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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: MAY 17, 1999
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(DATE OF EARLIEST EVENT REPORTED)(APRIL 30, 1999)
CARE FIRST INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA 33-84692C 41-0877001
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
3720 23RD AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55407
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 724-5495
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Items 1, 3, 4, 5, 6 and 8 are not included.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1999, Care First Inc. (the "Registrant") closed on a
definitive Purchase Agreement with Shelter Care Foundation, a District of
Columbia non-profit corporation ("SCF"), for the purchase of its 256 bed nursing
home facility, known as the Nile Health Care Center, located at 3720 23rd Avenue
South, Minneapolis, Minnesota 55407. SCF has no affiliation to the Registrant or
any of its affiliates. The nursing home facility has been owned and operated by
Care First Inc. since its original construction in 1983, with a major expansion
in 1994. The sales price of $20,000,000, paid in cash at the closing, was
determined through arms-length negotiations and includes the nursing home
facility for inpatient elderly and disabled persons and home health agency, with
related parking and accessory facilities. This transaction was previously
discussed in Care First Inc.'s Form 10-QSB filed August 12, 1998 for the quarter
ended June 30, 1998.
In connection with this disposition, Care First Inc. defeased the
outstanding revenue bonds on the facility in accordance with the terms and
conditions of these bonds by depositing with the Trustee, Firstar Bank of
Minnesota, National Association (f/k/a American Bank, National Association),
$12,161,087.81 out of the proceeds of the sale. This amount, together with
amounts already held by the Trustee in various indenture funds, is sufficient to
redeem the Registrant's bonds as of December 1, 1999, according to a
Verification Report issued by McGladrey & Pullen, LLP. As a result of the
defeasance and intended redemption of the Registrant's bonds, it intends to
promptly file with the Securities and Exchange Commission a Form 15 to cease its
reporting obligations under the Securities Exchange Act of 1934.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
To be provided by amendment within 60 days of the date hereof in
accordance with Item 7(b)(2) of Form 8-K.
(c) Exhibits.
2.1 Purchase Agreement dated July 27, 1998 between the Registrant
and Shelter Care Foundation.
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2.2 Amendment to Purchase Agreement dated February 17, 1999
between Registrant and Shelter Care Foundation.
2.3 Defeasance Agreement between Care First Inc. and Firstar Bank
of Minnesota, National Association dated as of April 30, 1999.
2.4 Verification Report
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CARE FIRST INC.
By /s/ Jack E. Nugent
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Jack E. Nugent
President and Director of Finance
May 17, 1999
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EXHIBIT 2.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, is made and entered into this ___ day of July,
1998, by and between SHELTER CARE FOUNDATION, a District of Columbia non-profit
corporation (hereinafter referred to as "Buyer"), and CARE FIRST INC., a
Minnesota corporation (hereinafter referred to as "Seller").
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of a 256-bed licensed nursing
home facility for in-patient elderly and disabled persons and a home health
agency, with related parking and accessory facilities, known as the Nile Health
Care Center, which facilities are located in the City of Minneapolis, Minnesota
(hereinafter referred to as the "Facilities"); and
WHEREAS, Seller desires to sell all of its rights, title and interest
in and to the Facilities and related personal property to Buyer and Buyer
desires to purchase the said real and personal property from Seller;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:
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1. Sale and Purchase
(a) Assets Purchased. Seller agrees to sell and hereby sells, and
Buyer agrees to purchase, and hereby purchases, on the terms and conditions set
forth herein, the following:
(i) Real Property. The real property located in Hennepin County,
Minnesota which is legally described in Exhibit A attached
hereto and made a part of this Agreement, and all buildings,
improvements and appurtenant structures thereon (the "Real
Property").
(ii) Personal Property. All equipment, furniture, fixtures,
appliances, tools, instruments, and other tangible personal
property owned by Seller as of the date of this Agreement or
acquired by Seller prior to Closing and located on the Real
Property and used in connection with the operation of the
Facilities (the "Personal Property"). The Personal Property
does not include antiques in basement room of the Facilities
and personal artworks. The Personal Property shall be
described in Exhibit B, which shall be prepared jointly by
Seller and Buyer prior to Closing, and which shall be attached
hereto and become a part of this Agreement.
(iii) Inventory. All inventories of every kind and nature whatsoever
(specifically including, but not limited to, all pharmacy
supplies, medical supplies, office supplies, fuel, other
supplies and foodstuffs) owned by Seller as of the date of
this Agreement or hereafter acquired, and relating to the
Facilities, except inventory sold or
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consumed in the ordinary course of business from and after the
date of this Agreement (the "Inventory").
(iv) Intangible Personal Property. All rights, if any, to the
telephone numbers of the Facilities and their sequential
numbers, medical records, administrative records, manuals,
other books and records relating directly to the operation of
the Facilities and located therein, existing plans and
specifications relating to the Facilities building and any
proposed additions, lien waivers, surety agreements, bonds,
warranties, guaranties, utility use agreements, covenants,
commitments, permits, certificates, approvals, and other
tangible personal property of every kind and nature whatsoever
owned by Seller as of the date of this Agreement or hereafter
acquired , which can be legally transferred and which relate
directly to the Facilities (the "Intangible Personal
Property"). This does not include cash (on hand or in banks)
or other current assets not specifically transferred pursuant
to this Agreement, or accounts, notes, interest and other
receivables arising from the operation of the Facilities prior
to Closing. The Intangible Personal Property shall be
described in Exhibit "C" which shall be prepared jointly by
Seller and Buyer prior to Closing, and which shall be attached
hereto and become a part of this Agreement.
(b) Liabilities. Except as expressly set forth in this Agreement,
Buyer does not assume any of the accounts payable or any of the other
liabilities in any manner connected with or related to Seller. At Closing, Buyer
shall assume and agree to pay and perform the obligations of the Seller
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with respect to (i) accrued and vested vacation and personal leave time pay for
employees of the Seller that are employed by the Buyer on and after the date of
Closing accordance with the provisions of Section 11(b), below; and (ii) the
obligations of the Seller arising after the date of Closing with respect to any
collective bargaining agreement by and between Seller and Service Employees
International Union, Local 113 (the "Union Contract"). Except as expressly set
forth in this Agreement, Buyer does not acquire any interest of Seller in its
current assets, including, without limitation, accounts receivable, Medicare or
Medicaid credits, or workers' compensation credits.
(c) Limited Liability Company. Buyer contemplates organizing a
Minnesota limited liability company whose sole member shall be Buyer with the
name "Nile Health Care LLC". At such time as such company is organized, Buyer
shall provide Seller documentation reasonably satisfactory to Seller: (i) that
such company has been lawfully organized; (ii) that such company is authorized
to assume the obligations of Buyer under this Agreement; and (iii) a proposed
assignment and assumption agreement. Upon approval thereof by Seller and
execution of the assignment and assumption agreement, this Agreement shall be
assigned by Buyer to said company which shall assume all obligations of Buyer
hereunder; except that Shelter Care Foundation shall remain obligated under the
terms and conditions of Sections 2(e) and (f) and 19(f) of this Agreement. In
the event that the transaction contemplated by this Agreement does not close,
Buyer shall have no right to use of the name "Nile Health Care" and shall amend
or discontinue the name of the limited liability company.
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2. Purchase Price
The purchase price for the Facilities and all other property, personal
and real, to be acquired in accordance with the provisions of this Agreement
shall be the amount of Twenty Million Dollars ($20,000,000). The purchase price
shall be payable in the following manner:
(a) At Closing, the purchase price shall be paid by Buyer as
follows:
(i) $17,300,000, cash, including deposits, paid at
closing (the "Cash Portion").
(ii) $1,080,000 by conveying to Seller or its designee(s),
the 1998 Series "B" tax-exempt bonds. These bonds
shall provide for monthly payments of principal and
interest based upon a level amortization over thirty
(30) years and interest at the rate of seven and
one-half percent (7.5%) per annum.
(iii) $1,620,000 by conveying to Seller or its designee(s),
the 1998 Series "C" tax-exempt bonds. These bonds
shall provide for monthly payments of principal and
interest based upon a level amortization over thirty
(30) years and interest at the rate of nine percent
(9.0%) per annum.
(b) The Series "B" bonds shall be secured as follows:
(i) A second mortgage shall be recorded against the
Facilities and Real Property.
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(ii) The bonds shall include the security provisions
granted by Buyer in connection with the financing of
the amount in subsection (a)(i), above, including,
but not limited to, Seller receiving copies of all
reports required by Buyer's senior lender,
restrictions on distributions of any assets or funds
by Buyer, restrictions on subordinate financing on
the Facilities, cross default provisions, and a
security agreement in the assets of Buyer, a fixture
financing statement and an assignment of leases and
rents, which shall be subordinate to the security of
the Buyer's senior lender.
(iii) The bonds shall include provisions for recourse
against the Facilities and all other assets of Buyer
(but, upon assignment of this Agreement pursuant to
Section 1(c) above, no recourse against Shelter Care
Foundation, the sole member of the assignee,) and for
accelerated payment in full of such bonds in the
event of refinancing, sale of the Facilities,
condemnation or damage or destruction of the
Facilities, change in control of Buyer or Shelter
Care Foundation and other appropriate circumstances.
(c) The parties intend and agree that the Series "B" bonds shall
be secured by all measures and to the greatest extent as is authorized by the
Housing and Urban Development Agency, or such other or successor governmental
agency used by Buyer for financing (hereinafter collectively referred to as
"HUD"); including increasing the amount of the Series "B" bonds, with a
corresponding reduction in the Series "C" bonds, to the extent allowed by HUD.
The security
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documents and bond documents shall all be in form and content mutually
acceptable to Seller and Buyer. Unless the security documents and bond documents
are acceptable to Seller, Seller may terminate this Agreement, in which case all
funds then held by the Escrow Agent shall be returned to Buyer and neither party
shall thereafter have any obligation under this Agreement. Buyer shall use
reasonable efforts to assure that Seller shall have opportunity to have access
and input to Buyer's senior lender with respect to any subordination agreement
to be requested of Seller. Seller shall use reasonable efforts to promptly
inform Buyer (if possible within ten (10) business days of receipt of
information or documents) regarding concerns or objections Seller has regarding
the form or content of the security documents and bond documents.
(d) The Series "C" bonds shall be secured by all measures and to
the greatest extent as authorized by HUD.
(e) At Closing, Buyer shall deliver to Seller a customary opinion
of counsel that the interest payments on the Series "B" and Series "C" bonds
shall be exempt from federal income tax. Buyer and Shelter Care Foundation shall
take no actions that would cause the tax exempt status of the interest payments
on the Series "B" and Series "C" bonds to be lost or jeopardized.
(f) At the request of Seller, and at Seller's expense, Buyer shall
use its best efforts to cause the subordinate debt, or specified portions
thereof, to be placed in the secondary market, but that shall not be a
contingency to Closing on the transaction contemplated by this Agreement.
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3. Earnest Money Deposits; Inspection Period; Bond Issuance
Period
(a) Earnest money in the amount of One Hundred Thousand Dollars
($100,000) shall be deposited on the date of execution of this Agreement with
Bank Windsor, Minneapolis, Minnesota (the "Escrow Agent") to be applied as set
forth in this Agreement (the "Deposit").
(b) Within five (5) days following execution of this Agreement,
Seller shall provide Buyer with a listing of the documents, leases, books and
records that have been requested by Buyer with respect to the Facilities (the
"Inspection Items") and not yet provided by Seller. Buyer shall have a period of
forty-five (45) days from the date of delivery of the last of the Inspection
Items (the "Inspection Period") to review the material provided and to perform
such other due diligence as Buyer determines to perform with respect to the
Facilities. Upon delivery of the last of the Inspection Items, both parties
shall execute an addendum to this Agreement confirming the date of the start of
the Inspection Period. If, prior to the expiration of Inspection Period, Buyer
elects to not proceed with the transaction contemplated by this Agreement, all
funds then held by the Escrow Agent shall be returned to the Buyer and this
Agreement shall thereupon be terminated. If, upon expiration of the Inspection
Period, Buyer elects to proceed with the transaction contemplated by this
Agreement, Buyer shall deposit with the Escrow Agent One Hundred Thousand
Dollars ($100,000) as additional earnest money, which additional earnest money
shall thereafter be deemed to be a part of the Deposit to be applied as set
forth in this Agreement.
(c) Provided that Buyer shall be satisfied with, or have waived,
the removal of all contingencies with respect to the property during the
Inspection Period, and shall have
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communicated the same in writing to Seller, a Bond Issuance Period shall be
granted by Seller upon the conclusion of the Inspection Period. Buyer shall have
forty-five (45) days following expiration of the Inspection Period (the "Bond
Issuance Period") to accomplish the authorization of the bonds issued by the
agency upon terms and conditions satisfactory to Buyer. During this period, the
Buyer shall use its best efforts to secure approval and authorization from the
City of Minneapolis or other appropriate issuer with respect to the issuance of
tax exempt bonds, the proceeds of which will be used by Buyer to finance the
acquisition of the Facilities. If, during the Bond Issuance Period, Buyer has
not obtained all necessary authorizations and approvals with respect to the
issuance of the tax exempt bonds, all funds then held by the Escrow Agent shall
be returned to the Buyer and this Agreement shall thereupon be terminated. Upon
authorization of the bonds, in accordance with the above, all sums which
constitute the Deposit shall become non-refundable, to be applied to the
purchase price at Closing or forfeited to Seller if Closing does not occur.
(d) Closing of the transactions contemplated under this Agreement
shall occur within thirty (30) days from the expiration of the Bond Issuance
Period. Buyer may extend Closing for two (2) additional thirty (30) day periods
by depositing with the Escrow Agent, prior to the expiration of the period, the
amount of Twenty-five Thousand Dollars ($25,000) for each additional thirty (30)
day period. The total Deposit shall continue to be non-refundable as set forth
above.
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4. Form of Conveyance
Subject to performance by Buyer, Seller agrees to execute and deliver a
deed of real property, bill of sale of personal property and other transfer
documents in form and substance consistent with the provisions hereof.
5. Real Estate Taxes
Real estate taxes due and payable in the year prior to Closing and all
years prior thereto and levied or pending assessments as of the date of Closing
shall be paid in full by Seller on or before the date of Closing. Real estate
taxes due and payable in the year of Closing shall be prorated from January 1 of
the year of Closing to the date of Closing, with taxes prorated after date of
Closing being Buyer's responsibility to pay.
6. Condition of Facilities
It is understood and agreed upon by Buyer and Seller that the
Facilities are being sold in their "as is" condition and that Seller makes no
warranties or representations with respect to the condition of the Facilities,
except with respect to hazardous materials as set forth in Section 14, below.
7. Destruction of Property
In the event that prior to Closing the property is damaged in any
manner by fire or other cause so as to render parts of the Facilities unusable,
then and in that event, either party hereto may, at its option and by giving the
other party fifteen (15) days' written notice, declare this Agreement
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null and void, and in such case all funds held by the Escrow Agent hereunder
shall be refunded to Buyer.
8. Marketable Title
(a) Seller shall, within a reasonable time after execution of this
Agreement, furnish a UCC Search and a current commitment for an owner's title
insurance policy covering the Real Property, certified to date to include proper
searches for State and Federal judgments and liens and showing marketable title
in Seller (and such items shall be deemed to be a part of the Inspection Items).
During the Inspection Period, Buyer shall examine title and make any objections
thereto, said objections to be made in writing or deemed to be waived. If said
title is not marketable and is not made so within sixty (60) days from the date
of written objections thereto as above provided, Buyer may declare this
Agreement null and void, in which case all funds held by the Escrow Agent
hereunder shall be refunded to Buyer and neither party shall have any further
rights or obligations hereunder. If the title to said property is found
marketable or is so made within said time, and if the Inspection Period and the
Bond Issuance Period have passed as set forth herein, and Buyer shall default in
any of the agreements and continue in default for a period of thirty (30) days
of notice thereof from Seller, then and in such case, Seller may terminate this
Agreement; and on such termination, all the payments made upon this Agreement
shall be retained by Seller as liquidated damages, time being of the essence
hereof. This provision shall not deprive either party of the right of enforcing
the specific performance of this Agreement, provided such action to enforce
specific performance shall be commenced within six (6) months after such right
of action shall arise.
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(b) Buyer shall pay any premium charged for any policy of title
insurance issued pursuant to the above title insurance commitment, if Buyer
elects to purchase such coverage.
9. Licensing
Seller and Buyer agree to cause the appropriate inspections and surveys
to be made of the Facilities by all agencies, local, state and federal, which
may be necessary or desirable in connection with the issuance of a license to
Buyer to operate a nursing home. However, if the appropriate governmental
authorities shall not require a survey to be made of the Facilities, such
prelicensing inspections and surveys may, naturally, be waived. If, nonetheless,
the relevant local, state and federal officials shall determine that repairs and
alterations must be made to the Facilities premises as a prelicensing condition
prior to Closing, then and in that event: (i) all such repairs and alterations
will be completed by Seller and all costs and expenses associated with such
repairs and alterations shall be incurred by and be the responsibility of Seller
or (ii) Buyer may elect to terminate this Agreement and the transaction
contemplated hereby, whereupon all funds held by the Escrow Agent shall be
repaid to Buyer.
10. Facilities Licensing and Certification
Seller shall keep in effect all required measures in staff operation
and other facilities necessary to continue to qualify the Facilities for at
least its existing classification of licensing and certification for its two
hundred fifty-six (256) nursing home beds, in the same numbers of each class of
bed as such home is presently licensed and certified.
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11. Closing Adjustments
(a) The income and expenses arising from the operation of the
Facilities prior to the date of Closing shall be for the account of Seller and
the income and expenses arising from the operation of the Facilities on or after
the date of Closing shall be for the account of Buyer. On the date of Closing,
Seller and Buyer shall determine the amount of all such items, prorated as of
the date of Closing (the "Closing Prorations"). Seller shall be entitled to all
payments applicable to resident housing and care prior to the date of Closing
and Seller shall be responsible for all expenses arising or incurred prior to
the date of Closing. If funds belonging to Seller or any payments applicable to
the operation of the facilities prior to the date of Closing payment are
received by Buyer, those funds shall be transmitted by Buyer to Seller promptly.
If any payments applicable to the operation of the Facilities on or after the
date of Closing have been or are received by Seller, those funds shall be
transmitted by Seller to Buyer promptly. Unless otherwise agreed to by the
parties, Seller shall pay, at time of Closing, all of its incurred and deemed
expenses to date of Closing, including without limitation all salaries, wages,
and other charges and expenses which may properly be accrued to date of Closing,
except as provided in subsection (b), below. Seller and Buyer agree that should
Buyer be compelled to pay any debts or bills properly payable by Seller, Seller
shall promptly pay such amount to Buyer.
(b) Notwithstanding the foregoing, Buyer shall assume the
obligations for accrued and vested vacation and personal leave time pay, as of
the date of Closing, of employees of Seller that become employees of Buyer, to
the extent that Buyer has received a credit therefor in the Closing Prorations.
Seller shall provide to Buyer, within fifteen (15) days following the execution
of this
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Agreement, a schedule of all employees at the Facilities, their currently
applicable wage rates, and their deemed vacation pay as of the date reflected
thereon and as projected to be as of the date of Closing.
(c) Costs and expenses associated with the sale of Seller's Assets
to Buyer shall be allocated between the parties as follows:
(i) Seller shall pay the state deed tax and Buyer shall
pay the recording and conservation fees due and
payable for recording of the warranty deed given to
transfer to Buyer title to the Real Property;
(ii) Seller shall pay the cost of the real property title
insurance commitments and the UCC Searches, and
provide Buyer with the Surveys that Seller presently
has, and Buyer shall pay the cost of the Owner's and
Lender's Title Policies, including the cost of any
title endorsements to the Title Policies required by
Buyer or Buyer's lender;
(iii) Buyer shall pay the mortgage registration tax and
cost of any recording fees for recording the First
and Second Mortgages and UCC-1 Financing Statements;
(iv) Buyer and Seller shall each pay their own attorneys'
fees;
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(v) Buyer and Seller shall pay any escrow fees equally;
(vi) Buyer will pay for the cost of the environmental
assessment (as defined below). In addition, in the
event that Seller elects to cure any problems
identified in the environmental assessment in
accordance with Section 14(b), Seller will pay for
the cost of curing such problems; and
(vii) In the event Seller elects to cure any objections
Buyer makes to the items described in the Title
Commitments or the UCC Searches, then Seller shall
pay the cost of curing such objections.
12. Possession and Records
Seller shall give possession of the Facilities to Buyer at the time of
Closing. At Closing, Seller agrees to have at the Facilities all patient records
and other financial records as may be necessary to substantiate rate charges and
rates to be charged by the Facilities and to leave any other records that may be
required by any department or division in the State of Minnesota. Seller further
agrees to make other records of the Facilities available to Buyer upon Buyer's
request at any reasonable time. Likewise, Buyer agrees to maintain all those
records which are left by Seller at the Facilities and to maintain such other
records as may be required by the State of Minnesota and to make all of such
records available to Seller at all reasonable times for proper business
purposes.
13. Expenses and Charges Related to Periods Prior to Closing
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(a) Seller shall (i) prepare any Cost Reports in connection with
the business at the Facilities that are due after Closing and which cover a
reporting period ending on or before the date of Closing and (ii) prepare and
file the Medicare Cost Report due ninety (90) days after the date of Closing.
Seller shall provide copies of any Cost Reports prepared by Seller to Buyer
prior to the filing thereof, so that Buyer shall have the opportunity to review
and comment on such Cost Reports; provided, however, that the contents of any
Cost Reports shall be in the absolute discretion of the party signing such Cost
Reports.
(b) Seller shall (i) provide Buyer with such information as Buyer
needs to prepare and file any Cost Reports due after Closing for a period ending
after Closing and (ii) certify to the appropriate department that, to the best
of Seller's knowledge, the information provided is a true and complete statement
prepared from the books and records of the Facilities in accordance with
applicable instructions, except as noted, and that all salary and non-salary
expenses presented in such information as a basis for securing reimbursement for
Title XIX patients were incurred to provide patient care in the Facilities.
(c) The parties acknowledge that the Minnesota Department of Human
Services ("DHS") may attempt to offset excess payments for periods prior to the
date of Closing against future income of Buyer. In the event that DHS notifies
Buyer of intent to review or audit rates or other matters attributable to
periods prior to the date of Closing, Buyer shall within seven (7) business days
notify Seller of the same and continue to keep Seller informed of any actions or
threatened actions of the DHS on a timely basis. Buyer agrees to notify Seller
promptly of any chargebacks or offsets
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proposed by DHS or any other governmental agency, attributable to claimed
overpayments or other matters for periods prior to the date of Closing, so that
Seller may have the opportunity to examine and contest or negotiate the same.
Provided that Seller shall have given Buyer notice as set forth above, and shall
have cooperated fully with Seller in the defense of any DHS claims, Seller shall
promptly reimburse Buyer for such DHS offsets or chargebacks against sums due
and owing to Buyer for periods after Closing. Seller shall be responsible for
any claims of overcharges to private paying residents for charges prior to
Closing. In the event that there is an increase in the rates paid for periods
ending on or prior to the date of Closing, the amount of such increase shall be
promptly transmitted and paid to Seller upon receipt thereof by Buyer.
(d) At Closing, the parties hereto shall enter into an Escrow
Agreement (the "Escrow Agreement") pursuant to which Buyer shall deposit Fifty
Thousand Dollars ($50,000) withheld from the Cash Portion for the purpose of
securing the payment or reimbursement obligations of Seller under this
Agreement. Additionally, from interest payments of Buyer on the Series "C"
bonds, the amount of Five Thousand Dollars ($5,000) per month shall be deposited
in escrow until a total of One Hundred Thousand Dollars ($100,000) is held in
escrow. The funds held in escrow shall be placed in an account earning interest.
In the event that Seller is obligated to make a payment or reimbursement to
Buyer pursuant to the terms of this Agreement, Buyer shall be entitled to
receive the amount of such payment or reimbursement from the amount held under
the Escrow Agreement. On the third anniversary of the date of Closing, the
excess of One Hundred Thousand Dollars ($100,000), together with interest
earned, over the amount of any payments or reimbursements released to Buyer as
set forth herein, shall be released to Seller or its designee. Notwithstanding
the
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foregoing, the obligation of Seller to make payments or reimbursements to Buyer
as set forth in this Agreement shall not be limited to the amount held under the
terms of the Escrow Agreement.
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14. Hazardous Materials
(a) To the best of Seller's knowledge: (i) Seller has not stored,
produced, processed or in any manner dealt with Hazardous Materials at the
Facilities (as that term is hereinafter defined) in violation of any applicable
federal, state or local environmental law, ordinance, rule or regulation; and
(ii) Seller has not received an outstanding notice, advice or order from any
governmental agency with regard to Hazardous Materials affecting the Facilities.
The term "Hazardous Materials" as used herein includes, without limitation,
gasoline, petroleum products, explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, polychlorinated
biphenyls or related or similar materials, asbestos or any other substance or
material as may be defined as a hazardous or toxic substance by any federal,
state or local environmental law, ordinance, rule or regulation. To the best of
Seller's knowledge, there are no asbestos-containing materials on or upon the
Facilities. With respect to the underground storage tank at the facility, Seller
has delivered to Buyer all notices, reports, orders and other documents and
communications, including all cost estimates or proposals, relating to the
removal of the tank and the presence of Hazardous Materials.
(b) The Closing and transfer of title to the Facilities is
contingent upon the Buyer, at its cost, obtaining a satisfactory environmental
assessment for the Facilities stating that there has not been a release of
Hazardous Materials at the Facilities and that the Facilities are in compliance
with all applicable federal, state and local environmental, health or safety
laws and regulations. If an environmental assessment of the Facilities does not
indicate that there has been no release of Hazardous Materials at the Facilities
or that the Facilities are in compliance, then Seller shall, if the same are
correctable, within thirty (30) days, correct such noncompliance or remediate
such release
19
<PAGE> 20
to the reasonable satisfaction of Buyer. In the event that Seller elects not to
correct such noncompliance or the same is not subject to correction, then Buyer,
at its sole option, may determine this Agreement to be null and void, serve
written notice of the same upon Seller, and immediately refund to Buyer all
monies previously paid by Buyer to Seller and all funds then held by the Escrow
Agent shall be returned to Buyer. Said notice shall be served by Buyer upon
Seller within ten (10) days of expiration of Seller's 30 day cure period or of
receipt by Buyer of Seller's notice that Seller does not intend to cure the
noncompliance or that the noncompliance is not subject to correction.
15. Financial Records
Seller shall make available to Buyer within thirty (30) days following
Closing all information and financial records of Seller relating to its
operation of the Facilities to the date of Closing which may be needed or useful
in substantiating rates used at the Facilities or in applying for modifications
thereof. Third party reimbursement reports to date of Closing shall be promptly
filed by Buyer.
16. Termination of Agreement by Buyer
Buyer may elect to terminate this Agreement and all obligations shall
thereby be rendered null and void, with all funds held by the Escrow Agent
hereunder to be immediately refunded to Buyer, under any of the following
circumstances:
(a) Upon the terms expressly set forth in any other section of
this Agreement;
20
<PAGE> 21
(b) If title to the Facilities real and personal Facilities are
not marketable and free and clear of all liens and encumbrances;
(c) If Buyer is unable to obtain all requisite approvals from the
State of Minnesota necessary for the transfer to Buyer of ownership and
operation of the Facilities and the licenses applicable thereto;
(d) If it shall be determined that the building or buildings
constituting the Facilities premises are not entirely within the boundary lines
of the real Facilities being transferred herein;
(e) If Buyer shall have been unable to obtain a satisfactory
environmental assessment for the Facilities as described in Section 14(b),
above;
(f) If Seller shall have failed to deliver to Buyer and to Buyer's
counsel documentation, reasonably satisfactory to Buyer's counsel, to the effect
that the transactions contemplated by this Agreement has been duly and fully
authorized by Seller and its shareholders; and
(g) If the representations and warranties of Seller set forth in
this Agreement are not true and correct on the date of Closing or if the
covenants of Seller set forth in this Agreement have not been complied with on
and before the date of Closing.
21
<PAGE> 22
Buyer may waive, in whole or in part, any requirements set forth in
this section. Buyer shall use its best efforts to promptly inform Seller of all
progress being made with regard to resolution of each of the above contingencies
and of any specific concerns that Buyer might have under each of the above
contingencies so as to allow Seller to cure such concerns or both parties to
otherwise resolve such concerns as soon as reasonably possible and as far in
advance of the scheduled date of Closing as reasonably possible.
17. Best Efforts Commitments of Parties; Operation Prior to
Closing
(a) Seller and Buyer covenant and agree with one another that they
shall exercise their best efforts to diligently proceed to satisfy all
conditions of Closing identified in Section 16, above, in order that such
Closing might be had in a timely manner.
(b) During the period from the date of this Agreement to the date
of Closing, Seller agrees to continue to operate the Facilities in the ordinary
course of business, consistent with all applicable laws, regulations rules and
orders, and consistent with past practices (including maintaining levels of
supplies and inventory and expenditures for maintenance and improvements at the
Facilities). Seller shall use its best efforts to continue to conduct the
financial operations of the Facilities, including credit and collection
practices and purchase and payment practices, with the same effort, to the same
extent and in the same manner as in the prior conduct of the financial
operations of the Facilities.
22
<PAGE> 23
18. Trust Account
At the time of Closing, all trust accounts of the nursing home
residents shall be audited and turned over to Buyer, with Buyer specifically
executing a hold harmless agreement for all assets turned over to it. Buyer
acknowledges and agrees that Buyer shall be responsible, at Buyer's expense, for
providing a surety bond or matching funds in accordance with the requirements of
DHS with respect to such resident trust accounts.
19. Miscellaneous
(a) All notices required hereunder, including notice of
termination, if appropriate, and other notices hereunder, shall be given:
To Seller, by delivery of such written notices to:
Care First Inc.
Mr. Jack Nugent
3720 23rd Avenue South
Minneapolis, MN 55407
With a copy to:
William E. Flynn, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 S. 8th St.
Minneapolis, MN 55402
To Buyer, by delivery of such written notices to:
Shelter Care Foundation
P.O. Box 1826
1330 Galleon Drive
Naples, FL 34102
23
<PAGE> 24
With a copy to:
Robert T. York, Esq.
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 S. Seventh St.
Minneapolis, MN 55402
(b) Time is of the essence hereof.
(c) All section headings are for convenience only and shall not be
construed to limit the content of this Agreement.
(d) Except as specifically stated herein, all agreements,
representations and warranties of the parties shall survive Closing.
(e) Seller and Buyer mutually represent that they have not
employed any agent or broker with respect to the sale or purchase of the
Facilities, except that Seller has retained LAWCO Financial, LLC, the fees of
which shall be solely the responsibility of Seller; and each party will
indemnify and hold the other harmless from any and all liability for any breach
of the foregoing representations.
(f) Buyer and Seller agree to keep confidential any proprietary
information disclosed to them by the other party during the course of this
transaction; and Buyer specifically agrees to
24
<PAGE> 25
continue to comply with all the terms and conditions of the Confidentiality
Agreement that it entered into in connection with first obtaining information
regarding the Facilities.
(g) Upon the execution of this Agreement, Seller shall take the
Facilities off the market, but may continue to entertain back up offers from
others, continue any incomplete marketing programs, and enter into back-up
contracts for the sale of the Facilities.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Buyer:
SHELTER CARE FOUNDATION
By: /s/ Richard A. Martin
--------------------------
Its: Director
----------------------
Seller:
CARE FIRST INC.
By: /s/ Jack E. Nugent
--------------------------
Its: President
----------------------
25
<PAGE> 1
AMENDMENT
TO
PURCHASE AGREEMENT
THIS AMENDMENT TO PURCHASE AGREEMENT is made and entered into this
_____ day of February, 1999, by and between SHELTER CARE FOUNDATION, INC., a
District of Columbia non-profit corporation (the "Buyer") and CARE FIRST, INC.,
a Minnesota corporation (the "Seller").
W I T N E S E T H:
WHEREAS, Seller and Buyer have entered into that certain Purchase
Agreement (the "Purchase Agreement") dated July 27, 1998, for the purchase by
the Buyer of the Facilities (as defined in the Purchase Agreement); and
WHEREAS, the parties desire to amend the terms of the Purchase
Agreement as more particularly set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:
1. Amendment to Section 2(a)
Section 2(a) of the Purchase Agreement is hereby amended by deleting
said Section in its entirety and replacing said Section with the following:
"(a) At Closing, the purchase price shall be paid by Buyer in cash.
All funds on deposit with the Escrow Agreement shall be
distributed to the Seller and the balance of the purchase
price shall be paid by the Buyer to the Seller in cash at
closing."
2. Deletion of Sections 2(b) through 2(f)
Sections 2(b) through 2(f) of the Purchase Agreement are hereby deleted
in their entirely.
<PAGE> 2
3. Other Provisions
Except as specifically amended as set forth above, all other terms and
provisions of the Purchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Buyer:
SHELTER CARE FOUNDATION, INC.
By: Lynn Carlson Schell
-----------------------
Its: Agent
-----------------------
Seller:
CARE FIRST, INC.
By: Jack E. Nugent
-----------------------
Its: President
-----------------------
2
<PAGE> 1
DEFEASANCE AGREEMENT
between
CARE FIRST INC.
and
FIRSTAR BANK OF MINNESOTA, NATIONAL ASSOCIATION
Dated as of April 30, 1999
<PAGE> 2
DEFEASANCE AGREEMENT
THIS DEFEASANCE AGREEMENT, dated as of April 30, 1999 (the "Defeasance
Agreement"), between FIRSTAR BANK OF MINNESOTA, NATIONAL ASSOCIATION, a national
banking association in the City of St. Paul, Minnesota (the "Trustee") and CARE
FIRST INC. (the "Company").
WITNESSETH
WHEREAS, on December 27, 1994, the City of Minneapolis, Minnesota (the
"Issuer"), issued Health Care Facilities Refunding Revenue Bonds (Care First
Inc. Project), Series 1994, in the amount of $4,725,000 (the "Series 1994
Refunding Bonds") and Taxable Health Care Facilities Revenue Bonds (Care First
Inc. Project), Series 1994, in the amount of $8,500,000 (the "Series 1994
Taxable Bonds"), pursuant to those certain Trust Indentures, dated as of
December 1, 1994, by and between the Issuer and the Trustee (formerly known as
American Bank, National Association) (the "Indentures") of which the principal
amount of $12,560,000.00 remains outstanding (collectively, the "Series 1994
Bonds").
WHEREAS, in connection with the sale of substantially all of its
assets, the Company has determined to defease the Series 1994 Bonds through
current funding of future payments of the principal of, and premium and interest
on, the Series 1994 Bonds or the optional redemption thereof prior to maturity.
WHEREAS, in order to accomplish the foregoing, the Company will deposit
with the Trustee $12,161,087.81 ("Company Funds") which amount of Company Funds,
when added to the cash on deposit in the Bond Funds, Optional Redemption Funds,
Reserve Funds and the Supplemental Reserve Funds created in the Indentures (the
"Indenture Funds") in the amount of $1,617,427.20, will be used to fund the
beginning cash balance of $356.25 and to purchase certain United States
government obligations in a principal amount, which, together with interest to
be earned thereon, will be used to retire and redeem the Series 1994 Bonds as
provided for herein.
WHEREAS, this Defeasance Agreement is irrevocable and is entered into
for the purpose of accomplishing the defeasance of the Series 1994 Bonds
pursuant to the Indentures and for the purpose of setting forth the duties and
obligations of the parties hereto in connection with such defeasance.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
<PAGE> 3
Section 1. Receipt of Documents by Trustee; Incorporation by Reference;
Performance of the Indenture. Receipt of true and correct copies of the
Indentures is hereby acknowledged by the Trustee, and reference herein to or
citation herein of any provision of the same shall be deemed to be incorporated
as part hereof in the same manner and with the same effect as if such provision
were fully set forth herein. The Trustee hereby confirms its agreement to
perform and be bound by all provisions of the Indentures which survive the
defeasance of the Series 1994 Bonds.
Section 2. Creation of Defeasance Fund. There is hereby created and
established with the Trustee a special and irrevocable escrow account to be
known as the "Defeasance Fund, Series 1994 Bonds - Care First Inc." (the
"Defeasance Fund") to be held in the custody of the Trustee separate and apart
from other funds of the Company, if any, or of the Trustee. The Defeasance Fund
will contain monies to be applied as provided herein, which will be an amount at
least sufficient to purchase Government Securities, as hereinafter defined, the
principal of and interest on which will be sufficient to pay when due the
principal of the Series 1994 Bonds (whether at maturity or mandatory or optional
redemption prior to maturity) and to pay when due the interest thereon to their
respective dates of maturity or prior redemption, and, in the event of an
optional redemption of the Series 1994 Bonds, to pay the premium thereon.
Section 3. Funding of the Defeasance Fund; Purchase of Government
Securities. Concurrently with the execution of this Defeasance Agreement, there
are herewith deposited with Trustee, from the Company Funds and the Indenture
Funds, immediately available monies in the amount of $13,778,515.01; all of
which amounts shall be deposited in the Defeasance Fund; and from such amount
the amount of $13,778,158.76 shall be used to purchase the Government Securities
described in Exhibit A attached hereto.
Section 4. Irrevocable Escrow; Application of Defeasance Fund. The
deposit of the monies and Government Securities in the Defeasance Fund shall be
irrevocable; and such monies and Government Securities, together with any
interest earned thereon, shall be held in escrow and shall be applied solely to
the payment of principal of and interest on the Series 1994 Bonds to their
respective dates of maturity or redemption prior to maturity, all in accordance
with the schedule set forth in Exhibit B attached hereto, and, in the event of
an optional redemption of the Series 1994 Bonds, to pay the premium on the
Series 1994 Bonds in connection with such optional redemption.
Section 5. Acceptance of Escrow. The Trustee hereby establishes the
Defeasance Fund and accepts the monies deposited therein pursuant to this
Defeasance Agreement. The Trustee shall purchase the Government Securities
solely from the monies deposited in the Defeasance Fund. The Trustee shall apply
the monies deposited in the Defeasance Fund and the Government Securities
purchased therefrom, together with any interest earned thereon, in accordance
with the provisions hereof.
2
<PAGE> 4
Section 6. Payment of Series 1994 Bonds. The Trustee shall receive the
matured principal of and the interest on the Government Securities as the same
are payable. Effective December 1, 1999, the Trustee shall redeem the Series
1994 Bonds in accordance with the optional redemption provisions of the
Indentures and the Series 1994 Bonds.
Section 7. Application of Defeasance Fund After Payment of Series 1994
Bonds. After payment in full of the principal of, interest and premium, if any,
on the Series 1994 Bonds, all remaining monies and Government Securities,
together with any interest thereon, in the Defeasance Fund shall be transferred
by the Trustee to the Company or its successor,
Section 8. Lien of Holders of Series 1994 Bonds on Defeasance Fund. The
Defeasance Fund created hereby shall be irrevocable and the holders of the
Series 1994 Bonds shall have an express lien on all monies and Government
Securities, including the interest earned thereon, in the Defeasance Fund until
paid out, used and applied in accordance with this Defeasance Agreement.
Section 9. Trustee's Fees. In consideration of the services rendered by
the Trustee under this Defeasance Agreement, the Company agrees to and shall pay
to the Trustee a fee of $500.00 due upon the execution of this Defeasance
Agreement; and shall reimburse the Trustee for extraordinary expenses such as
publication costs. The Trustee shall have no lien whatsoever upon and shall not
use any of the monies in the Defeasance Fund for the payment of its fees and
expenses.
Section 10. Termination of Defeasance Agreement. This Defeasance
Agreement shall terminate when the Series 1994 Bonds have been fully paid in
accordance with their terms and any remaining monies and Government Securities,
together with any interest thereon, in the Defeasance Fund have been transferred
by the Trustee to the Company or its successor, in accordance with the
applicable provisions of the Indentures.
Section 11. Amendment. This Defeasance Agreement may not be amended
without prior written notice thereof being sent to, and written consent being
obtained from, the holders of the Series 1994 Bonds then outstanding; provided,
however, that the parties hereto may, without the consent of, or notice to, such
holders, enter into such agreements supplemental to this Defeasance Agreement as
shall not adversely affect the rights of such holders and as shall not be
inconsistent with the terms and provisions of this Defeasance Agreement: (a) to
cure any ambiguity or formal defect or omission in this Defeasance Agreement; or
(b) to sever any clause herein deemed to be illegal.
Section 12. Resignation or Removal of the Trustee; Successor Trustees.
Upon merger or consolidation of the Trustee, if the resulting corporation is a
bank or trust company authorized by law to conduct such business, such
corporation shall be authorized to act as successor Trustee. Upon the
resignation of the Trustee, which shall be communicated in writing to the
Issuer, or in the event the Trustee becomes incapable of acting hereunder, a
successor Trustee may be
3
<PAGE> 5
appointed by the Issuer, which successor Trustee shall be reasonably acceptable
to the Company. No resignation shall become effective until a successor Trustee
has been appointed and has agreed to be bound by the terms of this Defeasance
Agreement.
Section 13. Defeasance and Optional Redemption Notices. The Trustee is
hereby directed to give notice of defeasance in a form containing substantially
all of the information required by the Indenture and the Series 1994 Bonds by
mailing a copy of such notice by first class mail to the registered owner of
each Series 1994 Bond at the address shown on the registration books.
The Trustee is hereby directed to give notice of redemption of the
Series 1994 Bonds in a form containing substantially all of the information
required by the Indenture and the Series 1994 Bonds by mailing a copy of such
notice by registered or certified mail to the registered owner of each Series
1994 Bonds at the address shown on the registration books not less than thirty
(30) days prior to the date fixed for redemption.
Section 14. Indemnification. The Company agrees to hold the Trustee
harmless and to indemnify the Trustee against any loss, liability, expenses
(including attorney's fees and expenses), claims, or demand arising out of or in
connection with the performance of its obligations in accordance with the
provisions of this Agreement, except for negligence or willful misconduct of the
Trustee. The foregoing indemnities in this paragraph shall survive the
resignation of the Trustee or the termination of this Defeasance Agreement.
Section 15. Definitions. For purposes of this Defeasance Agreement, in
addition to other terms defined herein, the following terms shall have the
following meanings:
The "Company" means Care First Inc. of Minneapolis, Minnesota, its
successors and assigns.
"Government Securities" means direct obligations of or obligations
fully guaranteed as to principal and interest by the United States of America.
Section 16. Counterparts; Headings. This Defeasance Agreement may be
executed in several counterparts, all or any of which shall be regarded for all
purposes as an original and shall constitute and be but one and the same
instrument. The paragraph headings used herein are for convenience of reference
only.
4
<PAGE> 6
IN WITNESS WHEREOF, the Company and the Trustee have each caused this
Defeasance Agreement to be executed by their duly authorized officers as of the
date first above written.
CARE FIRST INC.
By Jack E. Nugent
----------------------------
Its President
-----------------------------
FIRSTAR BANK OF MINNESOTA,
National Association
By Angela Weidell-LaBathe
-----------------------------
Its Vice President
-----------------------------
5
<PAGE> 1
EXHIBIT 2.4
CITY OF MINNEAPOLIS, MINNESOTA
(CARE FIRST INC.)
VERIFICATION REPORT
APRIL 30, 1999
<PAGE> 2
[MCGLADREY&PULLEN, LLP LETTERHEAD]
INDEPENDENT ACCOUNTANT'S VERIFICATION REPORT
City of Minneapolis U.S. Bancorp Piper Jaffray Inc.
City Hall 222 South Ninth Street
Minneapolis, Minnesota Minneapolis, Minnesota
Care First Inc. Firstar Bank of Minnesota, N.A.
3720 23rd Avenue South 101 East Fifth Street
Minneapolis, Minnesota Saint Paul, Minnesota
Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota
Pursuant to the request of U.S. Bancorp Piper Jaffray Inc. (the "Financial
Advisor") on behalf of the City of Minneapolis, Minnesota (the "Issuer") and
Care First, Inc., we have performed certain procedures, as discussed below, in
connection with the proposed defeasance of two of the Issuer's outstanding
series of bonds (collectively referred to as the "Prior Bonds"), as summarized
below:
<TABLE>
<CAPTION>
To Be Refunded Optional
---------------------------- Redemption
Amount Maturities Date and Price
------------- ---------- --------------
<S> <C> <C> <C>
- - Health Care Facilities Refunding 06/01/99 12/01/99
Revenue Bonds (Care First Inc. Project), through at
Series 1994 (the "1994A Bonds") $ 4,195,000 06/01/12 102.00
- - Taxable Health Care Facilities Revenue 12/01/99 12/01/99
Bonds (Care First Inc. Project), Series through at
1994 (the "1994B Bonds") $ 8,365,000 12/01/19 102.00
</TABLE>
The procedures were performed solely to assist the addressees of this report in
evaluating the mathematical accuracy of certain schedules prepared by the
Financial Advisor which indicate that there will be sufficient funds available
in an escrow account to be established on April 30, 1999 to pay the remaining
debt service payments and redemption premiums (the "Escrow Requirements")
related to the Prior Bonds, assuming those Prior Bonds originally scheduled to
mature on or after June 1, 2000 will be redeemed at 102.00 percent of par on
December 1, 1999.
<PAGE> 3
City of Minneapolis, Minnesota
Care First Inc.
Gray, Plant, Mooty, Mooty & Bennett, P.A.
U.S. Bancorp Piper Jaffray Inc.
Firstar Bank of Minnesota, N.A.
April 30, 1999
Page 2
The procedures we performed are summarized below.
1. We independently calculated the future cash receipts from two United States
Treasury Notes (the "T-Notes") to be deposited to the escrow account on
April 30, 1999 (Exhibit A-1), compared the future cash receipts to the
Financial Advisor's schedules, and found the future cash receipts to be in
agreement.
2. We independently calculated the Escrow Requirements related to the Prior
Bonds using information from the Official Statements for the Prior Bonds,
compared the Escrow Requirements to the Financial Advisor's schedules, and
found the Escrow Requirements to be in agreement.
3. Using the results of our independent calculations described in procedures 1
and 2 above and using an assumed initial cash deposit of $356.25 to the
escrow account on April 30, 1999, we prepared an escrow account cash flow
schedule (attached hereto as Exhibit A). The resulting cash flow schedule
indicates that there will be sufficient funds available in the escrow
account to pay the Escrow Requirements on a timely basis.
4. We compared pertinent terms (i.e., the principal amounts, interest rates,
maturity dates, and purchase prices) of the T-Notes to be acquired on April
30, 1999, as summarized herein, to the purchase confirmation notices
provided by the Financial Advisor; we found the terms to be in agreement.
5. We compared pertinent terms of the Prior Bonds (i.e., debt service payment
dates, annual maturity amounts, interest rates, and optional redemption
provisions), as summarized on Exhibits A-2 and A-3, to the Official
Statements for the Prior Bonds provided by the Financial Advisor; we found
the terms to be in agreement.
Based on performing the agreed-upon procedures, we have found that those
schedules provided by the Financial Advisor, when compared to those schedules
prepared by us (attached hereto as Exhibits), are arithmetically accurate and
reflect, based on the assumptions set forth herein, that there will be
sufficient funds available in the escrow account to pay the Escrow Requirements
related to the Prior Bonds.
This engagement was performed in accordance with standards established by the
American Institute of Certified Public Accountants (the "AICPA"). The
sufficiency of these procedures is solely the responsibility of the specified
users of the report. We make no representation regarding the sufficiency of the
procedures summarized above, either for the purpose for which this report has
been requested or for any other purpose.
We were not engaged to, and did not, perform an examination, the objective of
which would be the expression of an opinion on the achievability of the
anticipated escrow account cash sufficiency. Accordingly, in accordance with
standards for attestation services established by the AICPA, we do not express
such an opinion. Had we performed an examination or performed additional
procedures, other matters might have come to our attention that would have been
reported to you.
<PAGE> 4
City of Minneapolis, Minnesota
Care First Inc.
Gray, Plant, Mooty, Mooty & Bennett, P.A.
U.S. Bancorp Piper Jaffray Inc.
Firstar Bank of Minnesota, N.A.
April 30, 1999
Page 3
The results of our calculations with respect to the proposed transactions are
summarized in the accompanying exhibits. The original computations, along with
related characteristics and assumptions contained herein, were provided by the
Financial Advisor on behalf of the Issuer. We relied solely on this information
and these assumptions and limited our work to performing those procedures set
forth above.
This report is issued solely for the information of, and assistance to, the
addressees of this report and is not to be quoted or referred to in any
document, except for required closing transaction documents. Additionally, this
report should not be used by those who have not agreed to the procedures and
taken responsibility for the sufficiency of the procedures for their purposes.
Under the terms of our engagement, we have no obligation to update this report
because of events or transactions occurring subsequent to the date of this
report.
McGladrey & Pullen, LLP
Minneapolis, Minnesota
April 30, 1999
<PAGE> 5
EXHIBIT A
CITY OF MINNEAPOLIS MINNESOTA (CARE FIRST INC.)
ESCROW ACCOUNT CASH FLOW
<TABLE>
<CAPTION>
Escrow
Requirements
Total Cash Related to
Receipts From Prior Bonds
T-Notes (Exhibits A-2 Cash
Date (Exhibit A-1) and A-3) Balance
======================================================================================================================
<S> <C> <C> <C>
Initial cash deposit on April 30, 1999 $ - $ - $ 356.25
05/31/99 742,108.75 - 742,465.00
06/01/99 - 739,301.25 3,163.75
11/30/99 13,381,177.50 - 13,384,341.25
12/01/99 - 13,381,441.25 2,900.00
============================================
$ 14,123,286.25 $ 14,120,742.50
============================================
</TABLE>
<PAGE> 6
EXHIBIT A-1
CITY OF MINNEAPOLIS MINNESOTA (CARE FIRST INC.)
CASH RECEIPTS FROM T-NOTES
<TABLE>
<CAPTION>
Total Cash
Receipt Purchase Interest Receipts From
Date Price Rate Principal Interest T-Notes
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
05/31/99 $ 242,031.86 6.75% $ 235,000 $ 507,108.75 $ 742,108.75
11/30/99 13,536,126.90 7.75% 12,882,000 499,177.50 13,381,177.50
======================= ==================================================================
$ 13,778,158.76 $ 13,117,000 $ 1,006,286.25 $ 14,123,286.25
======================= ==================================================================
</TABLE>
<PAGE> 7
EXHIBIT A-2
CITY OF MINNEAPOLIS MINNESOTA (CARE FIRST INC.)
ESCROW REQUIREMENTS RELATED TO 1994A BONDS
<TABLE>
<CAPTION>
Escrow
Requirements
Interest Redemption Related To
Date Principal Rate Interest Premium 1994A Bonds
================================================================================================================================
<S> <C> <C> <C> <C> <C>
06/01/99 $ 80,000 6.40% $ 157,401.25 $ - $ 237,401.25
12/01/99 4,115,000(1) Various 154,841.25 80,300.00 4,350,141.25
======================= ==========================================================
$ 4,195,000 $ 312,242.50 80,300.00 4,587,542.50
======================= ==========================================================
</TABLE>
(1) Consists of the following bonds to be paid or optionally redeemed on
December 1, 1999:
<TABLE>
<CAPTION>
MATURITY INTEREST REDEMPTION
DATE PRINCIPAL RATE PRICE
===================================================================================================
<S> <C> <C> <C>
12/01/99 $ 100,000 6.50% 100.00
06/01/00 100,000 6.50% 102.00
12/01/00 105,000 6.75% 102.00
06/01/01 110,000 6.75% 102.00
12/01/01 110,000 7.00% 102.00
06/01/02 115,000 7.00% 102.00
12/01/02 120,000 7.10% 102.00
06/01/03 125,000 7.10% 102.00
12/01/03 130,000 7.25% 102.00
06/01/04 130,000 7.25% 102.00
06/01/12 2,970,000 7.75% 102.00
</TABLE>
<PAGE> 8
EXHIBIT A-3
CITY OF MINNEAPOLIS MINNESOTA (CARE FIRST INC.)
ESCROW REQUIREMENTS RELATED TO 1994B BONDS
<TABLE>
<CAPTION>
Escrow
Requirements
Interest Redemption Related to
Date Principal Rate Interest Premium 1994B Bonds
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
06/01/99 $ - - $ 501,900.00 $ - $ 501,900.00
12/01/99 8,365,000(1) 12.00% 501,900.00 164,400.00 9,031,300.00
============ ========================================================
$ 8,365,000 $ 1,003,800.00 $ 164,400.00 $ 9,533,200.00
============ ========================================================
</TABLE>
(1) Consists of the following bonds to be paid or optionally redeemed on
December 1, 1999:
<TABLE>
<CAPTION>
Maturity Interest Redemption
Date Principal Rate Price
========================================================================================
<S> <C> <C> <C>
12/01/99 $ 145,000 12.00% 100.00
12/01/19 8,220,000 12.00% 102.00
</TABLE>
