility pay daily room and board. Supplies, beauty shop, pharmacy and any other services are billed separately. Rates are usually adjusted annually at the first of the year.

An admission agreement to the skilled nursing facility may be terminated at any time if a resident: (1) fails to continue to meet health requirements; (2) fails to abide by the rules of the facility, or (3) fails to pay the monthly fees (Benevolent Care is provided through participation in the Medicaid program). In addition, a resident may terminate an agreement at any time.

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PRICING INFORMATION BY FACILITY

The following table shows the ranges in 2019 pricing for each facility by level and geographic area:

Entrance Fee Range Monthly

Service Fee Daily Room Rate

ST. LOUIS AREA

BREEZE PARK Apartments - Rental $5,000 $2,921 - $3,878 Apartments - Entrance Fee $100,200 - $135,200 $2,389 - $3,161* Patio Homes - Rental $5,000 $3,162 - $4,082 Patio Homes - Entrance Fee $104,500 - $166,100 $2,608 - $3,201* Assisted Living N/A $4,848 - $5,539 Assisted Living Memory Care N/A $4,693 -$7,376 Skilled Care Center N/A N/A $272-$343

LACLEDE GROVES Apartments $149,700 - $421,200 $2,554 - $3,731* Patio Homes $326,900 - $458,700 $2,280 - $2,596* Assisted Living N/A $5,348 - $8,169 Assisted Living Memory Care N/A $5,416 - $8,405 Skilled Care Center N/A N/A $232 - $338

MASON POINTE Assisted Living N/A $4,524 - $7,503 Skilled Care Center N/A N/A $276 - $352 MERAMEC BLUFFS Apartments $183,000 - $567,000 $2,416 - $3,381* Patio Homes $396,200 - $571,000 $2,503 - $2,827* Assisted Living N/A $5,261 - $8,031 Assisted Living Memory Care N/A $5,629 - $8,130 Skilled Care Center N/A N/A $272 - $348

MERIDIAN VILLAGE Apartments - Rental $5,000 $2,609 - $3,872 Apartments - Entrance Fee $108,700 - $174,300 $2,033 - $2,950* Patio Homes - Rental $5,000 $3,664 - $4,242 Patio Homes - Entrance Fee $171,200- $202,900 $2,756 - $3,165* Assisted Living N/A $4,017 - $7,068 Assisted Living Memory Care N/A $6,103 - $7,847 Skilled Care Center N/A N/A $254 - $346 RICHMOND TERRACE Assisted Living N/A $2,931 - $7,390

* Monthly Service Fees shown with 95% Refund Option. The monthly fees can be lowered with other Refund Options.

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CENTRAL MISSOURI HEISINGER BLUFFS Apartments - Rental $5,000 $1,343 - $4,270 Apartments - Entrance Fee $61,400 - $294,600 $1,017 - $2,707* Assisted Living N/A $2,727 - $6,387 Assisted Living Memory Care N/A $4,991 - $6,510 Skilled Care Center N/A N/A $198 - $270 St. Joseph’s Bluffs Skilled Care Center N/A N/A $225 - $287 LENOIR WOODS** Apartments - Rental $5,000 $3,260 - $5,271 Apartments - Entrance Fee $132,700 - $334,400 $2,556 - $3,497* Patio Homes $55,800 - $241,300 $929 - $2,267* Assisted Living N/A $3,915 - $7,218 Assisted Living Memory Care N/A $6,967- $7,333 Skilled Care Center N/A N/A $244- $306 CENTRAL ILLINOIS CONCORDIA VILLAGE

Apartments $117,000 - $320,800 $1,904 - $3,505* Patio Homes $304,400 - $447,600 $3,180 - $3,368* Assisted Living N/A $5,233 - $7,756 Skilled Care Center N/A N/A $269 - $344 LUTHERAN HILLSIDE VILLAGE Apartments $ 152,300 - $259,100 $2,525 - $3,390* Patio Homes $280,800 - $448,000 $1,735 - $1,935* Assisted Living N/A $4,062 - $7,262 Assisted Living Memory Care N/A $6,427 Skilled Care Center N/A N/A $275 - $375

* Monthly Service Fees shown with 95% Refund Option. The monthly fees can be lowered with other Refund Options.

NURSING STAFF AND OTHER EMPLOYEES

As of October 31, 2018, LSS had 3,214 employees. This includes a nursing staff comprised of 229 full-time Licensed Practical Nurses, 119 full-time Registered Nurses and 466 full-time Certified Nurse Aids. LSS experienced a 33.9% turnover rate for all full-time employees over the ten-month period ended October 31, 2018. The turnover rate for full-time nursing employees over the ten-month period was 38%.

EDUCATIONAL AFFILIATIONS

Through its Clinical Pastoral Education program, LSS is fully accredited to provide professional education for ministry. The program, which is affiliated with the Association of Clinical Pastoral Education, Inc., brings theological students and ministers into supervised encounters with persons in crisis. Out of an intense involvement with individuals in need and the feedback from peers and teachers, students

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develop a new awareness of themselves and of the needs of those to whom they minister. From theological reflection on specific human situations, they gain new understanding of the human situation. Within the interdisciplinary team process of helping individuals, they develop skills and interpersonal and inter-professional relationships.

A number of colleges, universities and other educational institutions use the facilities of LSS communities to provide clinical experience for their students. All of these programs provide their own instructors, who supervise the students, and protocols are established to assure that residents of the facilities receive proper care.

LICENSES AND MEMBERSHIPS

The Missouri Division of Aging, Department of Health, licenses the nursing homes at Laclede Groves, Breeze Park, Meramec Bluffs, Heisinger Bluffs, St. Joseph’s Bluffs, Lenoir Woods and Mason Pointe as skilled care nursing facilities. The assisted living apartments at Laclede Groves, Breeze Park, Meramec Bluffs, Richmond Terrace, Heisinger Bluffs, Lenoir Woods and Mason Pointe are each licensed by the same department as an Assisted Living Facility. The Assisted Living Facilities and Skilled Nursing facilities at Meridian Village, Lutheran Hillside Village and Concordia Village are licensed by the Illinois Department of Public Health.

LSS has the following major licenses and memberships related to its programs and facilities: LeadingAge – member LeadingAge Missouri - member LeadingAge Illinois - member Missouri Department of Health – license Illinois Department of Public Health - license American Health Care Association - member Missouri Health Care Association - member

The Missouri Division of Aging, Department of Health conducts annual and semiannual reviews of LSS’ facilities that provide licensed care in Missouri. The Illinois Department of Public Health conducts similar reviews in Illinois. Management believes that the results of these reviews have been excellent.

RISK MANAGEMENT AND INSURANCE

Insurance. LSS maintains insurance (or self-insures) with respect to its property, operations, and business against casualties, contingencies, and risks (including, but not limited to, public liability, property, and casualty, business interruption or use, occupancy and employee dishonesty) in such manner as is customary in the case of corporations engaged in the same or similar activities and similarly situated and as is, in the opinion of management, adequate to protect the property and operations of LSS and its Affiliates.

Workers’ Compensation and Unemployment Insurance. All Missouri and Illinois employees are covered by the applicable state workers’ compensation law, which provides for insurance coverage, without cost to the employee, for loss of time, as well as hospital and medical expenses resulting from a compensable injury incurred in the course of employment. Compensation during this period is based on a percentage of the employee’s average weekly earnings. In the event of an on the job injury resulting in a loss of time from work, the employee must obtain a medical release from his or her physician before returning to work. All employees are covered under a traditional worker’s compensation insurance policy.

Professional Liability Insurance. LSS purchases, for itself and its Affiliates, primary and excess liability medical malpractice insurance on a claims-made basis. The primary policy is purchased through

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Caring Communities Shared Services, Inc., a captive insurance group. This policy carries individual claim limits of $1,000,000, aggregate claim limits of $3,000,000, with $35,000 retention per loss.

LSS also carries, for itself and its Affiliates, umbrella coverage on general liability and professional liability of $10,000,000 for each occurrence and in the aggregate. Management does not expect any claims to exceed liability insurance coverage limits.

Environmental Matters. LSS is unaware of any material environmental problems relating to the properties of LSS and its Affiliates.

Litigation. There is no litigation pending or, to its knowledge, threatened against LSS or any of its Affiliates which, in the aggregate and after insurance coverage, would have a material adverse effect on LSS or its Affiliates.

REAL PROPERTY TAXES Currently, seven of the Life Plan Communities owned and operated by LSS and its affiliates have

been placed on the tax rolls and pay real and personal property tax. Although LSS will continue to monitor assessed valuations and challenge those valuations when appropriate, it does not expect that reductions in these tax obligations will be experienced in the future.

RESULTS OF OPERATIONS

The table on the following page represents the average daily census figures for all existing facilities owned by LSS for the fiscal years ended December 31, 2017, 2016 and 2015, as well as the ten-month period ended October 31, 2018:

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TABLE 3 HISTORICAL UTILIZATION DATA

Ten-Months Ended Fiscal Years Ended December 31, October 31, 2018 2017 2016 2015 Life Plan Communities:

Breeze Park Independent Living: 95.7% 95.9% 96.1% 95.9% Assisted Living: 97.3% 92.6% 96.2% 94.9% Skilled Nursing: 97.0% 95.7% 95.6% 93.4% Total: 96.4% 95.1% 96.1% 95.1%

Concordia Village(1) Independent Living: 96.7% 97.1% 93.5% 90.7% Assisted Living: 97.8% 97.7% 96.2% 95.3% Skilled Nursing: 89.8% 92.0% 90.8% 92.5% Total: 95.5% 95.9% 93.5% 91.9%

Heisinger Bluffs Independent Living: 90.3% 94.0% 82.9% 88.5% Assisted Living: 86.5% 87.6% 84.4% 92.2% Skilled Nursing: 88.3% 92.3% 90.8% 83.0% St. Joseph Bluffs: 79.3% 52.8% 70.7% 80.8% Total: 86.2% 87.7% 83.1% 90.2%

Laclede Groves Independent Living: 95.6% 96.4% 96.6% 95.9%

Assisted Living: 90.7% 93.5% 92.6% 94.7% Skilled Nursing: 95.2% 85.3% 86.2% 91.4% Total: 94.6% 94.5% 91.6% 94.0% Lenoir Woods(2) Independent Living: 92.7% 89.5% 96.3% 95.8% Assisted Living: 89.7% 93.5% 92.6% 73.4% Skilled Nursing: 86.0% 87.3% 79.6% 75.9% Total: 90.6% 89.8% 90.7% 86.6% Lutheran Hillside Village Independent Living: 94.6% 91.9% 91.6% 91.9% Assisted Living: 94.8% 86.8% 75.8% 89.9% Skilled Nursing: 79.4% 65.9% 77.8% 84.8% Total: 90.5% 87.1% 84.7% 90.2% Meramec Bluffs Independent Living: 96.6% 96.5% 97.3% 97.3% Assisted Living: 93.8% 90.6% 92.6% 96.3% Skilled Nursing: 93.8% 92.0% 93.5% 92.1% Total: 95.1% 94.3% 95.1% 95.4% Meridian Village Independent Living: 96.6% 95.8% 96.6% 95.7% Assisted Living: 95.3% 94.9% 94.6% 98.0% Skilled Nursing: 91.2% 90.6% 92.1% 91.5% Total: 95.0% 94.5% 91.9% 95.5%

Non- Life Plan Communities: Mason Pointe Assisted Living 77.0% 49.2% 55.4% N/A Skilled Nursing 67.1% 71.0% 71.4% N/A Total: 68.7% 56.7% 69.7% N/A REACH West County(3) Skilled Nursing 0.0% 0.0% 79.5% 78.6% Total: 0.0% 0.0% 79.5% 78.6% Richmond Terrace Assisted Living: 95.0% 90.7% 86.5% 87.7% Total: 95.0% 90.7% 86.5% 87.7% Total LSS: 91.6% 89.7% 89.5% 91.6%

Independent Living 95.1% 94.9% 95.1% 93.4% Assisted Living: 92.2% 89.6% 89.4% 90.9% Skilled Nursing: 85.8% 82.3% 81.9% 89.3%

Total: 91.6% 89.7% 89.5% 91.6%

(1) Concordia Village added 67 Independent Living Apartments in October 2015.

(2) Lenoir Woods added Independent Living Apartments in October 2017.

(3) REACH West County closed during 2016.

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SOURCES OF REVENUES

Payments on behalf of residents are made to the facilities by private commercial insurance carriers, the residents on their own behalf (or by their responsible parties) or under the Medicare and Medicaid programs. The following table shows the percentage of Medicare and Medicaid revenue to operating revenue during the three fiscal years ended December 31, 2017, 2016 and 2015, as well as the ten-month period ended October 31, 2018.

TABLE 4 SOURCES OF REVENUES

Ten-Months Ended

October 31, 2018

Fiscal Years Ended December 31,

2017 2016 2015 Medicare as a Percent of Operating Revenue 19.79% 20.13% 21.58% 22.93%

Medicaid as a Percent of Operating Revenue 2.99% 3.40% 4.07% 2.24%

Each year LSS provides charity care to residents who are no longer able to fully pay for their accommodations and services.

The percentage of Medicare revenue to total revenue peaked in 2015. LSS expects this overall percentage to stabilize or gradually decrease over the next several years. The percentage of Medicaid revenue to total revenue had been relatively stable prior to 2016. However, as a result of the purchase of Mason Pointe with its significantly higher Medicaid occupancy, Medicaid revenue for 2016 increased to 4.07% of total revenue. LSS expects this to gradually decline over the next several years.

FINANCIAL RECORDS

The fiscal year of LSS and each of its Affiliates ends December 31. LSS and each of its Affiliates uses the accrual basis of accounting. The audited annual consolidated financial statements for LSS and its Affiliates for the years ended December 31, 2017 and 2016 are set forth in APPENDIX B to this Official Statement.

FUNDRAISING REVIEW

Contributions, listed in the Audited Financial Statements as Unrestricted, Temporarily Restricted and Permanently Restricted, remain strong. Total contributions for 2017, 2016, and 2015 were $6,015,674, $5,501,792 and $5,050,437, respectively.

OUTSTANDING INDEBTEDNESS

The table on the following page sets forth the amount required each year for the payment of principal and interest on outstanding Prior Bonds (as defined in the Official Statement) issued on behalf of LSS and its Affiliates and secured by the Master Indenture.

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TABLE 5 ANNUAL DEBT SERVICE REQUIREMENTS ON PRIOR BONDS(1)

Period Ended Feb 1

Series 2000 Bonds Series 2010 Bonds Series 2011 Bonds Series 2014A Bonds Series 2014BCD Bonds Series 2016A Bonds Series 2016B Bonds Series 2016C Bonds Total Prior

Principal Interest(2) Principal Interest Principal Interest Principal Interest Principal Interest(2) Principal Interest(2) Principal Interest Principal Interest(2) Bonds(3)

2019 $ 1,835,000 $ 1,487,025 $ 250,000 $ 2,030,369 $ 1,000,000 $ 2,516,480 $ 1,890,000 $ 3,680,593 $ 1,525,000 $ 2,551,653 $ 965,000 $ 2,504,048 $ 2,890,000 $ 4,551,700 $ 440,000 $ 242,160 $ 30,359,026

2020 1,930,000 1,404,450 250,000 2,018,494 1,045,000 2,472,480 1,930,000 3,639,958 1,555,000 2,506,128 1,005,000 2,465,448 3,015,000 4,436,100 450,000 231,600 30,354,656

2021 2,035,000 1,317,600 245,000 2,006,619 1,100,000 2,420,230 2,005,000 3,565,315 1,585,000 2,459,673 1,045,000 2,425,248 3,150,000 4,315,500 460,000 220,800 30,355,984

2022 2,140,000 1,226,025 235,000 1,994,981 1,155,000 2,365,230 2,100,000 3,468,553 1,625,000 2,412,288 1,100,000 2,372,998 3,275,000 4,199,250 475,000 209,760 30,354,084

2023 2,255,000 1,129,725 225,000 1,983,819 1,210,000 2,306,783 2,200,000 3,371,553 1,655,000 2,363,663 1,155,000 2,317,998 3,465,000 4,035,500 485,000 198,360 30,357,399

2024 2,370,000 1,028,250 135,000 1,973,131 1,275,000 2,245,338 2,305,000 3,266,053 3,190,000 2,314,108 1,210,000 2,260,248 2,240,000 3,862,250 495,000 186,720 30,356,096

2025 2,495,000 921,600 125,000 1,966,719 1,340,000 2,180,350 2,405,000 3,160,950 3,230,000 2,222,218 1,270,000 2,199,748 2,405,000 3,750,250 510,000 174,840 30,356,674

2026 2,625,000 809,325 105,000 1,960,781 1,410,000 2,109,320 2,525,000 3,046,700 3,265,000 2,881,954 760,000 2,136,248 2,135,000 3,630,000 520,000 162,600 30,081,928

2027 2,765,000 691,200 90,000 1,955,138 1,485,000 2,034,475 2,645,000 2,923,180 3,310,000 3,152,925 885,000 2,111,548 1,500,000 3,523,250 535,000 150,120 29,756,835

2028 2,910,000 566,775 245,000 1,950,300 1,570,000 1,948,823 2,780,000 2,792,730 2,000,000 3,003,975 1,390,000 2,081,900 2,290,000 3,478,250 490,000 257,400 29,755,153

2029 3,065,000 435,825 230,000 1,937,131 1,660,000 1,858,263 2,915,000 2,655,530 2,000,000 2,913,975 1,450,000 2,018,250 2,515,000 3,363,750 505,000 235,350 29,758,074

2030 3,225,000 297,900 220,000 1,924,769 1,755,000 1,762,513 3,060,000 2,511,580 2,500,000 2,823,975 1,525,000 1,945,750 2,230,000 3,238,000 525,000 212,625 29,757,111

2031 3,395,000 152,775 205,000 1,912,944 1,860,000 1,661,285 3,215,000 2,359,105 2,500,000 2,711,475 1,600,000 1,869,500 2,460,000 3,126,500 540,000 189,000 29,757,584

2032 1,265,000 1,901,925 1,965,000 1,554,000 3,375,000 2,198,880 5,000,000 2,598,975 1,680,000 1,789,500 2,700,000 3,003,500 560,000 164,700 29,756,480

2033 1,335,000 1,833,931 2,085,000 1,436,100 3,540,000 2,030,655 5,110,000 2,373,975 1,765,000 1,705,500 2,955,000 2,868,500 580,000 139,500 29,758,161

2034 1,405,000 1,762,175 2,210,000 1,311,000 3,720,000 1,854,180 5,230,000 2,144,025 1,855,000 1,617,250 3,215,000 2,720,750 595,000 113,400 29,752,780

2035 1,475,000 1,686,656 2,340,000 1,178,400 3,900,000 1,668,705 3,105,000 1,908,675 1,945,000 1,524,500 5,765,000 2,560,000 620,000 86,625 29,763,561

2036 1,555,000 1,607,375 2,480,000 1,038,000 2,680,000 1,474,300 7,975,000 1,768,950 2,045,000 1,427,250 2,740,000 2,271,750 640,000 58,725 29,761,350

2037 1,640,000 1,521,850 2,630,000 889,200 2,815,000 1,340,650 6,225,000 1,410,075 2,130,000 1,340,000 4,960,000 2,162,150 665,000 29,925 29,758,850

2038 1,720,000 1,431,650 2,785,000 731,400 2,955,000 1,200,250 12,345,000 1,129,950 2,235,000 1,233,500 0 1,976,250 29,743,000

2039 1,810,000 1,337,050 2,955,000 564,300 3,105,000 1,052,850 12,765,000 574,425 2,350,000 1,121,750 0 1,976,250 29,611,625

2040 7,500,000 1,237,500 3,130,000 387,000 3,255,000 897,950 2,465,000 1,004,250 5,325,000 1,976,250 27,177,950

2041 7,500,000 825,000 3,320,000 199,200 3,420,000 735,550 2,590,000 881,000 5,590,000 1,710,000 26,770,750

2042 7,500,000 412,500 3,590,000 564,900 2,720,000 751,500 6,285,000 1,430,500 23,254,400

2043 3,770,000 385,750 2,855,000 615,500 5,180,000 1,116,250 13,922,500

2044 3,960,000 197,600 3,000,000 472,750 5,435,000 857,250 13,922,600

2045 3,150,000 322,750 5,710,000 585,500 9,768,250

2046 3,305,000 165,250 6,000,000 300,000 9,770,250

$33,045,000 $11,468,475 $37,265,000 $41,172,806 $43,765,000 $37,170,168 $76,060,000 $56,044,018 $87,695,000 $48,227,057 $51,450,000 $44,681,178 $95,430,000 $77,025,200 $10,090,000 $3,264,210 $753,853,111 (1) Debt service amounts are rounded to the nearest whole dollar. (2) The Series 2000 Bonds are unhedged variable rate bonds and are shown above with an assumed rate of 4.50%. The 2014B Bonds are subject to interest rate swaps maturing August 14, 2025. The actual swap rates (1.739% and 1.575%), credit spread (1.27%) and bank fees are reflected in the chart above through August 14, 2025, and an all-in

rate of 4.50% is assumed thereafter. The Series 2014C and 2014D Bonds reflect fixed rates of 2.75% and 3.10%, respectively, through February 1, 2025 pursuant to related bond documents and are shown above, with assumed rates of 4.50% thereafter. The Series 2016C Bonds reflect a fixed rate of 2.40% through February 1, 2027 pursuant to the related bond documents and are shown above, with an assumed rate of 4.50% thereafter. The Series 2000, 2014B, 2014C, 2014D and 2016C Bonds reflect principal amortization amounts as stated in the related bank agreements and bond documents.

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FINANCIAL INFORMATION

The following selected financial data for the years ended December 31, 2017, 2016 and 2015 is derived from the unaudited supplementary information included in the consolidated audited financial statements of LSS, excluding operations of the Non-Member Affiliates. The consolidated audited financial statements for the years ended December 31, 2017 and 2016 are set forth in APPENDIX B to this Official Statement. The selected data for the ten-month periods ended October 31, 2018 and 2017 are derived from the consolidated unaudited financial statements of the members of the Obligated Group. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which LSS considers necessary for a fair presentation of the results of operations for these periods. The information set forth in the following table for the fiscal years ended December 31, 2017, 2016 and 2015, which represents only excerpts from the complete consolidated audited financial statements should be read in conjunction with such consolidated audited financial statements. Operating results for the ten months ended October 31, 2018, are not necessarily indicative of results that may be expected for the full year ending December 31, 2018.

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TABLE 6

OBLIGATED GROUP SUMMARY STATEMENTS OF UNRESTRICTED ACTIVITIES

(UNAUDITED)

Ten Months Ended

October 31, Fiscal Years Ended

December 31, 2018 2017 2017 2016 2015

OPERATING REVENUE Resident Service $171,521,584 $162,005,267 $195,767,147 $191,382,024 $173,886,584 Amortization of Admission Fees 4,921,386 3,951,530 5,131,857 4,411,716 3,972,280 Interest on Investments Held by Trustee 1,898,428 1,692,927 2,016,821 1,907,120 1,353,153 Net Assets Released from Restrictions - Operations 518,373 749,712 1,008,913 972,123 568,028 Other 4,649,296 5,399,084 5,877,042 6,793,792 4,086,828

Total Operating Revenue 183,509,067 173,798,520 209,801,780 205,466,775 183,866,873

OPERATING EXPENSE Nursing 55,544,920 54,447,033 64,522,445 65,169,192 52,898,754 Home Community Based Services 3,507,825 3,847,240 4,625,760 5,164,643 5,075,424 Dining Services 20,968,714 19,787,349 24,113,648 22,102,008 19,998,822 Housekeeping and Laundry 5,872,108 5,808,312 6,911,713 6,206,798 4,870,259 Activities and Social Services 6,015,419 5,492,167 6,628,202 6,016,918 4,986,136 Plant Operations and Maintenance 14,726,280 13,814,527 16,618,521 16,304,307 13,428,058 Administrative 24,710,802 24,147,969 33,708,204 31,376,751 25,370,184 Marketing 4,850,818 5,107,602 6,097,598 6,572,141 4,948,196 Chaplaincy 1,057,832 1,106,059 1,338,960 1,306,346 1,279,514 Employee Benefits 18,133,660 20,465,131 23,847,892 21,901,995 19,382,748 Interest 14,614,702 13,626,164 16,569,752 16,679,575 15,597,008 Depreciation and Amortization 25,459,722 24,626,957 30,159,521 27,604,722 23,929,383

Total Operating Expense 195,462,802 192,276,510 235,142,216 226,405,396 191,764,486

OPERATING LOSS (11,953,735) (18,477,990) (25,340,436) (20,938,621) (7,897,613)

OTHER INCOME (EXPENSE) Unrealized Gain (Loss) on Investments (11,355,769) 7,219,468 (1,196,030) 4,894,903 (10,084,190) Net Investment Income 1,729,214 1,980,097 3,147,709 4,020,516 4,114,968 Realized Gain (Losses) on Investments (36,371) 4,078,776 14,719,647 2,666,312 2,922,883 Contributions 2,773,382 2,077,830 1,512,354 2,892,294 3,492,450 Endowment Expenses (2,144,209) (2,513,326) (2,383,171) (2,549,741) (2,205,342) Net Periodic Pension Cost - - (573,549) (698,280) (231,503) Other Non-Operating (22,172) (61,701) (77,422) - - Gain (Loss) on Refinancing - - - (1,329,466) 368,465 Loss on Disposal of Property and Equipment (106,114) - (430,043) (529,619) (2,980)

Total Other Income (Expense) (9,162,039) 12,781,144 14,719,495 9,366,919 (1,625,249)

DEFICIT OF NET REVENUE OVER EXPENSE (21,115,774) (5,696,846) (10,620,941) (11,571,702) (9,522,862)

Change in Valuation of Interest Rate Swap - - 364,203 525,373 (641,331) Other Changes to Plan Assets and Benefit Obligations - - (376,191) 550,998 (2,433,511) Net Assets Released from Restrictions – Capital Expenditures 37,480 - - - 13,042 CHANGE IN UNRESTRICTED NET ASSETS BEFORE DISCONTINUED OPERATIONS $(21,078,294) $(5,696,846) $(10,632,929) $(10,495,331) $(12,584,662) INCOME FROM DISCONTINUED OPERATIONS - - - - 2,079,014

DECREASE IN UNRESTRICTED NET ASSETS $(21,078,294) $(5,696,846) $(10,632,929) $(10,495,331) $(10,505,648)

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OBLIGATED GROUP HISTORICAL AND PRO FORMA DEBT SERVICE COVERAGE

The following table sets forth for the ten-month periods ended October 31, 2018, and 2017, and the fiscal years ended December 31, 2017, 2016 and 2015, the revenues of the Obligated Group available to pay its debt service and the extent to which such revenues covered debt service requirements on the actual long-term indebtedness of the Obligated Group (reflected in such financial statements) outstanding during such fiscal years, as well as on a pro forma basis, debt service anticipated to be associated with the Bonds. There can be no assurance that the Obligated Group will generate the revenues set forth below in subsequent fiscal years.

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TABLE 7 HISTORICAL AND PRO FORMA DEBT SERVICE COVERAGE

(UNAUDITED)

Ten Months Ended October 31,

Fiscal Years Ended December 31,

2018 2017 2017 2016 2015 Increase (Decrease) in Unrestricted Net Assets $(21,078,294) $(5,696,846) $(10,632,929) $(10,495,331) $(10,505,648) Add: Depreciation and Amortization 25,459,722 24,626,957 30,159,521 27,604,722 23,929,383 Interest Expense 14,614,702 13,626,164 16,569,752 16,679,575 15,597,008 Unrealized (Gain) Loss on Investments 11,355,769 (7,219,468) 1,196,030 (4,894,903) 10,084,190 Net Periodic Pension Cost - - 573,549 698,280 231,503 Loss (Gain) on Refinancing - - - 1,329,466 (368,465)

Change in Valuation of Interest Rate Swap

- - (364,203) (525,373) 641,331

Other Changes to Plan Assets and Benefit Obligations

- - 376,191 (550,998) 2,433,511

Net Entrance Fees Received(1) 23,546,915 14,461,333 22,151,592 13,274,773 18,625,289 Less: Amortization of Entrance Fees (4,921,386) (3,951,530) (5,131,857) (4,411,716) (3,972,280)

Net Income Available for Debt Service $48,977,428 $35,846,610 $54,897,646 $38,708,495 $56,695,822

Historical Annual Debt Service $23,768,869 $20,351,164 $24,639,752 $24,459,575 $22,387,008

Historical Annual Debt Service Coverage Ratio(2)

2.06 1.76 2.23 1.58 2.53x Historical Maximum Annual Debt Service(2) $25,297,833 $23,763,291 $28,558,463 $27,754,780 $25,949,856 Historical Maximum Annual Debt Service Coverage Ratio(2) 1.94 1.51 1.92 1.39 2.18x Historical Annual Debt Service Coverage Ratio - Revenue Only(2) 1.07 1.05 1.33 1.04 1.70x Pro Forma Maximum Annual Debt Service(2) 31,122,667 31,122,667 37,347,200 37,347,200 37,347,200 Pro Forma Maximum Annual Debt Service Coverage Ratio(2) 1.57 1.15 1.47 1.04 1.52x Pro Forma Maximum Annual Debt Service Coverage Ratio - Revenue Only(2) 0.82 0.69 0.88 0.68 1.02x (1) Includes first time entrance fees of $11,821,734, $1,848,525 and $9,842,303 for the years ended December 31, 2017, 2016 and 2015, respectively, and

$5,812,231 and $6,781,226 for the ten months ended October, 2018 and 2017, respectively. (2) The calculations of debt service requirements for purposes of covenant compliance with the Master Indenture include certain assumptions regarding variable

rate indebtedness, swaps, balloon indebtedness, guaranties, debt reserves, capitalized interest, discount indebtedness and other matters which may differ from the calculations shown in footnote (2) to Table 5 (e.g., under the Master Indenture, debt service requirements for the Series 2019B Bonds as Balloon Indebtedness, at the option of the Obligated Group, may be computed based on level debt service to the February 1, 2034 (preliminary, subject to change) nominal maturity date thereof).

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On December 6, 2018, LSS provided notice on the EMMA System regarding the potential refunding of a portion of the Series 2011 Bonds that became subject to optional redemption as of February 1, 2018, including potential refunding of bonds maturing on February 1, 2026 bearing interest at 5.450% and bonds maturing on February 1, 2031 bearing interest at 5.850%. LSS presently intends to use cash to redeem such bonds. Because such currently callable Series 2011 Bonds have not yet been redeemed, they remain included in the debt service requirements shown in Tables 7 and 7A.

LSS presently estimates the 2019 Mason Pointe Independent Living Project will generate first entrance fees of approximately $60,000,000 of which approximately $25,490,000 is anticipated to be applied for the redemption of the Series 2019B Bonds and approximately $34,510,000 is anticipated to be available for other LSS or Obligated Group purposes including without limitation the payment of other outstanding debt of the Obligated Group or other capital requirements as such first entrance fees become available.

For example purposes only, LSS has prepared the following additional voluntary disclosure supplementing the table above to show possible pro forma computations that would result if in the future LSS elects to apply the anticipated approximately $34,510,000 of available first entrance fees to redemption on February 1, 2021 of then callable Series 2011 Bonds or other outstanding debt, which could reduce maximum annual debt service requirements by up to approximately $2.1 million. Also, LSS expects the Series 2019B Bonds to be paid off by 2022, at which time the maximum annual debt service would be reduced to $31,665,858. LSS is not contractually obligated to redeem such bonds and has not exercised any right or given any notice of intention to do so and may in the future evaluate and determine whether to pursue such redemption or whether other alternative use of such entrance fees is in the best interest of LSS and the Obligated Group; therefore, there can be no assurance that such redemption or other reduction of debt will occur with such entrance fees. The Obligated Group has no duty to update such information in the future or provide other disclosure updates of future plans relating thereto.

TABLE 7A PRO FORMA MAXIMUM ANNUAL DEBT SERVICE

(UNAUDITED)

Ten Months Ended

October 31, Fiscal Years Ended

December 31, 2018 2017 2017 2016 2015 Pro Forma Maximum Annual Debt Service - Additional Outstanding Bonds Paid Down $26,388,215 $26,388,215 $31,665,858 $31,665,858 $31,665,858 Pro Forma Maximum Annual Debt Service Coverage Ratio - Additional Outstanding Bonds Paid Down 1.86 1.36 1.73 1.22 1.79

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OBLIGATED GROUP HISTORICAL AND PRO FORMA LIQUIDITY RATIOS

The following table sets forth the historical liquidity ratios for the Obligated Group for the ten-month periods ended October 31, 2018 and 2017, and the fiscal years ended December 31, 2017, 2016 and 2015, as well as on a pro forma basis, liquidity ratios for the Obligated Group for the same periods taking into account the debt and related debt service reserve associated with the Bonds.

TABLE 8 LUTHERAN SENIOR SERVICES OBLIGATED GROUP HISTORICAL AND PRO FORMA LIQUIDITY RATIOS

(UNAUDITED)

Ten Months Ended October 31, Fiscal Years Ended December 31,

2018 2017 2017 2016 2015

Total Unrestricted Cash and Investments $188,456,267 $187,420,736 $192,489,577 $198,889,333 $195,344,225 Debt Service Reserve Funds $39,101,850 $37,812,290 $42,454,107 $35,471,308 $36,349,779 Total $227,558,117 $225,233,026 $234,943,684 $234,360,641 $231,694,004

Series 2019AB Debt Service Reserve Fund $7,528,940 $7,528,940 $7,528,940 $7,528,940 $7,528,940 Total Pro Forma Unrestricted Cash and Investments Plus Debt Service Reserve Funds $235,087,057 $232,761,966 $242,472,624 $241,889,581 $239,222,944

Par Amount of Bonds Outstanding $434,800,000 $445,785,000 $445,785,000 $454,595,000 $384,675,000

Pro Forma Par Amount of Bonds Outstanding $528,710,000 $528,710,000 $528,710,000 $528,710,000 $528,710,000

Days Cash on Hand

Cash and Equivalents 8,236,374 2,914,274 4,941,712 7,907,890 15,922,528 Unrestricted Investments 180,219,893 184,506,462 187,547,865 190,981,443 179,421,697

Total Unrestricted Cash and Investments 188,456,267 187,420,736 192,489,577 198,889,333 195,344,225

Total Operating Expense 195,462,802 192,276,510 235,142,216 226,405,396 191,764,486

Endowment Expenses 2,144,209 2,513,326 2,383,171 2,549,741 2,205,342

Less: Depreciation and Amortization (25,459,722) (24,626,957) (30,159,521) (27,604,722) (23,929,383)

Total Cash Operating Expenses 172,147,289 170,162,879 207,365,866 201,350,415 170,040,445

Daily Cash Operating Expenses 566,274 559,746 568,126 550,138 465,864

Days of Unrestricted Cash and Investments on Hand 333 335 339 362 419

Ratios Based on Unrestricted Cash and Investments Plus Debt Service Reserve Funds

Percentage of Unrestricted Cash and Investments Plus Debt Service Reserve Funds to Par Amount of Bonds 52.34% 50.53% 52.70% 51.55% 60.23%

Percentage of Unrestricted Cash and Investments Plus Debt Service Reserve Funds to Pro Forma Par Amount of Bonds 44.46% 44.02% 45.86% 45.75% 45.25%

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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS

JANUARY 1, 2015 THROUGH OCTOBER 31, 2018 As shown on Table 6, during the period from January 1, 2015 through December 31, 2017 total

operating revenues increased by approximately $26,000,000 (an average of 7% per year) and total operating expenses increased by approximately $43,000,000 (an average of 11% per year). The single largest factor in operating expenses increasing at a rate higher than operating revenue is the acquisition of Mason Pointe on February 1, 2016 (see “RECENT PROJECTS – MASON POINTE, ST. LOUIS COUNTY, MISSOURI” herein). However, during 2018 LSS has worked diligently to address this and, as also shown in Table 6, total operating revenues for the ten months ended October 31, 2018 increased by approximately $9,700,000 (an increase of 5.6%) over the same period in 2017 while total operating expenses increased by approximately $3,200,00 (an increase of 1.7%) during that same period.

The years 2016 and 2017 have been challenging for LSS with the largest single challenge resulting from the acquisition of Mason Pointe in early 2016, although, generally, additional challenges resulted from increased pressures on the long term care industry which impacted all LSS communities. LSS made significant organizational changes in 2017 to address these challenges.

In February 2017 LSS promoted its Chief Nursing Officer to Chief Operating Officer. A review of the LSS operations and organizational structure, was also made and, as a result, other significant organizational and operational changes were also made. In September 2017 LSS eliminated its three Regional Vice Presidents of Operations. LSS also eliminated its Vice President of Human Resources. These changes significantly reduced the cost of overhead. LSS also created the office of Operations and Financial Improvement, co-led by Gary Anderson, Chief Operating Officer, and Paul Ogier, Chief Financial Officer. Working with the entire management team, LSS set the overarching objective to reduce operational losses to no more than $5,000,000 by 2020. LSS has made significant progress in reducing operating losses through the first ten months of 2018 and believes that this remains a reasonable objective. In order to achieve this objective, LSS has established the following four specific goals, each assigned to a different task force.

1. Reduce Overall Employee Turnover to 34% - One objective for 2018 was to reduce employee turnover from 37% to 34%. Turnover was reduced in 2017 from 42% to 37%. Results through the first 11 months of 2018 are running at an annualized rate of approximately 41.6%. This will be a continuing effort as the workforce is our number one challenge of LSS.

2. Reduce Operating Expenses by 2% and Increase Operating Revenue by 0.5 % - These targets

were based upon finding and eliminating costs currently included in the 2018 budget which did not impact direct care. LSS is pleased with the manner in which the management team has been addressing this and through a myriad of different categories have already identified and are beginning to implement costs savings and revenue opportunities aggregating over $3,000,000.

3. Develop Best Practices for the transition through Life Plan Communities with particular

focus on Assisted Living – LSS is seeing significantly increased competition within the Assisted Living area which is challenging it to better define the role of assisted living within the continuum of care as well as competitiveness for direct admission to Assisted Living facilities. LSS is still maintaining good overall occupancy within Assisted Living but is seeing increasing competition and wants to strengthen this area.

4. Improve profitability within REACH Short Stay areas – LSS is providing a very high quality of care in the short stay program. However, this is the area where LSS has the greatest opportunity

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to improve operating results and LSS is working on a number of those opportunities. Two of the opportunities expected to yield the greatest results are as follows:

a) In conjunction with the Electronic Implementation of Health Records LSS realized that it had lost focus on Activities of Daily Living documentation and accordingly, was not getting the appropriate RUG levels for the services provided. As a result, LSS is focusing on this and believes that there is a potential to increase revenue from $500,000 to $1,000,000 simply by improving documentation.

b) Managed care contracts within REACH areas are not as favorable as Medicare and the

percentage of managed care contracts is continuing to increase. LSS is working to negotiate/renegotiate these contracts while at the same time evaluating whether or not it is providing services under these contracts that it really should not be providing. LSS has been successful in renegotiating its largest contract.

The vast majority of the improvement versus budget for the first ten months of 2018 was

improvement in margins in the REACH program. The goal was to beat the budgeted operating loss by 10% for 2018. Through the first ten months of 2018 LSS has reduced the budgeted operating loss for the REACH program by more than 20%.

The efforts LSS has made improved the operating results of almost all LSS facilities, showing

better operating performance in the same period from one year ago. LSS believes it still has significant room for improvement at most locations but the single location with the most upside for improvement is Mason Pointe (for additional discussion, see “RECENT PROJECTS – MASON POINTE, ST. LOUIS COUNTY, MISSOURI” herein).

For many years the Obligated Group has experienced losses from operation and it is anticipated that this will continue. Operations can sustain an operating loss and still generate cash flow due to high depreciation, high Entrance Fee turnover, contributions and investment earnings. Contributions for the three years between 2015 and 2017 have averaged approximately $5,500,000 and 2018 is projected to be in line, if not greater. Investment earnings during this same period have averaged approximately $10,200,000 per year.

As shown in Table 8, total Unrestricted Cash and Investments have remained relatively stable decreasing from approximately $195,000,000 in 2015 to approximately $188,000,000 at October 31, 2018. However, Days Cash on Hand has decreased to 333 at October 31, 2018 (a day’s cash was approximately $465,000 in 2015 and has increased to approximately $566,000 for the 10 months ended October 31, 2018, an increase of 22%) and Cash to Debt levels have also decreased from 60.2% to 52.3%.

Management believes that the Projects will provide positive cash flow, particularly at Mason Pointe and will improve the overall operations of LSS. The addition of Independent Living Apartments to Mason Pointe are expected to add positive cash flow to the overall operations of Mason Pointe when they are occupied. The cash generated by the Entrance Fees will give LSS flexibility to retire outstanding bonds or address other capital needs in the future, and, if in the future, LSS in its sole discretion determines to redeem outstanding bonds as describe above, such redemptions could reduce maximum annual debt service to a level closer to the level prior to the issuance of the Series 2019 Bonds. Additionally, the construction of the independent living apartments will make Mason Pointe a full Life Plan Community which should provide support to the occupancy of the licensed care areas at Mason Pointe.

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PLANS AND GOALS LSS’ plans and goals for providing quality Christian care and growth are set forth in the Strategic

Plan approved by the LSS Board of Directors in April 2010 (the “Strategic Plan”) and reviewed annually. As part of the planning process, LSS has examined its mission, vision, core values and philosophy and has also spent considerable energy examining the market and competitors, looking at how to best be organized to achieve its mission. The Strategic Plan also contains information about each of LSS’ four strategic imperatives (Quality and Value, People, Stewardship and Expanding Ministry) and the objectives, action steps and timelines associated with those goals.

The primary focus of LSS during the next several years will be completing the expansion at Mason Pointe.

LSS has acquired land for a future greenfield development in Lake St. Louis, Missouri which is currently on hold and development is not expected to resume until Mason Pointe is stabilized.

FINANCIAL COVENANTS IN OTHER BANK DOCUMENTS The Series 2000 Bonds are secured by a separate letter of credit issued by Bank of America. This

letter of credit was issued pursuant to a Reimbursement Agreement which is secured by a Master Note issued under the Master Indenture. The Reimbursement Agreement contains certain financial covenants that are not contained in the Master Indenture. These covenants are solely for the benefit of Bank of America and may be waived or modified by Bank of America without the necessity of notifying or obtaining the consent of any Master Noteowner.

PNC Bank National Association (“PNC”) has made a loan to the Obligated Group by purchasing the Series 2014B Bonds. As a condition to such purchase, PNC has required LSS, as the Obligated Group Agent under the Master Indenture, on behalf of itself and the other members of the Obligated Group, to enter into a Continuing Covenant Agreement (the “PNC Agreement”). The PNC Agreement contains certain financial covenants that are not contained in the Master Indenture. Those covenants are solely for the benefit of PNC and may be waived or modified by PNC without the necessity of notifying or obtaining the consent of any Master Noteowner.

Kansas City Financial Corporation (“KCFC”) has purchased the Series 2014C Bonds. As a condition to such purchase, KCFC required LSS, as the Obligated Group Agent, on behalf of itself and the other members of the Obligated Group, to enter into a Continuing Covenant Agreement (the “KCFC Series 2014C Agreement”). The KCFC Series 2014C Agreement contains certain financial covenants that are not contained in the Master Indenture. Those covenants are solely for the benefit of KCFC and may be waived or modified by KCFC without the necessity of notifying or obtaining the consent of any Master Noteowner.

KCFC has purchased the Series 2014D Bonds. As a condition to such purchase, KCFC required LSS, as the Obligated Group Agent, on behalf of itself and the other members of the Obligated Group, to enter into a Continuing Covenant Agreement (the “KCFC Series 2014D Agreement”). The KCFC Series 2014D Agreement contains certain financial covenants that are not contained in the Master Indenture. Those covenants are solely for the benefit of KCFC and may be waived or modified by KCFC without the necessity of notifying or obtaining the consent of any Master Noteowner.

KCFC purchased the Series 2016C Bonds. As a condition to such purchase, KCFC required LSS, as the Obligated Group Agent, on behalf of itself and the other members of the Obligated Group, to enter into a Continuing Covenant Agreement (the “KCFC Series 2016C Agreement”). The KCFC Series 2016C Agreement contains certain financial covenants that are not contained in the Master Indenture. Those covenants are solely for the benefit of KCFC and may be waived or modified by KCFC without the necessity of notifying or obtaining the consent of any Master Noteowner.

A - 50

Excerpts of certain covenants in the Reimbursement Agreement relating to the Series 2000 Bonds are attached hereto as APPENDIX E. A redacted copy of the Series 2000 Letter of Credit (issued by Bank of America, N.A.) and the Reimbursement Agreement is on file on EMMA under the tab Disclosure Documents using the CUSIP No. 6069007G7 or at the following link https://emma.msrb.org/Security/Details/ADCB6894A5C1F5CDEEB977632FD74DBDF.

Excerpts of certain covenants in the PNC Agreement relating to the Series 2014B Bonds are attached hereto as APPENDIX E. The covenants contained in the KCFC Series 2014C Agreement relating to the Series 2014C Bonds, the KCFC Series 2014D Agreement relating to the Series 2014D Bonds and the KCFC Series 2016C Agreement relating to the Series 2016C Bonds are, essentially, identical. Excerpts of certain covenants in the KCFC Series 2014C Agreement, the KCFC Series 2014D Agreement and the KCFC Series 2016C Agreement are attached hereto as APPENDIX E.

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APPENDIX B

FINANCIAL STATEMENTS OF THE OBLIGATED GROUP AND AFFILIATES

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LUTHERAN SENIOR SERVICES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

LUTHERAN SENIOR SERVICES TABLE OF CONTENTS


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INDEPENDENT AUDITORS’ REPORT 1

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS 3

CONSOLIDATED STATEMENTS OF UNRESTRICTED ACTIVITIES 5

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS 6

CONSOLIDATED STATEMENTS OF CASH FLOWS 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10

SUPPLEMENTARY INFORMATION

COMBINING AND CONSOLIDATING BALANCE SHEET 49

COMBINING AND CONSOLIDATING STATEMENTS OF UNRESTRICTED ACTIVITIES 51

COMBINING AND CONSOLIDATING STATEMENTS OF CHANGES IN NET ASSETS 52

STATEMENT OF CASH FLOWS – OBLIGATED GROUP 53

CliftonLarsonAllen LLPCLAconnect.com

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INDEPENDENT AUDITORS’ REPORT

Board of Directors Lutheran Senior Services St. Louis, Missouri

Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Lutheran Senior Services (a Missouri corporation), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of unrestricted activities, changes in net assets, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Board of Directors Lutheran Senior Services

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OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lutheran Senior Services as of December 31, 2017 and 2016, and the results of their operations, change in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The combining and consolidating financial statements supplementary information is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

CliftonLarsonAllen LLP

St. Louis, Missouri April 3, 2018

LUTHERAN SENIOR SERVICES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2017 AND 2016

See accompanying Notes to Consolidated Financial Statements. (3)

2017 2016

CURRENT ASSETSCash and Cash Equivalents 5,377,424$ 8,173,258$ Resident Accounts Receivable, Net 11,545,992 15,757,395Current Portion of Notes Receivable 2,168,309 867,829Interest Receivable 851,597 811,960Other Current Assets 4,920,416 4,291,235Current Portion of Assets Limited as to Use 164,933,826 141,105,842

Total Current Assets 189,797,564 171,007,519

ASSETS LIMITED AS TO USEInvestments 258,760,995 276,431,649Less: Current Portion Shown Above 164,933,826 141,105,842

Total Assets Limited as to Use (Net of Current Portion Shown Above) 93,827,169 135,325,807

PROPERTY AND EQUIPMENT (at Cost)Land and Land Improvements 73,613,931 71,347,054Building and Improvements 651,296,344 605,899,053Equipment 61,816,561 59,324,878Construction in Progress 26,718,832 24,215,957

Total 813,445,668 760,786,942 Less: Accumulated Depreciation 290,276,525 264,809,978

Total Property and Equipment (at Depreciated Cost) 523,169,143 495,976,964

OTHER ASSETSNotes Receivable (Net of Current Portion Shown Above) 3,961,775 4,069,960Deferred Marketing Costs, Net 2,627,560 2,200,353Skilled Nursing Facility Bed Licenses 1,960,000 1,960,000

Total Other Assets 8,549,335 8,230,313

Total Assets 815,343,211$ 810,540,603$

ASSETS

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2017 2016

CURRENT LIABILITIESCurrent Maturities of Long-Term Debt 44,074,643$ 8,070,000$ Accounts Payable:

Trade 5,994,687 8,453,621Development 3,360,384 3,030,061

Accrued Interest Payable 7,225,702 6,190,315Other Accrued Liabilities 14,512,425 13,880,691Current Portion of Refundable Residency Fees 11,878,000 12,172,000

Total Current Liabilities 87,045,841 51,796,688

LONG-TERM DEBT (Net of Current Maturities Shown Above)Bonds and Notes Payable 418,927,208 461,841,969Interest Rate Swap Agreements 613,503 977,706

Total Long-Term Debt (Net of Current Maturities Shown Above) 419,540,711 462,819,675

OTHER LIABILITIESHUD Capital Advances 36,385,980 36,385,980Refundable Residency Fees 202,098,078 184,240,196Deferred Revenue from Residency Fees 21,293,401 19,235,005Charitable Gift Annuities Payable 12,093,079 12,236,301Resident Deposits 5,965,229 7,245,902Accrued Pension Cost 6,339,988 5,720,248

Total Other Liabilities 284,175,755 265,063,632

Total Liabilities 790,762,307 779,679,995

NET ASSETSUnrestricted:

Controlling Interest (5,922,297) 5,094,268 Noncontrolling Interest 8,163,193 6,920,739

Total Unrestricted Net Assets 2,240,896 12,015,007 Temporarily Restricted 13,130,738 10,700,582 Permanently Restricted 9,209,270 8,145,019

Total Net Assets 24,580,904 30,860,608

Total Liabilities and Net Assets 815,343,211$ 810,540,603$

LIABILITIES AND NET ASSETS

LUTHERAN SENIOR SERVICES CONSOLIDATED STATEMENTS OF UNRESTRICTED ACTIVITIES



Percent of Percent ofAmount Revenue Amount Revenue

OPERATING REVENUEResident Service 199,603,431$ 93.6 % 195,033,998$ 93.4 %Amortization of Residency Fees 5,131,857 2.4 4,411,716 2.1Interest on Investments Held by Trustee 2,016,821 0.9 1,907,120 0.9Net Assets Released from Restrictions - Operations 1,008,913 0.5 972,123 0.5Other 5,627,272 2.6 6,499,676 3.1

Total Operating Revenue 213,388,294 100.0 208,824,633 100.0

OPERATING EXPENSENursing 64,522,445 30.2 65,169,192 31.2Home Community Based Services 4,625,760 2.2 5,164,643 2.5Dining Services 24,113,648 11.3 22,102,008 10.6Housekeeping and Laundry 6,911,713 3.2 6,206,798 3.0Activities and Social Services 6,628,202 3.1 6,016,918 2.9Plant Operations and Maintenance 17,960,437 8.4 17,655,967 8.5Administrative 35,189,915 16.5 32,857,812 15.7Marketing 6,097,598 2.9 6,572,141 3.1Chaplaincy 1,338,960 0.6 1,306,346 0.6Employee Benefits 24,228,689 11.4 22,279,238 10.7Interest 16,611,805 7.8 16,679,575 8.0Depreciation and Amortization 31,564,061 14.8 28,907,022 13.8

Total Operating Expense 239,793,233 112.4 230,917,660 110.6

OPERATING LOSS (26,404,939) (12.4) (22,093,027) (10.6)

OTHER INCOME (EXPENSE)Unrealized Gain (Loss) on Investments (1,196,030) (0.6) 4,894,903 2.3Net Investment Income 3,120,783 1.5 3,989,588 1.9Realized Gains on Investments 14,719,647 6.9 2,666,312 1.3Contributions 1,512,354 0.7 2,892,294 1.4Endowment Expenses (2,383,171) (1.1) (2,549,741) (1.2)Net Periodic Pension Cost (573,549) (0.3) (698,280) (0.3)Loss on Refinancing - - (1,329,466) (0.6)Loss on Disposal of Property and Equipment (430,043) (0.2) (599,189) (0.3)Other Non-Operating Expenses (77,422) - - -

Total Other Income (Expense) 14,692,569 6.9 9,266,421 4.5

DEFICIT OF NET REVENUE OVER EXPENSE (11,712,370) (5.5) (12,826,606) (6.1)

Change in Valuation of Interest Rate Swaps 364,203 0.2 525,373 0.3Other Changes in Plan Assets and Benefit Obligations (376,191) (0.2) 550,998 0.3Equity Contributions 1,964,919 0.9 1,253,646 0.6Syndication Costs (14,672) - - -

CHANGE IN UNRESTRICTED NET ASSETS (9,774,111)$ (4.6)% (10,496,589)$ (4.9)%

20162017

LUTHERAN SENIOR SERVICES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS



Temporarily PermanentlyUnrestricted Restricted Restricted Total

NET ASSETS - DECEMBER 31, 2015 22,511,596$ 9,099,918$ 8,108,308$ 39,719,822$

CHANGE IN NET ASSETSDeficit of Net Revenue Over Expense (12,826,606) - - (12,826,606)Restricted Contributions - 2,572,787 36,711 2,609,498 Change in Valuation of Interest Rate Swaps 525,373 - - 525,373 Other Changes in Plan Assets and

Benefit Obligations 550,998 - - 550,998 Net Assets Released from Restrictions -

Operations - (972,123) - (972,123) Equity Contributions 1,253,646 - - 1,253,646

Change in Net Assets (10,496,589) 1,600,664 36,711 (8,859,214)

NET ASSETS - DECEMBER 31, 2016 12,015,007 10,700,582 8,145,019 30,860,608

CHANGE IN NET ASSETSDeficit of Net Revenue Over Expense (11,712,370) - - (11,712,370)Restricted Contributions - 3,439,069 1,064,251 4,503,320 Change in Valuation of Interest Rate Swaps 364,203 - - 364,203 Other Changes in Plan Assets and

Benefit Obligations (376,191) - - (376,191) Net Assets Released from Restrictions -

Operations - (1,008,913) - (1,008,913) Equity Contributions 1,964,919 - - 1,964,919 Syndication Costs (14,672) - - (14,672)

Change in Net Assets (9,774,111) 2,430,156 1,064,251 (6,279,704)

NET ASSETS - DECEMBER 31, 2017 2,240,896$ 13,130,738$ 9,209,270$ 24,580,904$

LUTHERAN SENIOR SERVICES CONSOLIDATED STATEMENTS OF CASH FLOWS



2017 2016CASH FLOWS FROM OPERATING ACTIVITIES

Cash Received from Resident Services 210,010,037$ 198,362,893$ Cash Paid to Suppliers and Employees (199,889,403) (184,059,765) Contributions Received 2,570,087 2,424,959 Investment Income Received 3,081,146 3,896,077 Realized Gains on Investments 14,719,647 2,666,312 Interest Paid (15,576,418) (16,650,130)

Net Cash Provided by Operating Activities 14,915,096 6,640,346

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from Investments 369,617,158 393,394,887 Purchase and Reinvested Interest of Investments (349,006,265) (365,737,798) Net Purchase of Property and Equipment (58,655,502) (50,111,154) Deferred Marketing Costs Incurred (612,993) (745,166)

Net Cash Used by Investing Activities (38,657,602) (23,199,231)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Refundable Admission Fees 33,349,892 26,461,711 Refunds Paid on Refundable Admission Fees (19,521,656) (17,899,447) Proceeds on Deferred Revenue from Admission Fees 1,930,244 1,229,991 Proceeds from Resident Deposits 8,835,687 4,549,949 Refunds Paid on Resident Deposits (864,110) (808,996) Receipts of Charitable Gift Annuities 1,506,766 3,038,138 Payments of Charitable Gift Annuities (2,656,942) (2,478,359) Contributions Made to Defined Benefit Pension Plan (330,000) (411,000) Syndication Costs (14,672) - Proceeds from Issuance of Long-Term Debt 3,145,172 - Payments on Long-Term Debt (8,810,000) (7,780,000) Payments of Debt Issuance Costs (127,029) - Restricted Contributions Received 4,503,320 2,609,498

Net Cash Provided by Financing Activities 20,946,672 8,511,485

NET DECREASE IN CASH AND CASH EQUIVALENTS (2,795,834) (8,047,400) Cash and Cash Equivalents - Beginning 8,173,258 16,220,658 CASH AND CASH EQUIVALENTS - ENDING 5,377,424$ 8,173,258$

LUTHERAN SENIOR SERVICES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



2017 2016RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Change In Net Assets (6,279,704)$ (8,859,214)$ Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities:

Depreciation and Amortization 31,564,061 28,907,022 Amortization of Debt Issuance Costs (1,313,983) (500,975) Amortization of Residency Fees (5,131,857) (4,411,716) Unrealized (Gain) Loss on Investments 1,196,030 (4,894,903) Restricted Contributions Received (4,503,320) (2,609,498) Loss on Disposal of Property and Equipment 430,043 599,189 Change in Charitable Gift Annuities 1,057,733 (467,335) Net Proceeds of Donated Homes (2,041,079) 843,855 Change in Valuation of Interest Rate Swaps (364,203) (525,373) Other Changes in Plan Assets and Benefit Obligations 376,191 (550,998) Net Periodic Pension Cost 573,549 698,280 Equity Contributions (1,964,919) (1,253,646) Syndication Costs 14,672 - Loss on Refinancing - 1,329,466 (Increases) Decreases in Current Assets:

Resident Accounts Receivable 4,211,403 (5,185,547) Notes Receivable (1,448,890) 107,646 Interest Receivable and Other Current Assets (668,818) (2,849,719)

Increases (Decreases) in Current Liabilities:Accounts Payable (2,458,934) 3,011,266 Interest Payable 1,035,387 29,445 Other Accrued Liabilities 631,734 3,223,101

Net Cash Provided by Operating Activities 14,915,096$ 6,640,346$

LUTHERAN SENIOR SERVICES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



2017 2016Bonds Issuance - Series 2014D:

Bond Proceeds -$ 12,390,000$ Redemption of Series 2005B Bonds - (12,212,515) Issuance Costs - (177,485)

Total Noncash Investing and Financing Activities - Series 2014D -$ -$

Bonds Issuance - Series 2016A:Bond Proceeds -$ 60,870,378$ Acquisition of Mason Pointe - (34,000,000) Campus Improvements to Mason Pointe - (5,000,000) Lutheran Hillside Village Project Costs - (15,000,373) Deposits to Debt Service Reserve Fund - (3,472,998) Funded Interest - (2,545,989) Issuance Costs - (851,018)

Total Noncash Investing and Financing Activities - Series 2016A -$ -$

Bonds Issuance - Series 2016B:Bond Proceeds -$ 142,369,578$ Lenoir Woods Project Costs - (51,000,000) Mason Pointe Project Costs - (3,500,000) Funded Interest on Lenoir Woods - (1,995,989) Redemption of Series 2006 Bonds - (41,187,874) Redemption of Series 2007A and Series 2007C Bonds - (35,448,564) Deposits to Debt Service Reserve Fund - (7,845,654) Issuance Costs - (1,391,497)

Total Noncash Investing and Financing Activities - Series 2016B -$ -$

Bonds Issuance - Series 2016C:Bond Proceeds 10,520,000$ -$ Redemption of Series 2007B Bonds (10,520,000) -

Total Noncash Investing and Financing Activities - Series 2016C -$ -$

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

LUTHERAN SENIOR SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

Nature of Organization Lutheran Senior Services (the Organization), a 501(c)(3) non-profit corporation, is organized and operates through the following Life Plan Communities:

Laclede Groves Laclede Groves (St. Louis, MO) operates 73 assisted living units, 63 assisted living memory care units, 311 independent living apartments, 54 patio homes, and 253 skilled nursing beds.

Meramec BluffsMeramec Bluffs (Ballwin, MO) operates 58 assisted living units, 20 assisted living memory care units, 264 independent living apartments, 25 patio homes, and 128 skilled nursing beds.

Breeze Park Breeze Park (St. Charles, MO) operates 52 assisted living units, 23 assisted living memory care units, 110 independent living apartments, 30 patio homes, and 81 skilled nursing beds.

Heisinger Bluffs Heisinger Bluffs (Jefferson City, MO) owns and operates 49 assisted living units, 24 assisted living memory care units, 65 independent living apartments, and 60 skilled nursing beds. Lutheran Senior Services is the sole member of The Cole County Lutheran Home Association (Heisinger Bluffs), which is a 501(c)(3) non-profit corporation.

Meridian Village Meridian Village (Glen Carbon, IL) owns and operates 53 assisted living units, 14 assisted living memory care units, 129 independent living apartments, 34 patio homes, and 70 skilled nursing beds. Lutheran Senior Services is the sole member of Meridian Village Association (Meridian Village) which is a 501(c)(3) non-profit corporation.

Lenoir Woods During the year ended December 31, 2017, Lenoir Woods (Columbia, MO) added 79 independent living apartments and a replacement care center, as further described in Note 10. After the 2017 addition, Lenoir Woods operates 42 assisted living units, 20 assisted living memory care units, 159 independent living apartments, 95 independent living homes, and 122 skilled nursing beds.

Lutheran Hillside Village During the year ended December 31, 2016, Lutheran Hillside Village (Peoria, IL) added 24 assisted living units and a 24-bed short stay skilled nursing rehabilitation unit. After the 2016 addition, Lutheran Hillside Village (Hillside Village) owns and operates 63 assisted living units, 20 assisted living memory care units, 126 independent living apartments, 48 patio homes and villas, and 87 skilled nursing beds. Lutheran Senior Services is the sole member of Lutheran Hillside Village (Hillside Village), which is a 501(c)(3) non-profit corporation.



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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)

Nature of Organization (Continued) Concordia Village Concordia Village (Springfield, IL) owns and operates 48 assisted living units, 178 independent living apartments, 26 patio homes, and 64 skilled nursing beds. Lutheran Senior Services is the sole member of Lutheran Retirement Centers Association (Concordia Village), which is a 501(c)(3) non-profit corporation.

Mason Pointe In February 2016, the Organization entered into an agreement (see Note 18) to purchase the real property and certain assets of The Cedars of Town and Country (now named Mason Pointe), including 230 licensed skilled nursing facility (SNF) beds, 22 licensed residential care facility beds, a certificate of need for a 54-bed assisted living facility, and 8 acres of real property which has the potential for campus expansion of independent living and common areas. Mason Pointe (Town and Country, MO) operates 42 assisted living units and 236 skilled nursing beds.

In addition to the Life Planning Comminuties�described above, Lutheran Senior Services also provides services through the following facilities and programs:

Richmond Terrace Lutheran Senior Services owns and operates an 83-unit assisted living facility known as Richmond Terrace (St. Louis, MO).

St. Joseph Bluffs Lutheran Senior Services owns and operates a SNF known as St. Joseph Bluffs (Jefferson City, MO), which currently operates 69 licensed beds.

REACH West County In August 2015, the Organization entered into an agreement with Mercy Hospital to purchase the assets (including the license for 120 SNF beds) and assume the operation of an existing 120-bed SNF located on the Mercy Hospital Campus in West St. Louis County. The Organization also entered into an operating lease agreement with Mercy for an initial term of three years, with monthly payments of $54,167 commencing on August 16, 2015. The Organization operated the Mercy facility under the name “REACH West County” until the Organization acquired Mason Pointe and transitioned SNF operations and the 120 SNF bed licenses to Mason Pointe, fulfilling the agreement with Mercy. The lease agreement was terminated effective June 17, 2016.



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Nature of Organization (Continued) Affordable Housing Lutheran Senior Services operates eight affordable housing campuses: Halls Ferry Manor, Inc., Rose Hill House, Rose Hill House, Inc. II, Dunn Road Manor, Inc., Westfield Manor Association, Hilltop Manor Association, Inc., Mackenzie Place 202, Inc. and Mackenzie Place 202-II, Inc. Additional information about Dunn Road Manor and the two Mackenzie Place entities is described in Note 14. Lutheran Senior Services also manages certain projects that are sponsored by National Benevolent Association (NBA), which include Hylton Point, Hylton Point II, Centennial Plaza, and W.T. Vernon (not part of NBA).

Home Community Based Services Lutheran Senior Services operates a home health agency that provides home health services to Medicare and private pay patients at its Life Planning Communities, affordable housing campuses, and also in the community. In addition, the home health agency runs a hospice program that serves patients at its Life Planning Communities and in the community. The Organization also administers certain other programs (The Good Neighbor Program, the Outreach Program, and the Volunteer Money Management Program), which are partially funded by the United Way, the purpose of which are to assist elderly individuals who live in their homes.

Management and Development Services Provident Group is a wholly owned subsidiary of Lutheran Senior Services and is a taxable non-profit management and development company focusing on the senior living industry. Provident Group provides services to Lutheran Senior Services and its affiliates.

Lutheran Senior Services Endowment Fund Lutheran Senior Services Endowment Fund (the Endowment Fund), a 501(c)(3) non-profit corporation, was created on May 31, 1998, through the dissolution of Lutheran Altenheim Society of Missouri Endowment Fund and a transfer of net assets to the Endowment Fund. It is under the common control of Lutheran Senior Services. The Endowment Fund earnings are to be used exclusively to support Lutheran Senior Services. The Endowment Fund contains donor restricted and board designated investments for benevolent care, clinical pastoral education, future construction and capital improvements.��

Heisinger Hope Foundation Heisinger Hope Foundation (the Foundation), a 501(c)(3) non-profit corporation, was formed for fundraising purposes to help support the operations of Heisinger Bluffs. It is under the common control of The Cole County Lutheran Home Association (Heisinger Bluffs). The Foundation contains donor restricted and board designated investments for benevolent care and capital improvements. Effective March 21, 2017, the Foundation was merged into the Endowment Fund.



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Nature of Organization (Continued) Lutheran Hillside Village Foundation Lutheran Hillside Village Foundation (the LHV Foundation), a 501(c)(3) non-profit corporation, was formed for fundraising purposes to help support the operations of Lutheran Hillside Village. It is under the common control of Lutheran Hillside Village.

The LHV Foundation earnings are to be used exclusively to support Lutheran Hillside Village. The LHV Foundation contains donor restricted and board designated investments for benevolent care and clinical pastoral education.

Tax Status The Organization and its affiliates, except for the wholly owned subsidiary, Provident Group, Inc.; and the wholly owned limited liability companies, Mackenzie Place HTC Master Tenant, L.P., Mackenzie Place LIHTC, L.P., and Dunn Road Manor LIHTC, L.P.; qualify as tax-exempt corporations described in Section 501(c)(3) of the Internal Revenue Code. Accordingly, the Organization is not subject to federal income taxes under Section 501(a) of the Code. The Organization is classified as a publicly-supported charitable organization under the Code, and contributions to the Organization qualify as a charitable tax deduction for the contributor.

Provident Group is organized as a taxable non-profit for federal and state income tax purposes.

Management has evaluated their income tax positions under the guidance included in ASC 740. Based on their review, management has not identified any material uncertain tax positions to be recorded or disclosed in the financial statements.

Principles of Consolidation The accompanying consolidated financial statements include all accounts of Lutheran Senior Services; the Endowment Fund; wholly owned subsidiaries: Provident Group, Meridian Village, Heisinger Bluffs, the Foundation, Concordia Village, Hillside Village, and the LHV Foundation; and Affordable Housing projects under common control: Halls Ferry Manor, Inc., Rose Hill House, Inc., Rose Hill House, Inc. II, General Partner in Dunn Road Manor LIHTC, L.P., Dunn Road Manor, Inc., Westfield Manor Association, Hilltop Manor Association, Inc., General Partner in Mackenzie Place HTC Tenant, L.P., General Partner in Mackenzie Place LIHTC, L.P., Mackenzie Place 202, and Mackenzie Place 202-II; collectively the Organization. Intercompany transactions and balances have been eliminated in the consolidated financial statements.



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Financial Statement Presentation Contributions received are recorded as an increase in unrestricted, temporarily restricted or permanently restricted support, depending on the existence or nature of any donor restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows:

Unrestricted – Those resources over which the Board of Directors has discretionary control. Designated amounts represent those assets which the board has set aside for a particular purpose.

Temporarily Restricted – Those resources subject to donor imposed restrictions which will be satisfied by actions of the Organization or passage of time.

Permanently Restricted – Those resources subject to a donor imposed restriction that they be maintained permanently by the Organization. The donors of these resources permit the Organization to use all or part of the income earned, including capital appreciation, or related investments for unrestricted or temporarily restricted purposes.

Unconditional promises to give cash and other assets are accrued at estimated fair value at the date each promise is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction is satisfied, net assets are released and reported as an increase in unrestricted net assets. Donor-restricted contributions whose restrictions are met within the same reporting period as received are recorded as unrestricted contributions.

Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Resident Services Revenue Resident services revenue includes rent, room charges and ancillary services to residents and is recorded at established billing rates net of contractual adjustments resulting from agreements with third-party payors, if applicable.

Provisions for estimated third-party payor settlements are provided in the period the related services are rendered. Differences between the amounts accrued and the subsequent settlements are recorded to operations in the year of settlement.



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Third Party Reimbursement Agreements MedicaidThe Organization participates in the Medicaid program administered by the Missouri Department of Social Services, Division of Medical Services. A licensed nursing facility that participates in the Medicaid program in the State of Missouri for the years ended December 31, 2017 and 2016 is reimbursed based upon facility-specific prospective daily rates. The State of Missouri approved a trend adjustment increase of $2.83 per day effective July 1, 2016 and also a rate decrease of $5.37 per day effective August 1, 2017.

The Organization participates in the Medicaid program administered by the Illinois Department of Healthcare and Family Services (HFS). A licensed nursing facility that participates in the Medicaid program in the State of Illinois is reimbursed based upon facility-specific prospective daily rates. Rates are set taking into account individual facility costs, variations in patient case mix, and geographical location. Facilities are subject to periodic audit by the Illinois Department of HFS which may result in retroactive adjustment to set rates.

�MedicareThe Organization participates in the Medicare program. This federal program is administered by CMS. The Organization is paid under the Medicare Prospective Payment System (PPS) for residents who are Medicare Part A eligible and meet the coverage guidelines for skilled nursing facility services (SNFs) and home health services (HH). The PPS is a per diem price-based system. Annual cost reports are required to be submitted to the designated Medicare Administrative Contractor; however, they do not contain a cost settlement.

Nursing facilities licensed for participation in the Medicare and Medicaid programs are subject to annual surveys. If it is determined that a nursing facility is not in substantial compliance with the requirements of participation, CMS may impose sanctions and penalties during the period of noncompliance, which would have a negative impact on the revenues of the nursing facilities.



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Occupancy Percentages The occupancy percentages for all of Lutheran Senior Services’ campuses and facilities are as follows for the years ended December 31:

Nursing Assisted Independent Nursing Assisted IndependentCampuses Facility Living Living Facility Living LivingBreeze Park 95.7% 92.6% 95.9% 95.6% 96.2% 96.1%Concordia Village 92.0% 97.7% 97.1% 90.8% 96.2% 93.5%Heisinger Bluffs 92.3% 87.6% 94.0% 90.8% 84.4% 82.9%Laclede Groves 85.3% 93.5% 96.4% 86.2% 92.6% 96.6%Lenoir Woods 87.3% 93.5% 89.5% 79.6% 92.6% 96.3%Lutheran Hillside Village 65.9% 86.8% 91.9% 77.8% 75.8% 91.6%Meramec Bluffs 92.0% 90.6% 96.5% 93.5% 92.6% 97.3%Mason Pointe * 71.0% 49.2% N/A 71.4% 55.4% N/AMeridian Village 90.6% 94.9% 95.8% 92.1% 94.6% 96.6%Richmond Terrace N/A 90.7% N/A N/A 86.5% N/ASt. Joseph Bluffs 52.8% N/A N/A 70.7% N/A N/AREACH West County ** N/A N/A N/A 79.5% N/A N/A

2017 2016

The occupancies above consist of private paying residents except in nursing facilities. The occupancy percentages and third party payor mix at the nursing facilities are as follows for the years ended December 31:

Campuses Occupancy Medicaid Medicare Occupancy Medicaid MedicareBreeze Park 95.7% 9.7% 11.2% 95.6% 12.2% 14.6%Concordia Village 92.0% 1.7% 10.1% 90.8% 3.6% 14.9%Heisinger Bluffs 92.3% 23.9% 0.2% 90.8% 23.2% 0.2%Laclede Groves 85.3% 21.8% 8.6% 86.2% 20.9% 10.0%Lenoir Woods 87.3% 7.3% 12.7% 79.6% 6.6% 18.4%Lutheran Hillside Village 65.9% 5.7% 16.5% 77.8% 4.9% 16.8%Meramec Bluffs 92.0% 10.5% 11.7% 93.5% 6.1% 9.6%Mason Pointe * 71.0% 50.7% 14.3% 71.4% 62.0% 12.1%Meridian Village 90.6% 5.3% 18.4% 92.1% 8.9% 18.6%St. Joseph Bluffs 52.8% N/A 38.1% 70.7% N/A 31.0%REACH West County ** N/A N/A N/A 79.5% 12.0% 26.2%

2017 2016

* Mason Pointe reflects occupancy from the date of acquisition, effective February 2016.

** REACH West County reflects occupancy through termination of the lease agreement, effective June 2016.



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Cash and Cash Equivalents The Organization considers all highly liquid debt instruments and certificates of deposit with a maturity of three months or less to be cash equivalents except for those included in investments.

Resident Accounts Receivable The Organization provides an allowance for uncollectible accounts using management’s judgment. Resident services are provided on an unsecured basis and payment is required upon receipt of the invoice. Accounts more than 90 days past due are individually analyzed for collectability. In addition, an allowance is estimated for other accounts based on the historical experience of the Organization.

The allowance for uncollectible accounts consists of approximately $4,325,000 and $1,933,000 at December 31, 2017 and 2016, respectively.

Assets Limited as to Use Assets limited as to use include assets set aside by the Board of Directors for future capital improvements and other purposes, over which the Board retains control and may, at its discretion, subsequently use for other purposes; assets held by trustees under the bond agreements; required HUD reserves; equity investments; self-insurance reserve; and assets limited as to use by donors. Assets limited as to use which are available to meet obligations classified as current liabilities of the Organization are reported as current assets.

Also, under the various HUD regulatory agreements, Halls Ferry Manor, Rose Hill House, Rose Hill House II, Dunn Road Manor, Westfield Manor, Hilltop Manor, Mackenzie Place 202, and Mackenzie Place 202-II make required deposits into restricted escrow accounts. These HUD projects are required to deposit any surplus cash from operations into a residual receipts account. There is also a requirement to deposit monthly amounts into a reserve for replacement account. All disbursements from these accounts require the prior written approval of HUD. These HUD projects also hold in trust security deposit amounts received by the tenants of the projects upon move-in.

Assets limited as to use are primarily invested in debt and equity securities, except for restricted deposits and funded reserves, and funds held by bond trustees which are primarily cash and cash equivalents. Also, the Organization’s equity investments in captive insurance companies, Senior Care Network and Mackenzie Place HTC Master Landlord, L.P. are recorded using the cost basis.

Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value on the balance sheet. Investment income or loss (including realized gains and losses on investments, interest and dividends) is included in net revenue over expense unless the income or loss is restricted by donor or law. Investments are classified as trading securities and are carried at fair value with realized and unrealized gains and losses included in the deficit of net revenue over expense performance indicator.



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Property and Equipment Property and equipment are recorded at historical cost, net of accumulated depreciation. The Organization capitalizes items or group purchases of like items that cost $500 or more and have a useful life greater than one year.

Depreciation is computed using the straight-line method over the following estimated useful lives:

Land Improvements 15 yearsBuilding and Improvements 5 to 40 yearsEquipment 3 to 10 years

Interest Capitalization Interest costs incurred on borrowed funds during the period of construction of capital assets are capitalized as a component of the cost of acquiring those assets, and depreciated over their estimated useful lives by the straight-line method of depreciation. Interest costs of $1,502,150 and $1,331,881 were capitalized during the years ended December 31, 2017 and 2016, respectively.

Deferred Marketing Costs Marketing costs incurred in connection with securing the initial Life Planning Community contracts at Meramec Bluffs, Concordia Village, Laclede Groves, and Hillside Village were capitalized and are being amortized over the average life expectancy of the initial residents. The Organization is currently marketing to secure initial Life Planning Community contracts for Lenoir Woods, Lake Pointe (see Note 10), and Mason Pointe. These marketing costs will be capitalized through the construction phase and up to one year after the facility opens or until stabilized occupancy, whichever occurs first.

Unamortized marketing costs for the years ended December 31, 2017 and 2016, were $4,539,090 and $3,926,097, respectively. Marketing costs are net of accumulated amortization of $1,911,530 and $1,725,744 as of December 31, 2017 and 2016, respectively. Amortization expense for the years ended December 31, 2017 and 2016 is $185,786 and $274,986, respectively.

Skilled Nursing Facility Bed Licenses During the year ended December 31, 2016, the Organization recorded an intangible asset for 230 SNF bed licenses acquired with Mason Pointe. The Organization previously had acquired 120 SNF bed licenses with the acquisition of REACH West County. Management has determined the asset does not have a finite life, therefore rather than amortizing the intangible asset is analyzed annually for impairment.



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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION(CONTINUED)

Accrued Pension Cost Accrued pension cost represents the under-funded amount of the defined benefit pension plan based on actuarial calculations and asset performance. At December 31, 2017 and 2016, the plan has an accrued pension cost of $6,339,988 and $5,720,248, respectively.

HUD Capital Advances HUD Capital Advances are non-interest-bearing mortgage notes that the HUD Section 202 projects utilized to finance construction of the facilities for very low income elderly persons. See further information disclosed in Note 5.

Refundable Residency Fees and Deferred Revenue from Residency Fees Residents of the Life Planning Communities often enter under agreements that require the payment of residency fees. Under terms of the residency agreements, the Organization is required to refund a portion of the residency fee to residents who terminate the agreement. A processing charge of 5% of the residency fee is retained by the Organization. Certain residents have the option of a fully refundable residency fee, which is offset by a higher monthly service fee.

For other residents, 1½% of the residency fee per month for each month a resident occupies his/her apartment or home is also retained by the Organization with the balance refundable to the resident. In no event shall the amount refunded be less than 50% of the residency fee; the amount is due and payable within six months of the move-out date, or at the time the Organization has obtained a subsequent executed agreement and full payment of a residency fee from another resident, if earlier.

On some contracts at Hillside Village, 10% of the residency fee, which is considered a processing charge, is retained by the Organization. For some contracts at Hillside Village, the 10% increases to 25% over fifteen years and is retained by the Organization, with the balance refundable to the resident. In no event shall the amount refunded be less than 75% of the residency fee; the amount is due and payable within six months of the move-out date if the resident leaves the campus, or at the time the Organization has obtained a subsequent executed agreement and full payment of a residency fee from another resident, if earlier. Though the contracts at Hillside Village that increase to 25% over time do still exist, they are no longer being offered to new residents.

Fees paid by a resident upon entering into a residency agreement, net of the portion that is refundable to the resident, are recorded as deferred revenue and are amortized into income using the straight-line method over the estimated remaining life expectancy of the resident. Due to the nature of the contracts, the refundable portion of residency fees is not amortized.

Management has estimated a current portion of the remaining refundable balances, based on an average of refunds paid in prior years, to be approximately $11,878,000 and $12,172,000 at December 31, 2017 and 2016, respectively.



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Obligation to Provide Future Services The independent living residents on the Laclede Groves campus have contracts that also provide for a certain number of free care days each year provided that the resident is not making a permanent transition into the nursing facility. These contracts are no longer offered.

In addition, through the acquisition of Lenoir Woods, the Organization has assumed the responsibility for existing resident contracts, some of which provide for free days of care and a permanent discount when the resident transfers permanently into the assisted living or nursing facility. Since Lenoir Woods became a part of Lutheran Senior Services, these contracts are no longer offered.

Hillside Village has existing contracts under the Catastrophic Protection Program (CPP) that provide for discounted nursing care for residents who meet certain requirements. During 2006, Hillside Village offered to buy back the CPP benefit from residents with that type of contract, but a few residents elected to continue participating in the program. Upon affiliation of Hillside Village with Lutheran Senior Services, these contracts are no longer offered.

Terms of these contracts do not limit the Organization’s ability to set monthly service fees at a level necessary to maintain adequate cash flow. No liability was required to be recorded at December 31, 2017 and 2016, based on evaluation of these contracts that provide for future services.

Charitable Gift Annuities Payable The Organization has established a gift annuity program whereby donors may contribute assets to the Organization in exchange for the right to receive a fixed dollar annual return during their lifetime. A portion of the transfer is considered to be a charitable contribution. The difference between the amount provided for the gift annuity and the present value of the liability for future payments is recognized as a temporarily restricted contribution. The annuity liability is revalued annually from computed present values based on published mortality rate tables adopted by the United States Internal Revenue Service.

Total charitable gift annuities payable as of December 31, 2017 and 2016 are approximately $14,824,000 and $14,916,000, respectively. The current portion of gift annuities payable as of December 31, 2017 and 2016 is approximately $2,731,000 and $2,680,000, respectively, and is included in other accrued liabilities.

Resident Deposits Reservation deposits of amounts ranging from $1,000 to $4,000 are required for each resident entering an independent or assisted living facility within the Organization. The deposits in the case of non-rental units are credited to the residents' accounts upon execution of the occupancy agreement. In the case of rental units, the deposits are treated as security deposits and refunded at the time the premises are vacated.

Meramec Bluffs offers garage spaces to the residents for a $12,000 deposit that is included in resident deposits and is refunded when the resident no longer uses the garage space. Earnings on these deposits are not restricted as to use.



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Fair Value of Financial Instruments Fair value measurement applies to reported balances that are required or permitted to be measured at fair value under an existing accounting standard. The Organization emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy.

The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows:

Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Organization has the ability to access.Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.Level 3 – Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Organization also adopted the policy of valuing certain financial instruments at fair value. This accounting policy allows the Organization the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on an instrument-by-instrument basis. The Organization has elected to measure instruments at fair value with the exception of investments in the captive insurance companies, Senior Care Network and Mackenzie Place HTC Landlord LP, which are recorded at cost. In addition, the Organization has not elected the fair value measurement for its liabilities. The Organization may elect to measure newly acquired financial instruments at fair value in the future.

InvestmentsInvestments are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions.



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Fair Value of Financial Instruments (Continued) Investments (Continued) Securities valued using Level 1 inputs include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active over-the-counter markets. Securities valued using Level 2 inputs include private collateralized mortgage obligations, municipal bonds, mutual funds and corporate debt securities.

DerivativesQuoted market prices are available and used for exchange-traded derivatives, such as certain interest rate futures and option contracts; such derivatives are classified as using Level 1 inputs. The Organization’s SWAP agreements’ fair values are determined using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities, and, accordingly, are classified as Level 2 inputs.

Other Operating Revenues Other operating revenue consists primarily of non-resident rental income, development and management fees, laundry, barber and beauty, cafeteria sales and other miscellaneous revenue.

Deficit of Net Revenue over Expense The consolidated statements of unrestricted activities include a measurement of deficit of net revenue over expense. Changes in unrestricted net assets, which are excluded from deficit of net revenue over expense, consistent with industry practice, include change in valuation of interest rate swaps, other changes in plan assets and benefit obligations, net assets released from restrictions for capital items, equity contributions, and syndication costs.

Charity Care The Christian mission of Lutheran Senior Services is “Older Adults Living Life to the Fullest”. The older adults served will experience the highest possible care and quality of life through an expanding network of communities and supportive services.

Lutheran Senior Services defines and measures this “investment in” and “partnership with” the community primarily through its benevolent care program. This is only one aspect of the charity care that Lutheran Senior Services provides as services are also provided through its Good Neighbor Program, Volunteer Money Management, and Case Management Services at less than cost.

Additionally, Lutheran Senior Services commits a significant amount of human and financial resources to Clinical Pastoral Education (CPE), Pastoral Care, and Affordable Housing. The Organization provides care to residents and clients who meet certain criteria under its financial assistance policy without charge. Key elements used to determine eligibility include verification of financial need and proper disclosure upon admission.



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Charity Care (Continued) Because the Organization does not pursue collection of amounts determined to qualify for financial assistance, they are not reported as revenue. Lutheran Senior Services has estimated its direct and indirect costs of providing charity care under its financial assistance policy. In order to estimate the cost of providing such care, management has used actual costs and operational projections. Using this methodology, Lutheran Senior Services has estimated costs foregone for services and supplies furnished under the Organization’s financial assistance policy of approximately $1,835,000 and $1,960,000 for the years ended December 31, 2017 and 2016, respectively.

Lutheran Senior Services receives donations under its CPE program. For the years ended December 31, 2017 and 2016, Lutheran Senior Services received donations of approximately $105,000 and $107,000, respectively.

Uncompensated Balances Lutheran Senior Services provides care to residents under the Medicaid program for which the costs to provide such care exceeds reimbursement. The Organization funds this difference through its operations. The shortfall associated with care provided under this program is approximately $10,227,000 and $9,887,000 at December 31, 2017 and 2016, respectively.

Contributed Services The Organization receives a substantial amount of services donated by volunteers. No amounts have been reflected in the consolidated financial statements for these services.

AdvertisingAdvertising costs are charged to operations when incurred. Advertising expense is approximately $644,000 and $730,000 for the years ended December 31, 2017 and 2016, respectively.

Recently Issued Accounting Standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The five step model defined by ASU 2014-09 requires the Organization to (i) identify the contracts with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. Revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU 2014-09 may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective).



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Recently Issued Accounting Standards (Continued) The AICPA’s Health Care Entities Revenue Recognition Task Force (“Task Force”) identified Type A or “life care” contracts as an implementation issue and submitted their interpretation of performance obligations, transaction price, and timing of satisfaction to the Financial Reporting Executive Committee (FinREC) in November 2017. The Organization believes the Task Force submission will be finalized into the AICPA Revenue Recognition guide. The Task Force submission, paired with anticipated management elections, will result in no significant change to the timing of revenues recognized by the Organization under its Residency Agreements or ancillary services. The Organization is still evaluating the impact ASU 2014-09 will have on disclosures and treatment of costs incurred to acquire or fulfill Residency Agreements. At this time, management intends to adopt ASU 2014-09 using the modified retrospective approach for the fiscal year beginning January 1, 2019.

FASB issued ASU 2016-02 in February of 2016 pertaining to recording of leases. The standard will not be effective for the Organization until the year ending December 31, 2019 Implementation of the new standard will result in changes to the reporting and disclosure of leases.

FASB issued ASU 2016-14 in August of 2016 pertaining to net asset classification. The standard will be effective for the Organization for the year ending December 31, 2018. Implementation of the new standard will result in a reduction of three classes of net assets (unrestricted, temporarily restricted, and permanently restricted) to two (net assets with donor restrictions and net assets without donor restrictions).

NOTE 2 NOTES RECEIVABLE

The Organization may at times obtain unsecured promissory notes for residency entrance fees with an initial term of six months and an option of renewal.

On November 30, 2010, the Organization entered into a mortgage note with Mackenzie Place HTC Master Landlord, L.P., a related party, in the amount of $5,000,000 to be drawn upon as needed for the construction of an affordable housing community. This note is secured by a deed of trust and a security agreement. On March 15, 2013, the Organization entered into a note modification agreement which established the maximum loan amount at $4,500,000 (the balance outstanding at the modification date). Commencing January 1, 2014, the loan requires monthly payments of $9,853, including principal and interest at the rate of 0.25% per annum, until the maturity date of January 1, 2021, at which date all remaining principal and outstanding interest are due.�

Current portion of Notes Receivable includes the $108,179 principal due for the above mentioned note. The remaining $2,060,130 relates to the promissory notes issued for the residency entrance fees. Collection on notes receivable is fully expected and, accordingly, no allowance has been provided.



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NOTE 2 NOTES RECEIVABLE (CONTINUED)

Future maturities of the mortgage note receivable are as follows:

Years Ending December 31, Principal2018 108,179$ 2019 108,450 2020 108,722 2021 3,744,603 Total 4,069,954$

NOTE 3 ASSETS LIMITED AS TO USE

Assets limited as to use include the following, by investment type, as of December 31:

2017 2016Cash Management Funds 32,172,973$ 31,427,223$ Government Securities 42,424,712 43,028,947 Corporate Bonds 21,956,063 38,375,338 Bond Funds 69,180,524 62,381,543 Equity Securities 78,444,182 85,607,728 Hedge Funds 9,051,232 8,198,332 Total Assets Limited as to Use Recorded at Fair Value 253,229,686 269,019,111 Equity Investments 3,122,059 3,012,988 Real Estate - Homes 2,409,250 4,399,550 Total Assets Limited as to Use 258,760,995$ 276,431,649$

The Organization has equity investments in Caring Communities Insurance Company, Life Services Network Reciprocal Insurance Company, Senior Care Network, and Mackenzie Place HTC Landlord L.P., as well as investments in real estate. These investments are recorded using the cost basis or equity method as discussed in the subsequent footnotes. Real estate investments are analyzed for impairment annually.

Alternative Investments The fair value of alternative investments has been estimated using the net asset value per share of the investments. Alternative investments held at December 31 consist of the following:

Redemption RedemptionDescription of Security 2017 2016 Frequency Notice PeriodStoneroad Strategic Income Plus II Inv Trust 9,051,232$ 8,198,332$ Bi-Weekly 5 Days

The alternative investments are invested with private equity, enhanced fixed income, and various other domestic and international securities managers. Alternative investments are generally valued at the “Net Asset Value” (NAV) net of management and incentive fees. NAV is often calculated 10-15 business days following the last business day of the month. For that reason, the NAV of any alternative investment shown may be for the month preceding December 31, 2017 and 2016.



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NOTE 3 ASSETS LIMITED AS TO USE (CONTINUED)

The balances of assets limited as to use are as follows as of December 31:

2017 2016BOARD DESIGNATED

Reserve Funds 131,888,826$ 140,301,159$ Benevolent Care 54,897,659 49,739,433 Other 1,018,707 804,710

Subtotal 187,805,192 190,845,302 PERMANENTLY AND TEMPORARILY RESTRICTED

Clinical Pastoral Education 1,101,185 1,101,185 Benevolent Care 19,175,246 17,247,960 Other Programs - Lutheran Hillside Village 1,105,503 - Other Programs - Lenoir Woods 558,074 496,456

Subtotal 21,940,008 18,845,601 HELD BY BOND TRUSTEE

Debt Service Reserve Funds 24,465,082 19,894,991 Project Funds 4,122 29,930,931 Debt Service Funds 17,984,903 10,523,787

Subtotal 42,454,107 60,349,709 RESTRICTED DEPOSITS AND FUNDED RESERVES

Reserve for Replacements 1,802,741 1,682,586 Operating Reserve 201,943 201,244 Residual Receipts 106,336 156,646 Security Deposits 183,877 183,357 Workers' Compensation Letter of Credit 1,133,404 1,143,877 Working Capital 11,328 10,339

Subtotal 3,439,629 3,378,049 EQUITY INVESTMENTS

Captive Insurance Companies 2,023,232 1,880,469 Senior Care Network 399,406 399,406 Investment in Mackenzie Place HTC Landlord L.P. 699,421 733,113

Subtotal 3,122,059 3,012,988 Total Assets Limited as to Use 258,760,995$ 276,431,649$

NOTE 4 LONG-TERM DEBT

Lutheran Senior Services’ long-term debt consists of the following as of December 31:

Security 2017 2016Central Bank of St. Louis Construction Loan with Interest at 2.700% due serially from 2018 through 2046

See (1) 3,337,923$ -$

Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016A

See (2)

Serial Bonds, with interest ranging from 1.500% to 5.000%, due serially from 2017 through 2036

16,210,000 17,130,000

Term Bonds, with interest at 5.000% due in 2036 9,390,000 9,390,000




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NOTE 4 LONG-TERM DEBT (CONTINUED)

Security 2017 2016Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016B

See (3)


54,030,000 55,955,000



Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016C due in 2037

See (4) 10,520,000 -

Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014A

See (5)


19,185,000 19,790,000

Term Bonds, with interest at 4.000% due in 2029 540,000 540,000






Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014B due in 2039, with a scheduled Initial Index Put Date of June 1 2019

See (6) 50,000,000 50,000,000

Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014C due in 2035

See (7) 27,755,000 28,255,000

Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014D due in 2027

See (8) 11,430,000 12,390,000

Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2011

See (9)


4,110,000 5,040,000









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Security 2017 2016Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Obligated Group) Series 2010

See (10)




Health and Educational Facilities Authority of the State of Missouri Revenue Bonds (Lutheran Senior Services Obligated Group) Series 2007B

See (11)


- 990,000

Term Bonds, with interest at 4.500% due in 2027 - 3,370,000

Term Bonds, with interest at 4.875% due in 2038 - 7,215,000

Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Revenue Bonds (Lutheran Senior Services Obligated Group) Series 2000

See (12) 34,790,000 36,445,000

Total Long-Term Debt 449,122,923$ 454,595,000$

Lutheran Senior Services’ long-term debt reconciles to the consolidated balance sheets as follows:

2017 2016Long-Term Debt 449,122,923$ 454,595,000$ Unamortized Discount on Revenue Bonds (167,997) (180,533) Unamortized Premium on Revenue Bonds 18,867,209 20,645,276 Unamortized Debt Issuance Costs (4,820,284) (5,147,774) Current Maturities of Long-Term Debt (44,074,643) (8,070,000)

Noncurrent Portion of Long-Term Debt 418,927,208$ 461,841,969$

The obligated group consists of consolidated Lutheran Senior Services excluding the Affordable Housing projects.

The unamortized discount and premium on revenue bonds relate to the Series 2010, 2011, 2014A, 2016A and 2016B Revenue Bonds and are being amortized using the effective interest method.



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Bonds and Notes Payable (1) On September 28, 2016, the Dunn Road LIHTC obtained a construction loan from Central

Bank of St. Louis for an amount of up to $5,000,000. The loan bears interest at 2.70% and is payable in monthly installments through September 1, 2018. Commencing October 1, 2018, the loan converts to amortizing status with monthly installments of principal in the amount of $14,881 plus interest at the prime rate plus one percent, payable in arrears on the first day of each month. Any remaining unpaid principal and accrued interest is due in full at the maturity date of October 1, 2046. The proceeds of this loan are being used in the construction of the Dunn Road LIHTC facility.

(2) On January 14, 2016, Lutheran Senior Services committed to $53,320,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016A under the Health and Educational Facilities Authority (HEFA) of the State of Missouri. The proceeds were used to pay for costs associated with the acquisition of and improvements to Mason Pointe, as well as to fund a debt service reserve fund for the Series 2016A bonds, fund capitalized interest, fund expansion of and improvements to Hillside Village, and pay certain costs related to the issuance of the Series 2016A bonds.

(3) On September 28, 2016, Lutheran Senior Services committed to $100,680,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016B under the Health and Educational Facilities Authority (HEFA) of the State of Missouri. The proceeds were used to complete a refunding of the Series 2006, 2007A, and 2007C bonds, as well as to fund capitalized interest and pay certain costs related to the issuance of the Series 2016B bonds. The remaining proceeds are being used to pay for costs associated with improvements to Mason Pointe and Lenoir Woods.

�(4) On February 1, 2017, Lutheran Senior Services committed to $10,520,000 Senior Living

Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016C under the Health and Educational Facilities Authority (HEFA) of the State of Missouri. The proceeds were used to complete a refunding of the Series 2007B bonds.

(5) On June 5, 2014, Lutheran Senior Services committed to $79,475,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014A under the HEFA of the State of Missouri. The proceeds were used to complete a refunding of the Series 2004 bonds, fund a debt service reserve fund for the Series 2014A bonds, fund capitalized interest, and pay certain costs related to the issuance of the Series 2014A bonds. The remaining proceeds were used to fund certain construction projects.



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Bonds and Notes Payable (Continued) (6) On June 5, 2014, Lutheran Senior Services committed to $50,000,000 Variable Rate

Demand Health Facilities Revenue Bonds (Lutheran Senior Services) Series 2014B under the HEFA of the State of Missouri. The proceeds were used to complete a refunding of the Series 2008 bonds. The Series 2014B bonds are direct placement bonds, the interest rate of which is indexed to a current short-term market rate. The average interest rates for the years ended December 31, 2017 and 2016 were 2.69% and 2.84%, respectively.

In relation to the Variable Rate Demand Health Facilities Revenue Bonds Series 2014B, the Organization entered into an interest rate swap transaction (swap transaction) dated July 28, 2008, with a principal amount of $25,000,000. The terms of the swap transaction established a fixed interest rate of 3.61%. The swap transaction was extended on August 14, 2015, establishing a fixed interest rate of 1.739%, and expires on August 14, 2025.

In relation to the Variable Rate Demand Health Facilities Revenue Bonds Series 2014B, the Organization entered into a swap transaction dated August 14, 2015, with a principal amount of $25,000,000. The terms of the swap transaction established a fixed interest rate of 1.575%. The swap transaction expires on August 14, 2025.

The Organization paid a net amount of approximately $497,000 and $743,000 related to the swap transactions during the years ended December 31, 2017 and 2016, respectively, which is included in interest expense. The fair value of the swap transactions was approximately negative $614,000 and $978,000 at December 31, 2017 and 2016, respectively, and is recorded as a long-term liability on the consolidated balance sheets. The changes of approximately $364,000 and $525,000 are reported as the change in unrestricted net assets for the years ended December 31, 2017 and 2016, respectively.

The Organization records these derivative instruments on the consolidated balance sheets at their respective fair values, and all changes in fair value in the consolidated statements of unrestricted activities as change in valuation of interest rate swaps.

(7) On December 16, 2014, Lutheran Senior Services issued $28,755,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014C under the HEFA of the State of Missouri. The Series 2014C bonds were directly purchased by a financial institution on February 2, 2015 for the purpose of providing funds for the redemption of the Series 2005A bonds. The average interest rate for the years ended December 31, 2017 and 2016 was 2.73%.

(8) On December 16, 2014, Lutheran Senior Services issued $12,390,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014D under the HEFA of the State of Missouri. The Series 2014D bonds were directly purchased by a financial institution on February 1, 2016 for the purpose of providing funds for the redemption of the Series 2005B bonds. The average interest rates for the years ended December 31, 2017 and 2016 was 3.00% and 5.68%, respectively.



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Bonds and Notes Payable (Continued) (9) On September 29, 2011, Lutheran Senior Services committed to $47,425,000 Senior

Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2011 under the HEFA of the State of Missouri. The proceeds were used to fund construction of a new 80 resident independent living apartment building, a new “Town Center” and renovations to the skilled nursing care facility and general site improvements at the Laclede Groves campus and to construct a 40-apartment assisted living facility to replace two assisted living facilities at the Lenoir Woods campus. Proceeds were also used to pay issuance costs and fund reserves.

(10) On October 31, 2010, Lutheran Senior Services committed to $38,300,000 Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2010 under the HEFA of the State of Missouri. The proceeds were used to build a 40-bed SNF at Meridian Village; to construct a 64-bed SNF and nine patio homes at Concordia Village; to renovate Heisinger Bluffs’ Intermediate Care Facility into a 42-bed skilled community under the household model; and to develop and complete a portion of the SNF renovation at Laclede Groves. Approximately $3.5 million of the proceeds were used to reimburse the Organization for costs incurred in the acquisition and renovation of the home office.

(11) On February 8, 2007, Lutheran Senior Services committed to $13,530,000 Senior Living Facilities Revenue Bonds, Series 2007B under the HEFA of the State of Missouri. The proceeds of the bonds were used to economically defease the Southwestern Illinois Development Authority Retirement Community Revenue Bonds (the Series 1998 bonds) which were used for construction of the 100-unit retirement community (Meridian Village). The proceeds from the Series 2007B bonds held in escrow for this purpose were used to prepay the mortgage and all related costs in October 2008. At that time, Meridian Village Association became a member of the Lutheran Senior Services Obligated Group. These bonds were redeemed with proceeds from the Series 2016C Bonds during 2017.

�(12) On December 21, 2000, Lutheran Senior Services committed to $50,000,000 Variable

Rate Demand Health Facilities Revenue Bonds (Lutheran Senior Services) Series 2000 under the HEFA of the State of Missouri. A portion of these proceeds were used to extinguish the $10,000,000 outstanding portion of Health Facilities Revenue Bonds (Lutheran Senior Services) Series 1996B of the HEFA. The remaining proceeds were for the construction of Meramec Bluffs.

This Variable Rate Demand Bond’s average interest rates for the years ended December 31, 2017 and 2016 were 0.84% and 0.41%, respectively. A demand feature allows the bonds to be remarketed upon 7 days’ notice at par value plus accrued interest. The Organization holds an irrevocable letter of credit with the bond trustee for the face amount of the bonds. The letter of credit had an initial five-year term expiring in July 2005, which was extended to October 2013. The letter was then extended on August 28, 2013 for an additional five-year term expiring October 1, 2018. In the event remarketing is not successful, the letter of credit will be drawn upon to pay the bond trustee. The Organization has a liability to the bond trustee immediately upon a draw on the letter of credit.



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Bonds and Notes Payable (Continued) Any draws on the letter of credit automatically convert to term loans if not immediately repaid. Term loans will be repaid in equal quarterly installments with repayment commencing one year and one day after the date of the liquidity advance, with the final payment due at expiration of the letter of credit.

Lines of CreditLutheran Senior Services entered into a $6,000,000 line of credit with Bank of America on December 21, 2010. This line of credit was available until maturity on December 30, 2014, and used mainly for capital purchases. Upon maturity, the line was renewed per Amendments No. 4-7, with a current maturity of December 31, 2018. The Organization drew $3,450,000 and $2,800,000 on this line of credit during 2017 and 2016, respectively. There are no balances outstanding as of December 31, 2017 and 2016.

Scheduled principal payments on long-term debt are as follows:

Terms of Debt Terms ofYears Ending December 31, Agreements Letter of Credit

2018 11,029,643$ 44,074,643$ 2019 10,973,572 9,138,572 2020 11,358,572 9,428,572 2021 11,803,572 9,768,572 2022 12,283,572 10,143,572

Thereafter 391,673,992 366,568,992 Subtotal 449,122,923 449,122,923

Unamortized Discount on Revenue Bonds (167,997) (167,997) Unamortized Premium on Revenue Bonds 18,867,209 18,867,209

Unamortized Debt Issuance Costs (4,820,284) (4,820,284) Total 463,001,851$ 463,001,851$

Under terms of the bond indentures, Lutheran Senior Services is required to maintain certain deposits with the respective trustees that are recorded as assets limited as to use on the consolidated balance sheets of Lutheran Senior Services. During the year ending December 31, 2017, the springing mortgage requirement was triggered, as prescribed in the Master Trust Indenture, requiring mortgages to collateralize the bonds with the associated real property. The respective springing mortgages were obtained in February 2018, within the terms of the Master Trust Indenture. In the year ending December 31, 2016, the Organization’s bonds were secured by the gross receipts of the obligated group as well as reserve funds of the respective bond issuance.

Restrictive Covenants The provisions of the debt agreements described above contain various restrictive covenants that limit the occurrence of additional debt, place restrictions on the disposition of property, and require certain measures of financial performance be satisfied as long as the bonds are outstanding. Management believes the Organization is in compliance with such covenants at December 31, 2017.



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Deferred Financing Costs Costs incurred in connection with the issuance of debt are capitalized and amortized over the term of the related indebtedness based on the effective interest rate method.

In 2016, the Organization paid off the Series 2006, 2007A, 2007B, and 2007C bonds with proceeds from the Series 2016B bonds, and wrote off $426,804 of unamortized financing costs and premium related to the Series 2006, 2007A, and 2007C bonds.

Additionally, in 2016, the Organization paid interest expense of $902,662 at closing for the Series 2016B Bonds to fund interest through the call date of February 1, 2017. These transactions are presented on the consolidated statements of unrestricted activities as a loss on refinancing.

Deferred financing costs of $9,063,486 and $8,936,457 are presented on the consolidated balance sheets net of accumulated amortization of $4,243,202 and $3,788,683 as of December 31, 2017 and 2016, respectively, as a reduction of long-term debt. Amortization expense for the years ended December 31, 2017 and 2016 is $454,519 and $399,465, respectively, and is presented on the consolidated statements of unrestricted activities as interest expense.

NOTE 5 HUD CAPITAL ADVANCES

The HUD 202 Projects are participants in a Capital Advance Program with the Department of Housing and Urban Development. Under this program, the Capital Advances bear no interest and repayment is not required so long as the housing remains available for very low-income elderly persons for a period of at least 40 years. Noncompliance would result in HUD billing the affected Project for the entire Capital Advance plus interest at stated interest rates from the date of the first advance.

The outstanding balances of capital advances are as follows as of December 31:

2017 2016Rose Hill House, Inc. 4,366,600$ 4,366,600$Halls Ferry Manor, Inc. 4,243,200 4,243,200Dunn Road Manor, Inc. 4,548,800 4,548,800Westfield Manor Association 5,797,600 5,797,600Hilltop Manor Association, Inc. 5,181,700 5,181,700Rose Hill House Inc, II 2,608,880 2,608,880Mackenzie Place 202 4,995,600 4,995,600Mackenzie Place 202-II 4,643,600 4,643,600 Total HUD Capital Advances 36,385,980$ 36,385,980$



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NOTE 6 FAIR VALUE MEASUREMENTS

The Organization uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. For additional information on how the Organization measures fair value refer to Note 1 – Summary of Significant Accounting Policies and Organization.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Assets Limited as to Use – Investments The fair values of the investments are estimated based on quoted market prices for those or similar investments.

HUD Capital Advances The fair value of HUD capital advances is estimated based upon the remaining term of the advance and current rates for similar instruments. Based on these inputs, the fair value of HUD capital advances would be classified as a level three liability.

Interest Rate Swap Agreements The fair value of the interest rate swap agreements is based upon the present value of future cash flow under their agreements in conjunction with their 10-year terms, expiring on August 14, 2025.

All Other The carrying value is a reasonable estimate of the fair value for all other financial instruments due to the short-term nature of those financial instruments.

The following tables present the fair value hierarchy for the balances of the assets and liabilities of the Organization measured at fair value on a recurring basis as of December 31:

2017Level 1 Level 2 Level 3 Total

AssetsAssets Limited as to Use - Investments:

Government Securities -$ 42,424,712$ -$ 42,424,712$ Corporate Bonds - 21,956,063 - 21,956,063 Bond Funds 69,180,524 - - 69,180,524 Equity Securities 78,444,182 - - 78,444,182 Total Assets Measured at Fair Value 147,624,706$ 64,380,775$ -$ 212,005,481$

LiabilitiesInterest Rate Swap Agreements -$ 613,503$ -$ 613,503$

Total Liabilities Measured at Fair Value -$ 613,503$ -$ 613,503$


AssetsAssets Limited as to Use - Investments:

Government Securities -$ 43,028,947$ -$ 43,028,947$ Corporate Bonds - 38,375,338 - 38,375,338 Bond Funds 62,381,543 - - 62,381,543 Equity Securities 85,607,728 - - 85,607,728 Total Assets Measured at Fair Value 147,989,271$ 81,404,285$ -$ 229,393,556$

LiabilitiesInterest Rate Swap Agreements -$ 977,706$ -$ 977,706$

Total Liabilities Measured at Fair Value -$ 977,706$ -$ 977,706$



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NOTE 7 RETIREMENT PLANS

Qualified Retirement Plans Savings Match Plan Lutheran Senior Services has a Section 403(b) retirement plan. Employees who elect to participate in the 403(b) retirement plan may defer up to the maximum amount allowable under the Internal Revenue Code. Lutheran Senior Services also has a Section 401(a) defined contribution retirement plan. The plan includes an employee savings plan, under which Lutheran Senior Services contributed up to 150% of what an employee contributes into their 403(b) plan to a maximum of 5% of the employee’s salary for the year ended December 31, 2016. For the year ended December 31, 2017, Lutheran Senior Services contributed 50% of the employee’s contribution to a maximum of 8% of the employee’s salary. Employer contributions made to the plan were $1,162,371 and $1,564,493 for the years ended December 31, 2017 and 2016, respectively.

Defined Benefit Pension Plan The defined benefit pension plan (the Plan) covers substantially all employees of Lutheran Senior Services and its affiliates who reached 21 years of age or older before January 1, 2001; were employed by Lutheran Senior Services on or before November 26, 2001; and earned 1,000 hours of service during or prior to the calendar year 2002. The Plan was originally effective July 1, 1966, and last amended and restated effective January 1, 2001. On November 27, 2001, the Board of Lutheran Senior Services approved a resolution to amend the Plan to no longer allow new employees to participate in the Plan and to freeze the benefits in five years. On an annual basis, the Board will determine whether the Plan will be terminated. The Organization uses a December 31 measurement date for its defined benefit plan.

Accumulated benefit obligation exceeds plan assets as follows:

2017 2016Projected Benefit Obligation 21,026,115$ 19,192,330$Accumulated Benefit Obligation 21,026,115 19,192,330Fair Value of Plan Assets 14,686,127 13,472,082

Funded status of the plan is as follows:

2017 2016Projected Benefit Obligation 21,026,115$ 19,192,330$Fair Value of Plan Assets 14,686,127 13,472,082

Funded Status (6,339,988)$ (5,720,248)$

Weighted average assumptions used to determine benefit obligations are as follows:

2017 2016Discount Rate 3.6% 4.2%Rate of Compensation Increase N/A N/A



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NOTE 7 RETIREMENT PLANS (CONTINUED)

Qualified Retirement Plans (Continued) Defined Benefit Pension Plan (Continued) Information related to net pension cost consists of:

2017 2016Net Periodic Pension Cost (573,549)$ (698,280)$Net Loss Recognized 712,736 706,825 Employer Contribution 330,000 411,000 Benefits Paid 829,247 802,729

Amounts that have not been recognized in net periodic benefit cost are as follows:

2017 2016Unrecognized Net Loss 5,302,756$ 4,926,565$

Weighted average assumptions used to determine net pension cost are as follows:

2017 2016Discount Rate 3.6% 4.2%Expected Long-Term Return on Plan Assets 7.0% 7.0%Rate of Compensation Increase N/A N/A

The Organization selects the expected long-term rate of return on plan assets assumption in consultation with its investment advisors and actuary. This rate is intended to reflect the average rate of earnings expected on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience, which may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period for which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses typically paid from plan assets.

The Organization’s pension plan weighted-average asset allocation by asset category is as follows as of December 31:

2017 2016Asset Category:

Cash and Money Market 0.3 % 1.9 %Fixed Income Funds 31.1 32.9Equity Securities 68.6 65.2

Total 100.0 % 100.0 %



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Qualified Retirement Plans (Continued) Defined Benefit Pension Plan (Continued) The following tables present the fair value hierarchy for the balances of the plan assets of the Organization measured at fair value on a recurring basis as of December 31:


Defined Pension Plan Assets:Fixed Income Funds 4,609,975$ -$ -$ 4,609,975$ Equity Securities 10,076,152 - - 10,076,152

Total Assets Measured at Fair Value 14,686,127$ -$ -$ 14,686,127$


Defined Pension Plan Assets:Fixed Income Funds 4,688,285$ -$ -$ 4,688,285$ Equity Securities 8,783,797 - - 8,783,797

Total Assets Measured at Fair Value 13,472,082$ -$ -$ 13,472,082$

The Organization’s investment policy requires that the assets of the Plan are invested in a manner consistent with the fiduciary standards of ERISA; namely, (a) the safeguards and diversity to which a prudent investor would adhere must be present and (b) all transactions undertaken on behalf of the Plan must be for the sole interest of Plan participants and their beneficiaries, to provide benefits in a prudent manner. The primary investment emphasis is to attain or improve upon the surplus of assets over the present value of liabilities.

The Organization’s targeted pension plan asset allocation by asset category consists of the following as of December 31:

2017 2016Asset Category:

Fixed Income Funds 35.0 % 35.0 %Equity Securities 65.0 65.0

Total 100.0 % 100.0 %

The Fund shall provide the highest possible return consistent with prudent diversification. The investment objective of the Retirement Fund is to earn a long-term total return of 7.0%. The actual asset mix shown above is within targeted ranges of the asset mix that the Organization believes will support the long-term objective.

ContributionsThe Organization has received confirmation that the Retirement Plan does have Church Plan status, and as such there are no mandatory minimum funding requirements. The Organization plans to contribute approximately $429,000 during 2018 based upon the recommendations from the Plan’s Actuarial Valuation Report as of February 27, 2018.



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Qualified Retirement Plans (Continued) Contributions (Continued) Pension benefits which reflect expected future service, as appropriate, are expected to be paid as follows:

Year Ending December 31, Amount2018 951,863$ 2019 975,670 2020 1,021,378 2021 1,072,008 2022 1,103,090

2023-2027 5,759,909

Non-Qualified Retirement Plans Effective January 1, 2002, Lutheran Senior Services adopted a deferred compensation plan for designated executives. The Board of Directors will approve an annual bonus compensation amount for each participant. In general, participants will become vested after five years in the deferred amounts on a five year rolling schedule in relation to the deferrals or upon obtaining the age of 65. The deferred funds will be held by a corporate trustee under a “Rabbi Trust” arrangement. For the years ended December 31, 2017 and 2016, the Board of Directors approved deferred compensation of $80,000 and $100,000, respectively.

Effective September 17, 2007, Lutheran Senior Services established a retirement plan for a designated executive in which the Board of Directors will approve an annual funding amount. The retirement plan funds will be held by a corporate trustee under a “Rabbi Trust” arrangement. During the year ending December 31, 2017 the executive became 100% vested after 10 years of service and was paid out, and a new vesting period began which will become 100% vested after 15 years of service. During the years ended December 31, 2017 and 2016, the Board of Directors approved funding amounts of $-0- and $141,000, respectively.

Lutheran Senior Services has a 457(b) deferred compensation plan for designated executives. The Board of Directors will approve an annual bonus compensation amount for each participant. The deferred funds will be held by a corporate trustee under a “Rabbi Trust” arrangement. Effective in the year ending December 31, 2017 the participants’ vesting is based on years of service at a rate of 10% annually on each anniversary. During the years ended December 31, 2017 and 2016, the Board of Directors approved bonus compensation amounts of $59,712 and $79,163, respectively.



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NOTE 8 CONCENTRATION OF CREDIT RISK

The Organization maintains its cash and cash equivalents, investments, and assets limited as to use at financial institutions which management believes have strong credit ratings and that the credit risk related to these deposits is minimal. Accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At times, deposits may exceed FDIC limits. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

The Organization has investments in a variety of investment funds. In general, investments are exposed to various risks such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the value of the investments will occur in the near term and that such changes could materially affect account balances and the statements of operations.

The Organization grants credit without collateral to its various facility residents or their families, many of whom are local residents and are insured under third-party payor agreements. The mix of receivables from residents and third-party payors consists of the following as of December 31:

2017 2016Private Pay and Insurance 3,922,228$ 4,001,403$Medicare 6,343,874 8,635,266Medicaid 5,604,890 5,053,361Allowance for Doubtful Accounts (4,325,000) (1,932,635) Total 11,545,992$ 15,757,395$

NOTE 9 NET ASSET CLASSIFICATIONS

Temporarily Restricted Net Assets Temporarily restricted net assets consist of amounts restricted for benevolent care, clinical pastoral education, capital expenditures, and miscellaneous operational purposes.

Net assets released from restriction for operations and capital expenditures of $1,008,913 and $972,123 consist of proceeds from contributions that were used for the donor-imposed restricted purpose during the years ended December 31, 2017 and 2016, respectively.

Permanently Restricted Net Assets The Organization’s endowment consists of donor-restricted funds given to the Organization to provide funds for benevolent care, clinical pastoral education, capital expenditures, and miscellaneous operational purposes. As required by Generally Accepted Accounting Principles (GAAP), net assets associated with endowment funds, including those designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.



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NOTE 9 NET ASSET CLASSIFICATIONS (CONTINUED)

Permanently Restricted Net Assets (Continued) Interpretation of Relevant Law The State of Missouri adopted the Uniform Prudent Management of Institutional Funds Act (the Act) in August of 2009. The Board of Directors of the Organization has interpreted the Act as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (1) the original value of gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund.

Return Objectives and Risk Parameters The Organization has adopted an investment policy for their investment funds, including the permanent endowments, which attempts to provide a balance of maintenance of adequate cash reserves, preservation of principal for funds designated as cash reserves, and growth of remaining assets within reasonable and prudent levels of risk. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that provide a total return, growth in income, and a predictive and dependable source of income.

Strategies Employed for Achieving Results To satisfy its capital appreciation and expected results, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places a balance of equity-based investments and fixed income investments to achieve its objectives within the risk constraints.

Spending Policy The Organization has a policy, based upon the intent of the donor-restricted endowed assets, to spend the earnings from the endowment funds for benevolent care, clinical pastoral education, capital expenditures and miscellaneous operational purposes. Earnings available to be spent are limited to 8% of a three-year rolling average of the endowment market value balances.



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NOTE 9 NET ASSET CLASSIFICATIONS (CONTINUED)

Permanently Restricted Net Assets (Continued) The composition of endowment net assets for the Organization and the changes in endowment net assets are as follows for the years ended December 31:

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Endowment Net Assets - December 31, 2015 41,931,217$ 15,269$ 8,108,308$ 50,054,794$ Contributions 4,054,038 - 36,711 4,090,749 Investment Income 2,857,458 - - 2,857,458 Net Appreciation of Investments 1,771,194 - - 1,771,194 Net Assets Released from Operations (227,478) - - (227,478) Benevolent Care and CPE Payouts (2,553,122) - - (2,553,122) Program Expenditures (982,361) - - (982,361) Endowment Net Assets - December 31, 2016 46,850,946 15,269 8,145,019 55,011,234 Contributions 452,743 - 1,064,251 1,516,994 Investment Income 7,150,207 - - 7,150,207 Net Appreciation of Investments 26,601 - - 26,601 Net Assets Released from Operations (73,000) - - (73,000) Benevolent Care and CPE Payouts (1,443,994) - - (1,443,994) Program Expenditures (504,187) - - (504,187) Endowment Net Assets - December 31, 2017 52,459,316$ 15,269$ 9,209,270$ 61,683,855$

NOTE 10 CONSTRUCTION IN PROGRESS

The construction in progress balance consists of numerous ongoing projects as follows:

Lutheran Hillside Village Lutheran Senior Services is undergoing a campus-wide development project that includes adding 36 skilled nursing beds with an approximate cost of $19,809,000. As of December 31, 2017 and 2016, approximately $19,809,000 and $17,385,000, respectively, has been expended for the planning, design and construction fees related to this project. During 2017 and 2016, approximately $3,095,000 and $16,714,000 was placed into service, respectively. The project was financed with proceeds from the Series 2016A Bonds.

Lake Pointe Lutheran Senior Services is in the planning stages of developing a new Life Planning Community in Lake St. Louis consisting of 176 independent living units, 32 assisted living units, 24 assisted living memory care units and 80 skilled nursing beds with an approximate cost of $126,000,000. During the year ending December 31, 2017 the project was placed on hold with expected completion within three to five years. As of December 31, 2017 and 2016, approximately $6,097,000 and $5,748,000, respectively, has been expended for the planning, design and construction fees related to this project. The project is currently being financed with board designated investments.



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NOTE 10 CONSTRUCTION IN PROGRESS (CONTINUED)

Heisinger Bluffs – Phase III Lutheran Senior Services was in the process of adding 51 independent living units and a wellness center at Heisinger Bluffs. The approximate cost of the project was $12,000,000 and was being financed with board designated investments. The project was determined not to go forward. Total capitalized project costs over the life of the project were approximately $951,000. During years ended December 31, 2017 and 2016 approximately $551,000 and $400,000 were expensed into unrestricted net assets related to the abandonment of the capital asset project.

Lenoir Woods Lutheran Senior Services is undergoing a campus-wide development project. One current phase is a new building consisting of 79 independent living apartments, with estimated construction costs of $24,109,000, of which approximately $20,000,000 was funded through Entrance Fees. As of December 31, 2017 and 2016, approximately $24,109,000 and $7,934,000, respectively, has been expended for architectural, engineering fees, and construction related to this project. During 2017, assets of approximately $24,109,000 were placed into service.

An additional current phase includes construction of a replacement SNF, with estimated construction costs of $28,000,000 being financed with proceeds from the Series 2016B Bonds. As of December 31, 2017 and 2016, approximately $23,500,000 and $5,427,000, respectively, has been expended for architectural, engineering fees, and construction related to this project. During 2017, assets of approximately $8,087,000 were placed into service.

Mason Pointe Lutheran Senior Services underwent various projects that included significant upgrades and improvements of approximately $5,000,000 to the skilled nursing facility. During 2016, assets of $5,000,000 were placed into service. These projects were financed from the Series 2016A Bonds.

Lutheran Senior Services is in the planning stages of developing new independent living apartments at Mason Pointe. As of December 31, 2017, approximately $2,100,000 has been expended for architectural and engineering fees related to this project. The approximate cost of architectural and engineering fees for the development stage is $3,500,000 and is being financed from the Series 2016B Bonds.

Dunn Road Manor Lutheran Senior Services is undergoing an expansion to the Dunn Road Manor affordable housing community. The community consists of 36 independent living apartments designed to serve low to moderate income elderly residents, with approximate construction costs of $6,500,000. As of December 31, 2017 and 2016, approximately $6,500,000 and $1,326,000, respectively, had been expended for the planning, design and construction fees related to this project. During 2017, assets of approximately $6,500,000, were placed into service.

OtherLutheran Senior Services has projects at varying stages of completion at these and other communities.



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NOTE 11 WORKERS’ COMPENSATION

The Organization has a liability insurance policy for workers’ compensation. The policy has an individual stop loss of $500,000 per occurrence and $2,000,000 in aggregate. Significant claims experience could impact the results of operations. Estimated future claims for incurred incidents of approximately $2,010,000 and $914,000 are recorded as liabilities at December 31, 2017 and 2016, respectively, and are included in other accrued liabilities on the consolidated balance sheets.

Lutheran Senior Services has a workers’ compensation escrow account with a local bank. The escrow is invested in U.S. Treasuries with a market value of approximately $1,133,000 and $1,144,000 at December 31, 2017 and 2016, respectively.

NOTE 12 CAPTIVE INSURANCE

Lutheran Senior Services has a claims-made policy for their professional liability insurance through Caring Communities Insurance Company (CCIC), a Reciprocal Risk Retention Group. As a subscriber to CCIC, Lutheran Senior Services has funds on deposit in a subscriber account of approximately $1,425,000 and $1,282,000 at December 31, 2017 and 2016, respectively. The subscriber account is recorded as an investment using the equity method. Lutheran Senior Services was required to make capital contributions totaling $598,616. The capital contributions are recorded as an investment at December 31, 2017 and 2016 using the equity method. Lutheran Senior Services also pays annual amounts to CCIC for their professional liability insurance coverage. The policy includes professional, commercial, and employee benefits liability and calls for a $35,000 deductible per occurrence and liability limits of $1,000,000 per occurrence and $3,000,000 in the aggregate. Depending on loss history and adequacy of capital, CCIC may, but is not obligated to, return a portion of premiums paid. Conversely, Lutheran Senior Services may be called upon to contribute additional funds to its subscriber account to maintain adequate capital in CCIC.

NOTE 13 SENIOR CARE NETWORK

Lutheran Senior Services owns 20% of Senior Care Network. Senior Care Network is a membership and service company that benefits the nursing and long-term care industry through collective initiatives which improve the delivery of nursing and long term care services in the St. Louis area. Senior Care Network currently has five supporting members and numerous affiliate members. In addition to providing group purchasing services, including health benefits, Senior Care Network owns a 40% interest in Alliance Rehab STL, L.L.C., which provides rehabilitation services to the long term care industry. Lutheran Senior Services records its interest in Senior Care Network on the equity basis. Within the terms of the health benefit agreement with Senior Care Network, the agreement was terminated at the conclusion of the contract year ended December 31, 2017. In accordance with the agreement, the Organization is not liable for any claims incurred after the termination date. As a result of the termination of the agreement, the Organization was due approximately $900,000, which was included in other current assets as of December 31, 2017. Subsequent to year end the Organization became self-insured for health insurance benefits.



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NOTE 14 INVESTMENT IN LIMITED PARTNERSHIPS

Mackenzie Place HTC Master Tenant, L.P. Lutheran Senior Services is the developer and lender of Mackenzie Place HTC Master Landlord, L.P. (the Landlord Partnership), a limited partnership which purchased, developed, and master leased to Mackenzie Place HTC Master Tenant, L.P. (the Tenant Partnership) a 20-unit independent living facility and certain common areas for the Village of Mackenzie Place retirement community. At December 31, 2017 and 2016, Lutheran Senior Services owed the Landlord Partnership approximately $-0- and $9,000, respectively, consisting mainly of a development fee.

Lutheran Senior Services, through a wholly-owned limited liability company, is the general partner of the Tenant Partnership and has 0.01% partnership interest. This development occurred on land adjacent to that owned by the Mackenzie Place LIHTC partnership. Commerce Bank is the state historic tax credit investor (as a limited partner of the Landlord Partnership) and St. Louis Equity Fund 2010 L.L.C. is the federal historic tax credit investor (as a limited partner of the Tenant Partnership) in this project.

In connection with the construction, development, and operation of this project, Lutheran Senior Services has undertaken the following obligations:

� Construction and Permanent Loan – During 2010, Lutheran Senior Services entered into a construction loan agreement to lend the Landlord Partnership up to $5,500,000 to fund rehabilitation costs of the building. On March 15, 2013, Lutheran Senior Services entered into a note modification agreement. The modified terms establish the maximum loan amount at $4,500,000 and provide for monthly payments of interest only at the annual rate of 5.00% through December 31, 2013. Commencing January 1, 2014, the loan requires monthly payments of $9,853, including principal and interest at the rate of 0.25% per annum, until the maturity date of January 1, 2021, at which date all remaining principal and outstanding interest are due. The balance of the loan is approximately $4,070,000 and $4,178,000 at December 31, 2017 and 2016, respectively.

� Tax Credit Guaranty – The project qualified for and received Federal and Missouri historic rehabilitation tax credits. The project produced Federal historic rehabilitation tax credits in the amount of $1,114,974 and Missouri historic rehabilitation tax credits in the amount of $1,064,285. Lutheran Senior Services has guaranteed tax credit deficit obligations to the tax credit investors. Such tax credit deficit obligations include payments to the tax credit investors in the amount of (1) any reduction, disallowance, or recapture of the projected tax credit amount; (2) any interest and penalties imposed by the IRS in the event of a recapture of tax credits; and (3) any income tax liability of the tax credit investors as a result of payments under these tax credit deficit obligations.



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NOTE 14 INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

Mackenzie Place HTC Master Tenant, L.P. (Continued) � Operating Deficit Guaranty – Lutheran Senior Services has guaranteed the full and timely

payment and performance of the obligations of the Landlord Partnership’s and Tenant Partnership’s general partner obligations to fund operating deficits for a period of 5 years following project lease-up. The aggregate projected operating costs for the Landlord Partnership and the Tenant Partnership over the first full 5-year period following lease-up is less than $750,000.

� Environmental Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of certain environmental indemnities made by the general partners of the Landlord Partnership and the Tenant Partnership for the benefit of the tax credit investors.

Mackenzie Place LIHTC, L.P. Lutheran Senior Services, through a wholly-owned limited liability company, is a general partner of Mackenzie Place LIHTC, L.P., a limited partnership which operates a 34-unit independent living facility qualifying for Federal and Missouri low-income housing tax credits at The Village of Mackenzie Place. Through this limited liability company, the Organization owns a 0.01% partnership interest as general partner in the partnership. The limited partners are St. Louis Equity Fund 2010 L.L.C. and First National Bank of St. Louis, N.A. In connection with the construction, development, and operation of this project, Lutheran Senior Services has undertaken the following obligations:

� Tax Credit Guaranty – The project will be operated as low-income housing qualifying for Federal and Missouri low-income housing tax credits. The total amount of Federal and Missouri tax credits over the applicable ten-year tax credit period is projected to be $12,700,000. Lutheran Senior Services has guaranteed the general partner’s credit deficit obligations to the limited partners. Such credit deficit obligations include payments to the limited partners in the amount of (1) any reduction, disallowance, or recapture of the projected tax credit amount; (2) any interest and penalties imposed by the IRS in the event of a recapture of tax credits; and (3) any income tax liability of the limited partners as a result of payments under the credit deficit obligations of the general partner. Any payments made by Lutheran Senior Services under this guaranty will be treated as a loan to the partnership, the payment of which will take priority over any distribution of residual assets to the partners upon a sale or refinancing of the project.

� Operating Deficit Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of all obligations of the general partner to fund operating deficits for a period of 5 years following project lease-up. The projected operating costs for the project over the first full 5-year period following lease-up is less than $1,150,000.

� Environmental Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of certain environmental indemnities made by the general partner for the benefit of the limited partners.



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NOTE 14 INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

Dunn Road Manor LIHTC, L.P. Lutheran Senior Services, through a wholly-owned limited liability company, is a general partner of Dunn Road Manor LIHTC, L.P., a limited partnership which is developing and will operate a 36-unit independent living facility qualifying for Federal and Missouri low-income housing tax credits at Dunn Road Manor. Through this limited liability company, the Organization owns a 0.01% partnership interest as general partner in the partnership. The limited partners are St. Louis Equity Fund 2015 L.L.C. and Central Bank of St. Louis. In connection with the construction, development, and operation of this project, Lutheran Senior Services has undertaken the following obligations:

� Tax Credit Guaranty – The project will be operated as low-income housing qualifying for Federal and Missouri low-income housing tax credits. The total amount of Federal and Missouri tax credits over the applicable ten-year tax credit period is projected to be $9,269,537. Lutheran Senior Services has guaranteed the general partner’s credit deficit obligations to the limited partners. Such credit deficit obligations include payments to the limited partners in the amount of (1) any reduction, disallowance, or recapture of the projected tax credit amount; (2) any interest and penalties imposed by the IRS in the event of a recapture of tax credits; and (3) any income tax liability of the limited partners as a result of payments under the credit deficit obligations of the general partner. Any payments made by Lutheran Senior Services under this guaranty will be treated as a loan to the partnership, the payment of which will take priority over any distribution of residual assets to the partners upon a sale or refinancing of the project.

� Construction Completion Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of all obligations of the Landlord Partnership’s general partner to ensure completion of construction of the project.

� Operating Deficit Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of all obligations of the general partner to fund operating deficits for a period of 5 years following project lease-up.

� Environmental Guaranty – Lutheran Senior Services has guaranteed the full and timely payment of certain environmental indemnities made by the general partner for the benefit of the limited partners.

Investment in Limited Partnerships In accordance with generally accepted accounting standards, the non-controlling interest of these limited partnerships is included in unrestricted net assets of the consolidated financial statements of the Organization.



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NOTE 15 CONTINGENT LIABILITIES

Government Regulations – Medicaid The Missouri Department of Social Services, Division of Medical Services and the Illinois Department of Healthcare and Family Services (HFS) reserve the right to perform field audit examinations of the Organization's records. Any adjustments resulting from such examinations could retroactively adjust Medicaid revenue.

Government Regulations – Medicare The Medicare intermediary has the authority to audit a SNF, Home Health, or Hospice's records any time within a three-year period after the date the SNF, Home Health, or Hospice receives a final notice of program reimbursement for each cost reporting period. Any adjustments resulting from these audits could retroactively adjust Medicare revenue.

Health Care Health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, reimbursement for resident services, and Medicare and Medicaid fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers.

Violations of these laws and regulations could result in expulsion from government health care programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed.

LitigationThe Organization is subject to asserted and unasserted claims encountered in the normal course of business. The Organization's management and legal counsel assess such contingent liabilities and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Organization or unasserted claims that may result in such proceedings, the Organization's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. In the opinion of management, disposition of these matters will not have a material effect on the Organization's financial condition or results of operations.

NOTE 16 FUNCTIONAL CLASSIFICATION OF EXPENSES

Functional classification of expenses is as follows for the years ended December 31:

2017 2016Program 203,548,257$ 197,505,474$ Management and General Support 36,244,976 33,412,186 Total Operating Expenses 239,793,233$ 230,917,660$



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NOTE 16 FUNCTIONAL CLASSIFICATION OF EXPENSES (CONTINUED)

Excluded from the functional expenses above are endowment expenses of approximately $2,383,000 and $2,561,000 for the years ended December 31, 2017 and 2016, respectively, which are considered fundraising expenses; and pension expenses of approximately $574,000 and $698,000 for the years ended December 31, 2017 and 2016, respectively, which are considered program expenses.

Fundraising expenses of approximately $2,383,000 and $2,561,000 were incurred during the years ended December 31, 2017 and 2016, respectively, and are included in the consolidated statements of unrestricted activities.

Salaries and related expenses are allocated based on job descriptions and the best estimates of management. Expenses, other than salaries and related expenses, which are not directly identifiable by program or supporting services, are allocated based on the best estimates of management.

NOTE 17 ACQUISITION OF MASON POINTE

The Organization acquired Mason Pointe effective February 1, 2016 with proceeds from the Series 2016A bonds (see Note 4) to satisfy the REACH West County lease described in Note 1. As such, Mason Pointe is now consolidated into the Organization. Upon acquisition, all assets were recorded at fair value. The purchase price of $34,000,000 is deemed fair value for the acquired assets recorded at February 1, 2016, which consist of the following:

Land 12,000,000$Building, Equipment, Fixtures 20,000,000Tangible Personal Property 1,000,000Intangible Property 1,000,000

Total Assets Acquired 34,000,000$

NOTE 18 SUBSEQUENT EVENT

In preparing these consolidated financial statements, the Organization has considered events and transactions that have occurred through April 3, 2018, the date the consolidated financial statements were available to be issued.

LUTHERAN SENIOR SERVICES COMBINING AND CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2017 (SEE INDEPENDENT AUDITORS’ REPORT)

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LutheranAffordable Senior

Obligated Housing ServicesGroup Projects Subtotal Eliminations Consolidated

CURRENT ASSETSCash and Cash Equivalents 4,941,712$ 435,712$ 5,377,424$ -$ 5,377,424$ Resident Accounts Receivable, Net 11,491,498 54,494 11,545,992 - 11,545,992 Current Portion of Notes Receivable 2,168,309 - 2,168,309 - 2,168,309 Interest Receivable 851,597 - 851,597 - 851,597 Other Current Assets 4,730,365 190,051 4,920,416 - 4,920,416 Current Portion of Assets Limited as to Use 164,933,826 - 164,933,826 - 164,933,826

Total Current Assets 189,117,307 680,257 189,797,564 - 189,797,564

ASSETS LIMITED AS TO USEInvestments 255,755,346 3,005,649 258,760,995 - 258,760,995 Less: Current Portion Shown Above 164,933,826 - 164,933,826 - 164,933,826

Total Assets Limited as to Use (Net ofCurrent Portion Shown Above) 90,821,520 3,005,649 93,827,169 - 93,827,169

PROPERTY AND EQUIPMENT (at Cost)

Land and Land Improvements 68,485,156 5,128,775 73,613,931 - 73,613,931 Building and Improvements 608,314,984 42,981,360 651,296,344 - 651,296,344 Equipment 59,499,633 2,316,928 61,816,561 - 61,816,561 Construction in Progress 26,718,832 - 26,718,832 - 26,718,832

Total 763,018,605 50,427,063 813,445,668 - 813,445,668 Less: Accumulated Depreciation 274,714,430 15,562,095 290,276,525 - 290,276,525

Total Property and Equipment (at Depreciated Cost) 488,304,175 34,864,968 523,169,143 - 523,169,143

OTHER ASSETSNotes Receivable (Net of Current Portion

Shown Above) 3,961,775 - 3,961,775 - 3,961,775 Deferred Marketing Costs, Net 2,627,560 - 2,627,560 - 2,627,560 Skilled Nursing Facility Bed Licenses 1,960,000 - 1,960,000 - 1,960,000

Total Other Assets 8,549,335 - 8,549,335 - 8,549,335

Total Assets 776,792,337$ 38,550,874$ 815,343,211$ -$ 815,343,211$

ASSETS

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CURRENT LIABILITIESCurrent Maturities of Long-Term Debt 44,030,000$ 44,643$ 44,074,643$ -$ 44,074,643$Accounts Payable:

Trade 5,962,447 32,240 5,994,687 - 5,994,687Development 3,348,884 11,500 3,360,384 - 3,360,384

Accrued Interest Payable 7,217,941 7,761 7,225,702 - 7,225,702Other Accrued Liabilities 14,367,869 144,556 14,512,425 - 14,512,425Current Portion of Refundable Residency Fees 11,878,000 - 11,878,000 - 11,878,000Due to (from) Healthcare Affiliates (409,533) 409,533 - - -

Total Current Liabilities 86,395,608 650,233 87,045,841 - 87,045,841

LONG-TERM DEBT (Net of CurrentMaturities Shown Above)Bonds and Notes Payable 415,644,858 3,282,350 418,927,208 - 418,927,208Interest Rate Swap Agreements 613,503 - 613,503 - 613,503

Total Long-Term Debt (Net of Current Maturities Shown Above) 416,258,361 3,282,350 419,540,711 - 419,540,711

OTHER LIABILITIESHUD Capital Advances - 36,385,980 36,385,980 - 36,385,980Refundable Residency Fees 202,098,078 - 202,098,078 - 202,098,078Deferred Revenue from Residency Fees 21,293,401 - 21,293,401 - 21,293,401Charitable Gift Annuities Payable 12,093,079 - 12,093,079 - 12,093,079Resident Deposits 5,752,415 212,814 5,965,229 - 5,965,229Accrued Pension Cost 6,339,988 - 6,339,988 - 6,339,988

Total Other Liabilities 247,576,961 36,598,794 284,175,755 - 284,175,755

Total Liabilities 750,230,930 40,531,377 790,762,307 - 790,762,307

NET ASSETS Unrestricted:

Controlling Interest 4,221,399 (10,143,696) (5,922,297) - (5,922,297)Noncontrolling Interest - 8,163,193 8,163,193 - 8,163,193

Total Unrestricted Net Assets 4,221,399 (1,980,503) 2,240,896 - 2,240,896

Temporarily Restricted 13,130,738 - 13,130,738 - 13,130,738Permanently Restricted 9,209,270 - 9,209,270 - 9,209,270

Total Net Assets 26,561,407 (1,980,503) 24,580,904 - 24,580,904

Total Liabilities and Net Assets 776,792,337$ 38,550,874$ 815,343,211$ -$ 815,343,211$

LIABILITIES AND NET ASSETS

LUTHERAN SENIOR SERVICES COMBINING AND CONSOLIDATING STATEMENT OF UNRESTRICTED ACTIVITIES

YEAR ENDED DECEMBER 31, 2017 (SEE INDEPENDENT AUDITORS’ REPORT)

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OPERATING REVENUEResident Service 195,767,147$ 3,836,284$ 199,603,431$ -$ 199,603,431$Amortization of Residency Fees 5,131,857 - 5,131,857 - 5,131,857 Interest on Investments Held by Trustee 2,016,821 - 2,016,821 - 2,016,821 Net Assets Released from Restrictions -

Operations 1,008,913 - 1,008,913 - 1,008,913 Other 5,877,042 59,479 5,936,521 (309,249) 5,627,272

Total Operating Revenue 209,801,780 3,895,763 213,697,543 (309,249) 213,388,294

OPERATING EXPENSENursing 64,522,445 - 64,522,445 - 64,522,445 Home Community Based Services 4,625,760 - 4,625,760 - 4,625,760 Dining Services 24,113,648 - 24,113,648 - 24,113,648 Housekeeping and Laundry 6,911,713 - 6,911,713 - 6,911,713 Activities and Social Services 6,628,202 - 6,628,202 - 6,628,202 Plant Operations and Maintenance 16,618,521 1,341,916 17,960,437 - 17,960,437 Administrative 33,708,204 1,790,960 35,499,164 (309,249) 35,189,915 Marketing 6,097,598 - 6,097,598 - 6,097,598 Chaplaincy 1,338,960 - 1,338,960 - 1,338,960 Employee Benefits 23,847,892 380,797 24,228,689 - 24,228,689 Interest 16,569,752 42,053 16,611,805 - 16,611,805 Depreciation and Amortization 30,159,521 1,404,540 31,564,061 - 31,564,061

Total Operating Expense 235,142,216 4,960,266 240,102,482 (309,249) 239,793,233

OPERATING LOSS (25,340,436) (1,064,503) (26,404,939) - (26,404,939)

OTHER INCOME (EXPENSE)Unrealized Loss on Investments (1,196,030) - (1,196,030) - (1,196,030) Net Investment Income 3,147,709 (26,926) 3,120,783 - 3,120,783 Realized Gains on Investments 14,719,647 - 14,719,647 - 14,719,647 Contributions 1,512,354 - 1,512,354 - 1,512,354 Endowment Expenses (2,383,171) - (2,383,171) - (2,383,171) Net Periodic Pension Cost (573,549) - (573,549) - (573,549) Loss on Disposal of Property and Equipment (430,043) - (430,043) - (430,043) Other Non-Operating Expenses (77,422) (77,422) - (77,422)

Total Other Income 14,719,495 (26,926) 14,692,569 - 14,692,569

DEFICIT OF NET REVENUE OVER EXPENSE (10,620,941) (1,091,429) (11,712,370) - (11,712,370)

Change in Valuation of Interest Rate Swaps 364,203 - 364,203 - 364,203 Other Changes in Plan Assets and Benefit

Obligations (376,191) - (376,191) - (376,191) Equity Contributions - 1,964,919 1,964,919 - 1,964,919 Syndication Costs - (14,672) (14,672) - (14,672)

CHANGE IN UNRESTRICTED NET ASSETS (10,632,929)$ 858,818$ (9,774,111)$ -$ (9,774,111)$

LUTHERAN SENIOR SERVICES COMBINING AND CONSOLIDATING STATEMENT OF CHANGES IN NET ASSETS


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Unrestricted Net Assets:Net Assets - December 31, 2016 14,854,328$ (2,839,321)$ 12,015,007$ -$ 12,015,007$ Change in Net Assets:

Deficit of Net Revenue over Expense (10,620,941) (1,091,429) (11,712,370) - (11,712,370) Change in Valuation of Interest Rate Swaps 364,203 - 364,203 - 364,203 Other Changes in Plan Assets and Benefit

Obligations (376,191) - (376,191) - (376,191) Net Assets Released from Restrictions - Capital - - - - - Equity Contributions - 1,964,919 1,964,919 - 1,964,919 Syndication Costs - (14,672) (14,672) - (14,672)

Change in Net Assets (10,632,929) 858,818 (9,774,111) - (9,774,111) Net Assets - December 31, 2017 4,221,399$ (1,980,503)$ 2,240,896$ -$ 2,240,896$

Temporarily Restricted Net Assets:Net Assets - December 31, 2016 10,700,582$ -$ 10,700,582$ -$ 10,700,582$ Change in Net Assets:

Restricted Contributions 3,439,069 - 3,439,069 - 3,439,069 Net Assets Released from Restrictions - Operations (1,008,913) - (1,008,913) - (1,008,913)

Change in Net Assets 2,430,156 - 2,430,156 - 2,430,156 Net Assets - December 31, 2017 13,130,738$ -$ 13,130,738$ -$ 13,130,738$

Permanently Restricted Net Assets:Net Assets - December 31, 2016 8,145,019$ -$ 8,145,019$ -$ 8,145,019$ Change in Net Assets:

Restricted Contributions 1,064,251 - 1,064,251 - 1,064,251 Change in Net Assets 1,064,251 - 1,064,251 - 1,064,251

Net Assets - December 31, 2017 9,209,270$ -$ 9,209,270$ -$ 9,209,270$

LUTHERAN SENIOR SERVICES STATEMENT OF CASH FLOWS – OBLIGATED GROUP


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CASH FLOWS FROM OPERATING ACTIVITIESCash Received from Resident Services 206,911,529$ Cash Paid to Suppliers and Employees (197,032,189)Contributions Received 2,570,087 Investment Income Received 3,081,146 Realized Gains on Investments 14,719,647 Interest Paid (15,582,346)

Net Cash Provided by Operating Activities 14,667,874

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from Investments 369,643,450 Purchase and Reinvested Interest of Investments (348,974,968)Net Purchase of Property and Equipment (53,326,148) Deferred Marketing Costs Incurred (612,993)

Net Cash Used by Investing Activities (33,270,659)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Refundable Admission Fees 33,349,892 Refunds Paid on Refundable Admission Fees (19,521,656) Proceeds on Deferred Revenue from Admission Fees 1,930,244 Proceeds from Resident Deposits 8,835,687 Refunds Paid on Resident Deposits (864,110) Receipts of Charitable Gift Annuities 1,506,766 Payments of Charitable Gift Annuities (2,656,942) Contributions Made to Defined Benefit Pension Plan (330,000) Syndication Costs - Proceeds from Long-Term Debt - Payments on Long-Term Debt (8,810,000) Payments of Debt Issuance Costs (109,744) Restricted Contributions Received 2,345,649

Net Cash Provided by Financing Activities 15,675,786

NET DECREASE IN CASH AND CASH EQUIVALENTS (2,926,999) Cash and Cash Equivalents - Beginning 7,868,711 CASH AND CASH EQUIVALENTS - ENDING 4,941,712$

LUTHERAN SENIOR SERVICES STATEMENT OF CASH FLOWS – OBLIGATED GROUP (CONTINUED)


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RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Change In Net Assets (7,138,522)$ Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities:

Depreciation and Amortization 30,159,521 Amortization of Debt Issuance Costs (1,313,983) Amortization of Residency Fees (5,131,857) Unrealized Loss on Investments 1,196,030 Restricted Contributions Received (4,503,320) Loss on Disposal of Property and Equipment 430,043 Change in Charitable Gift Annuities 1,057,733 Net Proceeds of Donated Homes (2,041,079) Change in Valuation of Interest Rate Swaps (364,203) Other Changes in Plan Assets and Benefit Obligations 376,191 Net Periodic Pension Cost 573,549 (Increases) Decreases in Current Assets:

Resident Accounts Receivable 4,261,846 Notes Receivable (1,448,890) Interest Receivable and Other Current Assets (606,667)

Increases in Current Liabilities:Accounts Payable (2,460,784) Interest Payable 1,027,626 Other Accrued Liabilities 594,640

Net Cash Provided by Operating Activities 14,667,874$

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

Bonds Issuance - Series 2016C:Bond Proceeds 10,520,000$ Redemption of Series 2007B Bonds (10,520,000)

Total Noncash Investing and Financing Activities - Series 2016C -$

APPENDIX C

DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF CERTAIN DOCUMENTS

DEFINITIONS The following are definitions of certain words and terms used in the Master Indenture, the Bond Indentures, the Loan Agreements and the Continuing Disclosure Agreement. These documents use the term “Corporation” to refer to the Institution.

{{*Series 2019B Bonds only*}} “2019 Mason Pointe Independent Living Project” means the portion of the Project comprising construction of 156 independent living units at the Corporation’s Mason Pointe community financed with the proceeds of the Bonds.

{{*Series 2019B Bonds only*}} “2019 Mason Pointe Independent Living Project First Entrance Fees”

means the first Entrance Fee received by the Corporation with respect to any independent living unit constructed at the Mason Pointe facility as part of the 2019 Mason Pointe Independent Living Project and shall not include any Entrance Fee received with respect to such independent living unit subsequent to the first Entrance Fee so received. “Accountant” shall mean a firm of independent certified public accountants selected by the Corporation and to whom the Master Trustee makes no reasonable objection. “Accounts Receivable” shall mean any and all right to payment for services rendered or for goods sold or leased which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. “Act” means the Missouri Health and Educational Facilities Authority Act, Chapter 360 of the Revised Statutes of Missouri, as amended from time to time. “Additional Indebtedness” shall mean any Indebtedness incurred under the Master Indenture (including all Notes and all Guaranties other than any Guaranty by any member of the Obligated Group of Indebtedness of any other member of the Obligated Group. “Additional Payments” means certain additional payments required to be made by the Corporation pursuant to the Loan Agreement. “Aggregate Income Available for Debt Service” shall mean, as to any period of time, the aggregate of Income Available for Debt Service of each member of the Obligated Group for such period, determined in such manner that no portion of Income Available for Debt Service of any such member is included more than once. “Annual Debt Service” shall mean the Long-Term Debt Service Requirement for the Fiscal Year in question. “Authority” means the Health and Educational Facilities Authority of the State of Missouri, created by the Act, or any agency, body or instrumentality of the State succeeding to or charged with the powers, duties and functions of the Authority. “Authority Representative” shall mean the Chairman, Vice Chairman or Executive Director of the Authority, and such other person or persons at the time designated to act on behalf of the Authority in matters relating to the Loan Agreement and the Bond Indenture as evidenced by a written certificate furnished to the Corporation and the Bond Trustee containing the specimen signature of such person or persons and signed on behalf of the Authority by its Chairman, Vice Chairman or Executive Director. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perform all duties of the Authority Representative. “Balloon Indebtedness” shall mean (i) Long-Term Indebtedness, or Short-Term Indebtedness which is intended to be refinanced upon or prior to its maturity (and which Short-Term Indebtedness is subject to a commercially reasonable binding commitment for such refinancing) so that such Short-Term Indebtedness will be Outstanding for more than one year as certified in an Officer’s Certificate, twenty-five percent (25%) or more of the initial principal amount of which matures (or is payable at the option of the holder) in the same twelve-month period, or (ii) Long-Term Indebtedness, or Short-Term Indebtedness which is intended to be refinanced upon or prior to its maturity (and which Short-Term Indebtedness is subject to a commercially reasonable binding commitment for such refinancing) so that such Short-Term Indebtedness will be Outstanding for more than one year as certified in an

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Officer’s Certificate, twenty-five percent (25%) or more of the initial principal amount of which is payable at the option of the holder in any twelve-month period, if such twenty-five percent (25%) or more is not to be amortized to below twenty-five percent (25%) by mandatory redemption prior to such twelve-month period, or (iii) any portion of an issue of Long-Term Indebtedness which, if treated as a separate issue of indebtedness would meet the test set forth in clause (i) of this definition and which Indebtedness is designated as Balloon Indebtedness in an Officer’s Certificate stating that such portion shall be deemed to constitute a separate issue of Balloon Indebtedness. “Bond Documents” means the Bond Indenture, the Bonds, the Loan Agreement, the Tax Agreement, the Master Indenture, the Series 2019[A][B] Bond Note, the Purchase Contract and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing. “Bond Indenture” means the Bond Trust Indenture as originally executed by the Authority and the Bond Trustee, as from time to time amended and supplemented by Supplemental Bond Indentures. “Bond Index” shall mean, at the option of the Obligated Group Agent, either (i) the Bond Buyer thirty (30) year “Revenue Bond Index,” as then published most recently by The Bond Buyer, New York, New York, or, if such index is no longer available, such index for comparable thirty (30) year maturity tax-exempt revenue bonds as may be certified to the Master Trustee by a financial advisory firm experienced in such field or a firm of nationally recognized investment bankers, or (ii) the interest rate or interest index as may be certified to the Master Trustee as appropriate to the situation by a firm of nationally recognized investment bankers. “Bond Register” means the registration books kept by the Bond Trustee to evidence the registration and transfer of Bonds. “Bond Registrar” means the Bond Trustee when acting as such, and any other bank or trust company designated and at the time serving as bond registrar under the Bond Indenture. “Bond Trustee” means UMB Bank, N.A., and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as trustee under the Bond Indenture. “Bondowner”, “Owner” or “Registered Owner” means the Person in whose name a Bond is registered on the Bond Register. “Bonds” means the Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects), Series 2019[A][B], issued by the Authority, authenticated and delivered under the Bond Indenture. “Business Day” means a day other than (a) a Saturday, Sunday or legal holiday, (b) a day on which banks located in any city in which the principal corporate trust office of the Bond Trustee or any Paying Agent is located are required or authorized by law to remain closed, or (c) a day on which the New York Stock Exchange or the payment system of the Federal Reserve System is closed. “Capitalization” shall mean the sum of (i) the aggregate principal amount of all Outstanding Long-Term Indebtedness of the members of the Obligated Group plus (ii) the Fund Balance of the members of the Obligated Group. “Capitalization Test” shall mean the Master Trustee shall have received an Officer’s Certificate demonstrating, based upon audited financial statements for the Historic Test Period, that immediately after the proposed transactions the aggregate principal amount of all Outstanding Long-Term Indebtedness (exclusive of Guaranties) will not exceed sixty-five percent (65%) of the aggregate Capitalization of the Obligated Group. “Capitalized Interest Account” means the account by that name created within the Project Fund. “Cede & Co.” means Cede & Co., as nominee name of The Depository Trust Company, New York, New York.

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“Certificate of Corporation Representative” means a written certificate signed by a Corporation Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Corporation with respect to matters set forth therein. “Certificate of Obligated Group Agent Representative” means a written certificate signed by an Obligated Group Agent Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Obligated Group Agent with respect to matters set forth therein. “Closing Date” means the date of delivery of and payment for the Bonds. “Code” shall mean the Internal Revenue Code of 1986, as amended, including, when appropriate, the statutory predecessor of the Code, and all applicable regulations (whether proposed, temporary or final) under the Code and the statutory predecessor of the Code, and any successor provisions to the provisions of the Code and those regulations and any official rulings, announcements, notices, procedures and judicial determinations under the foregoing applicable to the Bonds. “Completion Indebtedness” shall mean any Indebtedness incurred by any Note Obligor for the purpose of financing the completion of construction or the equipping of facilities for which Indebtedness has theretofore been incurred in accordance with the provisions of the Master Indenture, to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time. “Consultant” shall mean a person or firm selected by the Obligated Group Agent which is not, and no member, stockholder, director, officer or employee of which is, an officer or employee of the Corporation or any other Note Obligor, and which is a recognized professional management consultant of favorable reputation or an Accountant (which may be the Corporation’s external auditing firm) selected by the Obligated Group Agent and having the skill and experience necessary to render the particular report required by the provisions of the Master Indenture in which such requirement appears. “Continuing Disclosure Agreement” means the Eleventh Amended and Restated Continuing Disclosure Agreement between the Obligated Group Agent and UMB Bank National Association, N.A., as Dissemination Agent, as from time to time amended in accordance with the provisions thereof. “Corporate Trust Office” shall mean the office of the Master Trustee at which its principal corporate trust business is conducted, which at the date hereof is located in the City of St. Louis, Missouri. “Corporation” means Lutheran Senior Services, a Missouri legislatively chartered corporation, and its successors and assigns and any surviving, resulting or transferee corporation. “Corporation Representative” means the President or Chief Financial Officer/Treasurer of the Corporation, or other person or persons at the time designated to act on behalf of the Corporation in matters relating to the Loan Agreement and the Bond Indenture as evidenced by a written certificate furnished to the Authority and the Bond Trustee containing the specimen signature of such person or persons and signed on behalf of the Corporation by its President. Such certificate may designate an alternate or alternates each of whom shall be entitled to perform all duties of the Corporation Representative. “Costs of Issuance” means issuance costs with respect to the Bonds described in Section 147(g) of the Internal Revenue Code. “Costs of Issuance Fund” means the fund by that name created pursuant to the Bond Indenture. “Costs of the Project” shall mean costs permitted under the Act to be paid out of proceeds of Bonds with respect to the Project, including the total of all reasonable or necessary expenses incidental to the acquisition, construction, reconstruction, repair, alteration, improvement and extension of the Project, including without limitation: the expenses of studies and surveys, land title and mortgage title policies, architectural and engineering services and the cost of legal, organization or marketing services; financial and underwriting fees and expenses, the cost of acquiring or demolishing existing structures, developing the site of and constructing and equipping a new building constituting a part of the Project; rehabilitating, reconstructing, repairing or remodeling existing buildings

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constituting a part of the Project; and all other necessary and incidental expenses, including interest during construction on Bonds issued to finance the Project to a date subsequent to the estimated date of completion thereof, subject to limitations set forth in the Tax Agreement, and any other costs permitted by the Act. “Current Assets” shall mean cash and cash equivalent deposits, marketable securities, Accounts Receivable, accrued interest receivable, funds designed by a Governing Body for any specific purpose and any other intangible assets of the Obligated Group ordinarily considered current assets under generally accepted accounting principles. “Days Cash on Hand” means, as of the date of calculation, the amount determined by dividing (a) the sum of the amount of cash, cash equivalents and marketable securities plus the amount of any board designated assets consisting of cash, cash equivalents and marketable securities (excluding funds held by Master Trustee, but only in its capacity as Master Trustee, donor-restricted funds and such other funds restricted pursuant to agreements with third parties) as shown on the most recent audited financial statements of the Obligated Group required to be delivered pursuant to this Master Indenture, by (b) the quotient obtained by dividing the operating expenses (excluding depreciation expense) as shown on said financial statements by 365. “Debt Reserves” shall mean that portion of the proceeds of any Indebtedness or any other funds (other than Capitalized Interest) that are held in trust and are restricted to be used to pay principal or principal and interest due or to become due on Indebtedness. “Debt Service Fund” means the Fund by that name created pursuant to the Bond Indenture. “Debt Service Reserve Fund” means the fund by that name created pursuant to the Bond Indenture. {*Series 2019A Bonds only*} “Debt Service Reserve Requirement” means (a) at the date of original issuance and delivery of the Bonds, $[__________.__], and (b) subsequent to such date, at the option of the Obligated Group Representative and communicated in writing to the Authority and the Bond Trustee, a sum equal to the least of (A) 10% of the then Outstanding aggregate principal amount of the Bonds, (B) the maximum annual debt service on the Bonds in any future fiscal year following such date, or (C) 125% of the average future annual debt service on the Bonds. {{*Series 2019B Bonds only*}} “Debt Service Reserve Requirement” means $[__________.__]. “Defaulted Interest” means interest on any Bond which is payable but not paid on the date due. “Defeasance Obligations” means: (a) United States Government Obligations which are not subject to redemption in advance of their maturity dates; or (b) obligations of any state or political subdivision of any state, the interest on which is excluded from gross income for federal income tax purposes and which meet the following conditions:

(1) the obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for such obligations has been given irrevocable instructions concerning their calling and redemption and the issuer of such obligations has covenanted not to redeem such obligations other than as set forth in such instructions; (2) the obligations are secured by cash or United States Government Obligations that may be applied only to principal of, premium, if any, and interest payments on such obligations; (3) such cash and the principal of and interest on such United States Government Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities of the obligations; (4) such cash and United States Government Obligations serving as security for the obligations are held in an escrow fund by an escrow agent or a trustee irrevocably in trust;

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(5) such cash and United States Government Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent; and (6) the obligations are rated in the highest rating category by Moody’s (presently “Aaa”) or Standard & Poor’s (presently “AAA”) or Fitch (presently “AAA”) without regard to modifiers. {{*Series 2019B Bonds only*}} “Entrance Fee” or “Entrance Fees” means an entrance fee received by

the Corporation or another member of the Obligated Group pursuant to the terms of a residency agreement between a resident of an independent living apartment and the Corporation or another member of the Obligated Group but no payment shall constitute an Entrance Fee under this definition with respect to an independent living unit until occupancy of such independent living unit. Entrance Fees shall not include a security deposit, monthly rental or monthly service charge or any similar amount received by the Corporation or any other member of the Obligated Group. “Discount Indebtedness” shall mean Indebtedness sold to the original purchaser thereof (other than any underwriter or other similar intermediary) at a discount from the par amount of such Indebtedness. “Encumbered” shall mean subject to a Lien mentioned in the Master Indenture. “Event of Default” means (a) with respect to the Master Indenture any event or occurrence as defined in the Master Indenture, (b) with respect to the Bond Indenture any event or occurrence as defined in the Bond Indenture, and (c) with respect to the Loan Agreement any event or occurrence as defined in the Loan Agreement. “Fiscal Year” shall mean the fiscal year of the Obligated Group, which shall be the fiscal year designated from time to time in writing by the Obligated Group Agent to the Master Trustee; for purposes of making historical calculations or determinations set forth in the Master Indenture on a Fiscal Year basis, or for purposes of combinations or consolidation of those accounting information, with respect to those Note Obligors whose actual fiscal year is different from that designated above, the actual fiscal year of such Note Obligors which ended within the Fiscal Year of the Obligated Group shall be used; provided, however, that for purposes of making any calculations or determinations as set forth in the Master Indenture, the Obligated Group Agent may designate as the “Fiscal Year” any twelve-month period. Whenever the Master Indenture refers to a Fiscal Year of a specific Note Obligor, such reference shall be to the actual fiscal year adopted by such Note Obligor. “Fitch” means Fitch, Inc. and its successors and assigns, or, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, “Fitch” shall mean any other nationally recognized securities rating service designated by the Corporation, with notice to the Authority and the Bond Trustee. “Governing Body” shall mean, when used with respect to the Corporation, its board of directors, and when used with respect to any other Note Obligor, its board of directors, board of trustees, or other board or group of individuals in which the power to direct the management and policies of the Note Obligor are vested. “Gross Receipts” shall mean all accounts and assignable general intangibles now owned or hereafter acquired by or on behalf of any member of the Obligated Group, and all proceeds therefrom whether cash or noncash, all as defined in Article 9 of the Uniform Commercial Code; excluding, however, gifts, grants, bequests, donations and contributions heretofore or hereafter made and designated or specified by the granting authority, donor or maker thereof as being for specified purposes (other than payment of debt service on Indebtedness) and the income and gains derived therefrom to the extent required by such designation or specification. “Guaranty” shall mean all obligations of any Note Obligor guaranteeing in any manner, whether directly or indirectly, any obligation of any other person which would, if such other person were a member of the Obligated Group, constitute Indebtedness under the Master Indenture. “Historic Test Period” shall mean, at the option of the Obligated Group Agent, either (i) any twelve (12) consecutive calendar months out of the most recent period of eighteen (18) full calendar months, or (ii) the most recent period of twelve (12) full consecutive calendar months for which the financial statements of each member of the Obligated Group have been reported upon by an Accountant, or (iii) the most recent Fiscal Year of the Obligated Group.

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“Income Available for Debt Service” shall mean, with respect to each member of the Obligated Group, as to any period of time, the sum of entry fees received, net of refunds plus net income, or excess of revenue over expenses (including investment income, gifts and bequests, but excluding (i) earned entry fees, (ii) donor restricted funds and the income thereon to the extent restricted by the donor thereof to other than operating expenses, and (iii) unrealized gains and losses) before depreciation, amortization and interest, as determined in accordance with generally accepted accounting principles consistently applied; provided, that no determination thereof shall take into account (i) any revenue or expense of any person which is not a member of the Obligated Group, (ii) any gain or loss resulting from either the extinguishment of Indebtedness or the sale, exchange or other disposition of capital assets not in the ordinary course of business, (iii) the net proceeds of insurance (other than business interruption insurance) and condemnation awards, (iv) unrealized gains or losses on Interest Rate Exchange Agreement, or (v) any termination, breakage or similar payment or receipt under any Interest Rate Exchange Agreement. “Indebtedness” shall mean all obligations for payments of principal and interest with respect to money borrowed, incurred or assumed by one or more members of the Obligated Group, including Guaranties (other than any Guaranty by any member of the Obligated Group of Indebtedness of any other member of the Obligated Group), except obligations of a member of the Obligated Group to another member. Indebtedness shall not include any Interest Rate Exchange Agreement or any Note issued to evidence or secure obligations thereunder. Nothing in this definition or otherwise shall be construed to count Indebtedness more than once. “Insurance Consultant” shall mean a person or firm selected by the Corporation and qualified to survey risks and to recommend insurance coverage for organizations which operate facilities similar to those operated by the Corporation. “Interest Payment Date” means February 1 and August 1 of each year, beginning on August 1, 2019. “Interest Rate Exchange Agreement” means any interest rate exchange agreement or comparable agreement entered into by any member of the Obligated Group for a term exceeding one year, pursuant to which the member of the Obligated Group is obligated to make interest-like payments to or on behalf of a counterparty and that counterparty is obligated to make similar interest-like payments to or on behalf of the member or the Obligated Group (based on a different rate of, or formula for, interest), with neither party obligated to repay any principal. An Interest Rate Exchange Agreement shall hedge interest rate payments on a series of Related Bonds. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and, when appropriate, any statutory predecessor or successor thereto, and all applicable regulations (whether proposed, temporary or final) thereunder and any applicable official rulings, announcements, notices, procedures and judicial determinations relating to the foregoing. “Law or Regulation Circumstances” shall mean the occurrence of the following: (i) applicable laws, governmental regulations, third-party reimbursement methods or private or governmental insurance programs which shall prevent, have prevented or will prevent the Obligated Group from generating sufficient Aggregate Income Available for Debt Service to comply with a particular requirement of the Master Indenture then in question, (ii) the effect upon the Obligated Group of the circumstances set forth in clause (i) above shall have been confirmed by a signed Consultant’s opinion delivered to the Master Trustee, (iii) an Officer’s Certificate shall have been delivered to the Master Trustee stating that the Obligated Group has generated the maximum Aggregate Income Available for Debt Service which, in the opinion of such officer, could reasonably be generated given the circumstances set forth in clause (i) above, and (iv) if the opinion or report of the Consultant includes or is based on a conclusion of law, there shall have been delivered to the Master Trustee an Opinion of Counsel as to any such conclusions of law supporting the opinion or report of the Consultant. “Lien” shall mean any mortgage, pledge, security interest, lien, judgment lien, easement, or other encumbrance on title, including but not limited to, any mortgage or pledge of, security interest in or lien or encumbrance on any Property of any Note Obligor which secures any Indebtedness or any other obligation of any Note Obligor, or which secures any obligation of any person other than an obligation to any Note Obligor excluding liens applicable to Property in which any Note Obligor has only a leasehold interest unless the lien secures indebtedness of any Note Obligor.

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“Loan Agreement” means the Loan Agreement between the Authority and the Corporation, as from time to time amended by Supplemental Loan Agreements. “Loan Payments” means the payments referred to in the Loan Agreement. “Long-Term Debt Service Coverage Ratio” shall mean the ratio for the period in question of Aggregate Income Available for Debt Service to Maximum Annual Debt Service. Notwithstanding anything in the Master Trust Indenture to the contrary, projections of the Long-Term Debt Service Coverage Ratio may be made by an Officer’s Certificate if (i) the ratio of Aggregate Income Available for Debt Service to Annual Debt Service for the Historic Test Period exceeded 1.50, and (ii) the Long-Term Debt Service Coverage Ratio immediately following the transaction in question exceeds 1.50. “Long-Term Debt Service Requirement” shall mean, for any period of time, the aggregate of the scheduled payments to be made (other than amounts irrevocably deposited with a Related Bond Trustee or otherwise held for the benefit of a lender for purposes of such payments) in respect of principal and interest on Outstanding Long-Term Indebtedness of each member of the Obligated Group during such period, also taking into account (i) with respect to Balloon Indebtedness, the provisions of the Master Indenture, (ii) with respect to Variable Rate Indebtedness, the provisions of the Master Indenture, (iii) with respect to Discount Indebtedness, the provisions of the Master Indenture, (iv) with respect to Debt Reserves, the provisions of the Master Indenture, (v) with respect to Capitalized Interest, the provisions of the Master Indenture, and (vi) with respect to Indebtedness represented by a Guaranty of obligations of a person which is not a member of the Obligated Group, the provisions of the Master Indenture. “Long-Term Indebtedness” shall mean all Indebtedness, other than Short-Term Indebtedness, for any of the following: (i) Payments of principal and interest with respect to money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one year; (ii) Payments under leases which are capitalized in accordance with generally accepted accounting principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one year; and (iii) Payments under installment purchase contracts having an original term in excess of one year. “Master Indenture” means the Master Trust Indenture dated as of February 1, 1992, as amended and supplemented, among the Corporation, any other Members of the Obligated Group described therein and the Master Trustee, and the Supplemental Master Indenture and any future amendments and supplements thereto entered into from time to time (or any other master trust indenture or supplemental master indenture or similar document under which the Series 2019[A][B] Bond Note is issued and secured). “Master Notes” means all Notes issued under the Master Indenture. “Master Trustee” means U.S. Bank National Association, St. Louis, Missouri, as successor trustee under the Master Indenture. “Maximum Annual Debt Service” shall mean the highest Long-Term Debt Service Requirement for the then current or any future Fiscal Year. “Moody’s” means Moody’s Investors Service, Inc., and its successors and assigns, or, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, “Moody’s” shall mean any other nationally recognized securities rating service designated by the Corporation, with notice to the Authority and the Bond Trustee. “Non-Recourse Indebtedness” shall mean any Indebtedness secured by a Lien, which Indebtedness is not a general obligation of the Obligated Group or of any Note Obligor, and the liability for which Indebtedness is effectively limited to the Property subject to such Lien with no recourse, directly or indirectly, to any other Property of any Note Obligor.

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“Note” shall mean any Note issued, authenticated and delivered under the Master Indenture. References to a series of Notes or to Notes of a series shall mean the Notes or series of Notes issued pursuant to a single Related Supplement. “Noteholder” or “Holder” shall mean the registered owner of any Note in registered form or the bearer of any Note in coupon form which is not registered or is registered to bearer. “Note Obligor” or “Note Obligor of the Obligated Group” means each Person that is a Note Obligor on the date of original execution and delivery of the Master Indenture, each Person that subsequent to the date of the Master Indenture becomes a Note Obligor pursuant to the terms of the Master Indenture, and their successors and assigns, unless any such Person has withdrawn from the Obligated Group pursuant to the terms of the Master Indenture. “Obligated Group” means the Corporation and each other Note Obligor.

“Obligated Group Agent” means the Corporation, or such other Note Obligor from time to time designated as the Obligated Group Agent in a Certificate of Obligated Group Agent Representative delivered to the Master Trustee and each Related Bond Trustee.

“Obligated Group Agent Representative” means the President or the Chief Financial Officer/Treasurer of the Obligated Group Agent acting pursuant to duly delegated authority. “Officer’s Certificate” shall mean a certificate signed by the chairman of the Governing Body, or the president or chief executive officer, or the chief operating officer, or the chief financial officer, of the Obligated Group Agent. “Official Statement” means the Official Statement relating to the offering and sale of the Bonds. “Operating Revenues” shall mean the total operating revenues of the Obligated Group less applicable deductions from operating revenues as determined in accordance with generally accepted accounting principles consistently applied. “Opinion of Bond Counsel” means an opinion in writing addressed to the Authority and the Bond Trustee and signed by legal counsel acceptable to the Authority 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 legal counsel acceptable to the Corporation and the Bond Trustee and, to the extent the Authority is asked to take action in reliance thereon, the Authority, who may be an employee of or counsel to the Corporation. “Original Purchaser” means Herbert J. Sims & Co., Inc., for itself and as representative of any underwriters named in the Purchase Contract. “Outstanding” means, when used with reference to Bonds, as of a particular date, all Bonds theretofore authenticated and delivered, except: (a) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation pursuant to the Bond Indenture; (b) Bonds which are deemed to have been paid in accordance with the Bond Indenture; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to the Bond Indenture; provided, however, that in determining whether the Owners of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver, Bonds owned by the Authority

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or the Corporation shall be disregarded and deemed not Outstanding, except that in determining whether the Bond Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Bond Trustee knows to be so owned shall be disregarded. “Owner” shall have the same meaning as the term “Bondowner.” “Participants” means those financial institutions for whom the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference. “Paying Agent” means the Bond Trustee and any other commercial bank or trust company organized under the laws of any state of the United States of America or any national banking association designated by the Bond Indenture or any Supplemental Bond Indenture as paying agent for the Bonds at which the principal of and redemption premium, if any, and interest on such Bonds shall be payable. “Permitted Investments” means, if and to the extent the same are at the time legal for investment of funds held under the Bond Indenture, (a) United States Government Obligations; (b) bonds, debentures, notes, certificates of participation, or other similar obligations which are (i) issued by any state or political subdivision thereof or any agency or instrumentality of such state or political subdivision, and (ii) at the time of purchase, rated in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by Moody’s, Standard and Poor’s, or Fitch; (c) bonds, debentures, notes, participation certificates, or other similar obligations issued by a government sponsored agency (such as the Federal National Mortgage Association, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal Farm Credit Bank or the Student Loan Marketing Association) which is either (i) rated in the highest rating category by Moody’s, Standard & Poor’s or Fitch (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), or (ii) backed by the full faith and credit of the United States of America; (d) U.S. denominated deposit accounts, certificates of deposit, and banker’s acceptances of any bank, trust company, or savings and loan association, including the Master Trustee or Bond Trustee or its affiliates, which have a rating on their short-term certificates of deposit on the date of purchase in one of the two highest short-term rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by Moody’s, Standard & Poor’s or Fitch, and which matures not more than 360 days after the date of purchase; (e) commercial paper which is rated at the time of purchase in one of the two highest short-term rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by Moody’s, Standard & Poor’s or Fitch, and which matures not more than 270 days after the date of purchase; (f) bonds, notes, debentures or other evidences of indebtedness issued or guaranteed by a corporation which are, at the time of purchase, rated by Moody’s, Standard & Poor’s or Fitch in any of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise); (g) investment agreements: (i) with banks that at the time such agreement is executed are rated in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by Moody’s, Standard and Poor’s or Fitch, or (ii) with non-bank financial institutions, provided that (1) all of the unsecured, direct long-term debt of either the non-bank financial institution or the related guarantor of such non-bank financial institution is rated by Moody’s, Standard & Poor’s or Fitch at the time such agreement is executed in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) for obligations of that nature; or (2) if such non-bank financial institution has no outstanding long-term debt that is rated, all of the short-term debt of either the non-

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bank financial institution or the related guarantor of such non-bank financial institution is rated in one of the two highest short-term rating categories (without regard to any refinement or gradation of the rating category by numerical modifier or otherwise) assigned by Moody’s, Standard & Poor’s or Fitch; provided that if at any time after purchase the provider of the investment agreement drops below the two highest rating categories assigned by Standard & Poor’s, Moody’s or Fitch, the investment agreement must, within 30 days, either (1) be assigned to a provider rated in one of the two highest rating categories or (2) be secured by the provider with collateral securities rated in one of the two highest short-term rating categories (without regard to any refinement or gradation of the rating category by numerical modifier or otherwise) assigned by Moody’s, Standard & Poor’s or Fitch, the fair market value of which, in relation to the amount of the investment agreement including principal and interest, is equal to at least 102%; investment agreements with banks or non-bank financial institutions shall not be permitted if no rating is available with respect to debt of the investment agreement provider or the related guarantor of such provider; (h) repurchase agreements with respect to and secured by United States Government Obligations or by obligations described in clause (b) and (c) above, which agreements may be entered into with a bank (including without limitation the Master Trustee or the Bond Trustee), a trust company, financial services firm, or a broker dealer which is a member of the Securities Investors Protection Corporation, provided that (i) the Master Trustee, the Bond Trustee or a custodial agent of the Master Trustee or Bond Trustee has possession of the collateral and that the collateral is, to the knowledge of the Master Trustee or the Bond Trustee, free and clear of third party claims, (ii) a master repurchase agreement or specific written repurchase agreement governs the transaction, (iii) the collateral securities are valued no less frequently than monthly, and (iv) the fair market value of the collateral securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%; (i) investments in a money market fund, including funds of the Bond Trustee, the Master Trustee or their affiliates, rated (at the time of purchase) in the highest rating category (without regard to numerical modifier) for this type of investment by Moody’s, Standard & Poor’s or Fitch; (j) asset-backed securities, commercial mortgage-backed securities, or mortgage-backed securities which are, at the time of purchase, rated by Moody’s, Standard & Poor’s or Fitch in any of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise);and (k) shares in any investment company, money market mutual fund, fixed income mutual fund, exchange traded fund or other collective investment fund registered under the federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and whose investments consist solely of Permitted Investments as defined in paragraphs (a) through (j) above, including money market mutual funds from which the Master Trustee, the Bond Trustee or their affiliates derive a fee for investment advisory or other services to the fund. The Bond 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. “Permitted Liens” shall have the meaning specified therefor in the Master Indenture. “Person” shall mean any natural person, firm, association, partnership, trust, corporation, limited liability company, government or any agency or political subdivision thereof or other public body. “Prime Rate” means the interest rate per annum publicly announced from time to time by the Bond Trustee as its “prime rate,” such interest rate to change automatically as of the opening of business on the effective date of any change in the Prime Rate. “Principal Office” shall mean the Bond Trustee’s corporate trust office.

“Project” shall mean the facilities of the Corporation described in the Bond Indenture and the Tax Agreement, the costs of which will be paid in whole or in part, or for which the Corporation or the Obligated Group Agent will be reimbursed in whole or in part from the proceeds of the sale of the Bonds or from the proceeds of

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loans refinanced, in whole or in part, from the proceeds of the sale of the Bonds; provided, however, that the Corporation may make changes and amendments to the Project as provided in the Loan Agreement. “Project Account” means the account by that name created within the Project Fund. “Project Fund” means the fund by that name created pursuant to the Bond Indenture. “Property,” (i) when used in connection with a particular Person in the Bond Indenture or the Loan Agreement, shall mean any and all rights, title and interests of such Person in and to any and all property whether real or personal, tangible or intangible, and wherever situated, and (ii) when used in the Master Indenture, shall mean any and all land, leasehold interests, buildings, machinery, equipment, hardware, and inventory of each Note Obligor wherever located and whether now owned or hereafter acquired, any and all rights, titles and interests in and to any and all property whether real or personal, tangible or intangible or wherever situated which may be pledged in the future and whether now owned or hereafter acquired and shall include all revenues, receipts or other moneys, or right to receive any of the same, including, without limitation, total assets of each member of the Obligated Group, Current Assets, Gross Receipts, accounts, Accounts Receivable, contract rights and general intangibles, and all proceeds of all of the foregoing. “Property, Plant and Equipment” shall mean all Property of the members of the Obligated Group which is property, plant and equipment under generally accepted accounting principles. “Purchase Contract” means the Purchase Contract respecting the Bonds among the Authority, the Corporation and the Original Purchaser. “Qualified Financial Institution” means a bank, trust company, national banking association, insurance company or other financial services company or entity, whose unsecured long term debt obligations (in the case of a bank, trust company, national banking association or other financial services company or entity) or whose claims paying abilities (in the case of an insurance company) are rated A3 or higher by Moody’s or A- or higher by Standard & Poor’s or A- or higher by Fitch. “Rebate Fund” means the fund by that name created pursuant to the Bond Indenture.

“Record Date” means the 15th day (whether or not a business day) of the calendar month preceding the date on which an interest payment on any Bond is to be made. “Related Bonds” shall mean 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”), pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to (i) a Note Obligor in consideration of the execution, authentication and delivery of a Note or Notes to or for the order of such governmental issuer, or (ii) any person other than a Note Obligor in consideration of the issuance to such governmental issuer (A) by such person of any indebtedness or other obligation of such person, and (B) by a Note Obligor of a Guaranty issued under the Master Indenture in respect to such indebtedness or other obligation. “Related Bond Indenture” shall mean any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued. “Related Bond Issuer” shall mean the governmental issuer of any issue of Related Bonds. “Related Bond Trustee” shall mean the trustee and its successors in the trusts created under any Related Bond Indenture, and if there is no such trustee, shall mean the Related Bond Issuer. “Related Supplement”, “Supplement” or “Supplemental Master Indenture” shall mean an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture for the purpose of creating one or more series of Notes or a particular Guaranty issued under the Master Indenture or amending for the purpose of supplementing the terms thereof.

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“Replacement Bonds” means Bonds issued to the beneficial owners of the Bonds in accordance with the Bond Indenture. “Resolution” means the resolution of the Authority authorizing the execution and delivery of the Bond Indenture, the Loan Agreement, the Tax Agreement and the Purchase Contract and the issuance of the Bonds. “Securities Depository” means, initially, The Depository Trust Company, New York, New York, and its successors and assigns. “Series 2019[A][B] Bond Note” means the Master Indenture Bond Note (Lutheran Senior Services Projects), Series 2019[A][B] to be issued under the Master Indenture concurrently with the original issuance of the Bonds. {{*Series 2019B Bonds only*}} “Series 2019B Entrance Fee Special Debt Service Fund” means the fund by that name established pursuant to the Bond Indenture. “Short-Term Indebtedness” shall mean all Indebtedness, other than Long-Term Indebtedness for any of the following: (i) Payments of principal and interest with respect to money borrowed for an original term, or

renewable at the option of the borrower for a period from the date originally incurred, of one year or less; (ii) Payments under leases which are capitalized in accordance with generally accepted

accounting principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one year or less; and

(iii) Payments under installment purchase contracts having an original term of one year or less. “Special Record Date” means the date fixed by the Bond Trustee pursuant to the Bond Indenture for the payment of Defaulted Interest.

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, and its successors and assigns, or, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Standard & Poor’s shall mean any other nationally recognized securities rating service designated by the Corporation, with notice to the Authority and the Bond Trustee. “State” means the State of Missouri. “Subordinated Indebtedness” shall mean all obligations incurred or assumed by one or more members of the Obligated Group, the payment of which is by its terms specifically subordinated to payments on all Notes, or the principal of and interest on which would not be paid (whether by the terms of such obligation or by agreement of the obligee) when the Notes are in default or while bankruptcy, insolvency, receivership or other similar proceedings are instituted and implemented. “Subsidiary” shall mean a corporation, partnership, joint venture, association, business trust or similar entity organized under the laws of the United States of America or a state thereof which is directly or indirectly controlled by, or under common control by the same person as, any member of the Obligated Group or any other Subsidiary of any such member. For purposes of this definition, control means the power to direct the management and policies of a person through the ownership of a majority of its voting securities, the right to designate or elect a majority of the members of its board of directors or other governing board or body of the power or right to direct the management and policies of a person by contract or otherwise. “Supplemental Bond Indenture” means any indenture supplemental or amendatory to the Bond Indenture entered into by the Authority and the Bond Trustee pursuant to the Bond Indenture.

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“Supplemental Loan Agreement” means any agreement supplemental or amendatory to the Loan Agreement entered into by the Authority and the Corporation pursuant to the Loan Agreement and the Bond Indenture. “Supplemental Master Indenture” means the Supplemental Master Trust Indenture No. [32][33] dated as of February 1, 2019, between the Obligated Group Agent and the Master Trustee. “Tax Agreement” means the Tax Compliance Agreement among the Authority, the Corporation and the Bond Trustee relating to the Bonds, as from time to time amended in accordance with the provisions thereof. “Tax-Exempt Organization” means a nonprofit organization, organized under the laws of the United States of America or any state thereof, that is an organization described in Section 501(c)(3) of the Internal Revenue Code, is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code, and is not a “private foundation” within the meaning of Section 509(a) of the Internal Revenue Code, or corresponding provisions of federal income tax laws from time to time in effect. “Transaction Test” shall mean the Master Trustee shall have received any one of the following: (A) an Officer’s Certificate demonstrating that the ratio of Aggregate Income Available for Debt Service for the Historic Test Period, to projected Maximum Annual Debt Service for the full Fiscal Year immediately after the transaction in question, is not less than 1.10, or (B) an Officer’s Certificate or a Consultant’s opinion or report, as the case may be, demonstrating that the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service for the Historic Test Period, assuming that the transaction in question occurred at the commencement of the Historic Test Period, is not less than 1.10, or (C) a Consultant’s opinion or report, demonstrating that (1) projected Long-Term Debt Service Coverage Ratio for each of the two full Fiscal Years immediately after the transaction in question will not be less than 1.10, and (2) the projected Long-Term Debt Service Coverage Ratio for each of the two full Fiscal Years immediately after the transaction in question will not be more than thirty percent (30%) lower than the Long-Term Debt Service Coverage Ratio had the transaction not occurred; provided, however, that the provisions of this clause (2) need not be satisfied in the event that the Consultant’s opinion or report or Officer’s Certificate, if appropriate, demonstrates (i) that the projected Long-Term Debt Service Coverage Ratio for the full Fiscal Year immediately after the transaction in question will not be less than 2.50 and (ii) that the ratio of Aggregate Income Available for Debt Service to Annual Debt Service for the Historic Test Period exceeded 1.10, or (D) an Officer’s Certificate or a Consultant’s opinion or report, as the case may be, demonstrating that the average of the projected Long-Term Debt Service Coverage Ratios for the two full Fiscal Years immediately after the transaction in question will be greater than the average of the Long-Term Debt Service Coverage Ratios for such period had the transaction not occurred, or (E) an Officer’s Certificate or a Consultant’s opinion or report, as the case may be demonstrating that (1) the average of the projected Long-Term Debt Service Coverage Ratios for the two full Fiscal Years immediately after the transaction in question will not be less than 1.10, and (2) the average of the projected Long-Term Debt Service Coverage Ratios for the two full Fiscal Years immediately after the transaction in question will not be more than thirty-five percent (35%) lower than the average of the Long-Term Debt Service Coverage Ratios had the transaction not occurred, or (F) an Officer’s Certificate demonstrating that the Capitalization Test has been satisfied, or (G) a Consultant’s opinion, stating that the transaction in question will cause the financial and operational position of the Obligated Group to be stronger than such position of the Obligated Group absent such transaction. “Trust Estate” means the Trust Estate described in the granting clauses of the Bond Indenture.

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“Unencumbered” shall mean not subject to certain Liens mentioned in the Master Indenture. “United States Government Obligations” means (i) direct obligations of, or obligations the timely payment of the principal of and interest on which is unconditionally and fully unconditionally and fully guaranteed by, the United States of America; and (ii) evidences of ownership of proportionate interest in direct obligations of, or obligations the timely payment of the principal of and the interest on which is unconditionally and fully guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian. “Value” (as defined in the Master Indenture) when used in connection with Property, Plant and Equipment or other Property of any Note Obligor shall mean at the option of such Note Obligor (a) the cost basis of such property, net of accumulated depreciation, as it is carried on the books of such person and in conformity with generally accepted accounting principles consistently applied, and when used in connection with Property, Plant and Equipment or other Property of the Obligated Group, means the aggregate of the cost bases so determined with respect to such Property of each member of the Obligated Group determined in such a manner that no portion of such cost basis of Property of any member is included more than once or (b) the appraised value of such property as reflected in the written report of an appraiser acceptable to the Master Trustee and, in the case of real property, who is a member of the American Institute of Real Estate Appraisers, such appraisal taking place within two (2) years of the date such value is used in any computation or calculation in the Master Indenture. “Value” (as defined in the Bond Indenture) as of any particular time of determination, means (a) with respect to any investment agreement, the total amount that may be withdrawn therefrom for the purposes of the fund in which it is held, (b) with respect to any investments, other than those in the Debt Service Reserve Fund, the lower of the cost of the investment or the market price of the investment on the date of valuation, (c) with respect to any investments in the Debt Service Reserve Fund, the market price of the investment on the date of valuation, and (d) with respect to an insurance policy, letter of credit or surety bond guaranteeing payments into the Debt Service Reserve Fund, the face value thereof. “Variable Rate Indebtedness” shall mean Indebtedness that bears interest at a variable, adjustable or floating rate. “Written Request” means, with reference to the Authority, a request in writing signed by an Authority Representative, with reference to the Corporation, a request in writing signed by a Corporation Representative, and with reference to the Obligated Group Agent, a request in writing signed by an Obligated Group Agent Representative, or any other officers designated by the Authority, the Corporation or the Obligated Group Agent, as the case may be, to sign such Written Request.

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SUMMARY OF THE MASTER INDENTURE The following is a summary of certain provisions contained in the Master Indenture. The following is not a comprehensive description, however, and is qualified in its entirety by reference to the Master Indenture for a complete recital of its terms. Series and Amount of Notes The number of series of Notes that may be created under the Master Indenture is not limited. The aggregate principal amount of Notes of each series that may be issued, authenticated and delivered under the Master Indenture is not limited except as limited by the provisions of the Master Indenture or of a Related Supplement. Supplement Creating Series of Notes or a Guaranty Any Note Obligor or Obligors, and the Master Trustee may from time to time enter into a Related Supplement in order to create one or more series of Notes or a Guaranty issued under the Master Indenture. Such related Supplement shall, (i) with respect to a series of Notes created under the Master Indenture, set forth the date thereof, and the date or dates on which principal of and premium, if any, and interest on such Notes shall be payable, and (ii) with respect to a Guaranty created under the Master Indenture, provide for the form of such Guaranty and in either case shall contain such other terms and provisions as shall not be inconsistent with the provisions of the Master Indenture. Conditions to Issue of Notes or a Guaranty Issued Under the Master Indenture With respect to each series of Notes or a Guaranty issued under the Master Indenture, simultaneously with or prior to the execution, authentication and delivery of such Notes or Guaranty pursuant to the Master Indenture: (a) All requirements and conditions to the issuance of such Notes or such Guaranty, if any, set forth in the Related Supplement shall have been complied with and satisfied; and (b) The issuer of such Notes or such Guaranty shall have delivered to the Master Trustee an Opinion of Counsel to the effect that registration of such Notes or such Guaranty under the Securities Act of 1933, as amended, and qualification of the Master Indenture or the Related Supplement under the Trust Indenture Act of 1939, as amended, is not required, or, if such registration or qualification is required, that the members of the Obligated Group have complied with all applicable provisions of said Acts. Right to Redeem The Notes shall be subject to redemption prior to maturity at such times, to the extent and in the manner provided in the Master Indenture or in the Related Supplement pursuant to which they are issued, subject to the provisions of the Master Indenture. Effects of Call for Redemption On the date designated for redemption by notice given as in the Master Indenture provided, the Notes so called for redemption shall become and be due and payable at the redemption price provided for the redemption of such Notes on such date. If on the date fixed for redemption moneys for payment of the redemption price and accrued interest are held by the Master Trustee or paying agents as provided in the Master Indenture, interest on such Notes so called for redemption shall cease to accrue, the coupons on any such Notes payable after the date fixed for redemption shall be void, such Notes shall cease to be entitled to any benefit or security under the Master Indenture except the right to receive payment from moneys held by the Master Trustee or the paying agents and the amount of such Notes so called for redemption shall be deemed paid and no longer Outstanding. Payment of Principal and Interest Each Note Obligor jointly and severally covenants to promptly pay or cause to be paid the principal of, premium, if any, and interest on each Note issued under the Master Indenture, regardless of when such Note was issued, at the place, on the dates and in the manner provided in the Master Indenture, in the Related Supplement and in

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said Notes and any coupons appertaining thereto according to the terms thereof whether at maturity, upon proceedings for redemption, by acceleration or otherwise. Each Note Obligor agrees and represents that it has received fair consideration in return for the obligations undertaken and to be undertaken by such Note Obligor resulting from each Note issued or to be issued by the any Note Obligor under the Master Indenture. Covenants as to Corporate Existence, Maintenance of Property, Etc. Each Note Obligor, respectively, covenants in the Master Indenture: (a) Except as otherwise expressly provided in the Master Indenture, to preserve its corporate or other separate legal existence and all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and to be qualified to do business in each jurisdiction where its ownership of Property or the conduct of its business requires such qualifications; provided, however, that nothing in the Master Indenture shall be construed to obligate it to retain or preserve any of its rights or licenses no longer used or useful in the conduct of its business. (b) At all times to cause its business to be carried on and conducted and its Property to be maintained, preserved and kept in good repair, working order and condition and all needful and proper repairs, renewals and replacements thereof to be made; provided, however, that nothing in the Master Indenture contained shall be construed (i) to prevent it to cease to operate any portion of its Property, if in its judgment (evidenced, in the case of such cessation other than in the ordinary course of business, by a determination by its Governing Body) it is advisable not to operate the same, or if it intends to sell or otherwise dispose of the same in accordance with the provisions of the Master Indenture and within a reasonable time endeavors to effect such sale or other disposition, or (ii) to obligate it to retain, preserve, repair, renew or replace any Property, leases, rights, privileges or licenses no longer used or useful in the conduct of its business. (c) To do all things reasonably necessary to conduct its affairs and carry on its business and operations in such manner as to comply with any and all applicable laws of the United States and the several states thereof and to duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Property; provided, nevertheless, that nothing in the Master Indenture contained shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof or the applicability thereof to it shall be contested in good faith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall indemnity the Master Trustee and any Related Bond Issuer against any liability, cost and expense (including reasonable counsel fees) resulting from such contest. (d) Promptly to pay all lawful taxes, governmental charges and assessments at any time levied or assessed upon or against it or its Property; provided, however, that it shall have the right to contest in good faith any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall indemnify the Master Trustee and any Related Bond Issuer against any liability, cost and expense (including reasonable counsel fees) resulting from such contest. (e) Promptly to pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Notes and Guaranties issued and Outstanding under the Master Indenture) whose validity, amount or collectability is being contested in good faith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall indemnify the Master Trustee and any Related Bond Issuer against any liability, cost and expense (including reasonable counsel fees) resulting from such contest. (f) At all times to comply with all terms, covenants and provisions of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness; provided, however, that it shall have the right to contest in good faith any such terms, covenants or provisions and pending such contest may delay or defer compliance therewith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond

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Issuer to the risk of any liability, and, in any event, that the Obligated Group shall indemnify the Master Trustee and any Related Bond Issuer against any liability, cost and expense (including reasonable counsel fees) resulting from such contest. (g) To procure and maintain all necessary licenses and permits and maintain accreditation of its health care facilities and such other facilities for which accreditation is then available as well as the status of its health care facilities (other than those not currently having such status) as a provider of health care services eligible for reimbursement under any appropriate third-party payor programs and comparable programs, including future governmental programs as long as, in the opinion of the Corporation, such eligibility or accreditation is in the best interests of the Corporation. (h) In the case of each Note Obligor which is a Tax-Exempt Organization at the time it becomes a Note Obligor, so long as any Related Bond remains outstanding under the Related Bond Indenture, to take no action or suffer any action to be taken by others, which would result in the interest on any Related Bond becoming subject to federal income taxes unless it is intended at the time of issuance of such Related Bond that the interest thereon be taxable. Notwithstanding the foregoing, not-for-profit members of the Obligated Group may change to a for-profit status provided that (i) the Master Trustee receives an Officer’s Certificate stating that such change is in the best interest of the Obligated Group and stating the reasons therefor and (ii) the Obligated Group enters into such agreements and arrangements as may be necessary to preserve the tax-exempt status of any tax-exempt Related Bonds that will remain outstanding after the conversion. The Master Trustee shall require the Obligated Group to deliver an Opinion of Bond Counsel confirming that such agreements and arrangements will preserve such tax-exempt status, if required, prior to approving such agreements and arrangements. In addition, to the extent that a conversion to for-profit status might affect the validity of any securities issued by a Related Bond Issuer, the Master Trustee also may require an Opinion of Bond Counsel confirming that such validity will continue. (i) On the date on which a Note Obligor becomes subject to the provisions of the Master Indenture and at all times thereafter, to consent to the jurisdiction of the courts of the State of Missouri for causes of action arising solely under the terms of the Master Indenture and to appoint and maintain an agent (which may be the Obligated Group Agent) in the State of Missouri to receive service of process for this limited purpose. Notwithstanding the above paragraphs, the members of the Obligated Group may change their status with respect to accreditations, licenses, approvals and qualifications, upon filing with the Master Trustee (i) an Officer’s Certificate to the effect that (x) the proposed change is in the best interest of the Obligated Group and stating the reasons therefor and (y) such change will not adversely affect the operations and financial condition of the Obligated Group, and (ii) an Opinion of Bond Counsel to the effect that the proposed change will not adversely affect the tax-exempt status of any tax-exempt Related Bonds. Rate Covenant The Obligated Group shall use its best efforts to maintain for each Fiscal Year the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service at least at 1.10. If such ratio, as calculated at the end of any Fiscal Year, is below 1.10, the Obligated Group covenants to retain a Consultant, within sixty (60) days after the end of such Fiscal Year, to make recommendations to increase such ratio for subsequent Fiscal Years of the Obligated Group at least to the required level of 1.10 or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest practicable level. Each Note Obligor, respectively, agrees that it will, to the extent permitted by law, follow the recommendations of the Consultant. So long as the Obligated Group shall retain a Consultant and each Note Obligor shall follow such Consultant’s recommendations to the extent permitted by law, the Master Indenture shall be deemed to have been complied with even if such ratio for any subsequent Fiscal Year of the Obligated Group is below the required level of 1.10. The Obligated Group shall no longer be required to retain such Consultant if and for so long as such ratio is restored to and maintained at not less than 1.10. If Law or Regulation Circumstances exist, which prevent compliance with the ratio described in the preceding paragraph, the requirements set forth in the Master Indenture shall be deemed satisfied as long as an Officer’s Certificate is received by the Master Trustee at least once during each year that Law or Regulation Circumstances exist, which Officer’s Certificate confirms the continued existence of the factual circumstances giving rise to the Law or Regulation Circumstances

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In no event shall the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service for any Fiscal Years be less than 1.00. Limitations on Incurrence of Additional Indebtedness The Corporation and each other Note Obligor, respectively, agrees that it will not incur any Additional Indebtedness other than Additional Indebtedness consisting of one or more of the following: (a) Long-Term Indebtedness, including Notes and Guaranties, if prior to Incurrence of the Long-Term Indebtedness, there is delivered to the Master Trustee: (i) An Officer’s Certificate certifying the Long-Term Debt Service Coverage Ratio for the

Historic Test Period, taking into account the current aggregate Outstanding principal amount of all Long-Term Indebtedness, and such Long-Term Debt Service Coverage Ratio is not less than 1.10; and

(ii) An Officer’s Certificate certifying the Long-Term Debt Service Coverage Ratio for the

Historic Test Period, taking into account the current aggregate Outstanding principal amount of all Long-Term Indebtedness and the proposed additional Long-Term Indebtedness, as if it had been incurred at the beginning of such period, and such Long-Term Debt Service Coverage Ratio is not less than 1.10; or a consultant’s opinion or report, as the case may be, (A) certifying that the projected Long-Term Debt Service Coverage Ratio for each of the next two full Fiscal Years following the borrowing or, in the case of a borrowing for capital improvements, following the completion of the facilities being financed, taking the proposed additional Long-Term Indebtedness into account, is not less than 1.10, and (b) indicating that sufficient revenues and cash flow would be generated to meet the projected operating expenses (including debt service, if any, on the proposed indebtedness) of the Obligated Group during such two Fiscal Years.

(b) Completion Indebtedness without limitation. (c) Long-Term Indebtedness incurred for the purpose of refunding, including advance refunding, any Outstanding Long-Term Indebtedness. (d) Subordinated Indebtedness, without limitation. (e) Short-term Indebtedness if: (i) there is in effect at the time the Short-Term Indebtedness described in this subsection (e) is

incurred a binding commitment (including without limitation letters or lines of credit or insurance) which may be subject only to commercially reasonable contingencies by a credit provider generally regarded as responsible, to provide financing sufficient to pay such Short-Term Indebtedness at its maturity; and

(ii) the conditions described in subsection (a) are met with respect to such Short-Term

Indebtedness when it is assumed that such Indebtedness is Long-Term Indebtedness maturing over a 30 year term from the date of issuance of the Short-Term Indebtedness, with level annual debt service, and bears interest on the unpaid principal balance at a rate of interest equal to that derived from the Bond Index.

(f) Any other Indebtedness provided that at the time of incurrence of such Indebtedness the aggregate of all such Indebtedness plus Indebtedness to be incurred described in this paragraph (f) does not exceed 20% of Gross Receipts of the Obligated Group for the most recent Fiscal Year for which combined audited financial statements reported on by an Accountant are available; provided, however, that all or any portion of Indebtedness incurred pursuant to this paragraph (f) at any time outstanding shall be deemed to have been incurred under any other provision of the Master Indenture if at such time there shall be filed with the Master Trustee an Officers Certificate to the effect that such outstanding Indebtedness or portion thereof satisfies such other provision, specifying such other provision and establishing the satisfaction thereof, whereupon the amount deemed to have been incurred and outstanding as described in this paragraph (f) shall be accordingly reduced and to have been incurred and outstanding pursuant to such other provision.

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(g) Non-Recourse Indebtedness in an aggregate principal amount not in excess of 20% of the Value of Property, Plant and Equipment of the Obligated Group. (h) Any indebtedness not mentioned in the Master Indenture incurred in the ordinary course of business, including any Indebtedness not for borrowed money, such as social security and unemployment insurance liabilities. Sale, Lease or Other Disposition of Property Each Note Obligor, respectively, agrees that it will not, in the aggregate, in any Fiscal Year sell, lease or otherwise dispose of Property the Value of which would cause the aggregate Value of Property so transferred by members of the Obligated Group in such Fiscal Year to exceed the greater of $2,000,000 or five percent (5%) of the Value of all Property of the Obligated Group at the end of the most recent Fiscal Year, except for transfers, sales or leases of Property: (a) to any person if prior to the sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate stating that in the judgment of the signer such Property has, or within the next succeeding twenty-four (24) calendar months is reasonably expected to become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property; or (b) to another member of the Obligated Group; or (c) in the ordinary course of business; or (d) that constitutes unimproved real estate; or (e) if such Property is replaced promptly by other Property of comparable utility as certified in an Officer’s Certificate delivered to the Master Trustee; or (f) if the Obligated Group receives fair market value therefor and the proceeds of such disposition are applied to the purchase of additional capital assets, applied to the defeasance, discharge, redemption or retirement of Indebtedness or deposited into a depreciation reserve fund; or (g) to a person, including a Subsidiary, which is not a member of the Obligated Group provided that prior to the sale, lease or other disposition the Transaction Test shall have been satisfied. The requirements of this clause (g) shall be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a signed Consultant’s opinion to the effect that the projected Long-Term Service Coverage Ratio for each of the next two full Fiscal Years following the transaction in question will be less than 1.00; or (h) constituting all or substantially all of its Property to any person in accordance with the Master Indenture and as described below under the caption “Consolidation, Merger, Sale or Conveyance.” Consolidation, Merger, Sale or Conveyance Each Note Obligor may merge or consolidate with any member of the Obligated Group and may sell or convey all or substantially all of its assets to any member of the Obligated Group. Each Note Obligor, respectively, covenants that it will not merge or consolidate with any other corporation not a member of the Obligated Group or sell or convey all or substantially all of its assets to any person not a member of the Obligated Group unless: (i) Either it will be the continuing corporation, or the successor corporation (if other than a

member of the Obligated Group) shall be a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation shall become a member of the Obligated Group or shall otherwise expressly assume the due and punctual payment of the principal of and premium, if any, and interest on all Outstanding Notes and Guaranties issued under the Master Indenture according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Master Indenture by a Supplemental Master Indenture satisfactory to the Master Trustee, executed and delivered to the Master Trustee by such corporation; and

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(ii) No member of the Obligated Group immediately after such merger or consolidation, or

such sale or conveyance, would be in default in the performance or observance of any covenant or condition contained in the Master Indenture and the conditions described in the Master Indenture would be met for the creation of a Lien on Property, Plant and Equipment and the condition described in the Master Indenture would be met for the incurrence of one dollar of additional Long-Term Indebtedness; and

(iii) The Transaction Test shall have been satisfied; and (iv) If all amounts due or to become due on any Related Bond have not been fully paid to the

holder thereof, there shall have been delivered to the Master Trustee, the Related Bond Issuer, and the Related Bond Trustee, an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, the Related Bond Issuer, and the Related Bond Trustee, to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance, whether or not contemplated on any date of the delivery of such Related Bond, would not adversely affect the validity of such Related Bond or the exemption from federal income taxation of interest payable on such related Bond.

In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named in the Master Indenture as the Corporation or other Note Obligor, as the case may be. Such successor corporation thereupon may cause to be signed, and may issue in its own name Notes or Guaranties issuable under the Master Indenture; and upon the order of such successor corporation and subject to all the terms, conditions and limitations in the Master Indenture prescribed, the Master Trustee shall authenticate and shall deliver Notes that such successor corporation shall have caused to be signed and delivered to the Master Trustee. All Outstanding Notes so issued and all Outstanding Guaranties issued by such successor corporation under the Master Indenture shall in all respects have the same legal rank and benefit under the Master Indenture as Outstanding Notes or Guaranties theretofore or thereafter issued in accordance with the terms of the Master Indenture as though all of such Notes and Guaranties had been issued under the Master Indenture by the Corporation 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 Notes thereafter to be issued as may be appropriate. The Master Trustee shall receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of the Master Indenture and that it is proper for the Master Trustee under the provisions of the Master Indenture to join in the execution of the Supplemental Master Indenture. The requirements of the Master Indenture as described above shall be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a signed Consultant’s opinion to the effect that the projected Long-Term Debt Service Coverage Ratio for each of the next two full Fiscal Years following the transaction in question will not be less than 1.00. Persons Becoming Note Obligors If at any time the Obligated Group Agent and any person shall determine that such person should become a Note Obligor under the Master Indenture, the Obligated Group Agent and the person may execute and deliver to the Master Trustee an appropriate instrument, satisfactory to the Master Trustee, containing the agreement of such person (a) to become a Note Obligor under the Master Indenture and thereby become subject to compliance with all provisions of the Master Indenture pertaining to a Note Obligor, including the performance and observance of all covenants and obligations of a Note Obligor under the Master Indenture, and (b) guaranteeing to the Master Trustee and each other member of the Obligated Group that all Notes and Guaranties issued and then Outstanding under the Master Indenture will be paid in accordance with the terms thereof and of the Master Indenture, when due. Such agreement may be evidenced by the execution by such person becoming a Note Obligor of a Supplemental Master Indenture supplementing the Master Indenture.

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Each instrument executed and delivered to the Master Trustee in accordance with the provisions of the Master Indenture described in the preceding paragraph, shall be accompanied by an Opinion of Counsel, addressed to and satisfactory to the Master Trustee, (i) to the effect that such instrument has been duly authorized, executed and delivered by the Corporation and such person and constitutes and valid and binding obligation enforceable in accordance with its terms to the extent of the fair market value of any consideration received by such person in exchange for its becoming a Note Obligor, except that such Opinion of Counsel may state that enforceability may be limited by bankruptcy laws, insolvency laws and other laws affecting creditor’s rights generally, and may contain such other qualifications as shall be satisfactory to the Master Trustee, and (ii) as to such matters incidental to the transactions contemplated by the Master Indenture as the Master Trustee may deem necessary. It shall be a condition precedent to the consummation of any transaction involving an instrument to be executed and delivered to the Master Trustee in accordance with the Master Indenture and described in the first paragraph of this caption above that the Master Trustee shall also have received (i) an Officer’s Certificate which demonstrates that, immediately upon any person becoming a Note Obligor as part of such transaction, no member of the Obligated Group would be in default in the performance or observance of any covenant or condition to be performed or observed by it under the Master Indenture and any member of the Obligated Group would meet the conditions described in the Master Indenture for the creation of a Lien on Property, Plant and Equipment and for the incurrence of one dollar of additional Long-Term Indebtedness, (ii) if all amounts due or to become due on any Related Bond have not been paid to the holder thereof, an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, the Related Bond Issuer, and the Related Bond Trustee, to the effect that under then existing law the consummation of such transaction, whether or not contemplated on any date of the delivery of any such Related Bond, would not adversely affect the validity of such Related Bond or the exemption from federal income taxation of interest payable on any such Related Bond, and (iii) evidence that the Transaction Test shall have been satisfied; provided, however, that the requirements of subparagraph (iii) shall be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a signed Consultant’s opinion to the effect that the projected Long-Term Debt Service Coverage Ratio for each of the next two full Fiscal Years following the transaction in question will not be less than 1.00. Effects of Person Becoming a Note Obligor Upon any person becoming a Note Obligor pursuant to the Master Indenture: (a) All Notes thereafter issued and any Related Supplement subsequently entered into may be executed and delivered by the Corporation or any other Note Obligor. (b) All of the provisions, terms, covenants and representations set forth in the Master Indenture shall apply to each member of the Obligated Group from the time that each person becomes a member of the Obligated Group. All indebtedness and liens of a person becoming a member of the Obligated Group shall be permitted under the Master Indenture only if in compliance with the Master Indenture. Withdrawal from the Obligated Group The Corporation may not withdraw from the Obligated Group and no other member of the Obligated Group may withdraw from the Obligated Group unless: (i) the Obligated Group Agent consents to such withdrawal; (ii) such member is not primarily obligated under an agreement with a Related Bond Issuer

whereby such member has agreed to pay debt service with respect to Related Bonds then outstanding; (iii) if all amounts due on any Related Bond which bears interest that is exempt from federal

income taxation have not been paid to the holder thereof, the Master Trustee shall have received an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law such member’s withdrawal from the Obligated Group would not adversely affect the validity of the Related Bond or cause the interest payable on such Related Bond to become subject to federal income taxation;

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(iv) the Transaction Test shall have been satisfied; provided, however, that this requirement shall be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a signed Consultant’s opinion to the effect that the projected Long-Term Debt Service Coverage Ratio for each of the next two full Fiscal Years following the transaction in question will not be less than 1.00; and

(v) the Master Trustee shall have received an Officer’s Certificate to the effect that,

immediately after the withdrawal of such member from the Obligated Group, the Obligated Group will not be in default in the performance or observance of any covenant or condition to be performed under the Master Indenture.

Upon compliance with the conditions contained in paragraph (a) above, the Master Trustee shall execute any documents reasonably requested by the withdrawing member to evidence the termination of such member’s obligations under the Master Indenture, under any Supplemental Master Indentures and under all Notes and Guaranties Issued pursuant to the Master Indenture. Restrictions on Guaranties Each Note Obligor, respectively, agrees that it will not enter into, or become liable after the date of the Master Indenture in respect of, any Guaranty unless (i) such Guaranty is of Indebtedness of another member of the Obligated Group, or (ii) such Guaranty is of obligations of a person which is not a member of the Obligated Group, and such Guaranty could then be incurred as Long-Term Indebtedness under the Master Indenture, in each case taking into account the following paragraph: For purposes of any covenants or computations provided for in the Master Indenture, the aggregate annual principal and interest payments on, and the principal amount of, any indebtedness of a person which is not a member of the Obligated Group which is the subject of a Guaranty under the Master Indenture and which would, if such obligation were incurred by a member of the Obligated Group, constitute Long-Term Indebtedness, shall be deemed equivalent to twenty percent (20%) of the actual Annual Debt Service on, and principal amount of, such indebtedness (assuming the definitions of the Master Indenture apply to such Indebtedness), so long as such Guaranty constitutes a contingent liability under generally accepted accounting principles, provided, however, that the Annual Debt Service on and the principal amount of, any Long-Term Indebtedness represented by a Guaranty shall be deemed equivalent to all of the actual Annual Debt Service and principal amount of, such Indebtedness, if a payment has been made by any member of the Obligated Group on such Guaranty within three years of the date of any computation to be made under the Master Indenture (assuming the definitions of the Master Indenture apply to such Indebtedness). Also for purposes of any covenants or computations provided for in the Master Indenture, the aggregate annual principal and interest payments on, and principal amount of, any Short-Term Indebtedness represented by a Guaranty of obligations of a person which is not a member of the Obligated Group shall be deemed equivalent to the actual principal and interest payments on the Indebtedness which is the subject of the Guaranty (assuming the definitions of the Master Indenture apply to such Indebtedness). Limitations on Creation of Liens Each Note Obligor, respectively, agrees that it will not create or suffer to be created or exist any Lien upon Property now owned or hereafter acquired by it other than Permitted Liens. Permitted Liens shall consist of the following: (i) Liens arising by reason of good faith deposits with any Note Obligor in connection with

leases of real estate, bids or contracts (other than contracts for the payment of money, deposits by any Note Obligor 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;

(ii) 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 Note Obligor, or a Subsidiary, to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen’s

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compensation, unemployment insurance, pension or profit sharing plans or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;

(iii) Any judgment lien or notice of pending action against any Note Obligor so long as such

judgment or pending action is being contested and execution thereon is stayed or while the period for responsive pleadings has not lapsed, and so long as such lien or contest shall not materially impair the ability of such Note Obligor to meet its obligations under the Master Indenture;

(iv) (A) Rights reserved to or vested in any municipality or public authority by the terms of any

right, power, franchise, grant, license, permit or provision of law, affecting any Property, to (1) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of such Property or materially and adversely affect the value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Property; (B) any liens on any Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and labor for less than sixty (60) days; (C) easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any Property which do not materially impair the use of such Property or materially and adversely affect the value thereof; (D) rights reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such property or materially and adversely affect the value thereof; and (E) to the extent that it affects title to any Property, the Master Indenture;

(v) Any lien described in Exhibit A to the Master Indenture which is existing on the date of

authentication and delivery of the initial series of Notes, including renewals thereof, provided that except in conjunction with transfers of property among members of the Obligated Group no such Lien may be extended or modified to apply to any Property of any Note Obligor not subject to such Lien on such date, unless such Lien as so extended or modified otherwise qualifies as a Permitted Lien under the Master Indenture;

(vi) Any Lien securing Non-Recourse Indebtedness; (vii) Any Lien on Property (other than a Lien on Property which is part of the Property, Plant

and Equipment) acquired by a Note Obligor if the assumption of the Indebtedness secured by the Lien by such Note Obligor is additional Indebtedness permitted under the provisions of the Master Indenture, and if an Officer’s Certificate is delivered to the Master Trustee certifying that (A) the Lien and the Indebtedness secured in the Master Indenture were created and incurred by a person other than the Note Obligor acquiring such Property prior to acquisition of such Property by such Note Obligor, and (B) the Lien was created prior to the decision of such Note Obligor to acquire the Property and was not created for the purpose of enabling such Note Obligor to avoid the limitations of the Master Indenture on creation of Liens on Property of the Obligated Group;

(viii) Any Lien on Property, if, prior to the creation of such Lien or the acquisition of Property

subject to such Lien an Officer’s Certificate is delivered to the Master Trustee stating that (A) after giving effect to the Lien, the Value of the Property which is Encumbered will not exceed twenty percent (20%) of the Value of the Property, Plant and Equipment of the Obligated Group as the end of the Historic Test Period; and (B) the creation of the proposed Lien will not adversely affect the repayment of any Notes issued under the Master Indenture;

(ix) Any Lien representing statutory rights of the United States of America by reason of federal

funds made available under 42 U.S.C. §291 et seq. and similar rights under other federal and state statutes; (x) Liens on Property received by any member of the Obligated Group through gifts, grants or

bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or the income thereon;

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(xi) Any Lien in favor of the Master Trustee securing all Notes and Guarantees on a parity basis;

(xii) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of

such proceeds; (xiii) Liens on moneys deposited by patients, residents or others with any member of the

Obligated Group as security for or as prepayment for the cost of patient care or other services; (xiv) Any Lien due to rights of third-party payors for recoupment of amounts paid to any

member of the Obligated Group; (xv) Any Lien on Gross Receipts granted by a member of the Obligated Group to secure any

indebtedness that is Outstanding under the Master Indenture; (xvi) Any Lien representing rights of setoff and banker’s liens with respect to funds on deposit in

a financial institution in the ordinary course of business; (xvii) Any Liens arising under law or by contract with respect to initial deposits made under life-

care contracts; (xviii) A lease of the day care facility and any extension or renewal thereof and leases whereunder

any Note Obligor is lessor which relate to Property which is of a type that is customarily the subject of such leases, including without limitation office space for physicians and educational institutions, food service facilities, parking facilities, barber shops, beauty shops, flower shops, gift shops, or other health-based specialty services and pharmacy and similar departments;

(xix) Any security interest in any depreciation reserve, debt service reserve, construction, debt

service or similar fund established pursuant to the terms of any Supplemental Master Indenture or any Related Bond Indenture in favor of the Master Trustee, a Related Bond Trustee, a Related Authority or the holder of the Indebtedness, issued pursuant to such Supplemental Master Indenture or Related Bond Indenture or the holder of the Indebtedness;

(xx) Any lien on gross accounts receivable provided that the aggregate of the Indebtedness

secured by such Lien, and by all other Liens permitted by this Section does not exceed 35% of the gross patient accounts receivable less than 90 days in age as shown in the financial records of the Obligated Group on a combined basis; and

(xxi) Any lien on cash or securities securing the obligations of a member of the Obligated Group

under an Interest Rate Exchange Agreement.

(xxii) Any Lien on bonds (including but not limited to Related Bonds), notes or other obligations registered in the name of or beneficially owned by a member of the Obligated Group and purchased on behalf such member by a bank or other financial institution, providing a Credit Facility or other credit enhancement on such bonds, notes or other obligations provided such lien is in favor of the bank or other financial institution providing such Credit Facility or other credit enhancement;

The provisions in the Master Indenture described under this caption “Limitations on Creation of Liens” are covenants, the breach of which may result in an Event of Default under the Master Indenture. Such provisions are not intended by the parties to be a grant of any security or any property interest in Property of any member of the Obligated Group. Notwithstanding the provisions of the Master Indenture, each Note Obligor may create or suffer to be created or exist a Lien upon Property, in favor of the holder of any Indebtedness, with prior notice to the Master Trustee but without the consent of the Master Trustee or of the Holders of any Notes, so long as such Lien, or a Lien at least on a parity therewith, is effectively granted in favor of the Master Trustee for the benefit of the Holders of all Outstanding Notes and Guaranties and all Notes and Guaranties to become Outstanding under the Master Indenture.

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Pursuant to the Master Indenture each Note Obligor has granted a first security interest in its Gross Receipts to the Master Trustee for the benefit of all Outstanding Notes and Guaranties including all Notes and Guaranties to become Outstanding under the Master Indenture. Insurance Each Note Obligor, respectively, agrees that it will maintain, or cause to be maintained, insurance (including one or more self-insurance programs considered to be adequate under the provisions of the Master Indenture) covering such risks and in such amounts as, in its judgment, is adequate to protect it and its Properties and operations. The insurance required to be maintained pursuant to the Master Indenture shall be subject to the review of an Insurance Consultant every two years, commencing on the last day of the Fiscal Year ending in 1993 (except that with respect to any self-insurance, such review shall be accomplished every year), and each Note Obligor, respectively, agrees that it will follow any recommendations of the Insurance Consultant, except to the extent that its Governing Body determines that such recommendations are unfeasible or uneconomical, the reasons for such determination to be set forth in an Officer’s Certificate delivered to the Master Trustee. Each Note Obligor, respectively, agrees to provide insurance at would be customarily provided by continuing care retirement communities of a comparable type and size. Each Note Obligor, respectively, agrees that it will deliver or cause to be delivered to the Master Trustee triennially, on or prior to a date designated by it upon reasonable prior notice to the Master Trustee, an Officer’s Certificate setting forth a description of the insurance maintained, or caused to be maintained, by such person pursuant to this paragraph and then in effect and stating whether such insurance and the manner of providing such insurance and any reductions or eliminations of the amount of any insurance coverage during the triennial period covered by such report comply with the requirements of the Master Indenture and adequately protect such person and its Properties and operations. Such report shall also set forth any recommendations of the Insurance Consultant as to additional Insurance, if any, reasonably required (during the period preceding the next such triennial report) for the protection referred to in the next preceding sentence in light of available insurance coverage and practice in the continuing care retirement community industry. Reduction and Modification of Insurance Coverage Each Note Obligor covenants to maintain the following types of insurance, and must secure the concurrence of an Insurance Consultant, except to the extent that its Governing Body determines that the Insurance Consultant’s failure to concur is unreasonable, the reasons for such determination to be set forth in an Officer’s Certificate delivered to the Master Trustee, before it may reduce or eliminate the amount of its insurance coverage for the following types of insurance: (i) comprehensive general public liability insurance, including automobile insurance including owned, non-owned and hired automobiles (excluding collision and comprehensive coverage thereon), (ii) fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, Civil commotion, damage from aircraft, smoke and uniform standard coverage and vandalism and malicious mischief endorsements and business interruption insurance covering such perils, (iii) professional liability or medical malpractice insurance, (iv) workmen’s compensation insurance, (v) boiler insurance, and (vi) business interruption insurance. In making its decision whether to concur in such reductions or eliminations the Insurance Consultant may take into account whether the Note Obligor has established an adequate self-insurance program with respect to the risk involved in accordance with the second paragraph next below. Insurance required under the Master Indenture may be in the form of a blanket insurance policy or policies and in the case of all policies may include additional names of insureds. Required limits of coverage may be provided by so-called “umbrella” coverages. In lieu of obtaining third-party coverage for the foregoing risks, the Obligated Group may self-insure any of the required coverages (or a portion thereof) except for the coverages, described in subsection (ii) and (v) of the first paragraph under this caption, provided it delivers to the Master Trustee a report of an Insurance Consultant stating that the Obligated Group’s decision to self-insure such risks is consistent with proper management and insurance practices. In addition, as long as the Obligated Group maintains any self-insurance against professional liability, the Obligated Group will provide the Master Trustee annually with a report of an Insurance Consultant concerning the adequacy of funding and the funding determination processes employed by the Obligated Group for such self-insurance.

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The Obligated Group may also arrange insurance coverage through a captive insurance company provided an Insurance Consultant’s report indicates that such insurance is consistent with proper management and insurance practices. In the event that the insurance required by the Master Indenture is not commercially available and the Obligated Group has chosen not to self-insure against such losses, the Obligated Group shall employ an Insurance Consultant acceptable to the Master Trustee, who shall review the insurance coverage of the Obligated Group and the Property, Plant and Equipment and make recommendations on the types, amounts and provisions of insurance that should be carried. Insurance requirements shall be modified to conform with the recommendations of the Insurance Consultant. Insurance and Condemnation Proceeds Any Note Obligor may make agreements and covenants with the holder of Indebtedness which is incurred in compliance with the provisions of the Master Indenture and which is secured by a Permitted Lien with respect to the application or use to be made of insurance proceeds or condemnation awards which may be received in connection with Property which is subject to such Permitted Lien. After application in accordance with the paragraph above, remaining amounts received by any Note Obligor as insurance proceeds with respect to any casualty loss or as condemnation awards may be used in such manner as the recipient may determine, including without limitation, applying such moneys to the payment or prepayment of any Note or Notes in accordance with the terms thereof and of the Related Supplement, subject to compliance with the provisions of the Master Indenture; provided that if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds ten percent (10%) of the Value of the Property, Plant and Equipment, the Note Obligor agrees that it will promptly remit such proceeds or awards to the Master Trustee, if required, and the Obligated Group Agent may elect to direct the Master Trustee to cause such funds to be applied either (i) to the repair, reconstruction, restoration or replacement of the damaged or condemned facility or the purchase of capital equipment or (ii) to the prepayment of Notes issued and Outstanding, pro-rata among all such Notes. If the Obligated Group Agent elects clause (i) above, any remaining balance of such funds after such repair, reconstruction, restoration or replacement shall be paid to the appropriate Note Obligor. Filing of Financial Statements, Certificate of No Default, Other Information Each Note Obligor, respectively, covenants that it will, through the Obligated Group Agent, file with the Master Trustee:

(a) As soon as practicable after they are available but in no event more than 60 days after the end of each quarterly fiscal period of each Fiscal Year, the unaudited consolidated financial statements for such Fiscal Year up to the end of such period, including statements of operations and a balance sheet as of the end of such period, in each case which are either separate for each Note Obligor or combined or consolidated for the Corporation and including the results for each Note Obligor, all in reasonable detail prepared by or under the supervision of the senior financial officer of the Corporation, subject to year-end adjustment, by the senior financial officer or other authorized officer of the Corporation.

(b) As soon as practicable after they are available, but in no event more than 150 days after the last day of each Fiscal Year, audited financial statements of the members of the Obligated Group for such Fiscal Year reported upon by a firm of independent certified public accountants selected by the Obligated Group Agent and satisfactory to the Master Trustee, containing a balance sheet as of the end of such Fiscal Year and a statement of operations and changes in net assets for such Fiscal Year, and a statement of cash flows 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 a calculation of the Income Available for Debt Service for said Fiscal Year, the calculation of Maximum Annual Debt Service for such Fiscal Year, and a statement that such accountants have obtained no knowledge of any default by any Note Obligor in the fulfillment of any of the terms, covenants, provisions or conditions of the Master 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). The 150-day

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requirement of this section may be extended to 165 days if the Obligated Group Agent delivers to the Master Trustee, prior to the end of the 150-day period, an Officer’s Certificate to the effect that the delivery of audited financial statements is delayed due to circumstances beyond the control of the Obligated Group Agent.

(c) At the time of delivery of the financial report referred to in paragraph (a) above, an

Officer’s Certificate of the Obligated Group Agent stating that the Obligated Group Agent has made a review of the activities of the Obligated Group during the preceding Fiscal Year for the purpose of determining whether or not the Note Obligors have complied with all of the terms, provisions and conditions of the Master Indenture and that, to the best knowledge of the Obligated Group Agent, each Note Obligor has kept, observed, performed and fulfilled each and every covenant, provision and condition of the Master Indenture on its part to be performed and is not in default in the performance or observance of any of the terms, covenants, provisions or conditions hereof, or if any Note Obligor shall be in default such Certificate shall specify all such defaults and the nature thereof.

(d) If an event of default under the Master Indenture shall have occurred and be continuing,

such additional information as the Master Trustee may reasonably request concerning the financial affairs and operations of any Note Obligor, excluding specifically donor records, patient records, personnel records, and any other records the confidentiality of which may be protected by law, and for that purpose all pertinent books, documents and vouchers relating to the business affairs and Property of the Note Obligors shall at reasonable times during regular business hours be open to the inspection by the Master Trustee, its attorneys and agents (who may make copies of all or any part thereof).

Each Note Obligor also agrees that, within 30 days after its receipt thereof, it will file with the Master Trustee a copy of each Consultant’s report or counsel’s opinion required to be prepared under the terms of the Master Indenture. Audited financial statements of the members of the Obligated Group shall be prepared in accordance with generally accepted accounting principles and shall include financial data of all Note Obligors and may include financial data pertaining to such other Persons, as the Obligated Group Agent may determine, that are not Note Obligors but are permitted or required to be included in such audited financial statements under generally accepted accounting principles; provided that (i) such audited financial statements that include financial data of Persons that are not Note Obligors includes unaudited supplemental schedules which contain separate financial statements for the Obligated Group, and (ii) the Obligated Group Agent represents for the period reported in such audited financial statements that the inclusion therein of financial data pertaining to Persons which are not Note Obligors does not materially affect the content thereof from that which represents the financial performance, financial condition or results of only the members of the Obligated Group for such period. The financial data pertaining to Persons that are not Note Obligors shall be deemed not to materially affect the content of the audited financial statements if none of the (a) revenues, (b) income available for debt service, or (c) book value of the total property of such Persons (calculated in the same manner as Revenues, Aggregate Income Available for Debt Service and Book Value of Property of a Note Obligor), in the aggregate, exceed 15% of the (1) Revenues, (2) Aggregate Income Available for Debt Service, or (3) Value of the total Property of all members of the Obligated Group, respectively, for or as of the end of the subject period. Debt Service on Balloon Indebtedness For purposes of the computation of the Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, whether historical or projected, Balloon Indebtedness shall, at the election of the Obligated Group Agent, be deemed to be Indebtedness which, at the later of the date of its original incurrence or the date of calculation, was payable over the lesser of its nominal maturity or a thirty (30) year term, with level annual debt service, at a rate of interest equal to that derived from the Bond Index as determined by an Officer’s Certificate; provided, however, that if such Balloon Indebtedness were required to be subject to a binding commitment for refinancing, then the assumed amortization of such Balloon Indebtedness shall conform to the terms of such commitment.

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Debt Service on Variable Rate Indebtedness For purposes of the computation of the projected Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, Variable Rate Indebtedness shall be deemed Indebtedness which bears interest at a rate equal to that derived from the Bond Index, as determined by an Officer’s Certificate. Debt Service on Discount Indebtedness For purposes of the computation of the Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, whether historical or projected, the amount of principal represented by Discount Indebtedness shall, at the election of the Obligated Group Agent be deemed to be the accrued value of such Indebtedness computed on the basis of a constant yield to maturity. Credit for Debt Service For purposes of the computation of the Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, whether historic or projected, the Obligated Group may subtract from principal due on Indebtedness any Debt Reserves which are available and are actually to be applied to make such principal payment in the year such Indebtedness matures or its redeemed or otherwise retired, at the time of such computation for the period in question. Credit for Capitalized Interest For purposes of the computation of the Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, whether historic or projected, the Obligated Group may subtract from interest due on Indebtedness any Capitalized Interest which is available and is to be applied to make such interest payment in the year such interest comes due, at the time of such computation for the period in question. Interest Rate Exchange Agreements and Debt Service For purposes of the computation of the Long-Term Debt Service Requirement, Annual Debt Service or Maximum Annual Debt Service, whether historical or projected, the interest expense on the related series of Related Bonds shall take into account any amounts that were or will be paid or received under the Interest Rate Exchange Agreement. Notwithstanding the foregoing, future interest expense on a related series of Related Bonds may only be reduced by payments to be received under an Interest Rate Exchange Agreement if the swap counterparty (or any guarantor thereof) is rated in one of the three highest rating categories (without regard to modifiers) by a nationally recognized rating agency. Any termination, breakage or similar payment under an Interest Rate Exchange Agreement shall not be taken into account when computing debt service. Pledges of Gross Receipts Each Note Obligor, including any person becoming a Note Obligor, pursuant to the Granting Clauses of the Master Indenture, and pursuant to the Master Indenture grants, pledges, conveys and assigns to the Master Trustee as security for (i) the performance by each member of the Obligated Group of its obligations to pay the principal of, redemption premium, if any, and interest on each and all Notes and Guaranties issued under the Master Indenture and (ii) the performance by each member of the Obligated Group of its obligations under the Master Indenture, a first security interest in its Gross Receipts, subject only to Permitted Liens. Except for Permitted Liens, a Note Obligor shall not grant a Lien on or in its Gross Receipts to secure any Indebtedness other than the Notes and Guaranties issued under the Master Indenture. Only the Notes and Guaranties issued under the Master Indenture are entitled to the lien, pledge, security, rights and remedies afforded by the Master Indenture. Notwithstanding the security interest granted pursuant to the Master Indenture, so long as each Note Obligor (i) performs its obligations to pay the principal of, redemption premium, if any, and interest on each and all Notes and Guaranties issued under the Master Indenture and (ii) performs its obligations under the Master Indenture, each Note Obligor shall be entitled to utilize its Gross Receipts for its proper purposes.

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Uniform Commercial Code Filings Each Note Obligor shall cause the security interest of the Master Trustee in its Gross Receipts to be perfected by the filing of financing statements which fully comply with the Uniform Commercial Code--Secured Transactions. Each Note Obligor agrees that, upon the request of the Master Trustee, each such party will furnish to the Master Trustee all necessary continuation statements duly executed, if necessary, by the appropriate party, so as to enable the Master Trustee to execute such continuation statements and cause them to be filed within the time prescribed by the Uniform Commercial Code--Secured Transactions in order to continue such security interests. Liquidity Covenant The Obligated Group covenants that it will conduct its business so that as of the last day of each Fiscal Year of the Obligated Group (the “Testing Date”), the Obligated Group shall have not less than 120 Days Cash on Hand (the “Liquidity Covenant”). The Obligated Group shall, on the date on which audited financial statements are required to be filed with the Master Trustee (the “Calculation Date”), calculate the Days Cash on Hand as of the Testing Date and shall set forth such calculation in the Officer’s Certificate required under this Master Indenture. If the amount of Days Cash on Hand as of a Testing Date is less than the Liquidity Covenant, the Obligated Group shall, within 30 days after delivery of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Agent to the Master Trustee setting forth the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of Days Cash on Hand to the Liquidity Covenant for future periods. If the Obligated Group has not raised the level of Days Cash on Hand to the Liquidity Covenant by the next Testing Date, the Obligated Group shall, within 30 days after delivery of the Officer’s Certificate on the next Calculation Date disclosing such ongoing deficiency, retain a Consultant to make recommendations with respect to rates, fees and other factors affecting financial operations in order to increase the Liquidity Covenant for future periods. A copy of the Consultant’s report shall be filed with the Master Trustee within 60 days after the Consultant is retained. The Obligated Group shall follow the recommendations of the Consultant to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Obligated Group Agent) and permitted by law. Notwithstanding any other provisions of the Master Indenture, failure of the Obligated Group to achieve the Liquidity Covenant for any Testing Period shall not constitute an event of default if the Obligated Group takes all action necessary to comply with the procedures set forth above and, if applicable, follows the recommendations of the Consultant’s report to the extent feasible (as determined by the Governing Body of the Obligated Group Agent) and permitted by law. If, after implementation, to the extent feasible (as determined by the Governing Body of the Obligated Group Agent) and as permitted by law, the Obligated Group is still not able to achieve the Liquidity Covenant, then it shall not be obligated to again retain a Consultant unless the failure to achieve the Liquidity Covenant continues for at least three (3) successive years after receipt of the Consultant’s report. Events of Defaults Event of Default, as used in the Master Indenture, shall mean any of the following events: (a) The Obligated Group shall fail to make, within five (5) days of the due date thereof, any payment of the principal of, the premium, if any, and interest on any Note or any payment required by any Guaranty issued and Outstanding under the Master Indenture when and as the same shall become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof, of the Master Indenture and the Related Supplement. (b) Any Note Obligor shall fail duly to observe or perform any covenant or agreement on its part under the Master Indenture or any Related Supplement for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the members of the Obligated Group by the Master Trustee, or to the members of the Obligated Group and the Master Trustee by the holders of at least twenty-five percent (25%) in aggregate principal amount of Notes then Outstanding. If the breach of covenant or agreement in one

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which cannot be completely remedied within the thirty (30) days after written notice has been given, it shall not be an Event of Default as long as such Note Obligor has taken active steps within the thirty (30) days after written notice has been given to remedy the failure and is diligently pursuing such remedy; provided, however, the thirty (30) day cure period shall not apply to a failure of the Obligated Group to maintain a ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service for any Fiscal Year of not less than 1.00 in accordance with Section 5.03(c) of the Master Indenture (Rate Covenant). (c) Any Note Obligor shall default in the payment of any Indebtedness for borrowed moneys (other than Notes or Guaranties issued and Outstanding under the Master Indenture which are, and other than any other Indebtedness which is, Non-Recourse Indebtedness), in an amount in excess of one percent (1%) of Operating Revenues of the Obligated Group, whether such Indebtedness now exists or shall hereafter be created and any period of grace with respect thereto shall have expired where the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holders thereof (or a trustee on behalf of such holders) to cause such Indebtedness to become due prior to its stated maturity, or an event of default as defined in any mortgage, indenture or instrument, under which there may be issued or by which there may be secured or evidenced, any Indebtedness, whether such indebtedness now exists or shall hereafter be created, shall occur, provided, however, that such default shall not constitute an Event of Default within the meaning of the Master Indenture if within thirty (30) days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced (i) the members of the Obligated Group in good faith commence proceedings to contest the existence or payment of such Indebtedness, and (ii) sufficient moneys are escrowed with a bank or trust company for the payment of such Indebtedness. (d) The entry of a decree or order by a court having jurisdiction in the premises adjudging any Note Obligor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of any Note Obligor under the Federal Bankruptcy Code or any other applicable Federal or state law, or appointing a receiver, liquidator, assignee, or sequestrator (or similar official) of an Note Obligor or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days. (e) The institution by any Note Obligor of proceedings to be Adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other similar applicable Federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of any Note Obligor or of any substantial part of its Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. (f) An event of default added pursuant to any Related Supplement. Provided, however, than an event described in subsections (d) or (e) above shall not be an Event of Default if, excluding from the Obligated Group the member or members as to which the event described in subsection (d) or (e) above has occurred, there is compliance with the provisions of the Master Indenture and an Officer’s Certificate as to such compliance is delivered to the Master Trustee within sixty (60) days of the receipt of notice of the existence of such event. (g) Receipt by the Master Trustee of a notice from the issuer of a Credit or Liquidity Facility of a default under a Credit or Liquidity Facility relating to a Related Bond. Acceleration; Annulment of Acceleration Upon the occurrence and during the continuation of an Event of Default under the Master Indenture, the Master Trustee may and, upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Notes Outstanding (other than Notes which represent Non-Recourse Indebtedness), or upon the occurrence of an Event of Default described in (g) above shall, by notice to the members of the Obligated Group, declare all Notes Outstanding immediately due and payable, whereupon such Notes shall become and be immediately due and payable, anything in the Notes or in the Master Indenture to the contrary notwithstanding. In such event, there shall be due and payable on the Notes an amount equal to the total principal amount of all such Notes, plus all Interest accrued thereon and, to the extent permitted by applicable law, which accrues to the date of payment.

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At any time after the principal of the Notes shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, if (i) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay all matured installments of interest and interest on installments of principal or redemption prices then due (other than the principal then due only because of such declaration) of all Notes Outstanding; (ii) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Master Trustee and any paying agents; (iii) all other amounts then payable by the Obligated Group under the Master Indenture shall have been paid or a sum sufficient to pay the same shall have been deposited with the Master Trustee; and (iv) every Event of Default (other than a default in the payment of the principal of such Notes then due only because of such declaration) shall have been remedied, then the Master Trustee shall annul such declaration and its consequences with respect to any Notes or portions thereof not then due by their terms. No annulment shall extend to or affect any subsequent Event or Default or impair any right consequent thereon. Additional Remedies and Enforcement of Remedies Upon the occurrence and continuance, of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes Outstanding, together with indemnification of the Master Trustee to its satisfaction therefor, shall, proceed forthwith to protect and enforce its rights and the rights of the Noteholders under the Master Indenture by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient, including but not limited to: (i) Enforcement of the right of the Noteholder to collect and enforce the payment of amounts

due under the Notes; (ii) Suit upon all or any part of the Notes; (iii) Civil action to require any person holding moneys, documents or other property pledged to

secure payment of amounts due or to become due on the Notes to account as if it were the trustee of any express trust for the Holders of Notes so secured;

(iv) Civil action to enjoin the acts or things, which may be unlawful or in violation of the rights

of the Holders of Notes; and (v) Enforcement of any other right of the Noteholders conferred by law or in the Master

Indenture. Regardless of the happening of an Event of Default, the Master Trustee, if requested in writing by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (i) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation thereof, or (ii) to preserve or protect the interests of the Holders, provided that such request and the action to be taken by the Master Trustee are not in conflict with any applicable law or the provisions of the Master Indenture and, in the sole judgment of the Master Trustee, is not unduly prejudicial to the interest of the Holders of Notes not making such request. Application of Revenues and Other Moneys During the continuance of an Event of Default all moneys received by the Master Trustee pursuant to any right given or actions taken under the provisions of the Master Indenture, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses and advances incurred or made by the Master Trustee with respect thereto shall be applied as follows: (a) Unless the principal of all Outstanding Notes shall have become or have been declared due and payable:

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First: To the payment to the person entitled thereto of all installments of interest then due on the Notes in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due there to the Persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal installments of any Notes which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and if the amounts available shall not be sufficient to pay in full all the Notes due on any date, then to the payment thereof ratably, according to the amounts of principal installments due on such date, to the persons entitled thereto, without any discrimination or preference.

(b) If the principal of all Outstanding Notes shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Notes without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference. (c) If the principal of all Outstanding Notes shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of the Master Indenture, then, subject to the provisions of paragraph (b) above, in the event that the principal of all Outstanding Notes shall later become due or be declared due and payable, the moneys shall be applied in accordance with provisions of paragraph (a) above. Whenever moneys are to be applied by the Master Trustee pursuant to the Master Indenture, such moneys shall be applied by it at such times, and from time to time, as the Master Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Master Trustee shall apply such moneys, it shall fix the date upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Master Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any unpaid coupon or Note until such coupon or such Note shall be presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid. Whenever all Notes and interest thereon have been paid under the Master Indenture and all expenses and charges of the Master Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive the same; if no other Person shall be entitled thereto, then the balance shall be paid to the members of the Obligated Group, their successors, or as a court of competent jurisdiction may direct. Remedies Not Exclusive No remedy by the terms of the Master Indenture conferred upon or reserved to the Master Trustee or the Noteholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Master Indenture or existing at law or in equity or by statute on or after the date thereof. Remedies Vested in the Master Trustee All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Notes or coupons may be enforced by the Master Trustee without the possession of any of the Notes or coupons or the production thereof in any trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining as plaintiffs or defendants any Holders of the Notes. Subject to the Master Indenture, any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Notes and appurtenant coupons.

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Noteholders Control of Proceedings If an Event of Default shall have occurred and be continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of at least a majority in aggregate principal amount of Notes then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Master Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions of the Master Indenture or for the appointment of a receiver of any other proceedings under the Master Indenture, provided that such direction is not in conflict with any applicable law or the provisions thereof (including indemnity to the Master Trustee as provided in the Master Indenture) and, in the sole judgment of the Master Trustee, is not unduly prejudicial to the interest of Noteholders not joining in such direction and provided further that nothing in the Master Indenture shall impair the right of the Master Trustee in its discretion to take any other action under the Master Indenture which it may deem proper and which is not inconsistent with such direction by Noteholders. Termination of Proceedings In case any proceeding taken by the Master Trustee on account of an Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Master Trustee or to the Noteholders, then the members of the Obligated Group, the Master Trustee and the Noteholders shall be restored to their former positions under the Master Indenture and all rights, remedies and powers of the Master Trustee and the Noteholders shall continue as if no such proceeding had been taken. Waiver of Event of Default No delay or omission of the Master Trustee or of any Holder of the Notes to exercise any right or power accruing upon any Event of Default shall impair any such Event of Default or an acquiescence in the Master Indenture. Every power and remedy given by the Master Indenture to the Master Trustee and the Holders of the Notes, respectively, may be exercised from time to time and as often as may be deem expedient by them. The Master Trustee may waive any Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Master Indenture, or before the completion of the enforcement of any other remedy under the Master Indenture. Notwithstanding anything contained in the Master Indenture to the contrary, the Master Trustee, upon the written request of the Holders of at least a majority of the aggregate principal amount of Notes then Outstanding, shall waive any Event of Default under the Master Indenture and its consequences; provided, however, that, except under the circumstances set forth in the Master Indenture and described above in the second paragraph under the caption “Acceleration; Annulment of Acceleration” a default in the payments of the principal of, premium, if any, or interest on any Note, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Notes at the time Outstanding. In case of any waiver by the Master Trustee of an Event of Default under the Master Indenture, the members of the Obligated Group, the Master Trustee and the Noteholders shall be restored to their former positions and rights under the Master Indenture, respectively, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. Appointment of Receiver Upon the occurrence of any Event of Default unless the same shall have been waived as in the Master Indenture provided, the Master Trustee shall be entitled as a matter of right if it shall so elect, (i) forthwith and without declaring the Notes to be due and payable, (ii) after declaring the same to be due and payable, or (iii) upon the commencement of an action to enforce the specific performance of the Master Indenture or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Master Trustee or the Noteholders, to the appointment of a receiver or receivers of any or all of the Property of the Obligated Group with such powers as the court making such appointment shall confer. Each Note Obligor, respectively, in the Master Indenture consents and agrees, and will if requested by the Master Trustee consent and agree at the time of application by the Master Trustee for appointment of a receiver, to the appointment of such receiver and that such receiver may be given the right, power and authority, to the extent the same may lawfully be given, to take possession of and operate and deal with such

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property and the revenues, profits and proceeds therefrom, with like effect as such Note Obligor could do so, and to borrow money and issue evidences of indebtedness as such receiver. Remedies Subject to Provisions of Law All rights, remedies and powers provided by the Master Indenture may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of the Master Indenture are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render the Master Indenture or the provisions thereof invalid or unenforceable under the provisions of any applicable law. Notice of Default The Master Trustee shall, within 10 days after the Master Trustee has knowledge of the occurrence of an Event of Default, mail to all Holders of Notes as the name and addresses of such Holders appear upon the books of the Master Trustee, notice of such Event of Default known to the Master Trustee, unless such Event of Default shall have been cured before the giving of such notice (the term “Event of Default” for the purposes of this paragraph being in the Master Indenture defined to be the events specified in paragraphs (a), (b), (c), (d) and (e) under the caption “Events of Default”, not including any periods of grace, and irrespective of the giving of written notice; and provided that, except in the case of default in the payment of the principal of or premium, if any, or interest on the Notes and the Event of Default specified in (d) and (e) under the caption “Events of Default”, 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 or responsible officers of the Master Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of Notes. Master Trustee; General The Master Indenture contains provisions relating to the performance of the Master Trustee’s duties and limitations on the Master Trustee’s liabilities. Fees, Charges, and Expenses of Master Trustee The Master Trustee shall be entitled to payment and reimbursement for reasonable fees and for its services rendered under the Master Indenture and all advances, counsel fees and other expenses reasonably and necessarily made or incurred by the Master Trustee in connection with such services. The Master Trustee shall be entitled to payment and reimbursement for the reasonable fees and charges of the Master Trustee as paying agent and note registrar for the Notes and coupons as in the Master Indenture above provided. The members of the Obligated Group shall be jointly and severally liable for payment of the fees, charges and expenses of the Master Trustee. Upon an Event of Default, but only upon an Event of Default, the Master Trustee shall have a right of payment prior to payment on account of interest or principal of, or premium, if any, on any Note for the foregoing advances, fees, costs and expenditures incurred. Successor Master Trustee Any corporation or association into which the Master Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, ipso facto, shall be and become successor Master Trustee under the Master Indenture and vested with all of the title to the whole property or trust estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything in the Master Indenture to the contrary notwithstanding. Qualification of Master Trustee; Conflicting Interests If the Master Trustee has or shall acquire any conflicting interest, it shall, within ninety (90) days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign in the manner and

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with the effect specified in the provisions described below. For the purpose of this provision a banking or lending relationship shall not constitute a conflicting interest, however, the Master Trustee shall be deemed to have a conflicting interest if: (i) it receives written notice from the Obligated Group Agent (so long as no member of the Obligated Group is in default under the Master Indenture) to the effect that the Master Trustee has a conflicting interest, (ii) it receives written notice from any Related Bond Issuer to the effect that the Master Trustee has a conflicting interest, or (iii) it receives written notice from the holder of any Note to the effect that the Master Trustee has a conflicting interest. Resignation and Removal; Appointment of Successor Master Trustee The Master Trustee may at any time resign by giving written notice of resignation to each Note Obligor and by mailing notice of resignation to all registered Holders of the Notes and Guaranties at their last addresses appearing on the registry books. Upon receiving such notice of resignation, the Obligated Group Agent shall promptly appoint a successor trustee by a written instrument, in duplicate, executed by the Obligated Group Agent, one copy of which instrument shall be delivered to the Master Trustee so resigning and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. In case at any time any of the following shall occur: (1) the Master Trustee shall fail to comply with the provisions of the Master Indenture after

written request therefor by any Noteholder who has been a bona fide Noteholder for at least six months, 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 or rehabilitation, conservation or liquidation, then, in any such case, the Obligated Group Agent may remove the Master Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Master Trustee so removed and one copy to the successor trustee, or any Noteholder who has been a bona fide Noteholder for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court or competent jurisdiction for the removal of the Master Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribed, remove the Master Trustee and appoint a successor Trustee.

The Obligated Group Agent or holders of a majority in aggregate principal amount of the Notes at the time outstanding may at any time remove the Master Trustee and appoint a successor trustee by delivering to the Master Trustee to be removed, to the successor trustee so appointed evidence of the action taken by the Noteholders. Any resignation or removal of the Master Trustee and any appointment of a successor trustee pursuant to any of the provisions of the Master Indenture shall become effective upon acceptance of appointment by the successor trustee. Concerning any Successor Master Trustee Every successor Master Trustee appointed under the Master Indenture shall be a trust institution or bank located in Missouri in good standing and qualified to accept such trust having a reported capital, surplus and undivided profit of not less than $50,000,000. Every successor Master Trustee so appointed shall execute, acknowledge and deliver to its predecessor and also to each Note Obligor an instrument in writing accepting such appointment under the Master Indenture, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor; but such predecessor shall, nevertheless, on the written request of the Obligated Group Agent, or of its successor Master Trustee transfer all the estates, properties, rights, powers and trusts of such predecessor under the Master Indenture; and every predecessor Master Trustee shall deliver all securities and moneys held by its as Master Trustee under the master Indenture to its successor. Should any instrument in writing from any Note Obligor be required by any successor trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties in the Master

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Indenture vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on requests be executed, acknowledged and delivered by such Note Obligor. The resignation of any Master Trustee and the instrument or instruments removing any Master Trustee and appointing a successor under the Master Indenture, together with all other instruments provided for in the Master Indenture shall be filed and/or recorded by the successor Master Trustee in each recording office, if any, where the Master Indenture shall have been filed and/or recorded. Preferential Collection of Claims Against Note Obligors Subject to certain provisions as set forth in the Master Indenture and described below, if the Master Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of any Note Obligor, within four months prior to a default in the payment in full of the principal of and interest on (i) any of the Notes or (ii) any securities upon which any Note Obligor is an obligor (as defined in the Trust Indenture Act of 1939) outstanding under any other indenture (A) under which the Master Trustee is also trustee, (B) which contains provisions substantially similar to the provisions described in this paragraph, and (C) under which a default exists at the time of the apportionment of the funds and property held in such special account or subsequent to such a default, then, unless and until such default shall be cured, the Master Trustee shall set apart and hold in a special account for the benefit of the Master Trustee individually, the holders of the Notes and the holders of such other indenture securities: (1) an amount equal to any and all reductions in the amount due and owing upon any claim as

such creditor in respect of principal or interest, effected after the beginning of such four-month period and valid as against such Note Obligor and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in subparagraph (2) below, or from the exercise of any right of set-off which the Master Trustee could have exercised if a petition in bankruptcy had been filed by or against such Note Obligor upon the date of such default; and

(2) all property received by the Master Trustee in respect of any claim as such creditor, either

as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four-month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of such Note Obligor and its other creditors in such property or such proceeds.

There shall be excluded from the operation of paragraph described above a creditor relationship arising from: (1) The ownership or acquisition of securities issued under any indenture, or any security or

securities having a maturity of one year or more at the time of acquisition by the Master Trustee; (2) Advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by

the Master Indenture, for the purpose of preserving any property which shall at any time be subject to the Master Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is giving to the holders of the Notes at the time and in the manner provided in the Master Indenture;

(3) Disbursements made in the ordinary course of business in the capacity of trustee under an

indenture, transfer agent, conversion agent, registrar, custodian, paying agent, fiscal agent or depository or other similar capacity;

(4) An indebtedness created as a result of services rendered or premises rented, or an

indebtedness created as a result of goods or securities sold in a cash transaction as defined in the Master Indenture;

(5) The ownership of stock or other securities of a corporation organized under the provisions

of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Corporation; or

(6) The acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange,

acceptances or obligations which fall within the classification of self-liquidating paper as defined in the Master Indenture.

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Supplements Not Requiring Consent of Noteholders Each Note Obligor, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Supplements for one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in the Master Indenture. (b) To correct or supplement any provision in the Master Trust Indenture which may be inconsistent with any other provision in the Master Indenture, or to make, add, delete, or modify any other provisions with respect to matters or questions arising under the Master Indenture which shall not materially adversely affect the interest of the Holders. (c) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them subject to the Master Indenture. (d) To qualify the Master Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect. (e) To create and provide for the issuance of a series of Notes or a Guaranty as permitted under the Master Indenture. (f) To obligate a successor to the Corporation or other Note Obligor as provided in the Master Indenture. (g) To add new Note Obligors, as provided in the Master Indenture. (h) To obtain or upgrade the rating on Related Bonds. (i) To preserve the exemption from Federal income tax of the interest on any tax-exempt Related Bond. Supplements Requiring Consent of Noteholders Other than Supplements referred to in the Master Indenture and subject to the terms and provisions and limitations contained in the Master Indenture and not otherwise, the Holders of not less than fifty-one percent (51%) in aggregate principal amount of the Notes then Outstanding shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by each Note Obligor, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee of such Supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture; provided, however, nothing in the Master Indenture shall permit or be construed as permitting a Supplement which would: (i) Extend the stated maturity of or time for paying interest on any Note or reduce the principal

amount of or the redemption premium or rate of interest payable on any Note without the consent of the holder of such Note; or

(ii) Reduce the aggregate principal amount of Notes then Outstanding the consent of the

Holders of which is required to authorize such Supplement without the consent of the Holders of all Notes then Outstanding.

If at any time Note Obligors shall request the Master Trustee to enter into a Supplement pursuant to the Master Indenture, which request is accompanied by such Supplement and copies of the resolutions or other actions of the various Governing Bodies certified by an appropriate certifying officer, and if within such period, not exceeding three years, as shall be prescribed by the Obligated Group Agent, following the request, the Master Trustee shall receive an instrument or instruments purporting to be executed by the Holders of not less than the aggregate principal amount of Notes specified in the Master Indenture for the Supplement in question which instrument or instruments shall refer to the proposed Supplement and shall specifically consent to and approve the execution thereof in

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substantially the form of the copy thereof as on file with the Master Trustee, thereupon, but not otherwise, the Master Trustee may execute such Supplement in substantially such form, without liability or responsibility to any Holder of any Note, whether or not such Holder shall have consented thereto. Any such consent shall be binding upon the Holder of the Note giving such consent and upon any subsequent Holder of such Note and of any Note issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Note giving such consent or by a subsequent Holder thereof by failing with the Master Trustee, prior to the execution by the Master Trustee of such Supplement, such revocation and, if such Note or Notes are transferable by delivery, proof that such Notes are held by the signer of such revocation in the manner permitted by the Master Indenture. At any time after the Holders of the required principal amount or number of Notes shall have filed their consents to the Supplement, the Master Trustee shall make and file with each Note Obligor, a written statement to that effect. Such written statement shall be conclusive that such consents have been so filed. If the Holders of the required principal amount or number of the Notes Outstanding shall have consented to and approved the execution of such Supplement as in the Master Indenture provided, no Holder of any Note shall have any right to object to the execution thereof, or to object to any of the terms and provisions contained in the Master Indenture or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Master Trustee or any Note Obligor from executing the same or from taking any action pursuant to the provisions thereof. Satisfaction and Discharge of Master Indenture If (i) any Note Obligor or Obligors shall deliver to the Master Trustee for cancellation all Notes theretofore authenticated (other than any Notes which shall have been mutilated, destroyed, lost or stolen and which shall have been replaced or paid) and not theretofore cancelled, or (ii) all Notes not theretofore cancelled or delivered to the Master Trustee for cancellation shall have become due and payable, or (iii) the members of the Obligated Group or any thereof shall deposit with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between the Corporation and such bank or trust company in form acceptable to the Master Trustee) as trust funds the entire amount of moneys or investment obligations sufficient to pay at maturity or upon redemption all Notes not theretofore cancelled or delivered to the Master Trustee for cancellation, including principal and interest due or to become due to such date of maturity or redemption date, as the case may be, and if in the case of clause (i), (ii) , or (iii) above the members of the Obligated Group or any thereof shall also pay or cause to be paid all other sums payable under the Master Indenture by the members of the Obligated Group or any thereof, then the Master Indenture shall cease to be of further effect, and the Master Trustee, on demand of the members of the Obligated Group or any thereof, and at the cost and expense of the members of the Obligated Group or any thereof, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture; provided, however, that is there exists a Related Bond Indenture with respect to any Indebtedness Outstanding under the Master Indenture, the type of investment obligations permitted for purposes of clause (iii) above shall, with respect to such Indebtedness only, be limited to the type of investment obligations permitted under such Related Bond Indenture for the discharge of the Related Bonds. Each Note Obligor, respectively, in the Master Indenture agrees to reimburse the Master Trustee for any costs or expenses theretofore and thereafter reasonably and properly incurred by the Master Trustee in connection with the Master Indenture or such Note. Payment of Notes After Discharge of Lien Notwithstanding the discharge of the lien of the Master Indenture as therein provided, the Master Trustee shall nevertheless retain such rights, powers and duties under the Master Indenture as may be necessary and convenient for the payment of amounts due or to become due on the Notes and the registration, transfer, exchange and replacement of Notes as provided in the Master Indenture. Nevertheless, any moneys held by the Master Trustee or any paying agent for the payment of the principal of, premium, if any or interest on any Note remaining unclaimed for five years after the principal of all Notes has become due and payable, whether at maturity or upon proceedings for redemption or by declaration as provided in the Master Indenture, shall then be paid to the members of the Obligated Group and the Holders of any Notes or coupons not theretofore presented for payment shall thereafter be entitled to look only to the members of the Obligated Group for payment thereof as unsecured creditors and all liability of the Master Trustee or any paying agent with respect to such moneys shall thereupon cease.

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Appointment of Obligated Group Agent as Agent for Note Obligors Each Note Obligor in the Master Indenture appoints the Obligated Group Agent as its agent in the execution of any Supplemental Master Indenture, Note or Guaranty issued or delivered in connection therewith or related thereto, including, but without in any way limiting the foregoing, any Loan Agreement issued to secure or in connection with any Related Bond Indenture or Related Bonds.

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SUMMARY OF THE BOND INDENTURES The following is a summary of certain provisions contained in the Bond Indentures. The following is not a comprehensive description, however, and is qualified in its entirety by reference to the Bond Indentures for a complete recital of their terms. The Series 2019A Bonds and the Series 2019B Bonds each will be authorized, issued and secured by separate related Bond Indenture for such series between the Authority and the Bond Trustee under such Bond Indenture. The Series 2019A Bond Indenture and the Series 2019B Bond Indenture have separate funds and trust estates. Certain differences between the Bond Indentures, and provisions relevant only to one Bond Indenture but not the other, are indicated in the definitions above and the summaries below (e.g., “{*Series 2019A Bonds only*}” or “{{*Series 2019B Bonds only*}}”. Trust Estate The Trust Estate under the Bond Indenture consists of the following property: (a) All right, title and interest of the Authority (including the right to enforce any of the

terms thereof) in, to and under (1) the Loan Agreement, and all payments derived by the Authority from the Corporation including Loan Payments and other amounts to be received by the Authority and paid by the Corporation under and pursuant to and subject to the Loan Agreement (but excluding the Authority’s rights to payment of its fees and expenses, to indemnification, to notice and as otherwise expressly set forth in the Loan Agreement and excluding any payments made by the Bond Trustee or the Corporation to meet the rebate requirements of Section 148(f) of the Code), (2) the Series 2019[A][B] Bond Note, and (3) all financing statements or other instruments or documents evidencing, securing or otherwise relating to the loan of the proceeds of the Bonds;

(b) All moneys and securities (except moneys and securities held in the Rebate Fund) from

time to time held by the Bond Trustee under the terms of the Bond Indenture; and (c) Any and all other property (real, personal or mixed) of every kind and nature from time

to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Bond Indenture by the Authority or by anyone in its behalf or with its written consent, to the Bond Trustee.

Creation of Funds and Accounts There are established in the custody of the Bond Trustee the following special trust funds in the name of the Authority to be designated as follows: (a) “Health and Educational Facilities Authority of the State of Missouri Costs of Issuance Fund—Lutheran Senior Services Projects, Series 2019[A][B]” (the “Costs of Issuance Fund”); (b) “Health and Educational Facilities Authority of the State of Missouri Project Fund - Lutheran Senior Services Projects, Series 2019[A][B]” (the “Project Fund”), and within such fund two separate and segregated trust accounts designated the “Capitalized Interest Account” and the “Project Account”; (c) “Health and Educational Facilities Authority of the State of Missouri Debt Service Fund - Lutheran Senior Services Projects, Series 2019[A][B]” (the “Debt Service Fund”); (d) “Health and Educational Facilities Authority of the State of Missouri Debt Service Reserve Fund - Lutheran Senior Services Projects, Series 2019[A][B]” (the “Debt Service Reserve Fund”); (e) “Health and Educational Facilities Authority of the State of Missouri Rebate Fund - Lutheran Senior Services Projects, Series 2019[A][B]” (the “Rebate Fund”); and

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{{*Series 2019B Bonds only*}} (f) “Health and Educational Facilities Authority of the State of Missouri - Lutheran Senior Services Projects - Series 2019B Entrance Fee Special Debt Service Fund” (the “Series 2019B Special Debt Service Fund”). Costs of Issuance Fund Moneys on deposit in the Costs of Issuance Fund shall be paid out from time to time by the Bond Trustee upon Written Requests of the Obligated Group Agent in amounts equal to the amount of Costs of Issuance certified in such Written Requests. Project Fund Moneys deposited in the Capitalized Interest Account of the Project Fund shall be applied in accordance with the provisions of the Bond Indenture to pay interest on the Bonds as the same become due and payable. Moneys deposited in the Project Account of the Project Fund shall be paid out from time to time by the Bond Trustee in order to pay or as reimbursement for payment made for the Costs of the Project, in each case within three Business Days after receipt by the Bond Trustee of Written Requests of the Obligated Group Agent in substantially the form set forth in the Bond Indenture and upon the conditions set forth therein. If after payment by the Bond Trustee of all disbursement requests theretofore tendered to the Bond Trustee under the Bond Indenture and after receipt by the Bond Trustee of the statements required by the Bond Indenture respecting completion of the Project and after all rebatable earnings have been transferred to the Rebate Fund pursuant to the requirements of the Tax Agreement, there shall remain any moneys in the Project Fund, such moneys shall be deposited in the Debt Service Fund and used to redeem Bonds at the earliest permissible date, or, in the discretion of the Obligated Group Agent, shall be applied for any other purpose that, based on an Opinion of Bond Counsel, will not cause the interest on the Bonds to be includible in gross income for federal income tax purposes. If an Event of Default specified in the Bond Indenture shall have occurred and the Bonds shall have been declared due and payable pursuant to the Bond Indenture, any balance remaining in the Project Fund, other than amounts required to be transferred to the Rebate Fund, shall without further authorization be deposited in the Debt Service Fund by the Bond Trustee with advice to the Obligated Group Agent and to the Authority of such action. Debt Service Fund The Bond Trustee shall make deposits and credits to the Debt Service Fund, as and when received, as follows: (1) All Loan Payments paid by the Corporation for deposit in the Debt Service Fund pursuant

to the Loan Agreement. (2) Interest earnings and other income on Permitted Investments required to be deposited in

the Debt Service Fund pursuant to the Bond Indenture. (3) All other moneys received by the Bond Trustee under the Loan Agreement or any other

Bond Document, when accompanied by written directions from the person depositing such moneys that such moneys are to be paid into the Debt Service Fund.

Except as otherwise provided in the Bond Indenture, moneys in the Debt Service Fund shall be expended solely in accordance with the Bond Indenture to pay the principal of and redemption premium, if any, and interest on the Bonds as the same become due and payable at maturity, upon redemption, by acceleration or otherwise. Debt Service Reserve Fund The Bond Trustee shall make deposits and credits to the Debt Service Reserve Fund, as and when received, as follows:

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(1) The initial deposit required to be made by the Bond Indenture; (2) The amounts required to be deposited by the Corporation pursuant to the Loan Agreement. Except as otherwise provided in the Bond Indenture, moneys in the Debt Service Reserve Fund shall be used to make up any deficiencies in the account for the Bonds in the Debt Service Fund for the payment of interest and principal when due and payable on the Bonds. Moneys in the Debt Service Reserve Fund shall also be used to pay the last Bonds becoming due and any remaining balance shall be transferred to the Debt Service Fund. If any amount is withdrawn from the Debt Service Reserve Fund for the purposes described in the first sentence of this paragraph, the Bond Trustee shall require the Corporation to restore such amount pursuant to the Loan Agreement. The Bond Trustee shall determine the Value of cash and Permitted Investments in the Debt Service Reserve Fund (i) on December 31 of each year (or on the next Business Day thereafter, if such day is not a Business Day), (ii) after any redemption of Bonds (other than a scheduled mandatory sinking fund redemption) or provision for payment of Bonds (other than all Bonds) pursuant to the Bond Indenture, (iii) on the date of any withdrawal from the Debt Service Reserve Fund to make up a deficiency in the Debt Service Fund and on the last Business Day of each month thereafter until the amount in the Debt Service Reserve Fund has been restored to the Debt Service Reserve Requirement, (iv) on the date on which the Bond Trustee obtains actual knowledge that any insurance policy, letter of credit or surety bond providing for payments into the Debt Service Reserve Fund is no longer entitled to be credited against the Debt Service Reserve Requirement, (v) on the date that is six months prior to the stated expiration date of any insurance policy, letter of credit or surety bond providing for payments into the Debt Service Reserve Fund, and (vi) at such other times as the Bond Trustee deems appropriate. If on any valuation date the amount on deposit in the Debt Service Reserve Fund is less than 90% of the Debt Service Reserve Requirement, then the Corporation shall make payments directly to the Bond Trustee for deposit in the Debt Service Reserve Fund in the amounts and at the times required by the Loan Agreement to make up such deficiency (except that, in the case of any deficiency due to a withdrawal to make up a deficiency in the Debt Service Fund, the payments shall be in the amounts and at the times required by the Loan Agreement). If at any time of valuation, the Value of cash and Permitted Investments on deposit in the Debt Service Reserve Fund is in excess of the Debt Service Reserve Requirement the amount of such excess shall be transferred to the Debt Service Fund. In connection with any partial redemption or defeasance of the Bonds prior to maturity, the Bond Trustee may, at the request of the Obligated Group Agent, use any amounts on deposit in the Debt Service Reserve Fund which will be in excess of the Debt Service Reserve Requirement after such redemption or defeasance to pay the principal of or the principal portion of the redemption price of said Bonds to be redeemed or defeased. The Debt Service Reserve Requirement may be satisfied by (i) deposits in cash or Permitted Investments, or (ii) an insurance policy, a letter of credit or surety bond providing for payments into the Debt Service Reserve Fund, issued by an institution which, at the time of issuance, is a Qualified Financial Institution, or (iii) by a combination of the foregoing. Rebate Fund There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Agreement. All amounts on deposit at any time in the Rebate Fund shall be held by the Bond Trustee in trust to the extent required to pay rebatable arbitrage to the United States of America, and neither the Corporation, the Authority nor the owner of any Bonds shall have any rights in or claim to such money. All amounts held in the Rebate Fund shall be governed by the Bond Indenture and by the Tax Agreement. {{*Series 2019B Bonds only*}} Series 2019B Special Debt Service Fund and Special Purchase The Bond Trustee shall deposit all 2019 Mason Pointe Independent Living Project First Entrance Fees received from the Corporation pursuant to the Loan Agreement in the Series 2019B Special Debt Service Fund. All amounts deposited in the Series 2019B Special Debt Service Fund shall be used by the Bond Trustee solely for the purposes of paying and redeeming the Series 2019B Bonds as set forth in this Section. On or before the second Business Day of January, April, July and October of each year commencing April in the year 2020, the Bond Trustee shall determine the maximum amount of Series 2019B Bonds that may be redeemed in accordance with the Bond Indenture from amounts then on deposit in the Series 2019B Special Debt

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Service Fund, in any integral multiple of $5,000, at a redemption price equal 100% of the principal amount of the Series 2019B Bonds being redeemed, plus accrued interest thereon to the redemption date, without premium, and the Bond Trustee shall (1) without direction from the Authority or the Corporation, give notice of redemption in accordance with the Bond Indenture, and (2) redeem the Series 2019B Bonds called for redemption on the first day of the next month. Any Series 2019B Bonds remaining Outstanding as of February 1, 2022 (the “Special Purchase Date”), that have not been or will not be redeemed as of the Special Purchase Date, shall be subject to mandatory tender by the Owners thereof for purchase by or on behalf of the Corporation on the Special Purchase Date at a purchase price equal to 100% of the Series 2019B Bonds being purchased, plus accrued interest thereon to the purchase date, without premium, and the Bond Trustee shall (1) without direction from the Authority or the Corporation, give notice of mandatory tender for purchase to the Owners of such Series 2019B Bonds not later than 20 days prior to the Special Purchase Date, and (2) cause such Series 2019B Bonds to be purchased with moneys to be provided to the Bond Trustee by or on behalf of the Corporation on or prior to the Special Purchase Date in accordance with the Loan Agreement. Any Series 2019B Bonds not presented to the Bond Trustee for payment shall be deemed to be presented for payment on the Special Purchase Date, and the Owners of such Series 2019B Bonds shall not be entitled to any benefits of the Bond Indenture, except for payment of the purchase price of such Series 2019B Bonds in the manner specified in the Bond Indenture. No amount received by the Bond Trustee as a particular deposit of 2019 Mason Pointe Independent Living Project First Entrance Fees shall remain in the Series 2019B Special Debt Service Fund without application as described in this Section for a period exceeding twelve (12) months after the date of original deposit of such amount in the Series 2019B Special Debt Service Fund. Any amounts remaining on deposit in the Series 2019B Special Debt Service Fund when the Series 2019B Bonds are no longer Outstanding shall be transferred by the Bond Trustee to the Corporation, so long as the Corporation is not in default of any of its obligations under the Loan Agreement or the Master Indenture, after which the Series 2019B Special Debt Service Fund shall be closed. After the Series 2019B Special Debt Service Fund is closed, the Corporation may, in the Corporation’s sole discretion, use 2019 Mason Pointe Independent Living Project First Entrance Fees for any purpose (including without limiting the foregoing, payment, redemption, discharge or defeasance of any other indebtedness of the Corporation or the Obligated Group). Notwithstanding any provision of this Section, the Bond Indenture or the Loan Agreement to the contrary: (i) no payment by the Corporation to the Bond Trustee of 2019 Mason Pointe Independent Living Project First Entrance Fees with respect to an independent living unit shall be required until occupancy of such independent living unit; (ii) to the extent provided in the Master Indenture, 2019 Mason Pointe Independent Living Project First Entrance Fees shall constitute Gross Receipts pledged under the Master Indenture until used to pay principal or interest of Series 2019B Bonds, and at any time an Event of Default has occurred and is continuing under the Master Indenture of which the Bond Trustee has notice pursuant to the Bond Indenture, any amounts on deposit in the Series 2019B Special Debt Service Fund shall be immediately transferred by the Bond Trustee to or for the control of the Master Trustee or the Obligated Group under the Master Indenture to be available for application pursuant to the Master Indenture (for payment of Notes and Guarantees secured thereunder on a parity basis). Investment of Moneys Moneys held in each of the funds and accounts under the Bond Indenture shall, pursuant to written direction of the Corporation Representative, be invested and reinvested by the Bond Trustee in accordance with the provisions of the Bond Indenture and the Tax Agreement in Permitted Investments which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. Absent such written direction, the Bond Trustee shall invest and reinvest moneys held in each of the funds and accounts under the Bond Indenture in Permitted Investments of the type described in subsection (i) of the definition thereof. The Bond Trustee may make any investments through its own bond department or short-term investment department and may pool moneys for investment purposes, except moneys held in the yield restricted portion of any fund or account, which shall be invested separately. Any such Permitted Investments 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 in which such moneys are originally held. The interest accruing on each fund or account and any profit realized from such Permitted Investments (other than any amounts required to be deposited in the Rebate Fund pursuant to the Bond Indenture) shall be credited to

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such fund or account, and any loss resulting from such Permitted Investments shall be charged to such fund or account. The Bond Trustee shall sell and reduce to cash a sufficient amount of such Permitted Investments whenever the cash balance in such fund or account is insufficient for the purposes of such fund or account. Events of Default If any one or more of the following events occur, it is defined as and declared to be and to constitute an “Event of Default” under the Bond Indenture: (a) default in the due and punctual payment of any interest on any Bond when the same becomes due and payable; or (b) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when the same becomes due and payable, whether at the stated maturity or accelerated maturity thereof, or upon proceedings for redemption thereof; or (c) default in the performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Bond Indenture or any Supplemental Bond Indenture on the part of the Authority to be performed, and such incapacity or default shall continue for 60 days after written notice specifying such default and requiring the same to be remedied shall have been given to the Authority and the Corporation by the Bond Trustee (which notice may be given by the Bond Trustee in its discretion and shall be given at the written request of the Owners of not less than 10% in aggregate principal amount of the Bonds then Outstanding); provided, however, if any such default shall be correctable but is such that it cannot be corrected within such period, it shall not constitute an Event of Default if corrective action is instituted by the Authority or the Corporation within such period and diligently pursued until the default is corrected; or (d) any Event of Default as specified in the Loan Agreement has occurred and is continuing and has not been waived; or (e) any Event of Default as specified in the Master Indenture has occurred and is continuing and has not been waived. Acceleration of Maturity in Event of Default If the Series 2019[A][B] Bond Note has been declared by the Master Trustee to be immediately due and payable, then all Bonds Outstanding shall become and be immediately due and payable, anything in the Bonds or the Bond Indenture to the contrary notwithstanding. In addition, if an Event of Default shall have occurred and be continuing, the Bond Trustee may, and if requested by the Owners of not less than 25% in principal amount of the Bonds Outstanding shall, by notice in writing delivered to the Authority and the Corporation, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable; provided that if at any time after the principal of the Bonds then Outstanding shall have so become due and payable, and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such acceleration or before the completion of the enforcement of any other remedy under the Bond Indenture, all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds on overdue installments of interest in respect to which such default shall have occurred, and all arrears of payments of principal when due (other than payments of principal due as a result of acceleration), as the case may be, and all fees and expenses of the Bond Trustee in connection with such default shall have been paid or provided for, and if any acceleration of the Series 2019[A][B] Bond Note is annulled in accordance with the Master Indenture, then, upon the written request of the Owners of at least a majority in aggregate principal amount of all Bonds then Outstanding, the acceleration of the Bonds then Outstanding and the consequences of such acceleration shall be annulled or rescinded, but no such annulment or rescission shall extend to or affect any subsequent acceleration of the Bonds then Outstanding, or impair any right consequent hereon.

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Exercise of Remedies by the Bond Trustee Upon the occurrence and continuance of any Event of Default under the Bond Indenture, unless the same is waived as provided in the Bond Indenture, the Bond Trustee shall have the following rights and remedies, in addition to any other rights and remedies provided under the Bond Indenture or by law: (a) Right to Bring Suit, Etc. The Bond Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Bonds Outstanding, including interest on overdue principal (and premium, if any) and on overdue installments of interest, and any other sums due under the Bond Indenture, to realize on or to foreclose any of its interests or liens under the Bond Indenture or any other Bond Document, to enforce and compel the performance of the duties and obligations of the Authority as set forth in the Bond Indenture and to enforce or preserve any other rights or interests of the Bond Trustee under the Bond Indenture with respect to any of the Trust Estate or otherwise existing at law or in equity. (b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by the Owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Bond Indenture, the Bond Trustee shall be obligated to exercise such one or more of the rights and remedies conferred by the Bond Indenture as the Bond Trustee shall deem most expedient in the interests of the Owners. (c) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and of the Owners under the Bond Indenture, the Bond Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer. (d) Suits to Protect the Trust Estate. The Bond Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Bond Indenture and to protect its interests and the interests of the Owners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under the Bond Indenture or be prejudicial to the interests of the Owners or the Bond Trustee, or to intervene (subject to the approval of a court of competent jurisdiction) on behalf of the Owners in any judicial proceeding to which the Authority or the Corporation is a party and which in the judgment of the Bond Trustee has a substantial bearing on the interests of the Owners. (e) Enforcement Without Possession of Bonds. All rights of action under the Bond Indenture or any of the Bonds may be enforced and prosecuted by the Bond Trustee without the possession of any of the Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Bond Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel, and subject to the Bond Indenture, be for the equal and ratable benefit of the Owners of the Bonds in respect of which such judgment has been recovered. (f) Restoration of Positions. If the Bond Trustee or any Owner has instituted any proceeding to enforce any right or remedy under the Bond Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Bond Trustee or to such Owner, then and in every case the Authority, the Bond Trustee, the Corporation and the Owners shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Bond Indenture, and thereafter all rights and remedies of the Bond Trustee and the Owners shall continue as though no such proceeding had been instituted. Bond 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 Authority or any other obligor upon the Bonds or of such other obligor or their creditors, the Bond Trustee (irrespective of whether the principal of the Bonds shall then be due and payable, as therein expressed or by declaration or otherwise, and irrespective of whether the Bond Trustee shall

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have made any demand for the payment of overdue principal, premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Outstanding Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Bond Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel) and of the Owners allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Owner to make such payments to the Bond Trustee, and in the event that the Bond Trustee shall consent to the making of such payments directly to the Owners, to pay to the Bond Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel, and any other amounts due the Bond Trustee under the Bond Indenture. Nothing in the Bond Indenture shall be deemed to authorize the Bond Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Owner thereof, or to authorize the Bond Trustee to vote in respect of the claim of any Owner in any such proceeding. Limitation on Exercise of Remedies by Bondowners 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 the Bond Indenture or for the execution of any trust or for the appointment of a receiver or any other remedy, unless (a) a default has occurred of which the Bond Trustee has been notified as provided in the Bond Indenture or of which by said section the Bond Trustee is deemed to have notice, (b) such default shall have become an Event of Default, (c) the Owners of not less than 25% in aggregate principal amount of Bonds then Outstanding shall have made written request to the Bond Trustee, shall have offered it reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit or proceeding in its own name, and shall have offered to the Bond Trustee indemnity as provided in the Bond Indenture, and (d) the Bond Trustee shall thereafter fail or refuse to exercise the powers granted in the Bond Indenture or to institute such action, suit or proceeding in its own name; and such notification, request and offer of indemnity are declared in every case, at the option of the Bond Trustee, to be conditions precedent to the execution of the powers and trusts of the Bond Indenture, and to any action or cause of action for the enforcement of the Bond Indenture, or for the appointment of a receiver or for any other remedy, 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 Bond Indenture by its, her, his or their action or to enforce any right under the Bond Indenture except in the manner provided in the Bond Indenture, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner provided in the Bond Indenture, and for the equal benefit of the Owners of all Bonds then Outstanding. Nothing in the Bond Indenture contained shall, however, affect or impair the right of any Bondowner to payment of the principal of and interest on any Bond at and after the maturity thereof or the obligation to pay the principal of, redemption premium, if any, and interest on each of the Bonds to their respective Owners at the time, place, from the source and in the manner expressed herein and in the Bonds or affect or interfere with the right of any owner to institute suit for the enforcement of any such payment. Right of Bondowners to Direct Proceedings Except as provided in the Bond Indenture, the Owners of a majority in aggregate principal amount of Bonds then Outstanding shall have the right, at any time, 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 the Bond Indenture, or for the appointment of a receiver, custodian or any other proceedings; provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Bond Indenture and provided, further, that the Bond Trustee shall have the right to decline to follow any such direction if the Bond Trustee in good faith shall determine that the proceedings so directed would involve it in personal liability for which it has not been indemnified.

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Payment of Defaulted Interest Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed in the following manner. The Corporation shall notify the Bond Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be such as will enable the Bond Trustee to comply with the next sentence hereof), and shall deposit with the Bond Trustee at the time of such notice an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Bond Trustee for such deposit prior to the date of the proposed payment; money deposited with the Bond Trustee shall be held in trust for the benefit of the Owners of the Bonds entitled to such Defaulted Interest as provided in this Section. Following receipt of such funds the Bond Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Bond Trustee of the notice of the proposed payment. The Bond Trustee shall promptly notify the Corporation of such Special Record Date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Owner of a Bond entitled to such notice at the address of such owner as it appears on the Bond Register not less than 10 days prior to such Special Record Date. Application of Moneys in Event of Default Any moneys held or received by the Bond Trustee (after the deductions for payment of costs and expenses of proceedings resulting in the collection of such moneys, including attorneys’ fees and expenses) together with any other sums then held by the Bond Trustee as part of the Trust Estate (other than the Rebate Fund) shall be applied in the following order, at the date or dates fixed by the Bond Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) First: To the payment of all amounts due the Bond Trustee as compensation and reimbursement and the creation of a reserve for anticipated fees, costs and expenses; (b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Bonds for principal and premium, if any, and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Bond Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal and premium, if any, and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal and interest, without any preference or priority, ratably according to the aggregate amount so due; and (c) Third: To the payment of the remainder, if any, to the Corporation or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. Waivers of Events of Default The Bond Trustee may waive any Event of Default under the Bond Indenture and its consequences and rescind any declaration of maturity of principal and shall so waive and rescind upon the written request of the Owners of at least a majority in aggregate principal amount of all Bonds then Outstanding in the case of any default; provided that there shall not be waived without the consent of the Owners of all the Bonds Outstanding (a) an Event of Default in the payment of the principal of any Outstanding Bonds at the date of maturity specified therein, or (b) any default in the payment when due of the interest on any such Bonds unless, prior to such waiver or rescission of the Event of Default referred to in (a) or (b) above, all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds on overdue installments of interest in respect to which such default shall have occurred, and all arrears of payments of principal when due, (other than payments of principal due as a result of acceleration), as the case may be, and all expenses of the Bond Trustee in connection with such default shall have

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been paid or provided for. In case of any such waiver or rescission, or in case any proceeding taken by the Bond Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every case the Authority, the Corporation, the Bond Trustee and the Bondowners shall be restored to their former positions, rights and obligations under the Bond Indenture, respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. The Bond Trustee The Bond Indenture contains various provisions regarding the performance by the Bond Trustee of its duties under the Bond Indenture and various limitations on the liability of the Bond Trustee. The Bond Indenture requires that there shall at all times be a Bond Trustee thereunder which shall be a commercial bank or trust company organized and doing business under the laws of the United States of America or of any state thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by federal or state authority and must have a combined capital and surplus of at least $50,000,000 or be a subsidiary or affiliate of a trust Corporation or commercial bank which has a reported capital and surplus of not less than $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such 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 Bond Trustee shall cease to be eligible in accordance with this Section, it shall resign immediately in the manner and with the effect specified in this Article. The Bond Trustee may resign at any time by giving written notice thereof to the Authority, the Corporation, and each Owner of Bonds Outstanding as shown by the Bond Register required by the Bond Indenture to be kept by the Bond Trustee. If an instrument of acceptance by a successor Bond Trustee shall not have been delivered to the Bond Trustee within 30 days after the giving of such notice of resignation, the resigning Bond Trustee may petition any court of competent jurisdiction for the appointment of a successor Bond Trustee. If the Bond Trustee has or shall acquire any conflicting interest (within the meaning of the Trust Indenture Act of 1939, as amended), it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the Authority or the Corporation (so long as the Corporation is not in default under this Bond Indenture) that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in the preceding sentence. The Bond Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Authority and the Bond Trustee signed by the Owners of a majority in principal amount of the Outstanding Bonds, or, so long as the Corporation is not in default under the Loan Agreement, by the Corporation. The Authority, the Corporation or any Bondowner may at any time petition any court of competent jurisdiction for the removal for cause of the Bond Trustee. If at any time: (1) the Bond Trustee shall fail to resign due to a conflicting interest as described in the Bond Indenture after written request therefor by the Authority, the Corporation or any Bondowner, or (2) the Bond Trustee shall cease to be eligible under eligibility provisions of the Bond Indenture and shall fail to resign after written request therefor by the Authority, the Corporation or by any such Bondowner, or (3) the Bond Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Bond Trustee or of its property shall be appointed or any public officer shall take charge or control of the Bond Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Authority may remove the Bond Trustee, or the Corporation or any Bondowner may petition any court of competent jurisdiction for the removal of the Bond Trustee and the appointment of a successor Bond Trustee. The Bond Trustee shall give notice of each resignation and each removal of the Bond Trustee and each appointment of a successor Bond Trustee to the Authority and the Registered Owners of Bonds as their names and addresses appear in the Bond Register maintained by the Bond Trustee. Each notice shall include the name of the successor Bond Trustee and the address of its corporate trust office. No resignation or removal of the Bond Trustee and no appointment of a successor Bond Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Bond Trustee under the requirements of the Bond Indenture. If the Bond Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Bond Trustee for any cause, the Authority, the Corporation (so long as no event of default by the Corporation under the Bond Indenture or under the Loan Agreement has occurred and is continuing), or the Owners of a majority in principal amount of Bonds Outstanding (if an event of default by the Corporation under the Bond Indenture or under the Loan Agreement has occurred and is continuing), by an instrument or concurrent instruments

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in writing delivered to the Authority and the retiring Bond Trustee, shall promptly appoint a successor Bond Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee, by written instrument, may similarly appoint a temporary successor to fill such vacancy until a new Bond Trustee shall be so appointed by the Authority, the Corporation or the Bondowners. If a successor Bond Trustee shall be appointed in the manner herein provided, the successor Bond Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Bond Trustee and supersede the retiring Bond Trustee and any temporary successor Bond Trustee appointed by such receiver or trustee. If, within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, no successor Bond Trustee shall have been so appointed and accepted appointment in the manner herein provided, any Bondowner may petition any court of competent jurisdiction for the appointment of a successor Bond Trustee, until a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. Every such successor Bond Trustee appointed pursuant to this Section shall be a bank with trust powers or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of this Article. Supplemental Bond Indentures Not Requiring Consent of Bondowners The Authority, at the request of the Corporation, and the Bond Trustee may from time to time, without the consent of or notice to any of the Bondowners, enter into such Supplemental Bond Indenture or Supplemental Bond Indentures, for any one or more of the following purposes: (a) to more precisely identify the Project, or to substitute or add additional property thereto as permitted by the Loan Agreement, or to correct or amplify the description of any property at any time subject to the lien of the Bond Indenture, or better to assure, convey and confer unto the Bond Trustee any property subject or required to be subjected to the lien of the Bond Indenture, or to subject to the lien of the Bond Indenture additional property; (b) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of Bonds, as set forth in the Bond Indenture, additional conditions, limitations and restrictions thereafter to be observed; (c) To cure any ambiguity or formal defect or omission in the Bond Indenture or to release property from the Trust Estate that was included by reason of an error or other mistake; (d) To grant to or confer upon the Bond Trustee for the benefit of the Bondowners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondowners or the Bond Trustee or either of them; (e) To subject to the Bond Indenture additional revenues, properties or collateral; (f) To modify, amend or supplement the Bond Indenture or any indenture supplemental thereto in such manner as to permit the qualification of the Bond Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of any state of the United States; (g) To provide for the refunding or advance refunding of any Bonds; (h) To evidence the appointment of a separate trustee or the succession of a new trustee under the Bond Indenture; or (i) To make any other change which, in the judgment of the Bond Trustee, does not materially adversely affect the interests of the Bondowners. Supplemental Bond Indentures Requiring Consent of Bondowners With the consent of the Owners of not less than a majority in principal amount of the Bonds then Outstanding, and with the consent of the Corporation and the Authority, at the request of the Corporation, the Bond

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Trustee may from time to time enter into such other Supplemental Bond Indenture or Supplemental Bond Indentures as shall be deemed necessary or desirable by the Bond Trustee for the purpose of modifying, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Bond Indenture or in any Supplemental Indenture; provided that nothing in the Bond Indenture contained shall permit or be construed as permitting, without the consent of the Owners of all of the Bonds then Outstanding: (a) an extension of the maturity of the principal of or the scheduled date of payment of interest on any Bond, or (b) a reduction in the principal amount, redemption premium or any interest payable on any Bond, or (c) a privilege, preference or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of Bonds the Owners of which are required for consent to any such Supplemental Bond Indenture, or (e) the modification of the rights, duties or immunities of the Bond Trustee, without the written consent of the Bond Trustee. Notwithstanding the foregoing, (i) during any period of time in which an Event of Default has occurred and is continuing, an amendment of the type described in clauses (a) and (b) above may be made with respect to an Outstanding Bond with the consent of the Owners of at least eighty percent (80%) in aggregate principal amount of all Outstanding Bonds; provided, however, any such amendment shall not result in a change in privilege, preference or priority of Bonds over any other Bonds and no such amendment described in clauses (a) and (b) above shall result in a disproportionate change, reduction or modification with respect to any Bonds. Supplemental Loan Agreements Not Requiring Consent of Bondowners The Authority, at the request of the Corporation and the Bond Trustee, may, without the consent of or notice to the Bondowners, consent to the execution of any Supplemental Loan Agreements by the Authority and the Corporation as may be required: (a) by the Loan Agreement and the Bond Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Loan Agreement, or (c) in connection with any other change therein which, in the judgment of the Bond Trustee, does not materially adversely affect the interests of the Bondowners. Supplemental Loan Agreements Requiring Consent of Bondowners With the consent of the Owners of not less than a majority in principal amount of the Bonds then Outstanding, the Bond Trustee may consent to the execution of any Supplemental Loan Agreement by the Authority, at the request of the Corporation; provided that no such Supplemental Loan Agreement shall be entered into, without the consent of the Owners of all Bonds then Outstanding, which permits: (a) an extension of the maturity of the principal of or the interest on the Series 2019[A][B] Bond Note securing payments under the Loan Agreement, or (b) a reduction in the principal amount of the Series 2019[A][B] Bond Note securing payments under the Loan Agreement or the premium or rate of interest payable thereon. Notwithstanding the foregoing, (i) during any period of time in which an Event of Default has occurred and is continuing, an amendment of the type described in clauses (a) and (b) above may be made with respect to an Outstanding Bond with the consent of the Owners of at least eighty percent (80%) in aggregate principal amount of all Outstanding Bonds; provided, however, any such amendment shall not result in a change in privilege, preference or priority of Bonds over any other Bonds and no such amendment described in clauses (a) and (b) above shall result in a disproportionate change, reduction or modification with respect to any Bonds or the Series 2019[A][B] Bond Note. Bonds Deemed to be Paid Any Bond or Bonds shall be deemed to be paid and no longer Outstanding under the Bond Indenture and shall cease to be entitled to any lien, benefit or security under the Bond Indenture if the Bonds are paid in full or

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provision for the payment of such Bond or Bonds has been made in any one or more of the following ways: (a) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on such Bond or Bonds, as and when the same become due and payable; (b) by delivering and surrendering to the Bond Trustee, for cancellation by it, such Bond or Bonds; or (c) by depositing with the Bond Trustee, in trust, (1) moneys or Defeasance Obligations in such amounts and with maturities as the Bond Trustee shall determine will be, together with other moneys deposited therein and together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, fully sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bond or Bonds at or before their respective maturity dates and to pay the interest thereon as it comes due, (2) in the case of Bonds which do not mature or will not be redeemed within 180 days of the deposit referred to in (1) above, a verification report of a nationally recognized independent certified public accounting firm as to the adequacy of the trust funds to fully pay the Bonds deemed to be paid. Notwithstanding the foregoing, in the case of any Bonds which by their terms may be redeemed prior to the stated maturities thereof, no deposit under clause (c) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid until, as to all such Bonds which are to be redeemed prior to their respective stated maturities, proper notice of such redemption shall have been given in accordance with the Bond Indenture or irrevocable instructions shall have been given to the Bond Trustee to give such notice. Reserved Rights in Escrow The other provisions of the Bond Indenture notwithstanding, (a) subsequent to the date that moneys and/or Defeasance Obligations are deposited with the Bond Trustee to provide for the payment of all or any portion of the Bonds at the respective maturity dates therefor, the Authority may, if directed by the Corporation, elect to call such Bonds (or any portions thereof) on any earlier redemption date applicable to such Bonds (e.g., pursuant to the optional or extraordinary optional redemption provisions of the Bond Indenture) and/or cause to be delivered all or any portion of such Bonds acquired by the Corporation (whether by open market purchase or any other means) for cancellation and redemption in advance of their scheduled respective maturity or redemption dates, and may reduce the amount of moneys and/or Defeasance Obligations held in escrow for the remaining outstanding Bonds. No such election shall be made, however, unless the Corporation shall, in connection with the payment, discharge or defeasance resulting from such election, provide evidence to the Bond Trustee demonstrating satisfaction of the applicable requirements of the Bond Indenture for Bonds to be deemed paid. Satisfaction and Discharge of the Bond Indenture If the principal of, redemption premium, if any, and interest on all of the Bonds shall have been paid in accordance with their terms, or provision has been made for such payment as provided in the Bond Indenture, and provision shall also be made for paying all other sums payable under the Bond Indenture, including the payment of any rebatable arbitrage to the United States and the fees and expenses of the Authority, the Bond Trustee and any Paying Agent to the date of retirement of the Bonds, then the right, title and interest of the Bond Trustee in respect thereof shall thereupon cease, determine and be void, and thereupon the Bond Trustee, upon Written Request of the Corporation, and upon receipt by the Bond Trustee and the Authority of an Opinion of Bond Counsel to the effect that all conditions precedent to the satisfaction and discharge of the Bond Indenture have been complied with, shall cancel, discharge and release the Bond Indenture and shall execute, acknowledge and deliver to the Authority such instruments of satisfaction and discharge or release as shall be requisite to evidence such release and the satisfaction and discharge of the Bond Indenture.

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SUMMARY OF THE LOAN AGREEMENTS The following is a summary of certain provisions contained in the Loan Agreements. The following is not a comprehensive description, however, and is qualified in its entirety by reference to the Loan Agreements for a complete recital of their terms. The proceeds of the Series 2019A Bonds and the proceeds of the Series 2019B Bonds each will be loaned to the Corporation pursuant to a separate related Loan Agreement for such series between the Authority and the Corporation. Certain differences between the Loan Agreements, and provisions relevant only to one Loan Agreement but not the other, are indicated in the definitions above and the summaries below (e.g., “{*Series 2019A Bonds only*}” or “{{*Series 2019B Bonds only*}}”. Loan of Funds to the Corporation The Authority will make a loan to the Corporation, using the proceeds of the sale of the Bonds, and the Corporation agrees to receive the loan from the Authority for the purposes described in the Official Statement all as provided in the Loan Agreement and Bond Indenture. Upon the terms and conditions of the Loan Agreement and the Bond Indenture, the Authority shall make a loan to the Corporation by loaning to the Corporation the proceeds of the sale of the Bonds. The loan shall be made by depositing or transferring the Bond proceeds as provided in the Bond Indenture. As an inducement for the Authority to issue the Bonds and make the loan to the Corporation, and as evidence of and security for the Corporation’s obligations to make Loan Payments, and to further provide for the Loan Payments under the Loan Agreement, the Corporation shall cause the Series 2019[A][B] Bond Note to be issued under the Master Indenture to the Authority and pledged and assigned to the Bond Trustee. The Corporation shall pledge to the Authority all its right, title and interest in and to the proceeds of the loan, including any securities purchased with those proceeds and any earnings thereon, to secure the payment of the Bonds, such pledge to be effected by the deposit of such proceeds in accordance with the Bond Indenture. Such pledge shall continue so long as such proceeds are held by the Bond Trustee, it being understood that the Bond Trustee shall be authorized to apply and disburse such proceeds as provided in the Bond Indenture. the Corporation consents to the Authority assigning and pledging its interest in such proceeds to the Bond Trustee to secure the payment of the Bonds as set forth in the Bond Indenture. Use of Bond Proceeds The proceeds of the Bonds shall be deposited with the Bond Trustee and disbursed and applied as provided in the Bond Indenture and the Loan Agreement. Completion of the Project The Obligated Group Agent shall cause the Project to be diligently and continuously pursued and to be completed with reasonable dispatch, and to provide (from its own funds if required) all moneys necessary to complete the Project substantially in accordance with the plans and specifications for the Project. Changes or Amendments to the Project The Obligated Group Agent may make, authorize or permit such changes or amendments in the Project as it may reasonably determine to be necessary or desirable; provided, however, that no such change or amendment shall be made to the Project that would cause a material change in the cost, scope, nature or function of the Project, unless the Obligated Group Agent shall file with the Bond Trustee:

(a) a Certificate of Corporation Representative to the effect that the Project will, after such change or amendment, continue to constitute a “project” within the meaning of the Act, and such change or amendment will not result in any Property of the Obligated Group Agent being used for any purpose prohibited by the Loan Agreement or otherwise result in the Obligated Group Agent failing to comply with any provisions of the Loan Agreement; and

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(b) either (1) an Opinion of Bond Counsel addressed to the Bond Trustee and the Authority to the effect that such change or amendment will not result in the interest on the Bonds becoming includable in gross income for purposes of federal income taxation, or (2) a Certificate of Corporation Representative to the effect that the Obligated Group Agent expects to be able to shorten the average maturity of the Bonds to not exceed 120% of the average reasonably expected economic life of the facilities financed or refinanced with proceeds of the Bonds, as recalculated in accordance with the provisions of the Internal Revenue Code, through the deposit to the Debt Service Fund as described in the Loan Agreement.

Loan Payments To provide for the payment of the principal or purchase price of and redemption premium, if any, and interest on the Bonds, the Corporation shall make the following payments (“Loan Payments”) directly to the Bond Trustee, for the account of the Authority, for deposit as provided in the Bond Indenture, on the following dates, and otherwise as set out below: Debt Service Fund - Interest: At or before 11:00 a.m., St. Louis Time, at the Principal Office of the

Bond Trustee, on the Business Day immediately preceding the first day of each calendar month, commencing on the Business Day preceding March 1, 2019, an equal pro rata portion of the amount of the interest on the Bonds coming due on August 1, 2019, and thereafter, on the Business Day immediately preceding the first day of each calendar month, one-sixth of the amount of the interest on the Bonds coming due on the next Interest Payment Date; provided, however that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

Debt Service Fund - Principal: At or before 11:00 a.m., St. Louis Time, at the Principal Office of

the Bond Trustee, on the Business Day immediately preceding the first day of each calendar month, commencing on the Business Day immediately preceding March 1, 2019, an equal pro rata portion of the amount of the principal on the Bonds coming due on February 1, 2020, and thereafter, on the Business Day immediately preceding the first day of each calendar month, one-twelfth of the amount of the principal of the Bonds coming due on the next succeeding February 1 on which principal is due, whether at stated maturity, by redemption or acceleration or otherwise; provided, however, that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

Debt Service Fund - Redemption: On or before 11:00 a.m., St. Louis Time, at the Principal Office

of the Bond Trustee, on any date on which any Bonds are to be redeemed if the Corporation has exercised its right to redeem Bonds under any provision of the Bond Indenture or if any Bonds are required to be redeemed (other than pursuant to mandatory sinking fund redemption provisions) under any provision of the Bond Indenture, the redemption price of the Bonds being redeemed on such date.

{{*Series 2019B Bonds only*}} Series 2019B Entrance Fee Special Debt Service Fund - Redemption: At or before 11:00 a.m., St. Louis Time, at the Principal Office of the Bond Trustee, on the first Business Day of each January, April, July and October, commencing on the first Business Day of April in the year 2020, and thereafter for so long as the Series 2019B Bonds remain outstanding, the Corporation shall pay to the Bond Trustee all 2019 Mason Pointe Independent Living Project Entrance Fees; provided that no excess transfer is required if amounts on deposit in the Series 2019B Entrance Fee Special Debt Service Fund or the Debt Service Fund, or the Debt Service Reserve Fund irrevocably designated for payment of the Series 2019B Bonds are sufficient to redeem the Series 2019B Bonds in whole. Notwithstanding any provision of the Bond Indenture or the Loan Agreement to the contrary: (i) no payment by the Corporation to the Bond Trustee of a 2019 Mason Pointe Independent Living Project First Entrance Fee with respect to an independent living unit shall be required until occupancy of such independent living unit; and (ii) to the extent provided in the Master Indenture, 2019 Mason Pointe Independent Living Project First Entrance Fees shall constitute Gross Receipts pledged under the Master Indenture until used to pay principal or interest of Series 2019B Bonds, and at any time an Event of Default has occurred and is continuing under the Master Indenture, any 2019 Mason Pointe Independent Living Project First Entrance Fees shall be transferred to or for the control of the Master Trustee or the Obligated Group under the Master Indenture to

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be available for application pursuant to the Master Indenture (for payment of Notes and Guarantees secured thereunder on a parity basis).

{{*Series 2019B Bonds only*}} Series 2019B Entrance Fee Special Debt Service Fund – Special Purchase: On or before 11:00 a.m., St. Louis Time, on the Special Purchase Date, at the Principal Office of the Bond Trustee, the purchase price of all Series 2019B Bonds being purchased on the Special Purchase Date pursuant to the Bond Indenture.

Unpaid Loan Payments shall bear interest at the Prime Rate. Any interest charged and collected on an unpaid Loan Payment shall be deposited to the credit of the Debt Service Fund and applied to pay interest on overdue amounts in accordance with the Bond Indenture. Credits on Loan Payments Notwithstanding any provision contained in the Loan Agreement or in the Bond Indenture to the contrary, in addition to any credits on the Loan Payments resulting from the payment or prepayment of Loan Payments from other sources: (1) any moneys deposited by the Bond Trustee or the Corporation in the Debt Service Fund

for the payment of interest (including moneys received as accrued interest from the sale of Bonds and any initial deposit made from the proceeds of the sale of the Bonds) shall be credited against the obligation of the Corporation to pay interest on the Bonds as the same become due;

(2) any moneys deposited by the Bond Trustee or the Corporation in the Debt Service Fund

for the payment of principal shall be credited against the obligation of the Corporation to pay principal of the Bonds as the same become due or are subject to mandatory sinking fund redemption in the order of maturity thereof, except that prepayments for purposes of making an optional deposit into the Debt Service Fund for the redemption of Bonds shall be applied to the maturities of principal of the Bonds to be redeemed or purchased, delivered and cancelled from the proceeds of such optional deposit;

(3) the principal amount of Bonds of any series and maturity purchased by the Corporation

and delivered to the Bond Trustee, or purchased by the Bond Trustee and cancelled, shall be credited against the obligation of the Corporation to pay principal of the Bonds so purchased (including installment payments corresponding to mandatory sinking fund payments, if any, on the Bonds); provided that deposit of a Bond of one series and maturity may not be credited against a payment which would be used, in the normal course, to retire a Bond of another series and maturity; and

(4) the amount of any moneys transferred by the Bond Trustee from any other fund held

under the Bond Indenture and deposited in the Debt Service Fund for the payment of interest or principal shall be credited against the obligation of the Corporation to pay interest or principal, as the case may be, as the same become due.

Additional Payments The Corporation will make the following additional payments to the following persons:

Authority Fees. To the Authority upon demand, its regular ongoing annual fees and charges and all reasonable expenses, including but not limited to attorneys fees and financial advisor fees, incurred by the Authority in relation to the Bonds and the transactions contemplated by the Loan Agreement, the Bond Indenture and any of the Bond Documents, including all fees and charges of the Authority as provided for under the Act. Bond Trustee Fees and Professional Fees. To the Bond Trustee and any Paying Agent, registrars, counsel, accountants, engineers and other Persons when due, all reasonable fees, charges and expenses of such Persons for services rendered under the Bond Indenture and under any of the Bond Documents and

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expenses incurred in the performance of such services under the Bond Indenture and any of the Bond Documents for which such Persons are entitled to payment or reimbursement. Advances. To the Bond Trustee, the amount of all advances of funds made by it to perform covenants of the Corporation under the circumstances described in the Loan Agreement, with interest thereon at the rate of interest per annum equal to the Prime Rate. Rebate Payments. To the Bond Trustee, all rebate payments required under Section 148(f) of the Internal Revenue Code. Indemnification of Authority and Bond Trustee. The Corporation will, at its expense, pay and indemnify the Authority and the Bond Trustee and their respective current, former and future members, directors, officers and employees and agents from and against, all costs, expenses and charges, including reasonable counsel fees, incurred in enforcing any covenant or agreement of the Corporation or any other Member of the Obligated Group contained in any Bond Document. Such indemnification of the Authority shall be in addition to and not in lieu of certain other indemnification provisions contained in the Loan Agreement. Withdrawals from Debt Service Reserve Fund. If the Bond Trustee withdraws moneys from the Debt Service Reserve Fund to make up a deficiency in the Debt Service Fund to pay principal or interest on the Bonds, to the Bond Trustee for deposit in the Debt Service Reserve Fund monthly payments, each in an amount equal to one-twelfth of such withdrawal, on or before the 26th day of each month thereafter commencing with the seventh month following the withdrawal and continuing until the amount in the Debt Service Reserve Fund is at least equal to the Debt Service Reserve Requirement. Valuation of Debt Service Reserve Fund. If the value of the Debt Service Reserve Fund, as determined by the Bond Trustee pursuant to the Bond Indenture (other than clause (iii) thereof), is less than 90% of the Debt Service Reserve Requirement, the Corporation shall deliver to the Bond Trustee for deposit in the Debt Service Reserve Fund monthly payments, each in the amount of one-fourth of such deficiency, on or before the 26th day of each month for four months commencing with the second month immediately following such valuation, provided that if any deficiency determined pursuant to clause (iv) of the Bond Indenture, the Corporation shall immediately deliver to the Bond Trustee for deposit in the Debt Service Reserve Fund the full amount of such deficiency. Other Payments. All other payments of whatever nature which the Corporation has agreed to pay or assume under the Loan Agreement.

Covenants under the Master Indenture The Corporation and the Obligated Group Agent shall faithfully perform and comply with all applicable covenants, obligations, representations, undertakings and provisions contained in the Master Indenture. The Obligated Group Agent shall deliver to the Bond Trustee all reports, certificates, opinions and other documents required by the Master Indenture to be submitted to the Master Trustee at the time said reports, opinions or other documents are required to be submitted to the Master Trustee. Any Opinions of Bond Counsel required by the Master Indenture that relate to the Bonds shall be addressed to the Bond Trustee and the Authority in addition to the Master Trustee. The Corporation shall faithfully perform and comply with all covenants, obligations, representations, undertakings and duties of the Corporation stated in the Bond Indenture. Mortgages The Corporation, as Obligated Group Agent under the Master Indenture, acknowledges and certifies that members of the Obligated Group have caused to be executed for the benefit of all of the holders of Master Notes issued under the Master Indenture on a parity basis deeds of trust and mortgages (collectively the “Mortgages”), on certain real property owned by members of the Obligated Group on February 1, 2018, the effective date of the Mortgages, directly used in conjunction with the operation of licensed senior living communities by members of the

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Obligated Group (subject to Grantor’s Rights previously exercised or as may be exercised in the future, the “Mortgaged Property”), and in conjunction therewith have caused to be executed the Supplemental Master Trust Indenture No. 31 dated as of February 1, 2018 (the “Supplemental Master Indenture No. 31”) evidencing and providing for the granting of such Mortgages to the Master Trustee under the Master Indenture as aforesaid. The Supplemental Master Trust Indenture No. 31 includes certain Grantor’s Rights (defined therein) to which the Mortgages shall be subject. Subject to the Grantor’s Rights and the terms of the Master Indenture (including Supplemental Master Indenture No. 31) and the Mortgages (which permit the release of Mortgaged Property under certain circumstances), the Corporation, as Obligated Group Agent under the Master Indenture, hereby covenants and agrees to retain Mortgages on Mortgaged Property during any period any Bonds are Outstanding. Nothing in this section shall be deemed to preclude exercise from time to time of any Grantor’s Rights, including without limitation modifications, releases, and liens relating to the Mortgaged Property and the Mortgages. Additional Indebtedness The Corporation may issue or incur additional Indebtedness for any proper corporate purpose if the conditions set forth in the Master Indenture are met. Events of Default The occurrence and continuance of any of the following events shall constitute an “Event of Default” under the Loan Agreement: (a) failure of the Corporation to pay the Loan Payments or any installment of interest or

principal, or any premium, on the Series 2019[A][B] Bond Note when the same shall become due and payable, whether at maturity or upon any date fixed for prepayment or redemption or by acceleration or otherwise; or

(b) default in the performance, or breach, of any covenant or agreement of the Corporation or

the Obligated Group Agent under the Loan Agreement or the Tax Agreement (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere), and continuance of such default or breach for a period of 60 days after there has been given to the Corporation and the Obligated Group Agent by the Bond Trustee or to the Corporation and the Obligated Group Agent and the Bond Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied or such longer period as shall be required to remedy such default if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, and the Corporation or the Obligated Group Agent has immediately upon receipt of such notice commenced the curing of such default and is pursuing such cure with due diligence and dispatch; or

(c) any representation or warranty made by the Corporation in the Loan Agreement or any

other Bond Document or in any written statement or certificate furnished by the Corporation to the Authority or the Bond Trustee or the Original Purchasers of any Bonds in connection with the sale of any Bonds, or furnished by the Corporation pursuant hereto proves untrue in any material respect as of the date of the issuance or making thereof and, if the same may be corrected or brought into compliance so that the interests of the Bond Trustee, the Authority and the Bondowners are not materially adversely affected by such untruth, shall not be corrected or brought into compliance within 60 days after there has been given to the Corporation by the Bond Trustee or to the Corporation and the Bond Trustee by the Owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such untruth and requiring it to be remedied or such longer period as is required to remedy such untruth if such untruth cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied and the Corporation has immediately upon receipt of such notice commenced the curing of such untruth and is pursuing such cure with due diligence and dispatch; or

(d) any “Event of Default” specified in the Bond Indenture or the Master Indenture that has

not been waived.

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Remedies During the occurrence and continuance of any Event of Default under the Loan Agreement, the Bond Trustee, as assignee of the Authority, shall have the following rights and remedies, in addition to any other remedies therein or by law provided: Acceleration of Maturity; Waiver of Event of Default and Rescission of Acceleration. The Bond

Trustee as assignee of the Authority, if the Bond Trustee has declared the principal of all Bonds then Outstanding to be due and payable pursuant to the Bond Indenture shall, by written notice to the Master Trustee, the Obligated Group Agent and the Corporation request the Master Trustee to declare the principal of the Series 2019[A][B] Bond Note and the Loan Payments to be due and payable immediately pursuant to the Master Indenture (but the Series 2019[A][B] Bond Note and the Loan Payments shall become and be immediately due and payable as a result of such request only if the Master Trustee shall declare it to be due and payable in accordance with the Master Indenture). This provision, however, is subject to the condition that if, at any time after the principal of the Series 2019[A][B] Bond Note shall have been so declared and become due and payable, all arrears of interest and principal then due, if any, upon the Series 2019[A][B] Bond Note and the fees, costs, advances and expenses of the Authority and the Bond Trustee shall be paid by the Corporation, and every other default in the observance or performance of any covenant, condition or agreement contained in the Loan Agreement and the Series 2019[A][B] Bond Note shall be made good, or be secured, to the satisfaction of the Bond Trustee, or provision deemed by the Bond Trustee to be adequate shall be made therefor, and the acceleration of the Bonds and its consequences has been annulled or rescinded pursuant to the Bond Indenture then and in every such case the Bond Trustee, by written notice to the Master Trustee, the Corporation and the Obligated Group Agent, may request the Master Trustee to waive the Event of Default by reason of which the principal of the Series 2019[A][B] Bond Note shall have been so declared and become due and payable and to rescind and annul such declaration and its consequences; but no such waiver, rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

Right to Bring Suit, Etc. The Bond Trustee may in its discretion without notice or demand (a)

proceed to protect and enforce its rights by a suit or suits in equity or at law, whether for damages or for the specific performance of any covenant or agreement contained in the Series 2019[A][B] Bond Note or the Loan Agreement, or in aid of the execution of any power in the Loan Agreement or therein granted or for the enforcement of any other appropriate legal or equitable remedy, as the Bond Trustee shall deem effectual to protect and enforce any of its rights or duties or (b) avail itself of all other rights or remedies available to it.

Assignment by the Corporation The Loan Agreement may be assigned, as a whole or in part, by the Corporation, without the necessity of

obtaining the consent of either the Authority or the Bond Trustee, subject to each of the following conditions: (a) No assignment shall relieve the Corporation from primary liability for any obligations

under the Loan Agreement, and in the event of any such assignment the Corporation shall continue to remain primarily liable for payment of Loan Payments and Additional Payments and for performance and observance of the other agreements on its part to be performed and observed by the Corporation to the same extent as though no assignment had been made, unless such assignment is pursuant to a disposition of property or merger permitted under the Master Indenture in which the Corporation is not the surviving corporation and the surviving corporation has assumed such liability;

(b) The assignee shall assume the obligations of the Corporation under the Loan Agreement

to the extent of the interest assigned; (c) If there remains unpaid any Bond, the Bond Trustee and the Authority shall have

received an Opinion of Bond Counsel to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance resulting in the assignment, whether or not contemplated on any date of the delivery of such Bond, would not cause the interest payable on such Bond to become includable in gross income under the Code; and

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(d) The Corporation shall, within 30 days after the delivery thereof, furnish or cause to be

furnished to the Authority and the Bond Trustee a true and complete copy of each assignment and assumption of obligation.

Supplemental Loan Agreements Not Requiring Consent of Bondowners. The Authority, at the request of the Corporation, and the Bond Trustee may, without the consent of or notice to the Bondowners, consent to the execution of any Supplemental Loan Agreements by the Authority and the Corporation as may be required: (a) by the Loan Agreement and the Bond Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Loan Agreement, (c) in connection with any other change therein which, in the judgment of the Bond Trustee, does not

materially adversely affect the interests of the Bondowners, (d) to more precisely identify the Project, or to substitute or add additional property thereto, (e) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes

of the loan, as set forth in the Loan Agreement, additional conditions, limitations and restrictions thereafter to be observed,

(f) to evidence the succession of another corporation to the Corporation and the assumption by any

such successor of the covenants of the Corporation contained in the Loan Agreement, (g) to add to the covenants of the Corporation or to the rights, powers and remedies of the Bond

Trustee for the benefit of the Owners of all Bonds or to surrender any right or power conferred upon the Corporation in the Loan Agreement, or

(h) to make any other changes with respect to matters or questions arising under the Loan Agreement,

provided such action shall not materially adversely affect the interests of the Owners of the Bonds.

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SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The following is a summary of certain provisions contained in the Continuing Disclosure Agreement. The following is not a comprehensive description, however, and is qualified in its entirety by reference to the Continuing Disclosure Agreement for a complete recital of its terms. The Corporation, for itself and as the Obligated Group Agent, and the Bond Trustee are entering into the Continuing Disclosure Agreement for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Original Purchaser in complying with Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”). The members of the Obligated Group are the only “obligated persons” with responsibility for continuing disclosure under the Rule. Pursuant to the Continuing Disclosure Agreement, the Obligated Group Agent shall, or shall cause the Dissemination Agent (initially the Bond Trustee) to, not later than 180 days after the end of the Obligated Group’s fiscal year, provide to the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access system for municipal securities disclosures (“EMMA”), the following financial information and operating data (the “Annual Report”): (1) The audited financial statements of the Obligated Group for the prior fiscal year, prepared in

accordance with generally accepted accounting principles. If audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement relating to the Bonds, and the audited financial statements shall be filed in the same manner as the Annual Report promptly after they become available.

(2) Updates as of the end of the Fiscal Year of the operating data contained in the table under the caption

“Results of Operations – Historical Utilization Data” (Table 3) and the financial information under the caption “Obligated Group Summary Statements of Unrestricted Activities” (Table 6), “Obligated Group Historical Debt Service Coverage” (Table 7) and “Obligated Group Historical and Pro Forma Liquidity Ratios” (Table 8) in Appendix A of this Official Statement in substantially the same format contained in this Official Statement.

Pursuant to the Continuing Disclosure Agreement, no later than 10 business days after the occurrence of any of the following events, the Obligated Group Agent shall give, or cause to be given, to the MSRB notice of the occurrence of any of the following events with respect to the Bonds (“Material Events”): (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 Internal Revenue Service 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 status of the Bonds, or other material events affecting the tax status of the Bonds;

(7) modifications to rights of bondholders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the obligated person; (13) the consummation of a merger, consolidation, or acquisition involving the obligated

person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake

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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 the trustee, if material.

If the Dissemination Agent has been instructed by the Obligated Group Agent to report the occurrence of a Material Event, the Dissemination Agent shall promptly file a notice of such occurrence with the MSRB, with a copy to the Obligated Group Agent. The Obligated Group Agent may discharge any Dissemination Agent with or without appointing a successor Dissemination Agent, and upon such discharge may, from time to time, appoint or engage a successor Dissemination Agent to assist it in carrying out its obligations under this Continuing Disclosure Agreement. The Dissemination Agent shall not be responsible in any manner for the substantive content of any notice or report prepared by the Obligated Group Agent pursuant to the Continuing Disclosure Agreement. The initial Dissemination Agent shall be the Bond Trustee. Notwithstanding any other provision of the Continuing Disclosure Agreement, the Obligated Group Agent and the Dissemination Agent may amend the Continuing Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Obligated Group Agent) and any provision of the Continuing Disclosure Agreement may be waived, provided Bond Counsel or other counsel experienced in federal securities law matters provides the Dissemination Agent with its opinion that the undertaking of the Obligated Group Agent, as so amended or after giving effect to such waiver, is in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to the Continuing Disclosure Agreement. In the event of a failure of the Obligated Group Agent or the Dissemination Agent to comply with any provision of the Continuing Disclosure Agreement, the Bond Trustee may (and, at the request of the Original Purchaser or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall), or any owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Obligated Group Agent or the Dissemination Agent, as the case may be, to comply with its obligations under the Continuing Disclosure Agreement. A default under the Continuing Disclosure Agreement shall not be deemed an Event of Default under the Bond Indenture or the Loan Agreement, and the sole remedy under the Continuing Disclosure Agreement in the event of any failure of the Obligated Group Agent or the Dissemination Agent to comply with the Continuing Disclosure Agreement shall be an action to compel performance. As an additional disclosure which is not required by the Rule, while the Series 2016A Bonds remain outstanding, the Obligated Group Agent has agreed that it shall, or shall cause the Dissemination Agent to, not later than 30 days after the date the Obligated Group Agent is required to provide certification of Days Cash on Hand and/or Long-Term Debt Service Coverage Ratio financial covenants (as then required to be certified, the “Bank Financial Covenants”) under any Bank Agreement then in effect, provide to the MSRB, through EMMA, a notice showing the computed Bank Financial Covenants. For purposes of this paragraph, “Bank Agreement” means any credit agreement, liquidity agreement, standby bond purchase agreement, reimbursement agreement, direct purchase agreement, bond purchase agreement, continuing covenant agreement, or other agreement or instrument (or any amendment, supplement or other modification thereof) under which, directly or indirectly, any entity undertakes to make or provide funds to make payment of, or to purchase or provide credit enhancement for any Indebtedness of the Obligated Group which is secured by a Note under the Master Indenture. Additional Reporting for 2019 Mason Pointe Independent Living Project Commencing with the fiscal quarter of the Obligated Group ended March 31, 2019 and each fiscal quarter of the Obligated Group thereafter (each a “Quarter End”) and continuing until Stabilized Occupancy (defined below) of the 2019 Mason Pointe Independent Living Project (defined in the 2019B Bond Indenture, the “2019B Project”) is achieved, the Obligated Group Agent shall provide, or shall provide to the Dissemination Agent and cause the Dissemination Agent to provide, not later than 60 days after each Quarter End, to the MSRB, through EMMA, updates of the marketing information relating to the 2019B Project below:

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Marketing (Reserved Units) Reporting for 2019 Mason Pointe Independent Living Project

Quarter End Number of

Units Reserved Number of

Cancellations

Net Reservations for Quarter

Cumulative Units

Reserved

Cumulative Percentage of Total Units

[_________, 20__] [___] [__] [___] [___] [_.__]%

Commencing with the first Quarter End after the occurrence of First Occupancy Date (defined below) and thereafter for each Quarter End until the occurrence of Stabilized Occupancy (defined below) of the 2019B Project is achieved, the Obligated Group Agent shall, or shall cause the Dissemination Agent to, not later than 60 days after each Quarter End, provide to the MSRB, through EMMA, updates of the occupancy information relating to the 2019B Project below:

Occupancy Reporting for 2019 Mason Pointe Independent Living Project

Quarter End

Number of Total Units Available for Occupancy

Number of Units Occupied

Percentage of Total Units

[_________, 20__] [___] [__] [_.__]% “First Occupancy Date”, with respect to the foregoing reporting for the 2019B Project, means: the date of receipt of a certificate of occupancy for the first building of the 2019B Project containing independent living units. “Stabilized Occupancy”, with respect to the foregoing reporting for the 2019B Project, means: the first date, following receipt of a certificate of occupancy of all portions of the 2019B Project, when the average occupancy of all of the then available independent living units in the 2019B Project have attained aggregate average occupancy of at least 85% for a one-year period, determined, at the option of the Obligated Group Agent, either on the basis of four consecutive fiscal quarters or twelve consecutive months. The tables above are provided for example only and the Obligated Group Agent reserves the right (in its sole discretion and without the need for any consents or amendments) to modify from time to time the format and presentation of the required marketing and occupancy information, and to include such additional voluntary information as the Obligated Group Agent may determine from time to time.

* * *

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APPENDIX D

FORM OF BOND COUNSEL OPINION

February __, 2019

Health and Educational Facilities Authority of the State of Missouri Chesterfield, Missouri

Lutheran Senior Services, as Obligated Group Agent St. Louis, Missouri

UMB Bank, N.A., as Bond Trustee St. Louis, Missouri

Herbert J. Sims & Co., Inc. Rockville, Maryland

UMB Bank, N.A., as Master Trustee St. Louis, Missouri

PNC Capital Markets, LLC Pittsburgh, Pennsylvania UMB Bank, N.A. Kansas City, Missouri

Re: Health and Educational Facilities Authority of the State of Missouri Senior Living

Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2019A and Series 2019B

Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the Health and Educational Facilities Authority of the State of Missouri (the “Authority”) of the above-captioned bonds (the “Bonds”), pursuant to the Missouri Health and Educational Facilities Authority Act, Chapter 360 of the Revised Statutes of Missouri, as amended, a Bond Trust Indenture for the Series 2019A Bonds dated as of February 1, 2019 (the “Series 2019A Bond Indenture”), between the Authority and UMB Bank, N.A., as corporate trustee (the “Bond Trustee”) and a Bond Trust Indenture for the Series 2019B Bonds dated as of February 1, 2019 (the “Series 2019B Bond Indenture”, together with the Series 2019A Bond Indenture, the “Bond Indentures” and each a “Bond Indenture”), between the Authority and the Bond Trustee. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Bond Indentures. Regarding questions of fact material to our opinion, we have relied upon representations of the Authority, the Corporation and the Obligated Group contained in the Loan Agreements and the other Bond Documents and the certified proceedings and other certifications of the Authority, the Corporation, the Obligated Group and others furnished to us, without undertaking to verify them by independent investigation. We have also relied upon the legal opinion of Spencer, Fane LLP, St. Louis, Missouri, counsel to the Corporation and the other Members of the Obligated Group, regarding certain matters, including, (a) the corporate status and due organization of the Corporation and the other Members of the Obligated Group, (b) the status of the Corporation and the other Members of the Obligated Group as organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), (c) the good standing and qualification to do business of the Corporation and the other Members of the Obligated Group, (d) the corporate power of the Corporation and the other Members of the Obligated Group to enter into and perform their respective obligations under the Loan Agreements, the Tax Compliance Agreement,

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and the Series 2019A Bond Note and the Series 2019B Bond Note (collectively, the “Series 2019 Bond Notes” and each a “Series 2019 Bond Note”), and (e) the due authorization, execution and delivery of the Loan Agreements and the Tax Compliance Agreement by the Corporation, and of the Series 2019 Bond Notes by the Obligated Group Agent, on behalf of the Corporation and the other Members of the Obligated Group, and the binding effect and enforceability thereof against the Corporation and the other Members of the Obligated Group, respectively. Based on and subject to the foregoing, we are of the opinion, under existing law, as follows: 1. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and legally binding special obligations of the Authority. 2. The Bonds are payable solely from the loan payments made by the Corporation under the related Loan Agreement, payments made by the Obligated Group pursuant to the related Series 2019 Bond Note and from other funds held by the Bond Trustee and pledged under the related Bond Indenture for such series of Bonds. The Bonds do not constitute a debt or liability of the State of Missouri or of any political subdivision thereof within the meaning of any constitutional or statutory provision or limitation and do not constitute a pledge of the full faith and credit of the State of Missouri or of any political subdivision thereof. The issuance of the Bonds shall not, directly, indirectly or contingently, obligate the State of Missouri or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. 3. The Bond Indentures, the Loan Agreements and the Tax Compliance Agreement have been duly authorized, executed and delivered by the Authority and are valid and legally binding agreements of the Authority, enforceable against the Authority. The Series 2019 Bond Notes have been duly pledged and assigned by the Authority without recourse to the Bond Trustee and all of the Authority’s right, title and interest in the Loan Agreements (except certain rights to indemnification, reimbursement, notice and administrative fees) and the Series 2019 Bond Notes have been duly assigned by the Authority to the Bond Trustee under each related Bond Indenture for the benefit and security of the owners of the Bonds. 4. The interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax. The opinions set forth in this paragraph are subject to the condition that the Authority and the Corporation comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order to preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The Authority and the Corporation have covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Bonds are not “qualified tax-exempt obligations” for purposes of Section 265(b) of the Code. 5. The interest on the Bonds is exempt from income taxation by the State of Missouri. We express no opinion regarding (a) the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds (except to the extent, if any, stated in the Official Statement), (b) the perfection or priority of the lien on the Trust Estate pledged under each related Bond Indenture, or (c) federal or state tax consequences arising with respect to the Bonds, other than as expressly set forth in this opinion.

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The rights of the owners of the Bonds and the enforceability of the Bonds, the Bond Indentures, the Loan Agreements, the Tax Compliance Agreement and Series 2019 Bond Notes may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by equitable principles, whether considered at law or in equity. This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours,

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APPENDIX E

EXCERPTS OF SELECTED MORTGAGE DOCUMENTS

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MORTGAGE RELATED EXCERPTS OF SUPPLEMENTAL MASTER TRUST INDENTURE NO. 31

Section 201. Mortgages. In order to provide additional security for Holders of Master Obligations from time to time issued pursuant to the Then Current Master Indenture, the Note Obligors, pursuant to the Then Current Mortgage Covenants (as hereinafter defined) have or may agree to execute, deliver and record mortgages and/or deeds of trust in favor of the Master Trustee encumbering certain real property owned by Note Obligors to support the obligations of the Obligated Group with respect to the Master Obligations on a parity basis (such mortgages and deeds of trust from time to time executed, delivered, recorded and remaining outstanding being referred to, collectively, as the “Then Current Mortgages” and each, individually, as a “Then Current Mortgage”). At the date of this Supplemental Master Indenture, in satisfaction of the Present Mortgage Covenants (as hereinafter defined), the Note Obligors have agreed to execute, deliver and record the mortgages and deeds of trust listed below (the “Present Mortgages”).

Deed of Trust and Security Agreement (Lutheran Senior Services – Breeze Park Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Laclede Groves Community) dated as February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Meramec Bluffs Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Lenoir Woods Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Richmond Terrace Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – St. Joseph’s Bluffs Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Mason Pointe Community) dated as of February 1, 2018, from Lutheran Senior Services as grantor to UMB Bank, n.a., master trustee, as grantee;

Deed of Trust and Security Agreement (Lutheran Senior Services – Heisinger Bluffs Community) dated as of February 1, 2018, from The Cole County Lutheran Home Association as grantor to UMB Bank, n.a, master trustee, as grantee;

Mortgage and Security Agreement (Lutheran Senior Services – Lutheran Hillside Village Community) dated as of February 1, 2018, from Lutheran Hillside Village, Inc. as mortgagor to UMB Bank, n.a., master trustee, as mortgagee;

Mortgage and Security Agreement (Lutheran Senior Services – Concordia Village Community) dated as of February 1, 2018, from Lutheran Retirement Center Association as mortgagor to UMB Bank, n.a., master trustee, as mortgagee; and

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Mortgage and Security Agreement (Lutheran Senior Services – Meridian Village Community) dated as of February 1, 2018, from Meridian Village Association as mortgagor to UMB Bank, n.a., master trustee, as mortgagee.

The Present Mortgages have been provided to comply with certain covenants to grant mortgages or deeds of trust (the “Present Mortgage Covenants”) contained in the agreements listed below. After the date of this Supplemental Master Indenture, Note Obligors may enter into additional covenants or other agreements requiring the grant of mortgages or deeds of trust to secure Master Obligations and other covenants or agreements to grant mortgages or deeds of trust may be terminated or modified. The from time to time currently effective covenants and agreements of the Note Obligors to grant mortgages or deeds of trust to support Master Obligations are referred to herein as the “Then Current Mortgage Covenants.”

a. Letter of Credit and Reimbursement Agreement dated as of August 28, 2013 between Bank of America,

N.A. and Lutheran Senior Services relating to Health and Educational Facilities Authority of the State of Missouri Variable Rate Demand Health Facilities Revenue Bonds (Lutheran Senior Services) Series 2000;

b. Continuing Covenant Agreement dated as of June 1, 2014 between the Obligated Group Agent and PNC Bank, National Association relating to Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014B;

c. Continuing Covenant Agreement dated as of December 1, 2014 between the Obligated Group Agent and Kansas City Financial Corporation relating to Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014C, as amended by First Amendment to Continuing Covenant Agreement dated as of November 1, 2016;

d. Continuing Covenant Agreement dated as of December 1, 2014 between the Obligated Group Agent and

Kansas City Financial Corporation relating to Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2014D, as amended by First Amendment to Continuing Covenant Agreement dated as of November 1, 2016;

e. Loan Agreement dated as of November 1, 2016 between the Health and Educational Facilities Authority

of the State of Missouri and the Obligated Group Agent relating to the Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016B

f. Continuing Covenant Agreement dated as of November 1, 2016 between the Obligated Group Agent and Kansas City Financial Corporation relating to Health and Educational Facilities Authority of the State of Missouri Senior Living Facilities Revenue Bonds (Lutheran Senior Services Projects) Series 2016C.

Section 202. Rights of Master Trustee under Mortgages. Upon the occurrence and during the continuation of an Event of Default under the Then Current Master Indenture, the Master Trustee may, upon written notice to the members of the Obligated Group (a “Trustee Notice”), exercise all rights and remedies available under all or any of the Then Current Mortgages. Section 203. Grantor’s Rights. The Note Obligor(s) granting any Then Current Mortgage (each, the “Grantor”), and the Obligated Group Agent on behalf of such Grantor, shall have the rights set out below with respect to such Then Current Mortgage and the property subject to such Then Current Mortgage (the “Grantor’s Rights”), which Grantor’s Rights may be exercised by Grantor or the Obligated Group Agent on behalf of Grantor, upon notice to the Master Trustee, without the need for the consent of the Master Trustee or the Holder of any Master Obligation. All such Grantor’s Rights shall be deemed to be incorporated in and made a part of each Then Current Mortgage whether or not so stated in any such Then Current Mortgage.

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a. The right to obtain the release of any Then Current Mortgage on all or any portion of the property subject to such Then Current Mortgage in the event of the occurrence of any of the following:

i. The date on which there are no longer any Then Current Mortgage Covenants that require

that such Then Current Mortgage (or any portion of the property subject to such Then Current Mortgage being released) remain in effect (whether resulting from payment, redemption, cancelation, defeasance, discharge or other provision for payment of the Master Obligations or Related Bonds for which the Then Current Mortgage Covenants were established, or from the waiver, amendment, termination or other modification of the applicable Then Current Mortgage Covenants, or otherwise); or

ii. All Master Obligations issued under the Then Current Master Indenture have been paid,

redeemed, canceled, defeased, discharged or other provision for payment thereof has been made; or

iii. The Then Current Master Indenture is satisfied and discharged in accordance with its

terms.

b. The right to make replacements, additions, alterations, changes, modifications and improvements to the property subject to any Then Current Mortgage to the extent permitted for Property under the Then Current Master Indenture.

c. The right to install and remove furniture fixtures and equipment on or from any property subject to a

Then Current Mortgage to the extent not prohibited by the Then Current Master Indenture.

d. The right to sell, lease or otherwise dispose of any part of the property subject to a Then Current Mortgage to the extent permitted for Property under the Then Current Master Indenture.

e. The right to consolidate, merge, sell or convey the property subject to a Then Current Mortgage to the

extent permitted under the Then Current Master Indenture.

f. The right to permit to be created, incurred or exist any Permitted Liens (as defined in the Then Current Master Indenture) inclusive of, but not limited to (i) leases, rentals or other rights of occupancy for any reasonable business purposes and (ii) easements or encumbrances (whether governmental or private) or dedication for any governmental or other purpose necessary to accomplish the purposes for which the property is then being or will be used.

g. The right of a Grantor to release property it has subjected to a Then Current Mortgage upon its

withdrawal from the Obligated Group pursuant to the terms of the Then Current Master Indenture.

h. The right to release any Then Current Mortgage or all or any portion of the property subject to a Then Current Mortgage upon certification to the Master Trustee by the Obligated Group Representative that such property to be released has produced less than 5% of the total gross operating revenue of the Obligated Group as shown on the most recent audited financial statements of the Obligated Group required to be delivered pursuant to the Then Current Master Indenture.

i. The right to release any portion of the property subject to a Then Current Mortgage upon certification

to the Master Trustee by the Obligated Group Representative that such portion of such property is not then actively used as a part of the senior living community located on such property (i.e., excess or vacant land or land used for agricultural or other purposes unrelated to the operation of such licensing or living community).

j. The right to release any portion of the property subject to a Then Current Mortgage which, at the time

of such release, is (i) not required by the Then Current Mortgage Covenants to be subject to the Then

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Current Mortgage or (ii) has been included in the property subjected to a Then Current Mortgage as a result of an error or mistake.

k. The right to amend, supplement, change or modify the Then Current Master Indenture, in accordance with its terms, and the right to amend, supplement, change or modify any Then Current Mortgage (i) in connection with the exercise of any Grantor’s Rights; or (ii) for any purpose for which the Then Current Master Indenture may, in accordance with its terms, be amended or supplemented without the consent of or notice to any Holders of Notes; or (iii) for any purpose for which the Then Current Master Indenture may, in accordance with its terms, be amended or supplemented with the consent of the Noteholders as long as such consent of Noteholders is obtained; or (iv) to increase or decrease the maximum principal amount of indebtedness secured by any Then Current Mortgage as determined necessary or appropriate by the Obligated Group Agent provided that all such indebtedness is evidenced by Master Obligations; (v) in order to acquire, develop or divest any property in conjunction with the development or redevelopment of any new or existing project or facility to the extent such acquisition, development or divestiture is permitted pursuant to the Then Current Master Indenture or (vi) for any other purpose relating to any Then Current Mortgage or Then Current Mortgage Covenant if after giving effect to such amendments, supplements, changes or modifications, the Then Current Mortgages and the property subject to the Then Current Mortgages will satisfy the requirements of any Then Current Mortgage Covenants and such amendments, supplements, changes or modifications do not violate any term of the Then Current Master Indenture. Upon the written request of the Institution or of any Grantor, the Master Trustee shall, upon receipt of a certification of the Obligated Group Representative to the Master Trustee that such release, amendment, modification and/or termination of any Then Current Mortgage does not violate any term of the Then Current Master Indenture, and without the need for the consent of the Holder of any Master Obligation (except for any consent of a Noteholder contemplated by Section 203(k)(iii), above) or any other Person or entity, at the cost of the Obligated Group, execute and deliver such release amendment, modification and/or termination documents as shall be necessary in conjunction with the exercise of the Grantor’s Rights.

Each of the foregoing Grantor’s Rights is a right and not a limitation and shall not be construed to limit any

other Grantor’s Rights or any other rights of a Grantor or the Obligated Group under the Then Current Master Indenture, any Then Current Mortgage, Then Current Mortgage Covenants, any Master Obligation, any Related Bond or any other related transaction document.

Section 204. Obligated Group Agent Right to Amend, Modify or Terminate. Each Grantor hereby delegates to the Obligated Group Agent the authority, without the need for any consent or approval of the Grantor to execute, deliver and record any amendment, modification and/or termination of any Then Current Mortgage as the Obligated Group Agent, in its sole discretion, may determine to be necessary or appropriate to exercise any of the Grantor’s Rights or any other right afforded Grantor pursuant to the Then Current Master Indenture.

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EXCERPTS OF FORMS OF

[ILLINOIS MORTGAGE]

[[MISSOURI DEED OF TRUST]]

Section 1. Granting Clauses.

The [Mortgagor][[Institution]], in consideration of the debt [[and trust]] described in this Mortgage, and the sum of Ten Dollars ($10.00) and other good and valuable consideration paid to the [Mortgagor][[Institution]] by the Mortgagee, the receipt and sufficiency of which are acknowledged by the [Mortgagor][[Institution]], does by these presents GRANT, BARGAIN AND SELL, CONVEY AND CONFIRM to the [Mortgagee][[Mortgage Trustee]] all of, and GRANT A SECURITY INTEREST to the Mortgagee in all of, the herein defined Mortgaged Property; subject to the Grantor’s Rights.

“Mortgaged Property” means the real property described on the attached Exhibit A and incorporated into this Mortgage by this reference (the “Land”) and all buildings, structures and other real property improvements on the Land existing on February 1, 2018.

TO HAVE AND TO HOLD the Mortgaged Property [[to the Mortgage Trustee]] for [the benefit] and [security][[on behalf]] of [[the]] Mortgagee and to the use and benefit of Mortgagee and its successors and assigns forever, subject to the Grantor’s Rights retained by the [Mortgagee][[Institution]], and upon the terms and subject to the conditions of this Mortgage[, together with all right to possession of the Mortgaged Property after the occurrence of an Event of Default; the Mortgagor hereby releasing and waiving all rights under and by virtue of the homestead exemption laws of the State of Illinois.]

NOW, THEREFORE, this Mortgage shall be released, without warranty, at the request and at the cost of [Mortgagor][[Institution]], if the requirements for release of this Mortgage set forth in the Then Current Master Indenture are satisfied (e.g., exercise of a Grantor’s Right permitting release).

Section 2. General Covenant. The [Mortgagor][[Institution]] will perform, comply with and abide by all of the agreements, conditions and covenants in the Then Current Master Indenture, the Master Obligations, and this Mortgage, all incorporated into this Mortgage by this reference. This Mortgage secures to the [Mortgagee: ][[Master Trustee:]] (a) the repayment of all obligations evidenced by the Master Obligations, including interest; (b) the payment of all other sums now or in the future advanced by the Master Trustee or the Holder of any Master Obligation in conjunction with any Master Obligation or under this Mortgage and the performance of all present and future obligations of the [Mortgagor][[Institution]] thereunder.

This instrument secures future advances and future obligations and is a “security instrument” governed by [810 ILCS 5/9-204][[§443.055, RSMo]], as amended. The total principal amount of obligations secured by this Mortgage outstanding at any one time, not including sums advanced to protect the security of this Mortgage, or for any other purposes specified in [810 ILCS 5/9-204][[§443.055(3) RSMo]] shall not exceed the “Face Amount” stated on the recording cover page of this Mortgage.

Section 3. Payment of Costs, Charges, and Expenses. The [Mortgagor][[Institution]] agrees to pay all reasonable costs, charges and expenses, including attorneys’ fees and abstract costs, reasonably incurred or paid at any time by the [[Mortgage Trustee or the]] Mortgagee because of the failure of any Note Obligor to perform, comply with, and abide by each and every one of the agreements, conditions and covenants of the Then Current Master Indenture, the Master Obligations and this Mortgage.

Section 4. Grantor’s Rights. The rights of Mortgagee [[and the Mortgage Trustee]] in and to the Mortgaged Property are at all times subject to the Grantor’s Rights.

Section 5. Parity Obligations. The Master Obligations are, or when issued will be, Notes or Guaranties issued under the Master Indenture and any Note Obligor may, in the manner provided by and subject to the limitations of the Then Current Master Indenture, issue or incur one or more Master Obligations secured by this Mortgage in addition to the current Master Obligations described in Section D of the Background Recitals. All such Master Obligations then Outstanding, shall be equally and ratably secured by the lien and security interest of this Mortgage on the Mortgaged Property. The rights and remedies of the Holders of the Master Obligations are to be equal and pari passu and nothing in this Mortgage shall be deemed to give to the holders of any Master Obligation

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any rights or remedies superior or inferior to the rights or remedies of the Holder or Holders of any other Master Obligation. The [Mortgagor][[Grantor]] shall take, and the [Mortgagee][[Master Trustee]] shall have the right (but not the obligation) to take such action as is required to assure that the Mortgaged Property will secure any Master Obligations on a parity basis under this Mortgage.

Section 6. Default and Remedies. Upon the occurrence and during the continuation of an Event of Default under the Then Current Master Indenture, and the issuance by the [Mortgagee][[Master Trustee]] of a “Trustee Notice” (as that term is defined in the Then Current Master Indenture) and until any such Trustee Notice is rescinded or the Event of Default is waived or cured, the Mortgagee without notice or demand, to the extent permitted by the law of the State of [Illinois][[Missouri]], may exercise any remedy permitted by law or by contract, and in particular, without limiting the generality of the foregoing, have the absolute right, at its option, to pursue one or more of the following remedies:

(a) The Mortgagee shall [have the right to foreclose the lien hereof for payment of all Master Obligations or part thereof and/or exercise any right, power or remedy provided in this Mortgage or the Then Current Master Indenture in accordance with the Illinois Mortgage Foreclosure Act (Chapter 735, Sections 5/15 – 1101 et seq., Illinois Compiled Statutes) (as may be amended from time to time, the “Act”),][[be entitled, immediately or thereafter, without notice or demand, to the extent permitted by the laws of the State of Missouri, (i) to institute suit at law or in equity to enforce the rights of the Mortgagee and (ii) to enforce, at the Mortgagee’s continuing option, payment of all Master Obligations by action to foreclose this Mortgage, either or both, concurrently or otherwise; and one action or suit shall not abate or be a bar to or waiver of the Mortgagee’s right to institute or maintain the other,]] provided that the Mortgagee shall have only one payment and satisfaction of the Master Obligations.

(b) [In the event of a foreclosure sale, Mortgagee is hereby authorized, without the consent of Mortgagor, to assign any and all insurance policies to the purchaser at such sale or to take such other steps as Mortgagee may deem advisable to cause the interest of such purchaser to be protected by any such insurance policies.]The Mortgagee shall have the right from time to time to take action to recover any sums, whether interest, principal or any installment of either, or any other sums required to be paid under the terms of this Mortgage as the same become due, without regard to whether or not the principal sum secured, or any other sums secured, by this Mortgage shall be due, and without prejudice to the right of the Mortgagee thereafter to bring an action of foreclosure, or any other action, or commence foreclosure proceedings [pursuant to][[under]] the [Act][[power of sale]], for a default or defaults by the [Mortgagor][[Institution]] existing at the time such earlier action was commenced.

(c) [In any suit to foreclose the lien hereof, there shall be allowed and included as additional indebtedness in the decree for sale all expenditures and expenses which may be paid or incurred by or on behalf of the Mortgagee for reasonable attorneys’ fees, appraisers’ fees, outlays for documentary and expert evidence, stenographers’ charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies, and similar data and assurances with respect to the title as the Mortgagee may deem reasonably necessary either to prosecute such suit or to evidence to bidders at any sale which may be had pursuant to such decree the true condition of the title to or the value of the Mortgaged Property. All expenditures and expenses of the nature mentioned in this section and such other expenses and fees as may be incurred in the enforcement of the Mortgagor’s obligations hereunder, the protection of said Mortgaged Property and the maintenance of the lien of this Mortgage, including the reasonable fees of any attorney employed by the Mortgagee in any litigation or proceeding affecting this Mortgage or the Mortgaged Property, including probate and bankruptcy proceedings, or in preparations for the commencement or defense of any proceeding or threatened suit or proceeding shall be immediately due and payable by the Mortgagor, with interest thereon until paid at the Default Rate and shall be secured by this Mortgage.][[The Mortgage Trustee, or a successor trustee, may proceed to sell the Mortgaged Property and any and every part thereof, at public venue, to the highest bidder, at the then customary place in such city or county for cash, first giving the public notice required by law of the time, terms and place of sale, and of the property to be sold, and upon such sale shall

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execute and deliver a deed of conveyance and bill of sale of the property sold to the purchaser or purchasers thereof, and any statement or recital of fact in such deed and bill of sale in relation to the nonpayment of money hereby secured to be paid, existence of the indebtedness so secured, notice of advertisement, sale, receipt of money, and the happening of any of the aforesaid events whereby the successor trustee became successor as herein provided shall be prima facia evidence of the truth of such statement or recital. Upon any sale pursuant to this subsection, the Mortgagee may bid for and purchase the property being sold, and upon compliance with the terms of sale, subject to applicable rights of redemption, the Mortgagee may hold, retain, possess and dispose of such property in its own absolute right; the Mortgagee at any such sale may, in paying the purchase price, turn in any or all Master Obligations for value in lieu of cash in payment of such purchase price. In case the amount of such purchase price shall be less than the amount due on the Master Obligations, they shall be returned to the Mortgagee after a notation of such partial payment shall have been made thereon. The Mortgage Trustee hereby leases and lets the Mortgaged Property to the Institution until a sale be had under the foregoing provisions therefor, upon the following terms and conditions, to wit: The Institution, and every and all persons claiming or possessing the Mortgaged Property, and any part thereof, by, through or under it shall or will pay rent therefor during said term at the rate of one cent (1¢) per month, payable monthly upon demand and shall and will surrender peaceable possession of the Mortgaged Property, and any and every part thereof, sold under said provisions, to the Mortgage Trustee, its successors, assignees, or purchasers thereof under such sale, within ten days after making of such sale without notice or demand therefor.]]

(d) Any court of competent jurisdiction may, at any time or times, either before or after a foreclosure sale, without notice and without requiring bond, without regard to the solvency or insolvency of any person liable for payment of the Master Obligations, and without regard to whether the Mortgagee has exercised or is exercising any other available remedy, appoint, as a matter of strict right and as an admitted equity, a receiver for the [Mortgaged Property, in accordance with the Act][[benefit of the Mortgagee]], with power to collect the rents, issues, and profits of the Mortgaged Property, due and to become due. These provisions for the appointment of a receiver and assignment of rents are an express condition upon which the financial accommodations to the [Mortgagor][[Institution]] have been made. The receiver, out of such rents, issues, and profits when collected, may pay all attorneys’ fees and expenses; may pay all costs and operating expenses incurred in the management and operation of the Mortgaged Property; may pay and secure the release of prior or subordinate liens, if any; may pay taxes, assessments, water and other utility charges, and insurance premiums, then due or thereafter accruing; may make and pay for any repairs to the Mortgaged Property deemed advisable to the Mortgagee; and may pay all or any part of the Master Obligations then due and payable, or other sums secured hereby or any deficiency decree entered in any foreclosure proceedings or otherwise as the Mortgagee may direct, all in such order of application as the Mortgagee may direct.

(e) The Mortgagee shall have the option to proceed with foreclosure in satisfaction of any part of the Master Obligations without declaring the whole of the Master Obligations as immediately matured, and such foreclosure may be made subject to the unmatured part of the Master Obligations, and it is agreed that such foreclosure, if so made, shall not in any manner affect the unmatured part of the Master Obligations, but as to such unmatured part this Mortgage shall remain in full force and effect just as though no foreclosure had been made. Several foreclosures may be made without exhausting the right of foreclosure for any unmatured part of the Master Obligations, it being the intention of the parties to provide for a foreclosure and sale of the security for any matured portion of the Master Obligations without exhausting the power of foreclosure and power to sell the Mortgaged Property for any other part of the Master Obligations. If more than one property, lot, or parcel is encumbered by this Mortgage, and if this Mortgage is foreclosed upon, or judgment is entered upon any obligation secured by this Mortgage, or if the Mortgagee exercises its power of sale, execution may be made upon, or the Mortgagee may exercise its power of sale against, any one or more of the properties, lots, or parcels and not upon the others, or upon all of such properties or parcels, either together or separately, and at different times or at the same time, and execution sales or sales by advertisement likewise may be

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conducted separately or concurrently, in each case at the Mortgagee’s election as permitted by [Illinois][[Missouri]] law.

[If any provision in ][[All rights, remedies and powers provided by ]]this Mortgage [shall be inconsistent with any ][[may be exercised only to the extent that the exercise thereof does not violate any applicable]] provision of [[law, and all]] the [Act, ]provisions of [the Act shall supersede such provisions in this Mortgage, but shall not invalidate or ] [[are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not]] render [[this Mortgage invalid or]] unenforceable [any other provisions of this Mortgage that may be construed in a manner consistent with the Act.][If any provision in this Mortgage shall grant to Mortgagee (including the Mortgagee acting as mortgagee-in-possession) or a receiver appointed pursuant to subsection (e) above, any powers, rights or remedies prior to, upon or following the occurrence of an Event of Default which are more limited than the powers, rights or remedies that would otherwise be vested in Mortgagee or such receiver] under the [Act in the absence of said provision, the Mortgagee and such receiver shall be vested with the powers, rights and remedies granted in the Act to the full extent permitted by][[provisions of any applicable]] law.

Section 7. [Without limiting the generality of the foregoing, all expenses incurred by the Mortgagee which are the type referred to in Section 5/15-1510 or 5/15-1512 of the Act, whether incurred before or after any decree or judgment of foreclosure, and whether or not enumerated in this Mortgage, shall be added to the Master Obligations and/or by the decree or judgment of foreclosure.]Special Remedies (Mortgagee May Occupy and Take Possession). Following a Trustee Notice and until any such Trustee Notice is rescinded or the Event of Default is waived or cured, the Mortgagee personally or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the [Mortgagor][[Institution]], its agents and servants wholly therefrom, and having and holding the same, may use, occupy and control the Mortgaged Property, either personally or by its superintendents, managers, agents, servants, attorneys or receivers. Upon every such entry, the Mortgagee at the expense of the Mortgaged Property or the [Mortgagor][[Institution]], from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid. Likewise, from time to time, at the expense of the Mortgaged Property or the [Mortgagor][[Institution]], the Mortgagee may make all necessary or proper repairs, renewals and replacements thereto and thereon as to it may seem advisable; and in every such case the Mortgagee shall have the right to manage and operate the Mortgaged Property and exercise all rights and powers of the [Mortgagor][[Institution]] with respect thereto either in the name of the [Mortgagor][[Institution]] or otherwise as it shall deem best; and the Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof. After deducting the expenses of conducting the business thereof and of all maintenance, repairs, renewals and replacements, and amounts necessary to pay for taxes, assessments, insurance and prior or other proper charges upon the Mortgaged Property, or any part thereof, as well as just and reasonable compensation for the services of the Mortgagee and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, the Mortgagee shall apply the moneys arising as aforesaid as provided in Section 8 below.

Section 8. Applications of Proceeds of Sale. Moneys collected by [the Mortgage Trustee or] the Mortgagee pursuant to the sale or other disposition of the Mortgaged Property shall be paid over to the Mortgagee and shall be applied as provided in the Then Current Master Indenture for the application of revenues and other moneys after default.

Section 9. Waivers. To the extent permitted by law, the [Mortgagor][[Institution]] agrees not at any time to insist upon, plead, claim or take any benefit or advantage, in any way whatsoever, whether now or in the future, of any of the following: (a) any stay, extension or moratorium law, under the Bankruptcy Code or otherwise, or any exemption from execution or sale of all or any part of the Mortgaged Property which may affect the covenants and terms of performance of this Mortgage; (b) any law providing for the valuation or appraisal of all or any part of the Mortgaged Property prior to or after any sale or sales made pursuant to this Mortgage, or pursuant to the decree, judgment, or order of any court of competent jurisdiction; or (c) any right under any statute to redeem all or any part of the property so sold, the [Mortgagor][[Institution]] wholly waives, for the [Mortgagor][[Institution]] and those who claim under the [Mortgagor][[Institution]] (a) all rights [of reinstatement ]and periods of redemption [to the full extent permitted by the provisions of 735 ILCS 5/15-1601 or other applicable][[provided under Missouri]] law[ or replacement statutes][[, (b) all statutory rights to redeem]], and ([b][[c]]) all right to have the

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Mortgaged Property or any other assets which secure the Master Obligations marshaled upon any foreclosure under this Mortgage. The [Mortgagor][[Institution]] waives any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of this Mortgage (whether based on contract, tort or any other theory).

Section 10. No Remedy Exclusive. No remedy conferred upon or reserved to [[the Mortgage Trustee or]] the Mortgagee herein, or in the Master Obligations, is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every remedy given to the [[Mortgage Trustee or the]] Mortgagee or now or hereafter existing at law or in equity or by statute. No delay or omission of [[the Mortgage Trustee or]] the Mortgagee to exercise any right or power accruing upon any default herein, in the Master Obligations, or in the Master Indenture or any other document or instrument evidencing, securing or otherwise relating to the debt hereby secured, nor any failure by the Mortgagee to insist upon the strict performance by the [Mortgagor][[Institution]] of any of the terms and provisions thereof, shall impair any such right or power, or shall be construed to be a waiver of any such default or any acquiescence therein; and the Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by the [Mortgagor][[Institution]] of any and all of the terms and provisions of this Mortgage to be performed by the [Mortgagor][[Institution]]; and every power and remedy given by the Then Current Master Indenture, the Master Obligations or this Mortgage, to the [[Mortgage Trustee or the]] Mortgagee may be exercised from time to time as often as may be deemed expedient by the Mortgagee. Nothing in this Mortgage or the Then Current Master Indenture or in the Master Obligations shall affect the obligation of the [Mortgagor][[Institution]] to pay the principal of and interest on the Master Obligations in the manner and at the time and place therein respectively expressed.

Section 11. Covenants of the [Mortgagee][[Mortgage Trustee]]; Substitutions. [[The Mortgage Trustee covenants faithfully to perform the trust herein created]]. The Mortgagee may, from time to time, substitute another [Mortgagee][[trustee]] in place of the then current [Mortgagee. ][[Mortgage Trustee]]. Upon such appointment, and without conveyance to the successor [Mortgagee][[trustee]], the latter shall be vested with all the title, estate, rights, powers and trusts conferred upon the [Mortgagee. ][[Mortgage Trustee.]] Such appointment shall be made by written instrument executed by the Mortgagee which shall be recorded among the public records of the county in which this Mortgage is recorded, and shall be conclusive proof of the proper appointment of the successor [Mortgagee][[Mortgage Trustee]], with the Mortgagee to furnish the [Mortgagor][[Institution]] with a copy of such recorded instrument within thirty days of its recording.

Section 12. Amendments, Supplements, Changes and Modifications. This Mortgage may be amended, supplemented, changed or modified in accordance with the terms set forth in this Mortgage or in the Then Current Master Indenture, including to permit the exercise of any of Grantor’s Rights. The [Mortgagor][[Institution]] hereby delegates to the Obligated Group Agent the authority, without the need for any consent or approval of the [Mortgagor][[Institution]] to execute, deliver and record any amendment, supplement, change or modification to this Mortgage as the Obligated Group Agent, in its sole discretion may determine to be necessary or appropriate to permit the exercise of any of Grantor’s Rights or any other right afforded [Mortgagor][[Grantor]] under this Mortgage or the Then Current Master Indenture.

Section 13. Notices. It shall be sufficient service of any notice, request, complaint, demand or other paper required by this Mortgage to be given to or filed with the Mortgagee, the Holders of the Master Obligations[, the Institution] or the [Mortgagor][[Mortgage Trustee]] if the same is given or filed in the manner and at the addresses specified in the Then Current Master Indenture, the applicable Master Obligation, this Mortgage or any document related to any of the foregoing providing for notice to the applicable person or entity.

Section 14. Successors and Assigns. The covenants and agreements of this Mortgage shall benefit the Mortgagee and Mortgagee’s successors and assigns.

Section 15. Time. Time is of the essence in connection with all Master Obligations.

Section 16. Severability. The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Mortgage shall not affect the validity or enforceability of the remaining portions of this Mortgage or any part thereof.

Section 17. [Illinois][[Missouri]] Law Governs. This Mortgage shall be governed by and construed and interpreted in accordance with the laws of the State of [Illinois][[Missouri]] without regard to conflicts of law principles.

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APPENDIX F

EXCERPTS OF SELECTED BANK COVENANTS

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SERIES 2000 BONDS REIMBURSEMENT AGREEMENT The following are relevant excerpts of certain covenants in the Reimbursement Agreement relating to the Series

2000 Bonds in favor of the Bank. Capitalized terms have the meanings set forth in the Master Indenture or the Reimbursement Agreement.

Section 5.1 Incorporation by Reference of Master Indenture Covenants; Additional Financial (a) The Institution covenants and agrees with the Bank that so long as any amounts may be drawn under the Letter

of Credit and thereafter, so long as any Obligations remain unfulfilled or unpaid under this Agreement, it and the other members of the Obligated Group will observe, perform, comply with and be bound by each and all of the agreements, covenants, obligations and undertakings contained m Article V of the Master Indenture, each and all of which are hereby incorporated herein by reference for the benefit of the Bank with the same force and effect as though set forth herein in their entirety.

(b) Additional Financial Covenants.

(i) Debt Service Coverage. The Obligated Group shall maintain a Long-Term Debt Service Coverage Ratio of not less than 1.25 to 1.0, to be tested quarterly as of the end of each fiscal quarter for the preceding four fiscal quarters, and

(ii) Days Cash on Hand. The Obligated Group shall maintain, at a minimum, Days Cash on Hand equivalent to 300 days of unrestricted cash and investments, to be tested semi-annually as of the end of the Obligated Group’s second and fourth fiscal quarters; [Note: the original provision references the possibility of changes that would occur if certain amendments were executed in connection with the Reimbursement Agreement on the Series 2008 Bonds. Those amendments have not been completed as of the date of the Official Statement.]

(iii) Rating. The Obligated Group shall maintain a rating from Fitch on the senior unenhanced long-term indebtedness of the Obligated Group of not less than “BBB-” (or an equivalent rating of Moody’s or S&P).

Events of Default. A default by the Institution under the covenants set forth above (as well as other covenants in the Reimbursement Agreement) grant the Bank the right to declare an Event of Default under the Reimbursement Agreement and cause a mandatory tender of the Series 2000 Bonds. The Master Indenture contains both a rate covenant (the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service) and a Days Cash on Hand covenant in amounts lower than the covenants contained in the Reimbursement Agreement, however, a violation of those covenants will not result in an event of default under the Master Indenture so long as the Obligated Group Agent takes the actions required by the Master Indenture; provided, however, the Master Indenture provides that in no event shall the ratio of Aggregate Income Available for Debt Service to Maximum Annual Debt Service for any Fiscal Years be less than 1.00. See the captions “SUMMARY OF THE MASTER INDENTURE – Rate Covenant and – Liquidity Covenant” in Appendix C.

SERIES 2014B BONDS CONTINUING COVENANT AGREEMENT The following are excerpts of certain covenants in the Continuing Covenant Agreement relating to the Series 2014B

Bonds. Capitalized terms have the meanings set forth in the Master Indenture or the Continuing Covenant Agreement.

Section 6.01. Incorporation by Reference of Master Indenture Covenants and Related Document Covenants; Additional Financial Covenants.

(a) The Obligated Group Agent covenants and agrees with the Purchaser that so long as any Obligations remain unfulfilled or unpaid under this Agreement, it and each other Member of the Obligated Group will observe, perform, comply with and be bound by each and all of the agreements, covenants, obligations and undertakings contained in Article V of the Master Indenture, each and all of which are hereby incorporated herein by reference for the benefit of the Purchaser with the same force and effect as though set forth herein in their entirety.

For the purpose of this Agreement, the provisions of Article V of the Master Indenture referred to above and the other sections of the Master Indenture to which reference is made in such Article V, together with related definitions, exhibits and ancillary provisions are hereby incorporated herein by reference mutatis mutandis and will be deemed to continue in effect for the benefit of the Purchaser until all of the Obligations of the Obligated Group Agent and the Obligated Group hereunder have been fully paid and satisfied. References in the Master Indenture to (i) the “Master Trustee,” (ii) “this Master

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Indenture,” “herein” and “hereunder,” (iii) “Note” and “Notes” and (iv) “Event of Default” shall for the purposes of this Agreement be deemed references to (a) the Purchaser, (b) this Agreement, (c) the Obligations, and (d) the Events of Default specified in Article VIII hereof.


(i) Debt Service Coverage. The Obligated Group shall maintain a Long-Term Debt Service Coverage Ratio of not less than 1.25 to 1.0, to be tested quarterly as of the end of each fiscal quarter for the preceding four fiscal quarters; and

(ii) Days Cash on Hand. The Obligated Group shall maintain, at a minimum, Days Cash on Hand equivalent to 300 days of unrestricted cash and investments, to be tested semi-annually as of the end of the Obligated Group’s second and fourth fiscal quarters.

(iii) Rating. The Obligated Group shall maintain a rating from Fitch on the senior unenhanced long-term indebtedness of the Obligated Group of not less than “BBB-” (or an equivalent rating of Moody’s or S&P). In furtherance of the Obligated Group’s covenant to maintain the aforementioned rating, the Obligated Group Agent covenants and agrees with the Purchaser to provide, or cause the Obligated Group to provide, to the rating agency(ies) from time to time (but not less than annually) such financial and other information as may be required by such rating agency(ies) in order to maintain such rating(s) and such additional information as the rating agency(ies) may from time to time reasonably request. The Obligated Group Agent shall, and shall cause the Obligated Group to, contemporaneously provide the Purchaser with a copy of all such information provided to the rating agency(ies).

SERIES 2014C BONDS CONTINUING COVENANT AGREEMENT The following are excerpts of certain covenants in the Continuing Covenant Agreement relating to the Series 2014C

Bonds. Capitalized terms have the meanings set forth in the Master Indenture or the Continuing Covenant Agreement.



For the purpose of this Agreement, the provisions of Article V of the Master Indenture referred to above and the other sections of the Master Indenture to which reference is made in such Article V, together with related definitions, exhibits and ancillary provisions are hereby incorporated herein by reference mutatis mutandis and will be deemed to continue in effect for the benefit of the Purchaser until all of the Obligations of the Obligated Group Agent and the Obligated Group hereunder have been fully paid and satisfied. References in the Master Indenture to (i) the “Master Trustee,” (ii) “this Master Indenture,” “herein” and “hereunder,” (iii) “Note” and “Notes” and (iv) “Event of Default” shall for the purposes of this Agreement be deemed references to (a) the Purchaser, (b) this Agreement, (c) the Obligations, and (d) the Events of Default specified in Article V hereof.


(i) Debt Service Coverage. The Obligated Group shall maintain a Long- Term Debt Service Coverage Ratio of not less than 1.25 to 1.0, to be tested quarterly as of the end of each fiscal quarter for the preceding four fiscal quarters; and


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A default by the Obligated Person under the covenants set forth above, as well as other covenants in the Continuing Covenant Agreement, grants the Series 2014C Initial Purchaser the right to declare an Event of Default under the Continuing Covenant Agreement and effect a mandatory redemption or mandatory tender or acceleration of the Series 2014C Bonds or take such other remedial action as is provided for in the bond trust indenture for the Series 2014C Bonds and the Master Indenture.

SERIES 2014D BONDS CONTINUING COVENANT AGREEMENT

The following are excerpts of certain covenants in the Continuing Covenant Agreement relating to the Series 2014D Bonds. Capitalized terms have the meanings set forth in the Master Indenture or the Continuing Covenant Agreement.








A default by the Obligated Person under the covenants set forth above, as well as other covenants in the Continuing Covenant Agreement, grants the Series 2014D Initial Purchaser the right to declare an Event of Default under the Continuing Covenant Agreement and effect a mandatory redemption or mandatory tender or acceleration of the Series 2014D Bonds or

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take such other remedial action as is provided for in the bond trust indenture for the Series 2014D Bonds and the Master Indenture.

SERIES 2016C BONDS CONTINUING COVENANT AGREEMENT

The following are excerpts of certain covenants in the Continuing Covenant Agreement relating to the Series 2016C Bonds. Capitalized terms have the meanings set forth in the Master Indenture or the Continuing Covenant Agreement.








A default by the Obligated Person under the covenants set forth above, as well as other covenants in the Continuing Covenant Agreement, grants the Series 2016C Initial Purchaser the right to declare an Event of Default under the Continuing Covenant Agreement and effect a mandatory redemption or mandatory tender or acceleration of the Series 2016C Bonds or take such other remedial action as is provided for in the bond trust indenture for the Series 2016C Bonds and the Master Indenture.

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