Davenport & Company, LLC. See ("Rating" herein)

Transcription

1 NEW ISSUE - BOOK ENTRY ONLY RATING: Fitch: BBB See ("Rating" herein) In the opinion of Christian & Barton, L.L.P., Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Series 2015 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (ii) income, including any profit made on the sale thereof, shall at all times be exempt from all taxation by the Commonwealth of Virginia and any political subdivision thereof. Such interest may be included in the calculation of a corporation's federal alternative minimum tax, and a holder may be subject to other federal income tax consequences as described in "TAX MATTERS." $68,815,000 INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF ALEXANDRIA Residential Care Facilities Mortgage Revenue Bonds (Goodwin House Incorporated), Series 2015 Dated: Date of Delivery Due: As shown below The Series 2015 Bonds will be issued in fully registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Series 2015 Bonds. Individual purchases of beneficial ownership interests in the Series 2015 Bonds will be made in book-entry form only, and individual purchasers will not receive physical delivery of bond certificates. Payments of the principal of, and interest on, the Series 2015 Bonds will be made by U.S. Bank National Association, as bond trustee (the "Bond Trustee"), to Cede & Co., as nominee for DTC, for disbursement to DTC participants, and subsequent disbursement to the beneficial owners of the Series 2015 Bonds. Interest on the Series 2015 Bonds will be payable on October 1, 2015, and thereafter semi-annually on each April 1 and October 1. The Series 2015 Bonds will be issued in authorized denominations of $5,000 and integral multiples of $5,000. THE SERIES 2015 BONDS ARE SUBJECT TO OPTIONAL, MANDATORY AND EXTRAORDINARY REDEMPTION PRIOR TO MATURITY AS DESCRIBED IN "THE SERIES 2015 BONDS." The proceeds of the Series 2015 Bonds, together with other moneys available therefor as described herein, will be used by Goodwin House Incorporated (the "Corporation") (1) to refund the outstanding principal amount of the Industrial Development Authority of the City of Alexandria's Variable Rate Demand Revenue Refunding Bonds (Goodwin House), Series 2005, (2) to finance the costs of improvements and additions to the Corporation's continuing care retirement facility known as Goodwin House Alexandria as more particularly described herein (the "Project"), (3) to pay certain costs of issuance of the Series 2015 Bonds, and (4) to fund a debt service reserve fund for the Series 2015 Bonds. The Series 2015 Bonds will be limited obligations of the Authority and (except to the extent that payment thereof may be made from a portion of the proceeds of the Series 2015 Bonds or any investment income therefrom) will be payable solely from, and secured by (1) a security interest in certain property of the Corporation and a first mortgage lien on certain real estate of the Corporation, created by the Master Indenture and a Deed of Trust, both as defined herein, (2) a debt service reserve fund, and (3) the covenants and obligations contained in the Master Indenture, including an assignment of Pledged Assets, as defined herein, of the Obligated Group. See "SECURITY FOR THE SERIES 2015 BONDS." FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH THE PURCHASE OF SERIES 2015 BONDS, SEE "BONDHOLDERS' RISKS." The Series 2015 Bonds, the premium, if any, and the interest thereon shall not be deemed to constitute a debt or a pledge of faith and credit of the Commonwealth of Virginia, or any political subdivision of the Commonwealth, including the Authority and the City of Alexandria, Virginia. Neither the Commonwealth nor any political subdivision of the Commonwealth, including the Authority and the City of Alexandria, Virginia, shall be obligated to pay the principal of or premium, if any, or interest on the Series 2015 Bonds or other costs incident thereto except from the revenues and receipts pledged therefor. Neither the faith and credit nor the taxing power of the Commonwealth of Virginia or any political subdivision thereof, including the Authority and the City of Alexandria, Virginia, is pledged to the payment of the principal of the Series 2015 Bonds or interest thereon or other costs incident thereto. This cover page contains certain information for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2015 Bonds are offered when, as, and if issued by the Authority and received by the Underwriters, subject to the approval of their validity by Christian & Barton, L.L.P., Richmond, Virginia, Bond Counsel, as described herein, and subject to certain other conditions. Certain legal matters will be passed upon for the Authority by McGuireWoods LLP; for the Corporation by its special counsel Christian & Barton, L.L.P., Richmond, Virginia; and for the Underwriters by McGuireWoods LLP, Richmond, Virginia. Delivery of the Series 2015 Bonds is expected in New York, New York, on or about May 21, 2015, through the facilities of DTC. MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES OR YIELDS CUSIP Base: $10,285,000 Serial Bonds Due Amount $310, , , , , , , ,000 Interest Rate 1.000% Yield 0.750% Price % CUSIP Suffix AA8 AQ3 AR1 AB6 AS9 AC4 AT7 AD2 Due Amount $955, ,000 1,045, , , , ,000 1,195,000 Interest Rate 4.000% Yield 2.400% Price % $4,180, % Term Bonds due October 1, 2030 priced at %* to yield 3.950%, CUSIP: AW0 $2,705, % Term Bonds due October 1, 2030 priced at % to yield 4.100%, CUSIP: AL4 $6,870, % Term Bonds due October 1, 2035 priced at %* to yield 4.125%, CUSIP: AX8 $1,800, % Term Bonds due October 1, 2035 priced at % to yield 4.300%, CUSIP: AM2 $25,050, % Term Bonds due October 1, 2045 priced at %* to yield 4.300%, CUSIP: AN0 $6,650, % Term Bonds due October 1, 2047 priced at %* to yield 4.350%, CUSIP: AY6 $11,275, % Term Bonds due October 1, 2050 priced at %* to yield 4.420%, CUSIP: AP5 * Priced to the first optional redemption date, October 1, Davenport & Company, LLC Dated: May 5, 2015 CUSIP Suffix AE0 AF7 AG5 AU4 AH3 AV2 AJ9 AK6

2 Goodwin House Bailey s Crossroads Goodwin House Alexandria

3 Computer-generated image of Center of Excellence at Goodwin House Alexandria View from rooftop terrace at Goodwin House Alexandria

4 Swimming Pool at Goodwin House Bailey s Crossroads Bistro at Goodwin House Bailey s Crossroads

5 Lobby at Goodwin House Alexandria Art Gallery at Goodwin House Bailey s Crossroads

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7 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2015 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Series 2015 Bonds are exempt from registration under the Securities Act of 1933, as amended. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Official Statement. Any representation to the contrary is a criminal offense. No broker, dealer, salesman or other person has been authorized by the Authority, the Corporation or the Underwriters to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the Corporation or the Underwriters. The information contained in this Official Statement has been obtained from the Corporation and other sources believed by the Underwriters to be reliable, but it is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriters or, as to information from sources other than the Authority, by the Authority, or, as to information from sources other than the Corporation, by the Corporation. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under 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. This Official Statement and the information contained herein are subject to completion and amendment. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2015 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. This Official Statement is not to be construed as an agreement or contract between the Authority and the purchasers or owners of any of the Series 2015 Bonds. Copyright 2013, American Bankers Association. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor's. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the Authority, the Underwriters, or the Corporation and are included solely for the convenience of the registered owners of the applicable Series 2015 Bonds. None of the Authority, the Underwriters or the Corporation is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Series 2015 Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2015 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2015 Bonds. Other than with respect to information concerning the Authority contained in "THE AUTHORITY" and "LITIGATION," 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 Bond Trustee has not participated in the preparation of this Official Statement. ALL QUOTATIONS FROM AND SUMMARIES AND EXPLANATIONS OF PROVISIONS OF LAWS AND DOCUMENTS HEREIN DO NOT PURPORT TO BE COMPLETE, AND REFERENCE IS MADE TO SUCH LAWS AND DOCUMENTS FOR FULL AND COMPLETE STATEMENTS OF THEIR PROVISIONS. ANY STATEMENTS MADE IN THIS OFFICIAL STATEMENT INVOLVING ESTIMATES OR MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO STATED, ARE INTENDED MERELY AS ESTIMATES OR OPINIONS AND NOT AS REPRESENTATIONS OF FACT. THE INFORMATION AND EXPRESSIONS OF OPINIONS HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE OF THE SERIES 2015 BONDS SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE AUTHORITY OR THE CORPORATION.

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9 TABLE OF CONTENTS SUMMARY STATEMENT... i The Series 2015 Bonds... i The Corporation... i Security for the Series 2015 Bonds... i Certain Covenants of the Corporation... ii Financial Reporting and Continuing and Additional Disclosure... v Risk Factors... vii INTRODUCTORY STATEMENT... 1 THE CORPORATION... 3 PLAN OF FINANCE... 3 The Project... 3 Refunding of Series 2005 Bonds... 4 ESTIMATED SOURCES AND USES OF FUNDS... 4 ANNUAL DEBT SERVICE REQUIREMENTS... 5 SECURITY FOR THE SERIES 2015 BONDS... 6 General... 6 The Master Indenture and the Obligated Group... 6 Mortgaged Premises and Security Interest in Equipment... 7 Pledged Assets... 7 Covenants; Additional Indebtedness... 8 Debt Service Reserve Fund... 8 Amendments to Covenants and Security Provisions... 8 THE SERIES 2015 BONDS... 9 General... 9 Redemption Provisions... 9 Issuance of Additional Parity Bonds; Parity Indebtedness Defeasance Book-Entry Only System THE AUTHORITY BONDHOLDERS' RISKS Limited Obligations The Project Uncertainty of Full Occupancy and Entrance Fee Collection Competition Actual Results May Differ from Historical and Projected Results Risks Associated with Swaps State Regulation; Rights of Residents Organized Resident Activity Labor Union Activity and Staffing Health Care Reform Reimbursement under Federal and State Programs Tax-Exempt Status Tax Consequences to Residents Limited Assets of the Corporation; Disposition of Assets Limited Value at Foreclosure Additions to the Obligated Group Additional Indebtedness Sale of Homes; Economic Conditions Nature of Income of the Elderly Environmental Risks Financial Assistance Page

10 Insurance Market for Bonds Bankruptcy Limitation on Security Interest in Gross Receipts Limitations on Enforceability of Remedies Federal Tax Matters Other Risk Factors TAX MATTERS Risk of Future Legislative Changes and/or Court Decisions Original Issue Premium Original Issue Discount LEGALITY UNDERWRITING INDEPENDENT ACCOUNTANTS RATING RELATIONSHIP OF PARTIES LITIGATION The Authority The Corporation FINANCING DOCUMENTS AND SELECTED COVENANTS Rate Covenant Liquidity Covenant FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE Financial Reporting Continuing Disclosure Additional Disclosure MISCELLANEOUS Appendix A - Goodwin House Incorporated Appendix B - Audited Consolidated Financial Statements of Goodwin House Incorporated and Affiliates Appendix C - Summaries of Certain Provisions of the Financing Documents Appendix D - Proposed Form of Opinion of Bond Counsel

11 SUMMARY STATEMENT The information set forth in this Summary 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 2015 Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or otherwise to use it without this entire Official Statement. Definitions of certain terms in this Summary Statement are set forth in Appendix C to this Official Statement. The Series 2015 Bonds The Industrial Development Authority of the City of Alexandria (the "Authority"), a political subdivision of the Commonwealth of Virginia, is issuing $68,815,000 in aggregate principal amount of its Residential Care Facilities Mortgage Revenue Bonds (Goodwin House Incorporated), Series 2015 (the "Series 2015 Bonds"). The Series 2015 Bonds will be subject to optional, mandatory and extraordinary redemption, as described in this Official Statement. A description of the Series 2015 Bonds is contained in this Official Statement under "THE SERIES 2015 BONDS." The Series 2015 Bonds will be issued pursuant to a Trust Indenture (the "Trust Indenture"), by and between the Authority and U.S. Bank National Association, as bond trustee (the "Bond Trustee"). The proceeds of the Series 2015 Bonds will be loaned to Goodwin House Incorporated (the "Corporation"), pursuant to a Loan Agreement (the "Loan Agreement"), between the Authority and the Corporation. The Corporation will use the proceeds from the sale of the Series 2015 Bonds, together with other available funds, to (1) refund the outstanding principal amount of the Authority's Variable Rate Demand Revenue Refunding Bonds (Goodwin House), Series 2005 (the "Series 2005 Bonds"), issued to finance the costs of improvements at the Corporation's continuing care retirement facility in the City of Alexandria, Virginia known as Goodwin House Alexandria ("Goodwin House Alexandria") and to refinance certain indebtedness, (2) finance the costs of improvements and additions to Goodwin House Alexandria (collectively, the "Project"), (3) pay certain costs of issuance of Series 2015 Bonds, and (4) fund a debt service reserve fund for the Series 2015 Bonds. See "PLAN OF FINANCE." The Corporation The Corporation is a not-for-profit Virginia non-stock corporation formed in 1955 for the purpose of among other things, owning and operating continuing care retirement facilities for the elderly in Northern Virginia, including the facilities known as Goodwin House Alexandria, opened in 1967, and Goodwin House Bailey's Crossroads, opened in 1987 (collectively, the "Facilities"), in a manner designed to satisfy the physical, social and psychological needs of the elderly. The Corporation has received a determination letter from the Internal Revenue Service stating that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and is therefore exempt from federal income tax under Section 501(a) of the Code. Attached as Appendix A to this Official Statement is a description of the Corporation and the Facilities, including the Project. At the time of issuance of the Series 2015 Bonds, the Corporation will be the only Member of the Obligated Group. Further information regarding the Corporation, its existing operations, and the Project is included in Appendix A and Appendix B. Security for the Series 2015 Bonds The Series 2015 Bonds will be limited obligations of the Authority and will be secured in part by the Corporation's promissory note in the principal amount of $68,815,000 dated the date of delivery, which will be issued as an obligation (the "Series 2015 Obligation") under, and secured by an Amended and Restated Master Trust -i-

12 Indenture dated as of May 1, 2007, as previously supplemented and as supplemented by a Supplemental Indenture for Obligation No. 6 dated as of May 1, 2015 (collectively, the "Master Indenture") all between the Corporation and U.S. Bank National Association, as master trustee (the "Master Trustee"). The Corporation will be the sole Member of the Obligated Group under the Master Indenture upon the issuance of the Series 2015 Bonds. References herein to the "Member" and the "Obligated Group" are to the Corporation and any other entities that subsequently become Members of the Obligated Group. The Series 2015 Obligation and all Outstanding Obligations under the Master Indenture will be secured by a first mortgage lien on the Corporation's retirement facilities in the City of Alexandria and Fairfax County, Virginia, created by an Amended and Restated Deed of Trust and Appointment of Substitute Trustee dated as of March 1, 2005 as previously modified and as modified by a Second Modification to Amended and Restated Deed of Trust and Appointment of Substitute Trustee dated as of May 1, 2015 (collectively, the "Deed of Trust"). See "SECURITY FOR THE SERIES 2015 BONDS." As security for the Series 2015 Bonds, the Authority will assign to the Bond Trustee (a) all of its right, title and interest in and to the Series 2015 Obligation, (b) all of its rights under the Master Indenture and the Deed of Trust, and (c) substantially all of its right, title and interest in and to the Loan Agreement (except for the Authority's rights to payment of its fees and expenses and to indemnification and its right to receipt of certain notices). See "SECURITY FOR THE SERIES 2015 BONDS." Although the Trust Indenture makes no provision for the issuance of any additional bonds or other indebtedness secured thereby, the Master Indenture permits the Obligated Group or other future Members of the Obligated Group, if any, to issue, incur, guarantee and assume additional indebtedness, which may be secured on a parity basis with the Outstanding Obligations. Such additional indebtedness would therefore be secured on a parity basis with the Series 2015 Obligation, the Series 2007 Obligation (as defined herein) and the 2005 Swap Obligation (as defined herein). See "The Master Indenture and the Obligated Group" in "SECURITY FOR THE SERIES 2015 BONDS" and "THE MASTER INDENTURE" in Appendix C. Payment of the principal of and interest on the Series 2015 Bonds will be additionally secured by moneys on deposit in the Debt Service Reserve Fund relating to the Series 2015 Bonds (the "Debt Service Reserve Fund"), as established by the Trust Indenture. See "SECURITY FOR THE SERIES 2015 BONDS." Certain Covenants of the Corporation Attached as Appendix C to this Official Statement are summaries of certain provisions of the Master Indenture, Trust Indenture and Loan Agreement. Certain of the provisions described below apply only so long as the Series 2015 Obligation or any of the Series 2015 Bonds are outstanding. These summaries do not purport to be complete, and reference is made to the respective documents, copies of which are on file with the Bond Trustee, for a complete statement of the rights, duties and obligations of the parties thereto. All capitalized terms not otherwise defined herein shall have the meanings set forth in "DEFINITIONS OF CERTAIN TERMS" in Appendix C hereto. Further, a discussion of these covenants can be found in "FINANCING DOCUMENTS AND SELECTED COVENANTS." Rate Covenant.* In the Loan Agreement, the Corporation has covenanted to operate its Facilities on a revenue-producing basis, charge such fees and rates for its Facilities and services and exercise such skill and diligence, including obtaining payment for services provided, as to provide income from its Property together with other available funds sufficient to promptly pay all amounts of principal and interest due on Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it hereunder, to the extent permitted by law. The Corporation will from time to time, as often as necessary and to the extent permitted by law, revise its rates, fees and charges in such manner as may be necessary or proper to comply with this covenant. * As described in "Historical Debt Service Coverage Ratio" in "THE MASTER INDENTURE" in Appendix C, the consequences set forth in the Master Indenture of the Obligated Group not achieving a Historical Debt Service Coverage Ratio of at least 1.00:1 differ from the consequences set forth in the Loan Agreement as described in this section. -ii-

13 The Corporation will calculate, or cause the calculation of, the Historical Debt Service Coverage Ratio of the Obligated Group for each Fiscal Year. If the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.20:1, the Obligated Group shall, at the Obligated Group's expense and within 30 days of the calculation of Historical Debt Service Coverage Ratio, retain a Consultant to make written recommendations to increase the Obligated Group's Historical Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year. The Obligated Group will file with the Bond Trustee and the Master Trustee a copy of any Consultant's report and recommendations prepared in accordance with the provisions of this covenant. Each Member will follow each recommendation of the Consultant applicable to it to the extent Legal and Feasible. This covenant will not be construed to prohibit any Member from serving indigent patients to the extent required for such Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the other requirements of this covenant. The foregoing provisions notwithstanding, if the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.20:1, the Obligated Group will not be required to retain a Consultant to make recommendations if: (1) there is filed with the Bond Trustee and the Master Trustee a written report of a Consultant (which Consultant and report, including without limitation the scope, form, substance and other aspects of such report, are reasonably acceptable to the Bond Trustee and the Master Trustee) that contains an opinion of such Consultant that applicable laws or regulations have prevented the Obligated Group from generating Income Available for Debt Service during such Fiscal Year sufficient to meet the requirements of this section, and, if requested by the Bond Trustee and the Master Trustee, a concurring Opinion of Counsel (which Counsel and Opinion of Counsel, including without limitation the scope, form, substance and other aspects thereof, are reasonably acceptable to the Bond Trustee and the Master Trustee) as to any conclusions of law supporting the opinion of such Consultant; (2) the report of such Consultant indicates that the rates charged by the Obligated Group are such that, in the opinion of the Consultant, the Obligated Group has generated the maximum amount of Revenues reasonably practicable given such laws or regulations; and (3) the Historical Debt Service Coverage Ratio of the Obligated Group for such Fiscal Year was at least 1.00:1. The Obligated Group will not be required to cause the Consultant's report referred to in the preceding sentence to be prepared more frequently than once every two Fiscal Years if the Obligated Group provides to the Bond Trustee and the Master Trustee, at the end of each Fiscal Year for which such Consultant's report is not required, an Opinion of Counsel (which Counsel and Opinion of Counsel, including without limitation the scope, form, substance and other aspects thereof, are reasonably acceptable to the Bond Trustee and the Master Trustee) to the effect that the applicable laws and regulations underlying the Consultant's report delivered in respect of the previous Fiscal Year have not changed in any material way. Failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of 1.20:1 for any Fiscal Year shall not constitute an Event of Default under the Loan Agreement if the Obligated Group complies with the provisions above and follows the recommendations made by any Consultant retained pursuant to this section to the extent Legal and Feasible; provided however, (1) the failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of at least 1.00:1 for any Fiscal Year shall constitute an Event of Default under the Loan Agreement if the Days' Cash on Hand of the Obligated Group as of the last day of such Fiscal Year was less than 225, and (2) the failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of at least 1:00:1 for any two consecutive Fiscal Years shall constitute an Event of Default under the Loan Agreement. In the event that any Member of the Obligated Group incurs any Additional Indebtedness for any acquisition, construction, renovation or replacement project pursuant to any other provision of the Master Indenture, the Debt Service Requirements on such Additional Indebtedness and the Revenues and Expenses relating to the project or projects financed with the proceeds of such Additional Indebtedness will be excluded from the calculation of the Historical Debt Service Coverage Ratio of the Obligated Group for the purposes of complying with this section, until the first full Fiscal Year following the latest of (1) the estimated completion date of the acquisition, construction, renovation or replacement project being paid for with the proceeds of such Additional Indebtedness, provided that such completion occurs no later than six months following the completion date for such project set forth in the Consultant's report described in paragraph (A) below; (2) the first full year in which Stable Occupancy is achieved in the case of construction, renovation or replacement of elderly housing Facilities financed with the -iii-

14 proceeds of such Additional Indebtedness, which Stable Occupancy will be projected in the report of the Consultant referred to in paragraph (A) below to occur no later than during the fourth full Fiscal Year following the incurrence of such Additional Indebtedness, and (3) the end of the fourth full Fiscal Year after the incurrence of such Additional Indebtedness, if the following conditions are met: (A) there is delivered to the Bond Trustee and the Master Trustee a report or opinion of a Consultant to the effect that the Projected Debt Service Coverage Ratio for each of the first two full Fiscal Years following the later of (i) the estimated completion of the acquisition, construction, renovation or replacement being paid for with the proceeds of such Additional Indebtedness, and (ii) the first full Fiscal Year following the year in which Stable Occupancy is achieved in the case of construction, renovation or replacement of elderly housing Facilities being financed with the proceeds of such Additional Indebtedness, which Stable Occupancy will be projected to occur no later than during the fourth full Fiscal Year following the incurrence of such Additional Indebtedness, will be not less than 1.20:1 after giving effect to the incurrence of such Additional Indebtedness and the application of the proceeds thereof; provided, however, that in the event that a Consultant will deliver a report to the Bond Trustee and the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for Members to produce the required ratio, then such ratio will be reduced to the highest practicable ratio then permitted by such laws or regulations but in no event less than 1.00:1; provided, however, that in the event a Consultant's report is not required to incur such Additional Indebtedness, the Obligated Group may deliver an Officer's Certificate to the Bond Trustee and the Master Trustee in lieu of the Consultant's report described in this subparagraph; and (B) there is delivered to the Bond Trustee and the Master Trustee an Officer's Certificate on the date on which Financial Statements are required to be delivered to the Bond Trustee and the Master Trustee pursuant to the Master Indenture until the first Fiscal Year in which the exclusion from the calculation of the Historical Debt Service Coverage Ratio no longer applies, calculating the Historical Debt Service Coverage Ratio of the Obligated Group at the end of each Fiscal Year, and demonstrating that such Historical Debt Service Coverage Ratio is not less than 1.00:1, such Historical Debt Service Coverage Ratio to be computed without taking into account (i) the Additional Indebtedness to be incurred if (x) the interest on such Additional Indebtedness during such period is funded from proceeds thereof or other funds of the Member then on hand and available therefor and (y) no principal of such Additional Indebtedness is payable during such period, and (ii) the Revenues to be derived from the project to be financed from the proceeds of such Additional Indebtedness. So long as the Corporation is the sole member of the Obligated Group, the foregoing provisions of this section concerning the "Obligated Group" and each "Member" shall be deemed to mean the Corporation. If one or more additional entities becomes a Member of the Obligated Group, the Corporation covenants to cause each to agree to comply with the provisions of this section pertaining to the Obligated Group and each Member. Liquidity Covenant. In the Master Indenture, the Obligated Group has covenanted to calculate the Days' Cash on Hand of the Obligated Group as of September 30 and March 31 of each Fiscal Year (each, a "Testing Date"). Each Obligated Group Member shall conduct its business so that on each Testing Date the Obligated Group shall have no less than 225 Days' Cash on Hand. If the Days' Cash on Hand on any Testing Date shall be less than 225, the Group Representative shall, within 30 days of the calculation of Days' Cash on Hand for such Testing Date, deliver an Officer's Certificate to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth the Obligated Group's plans to achieve 225 Days' Cash on Hand on the next succeeding Testing Date. If the Obligated Group does not have 225 Days' Cash on Hand on the Testing Date following delivery to the Master Trustee of the Officer's Certificate required to be delivered as described above, the Group Representative shall, within 30 days of the discovery of the second such deficiency, retain a Consultant to make written recommendations to increase the Obligated Group's Days' Cash on Hand to 225 on the next Testing Date. The Group Representative shall cause a copy of the Consultant's report and recommendations to be filed with the Master -iv-

15 Trustee in accordance with the provisions of the Master Indenture. Each Member of the Obligated Group shall follow each recommendation of the Consultant applicable to it to the extent Legal and Feasible. Failure of the Obligated Group to have 225 Days' Cash on Hand on any Testing Date shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action required pursuant to this section and follows each recommendation contained in any Consultant's report to the extent Legal and Feasible. Notice of Engagement of Consultant. The Series 2015 Supplement provides that for so long as Obligation No. 6 is outstanding, if at any time the Obligated Group is required to engage a Consultant under the provisions described above relating to "Rate Covenant" or "Liquidity Covenant" or respecting the incurrence of Indebtedness (as described under "Limitations on Indebtedness" in "THE MASTER INDENTURE" in Appendix C) the following provisions shall apply: (a) Upon selecting a Consultant as required under the provisions of the Master Indenture, the Group Representative will notify the Master Trustee of such selection, in writing, and such notice shall state the reason why the Consultant is being engaged, including a description of the covenant(s) of the Master Indenture that require such engagement. The Master Trustee shall, as soon as practicable but in no case longer than three Business Days after receipt of notice, notify the holders of all Obligations Outstanding under the Master Indenture of such selection. Such notice shall be given in writing and in accordance with the provisions of the Master Indenture and shall (i) include the name of the Consultant, (ii) state the reason that the Consultant is being engaged, including a description of the covenant(s) of the Master Indenture that require the Consultant to be engaged, and (iii) state that any Holder of an Obligation Outstanding under the Master Indenture may submit to the Master Trustee written objections or comments with respect to selection of the selected Consultant within five (5) Business Days following the date on which notice of the selection of the Consultant is sent to the Holders. No later than three Business Days after the end of the five (5) Business Day comment period, the Master Trustee shall convey all written objections and comments received to the Group Representative. The Obligated Group agrees to consider all such objections and comments in good faith, but no Holder or Holders shall have any right or power to veto the selection of any Consultant. (b) When the Master Trustee notifies the Holders of Obligations of the selection of a Consultant in accordance with (a) above, the Master Trustee will also request that any Related Bond Trustee send a notice containing the information required by (a) above to the owners of all of the Related Bonds then outstanding, advising such owners that they may submit written objections or comments upon the selection of the Consultant to the Related Bond Trustee or directly to the Master Trustee, specifying the address or addresses where such objections or comments shall be sent. Any written objections or comments received by the Related Bond Trustee or the Master Trustee from owners of Related Bonds shall be forwarded to the Group Representative promptly. The Obligated Group agrees to consider all such objections and comments in good faith, but no owner or owners of Related Bonds shall have any right or power to veto the selection of any Consultant. The five (5) Business Day notice period described in (a) above may be extended by the Master Trustee in order to permit each Related Bond Trustee to give the owners of the Related Bonds five (5) Business Days in which to respond to the notice given by the Related Bond Trustee. Notwithstanding the foregoing, the Corporation shall have the right to engage any Consultant within the time constraints applicable thereto contained in the Master Indenture. Financial Reporting and Continuing and Additional Disclosure Financial Reporting. In the Master Indenture, each Member has covenanted to cause certain financial reports to be delivered to the Master Trustee. See "THE MASTER INDENTURE" in Appendix C. Continuing Disclosure. Given the sources of repayment for the Series 2015 Bonds and the Authority's limited obligation as the conduit issuer of the Series 2015 Bonds, the Authority has determined that its financial and operating data is not material to a decision to purchase, hold or sell the Series 2015 Bonds. Consequently, the Authority will not provide any such information. However, the Corporation has agreed to cause the Obligated Group to make certain financial information with respect to it and certain operating data available to holders of the Series 2015 Bonds through the Municipal Securities Rulemaking Board ("MSRB") during the time that the Series -v-

16 2015 Bonds are outstanding. The Obligated Group is solely responsible for providing such disclosure, and the Authority shall have no responsibility or liability to the holders of the Series 2015 Bonds or any other person for the making, monitoring or content of such disclosures. See "FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE" for further information. Additional Disclosure. In addition to the Continuing Disclosure described above, the Corporation shall also provide the following to the MSRB: (a) Quarterly reports of the Obligated Group, as soon as practicable, but in no event more than 45 days after the completion of each Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2015, and, unless otherwise provided, which reports shall include the following: (1) quarterly unaudited financial statements of the Obligated Group, including a combined or combining statement of revenues and expenses (including a comparison to the annual budget) and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such Fiscal Quarter, including management discussion and analysis; (2) a calculation of the Historical Debt Service Coverage Ratio and Days Cash on Hand of the Obligated Group for such Fiscal Quarter on a rolling four-quarter basis (calculation of the Historical Debt Service Coverage Ratio and Days' Cash on Hand on a date that is not otherwise a testing date as described under "FINANCING DOCUMENTS AND SELECTED COVENANTS - Rate Covenant" or "- Liquidity Covenant" will be for informational purposes only); (3) the financial or operating statistical information for the Obligated Group for such Fiscal Quarter of the type described in (i) the table under the subsection entitled "Occupancy and Waiting List," and (ii) the table entitled "Health Center Payor Mix" in the subsection entitled "Sources of Revenue" in "THE GOODWIN HOUSE COMMUNITIES," all as shown in Appendix A; and (4) an Officer's Certificate stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or if not, specifying all such defaults or noncompliance and the nature thereof. (b) If the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.00:1 and the Days' Cash on Hand of the Obligated Group on any Testing Date is less than 225, monthly reports, which reports shall include the financial information and the calculations described in paragraphs (1) and (2) in the above subsection, as soon as practicable but in no event later than 45 days after the end of each month until the Historical Debt Service Coverage Ratio of the Obligated Group is at least 1.00:1 and the Days' Cash on Hand of the Obligated Group is at least equal to 225. (c) A copy of the Obligated Group's annual operating and capital budget for such Fiscal Year prior to the start of such Fiscal Year. (d) Within 120 days of the end of each Fiscal Year, (i) a summary of the actuarial funded status of each of the Facilities and a summary of the new entrant pricing margin (on a weighted average basis by resident contract type) with respect to each of the Facilities, (ii) the CMS Provider Rating Report for each of the Facilities, (iii) a statement identifying the amount and purpose of any bonds or notes issued by or on behalf of the Obligated Group and any such other bonds or notes retired in the prior Fiscal Year in advance of their maturity dates; and (iv) debt service schedules presenting the principal and interest requirements of each series of bonds or notes outstanding under the Master Indenture, as well as an aggregate debt service schedule with respect to all such indebtedness. (e) The financial statements, statement of no default and other information, reports and opinions that the Corporation has covenanted to furnish to the Master Trustee pursuant to the Master Indenture. Such information shall be furnished to the MSRB at the times and in the manner as required to be provided to the Master Trustee. For a further discussion on the financial reporting to be provided to the Master Trustee see "FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE - Financial Reporting." -vi-

17 (f) As soon as practicable after the information is available but in no event more than thirty (30) days after the end of each calendar month, (i) with respect to the Project, beginning with the month ending June 30, 2015 and ending with the month during which the Project is completed, a summary of construction progress and activities, including construction disbursements against budget and estimated costs to complete, and (ii) with respect to any "major capital undertaking" of the Obligated Group (defined as any capital acquisition, expansion, replacement or renovation project in an amount equal to or greater than ten percent (10%) of the "Property and Equipment, Net" of the Obligated Group determined by reference to its most recent audited financial statement), beginning with the month following the commencement of such major capital undertaking and ending with the month during which such major capital undertaking is completed, a summary of construction progress and activities, including construction disbursements against budget and estimated costs to complete. Risk Factors AN INVESTMENT IN THE SERIES 2015 BONDS INVOLVES A CERTAIN DEGREE OF RISK INCLUDING THOSE SET FORTH UNDER "BONDHOLDERS' RISKS." A PROSPECTIVE BONDHOLDER OF SERIES 2015 BONDS IS ADVISED TO READ "SECURITY FOR THE SERIES 2015 BONDS," "THE SERIES 2015 BONDS," AND "BONDHOLDERS' RISKS" FOR A DISCUSSION OF CERTAIN RISKS FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2015 BONDS. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. -vii-

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19 OFFICIAL STATEMENT $68,815,000 Industrial Development Authority of the City of Alexandria Residential Care Facilities Mortgage Revenue Bonds (Goodwin House Incorporated), Series 2015 INTRODUCTORY STATEMENT This Official Statement, including the cover page and inside cover page hereof and appendices hereto, is provided to furnish information regarding the Industrial Development Authority of the City of Alexandria $68,815,000 Residential Care Facilities Mortgage Revenue Bonds (Goodwin House Incorporated), Series 2015 (the "Series 2015 Bonds"). Definitions of certain terms used in this Official Statement are set forth in Appendix A and Appendix C to this Official Statement. The Series 2015 Bonds are being issued by the Industrial Development Authority of the City of Alexandria, a political subdivision of the Commonwealth of Virginia (the "Authority"), pursuant to the Virginia Industrial Development and Revenue Bond Act, Chapter 49, Title 15.2, Code of Virginia of 1950, as amended (the "Act"), and the Trust Indenture dated as of May 1, 2015 (the "Trust Indenture"), by and between the Authority and U.S. Bank National Association, as bond trustee (the "Bond Trustee"). THE SERIES 2015 BONDS AND THE PREMIUM, IF ANY, AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE COMMONWEALTH OF VIRGINIA, OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA. NEITHER THE COMMONWEALTH OF VIRGINIA NOR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2015 BONDS OR OTHER COSTS INCIDENT THERETO, EXCEPT FROM THE REVENUES AND RECEIPTS PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, WILL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2015 BONDS OR OTHER COSTS INCIDENT THERETO. THE AUTHORITY HAS NO TAXING POWER. Pursuant to the Loan Agreement described herein (the "Loan Agreement"), between the Authority and Goodwin House Incorporated (the "Corporation"), the Authority will lend the proceeds of the Series 2015 Bonds to the Corporation. Pursuant to the Loan Agreement, the Corporation will deliver to the Authority and the Authority, in turn, will assign to the Bond Trustee, a promissory note in the principal amount of $68,815,000 dated the date of delivery securing the Series 2015 Bonds (the "Series 2015 Obligation"), required payments on which will be sufficient to pay, among other things, all principal of and premium, if any, and interest on the Series 2015 Bonds and certain related expenses. The proceeds of the Series 2015 Bonds, together with other moneys available therefor as described herein, will be used by the Corporation to (1) refund the outstanding principal amount of the Authority's Variable Rate Demand Revenue Refunding Bonds (Goodwin House), Series 2005 (the "Series 2005 Bonds"), issued to finance the costs of improvements to the Corporation's continuing care retirement facility known as Goodwin House Alexandria ("Goodwin House Alexandria") and to refinance certain indebtedness, (2) finance the costs of improvements and additions to Goodwin House Alexandria (as further described in "PLAN OF FINANCE" herein), (3) pay certain costs of issuance of Series 2015 Bonds, and (4) fund a debt service reserve fund for the Series 2015 Bonds. The Series 2015 Obligation will be issued as an obligation under, and secured by, an Amended and Restated Master Trust Indenture dated as of May 1, 2007, as previously supplemented and as supplemented by a Supplemental Indenture for Obligation No. 6 dated as of May 1, 2015 (as supplemented, the "Master Indenture"),

20 each between the Corporation and U.S. Bank National Association, as master trustee (the "Master Trustee"). Upon the issuance of the Series 2015 Bonds, the Corporation will be the sole Member of the Obligated Group under the Master Indenture. References herein to the "Member" and the "Obligated Group" are to the Corporation and any other entities that subsequently become Members of the Obligated Group. Upon the issuance of the Series 2015 Bonds and the refunding of the Series 2005 Bonds, there will remain outstanding as an Obligation under the Master Indenture the Corporation's promissory note dated the date of delivery (the "Series 2007 Obligation"), securing payment of the Fairfax County Economic Development Authority's Residential Care Facilities Mortgage Revenue Bonds (Goodwin House, Incorporated), Series 2007 (the "Series 2007 Bonds"), issued for the benefit of the Corporation. The Series 2007 Obligation is currently outstanding in the principal amount of $136,510,000. In connection with the issuance of the Series 2005 Bonds, the Corporation entered into a swap agreement with Allied Irish Banks, p.l.c., New York Branch (the "Swap Provider"), in a notional principal amount of approximately $26,875,000 (the "2005 Swap"). The notional amount of the 2005 Swap decreases annually until the scheduled termination date of October 1, The 2005 Swap has an effective fixed interest rate of 3.7%. The 2005 Swap will not be terminated in connection with the refunding of the Series 2005 Bonds. See "BONDHOLDERS' RISKS Risks Associated with Swaps" herein. The Corporation's obligations with respect to the 2005 Swap were issued as a secured obligation under the Master Indenture (the "2005 Swap Obligation"). The Series 2015 Obligation, the outstanding Series 2007 Obligation and the 2005 Swap Obligation, and certain future Obligations under the Master Indenture will be secured by a first mortgage lien on Goodwin House Alexandria and the Corporation's facility known as Bailey's Crossroads Facility, created by an Amended and Restated Deed of Trust and Appointment of Substitute Trustee dated as of March 1, 2005, as previously modified and as modified by a Second Modification to Amended and Restated Deed of Trust and Appointment of Substitute Trustee dated as of May 1, 2015 (as amended, the "Deed of Trust"). See "SECURITY FOR THE SERIES 2015 BONDS." As security for the Series 2015 Bonds, the Authority will assign to the Bond Trustee (a) all of its right, title and interest in and to the Series 2015 Obligation, (b) all of its rights under the Master Indenture and the Deed of Trust, and (c) substantially all of its right, title and interest in and to the Loan Agreement (except for the Authority's rights to payment of its fees and expenses and to indemnification and its right to receipt of certain notices). See "SECURITY FOR THE SERIES 2015 BONDS." A description of the Corporation, its operations, the Corporation's Facilities (as defined below) and the Project is included in Appendix A hereto. The Master Indenture permits any persons that are not Members of the Obligated Group and other corporations that are successor corporations to any Member of the Obligated Group through merger or consolidation as permitted by the Master Indenture to become Members of the Obligated Group upon compliance with certain financial and other requirements. Upon compliance with certain requirements, Members of the Obligated Group may withdraw from the Obligated Group. See the discussion of such provisions in "THE MASTER INDENTURE" in Appendix C. Payment of the Series 2015 Bonds is primarily dependent on revenues to be generated by the Facilities. A description of certain risks affecting the generation of such revenues is set forth in "BONDHOLDERS' RISKS." The Corporation will undertake in the Loan Agreement to comply with the provisions of Rule 15c2-12 promulgated by the Securities and Exchange Commission and as in effect on the date hereof, by providing certain limited annual financial information and material event notices required by Rule 15c2-12. See "FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE." Appendix B to this Official Statement contains audited consolidated financial statements of the Corporation and its affiliates as of and for the fiscal years ended September 30, 2014 and 2013, and as of and for the fiscal years ended September 30, 2013 and Definitions of certain terms and a summary of certain documents relating to the Series 2015 Bonds are set forth in Appendix C to this Official Statement. The proposed form of opinion of Bond Counsel is attached hereto as Appendix D. -2-

21 THE CORPORATION The Corporation is a not-for-profit Virginia non-stock corporation formed in 1955 for the purpose of among other things, owning and operating continuing care retirement facilities in Northern Virginia for the elderly in a manner designed to satisfy the physical, social and psychological needs of such persons. The Corporation currently owns and operates Goodwin House Alexandria and Goodwin House Bailey's Crossroads (collectively, the "Facilities"). The Corporation has received a determination letter from the Internal Revenue Service stating that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and is therefore exempt from federal income tax under Section 501(a) of the Code. Attached as Appendix A to this Official Statement is a description of the Corporation and the Facilities, including the Project. Appendix A to this Official Statement includes a description of the Corporation, its operations, and the Facilities. Appendix B to this Official Statement includes audited consolidated financial statements of the Corporation and its affiliates (collectively, the "Organization") as of and for the fiscal year ended September 30, 2014 and September 30, 2013 and audited consolidated financial statements of the Organization as of and for the fiscal year ended September 30, 2013 and September 30, 2012, which statements have been audited by CliftonLarsonAllen, LLP, independent certified public accountants. THE AFFILIATES ARE NOT MEMBERS OF THE OBLIGATED GROUP. For a discussion of the relationship between the Corporation and its affiliates see "GOODWIN HOUSE INCORPORATED Background," "-Goodwin House Community Services," "- Goodwin House Foundation" and "-Goodwin House Development Corporation" in Appendix A. For the fiscal years ended September 30, 2014 and September 30, 2013, the Corporation accounted for 97% and 97%, respectively, of the Organization's total assets, 97% and 98%, respectively, of its operating revenues and 91% and 117%, respectively, of its operating income. For financial reporting purposes, the results of operations of the affiliates are consolidated with the results of the Corporation. PLAN OF FINANCE As more fully described in "ESTIMATED SOURCES AND USES OF FUNDS," proceeds from the Series 2015 Bonds will be used, with other available funds, to pay the costs of the Project, refund the outstanding principal amount of the Series 2005 Bonds, fund a debt service reserve fund, and pay certain costs of issuing the Series 2015 Bonds. The Project A portion of the Series 2015 Bond proceeds will be used to finance costs of the Project, which is expected to consist of improvements and additions to Goodwin House Alexandria, including, without limitation, (a) constructing and equipping a new five-story nursing and memory care facility, along with auditorium and community meeting spaces (the "Center of Excellence"), (b) renovating the first and second floors of the existing nursing and memory care facility to create approximately additional 16 residential apartments and 11 assisted living apartments, and (c) expanding and upgrading common areas and amenities, principally dining and other functional spaces (collectively, the "Project"). Details of the Project are described in "THE GOODWIN HOUSE ALEXANDRIA POSITIONING" in Appendix A. Management expects that the Project will cost approximately $68,228,100, as set forth in "THE GOODWIN HOUSE ALEXANDRIA POSITIONING - Summary of Project Budget," of which approximately $43,228,100 will be financed with a portion of the Series 2015 Bond proceeds and the remainder will be paid from an equity contribution from the Corporation, which is anticipated to be contributed after the Corporation has expended the Series 2015 Bond proceeds. For risks associated with the Project, see "BONDHOLDERS' RISKS - The Project" herein. To the extent Series 2015 Bond proceeds are not used to finance costs associated with the Project, the Corporation expects to apply such proceeds to finance certain alternative capital improvements as more particularly described in "THE -3-

22 GOODWIN HOUSE ALEXANDRIA POSITIONING Alternative Plan for Use of Bond Proceeds" in Appendix A. Refunding of Series 2005 Bonds Upon issuance of the Series 2015 Bonds, a portion of the net proceeds of the Series 2015 Bonds, together with other funds provided by the Corporation, will be transferred to the bond trustee for the Series 2005 Bonds and used in connection with the payment and redemption of the outstanding principal on the Series 2005 Bonds, at a redemption price of 100% of the outstanding principal amount thereof plus interest accruing to the redemption date. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds in connection with the issuance of the Series 2015 Bonds are provided below. ESTIMATED SOURCES OF FUNDS (1) Series 2015 Bonds... $68,815,000 Net Original Issue Premium... 4,020,086 Release from Trustee-held funds (2) ,786 Equity Contribution... 25,292,688 Total Estimated Sources of Funds... $98,367,560 ESTIMATED USES OF FUNDS (1) Project Costs Series 2015 Bond Proceeds... $43,229,420 Equity Contribution... 25,000,000 Refunding of Series 2005 Bonds... 24,245,000 Debt Service Reserve Fund (3)... 4,143,750 Financing Costs (4)... 1,749,390 Total Estimated Uses of Funds... $98,367,560 (1) (2) (3) (4) Rounded to the nearest dollar. Proceeds released from the principal and interest funds for the Series 2005 Bonds. The amount of the Debt Service Reserve Fund is equal to the Required Reserve, as defined in "DEFINITIONS OF CERTAIN TERMS" in Appendix C. See "SECURITY FOR THE SERIES 2015 BONDS - Debt Service Reserve Fund." Includes the Underwriters' compensation, legal and accounting fees, printing costs, Authority fees, Bond Trustee fees, title insurance premium, recording costs, and miscellaneous other expenses in connection with the issuance of the Series 2015 Bonds. No more than 2% of the proceeds of the Series 2015 Bonds will be used to pay the costs of issuance of the Series 2015 Bonds. See also "UNDERWRITING." -4-

23 ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth, for each twelve-month period ending on October 1, the amounts payable by the Corporation (rounded up to the nearest dollar) for the payment of principal of (whether at maturity or by mandatory sinking fund redemption) and interest on the Series 2015 Bonds and the outstanding debt service on the Series 2007 Bonds. Year Ending Series 2015 Bonds Debt Service Outstanding Debt Service on Total Debt October 1 Principal Interest Total Series 2007 Bonds Service 2015 $310,000 $ 1,187,726 $ 1,497,726 $ 9,244,043 $ 10,741, ,000 3,285,988 4,140,988 9,243,243 13,384, ,000 3,268,888 4,138,888 9,245,743 13,384, ,000 3,243,988 4,138,988 9,242,208 13,381, ,000 3,218,538 4,143,538 9,242,528 13,386, ,000 3,184,631 4,139,631 9,246,148 13,385, ,000 3,146,431 4,141,431 9,242,648 13,384, ,045,000 3,096,681 4,141,681 9,246,898 13,388, ,095,000 3,044,431 4,139,431 9,243,148 13,382, ,145,000 2,997,088 4,142,088 9,246,703 13,388, ,195,000 2,945,700 4,140,700 9,246,188 13,386, ,255,000 2,885,950 4,140,950 9,242,438 13,383, ,315,000 2,828,100 4,143,100 9,244,438 13,387, ,375,000 2,767,500 4,142,500 9,246,438 13,388, ,435,000 2,704,150 4,139,150 9,242,475 13,381, ,505,000 2,638,050 4,143,050 9,242,238 13,385, ,575,000 2,568,750 4,143,750 9,244,956 13,388, ,650,000 2,492,438 4,142,438 9,244,863 13,387, ,730,000 2,412,488 4,142,488 9,246,444 13,388, ,815,000 2,328,688 4,143,688 9,243,931 13,387, ,900,000 2,240,750 4,140,750 9,246,813 13,387, ,990,000 2,148,750 4,138,750 9,244,063 13,382, ,090,000 2,049,250 4,139,250 9,245,169 13,384, ,195,000 1,944,750 4,139,750 9,244,106 13,383, ,305,000 1,835,000 4,140,000 9,245,106 13,385, ,420,000 1,719,750 4,139,750 9,242,144 13,381, ,540,000 1,598,750 4,138,750 9,244,450 13,383, ,670,000 1,471,750 4,141,750 9,245,744 13,387, ,805,000 1,338,250 4,143,250-4,143, ,945,000 1,198,000 4,143,000-4,143, ,090,000 1,050,750 4,140,750-4,140, ,245, ,250 4,141,250-4,141, ,405, ,000 4,139,000-4,139, ,575, ,750 4,138,750-4,138, ,755, ,000 4,140,000-4,140, ,945, ,250 4,142,250-4,142,250 TOTAL $ 68,815,000 $ 77,618,201 $146,433,201 $258,845,305 $405,278,506-5-

24 SECURITY FOR THE SERIES 2015 BONDS THE SERIES 2015 BONDS, THE PREMIUM, IF ANY, AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA. NEITHER THE COMMONWEALTH OF VIRGINIA NOR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, SHALL BE OBLIGATED TO PAY PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON, OR THE PURCHASE PRICE OF, THE SERIES 2015 BONDS OR OTHER COSTS INCIDENT THERETO, EXCEPT FROM THE REVENUES AND RECEIPTS PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THE SERIES 2015 BONDS OR INTEREST THEREON OR OTHER COSTS INCIDENT THERETO. THE AUTHORITY HAS NO TAXING POWER. General The Series 2015 Bonds will be issued under and will be equally and ratably secured under the Trust Indenture, which will assign and pledge to the Bond Trustee (1) the Series 2015 Obligation, (2) certain rights of the Authority under the Loan Agreement, (3) all funds held by the Bond Trustee under the Trust Indenture, and (4) all revenues and receipts receivable by the Authority therefrom and from the security therefor. The Series 2015 Obligation will constitute an unconditional promise by the Corporation to pay amounts sufficient to pay principal of (whether at maturity, by acceleration or call for redemption) and premium, if any, and interest on the Series 2015 Bonds. The Series 2015 Bonds will be further secured by the Debt Service Reserve Fund which will not be security for any other Obligation. See "Establishment of Funds - Debt Service Reserve Fund" in "THE TRUST INDENTURE" in Appendix C. The Master Indenture and the Obligated Group The Series 2015 Obligation is issued as an Obligation under the Master Indenture. The Series 2015 Obligation, together with the outstanding Series 2007 Obligation, the 2005 Swap Obligation and any other Obligations issued by the Obligated Group or any other Member, will be the general and joint and several obligations of each and every Member. All such Obligations will rank on a parity basis with each other as joint and several obligations of all Members under the Master Indenture entitled to equal and ratable treatment thereunder, and all Members are required to make payment sufficient to pay all Obligations when due. The Obligated Group is subject to certain requirements with respect to the maintenance of its property and certain restrictions and limitations with respect to the incurrence of indebtedness (including long term debt service coverage ratios), consolidation and merger, transfer of assets and addition and withdrawal of Members of the Obligated Group. The Members also covenant that, if so directed upon an Event of Default (as described in "Events of Defaults" in "THE MASTER INDENTURE" in Appendix C), they will deposit on a daily basis into a special account held by the Master Trustee all revenues and receipts derived from their operations. Summaries of certain of those covenants are contained in "THE MASTER INDENTURE" in Appendix C. At the time of issuance of the Series 2015 Bonds, the Corporation will be the only Member of the Obligated Group. The Master Indenture permits additional Members to join the Obligated Group at any time, subject to the continued ability of the Obligated Group to meet certain financial covenants. Although the Corporation has affiliated entities, the Corporation currently has no plans to add Members to the Obligated Group. Additional Members of the Obligated Group will be obligated to pay all of the Obligated Group's obligations on existing Obligations, including the Series 2015 Obligation, and agree to perform all covenants under the Master Indenture applicable to the Obligated Group. Under the Master Indenture, the Corporation has covenanted to remain a Member of the Obligated Group until the Series 2015 Bonds are paid in full. See "Withdrawal from the Obligated Group" in "THE MASTER INDENTURE" in Appendix C. The enforceability of the obligations of -6-

25 Members of the Obligated Group may be limited in certain circumstances. See "BONDHOLDERS' RISKS - Bankruptcy" and "- Limitations on Enforceability of Remedies." Mortgaged Premises and Security Interest in Equipment The Series 2015 Obligation, the outstanding Series 2007 Obligation and the 2005 Swap Obligation, will be secured by the Deed of Trust, which grants a lien on the real property and the improvements constituting the Mortgaged Premises. In addition, future Obligations issued under the Master Indenture may also be secured by the Deed of Trust without the consent of the holders of the Series 2015 Bonds. As described in "BONDHOLDERS' RISKS," substantial portions of the Mortgaged Premises have been specifically designed as continuing care retirement communities and therefore their value at any foreclosure sale could be limited by the number of alternate uses. The Obligated Group currently owns and may own in the future other real property that will not be subject to the lien created by the Deed of Trust. Simultaneously with the issuance of the Series 2015 Bonds, the Master Trustee will receive a mortgagee title insurance policy insuring the Master Trustee's lien under the Deed of Trust as a first priority lien on the Mortgaged Premises. The Master Indenture requires that, before the issuance of any additional Obligations to be secured by the Deed of Trust, the amount of the mortgagee title insurance policy must be increased to the full principal amount of all Obligations to be outstanding under the Master Indenture which are to be secured by the Deed of Trust. The Deed of Trust will also create a security interest in those items of fixtures, furnishing, machinery and equipment, except for motor vehicles titled under a certificate of title, that are now owned or hereinafter acquired by the Corporation and located on the real estate portion of the Mortgaged Premises (the "Equipment") prior to all other security interests except purchase money security interests in such Equipment, any security interests existing before the security interest created by the Deed of Trust attaches and certain other exceptions under the UCC (as defined below). To continue the perfection of the security interest in Equipment, continuation statements meeting the requirements of the UCC must be filed periodically. Pledged Assets The Master Indenture creates a security interest in the Pledged Assets of the Obligated Group, defined as all inventory, accounts (including accounts receivable and contract rights), documents, instruments, other moneys, chattel paper and general intangibles, now owned or hereafter acquired by the Obligated Group, and all proceeds thereof, all as defined in the Uniform Commercial Code of Virginia (the "UCC"), including without limitation all rights under residency agreements with respect to residential units in the residence and care facilities owned by the Corporation and other facilities owned by any Members, rights to payment for goods sold or leased or for services rendered, rights to payment under agreements with Medicare, Medicaid, governmental bodies, insurance companies and prepaid health care organizations (to the extent assignment thereof is permitted by law), medical or hospital insurance, indemnity or reimbursement programs or agreements, instruments evidencing a monetary obligation and a security interest in or a lease of specific goods, all rights in Entrance Fees, and all rights to endowments, gifts, grants, trust funds, bequests, donations and contributions. Although Pledged Assets includes charitable pledges and gifts to the Obligated Group, the use of such amount by the Obligated Group or the Master Trustee may be limited by any use restrictions placed by the donor of such charitable funds. Charitable pledges and gifts received by Goodwin House Foundation, which is not a Member of the Obligated Group, are not included as Pledged Assets. To continue perfection of the security interest in Pledged Assets, continuation statements meeting the requirements of the UCC must be filed periodically. As described in "Sale, Lease, or Other Disposition of Assets" in "THE MASTER INDENTURE" in Appendix C, Members of the Obligated Group have the right to dispose of their assets, including Pledged Assets, under certain circumstances, in which case the assets disposed of will no longer be security for the Series 2015 Bonds. Cash held by the Obligated Group may not be subject to any perfectible security interest under the UCC. The security interest in any item of inventory will be inferior to the interest of a buyer in the ordinary course of business and will be inferior to a purchase money security interest, as defined in the UCC, perfected in connection with the sale to the Obligated Group of such item. The lien on certain other Pledged Assets may not be enforceable against third parties unless such other Pledged Assets are transferred to the Master Trustee (which transfer the -7-

26 Obligated Group is not required by the Master Indenture to make prior to a default thereunder and which transfer may be set aside if it occurs within 90 days of the filing of a petition in bankruptcy) and is subject to exceptions under the UCC. The federal government may in the future proscribe or restrict the assignment of rights arising out of Medicare, Medicaid or other federal programs. Subject to certain conditions, in case of the failure of the Obligated Group to make any payment on the Series 2015 Obligation or any other Obligation under the Master Indenture when due or to observe, after any applicable cure period, any of their covenants concerning the operation of the Facilities or in case of any other Event of Default under the Master Indenture, the Master Trustee may take possession of Pledged Assets and apply them to payment of the principal of and interest on the Series 2015 Obligation on a parity basis with other Obligations under the Master Indenture. Covenants; Additional Indebtedness The Members of the Obligated Group will be subject to covenants under the Master Indenture relating to maintenance of a Long-Term Debt Service Coverage Ratio and restricting, among other things, incurrence of Indebtedness, existence of Permitted Liens on the Obligated Group's Property, consolidation and merger, disposition of assets, addition of Members to the Obligated Group and withdrawal of Members from the Obligated Group (see "FINANCING DOCUMENTS AND SELECTED COVENANTS" and "THE MASTER INDENTURE" in Appendix C). THE MASTER INDENTURE PERMITS EACH MEMBER OF THE OBLIGATED GROUP TO INCUR ADDITIONAL INDEBTEDNESS EVIDENCED BY OBLIGATIONS ISSUED UNDER THE MASTER INDENTURE THAT WILL SHARE THE SECURITY FOR THE SERIES 2015 OBLIGATION ON A PARITY BASIS WITH THE SERIES 2015 OBLIGATION, THE SERIES 2007 OBLIGATION AND THE 2005 SWAP OBLIGATION. SUCH ADDITIONAL OBLIGATIONS WILL NOT BE SECURED BY THE MONEY OR INVESTMENTS IN ANY FUND OR ACCOUNT HELD BY THE BOND TRUSTEE UNDER THE TRUST INDENTURE AS SECURITY FOR THE SERIES 2015 BONDS, INCLUDING THE DEBT SERVICE RESERVE FUND. Debt Service Reserve Fund Upon the issuance of the Series 2015 Bonds, the Debt Service Reserve Fund relating to the Series 2015 Bonds (the "Debt Service Reserve Fund") will contain an amount equal to the Required Reserve, which will initially be $4,143,750. The Required Reserve amount shall equal the maximum amount payable with respect to principal of and interest on the Series 2015 Bonds, during the then current or any succeeding calendar year; provided that the Required Reserve will not exceed the maximum amount allowed under the regulations of the Internal Revenue Service relating to a "reasonably required reserve or replacement fund." The Bond Trustee is required to use amounts in the Debt Service Reserve Fund to make transfers to the Bond Fund to the extent necessary to pay principal of and interest on the Series 2015 Bonds when due. See "Establishment of Funds Debt Service Reserve Fund" in "THE TRUST INDENTURE" in Appendix C. The Debt Service Reserve Fund is security only for the Series 2015 Bonds and not for the Series 2007 Obligation, the 2005 Swap Obligation or any other Obligations that may be issued in the future under the Master Indenture. Amendments to Covenants and Security Provisions Subject to certain exceptions, the covenants and other security provisions of the Master Indenture and the Deed of Trust may be amended with the consent of the holders of not less than a majority in aggregate principal amount of all Obligations then outstanding (which may include Obligations issued in the future). Such amendments may alter or eliminate the covenants and security provisions described in this Official Statement. Upon issuance of the Series 2015 Bonds, the Series 2015 Obligation will represent approximately 33.5% of the Obligations outstanding under the Master Indenture. See "Supplements Requiring Consent of Holders; Consents of Related Bondholders" in "THE MASTER INDENTURE" in Appendix C. -8-

27 THE SERIES 2015 BONDS General The Series 2015 Bonds will be registered as to principal and interest in the name of Cede & Co., as nominee for DTC (as defined herein), or otherwise as hereinafter described. Purchases of beneficial ownership interests in the Series 2015 Bonds will be made only in book-entry form and purchasers will not receive certificates representing their interests in the Series 2015 Bonds so purchased. If the book-entry system is discontinued, bond certificates will be delivered as described in the Trust Indenture, and Beneficial Owners (as defined below under "THE SERIES 2015 BONDS - Book-Entry Only System") will become the registered owners. The Series 2015 Bonds will be dated the date of issuance and will bear interest from the date of issuance, at rates set forth on the cover of this Official Statement payable on October 1, 2015, and on each April 1 and October 1 thereafter (the "Interest Payment Date"). Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. Interest shall be payable to the holders of the Series 2015 Bonds by check or draft to such holders at their addresses as they appear on registration books kept by the bond registrar as of the 15 th day of the month preceding the applicable Interest Payment Date. The Series 2015 Bonds will mature in installments on October 1 in the years and amounts as set forth on the inside cover of this Official Statement. The Series 2015 Bonds will be issued as registered bonds in denominations of $5,000 and multiples thereof. As long as the Series 2015 Bonds are held by DTC or its nominee, interest will be paid to Cede & Co., as nominee of DTC, in next day funds on each interest payment date. If the book-entry system is discontinued, interest on Series 2015 Bonds will be payable by check or draft mailed to the registered owner. Principal will be payable at the principal corporate trust office of the Bond Trustee. Redemption Provisions Mandatory Sinking Fund Redemption. The Series 2015 Bonds maturing on October 1, 2030 (5.0% coupon), October 1, 2030 (4.0% coupon), October 1, 2035 (5.00% coupon), October 1, 2035 (4.25% coupon), October 1, 2045, October 1, 2047 and October 1, 2050 are required to be redeemed prior to maturity on the dates and in the amounts set forth below, at a price of 100% of the principal amount of the Series 2015 Bonds to be redeemed plus accrued interest to the redemption date: Series 2015 Bonds maturing October 1, 2030 (5.0% coupon) Year Amount 2026 $765, , , , (final maturity) 910,000 Series 2015 Bonds maturing October 1, 2030 (4.0% coupon) Year Amount 2026 $490, , , , (final maturity) 595,000-9-

28 Series 2015 Bonds maturing October 1, 2035 (5.0% coupon) Year Amount 2031 $1,250, ,310, ,370, ,440, (final maturity) 1,500,000 Series 2015 Bonds maturing October 1, 2035 (4.25% coupon) Year Amount 2031 $325, , , , (final maturity) 400,000 Series 2015 Bonds maturing October 1, 2045 Year Amount 2036 $1,990, ,090, ,195, ,305, ,420, ,540, ,670, ,805, ,945, (final maturity) 3,090,000 Series 2015 Bonds maturing October 1, 2047 Year Amount 2046 $3,245, (final maturity) 3,405,000 Series 2015 Bonds maturing October 1, 2050 Year Amount 2048 $3,575, ,755, (final maturity) 3,945,000 The Trust Indenture provides for a credit against sinking fund redemption requirements for Series 2015 Bonds that prior to any sinking fund redemption date have been purchased and cancelled or surrendered for cancellation and which have not previously been applied as a credit against any sinking fund redemption requirement. Optional Redemption. (a) Except as set forth in (b) below, Series 2015 Bonds maturing on or after October 1, 2026 will be subject to redemption by the Authority, at the direction of the Corporation, prior to maturity on or after October 1, 2025, in whole or in part at any time, upon payment of the following redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date. -10-

29 (b) The Series 2015 Bonds maturing on October 1, 2030 with the 4.00% coupon and the Series 2015 Bonds maturing on October 1, 2035 with the 4.25% coupon will be subject to redemption by the Authority, at the direction of the Corporation, prior to maturity on or after October 1, 2020, in whole or in part at any time upon payment of the following redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date. Extraordinary Redemption of Series 2015 Bonds. The Series 2015 Bonds are subject to redemption in whole or in part at any time at a redemption price equal to 100% of the principal amount of such Series 2015 Bonds to be redeemed plus accrued interest thereon to the date of redemption, without premium, in the event of the exercise by the Corporation of its option to prepay the Series 2015 Obligation due to damage to or destruction of all or any part of the Facilities, loss of title thereto or the condemnation thereof, provided that the book value of the damaged or lost property exceeds 10% of the book value of the property, plant and equipment of the Corporation. The Series 2015 Bonds are subject to redemption in whole at any time at a redemption price equal to 100% of the principal amount of such Series 2015 Bonds to be redeemed, plus accrued interest thereon to the redemption date, without premium, if the Corporation exercises its option to prepay the Series 2015 Obligation in whole upon the occurrence of certain other extraordinary events as provided in the Loan Agreement. See "Prepayment of Obligation No. 6" in "THE LOAN AGREEMENT" in Appendix C. Acceleration Upon Default; Other Remedies. All principal and accrued interest on the Series 2015 Bonds may become immediately due and payable, without premium, upon an Event of Default under the Trust Indenture if the Bond Trustee (1) exercises its option to so declare, or (2) is directed to so declare by the holders of at least 25% in aggregate principal amount of all the Series 2015 Bonds then outstanding under the Trust Indenture. For all Events of Default, the Bond Trustee will look to the holders of all the Series 2015 Bonds outstanding under the Trust Indenture to determine who may direct remedies upon an Event of Default. See "Default, Acceleration and Other Remedies" in "THE TRUST INDENTURE" in Appendix C. Required payments under the Series 2015 Obligation may only be accelerated by the Master Trustee. Upon the occurrence of an Event of Default under the Master Indenture, the Master Trustee may accelerate payment of the Series 2015 Obligation and shall do so if directed by the holders of not less than 25% in aggregate principal amount of Obligations outstanding under the Master Indenture. See "Acceleration; Annulment of Acceleration; Other Remedies" and "Pledged Assets; Application of Moneys After Default" in "THE MASTER INDENTURE" in Appendix C. Manner of Redemption. During the period that DTC or the DTC nominee is the registered holder of the Series 2015 Bonds, the Bond Trustee will not be responsible for mailing notices of redemption to the Beneficial Owners of the Series 2015 Bonds. See "THE SERIES 2015 BONDS Book-Entry Only System." If fewer than all of the Series 2015 Bonds of any one maturity shall be called for redemption, the Bond Trustee shall select the particular Series 2015 Bonds or portions thereof to be redeemed from such maturity by lot in such other manner as the Bond Trustee in its discretion may deem proper; provided, however, that the portion of any Series 2015 Bond to be redeemed shall be in an Authorized Denomination. The Bond Trustee shall cause notice of any redemption identifying the Series 2015 Bonds to be redeemed to be sent by first-class mail, postage prepaid not less than 30 nor more than 60 days prior to the redemption date to the Holder of each Series 2015 Bond to be redeemed at such Holder's address as it appears on the registration books maintained by the Bond Trustee. Failure to mail any such notice to any Holder or any defect in any notice so mailed shall not affect the validity of the proceedings for the redemption of the Series 2015 Bonds of any other Holders as to which notice shall have been properly given. In the case of an optional redemption, the notice may state that it is conditioned upon any condition specified by the Corporation, including but not limited to the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Bond Trustee no later than the redemption date. In the event any such condition is not satisfied as to any Series 2015 Bond prior to the redemption date the call for redemption of such Series 2015 Bond shall be null and void, and the Bond Trustee shall thereafter give notice of such fact, in the same manner as the original notice of redemption, to the Holder of such Series 2015 Bond. -11-

30 Issuance of Additional Parity Bonds; Parity Indebtedness Although the Trust Indenture makes no provision for the issuance of any additional bonds or other indebtedness secured thereby, the Master Indenture permits the Obligated Group to issue, incur, guarantee and assume additional indebtedness, which may be secured on a parity basis with the Obligations. Additional indebtedness issued on a parity basis with Obligations would be secured on a parity basis with the Series 2015 Obligation, the Series 2007 Obligation and the 2005 Swap Obligation. See "SECURITY FOR THE SERIES 2015 BONDS - The Master Indenture and the Obligated Group" and "THE MASTER INDENTURE" in Appendix C. As holder of the Series 2015 Obligation, under certain conditions the Bond Trustee may also require the Master Trustee to accelerate payment of the Series 2015 Obligation, subject to the rights of the holders of the other Obligations, as currently exist or as entered into in the future under the Master Indenture. See "Events of Default" and "Acceleration; Annulment of Acceleration; Other Remedies" in "THE MASTER INDENTURE" in Appendix C. Defeasance If the interest on, and either the principal or redemption price of any Series 2015 Bond has been paid, or sufficient money or defeasance obligations (which may include securities other than government obligations) have been deposited with the Bond Trustee to pay the principal of, premium, if any, and interest due and to become due on such Series 2015 Bonds on or prior to the redemption or maturity date thereof, such Series 2015 Bond shall no longer be deemed outstanding under the Trust Indenture. If all outstanding Series 2015 Bonds have been defeased, the Bond Trustee shall cancel and discharge the Trust Indenture. See "Discharge of Trust Indenture" in "THE TRUST INDENTURE" in Appendix C. Book-Entry Only System The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Series 2015 Bonds, payments of principal of and premium, if any, and interest on the Series 2015 Bonds to the Depository Trust Company ("DTC"), New York, New York, its nominee, Direct and Indirect Participants (as defined below) or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2015 Bonds and other bond-related transactions by and between DTC, Direct and Indirect Participants and Beneficial Owners is based solely on information furnished by DTC. None of the Authority, the Bond Trustee, the Master Trustee, the Obligated Group nor the Underwriters assume any responsibility for the accuracy or adequacy of the information included in such description. DTC will act as securities depository for the Series 2015 Bonds. The Series 2015 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2015 Bond certificate will be issued in the aggregate principal amount of each maturity of the Series 2015 Bonds and will be deposited with DTC at the office of the Bond Trustee on behalf of DTC utilizing the DTC FAST system of registration. DTC, the world's largest securities 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 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 -12-

31 through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC is rated "AA+" by S&P. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of the Series 2015 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2015 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2015 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' (jointly, the "Participants") records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2015 Bonds, except in the event that use of the book-entry system for the Series 2015 Bonds is discontinued. To facilitate subsequent transfers, all of the Series 2015 Bonds deposited by Direct Participants with DTC (or the Bond Trustee on behalf of DTC utilizing the DTC FAST system of registration) 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 the Series 2015 Bonds with DTC (or the Bond Trustee on behalf of DTC utilizing the DTC FAST system of registration) and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2015 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such the Series 2015 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2015 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2015 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of the Series 2015 Bonds may wish to ascertain that the nominee holding the Series 2015 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Trustee and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2015 Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2015 Bonds unless authorized by a Direct Participant in accordance with DTC's 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 2015 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). The Authority may enter into amendments to the agreement with DTC or successor agreements with a successor securities depository, relating to the book-entry system to be maintained with respect to the Series 2015 Bonds without the consent of Beneficial Owners or Bondholders. Redemption proceeds, distributions, and interest payments on the Series 2015 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Bond Trustee, on payable 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 the Series 2015 Bonds 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 or its nominee, the Bond Trustee or the Authority, subject -13-

32 to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2015 Bonds at any time by giving reasonable notice to the Authority or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2015 Bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2015 Bond certificates will be printed and delivered. THE ABOVE INFORMATION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY, THE OBLIGATED GROUP AND THE UNDERWRITERS BELIEVE TO BE RELIABLE, BUT THE AUTHORITY, THE OBLIGATED GROUP AND THE UNDERWRITERS TAKE NO RESPONSIBILITY FOR THE ACCURACY THEREOF. NEITHER THE AUTHORITY, THE OBLIGATED GROUP NOR THE BOND TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS FOR (I) SENDING TRANSACTION STATEMENTS; (II) MAINTAINING, SUPERVISING OR REVIEWING, OR THE ACCURACY OF, ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (III) PAYMENT OR THE TIMELINESS OF PAYMENT BY DTC TO ANY DTC PARTICIPANT, OR BY ANY DTC PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON BOOK-ENTRY SERIES 2015 BONDS; (IV) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY DTC PARTICIPANT, OR BY ANY DTC PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OF ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE TRUST AGREEMENT TO BE GIVEN TO HOLDERS OR OWNERS OF BOOK-ENTRY SERIES 2015 BONDS; (V) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF BOOK-ENTRY SERIES 2015 BONDS, OR (VI) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF THE BOOK-ENTRY SERIES 2015 BONDS. So long as Cede & Co. is the registered owner of the Series 2015 Bonds, reference herein to the registered owners of the Series 2015 Bonds (other than under "TAX MATTERS") shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Series 2015 Bonds. THE AUTHORITY The Authority was created by an ordinance adopted by the City Council of the City of Alexandria, Virginia (the "City Council"), to promote and further the purposes of the Act. The Authority is a political subdivision of the Commonwealth of Virginia governed by seven directors appointed by the City Council. The Authority is empowered to issue its revenue bonds to finance, among other things, facilities for the residence and care of the aged. The Authority has no taxing power. BONDHOLDERS' RISKS Payment of the Series 2015 Bonds will depend on the Corporation's ability to generate revenues sufficient to pay debt service on the Series 2015 Bonds and the Series 2007 Bonds, and any other indebtedness, while paying operating expenses of the Facilities. The Corporation's ability to generate revenues and its overall financial condition may be adversely affected by a wide variety of unforeseen events and conditions, including escalation in the costs related to the Project or other construction expenditures that may be undertaken, changes in demand for facilities similar to those provided by the Corporation affecting the Corporation's ability to reach and maintain full occupancy, fluctuations in public confidence both in the Facilities and the services they provide, and changes in -14-

33 government licensing procedures, regulation and competition. The following are some of the factors that may affect the Corporation's operations and economic well-being. There are many diverse factors that may have a substantial bearing on the risks generally incident to the operation of the Facilities. Such factors include generally imposed fiscal policies, adverse use of adjacent or neighboring real estate, the ability to maintain the facilities, community acceptance of the facilities, changes in demand for the facilities, changes in the number of competing facilities, changes in the costs of operation of the facilities, changes in the laws of the Commonwealth of Virginia affecting long term care programs, the limited income of the elderly, changes in the long term care and health care industries, difficulties in or restrictions on the Corporation's ability to raise rates charged, general economic conditions and the availability of working capital. In recent years, a number of long term care facilities throughout the United States have defaulted on various financing obligations or otherwise have failed to perform as originally expected. There can be no assurance the Corporation will not experience one or more of the adverse factors that caused other facilities to struggle or fail. Many other factors may adversely affect the operation of facilities like the Facility and cannot be determined at this time. A BONDHOLDER IS ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO, AND SPECIAL REFERENCE IS MADE TO THE SECTION "SECURITY FOR THE SERIES 2015 BONDS" AND THIS SECTION FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2015 BONDS. Limited Obligations THE SERIES 2015 BONDS AND THE PREMIUM, IF ANY, AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE COMMONWEALTH OF VIRGINIA, OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA. NEITHER THE COMMONWEALTH OF VIRGINIA, NOR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, SHALL BE OBLIGATED TO PAY PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2015 BONDS OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE REVENUES AND RECEIPTS PLEDGED THEREFOR, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF VIRGINIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND THE CITY OF ALEXANDRIA, VIRGINIA, IS PLEDGED TO THE PAYMENT OF PRINCIPAL OF THE SERIES 2015 BONDS OR INTEREST THEREON OR OTHER COSTS INCIDENT THERETO. The Project As described in "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Construction Pricing, Procurement, Schedule and Permits" in Appendix A, the Corporation is in the construction document phase of the Project, and a portion of the proceeds of the Bonds will be used for the design and construction of the Project. See "ESTIMATED SOURCES AND USES OF FUNDS." The occurrence of certain events, such as those described below, could prevent the Corporation from completing all or a portion of the Project. In the event the Corporation is not able to complete all or a portion of the Project, any Series 2015 Bond proceeds not used to finance the Project are expected to be used to finance routine capital improvements and equipment, as described in "THE PLAN OF FINANCE" herein and "THE GOODWIN HOUSE ALEXANDRIA POSITIONING" in Appendix A. Construction Costs. No Guaranteed Maximum Price Contract. The Corporation has not yet executed a guaranteed maximum price contract with respect to the Project. While management has worked with members of its Project team to estimate the costs of the various components of the Project, as described in "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Construction Pricing, Procurement, Schedule and Permits" in Appendix A, -15-

34 actual Project costs may exceed the Project budget. See "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Summary of Project Budget" in Appendix A. Costs Overruns. Construction of the Project is subject to the usual risks associated with construction projects including, but not limited to, delays in issuance of required building permits or other necessary approvals or permits, strikes, labor disputes, shortages of materials and/or labor, transportation delays, restrictions related to endangered species, adverse weather conditions, fire, casualties, acts of God, war, acts of public enemies, terrorism, orders of any kind of federal, state, county, city or local government, insurrections, riots, adverse conditions not reasonably anticipated or other causes beyond the control of the Corporation or its contractors. Such events may result in increases in the costs of the Project. Further such events could result in delayed marketing, substantial completion, and/or occupancy of the Project and thus the revenue flow from certain components of the Project and could negatively affect marketing and occupancy of the Corporation's existing residences. Sufficiency of Series 2015 Bond Proceeds. It is anticipated that the proceeds from the sale of the Series 2015 Bonds, along with the Corporation's expected $25,000,000 equity contribution, will be sufficient to complete the Project. In the event the proceeds of the Series 2015 Bonds are not sufficient to complete the Project, the Corporation would have to (i) complete the Project with its own funds, thereby using its cash and investments, (ii) obtain alternative financing from other sources that may not be available at favorable terms, or (iii) change the design of the Project or not complete certain components of the Project, which may have an adverse impact on the marketing and occupancy of the Project and could negatively affect marketing and occupancy of the Corporation's existing residences. If the Corporation uses its own funds or obtains additional financing to complete the Project such actions could materially affect the Corporation's ability to pay debt service on the Series 2015 Bonds or the financial position of the Corporation. For a discussion of the Corporation's construction pricing estimates see "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Construction Pricing, Procurement, Schedule and Permits" in Appendix A. Zoning Approvals and Building Permits. Management of the Corporation believes that all required zoning approvals and building permits will be obtained in due course. See "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Certificate of Public Need and Zoning Approvals" in Appendix A hereto for a status and timing of the various approvals and permits. Although construction work will be inspected periodically by the Project architect, there can be no assurance that the Project will conform to construction specifications or state or local regulations. Any delays in obtaining, or the inability to obtain, the requisite zoning approvals and building permits could result in the escalation of the costs of the Project, considerable delays in the completion of the Project or the impossibility of completion of all or a portion of the Project. Certificate of Need. As described in "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Certificate of Public Need and Zoning Approvals" in Appendix A, the Corporation has submitted its Certificate of Public Need ("COPN") application, which is required for the portion of the Project consisting of the "Center of Excellence." As described under "BONDHOLDERS' RISKS - State Regulation; Rights of Residents" below, the COPN approval process can be a time-consuming and expensive process with no guarantees of success. The inability to obtain the COPN for the Center of Excellence would prevent the Corporation from completing the Project. Uncertainty of Full Occupancy and Entrance Fee Collection Payment of the Series 2015 Bonds is dependent on the continuing ability of the Corporation to (i) collect new entrance fees ("Entrance Fees") from residents occupying independent living units at the Facilities vacated by deceased residents, residents permanently transferred to assisted living or nursing care facilities operated by the Corporation or residents leaving the Facilities for other reasons, and (ii) keep the Facilities substantially occupied by residents who can pay the full amount of the Entrance Fees and monthly service fees. Management expects to implement regular increases in both Entrance Fees and monthly service fees necessary to offset increasing costs due primarily to inflation. There can be no assurance that such increases can or will be made or that increases in expenses will be no greater than assumed. Also, since many of the residents may be living on fixed incomes or incomes that do not readily change in response to changes in economic conditions, -16-

35 there can be no assurance that any such fee increases can be paid by residents or that such increases will not adversely affect the utilization of the Facilities. While the Corporation intends to accept new residents unable to pay in full the Entrance Fees and monthly service fees only to the extent the Goodwin House Foundation has fellowship funds available to pay their expenses, it is possible that residents who unexpectedly become unable to make such payments would be allowed to remain residents, even though the costs of caring for them could have an adverse effect on the financial condition of the Corporation. As a charitable tax-exempt organization, the Corporation may be unable or unwilling to require residents who lack adequate financial resources to leave the Facilities. In the future, the Corporation could possibly be required to accept residents unable to pay all fees or be required to provide services to a certain number of indigent persons unable to pay any fees, in order to maintain its tax exempt status. In addition, the number of persons who can afford payment of the substantial Entrance Fees and monthly service fees may be affected by general economic conditions. In particular, a depressed housing market may prevent prospective residents from selling their homes and generating cash to pay Entrance Fees. The fee structures for the Facilities are included in "THE GOODWIN HOUSE COMMUNITIES Sources of Revenue" in Appendix A hereto. As set forth therein, the Corporation has set such fees based on, among other things, anticipated revenue needs and analysis of the market areas. Competition The Facilities are located in an area where other continuing care retirement facilities and other facilities offering health care services to older adults exist or may be developed. As discussed in the section "THE GOODWIN HOUSE ALEXANDRIA POSITIONING Rationale" in Appendix A hereto, the rationale for the Project is to upgrade the existing facilities at the Goodwin House Alexandria campus to meet consumer demand and expectations in order to plan for the long-term financial viability and competitive sustainability of the Goodwin House Alexandria campus. Failure to complete the Project as discussed in "BONDHOLDERS' RISKS The Project" above, or the renovation or expansion of the existing Facilities, could have an adverse impact on the Corporation's ability to remain competitive with similarly situated continuing care retirement communities and other forms of retirement living offering health care services. The Corporation may also face additional competition in the future as a result of changing demographic conditions and the construction of new, or the renovation or expansion of existing continuing care facilities in the geographic area served by the Facilities. Other forms of retirement living, including condominiums, apartment buildings and facilities not specifically designed for the elderly, may offer an alternative to persons willing to forego the availability of health care and continuing care services in exchange for lower prices. All of these factors combine to make the elderly housing and health care industry volatile and subject to material change that cannot be currently predicted. See "MARKET AREA Competition" in Appendix A for a description of the Corporation's market area and a list of those continuing care retirement communities that the Corporation has indicated as competitive with the Facilities. Actual Results May Differ from Historical and Projected Results Certain audited and unaudited historical financial information regarding the Corporation is set forth in Appendices A and B. There can be no assurance that the financial results achieved in the future will be similar to historical results. Such future results will vary from historical results and the variations may be material. Therefore, the historical financial results cannot be taken as a representation that the Corporation will be able to fulfill its obligations under the Loan Agreement, the Master Indenture and the Series 2015 Obligation, respectively. Risks Associated with Swaps Under certain circumstances, the 2005 Swap (and potentially any other derivative entered into in the future) may be terminated prior to its termination date. If a swap is terminated under certain market conditions, the Corporation may owe a termination payment to the swap provider. Under other circumstances of termination, the -17-

36 Corporation may be entitled to receive a termination payment. Any termination payment would generally be based upon the market value of the swap on the date of termination. As of March 31, 2015, the Corporation estimated that if the 2005 Swap were terminated under certain circumstances the Corporation would owe the Swap Provider a termination payment of approximately $458,862. In the event of an early termination of the 2005 Swap (or any other derivative), there can be no assurance that (i) the Corporation will receive any termination payment payable to it by Swap Provider or any other counterparty, (ii) the Corporation will have sufficient amounts to pay a termination payment payable by it to Swap Provider or any other counterparty or (iii) the Corporation would be able to obtain a replacement swap agreement with comparable terms. The Corporation has credit risk to the extent the Swap Provider's credit or ability to perform is reduced. State Regulation; Rights of Residents The Virginia Continuing Care Provider Registration and Disclosure Act (the "Statute") requires the Corporation to provide to the Commonwealth of Virginia and each resident a detailed disclosure statement and requires the escrowing of deposits of Entrance Fees. The Statute also regulates the form of residency agreements and establishes certain rights of residents, including the right to organize, to obtain refunds under certain circumstances and not to have residency agreements cancelled except for good cause. The Statute gives the State Corporation Commission of Virginia power to promulgate regulations and issue injunctions and cease-and-desist orders. The Corporation's management believes that it is in compliance with the Statute and that continued compliance will not materially affect its operation, but there is no certainty that the Statute and the regulations promulgated under the Statute will not adversely affect operation of the Facilities or the financial condition of the Corporation. The Center of Excellence requires a COPN approval, which can be a time-consuming and expensive process with no guarantee of success. See "THE GOODWIN HOUSE ALEXANDRIA POSITIONING" in Appendix A for a description of the status of the COPN. Future expansion at the Facilities, especially related to nursing care beds, could require additional COPN approval, which can be a time-consuming and expensive process with no guarantee of success. The inability of the Corporation to obtain the COPN for the Center of Excellence and any future COPNs or other governmental approvals to undertake additional projects necessary to remain competitive, both as to rates and charges as well as quality and scope of care, could adversely affect the operations of the Corporation and its ability to attract residents. The enactment of additional legislation restricting or regulating the operation of residential care facilities, creating additional residents' rights or requiring certain financial reserves could adversely affect the financial condition of the Corporation and may limit the terms and enforceability of and remedies under residency agreements. In addition, the ability of the Master Trustee to foreclose its lien on the Facilities or enforce other rights and remedies under the financing documents may be adversely affected by litigation on behalf of residents. Although under the current residency agreement, residents have no special lien or claim against any property of the Corporation, there can be no certainty that residents could not successfully claim or otherwise restrict the use of the Corporation's property in bankruptcy proceedings or other disputes. Although the Corporation expects to continue to use the continuing care concept of contracting with residents, it is under no obligation to do so. Organized Resident Activity The Corporation 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 monthly service fees with respect to the Facilities or other charges without increase. Moreover, the Corporation 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 Corporation will be able satisfactorily to meet the needs of such resident groups. Labor Union Activity and Staffing Although the employees of the Corporation are not represented by a union and management is not aware of any labor organizational efforts, health care facilities in Virginia are being subjected to increasing union organizational efforts. The unionization of the Corporation's employees could have an adverse effect on the -18-

37 Corporation's financial condition. Furthermore, although the Corporation has been able to attract desirable employees in the past, low unemployment in the Northern Virginia area may adversely affect the availability of and the wages of future staff, which in turn may adversely affect the Corporation's financial condition. Health Care Reform Recently passed health care reform law at the federal level would impose certain expanded contracting requirements on long-term care facilities regarding coordination of care with hospitals and hospital systems going forward. In addition, legislation is periodically introduced in Congress and in the Virginia legislature that could result in limitations on revenues, reimbursements, or charges for health care facilities. At this time, no determination can be made as to whether such federal or state legislation will be enacted or, if enacted, its impact on the Facilities. For its fiscal year ended September 30, 2014, the Corporation's percentage of net health care revenues paid from Medicare was 33%, and the percentage of net health care revenues paid from Medicaid was 2%. Reimbursement under Federal and State Programs The Corporation receives reimbursement from Medicaid, Medicare and other governmental programs for some persons treated at the health care center portions of the Facilities. In 2014 such reimbursement constituted approximately 35% of the Corporation's net health care revenues. Participation in such programs subjects the Corporation to control and regulation by government agencies. Reimbursement under these programs is subject to both federal and state law and regulations. Inability to comply with such laws and regulations may affect receipt of Medicare and Medicaid reimbursement and may thus adversely affect the Corporation's revenues. Failure to comply with these laws can result in regulatory action, monetary fines, loss or restriction of licensure or certification, and other remedies. There is no certainty that compliance with the laws or regulatory actions under them will not adversely affect operation of the Facilities or the financial condition of the Corporation. The health care industry in general is subject to regulation by a number of federal, state and local governmental agencies, including the Centers for Medicare and Medicaid Services. As a result, the industry is sensitive to legislative changes in such programs and is affected by reductions in governmental spending for such programs. Congress has in the past enacted a number of provisions that affect health care providers and additional legislative changes can be expected. Previous legislative actions have included limitation of payments to nursing homes under the Medicare program. Additional legislation dealing with nursing home revenues could be introduced that, if enacted, might have an adverse impact upon the revenues of the Facilities. Tax-Exempt Status The Corporation has received a letter from the Internal Revenue Service ("IRS") recognizing it as exempt from federal income taxes pursuant to Section 501(c)(3) of the Code. In order to maintain such status, the Corporation will be required to conduct its operations in a manner consistent with representations it has previously made to the IRS and with current and future IRS regulations and rulings governing tax-exempt facilities for the residence and care of the elderly. In recent years, the IRS and members of Congress have expressed concern about the need for more restrictive rules governing the tax-exempt status of 501(c)(3) organizations generally and, in particular, the acceptance of low to moderate income residents by retirement communities in order to utilize taxexempt financing. Loss of tax-exempt status would likely have a significant adverse effect on the initial Member and its operations and could result in the includability of interest on the Series 2015 Bonds in gross income for federal income tax purposes for holders of the Series 2015 Bonds retroactively to their date of issue. See "TAX MATTERS." Although the Corporation has covenanted in the Loan Agreement to take all appropriate measures to maintain its tax exempt status, compliance with current and future regulations and rulings of the IRS could adversely affect the ability of the Corporation to charge and collect revenues, finance or refinance indebtedness on a tax exempt basis or otherwise generate revenues necessary to provide for payment of the Series 2015 Bonds. Tax Consequences to Residents Section 7872 of the Code provides that, in each year of a "below market loan," the lender will be treated as receiving taxable interest income calculated at the "applicable federal rate" in each year of the loan, even if the -19-

38 obligation to pay the loan does not provide for payment of any interest. The payment to the Corporation of the Entrance Fee may be deemed to be a below market loan. If, however, the Corporation and the residents satisfy the conditions of Section 7872(h) of the Code dealing with certain payments to a "qualified continuing care facility" pursuant to a "continuing care contract," an Entrance Fee will not be treated as a "below market loan." No Treasury Regulations interpreting Section 7872(h) or the committee reports have been issued. If a resident's payment to the Corporation of an Entrance Fee does not satisfy the conditions of Section 7872(h), then the prospect of a resident having to pay taxes on amounts not actually received will increase the resident's costs and may adversely increase the time necessary to fill vacancies in the Facilities. This, in turn, could adversely affect revenues of the Corporation. Section 7872 of the Code could have an adverse effect on the Corporation's ability to maintain current reservations or to market additional units of the Facilities. Limited Assets of the Corporation; Disposition of Assets The sole business of the Corporation consists of the ownership and operation of the Facilities. Although it may seek donations from groups and individuals, the Corporation has no guaranteed sources of funds if revenues from operation of the Facilities are not sufficient to cover expenses, including debt service on the Series 2015 Obligation. Under the Master Indenture, the Obligated Group may sell, lease or dispose of its property provided the Obligated Group satisfies certain conditions. See "Sale, Lease or Other Disposition of Assets" in "THE MASTER INDENTURE" in Appendix C. Limited Value at Foreclosure The Facilities have been specifically designed and constructed as a continuing care retirement community. The number of entities that could be expected to purchase or lease the Facilities are limited, and thus the ability of the Master Trustee to realize funds from the sale or rental of the Facilities upon an event of default may be limited. Such value also may be limited by actual or alleged rights of residents. See "BONDHOLDERS' RISKS - State Regulation; Rights of Residents" above. In addition, the practical realization of value from the real property subject to the Deed of Trust upon any default will depend on the exercise of remedies specified under the Deed of Trust, principally, foreclosure. Under Virginia law, however, the remedies may not be readily available or may otherwise be limited. Other statutory provisions (such as the federal bankruptcy laws) also may have the effect of delaying enforcement of the lien and security interest under the Deed of Trust in the event of a default by the Corporation. An appraisal represents only the opinion of the appraiser and only as of its date. There may be a difference between the actual value of the Facilities and the amount of the Series 2007 Obligation and the Series 2015 Obligation, and that difference may be material and adverse to Bondholders. In particular, it cannot presently be determined with certainty what the value of the Facilities would be in the event of foreclosure under the Deed of Trust. Further, the value of the Facilities at any given time will be directly affected by market and financial conditions which are not in the control of the parties involved in the Series 2015 Bond transaction. Real property values can fluctuate substantially depending on a variety of factors. There is nothing associated with the Facilities to suggest that its value would remain stable or would not decrease if the general values of property in its local area were to decline. Appraisals are estimates of value and not an assurance of what any particular property would bring on sale. Appraisals also are subject to numerous other limitations set forth therein. Potential investors should not assume that the values described above represent reliable estimates of what the Facility would bring in liquidation following an Event of Default. Additions to the Obligated Group Upon satisfaction of certain conditions in the Master Indenture, other entities can become Members of the Obligated Group. See "Persons Becoming Members" in "THE MASTER INDENTURE" in Appendix C hereto. The Obligated Group currently has no plans to add additional Members to the Obligated Group. However, if and -20-

39 when new Members are added, the Obligated Group's financial situation and operations will likely be altered from that of the Obligated Group as currently constituted. Additional Indebtedness The Master Indenture permits any Member of the Obligated Group to incur Additional Indebtedness which may be equally and ratably secured with the Series 2015 Obligation, the Series 2007 Obligation and the 2005 Swap Obligation. Any such additional parity indebtedness would be entitled to share ratably with the holders of the Series 2015 Obligation, the Series 2007 Obligation and the 2005 Swap Obligation, as set forth in the Master Indenture, in any money realized from the exercise of remedies in the event of a default under the Master Indenture. The issuance of additional parity indebtedness could impair the ability of the Corporation to maintain its compliance with certain covenants described in "THE MASTER INDENTURE" in Appendix C hereto. There is no assurance that, despite compliance with the conditions upon which Additional Indebtedness may be incurred at the time such debt is created, the ability of the Corporation to make the necessary payments to repay the Series 2015 Obligation and the Series 2007 Obligation may not be materially adversely affected upon the incurrence of Additional Indebtedness. Sale of Homes; Economic Conditions The number of persons who can afford payment of the substantial Entrance Fees and monthly service fees may be affected by general economic conditions. It is anticipated that a substantial number of existing and potential applicants for residency at the Facilities will expect to pay the Entrance Fees from the proceeds of the sale of a residence. Nationwide there previously had been a substantial reduction in residential sales volume, a reduction in residential sales prices and residential mortgage loans generally had become less available. While housing prices and sales volume in Virginia have stabilized and shown recent improvement, if there is another reduction or stagnation in residential sales volume or if mortgage loans remain difficult to secure or if such loans are only available only at interest rates that prospective home purchasers are unwilling to pay, or should there be any material adverse conditions in the residential housing market, such applicants might be unable to sell their homes at acceptable financial terms, and in such event may choose not to establish residence at the Facilities. Nature of Income of the Elderly A large percentage of the monthly income of some residents of the Facilities is fixed income derived from pensions and social security. If, due to inflation or otherwise, substantial increases in monthly service fees are required to cover increases in operating costs, nursing care costs, wages, benefits and other expenses, residents may have difficulty paying or may be unable to pay such increased monthly service fees. Management conducts a financial analysis of each potential resident before a residency agreement is executed to determine the likely ability of the resident to meet the financial obligations to the Corporation; however, no assurance may be given that future events, including life expectancy, will not result in residents encountering difficulty in paying monthly service fees. Environmental Risks The federal Comprehensive Environmental Response, Compensation and Liability Act (the "Federal Superfund Act") provides authority to the United States Environmental Protection Agency to arrange for response actions in the event of a release or substantial threat of release of hazardous substances and also imposes liability for certain response costs and damages on the present owner (among other parties) of a site of such release or threat of release. The Federal Superfund Act provides that all costs and damages for which a person is liable to the United States will constitute a lien upon all real property belonging to such person which is subject to or affected by the response action. The federal lien is subject to the normal rules of priority. If the sites on which any of the Facilities are located were found to be environmentally contaminated such that they became "Superfund sites" under the Federal Superfund Act, the federal government could require a cleanup of such sites, and the Corporation could be required to pay all or a part of such clean-up costs, which could be substantial. If the Corporation were unable to continue operations at any Facility because of its status as a Superfund site, the value of the site at foreclosure would be reduced by the cost of any clean up. A Phase One Environmental Survey was performed on the Goodwin House Bailey's Crossroads site as of January A Phase -21-

40 One Environmental Survey is not expected to be performed on the Goodwin House Alexandria site. The Corporation has no reason to believe that the sites on which the Corporation Facilities are located have environmental problems of a material nature. There can be no assurances that the sites are free of environmental concerns. Financial Assistance The Corporation currently assists residents financially who become unable to pay monthly service and other fees of the Facilities by reason of circumstances beyond their control through loans or grants from the Goodwin House Foundation. See "FINANCIAL INFORMATION - Financial Assistance" in Appendix A hereto. The increased cost of care resulting from cost increases generally and financial assistance to a significant number of residents could adversely affect the financial condition of the Corporation. To reduce the potential financial impact on the Corporation, and to ensure the uninterrupted continuance of the health care needs of residents who may require transfers to other facilities that provide higher levels of care, residents are required to enroll in Medicare Parts A and B and maintain in effect supplemental Medicare insurance or maintain equivalent comprehensive health insurance. Insurance The Master Indenture requires the Corporation to carry certain insurance. See "Insurance" in "THE MASTER INDENTURE" in Appendix C. Uninsured claims and increases in insurance premiums could, to the extent not covered by increased revenues, adversely affect the financial condition of the Corporation. The operations of the Corporation, and thereby of the Facilities, may also be affected by increases in the incidence of professional liability lawsuits against healthcare 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. Litigation may also arise from the corporate and business activities of the Corporation, including from its status as an employer. Many of these risks would be covered by insurance, but some might not be. For example, antitrust claims, claims arising from wrongful termination, business disputes and workers' compensation may not be covered by insurance or other sources and may, in whole or in part, be a liability of the Corporation if determined or settled adversely. The Corporation believes it maintains professional liability insurance in the appropriate amount. It is not possible at this time to determine either the extent to which such insurance coverage will continue to be available to the Corporation or the premiums at which such coverage can be obtained. Market for Bonds It is the present practice of the Underwriters to make a secondary market in the bond issues that they offer. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular bond issue, these secondary marketing practices in connection with a particular bond issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially lower than the original purchase price. While there can be no guarantee or assurance that their present secondary marketing practices will always be continued, the Underwriters presently intend to make a secondary market in the Series 2015 Bonds, subject to the foregoing limitations. Nevertheless, there can be no guarantee that there will be a secondary market for the Series 2015 Bonds or, if a secondary market exists, that the Series 2015 Bonds can be sold for any particular price. Bankruptcy The filing by, or against, the Corporation or the Authority for relief under the United States Bankruptcy Code (the "Bankruptcy Code") would have an adverse effect on the ability of the Master Trustee and holders of the Series 2015 Bonds to enforce their claim or claims to the security granted by the Master Indenture, and their claim or claims to money owed them as unsecured claimants, if any. The filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Corporation or the Authority, as applicable, and their respective property and as an automatic stay of any act or proceeding to enforce a lien against -22-

41 such property. Moreover, following such a filing the revenues and accounts receivable and other property of the Corporation or the Authority, as applicable, acquired after the filing (and under some conditions prior to the filing) would not be subject to the liens and security interests created under the Master Indenture. In addition, the bankruptcy court has the power to issue any order, process or judgment that is necessary or appropriate to carry out the provisions of the Bankruptcy Code; such a court order could require that the property of the Corporation or the Authority, as applicable, including the Gross Receipts of the Corporation and proceeds thereof, to be used for the benefit of the Corporation, despite the lien and security interest of the Master Trustee and the Deed of Trust therein. The amount of the secured claim which could be filed by the Master Trustee on behalf of the holders of the Series 2015 Bonds would be limited to the value of the Facilities at the time the bankruptcy proceeding was commenced. This amount would likely be less than the principal amounts of the Series 2015 Bonds, the Series 2015 Obligation and the Series 2007 Obligation and the obligations, if any, with respect to the 2005 Swap Obligation, since the failure of the Facilities to produce sufficient revenues to pay operating expenses and debt service requirements prior to the bankruptcy would reduce the value of the Facilities. To the extent the principal amounts of the Series 2015 Obligation, the Series 2007 Obligation and the obligations, if any, with respect to the 2005 Swap Obligation, exceed the value of the Facilities, the excess would be an unsecured claim which would rank on a parity with the claims of unsecured general creditors of the Corporation. As a result, if the Facilities were sold following commencement of a bankruptcy proceeding, it is unclear how much the holders of the Series 2015 Bonds would receive. In a bankruptcy proceeding, the debtor could file a plan of reorganization which modifies the rights of creditors generally, or any class of creditors, secured or unsecured. The holders of the Series 2015 Bonds may only receive post-petition interest on the Series 2015 Bonds to the extent the value of their security exceeds their claim. The plan, when confirmed by the court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly in favor of junior creditors. More particularly, the Bankruptcy Code would permit the liquidation of the Corporation or the adoption of a reorganization plan for the Corporation or the Authority, as applicable, even though such plan had not been accepted by (i) the holders of a majority in aggregate principal amount of the Series 2015 Bonds, if the plan is "fair and equitable" and does not discriminate unfairly against the holders of the Series 2015 Bonds as a class and is in the "best interest of the creditors," which may mean that the holders of the Series 2015 Bonds are provided with the benefit of their original lien or the "indubitable equivalent;" or (ii) any holder of the Series 2015 Bonds if the holders of the Series 2015 Bonds, as a class, are deemed unimpaired under the plan. In addition, if the bankruptcy court were to conclude that the holders of the Series 2015 Bonds have "adequate protection," it may (1) substitute other security for the security subject to the lien of the Master Indenture or (2) subordinate the lien of the holders of the Series 2015 Bonds to persons who supply credit to the Corporation or the Authority, as applicable, after commencement of the case. In the event of the bankruptcy of the Corporation or the Authority, any amount realized by the Master Trustee or holders of the Series 2015 Bonds may depend on the bankruptcy court's interpretation of "indubitable equivalent" and "adequate protection" under then existing circumstances. The effect of these and other provisions of Federal bankruptcy law cannot be predicted and may be significantly affected by judicial interpretation. Any transfers made to the holders of the Series 2015 Bonds or the Master Trustee at or prior to the commencement of the case may be avoided and recaptured if such transfers are (a) avoidable by a judicial lien creditor who obtained its lien on the date the case commenced (regardless of whether such a creditor actually exists), (b) preferential or fraudulent or (c) voidable under applicable law by any actual unsecured creditor. The holders of the Series 2015 Bonds may also be subject to avoidance and recapture of postpetition transfers, turnover of property of the debtor which they, the Master Trustee or a custodian hold and assumption, assignment or rejection of executory contracts. -23-

42 Certain judicial decisions have cast doubt upon the right of a trustee, in the event of a health care facility's bankruptcy, to collect and retain for the benefit of holders of the Series 2015 Bonds portions of revenues consisting of Medicare and other governmental receivables. Limitation on Security Interest in Gross Receipts The effectiveness, priority and perfection of the security interest in the Obligated Group's Pledged Assets granted in the Master Indenture and the Deed of Trust and the ability to receive and realize on the same may be limited by a number of factors, including: (i) present or future prohibitions against assignment contained in any applicable statutes or regulations; (ii) certain judicial decisions which cast doubt upon the right of the Master Trustee, in the event of the bankruptcy of any Member of the Obligated Group, to collect and retain accounts receivable from Medicare and other governmental programs; (iii) commingling of the proceeds of Pledged Assets with other money of a Member of the Obligated Group not subject to the security interest in Pledged Assets; (iv) statutory liens; (v) rights arising in favor of the United States of America 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 enforceability of the mortgage or the security interest in the Pledged Assets of the Obligated Group which are earned by the Obligated Group within 90 days preceding or, in certain circumstances with respect to related corporations, within one year preceding and after any effectual institution of bankruptcy proceedings by or against a Member of the Obligated Group; (viii) rights of third parties in Pledged Assets converted to cash and not in the possession of the Master Trustee; (ix) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Virginia Uniform Commercial Code as from time to time in effect; and (x) rights of residents of the Facilities pursuant to residency agreements. Pursuant to the Master Indenture, each Member of the Obligated Group that pledges its Pledged Assets under the Master Indenture covenants and agrees that, if an Event of Default involving a failure to pay any installment of interest or principal on an Obligation should occur and be continuing, it will deposit the proceeds of its Pledged Assets with the Master Trustee. Such deposits will continue daily until such default is cured. It is unclear whether the covenant to deposit the proceeds of Pledged Assets with the Master Trustee is enforceable. In light of the foregoing and of questions as to limitations on the effectiveness of the security interest granted in such Pledged Assets, as described above, no opinion will be expressed by counsel to the Obligated Group as to enforceability of such covenant with respect to the required deposits. In addition, accounts receivable of the Members of the Obligated Group which constitute Pledged Assets and are pledged as security under the Master Indenture may be sold if such sale is in accordance with the provisions of the Master Indenture. Any lien created under the Master Indenture would terminate and be immediately released upon any such sale with respect to any such accounts receivable so sold. Limitations on Enforceability of Remedies The realization of any rights upon a default will depend upon the exercise of various remedies specified in the Trust Indenture, the Master Indenture, the Loan Agreement and the Deed of Trust. Any attempt by the Bond Trustee or Master Trustee to enforce such remedies may require judicial action, which is often subject to discretion and delay. Under existing law, certain of the legal and equitable remedies specified in the Trust Indenture, the Master Indenture, the Loan Agreement and the Deed of Trust may not be readily available. Any default in the performance of most of the covenants set forth in the Trust Indenture, the Master Indenture, the Loan Agreement or the Deed of Trust would constitute an Event of Default only following notice and lapse of time, as further described in Appendix C hereto. The Master Trustee may give such notice of a default under the Master Indenture at any time in its discretion, but is not required to give such notice without the request of the holders of at least 25% in aggregate principal amount of the Obligations outstanding under the Master Indenture. Events of Default specified by the Master Indenture are remediable through enforcement action taken by the Master Trustee in its discretion or at the request of the holders of not less than 25% in aggregate principal amount of the Obligations outstanding under the Master Indenture, subject to the right of the holders of a majority in aggregate principal amount of Obligations then outstanding to direct all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture or any other proceedings thereunder. -24-

43 Upon issuance of the Series 2015 Obligation, the Series 2015 Obligation will constitute approximately 33.5% and the Series 2007 Obligation will constitute approximately 66.5% of all Obligations outstanding under the Master Indenture. The holder of the 2005 Swap Obligation does not have any voting rights or rights to enforce any remedies under the Master Indenture. The Master Indenture permits the issuance of Additional Obligations under the circumstances specified therein, so the proportion of the principal amount of the Series 2015 Obligation to the principal amount of all Obligations at any time outstanding under the Master Indenture is subject to change. Upon an acceleration of the Series 2015 Obligation, after paying the expenses and other amounts due the Trustee, amounts available to pay all outstanding Bonds will be prorated among all holders of Obligations without preference or priority of principal or premium over interest or of interest over principal or premium, or of any Obligation over any other Obligation. Federal Tax Matters Possible Changes in the Corporation's Tax Status. The possible modification or repeal of certain existing federal income or state tax laws or other loss by the Corporation of the present advantages of certain provisions of the federal income or state tax laws could materially and adversely affect the status of the Corporation and thereby the revenues of the Corporation. The Corporation has obtained a determination letter from the Internal Revenue Service to the effect that the Corporation is exempt from federal income taxation under Section 501(a) of the Code by virtue of being an organization described in Section 501(c)(3) of the Code. As an exempt organization, the Corporation is subject to a number of requirements affecting its operation. The failure of the Corporation to remain qualified as an exempt organization would affect the funds available to the Corporation for payments to be made under the Loan Agreement. Failure of the Corporation 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 refinanced with Series 2015 Bond proceeds, could cause interest on the Series 2015 Bonds to be included in the gross income of holders of Series 2015 Bonds or former holders of Series 2015 Bonds for federal income tax purposes. It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of charitable organizations. 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 Corporation by requiring it to pay income taxes. Intermediate Sanctions. Section 4958 of the Code, provides the IRS with an "intermediate" tax enforcement tool to combat violations by tax-exempt organizations of the private inurement prohibition of the Code. Previous to the "intermediate sanctions law," the IRS could punish such violations only through revocation of an entity's tax-exempt status. Intermediate sanctions may be imposed where there is an "excess benefit transaction," defined to include a disqualified person (i.e., a director, officer or other related party) (1) engaging in a non-fair market value transaction with the tax-exempt organization; (2) receiving excessive compensation from the taxexempt organization; or (3) receiving payment in an arrangement that violates the private inurement proscription. A disqualified person who benefits from an excess benefit transaction will be subject to a "first tier" penalty excise tax equal to 25% of the amount of the excess benefit. Organizational managers who participate in an excess benefit transaction knowing it to be improper are subject to a first-tier penalty excise tax of 10% of the amount of the excess benefit, subject to a maximum penalty of $10,000. A "second tier" penalty excise tax of 200% of the amount of the excess benefit may be imposed on the disqualified person (but not the organizational manager) if the excess benefit transaction is not corrected in a specified time period. Bond Audit. IRS officials have stated that more resources will be allocated to audits of tax-exempt bonds in the charitable organization sector. The Series 2015 Bonds may be subject to audit, from time to time, by the IRS. The Corporation believes that the Series 2015 Bonds properly comply with applicable tax laws and regulations. In addition, Bond Counsel will render an opinion with respect to the tax-exempt status of the Series 2015 Bonds, as described under the heading "TAX MATTERS" below. No ruling with respect to the tax-exempt status of the Series 2015 Bonds has been or will be sought from the IRS and opinions of counsel are not binding on the IRS or the courts, and are not guarantees. There can be no assurance, therefore, that an audit of the Series 2015 Bonds will not adversely affect the Series 2015 Bonds. -25-

44 Other Tax Status Issues. The IRS has also 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 under Section 501(c)(3). Revenue Rulings and hold that, if otherwise qualified, a facility providing residential services to the elderly is exempt under Section 501(c)(3) if the organization (1) is dedicated to providing, and in fact provides or otherwise makes available services for, care and housing to aged individuals who otherwise would be unable to provide for themselves without hardship, (2) to the extent of its financial ability, renders services to all or a reasonable proportion of its residents at substantially below actual cost, and (3) renders services that minister to the needs of the elderly and relieve hardship or distress. Revenue Ruling 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 is committed by established policy to maintaining persons as residents, even if they become unable to pay the monthly charges after being admitted to the facility. Other Risk Factors Various other risk factors, such as fluctuations in interest rates and changes in tax laws affecting the Corporation's cost of capital, and the inability to obtain necessary COPNs for expansions of the health center, could also affect the future financial strength or operational efficiency of the Corporation, and therefore its ability to make required payments of principal and interest on the Series 2015 Obligation. A significant portion of the Corporation's budget relates to fixed expenses, which cannot be easily reduced or eliminated. The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Corporation: (1) Reinstatement or establishment of mandatory governmental wage, rent or price controls; (2) Inability to control increases in operating costs, including salaries, wages and fringe benefits, supplies and other expenses, given an inability to obtain corresponding increases in revenues from residents whose incomes will largely be fixed; (3) Adoption of other federal, state or local legislation or regulations having an adverse effect on the future operating or financial performance of the Corporation; (4) The cost and availability of energy; (5) Any increase in the quantity of indigent care provided which is mandated by law or required due to increased needs of the Facilities in order to maintain the charitable status of the Corporation; (6) Inflation or other adverse economic conditions; (7) Changes in tax, pension, social security or other laws and regulations affecting the provisions of health care and other services to the elderly; (8) The occurrence of natural disasters, including hurricanes, volcanic eruptions and typhoons, floods or earthquakes, which may damage the facilities of the Corporation, interrupt utility service to the facilities, or otherwise impair the operation and generation of revenues from said facilities; or (9) Cost and availability of any insurance, such as malpractice, fire, automobile and general comprehensive liability, that organizations such as the Corporation generally carry. TAX MATTERS In the opinion of Christian & Barton, L.L.P., Bond Counsel, under existing law: (i) interest on the Series 2015 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and is not an item of tax preference for purposes of the federal -26-

45 alternative minimum tax imposed on individuals and corporations, and (ii) income, including any profit made on the sale thereof, shall at all times be exempt from all taxation by the Commonwealth of Virginia and any political subdivision thereof. Bond Counsel expresses no opinion as to any other tax consequences regarding the Series 2015 Bonds. The opinion on tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the Authority and the Corporation contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Series 2015 Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel has not given any opinion or assurance concerning Section 513(a) of the Code or the effect of any future activities of the Authority or the Corporation. Failure of the Corporation to maintain its status as an organization described in Section 501(c)(3) of the Code, or to operate the facilities financed by the Series 2015 Bonds in a manner that is substantially related to the Corporation's exempt purpose under Section 513(a) of the Code, may cause interest on the Series 2015 Bonds to be included in gross income retroactively to the date of the issuance of the Series 2015 Bonds. Bond Counsel will not independently verify the accuracy of the Authority's and the Corporation's certifications and representations or the continuing compliance with the Authority's and the Corporation's covenants. The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly addressed by such authority. It represents Bond Counsel's legal judgment as to exclusion of interest on the Series 2015 Bonds from gross income for federal income tax purposes but is not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service ("IRS") or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in the Code and the applicable regulations under the Code, or (ii) the interpretation and the enforcement of the Code or those regulations by the IRS. The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations. Noncompliance with these requirements by the Authority or the Corporation may cause loss of such status and result in the interest on the Series 2015 Bonds being included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2015 Bonds. The Corporation and, subject to certain limitations, the Authority have each covenanted to take the actions required of it for the interest on the Series 2015 Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. After the date of issuance of the Series 2015 Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel's attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2015 Bonds or the market value of the Series 2015 Bonds. A portion of the interest on the Series 2015 Bonds earned by certain corporations may be subject to a federal corporate alternative minimum tax. In addition, interest on the Series 2015 Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Series 2015 Bonds. Bond Counsel will express no opinion regarding those consequences. Payments of interest on tax-exempt obligations, including the Series 2015 Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If a Series 2015 Bond owner is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes. -27-

46 Bond Counsel's engagement with respect to the Series 2015 Bonds ends with the issuance of the Series 2015 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, the Corporation or the owners of the Series 2015 Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Series 2015 Bonds, under current IRS procedures, the IRS will treat the Authority as the taxpayer and the beneficial owners of the Series 2015 Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Series 2015 Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market value of the Series 2015 Bonds. Prospective purchasers of the Series 2015 Bonds upon their original issuance at prices other than the respective prices indicated on the cover of this Official Statement, and prospective purchasers of the Series 2015 Bonds at other than their original issuance, should consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion. Risk of Future Legislative Changes and/or Court Decisions Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the State legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Series 2015 Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Series 2015 Bonds will not have an adverse effect on the tax status of interest or other income on the Series 2015 Bonds or the market value or marketability of the Series 2015 Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Series 2015 Bonds from gross income for federal or state income tax purposes for all or certain taxpayers. For example, recent presidential and legislative proposals would eliminate, reduce or otherwise alter the tax benefits currently provided to certain owners of state and local government bonds, including proposals that would result in additional federal income tax on taxpayers that own tax-exempt obligations if their incomes exceed certain thresholds. Investors in the Series 2015 Bonds should be aware that any such future legislative actions (including federal income tax reform) may retroactively change the treatment of all or a portion of the interest on the Series 2015 Bonds for federal income tax purposes for all or certain taxpayers. In such event, the market value of the Series 2015 Bonds may be adversely affected and the ability of holders to sell their Series 2015 Bonds in the secondary market may be reduced. Investors should consult their own financial and tax advisers to analyze the importance of these risks. Original Issue Premium Any maturities of the Series 2015 Bonds that may be sold at an initial offering price which exceeds the stated redemption price payable at maturity (the "Premium Bonds") will be considered for federal income tax purposes to have original issue premium equal to such excess. The federal tax basis of the initial purchaser of such Premium Bonds is reduced by the amount of the excess that is amortized during the period such initial owner holds such bond in determining gain or loss for federal income tax purposes. Such reduction in basis will increase the amount of any gain or decrease the amount of any loss recognized for federal income tax purposes on the sale or other taxable disposition of such bond by the initial owner. The initial purchaser of such Premium Bonds must amortize any premium over the term of the Premium Bond using constant yield principles, based on the initial offering price of such Premium Bond. Original Issue Discount Various maturities of the Series 2015 Bonds ("Discount Bonds"), as indicated on the inside front cover of this Official Statement, were offered and sold to the public at an original issue discount ("OID"). OID is the excess of the stated redemption price at maturity (the principal amount) over the "issue price" of a Discount Bond. The -28-

47 issue price of a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of the same maturity is sold pursuant to that offering. For federal income tax purposes, OID accrues to the owner of a Discount Bond over the period to maturity based on the constant yield method, compounded semiannually (or over a shorter permitted compounding interval selected by the owner). The portion of OID that accrues during the period of ownership of a Discount Bond (i) is interest excluded from the owner's gross income for federal income tax purposes to the same extent, and subject to the same considerations discussed above, as other interest on the Series 2015 Bonds, and (ii) is added to the owner's tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale or other disposition of that Discount Bond. The amount of OID that accrues each year to a corporate owner of a Discount Bond is taken into account in computing the corporation's liability for federal alternative minimum tax. A purchaser of a Discount Bond in the initial public offering at the price for that Discount Bond stated on the cover of this Official Statement who holds that Discount Bond to maturity will realize no gain or loss upon the retirement of that Discount Bond. Owners of Discount Bonds should consult their own tax advisers as to the determination for federal income tax purposes of the amount of OID properly accruable or amortizable in any period with respect to the Discount Bonds and as to other federal tax consequences and the treatment of OID for purposes of state and local taxes on, or based on, income. LEGALITY Certain legal matters relating to the authorization, issuance and sale of the Series 2015 Bonds are subject to the approving opinion of Christian & Barton, L.L.P., Richmond, Virginia, Bond Counsel. Such opinion will be available at the time of delivery of the Series 2015 Bonds. Bond Counsel's opinion will be limited to matters relating to the authorization and validity of the Series 2015 Bonds and to the exemption of interest on the Series 2015 Bonds under present federal and Virginia income tax laws and will make no statement as to the ability of the Corporation or the Authority to provide for payment of the Series 2015 Bonds. Certain legal matters will be passed upon for the Authority by its counsel, McGuireWoods LLP; for the Corporation by its special counsel, Christian & Barton, L.L.P.; and for the Underwriters by their counsel, McGuireWoods LLP. UNDERWRITING B. C. Ziegler and Company, on behalf of itself and Davenport & Company, LLC (the "Underwriters"), has entered into a Bond Purchase Agreement to purchase the Series 2015 Bonds at the purchase price of $72,078, (representing the principal amount of the Series 2015 Bonds less an Underwriter's discount of $756, (approximately 1.10% of the original aggregate principal amount of the Series 2015 Bonds) and plus a net original issue premium of $4,020,085.95). The obligation of the Underwriters to pay for the Series 2015 Bonds is subject to certain terms and conditions set forth in the Bond Purchase Agreement, including delivery of specified opinions of counsel and of a certificate of the Corporation that there has been no material adverse change in its condition (financial or otherwise) from that set forth in this Official Statement. The Corporation has agreed in the Bond Purchase Agreement to indemnify the Underwriters and the Authority against certain liabilities relating to this Official Statement. The Underwriters may offer and sell Series 2015 Bonds to certain dealers (including dealer banks and dealers depositing Series 2015 Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of this Official Statement. Such initial public offering prices may be changed from time to time by the Underwriters. INDEPENDENT ACCOUNTANTS The consolidated financial statements of the Corporation and its affiliates as of and for the fiscal years ended September 30, 2014 and September 30, 2013, and the consolidated financial statements of the Corporation and its affiliates as of and for the fiscal years ended September 30, 2013 and September 30, 2012, attached as Appendix B, have been audited by CliftonLarsonAllen LLP, independent accountants, as stated in their report -29-

48 appearing therein. The unaudited interim consolidated financial statements for the Corporation, as of and for the five-month periods ended February 28, 2014 and February 28, 2015, included in this Official Statement in Appendix A, have been prepared by the Corporation and have not been reviewed or audited by any independent third party, including CliftonLarsonAllen LLP. The financial information contained in Appendix A was internally prepared by management of the Corporation in accordance with U.S. generally accepted accounting principles. RATING The Series 2015 Bonds have been rated "BBB" by Fitch Ratings ("Fitch"). This rating reflects only the view of such rating agency and an explanation of the significance of such rating may be obtained from such rating agency. There is no assurance that such rating will be maintained for any given period of time or that such rating will not be revised downward, suspended or withdrawn entirely by Fitch, if in its sole judgment, circumstances so warrant. Any such downward revision, suspension or withdrawal of such rating may have an adverse effect on the market price of the Series 2015 Bonds. RELATIONSHIP OF PARTIES Christian & Barton, L.L.P., bond counsel for the Series 2015 Bonds, also serves as special counsel to the Corporation in connection with the issuance and sale of the Series 2015 Bonds and in unrelated matters. Christian & Barton, L.L.P, also regularly serves as counsel to U.S. Bank National Association, the Bond Trustee and the Master Trustee, in unrelated matters. McGuireWoods LLP, counsel to the Underwriters, also serves as counsel to the Authority in connection with the issuance and sale of the Series 2015 Bonds and in unrelated matters. McGuireWoods LLP, counsel to the Underwriters, regularly serve from time to time as counsel to the Corporation and U.S. Bank National Association, the Bond Trustee and Master Trustee for the Series 2015 Bonds, in unrelated matters. The Authority LITIGATION There is currently no litigation of any nature to which the Authority is a party pending or, to the knowledge of the Authority, threatened against it to restrain or enjoin the issuance, sale, execution or delivery of the Series 2015 Bonds or in any way contesting or affecting the validity of the Series 2015 Bonds or any proceedings taken with respect to the issuance or sale thereof, or in any way contesting or affecting the validity of or application of any moneys or the security provided for the Series 2015 Bonds or the existence or powers of the Authority in connection with the issuance, sale, execution or delivery of the Series 2015 Bonds; provided, however, that the foregoing does not include any litigation that may have been filed against but not served on the Authority and of which it has no knowledge. The Corporation According to the Corporation, there is currently no material litigation of any nature to which the Corporation is a party pending or, to the knowledge of the Corporation, threatened against it. FINANCING DOCUMENTS AND SELECTED COVENANTS The Trust Agreement, the Master Indenture and the Loan Agreement (the "Financing Documents") contain certain covenants of the Obligated Group with respect to maintenance of the Facilities, including the Project, incurrence of additional debt, disposition of assets, use of bond proceeds, maintenance of the Members of the Obligated Group's existence as tax-exempt, nonprofit corporations and information reporting as described more fully in the sections "THE TRUST INDENTURE," "THE MASTER INDENTURE" and "THE LOAN AGREEMENT' in Appendix C hereto. Certain of the provisions described below apply only so long as the Series 2015 Obligation or any of the Series 2015 Bonds are outstanding. Below is a summary of selected covenants contained in the Financing Documents, which do not purport to be complete, and reference is made to the respective documents, copies of which are on file with the Bond Trustee, for a complete statement of the rights duties and -30-

49 obligations of the parties thereto. All capitalized terms not otherwise defined herein shall have the meanings set forth in "DEFINITIONS OF CERTAIN TERMS" in Appendix C hereto. Rate Covenant* (a) The Corporation has covenanted to operate its Facilities on a revenue-producing basis, charge such fees and rates for its Facilities and services and exercise such skill and diligence, including obtaining payment for services provided, as to provide income from its Property together with other available funds sufficient to promptly pay all amounts of principal and interest due on Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it hereunder, to the extent permitted by law. The Corporation will from time to time, as often as necessary and to the extent permitted by law, revise its rates, fees and charges in such manner as may be necessary or proper to comply with this covenant. (b) The Corporation will calculate, or cause the calculation of, the Historical Debt Service Coverage Ratio of the Obligated Group for each Fiscal Year. (c) If the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.20:1, the Obligated Group shall, at the Obligated Group's expense and within 30 days of the calculation of Historical Debt Service Coverage Ratio, retain a Consultant to make written recommendations to increase the Obligated Group's Historical Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year. (d) The Obligated Group will file with the Bond Trustee and the Master Trustee a copy of any Consultant's report and recommendations prepared in accordance with the provisions of this covenant. Each Member will follow each recommendation of the Consultant applicable to it to the extent Legal and Feasible. This covenant will not be construed to prohibit any Member from serving indigent patients to the extent required for such Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the other requirements of this covenant. (e) The foregoing provisions notwithstanding, if the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.20:1, the Obligated Group will not be required to retain a Consultant to make recommendations pursuant to subsection (c) above if: (1) there is filed with the Bond Trustee and the Master Trustee a written report of a Consultant (which Consultant and report, including without limitation the scope, form, substance and other aspects of such report, are reasonably acceptable to the Bond Trustee and the Master Trustee) that contains an opinion of such Consultant that applicable laws or regulations have prevented the Obligated Group from generating Income Available for Debt Service during such Fiscal Year sufficient to meet the requirements of this section, and, if requested by the Bond Trustee and the Master Trustee, a concurring Opinion of Counsel (which Counsel and Opinion of Counsel, including without limitation the scope, form, substance and other aspects thereof, are reasonably acceptable to the Bond Trustee and the Master Trustee) as to any conclusions of law supporting the opinion of such Consultant; (2) the report of such Consultant indicates that the rates charged by the Obligated Group are such that, in the opinion of the Consultant, the Obligated Group has generated the maximum amount of Revenues reasonably practicable given such laws or regulations; and (3) the Historical Debt Service Coverage Ratio of the Obligated Group for such Fiscal Year was at least 1.00:1. The Obligated Group will not be required to cause the Consultant's report referred to in the preceding sentence to be prepared more frequently than once every two Fiscal Years if the Obligated Group provides to the Bond Trustee and the Master Trustee, at the end of each Fiscal Year for which such Consultant's report is not required, an Opinion of Counsel (which Counsel and Opinion of Counsel, including without limitation the scope, form, substance and other aspects thereof, are reasonably acceptable to the Bond Trustee and the Master Trustee) to the effect that the applicable laws and regulations underlying the Consultant's report delivered in respect of the previous Fiscal Year have not changed in any material way. * As described in "Historical Debt Service Coverage Ratio" in "THE MASTER INDENTURE" in Appendix C, the consequences set forth in the Master Indenture of the Obligated Group not achieving a Historical Debt Service Coverage Ratio of at least 1.00:1 differ from the consequences set forth in the Loan Agreement as described in this section. -31-

50 (f) Failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of 1.20:1 for any Fiscal Year shall not constitute an Event of Default under the Loan Agreement if the Obligated Group complies with the provisions above and follows the recommendations made by any Consultant retained pursuant to this section to the extent Legal and Feasible; provided however, (1) the failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of at least 1.00:1 for any Fiscal Year shall constitute an Event of Default under the Loan Agreement if the Days' Cash on Hand of the Obligated Group as of the last day of such Fiscal Year was less than 225, and (2) the failure of the Obligated Group to achieve a Historical Debt Service Coverage Ratio of at least 1:00:1 for any two consecutive Fiscal Years shall constitute an Event of Default under the Loan Agreement. (g) In the event that any Member of the Obligated Group incurs any Additional Indebtedness for any acquisition, construction, renovation or replacement project pursuant to any other provision of the Master Indenture, the Debt Service Requirements on such Additional Indebtedness and the Revenues and Expenses relating to the project or projects financed with the proceeds of such Additional Indebtedness will be excluded from the calculation of the Historical Debt Service Coverage Ratio of the Obligated Group for the purposes of complying with this section, until the first full Fiscal Year following the latest of (1) the estimated completion date of the acquisition, construction, renovation or replacement project being paid for with the proceeds of such Additional Indebtedness, provided that such completion occurs no later than six months following the completion date for such project set forth in the Consultant's report described in paragraph (3)(A) below; (2) the first full year in which Stable Occupancy is achieved in the case of construction, renovation or replacement of elderly housing Facilities financed with the proceeds of such Additional Indebtedness, which Stable Occupancy will be projected in the report of the Consultant referred to in paragraph (3)(A) below to occur no later than during the fourth full Fiscal Year following the incurrence of such Additional Indebtedness, and (3) the end of the fourth full Fiscal Year after the incurrence of such Additional Indebtedness, if the following conditions are met: (A) there is delivered to the Bond Trustee and the Master Trustee a report or opinion of a Consultant to the effect that the Projected Debt Service Coverage Ratio for each of the first two full Fiscal Years following the later of (i) the estimated completion of the acquisition, construction, renovation or replacement being paid for with the proceeds of such Additional Indebtedness, and (ii) the first full Fiscal Year following the year in which Stable Occupancy is achieved in the case of construction, renovation or replacement of elderly housing Facilities being financed with the proceeds of such Additional Indebtedness, which Stable Occupancy will be projected to occur no later than during the fourth full Fiscal Year following the incurrence of such Additional Indebtedness, will be not less than 1.20:1 after giving effect to the incurrence of such Additional Indebtedness and the application of the proceeds thereof; provided, however, that in the event that a Consultant will deliver a report to the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for Members to produce the required ratio, then such ratio will be reduced to the highest practicable ratio then permitted by such laws or regulations but in no event less than 1.00:1; provided, however, that in the event a Consultant's report is not required to incur such Additional Indebtedness, the Obligated Group may deliver an Officer's Certificate to the Bond Trustee and the Master Trustee in lieu of the Consultant's report described in this subparagraph; and (B) there is delivered to the Bond Trustee and the Master Trustee an Officer's Certificate on the date on which Financial Statements are required to be delivered to the Bond Trustee and the Master Trustee pursuant to the Master Indenture until the first Fiscal Year in which the exclusion from the calculation of the Historical Debt Service Coverage Ratio no longer applies, calculating the Historical Debt Service Coverage Ratio of the Obligated Group at the end of each Fiscal Year, and demonstrating that such Historical Debt Service Coverage Ratio is not less than 1.00:1, such Historical Debt Service Coverage Ratio to be computed without taking into account (i) the Additional Indebtedness to be incurred if (x) the interest on such Additional Indebtedness during such period is funded from proceeds thereof or other funds of the Member then on hand and available therefor and (y) no principal of such Additional Indebtedness is payable during such period, and (ii) the Revenues to be derived from the project to be financed from the proceeds of such Additional Indebtedness. So long as the Corporation is the sole member of the Obligated Group, the foregoing provisions of this section concerning the "Obligated Group" and each "Member" will be deemed to mean the Corporation. If one or -32-

51 more additional entities becomes a Member of the Obligated Group, the Corporation covenants to cause each to agree to comply with the provisions of this section pertaining to the Obligated Group and each Member. Liquidity Covenant In the Master Indenture, the Obligated Group has covenanted to calculate the Days' Cash on Hand of the Obligated Group as of September 30 and March 31 of each Fiscal Year (each, a "Testing Date"). Each Obligated Group Member shall conduct its business so that on each Testing Date the Obligated Group shall have no less than 225 Days' Cash on Hand. If the Days' Cash on Hand on any Testing Date shall be less than 225, the Group Representative shall, within 30 days of the calculation of Days' Cash on Hand for such Testing Date, deliver an Officer's Certificate to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth the Obligated Group's plans to achieve 225 Days' Cash on Hand on the next succeeding Testing Date. If the Obligated Group does not have 225 Days' Cash on Hand on the Testing Date following delivery to the Master Trustee of the Officer's Certificate required to be delivered as described above, the Group Representative shall, within 30 days of the discovery of the second such deficiency, retain a Consultant to make written recommendations to increase the Obligated Group's Days' Cash on Hand to 225 on the next Testing Date. The Group Representative shall cause a copy of the Consultant's report and recommendations to be filed with the Master Trustee in accordance with the provisions of the Master Indenture. Each Member of the Obligated Group shall follow each recommendation of the Consultant applicable to it to the extent Legal and Feasible. Failure of the Obligated Group to have 225 Days' Cash on Hand on any Testing Date shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action required pursuant to this section and follows each recommendation contained in any Consultant's report to the extent Legal and Feasible. Notice of Engagement of Consultant The Series 2015 Supplement provides that for so long as Obligation No. 6 is outstanding, if at any time the Obligated Group is required to engage a Consultant under the provisions described above relating to "FINANCING DOCUMENTS AND SELECTED COVENANTS - Rate Covenant" or "- Liquidity Covenant" or respecting the incurrence of Indebtedness (as described under "Limitations on Indebtedness" in "THE MASTER INDENTURE" in Appendix C) the following provisions shall apply: (a) Upon selecting a Consultant as required under the provisions of the Master Indenture, the Group Representative will notify the Master Trustee of such selection, in writing, and such notice shall state the reason why the Consultant is being engaged, including a description of the covenant(s) of the Master Indenture that require such engagement. The Master Trustee shall, as soon as practicable but in no case longer than three Business Days after receipt of notice, notify the holders of all Obligations Outstanding under the Master Indenture of such selection. Such notice shall be given in writing and in accordance with the provisions of the Master Indenture and shall (i) include the name of the Consultant, (ii) state the reason that the Consultant is being engaged, including a description of the covenant(s) of the Master Indenture that require the Consultant to be engaged, and (iii) state that any Holder of an Obligation Outstanding under the Master Indenture may submit to the Master Trustee written objections or comments with respect to selection of the selected Consultant within five (5) Business Days following the date on which notice of the selection of the Consultant is sent to the Holders. No later than three Business Days after the end of the five (5) Business Day comment period, the Master Trustee shall convey all written objections and comments received to the Group Representative. The Obligated Group agrees to consider all such objections and comments in good faith, but no Holder or Holders shall have any right or power to veto the selection of any Consultant. (b) When the Master Trustee notifies the Holders of Obligations of the selection of a Consultant in accordance with (a) above, the Master Trustee will also request that any Related Bond Trustee send a notice containing the information required by (a) above to the owners of all of the Related Bonds then outstanding, advising such owners that they may submit written objections or comments upon the selection of the Consultant to -33-

52 the Related Bond Trustee or directly to the Master Trustee, specifying the address or addresses where such objections or comments shall be sent. Any written objections or comments received by the Related Bond Trustee or the Master Trustee from owners of Related Bonds shall be forwarded to the Group Representative promptly. The Obligated Group agrees to consider all such objections and comments in good faith, but no owner or owners of Related Bonds shall have any right or power to veto the selection of any Consultant. The five (5) Business Day notice period described in (a) above may be extended by the Master Trustee in order to permit each Related Bond Trustee to give the owners of the Related Bonds five (5) Business Days in which to respond to the notice given by the Related Bond Trustee. Notwithstanding the foregoing, the Corporation shall have the right to engage any Consultant within the time constraints applicable thereto contained in the Master Indenture. Financial Reporting FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE In the Master Indenture, each Member has covenanted to cause certain financial reports to be delivered to the Master Trustee, which is summarized in "THE MASTER INDENTURE" in Appendix C. Continuing Disclosure Requirements of Rule 15c2-12. The Corporation has undertaken in the Loan Agreement to cause the Obligated Group to comply with the provisions of Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission (the "SEC"), by providing, or causing its dissemination agent if any to provide, certain annual financial information and operating data and material event notices required by the Rule. Such annual information is to be filed with the Municipal Securities Rulemaking Board (the "MSRB") within 120 days after the end of the Corporation's Fiscal Year. The Corporation has covenanted to cause the Obligated Group to provide annually audited financial statements and certain other annual financial information. The Rule requires that the information to be filed with the MSRB as described below is to be filed in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB. An MSRB rule change approved by the SEC established the MSRB's Electronic Municipal Market Access System ("EMMA") for the receipt of, and for making available to the public, continuing disclosure documents and related information to be submitted pursuant to continuing disclosure undertakings entered into on or after July 1, 2009, consistent with the Rule. In general, all continuing disclosure documents and related information are to be submitted to the MSRB's continuing disclosure service through EMMA, accompanied by certain identification information, in portable document format (PDF) files configured to permit the documents to be saved, viewed, printed and retransmitted by electronic means and must be word-searchable. No financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Series 2015 Bonds and the Authority will not provide any such information. The Corporation has undertaken all responsibilities for any continuing disclosure to holders of the Series 2015 Bonds as described below and the Authority shall have no liability to the holders of the Series 2015 Bonds or any other person with respect to such disclosures. Prior Compliance. The Corporation has complied in all material respects with its prior continuing disclosure undertakings during the previous five years. Continuing Disclosure for Series 2015 Bonds. The Corporation has covenanted to cause the Obligated Group to provide, within 120 days after the end of its Fiscal Year, to the MSRB certain annual financial and operational information (the "Annual Disclosure"): -34-

53 (a) the financial information with respect to the Obligated Group, which shall be based on financial statements prepared in accordance with generally accepted accounting principles; (b) to the extent such items are not included in the financial information referred to in (a) above, the financial or operating statistical information for the Facilities of the type (and for the number of years) described in the table under the subsection entitled "Occupancy and Waiting List" in "THE GOODWIN HOUSE COMMUNITIES," in the table entitled "Health Center Payor Mix" in the subsections entitled "Sources of Revenue" in " THE GOODWIN HOUSE COMMUNITIES," and in the tables in the subsection entitled "Summary Statements of Operations," "Historical Long-Term Debt Service Coverage," and "Summary of Cash Position" each in "FINANCIAL INFORMATION" and (ii) a brief narrative for the preceding fiscal year similar to that narrative shown in "Management's Discussion of Financial Performance" in "FINANCIAL INFORMATION," all shown in Appendix A. The Corporation has covenanted to file with the MSRB in a timely manner not in excess of ten business days after the occurrence of the event, notice (the "Material Event Notices") of the occurrence of any of the following events with respect to the Series 2015 Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on any credit enhancement reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2015 Bonds, or other material events affecting the tax status of the Series 2015 Bonds; (7) modifications to rights of Bondholders, if material; (8) bond calls, if material, and tender officers; (9) defeasance of all or any portion of the Series 2015 Bonds; (10) release, substitution or sale of property securing repayment of the Series 2015 Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Corporation; For the purposes of the event identified in (12), above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Corporation in a proceeding under the Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Corporation, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Corporation. -35-

54 (13) the consummation of a merger, consolidation, or acquisition involving the Corporation or the sale of all or substantially all of the assets of the Corporation, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. The Corporation may modify its obligations set forth above, without the consent of bondholders or the Authority, provided that such modification complies with the Rule as it exists at the time of modification. If an amendment is made, the annual financial information containing the amended operating data or financial information will explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided and will contain such other explanation with respect to the amendment as may be required by the Rule. The Corporation shall promptly provide or cause to be provided notice of any such modification to the Authority, the Bond Trustee and the MSRB. The Loan Agreement provides holders of the Series 2015 Bonds with certain enforcement rights in the event of a failure by the Corporation to comply with the terms thereof; however, a failure to comply with the Corporation's continuing disclosure undertaking does not constitute a default under the Trust Indenture, the Loan Agreement, the Series 2015 Obligation, or the Master Indenture. The Corporation may from time to time disclose certain information and data in addition to the Annual Disclosure without creating any obligation to continue to provide, or update, such additional information or data. Limited Obligations. The Obligated Group is obligated to provide only limited information at specific times, and such information may not include all information necessary to determine the value of the Series 2015 Bonds. The Obligated Group may, from time to time, disclose certain information and data in addition to that required, but assumes no obligation to continue to provide, or update, such additional information or data, except as described in "FINANCIAL REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE - Additional Disclosure" below. Additional Disclosure General. In addition to the continuing disclosure undertaking described above, the Corporation shall also provide the following to the MSRB: (a) Quarterly reports of the Obligated Group, as soon as practicable, but in no event more than 45 days after the completion of each Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2015, and, unless otherwise provided, which reports shall include the following: (1) quarterly unaudited financial statements of the Obligated Group, including a combined or combining statement of revenues and expenses (including a comparison to the annual budget) and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such Fiscal Quarter, including management discussion and analysis; (2) a calculation of the Historical Debt Service Coverage Ratio and Days Cash on Hand of the Obligated Group for such Fiscal Quarter on a rolling four-quarter basis (calculation of the Historical Debt Service Coverage Ratio and Days' Cash on Hand on a date that is not otherwise a testing date as described under "FINANCING DOCUMENTS AND SELECTED COVENANTS - Rate Covenant" or "- Liquidity Covenant" will be for informational purposes only); (3) the financial or operating statistical information for the Obligated Group for such Fiscal Quarter of the type described in (i) the table under the subsection entitled "Occupancy and Waiting List," and (ii) the -36-

55 table entitled "Health Center Payor Mix" in the subsection entitled "Sources of Revenue" in "THE GOODWIN HOUSE COMMUNITIES," all as shown in Appendix A; and (4) an Officer's Certificate stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or if not, specifying all such defaults or noncompliance and the nature thereof. (b) If the Historical Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.00:1 and the Days' Cash on Hand of the Obligated Group on any Testing Date is less than 225, monthly reports, which reports shall include the financial information and the calculations described in paragraphs (1) and (2) in the above subsection, as soon as practicable but in no event later than 45 days after the end of each month until the Historical Debt Service Coverage Ratio of the Obligated Group is at least 1.00:1 and the Days' Cash on Hand of the Obligated Group is at least equal to 225. (c) A copy of the Obligated Group's annual operating and capital budget for such Fiscal Year prior to the start of such Fiscal Year. (d) Within 120 days of the end of each Fiscal Year, (i) a summary of the actuarial funded status of each of the Facilities and a summary of the new entrant pricing margin (on a weighted average basis by resident contract type) with respect to each of the Facilities, (ii) the CMS Provider Rating Report for each of the Facilities, (iii) a statement identifying the amount and purpose of any bonds or notes issued by or on behalf of the Obligated Group and any such other bonds or noted retired in the prior Fiscal Year in advance of their maturity dates; and (iv) debt service schedules presenting the principal and interest requirements of each series of bonds or notes outstanding under the Master Indenture, as well as an aggregate debt service schedule with respect to all such indebtedness. (e) The financial statements, statement of no default and other information, reports and opinions that the Corporation has covenanted to furnish to the Master Trustee pursuant to the Master Indenture. Such information shall be furnished to the MSRB at the times and in the manner as required to be provided to the Master Trustee. For a further discussion on the financial reporting to be provided to the Master Trustee see "FINANCING REPORTING AND CONTINUING AND ADDITIONAL DISCLOSURE - Financial Reporting." (f) As soon as practicable after the information is available but in no event more than thirty (30) days after the end of each calendar month, (i) with respect to the Project, beginning with the month ending June 30, 2015 and ending with the month during which the Project is completed, a summary of construction progress and activities, including construction disbursements against budget and estimated costs to complete, and (ii) with respect to any "major capital undertaking" of the Obligated Group (defined as any capital acquisition, expansion, replacement or renovation project in an amount equal to or greater than ten percent (10%) of the "Property and Equipment, Net" of the Obligated Group determined by reference to its most recent audited financial statement), beginning with the month following the commencement of such major capital undertaking and ending with the month during which such major capital undertaking is completed, a summary of construction progress and activities, including construction disbursements against budget and estimated costs to complete. Limited Obligations. The Obligated Group is obligated to provide only limited information at specific times, and such information may not include all information necessary to determine the value of the Series 2015 Bonds. The Obligated Group may, from time to time, disclose certain information and data in addition to that required, but assumes no obligation to continue to provide, or update, such additional information or data, except as described above. -37-

56 MISCELLANEOUS The Corporation has furnished all information in this Official Statement except in the sections herein "THE AUTHORITY," "THE SERIES 2015 BONDS - Book Entry Only System," "UNDERWRITING," "LEGALITY" and "TAX MATTERS" and with respect to litigation affecting the Authority. The Authority assumes no responsibility for the accuracy or completeness of information other than in the section "THE AUTHORITY" and with respect to litigation affecting the Authority (see the section herein "LITIGATION"). The use of this Official Statement in connection with the offering and sale of the Series 2015 Bonds has been duly authorized and approved by the Authority and the Corporation. The Authority has deemed this Official Statement final as of its date within the meaning of the Rule. INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF ALEXANDRIA By: /s/ Mark Williams Its: Chairman APPROVED: GOODWIN HOUSE INCORPORATED By: /s/ Kathleen S. Anderson Its: President and Chief Executive Officer By: /s/ Richard T. Carter Its: Assistant Treasurer and Chief Financial Officer -38-

57 GOODWIN HOUSE INCORPORATED APPENDIX A

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59 TABLE OF CONTENTS Page GOODWIN HOUSE INCORPORATED... A-2 Background... A-2 Governance... A-2 Management... A-4 Concept of Goodwin House... A-5 Goodwin House at Home... A-6 Goodwin House Foundation... A-6 Goodwin House Community Services... A-7 Goodwin House Development Corporation... A-7 THE GOODWIN HOUSE COMMUNITIES... A-7 General... A-7 Occupancy and Waiting List... A-9 Resident Contract Options... A-10 Sources of Revenue... A-10 Actuarially-Based Pricing... A-13 Refund of Entrance Fees... A-14 Employees; Pension Plans... A-14 Licensures, Certifications and Memberships... A-14 THE GOODWIN HOUSE ALEXANDRIA POSITIONING... A-15 Overview... A-15 Rationale... A-15 Components... A-16 Health Care and Residential Living Capacity Post-Positioning... A-17 Project Team... A-17 Construction Pricing, Procurement, Schedule and Permits... A-18 Summary of Project Budget... A-20 Certificate of Public Need and Zoning Approvals... A-20 Alternative Plan for Use of Bond Proceeds... A-21 MARKET AREA... A-23 Primary Market Area for the Facilities... A-23 Eligible Households in the Primary Market Area... A-23 Market Area Real Estate Trends... A-24 Competition... A-25 FINANCIAL INFORMATION... A-25 Summary Statements of Operations... A-25 Management's Discussion of Financial Performance... A-27 Historical Long-Term Debt Service Coverage... A-28 Summary of Cash Position... A-29 Outstanding Debt... A-29 Financial Assistance... A-29 Investments... A-30 LITIGATION... A-30 A-1

60 GOODWIN HOUSE INCORPORATED Background Goodwin House Incorporated ("Goodwin House" or the "Corporation") was incorporated in 1955 under its former name, The Home for the Aged in the Diocese of Virginia, as a not-for-profit Virginia non-stock corporation and is affiliated with the Protestant Episcopal Church in the Diocese of Virginia (the "Diocese"). Goodwin House was the first organization chartered by the Diocese to operate a residential community to provide care for elderly persons in the Commonwealth of Virginia. Goodwin House operates two continuing care retirement facilities in the Northern Virginia area: Goodwin House Alexandria, located in the City of Alexandria, Virginia and Goodwin House Bailey's Crossroads, located in Fairfax County, Virginia (with a small portion located within Arlington County). The two communities are approximately 1.5 miles apart and easily accessible to each other via Leesburg Pike (State Route 7). Goodwin House also operates a licensed home care agency, a Medicare certified Palliative Care and Hospice program, an accredited Clinical Pastoral Education (CPE) program, and in June 2014 launched a home and community based services program as described below under "- Goodwin House at Home." Goodwin House is open to any person without regard to race, color, sex, religion, national origin, marital status, sexual orientation, or disability. Goodwin House serves individuals who are 65 years or older (except for a spouse under this age) who meet the conditions of occupancy for the level of living in which they apply. Goodwin House is the sole member of the Obligated Group established under the Master Trust Indenture dated as of May 1, 2007, as supplemented (the "Master Indenture"), between the Goodwin House and U.S. Bank National Association as master trustee. Governance Members of the governing board and subsidiary boards of the Corporation are respected leaders in their fields and communities, recruited strategically to advance the Goodwin House mission. Board members serve without pay. The governing Board of Trustees of Goodwin House is composed of at least 13 but no more than 17 members. Trustees serve a three-year term, with the terms of approximately one-third of such trustees to expire each year. Two-thirds of the trustees must be communicants in good standing of The Protestant Episcopal Church in the United States of America (The Episcopal Church) or of those Churches in full communion with The Episcopal Church. The Board of Directors of Goodwin House Foundation may submit up to three nominees; each trustee elected as a nominee of Goodwin House Foundation serves a one-year term. Trustees are elected by the Board of Trustees of Goodwin House not later than December 31 of each year, and terms commence January 1. Trustees are elected from a list of nominees submitted by the Governance Committee of the Board of Trustees. The Governance Committee is comprised entirely of members of the Board. It is responsible for maintaining and improving the governance structure of the Corporation, and for assuring that the Board of Trustees is responsive and effective in addressing the evolving needs of the Corporation for talented leadership. Its primary duties are recruitment of qualified prospects for service on the Board of Trustees, nominations of candidates, and education and development of Trustees. In nominating candidates, the Committee seeks individuals possessing the skills necessary to protect and advance the mission of the Corporation. The Committee is responsible for regular Board self-evaluation in compliance with accreditation standards and governance best practices. A-2

61 The current members of the Board of Trustees, the length of their terms and their principal business affiliations are as follows: Board Member Term Expires Business Affiliation Donald R. Calloway, Jr. (Chair) 12/31/16 General Contractor and Owner, Calloway Consolidated Group Inc. (retired); Owner, Argus Ventures LLC Mary Lewis Hix (Vice Chair and Treasurer) Melinda Baskin Hudson (Secretary) 12/31/16 CREDO Institute Inc., Finance Faculty; Vice President for Finance and Administration (retired), Virginia Theological Seminary 12/31/17 Executive Vice President, America's Promise Alliance Dr. Cyrillene C. Clark 12/31/17 Industrial/Organizational Psychologist in Private Practice; formerly Senior Consultant and Practice Leader, Hay Group, Inc. David R. Clarke 12/31/17 Lawyer and Principal, Blankingship & Keith, P.C. Deborah K. Forbes 12/31/15 Attorney and Certified Public Accountant; Executive Director, Committee on Investment of Employee Benefits Assets (CIEBA) Dr. Janet Hansen 12/31/15 Policy Analyst (retired); formerly Vice President and Director of Education Studies, Committee for Economic Development Dr. Nancy Randolph 12/31/15 Director of Accreditation and Standards, Council on Social Work Education (retired); formerly Special Assistant to the President and Professor, Harvard University Thomas Regnell 12/31/16 President & CEO, Chevy Chase Land Company, a commercial and multi-family property owner, developer, and operator Charles H. Smith 12/31/15 President, Blue Ridge Advisors The Reverend Dr. Rosemari Sullivan 12/31/15 Episcopal Priest; formerly Special Coordinator for Haiti, Office of the Presiding Bishop and Executive Officer and Secretary of General Convention, The Episcopal Church (national) Dr. Robert Wallace 12/31/15 Professor and Chairman, Department of Surgery, Georgetown University (retired); formerly Chair, Department of Surgery, Mayo Clinic Thomas C. West, CLU, ChFc 12/31/16 Long-term Care Insurance Expert and Senior Advisor, Signature Estate and Investment Advisors Martha Wilcox 12/31/15 Chief Marketing Officer, Safe Kids Worldwide; formerly Executive Vice President, Williams Whittle A-3

62 Management The daily operations of Goodwin House are the responsibility of management, whose principal members are listed below. Kathleen S. Anderson (age 64) is President and Chief Executive Officer of Goodwin House (February 2002 to present). Ms. Anderson is a member of the LeadingAge Virginia Strategic Planning and Education Committees. She previously served on the Board of Directors and Executive Committee of LeadingAge, and on its Ethics Commission and Awards Committee. From 2011 to 2013 she served as Coach for the LeadingAge Leadership Academy, and previously as Co-Chair of the LeadingAge Leadership Council. She served as President of the Pennsylvania Association of Non-Profit Homes for the Aging (now LeadingAge Pennsylvania) and Vice Chair of the American Baptist Homes and Hospitals Association. From 2004 to 2009 she served on the Inova Health System Health Care Services Board of Directors and Chair of the Fair Oaks Hospital Quality Committee. Ms. Anderson served Baptist Homes of Western Pennsylvania as President and Chief Executive Officer (1992 to 2001) and Executive Administrator (1986 to 1992). Ms. Anderson holds a bachelor of arts degree in Education from Westminster College and a master of science degree in Education from Duquesne University. Colleen Ryan Mallon (age 50) is Vice President of Marketing and Mission Expansion. She joined Goodwin House as Corporate Director of Marketing in November 2003, and was promoted to her current position in February Ms. Ryan Mallon spent 12 years with The Washington House, a continuing care retirement community in Alexandria, where she served as Director of Marketing (1991 to 1995), Vice President of Operations (1995 to 1997), Vice President of Community Outreach (1997 to 2000) and President and Chief Executive Officer (2001 to 2003). She previously served LeadingAge as the Program Coordinator of the Continuing Care Accreditation Commission (1987 to 1991). Ms. Ryan Mallon is a Licensed Nursing Home Administrator and Preceptor in the Commonwealth of Virginia. She currently serves as Vice Chair of the Board of Directors of Insight Memory Care Center in Fairfax, Virginia. Ms. Ryan Mallon graduated with a bachelor of arts degree in Sociology with a concentration in Gerontology from Trinity College. Richard T. Carter (age 60) is Assistant Treasurer and Chief Financial Officer of Goodwin House (April 2009 to present). He is also a director of the Virginia Senior Care Group, which provides insurance services to a network of non-profit Virginia continuing care retirement communities, including Goodwin House. Prior to joining Goodwin House, Mr. Carter served as the Chief Financial Officer of Maryland & Virginia Milk Producers Cooperative Association, Inc. (2002 to 2008), Partner with Tatum CFO Partners, LLP (2000 to 2002), Senior Manager of Arthur Andersen LLP (1996 to 2000), Chief Financial Officer of Ameribanc Savings Bank (1986 to 1995), and Manager of Arthur Andersen & Co. (1977 to 1986). Mr. Carter is a certified public accountant and is a member of the American Institute of Public Accountants. He holds a bachelor of science degree in Commerce from the University of Virginia. Fran Casey (age 53) is the Corporate Director of Human Resources for Goodwin House (2002 to present). Joining Goodwin House over 25 years ago, Ms. Casey has also served as Manager of Human Resources for Goodwin House Bailey's Crossroads (1987 to 1990), Director of Quality Assessment and Staff Development (1990 to 1995) and Director of Training (1995 to 2002). Ms. Casey led the development of the Goodwin House Emerging Leaders Program to develop internal talent and leadership capacity. Since inception in 2010, 25 Goodwin House leaders have graduated from the Program, nearly 60% of whom have been promoted or have seen their roles expanded. Goodwin House has shared the Program with communities across the country seeking to establish their own leadership programs. Ms. Casey has led collaborative partnerships with other Virginia continuing care retirement communities. Ms. Casey holds an undergraduate degree in Psychology and a Master of Arts in Human Resources Management from George Washington University. Ms. Casey holds Senior Professional in Human Resources (SPHR) certification. Harry Webster Baldwin, III (age 63) joined Goodwin House Alexandria as Executive Director in March Mr. Baldwin is a Licensed Nursing Home Administrator and Preceptor in the Commonwealth of Virginia. Mr. Baldwin came to Goodwin House Alexandria from Lakewood Manor in Richmond, where he served as Administrator. Mr. Baldwin has extensive prior experience in senior living community leadership and the fields of gerontology and senior services. Mr. Baldwin was a member of the Board of the Alexandria Chamber of Commerce, has chaired a support and counseling group for individuals in job or career transition, has served on his parish Vestry A-4

63 and as that body's Senior Warden, and is chair and convener of a parish lay committee for a local seminary student. He has a bachelor of arts degree in Psychology and Sociology from the University of Richmond and a master's degree in Gerontology from Virginia Commonwealth University. Linda L. Lateana (age 64) is Executive Director of Goodwin House Bailey's Crossroads. She is a graduate of Southern Methodist University and earned a master's degree of Social Work from the University of Arkansas, Graduate School of Social Work. As a clinical social worker, she has worked with community-based services and in long-term care for over 30 years. Ms. Lateana joined the staff of Goodwin House Bailey's Crossroads in 1987 and became a Licensed Nursing Home Administrator in She has served as an evaluator for the Continuing Care Accreditation Commission's nationwide accreditation process for retirement communities. She is a Licensed Nursing Home Administrator and Preceptor in the Commonwealth of Virginia, Past Vice-Chair of the Board of Directors of LeadingAge Virginia and past member of the House of Delegates of LeadingAge. She currently serves on the LeadingAge Education Committee. Ms. Lateana served on the Board of the Alzheimer's Family Day Center and on the Bailey's Crossroads Revitalization Corporation, where she worked with the Urban Land Institute to make recommendations for the future of the Bailey's Crossroads area that were ultimately incorporated into the Fairfax County Comprehensive Plan. Following a $120 million expansion and renovation of Goodwin House Bailey's Crossroads, Ms. Lateana was invited to participate on The American Institute of Architects' Design for Aging Review Panel. John Charalambopoulos, M.D., M.S. (age 43) is the Medical Director of Goodwin House Alexandria. He is Board Certified in Internal Medicine and joined Medical Associates of Arlington in From the University of New Orleans, he graduated cum laude with a bachelor of science degree, and furthered his education by receiving a master of science degree in cancer research from the University of Western Ontario. He then earned his Doctor of Medicine from Jefferson Medical College in Dr. Charalambopoulos completed his Internal Medicine training at Georgetown University Hospital, where he was honored by the medical students for excellence in teaching with the String of Pearls Award. Christopher M. Walsh, M.D. (age 39) is the Medical Director of Goodwin House Bailey's Crossroads. He is a native of New York, graduated magna cum laude from Georgetown University. He continued his studies at the Georgetown University School of Medicine, where he was elected to the Alpha Omega Alpha Honor Society, and received the Michael J. Caruso Memorial Award for humanitarian principles in patient care. Dr. Walsh completed his Internal Medicine training at Mount Sinai Hospital in New York City and is board certified. He has been in practice in the Arlington area since 2004, and is the founding physician of Medical Associates of Arlington. Dr. Walsh is a Clinical Assistant Professor of Medicine at the Georgetown University School of Medicine. In addition, he has served as the Team Internist for the Washington Capitals professional hockey team since Dr. Walsh is a Fellow of the American College of Physicians, and an active member of the Virginia and Arlington County Medical Societies, Alpha Omega Alpha Medical Honor Society, and the American Medical Association. Concept of Goodwin House Goodwin House operates under the continuing care concept, which recognizes older adults as having varying needs along a continuum from active, independent living to increasing health care needs. Goodwin House offers five long-term care options, three of which are considered extensive coverage options and two of which are considered fee-for-service options. Under terms of the resident contracts and in return for an initial entrance fee and ongoing monthly fees, Goodwin House provides a comprehensive range of services to each resident at Goodwin House Alexandria and Goodwin House Bailey's Crossroads. See "Resident Contract Options" in "THE GOODWIN HOUSE COMMUNITIES," below. The services provided to residents include individual apartments, utilities, meals, housekeeping and linen service, and participation in extensive social, educational, cultural and spiritual programs. Admission to independent living is open to any person, 65 years of age or older (in the case of a couple, only one must meet this age requirement), who is able to live independently in a residential apartment and meets the conditions of occupancy, as demonstrated by a physical examination and an in-person assessment with a social worker and clinical nurse. Persons who are not able to live independently and require some assistance may enter directly into the assisted living apartments on a space available basis. Goodwin House is in substantial compliance A-5

64 with all federal and state regulatory requirements, including the Fair Housing Act and the Americans with Disabilities Act. Its admission policies are non-discriminatory, except as to age and the acuity of care required. Residents who require assistance with activities of daily living, but do not need nursing care may move to an assisted living apartment. Goodwin House provides the same services in these apartments as provided for residents of the independent living apartments, including dining, utilities, weekly housekeeping and linen service, and recreational and social activities geared to residents who may not be fully independent. A life care resident requiring nursing services can move into the health center, either on a temporary or permanent basis. Such nursing services are provided at no additional charge other than medical supplies, under a life care option. If a resident's stay in the health center is temporary, the resident retains his/her apartment and continues to pay the same monthly fee. If nursing service will be required on a permanent basis, the resident releases his/her residence and moves to the health center at no additional charge other than (i) normal increases in the monthly fee for the accommodation to which he/she was contracted originally, (ii) any additional meals, and (iii) medical supplies. Physical therapy and home care services are available to residents at an additional charge. If a resident is under a fee-for-service option, his/her applicable monthly fee will be increased if assisted living, memory support or 24-hour nursing care is provided. Goodwin House at Home Goodwin House at Home received approval as a Community-Based Continuing Care Program from the Commonwealth of Virginia State Corporation Commission in February 2014 and began marketing to the public in June Goodwin House at Home is designed for healthy, active adults 55 and older who want to combine the independence of living at home with the security of life care benefits found in a continuing care community. Serving Northern Virginia and Washington, DC, Goodwin House at Home enables members to stay in their homes as they age, while being given support for all stages of life, at all levels of living. Member benefits include a professional resource manager, home safety assessment, social and wellness programs, chronic disease management, transportation to medical appointments when necessary and assistance with activities of daily living (ADLs). Goodwin House at Home is the first program of its kind in Northern Virginia, one of only two in the Commonwealth of Virginia, and one of 22 "life care at home" programs across the country, with 22 additional programs in development. The Corporation began exploring a potential at home program in 2011, in furtherance of its vision to expand the places and ways it serves older adults, in recognition of the desire of many consumers to age in their own homes, and in response to the growing waiting list for the Corporation's continuing care communities. The Corporation conducted extensive market research and rigorous financial and actuarial analyses to develop the business model and pricing for Goodwin House at Home. A subset of the Corporation's governing board was identified to work with management on the eventual product. Goodwin House at Home membership at April 22, 2015 exceeded initial projections with 23 members compared to the budget of 12 members. Market research indicates that the program could grow to 350 members over twenty years. This program is intended to be self-sustaining, to support the Corporation's balance sheet, and to strengthen core business functions. Goodwin House Foundation Goodwin House Foundation (the "Foundation") was created in 1989 to benefit, support and foster the operations and functions and carry out the mission and charitable purpose of Goodwin House. Goodwin House elects the Board of Directors of the Foundation and exercises control over the Foundation. The Foundation is not a member of the Obligated Group (as defined in the Master Indenture). A-6

65 Goodwin House Community Services The Corporation established Goodwin House Community Services ("GHCS") in 2001 to support the charitable mission and purposes of Goodwin House by making available certain services to other charitable, not for profit entities providing housing for the aged, including persons of low income, in the communities served by Goodwin House. Goodwin House elects the Board of Directors of GHCS and exercises control over GHCS. All Directors of GHCS are Trustees or Officers of Goodwin House. GHCS is not a member of the Obligated Group. Goodwin House Development Corporation The Corporation established Goodwin House Development Corporation ("GHDC") in 2001 to support and extend the Corporation's charitable mission and purposes beyond its existing continuing care retirement communities. Goodwin House elects the Board of Directors of GHDC and exercises control over GHDC. All Directors of GHDC are Trustees or Officers of Goodwin House. GHDC is not a member of the Obligated Group. Since 2012, Goodwin House has committed funding totaling $4,817,865 to GHDC in support of its purposes under the provisions of the Master Indenture permitting the sale, lease or disposition of assets under certain circumstances as described in APPENDIX D DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS The Master Indenture Sale, Lease or Other Disposition of Assets." General THE GOODWIN HOUSE COMMUNITIES Goodwin House Alexandria. The original building, opened to residents in August, 1967, is a nine-story brick building with two below-grade floors; a five-story wing was added to the original building in 1976 and a second, two-story addition was completed in October An adjacent fifteen-story residential tower was completed in July 1998, followed by an extensive renovation of the original building completed in June The property is located at 4800 Fillmore Avenue, Alexandria, Virginia 22311, on seven acres of land on the western border of Alexandria near the intersection of Seminary Road and North Beauregard Street. Goodwin House Alexandria's original building has 124 licensed residential units, with a licensure capacity for 250 residents. These licensed units have been configured into 19 four-room suites, 15 two-bedroom units, 63 one-bedroom units, 14 alcove units, and 13 studios. The fifteen-story tower added in 1998 contains 131 unlicensed residential apartments, which have been configured into 15 three-bedroom-with-den apartments, 58 two-bedroomwith-den apartments, 29 two-bedroom apartments and 29 one-bedroom-with-den apartments. All health care facilities of Goodwin House Alexandria are located in the original building. There are 41 assisted living apartments located on the third floor. The facility also houses 80 licensed nursing care beds, 68 of which are located on the second floor and 12 of which are located in the special memory support center on the first floor. Goodwin House Bailey's Crossroads. The original building at Goodwin House Bailey's Crossroads, completed in October 1987, is a 12-story brick building plus a ground floor which houses an auditorium, beauty shop, and several other common areas. The property is located at 3440 South Jefferson Street, Falls Church, Virginia 22041, on eight acres of land in the Bailey's Crossroads area of Fairfax County (at the northeastern border with Arlington County) just off of King Street. The original Goodwin House Bailey's Crossroads building has 222 licensed residential units, with a licensure capacity for 500 residents. These units are configured as 12 studio units, 94 one-bedroom units, 82 onebedroom-with-den units, 23 two-bedroom-with-den units and 11 three-bedroom-with-den units. Additionally, there are 43 assisted living units and 16 memory support rooms located on the third floor of the original building. A new Health and Wellness Center was opened as part of a $120 million Goodwin House Bailey's Crossroads redevelopment project in June The Health and Wellness Center houses a 60-foot swimming pool, an expansive health and fitness club, a clinic, 16 memory support rooms referenced above, and an expanded health A-7

66 center on the second floor. After the new health center wing was opened, the former health care accommodations were renovated into private rooms in households that offer kitchen, dining and outdoor area in each household. Goodwin House Bailey's Crossroads opened a 15-story 106-unit independent living tower in January Known as The Pointe, this residential tower is configured into 24 one-bedroom-with-den units, 50 two-bedroom units and 32 two-bedroom-with-den units. Each of the Goodwin House communities also contains a number of amenities for residents, including a limited-service branch bank, library, computer lab, fitness center, pool, beauty salon, wellness clinic, formal and casual dining rooms, and common areas. The table below summarizes the current unit configuration of the Goodwin House communities: Goodwin House Alexandria Goodwin House Bailey's Crossroads Total Units / Beds Unit Type Independent Living Apartments Assisted Living Units Standard Assisted Living Units Memory Skilled Nursing Beds Standard Skilled Nursing Beds Memory Total Units/Beds [The remainder of this page in intentionally left blank] A-8

67 Occupancy and Waiting List Historical occupancy figures for Goodwin House Alexandria and Goodwin House Bailey's Crossroads for the past five fiscal years ended September 30, 2014 and through the five months ended February 28, 2015 are shown in the following table. With respect to independent living apartments, historical occupancy figures are as of the last day of such fiscal year and as of February 28, With respect to assisted living units and Health Center beds, historical occupancy figures are shown as the average for the fourth quarter of such fiscal year and the average for the five months ended February 28, Goodwin House Alexandria Five Months September 30, Ended /28/2015 Independent Living Apartments (1) Number of units available Number of units occupied Percent Occupied 93% 94% 93% 96% 95% 95% Assisted Living Units (2) Number of bed days available 3,772 3,772 3,772 3,772 3,772 6,191 Number of bed days occupied 3,584 3,632 3,664 3,440 3,496 5,689 Percent Occupied 95% 96% 97% 91% 93% 90% Health Center (2) Number of bed days available 7,360 7,360 7,360 7,360 7,360 12,080 Number of bed days occupied 7,045 6,575 7,012 7,088 7,242 11,887 Percent Occupied 96% 89% 95% 96% 98% 98% Goodwin House Bailey's Crossroads Independent Living Apartments (1) Number of units available Number of units occupied Percent Occupied 85% 92% 95% 96% 96% 98% Assisted Living Units (2) Number of bed days available 5,428 5,428 5,428 5,428 5,428 8,909 Number of bed days occupied 4,623 4,655 4,936 5,221 4,944 8,065 Percent Occupied 85% 86% 91% 96% 91% 91% Health Center (2) Number of bed days available 6,256 6,256 6,440 6,348 6,348 10,419 Number of bed days occupied 6,020 6,018 6,193 6,061 6,102 9,822 Percent Occupied 96% 96% 96% 95% 96% 94% (1) Goodwin House has, when feasible, combined smaller units to create larger units, thereby slightly reducing capacity. (2) Annual figures for assisted living units and the health center are averages for the quarter ended September 30. As of February 28, 2015, Goodwin House Alexandria had 193 applications for the current inventory of residential living apartments, which requires a $1,000 refundable (as well as a $300 nonrefundable fee) waiting list deposit. There were also five applications for assisted living units. The average annual unit turnover for independent living and assisted living apartments is approximately 32 for independent living. Based on this historical rate of turnover, the waiting period for entry to an independent living unit has been approximately six months to one year for studio, alcove and one-bedroom/one-bath apartments and two to three years for the one-bedroom-with-den, twobedroom and larger apartments. As of February 28, 2015, Goodwin House Bailey's Crossroads had 187 applications for the current inventory of independent living units. The average annual unit independent living turnover in the original building is 33; however, The Pointe turnover for 2015 is budgeted at only six apartments since the building has only been open for five years, and 60% of the apartments are occupied by two people. Based on this historical rate of turnover, the A-9

68 waiting period for entry to an independent living unit has been approximately six months to one year for studio, alcove and one-bedroom/one-bath apartments and up to two years for the one-bedroom-with-den, two-bedroom, and larger apartments. Resident Contract Options Goodwin House's "standard" plan is an all-inclusive, or "Type A," life care service program that includes access to all services, including health care. Under the standard plan for residential living, residents generally pay an entrance fee that is refundable upon voluntary termination of the contract during the first 100 months of occupancy, less one percent for each month of occupancy (if the contract is terminated due to death, the entrance fee is refundable during the first 25 months of occupancy, less four percent for each month of occupancy). Contracts include different meal options, and the monthly fees vary based on the number of meals per day and the size and type of residence selected. For individuals entering into assisted living directly under a standard plan contract, the entrance refund declines by four percent for each month of occupancy if a resident moves out of the community and eight percent if contract is terminated due to death. In addition to the standard plan, Goodwin House offers four other plans, including a "modified" plan, a "50% refundable" plan, a "long-term care" plan, and a "90% refundable" plan, each of which differs from the standard plan with respect to the entrance and monthly fee schedules. Under the modified plan, the resident pays an entrance fee 37% lower than that for the standard plan, but pays a correspondingly higher monthly fee. The entrance fee paid under the modified plan is refundable upon voluntary termination of the contract during the first 100 months of occupancy, less one percent for each month of occupancy (if the contract is terminated due to death, the entrance fee is refundable during the first 25 months of occupancy, less four percent for each month of occupancy). The fee provisions under the 50% refundable plan result in an entrance fee 37% higher than the standard contract, with a correspondingly lower monthly service fee, but at least 50% of the entrance fee will be refunded upon voluntary termination of the resident contract (regardless of the months of occupancy). The long-term care plan requires a lower entrance fee for residents with adequate long-term care insurance approved by Goodwin House. Under this plan, 90 days of health care coverage is included, which is intended to cover the waiting period that most long-term care insurance policies require. After the first 90 days, the resident is responsible for the private pay rates in assisted living or the health center. Finally, the 90% refundable plan is considered a fee-for-service, or "Type C" service program; the entrance fee is 100% refundable in the first six months of occupancy and 90% thereafter. However, the 90% refundable plan does not include assisted living or nursing care but provides guaranteed access to these levels of care at the private daily rate. below. As of February 28, 2015, the percentage of residents contracted under the various plans are as shown Contract Type Goodwin House Alexandria Goodwin House Bailey's Crossroads Standard Plan 80% 77% Modified Plan 9 7 Long-Term Care Plan % Refundable Plan % Refundable Plan 2 2 Total 100% 100% Sources of Revenue On entry to Goodwin House, residents pay an entrance fee based on the type of residence selected. If two people occupy a residence, a second person entrance fee is also payable (current second person entrance fees are $48,570 for Goodwin House Alexandria and $50,699 for Goodwin House Bailey's Crossroads). In addition to an entrance fee, residents pay a monthly fee, the amount of which is determined by the type of residence selected, the A-10

69 number of persons (one or two) living in that residence and the resident contract type selected (see "- Resident Contract Options," above). In addition to a second person entrance fee, there is a flat second person monthly fee of $1,761 at Goodwin House Alexandria and $1,703 at Goodwin House Bailey's Crossroads for all independent living accommodations. Residents who move into assisted living or the health center continue to pay monthly fees according to the current rate for the accommodation occupied prior to the move. Entrance and monthly fees are reviewed each year in connection with the development of the budgets, and any adjustments to the fee structure are generally implemented effective each November 1. The current rate structure for residents with standard contracts for independent living apartments, effective November 1, 2014, is set forth in the table below: Independent Living Fee Structure (1) Goodwin House Alexandria Unit Type # of Units Sq. Ft. Entrance Fees (2) Monthly Fees (3) Brookville-Studio $ 103,210 $2,289 Fairlington-Deluxe Studio ,070 2,299 Cameron-Bed Alcove ,560 2,410 Braddock-Deluxe Alcove ,000 2,429 Kenmore-1 Bedroom ,150 2,680 Clermont-Corner 1 Bedroom ,150 2,680 Eisenhower-1 Bedroom/Studio ,110 2,687 Beverly-1 Bedroom/2 Studios ,280 2,894 Clover-1 Bedroom/Alcove/Studio ,780 2,911 Ramsey-2 Bedrooms ,040 3,704 Commonwealth-4 Room Suite 19 1, ,090 3,762 Woodlawn/Gunston-1 Bedroom/Den 29 1, ,740 3,813 Ellipse/Rosement-1 Bedroom/Den 29 1, ,790 4,307 Carlyle-2 Bedrooms/Den 15 1, ,530 4,714 Gadsby/Collingswood-2 Bedrooms/Den 28 1, ,210 5,059 Potomac-3 Bedrooms/Den 15 1, ,990 5,491 Alexandrian-3 Bedrooms/Den 15 1, ,940 6,035 The budget is based on weighted averages including an entrance fee of $279,788, and a monthly fee of $4,056 at Goodwin House Alexandria. (1) (2) (3) Represents fees under the standard plan; see "- Resident Contract Options," above. Add $48,570 for double occupancy. Add $1,761 per month for double occupancy. A-11

70 Independent Living Fee Structure (1) Goodwin House Bailey's Crossroads Types of Units # of Units Sq. Ft. Entrance Fees (2) Monthly Fees (3) Annandale-Studio $122,540 $2,401 Buckingham/Glencarlyn-1 Bedroom ,370 2,790 Ballston/Bluemont-1 Bedroom ,700 3,215 Clarendon/Yorktowne-1 Bedroom ,400 3,807 McLean/Barcroft-1 Bedroom/Den ,350 3,900 Claremont-1 Bedroom/Den 48 1, ,950 3,911 Arlingtonian-2 Bedrooms/Den 23 1, ,580 4,220 Skyline-3 Bedroom/Den 11 1, ,520 4,963 Ashton-1 Bedroom/Den 12 1, ,480 4,117 Brenmar- 1 Bedroom/Den 12 1, ,070 4,290 Glendale-2 Bedroom 12 1, ,010 4,596 Burke-2 Bedroom 24 1, ,530 4,605 Columbia-2 Bedroom/Den 12 1, ,490 4,758 Langley-2 Bedroom/Den 12 1, ,730 4,934 Rosslyn-2 Bedroom 12 1, , Glebe/Foxcroft-2 Bedroom- 2 ½ Bath 2 1, ,800 5,095 Rador/Highland-2 Bedroom-2 ½ Bath 2 1, ,230 5,392 Woodmont/Westover-2 Bedroom/Den 2 2, ,500 6,281 Stratford/Shirlington-2 Bedroom/Den 2 2, ,510 6,287 MacArthur/Madrillon-2 Bedroom/Den 2 2, ,630 6,984 The budget is based on weighted averages including an entrance fee of $275,235, and a monthly fee of $4,105 at Goodwin House Bailey's Crossroads. (1) (2) (3) Represents fees under the standard plan; see "- Resident Contract Options," above. Add $50,699 for double occupancy. Add $1,703 per month for double occupancy. The current rate structure for residents with standard contracts for assisted living apartments, effective November 1, 2014, is as follows: Assisted Living Fee Structure (1) Unit Type # of Units Sq. Ft. Entrance Fees (2) Monthly Fees (3) Alexandria Studio $237,200 $3,703 Large Studio ,250 3,712 Alcove ,550 3,827 Deluxe Alcove ,940 3,848 1 Bedroom ,000 4,076 Bailey's Crossroads Studio $245,250 $3,585 1 Bedroom ,000 4,052 (1) (2) (3) Represents fees under the standard plan; see "- Resident Contract Options," above. Add $50,530 in Alexandria and $52,730 at Bailey's Crossroads for double occupancy. Add $2,998 in Alexandria and $2,978 at Bailey's Crossroads per month for double occupancy. Entrance fees for each fiscal year's entering group of residents are recognized as income over a period of years, based on the life expectancy of each individual resident. See "Summary Consolidated Statements of Operations" in "FINANCIAL INFORMATION." A-12

71 Other elements of operating revenue include fees from direct admissions to assisted living units as well as nursing care and skilled care admissions from the outside community. There are no Virginia Department of Health Certificate of Public Need restrictions limiting direct admissions to Goodwin House health centers. The current rate structure for health care and special care units, effective as of November 1, 2014, is as follows: Health Center Fee Structure Unit Type Per Diem Fees Alexandria Private Skilled Care $458 Semi-Private Skilled Care 380 Private Nursing Care 400 Semi-Private Nursing Care 317 Bailey's Crossroads Private Skilled Care $454 Semi-Private Skilled Care 390 Shared Private Skilled Care 433 Private Nursing Care 409 Semi-Private Nursing Care 339 Shared Private Nursing Care 390 The number of direct admissions is dependent on the needs of life care residents at each facility and, therefore, may vary greatly from year to year. Other revenue sources are Medicare reimbursements for skilled nursing care for residents and nonresidents who have been hospitalized at an outside facility for three or more days, and Medicaid reimbursements for skilled care and nursing care for nonresidents. The percentages of net health care revenues paid from these sources for the past five fiscal years ended September 30 and as of February 28, 2015, were as follows: Health Center Payor Mix /28/2015 Life Care 35% 38% 38% 41% 41% 39% Medicaid Medicare Private In addition to the preceding, Goodwin House derives revenues from charges for resident services, such as guest meals and lodging, laundry and beauty shop operations; from the receipts of an on-site pharmacy that serves residents and employees; from rehabilitation therapy; from investment income on invested funds; and from certain other sources as described in the financial statements in Appendix B to the Official Statement. Goodwin House and the Foundation maintain various funds for financial assistance to residents. See "Financial Assistance" in "FINANCIAL INFORMATION." Actuarially-Based Pricing Since the inception of Goodwin House, the Board of Trustees has carefully considered the financial stability of its operating communities, including the adoption and integration of actuarial principles in its resident pricing and financial management practices. Goodwin House retains an actuarial consultant with extensive experience in the life care industry to annually conduct a comprehensive actuarial study of its resident population and their contract obligations in accordance with Actuarial Standard of Practice No. 3. The scope of the study typically includes: (1) formulation of demographic and economic assumptions; (2) a population projection of contract-holder movements and independent living turnover; (3) an actuarial valuation of reserve adequacy for A-13

72 current residents; (4) an actuarial pricing analysis of fees charged to new entrants; and (5) a 20-year cash-flow projection of sources and uses. The most recent actuarial compilation report was completed as of the fiscal year ended September 30, 2014 and indicated that Goodwin House was in satisfactory actuarial balance; however, this update did not include any assessment of the impact of the Alexandria Positioning (as hereinafter defined) or the issuance of the Series 2015 Bonds and related expansion activities. Refund of Entrance Fees As described under "- Resident Contract Options" above, upon termination of a resident's contract due to death, Goodwin House will refund the amount of the entrance fee paid by the resident, less four percent for each month of occupancy. Upon termination of the resident's contract for any other reason, Goodwin House will refund the amount of the entrance fee paid by the resident less one percent for each month of occupancy. If the resident enters into a refundable plan (and subsequently pays a higher entrance fee), then the resident is entitled to a refund upon termination of the contract for any reason in an amount no less than 50% of the entrance fee or 90% of the entrance fee, depending on the type of refundable plan. The portion of deferred entrance fees subject to refund provisions as of September 30, 2013 and 2014, amounted to $91,466,672 and $88,512,928, respectively. The estimated amount of refundable entrance fees to be paid to current residents, based on the experience of Goodwin House, was $15,426,756 and $14,931,618 at September 30, 2013 and 2014, respectively. Employees; Pension Plans Goodwin House has approximately 656 full-time equivalent employees. Goodwin House has had no significant problems in hiring or retaining suitable employees. No employee of Goodwin House is represented by a labor union. Goodwin House sponsors a defined contribution 401(k) profit-sharing plan (the "Plan") that covers all fulltime employees age 21 or older who have completed one year of service, and part-time employees working 1,000 hours or more, age 21 or older. Contributions to the Plan are determined by the Board of Trustees of Goodwin House on a discretionary basis. Goodwin House contributed approximately $1,201,000 and $1,239,000 to the Plan related to the fiscal years ended September 30, 2013 and 2014, respectively. Goodwin House also sponsors eligible deferred compensation plans (under Sections 457(b) and 457(f) of the Internal Revenue Code of 1986, as amended). Goodwin House contributed approximately $155,500 and $156,500 to the Section 457 plans for years ended September 30, 2013 and 2014, respectively. The Corporation has no unfunded pension plan obligations. Licensures, Certifications and Memberships Goodwin House Alexandria and Goodwin House Bailey's Crossroads are licensed as assisted living facilities by the Virginia Department of Social Services and as nursing facilities by the Virginia Department of Health. Goodwin House Alexandria and Goodwin House Bailey's Crossroads are certified under the Medicare and Medicaid federal programs and are accredited by the Commission on Accreditation of Rehabilitative Facilities- Continuing Care Accreditation Commission (CARF-CCAC). Goodwin House maintains membership in the following organizations: LeadingAge; LeadingAge Virginia; The Center to Advance Palliative Care; National Hospice and Palliative Care Organization; Association for Clinical Pastoral Education; Americans for the Arts; City of Alexandria Chamber of Commerce; Senior Services of Alexandria; Arts Council of Fairfax County; and Bailey's Crossroads Revitalization Corporation. Individual staff members are encouraged to participate in their respective professional associations and networks. A-14

73 THE GOODWIN HOUSE ALEXANDRIA POSITIONING Overview The Board of Trustees has adopted a plan to upgrade the property and programs of Goodwin House Alexandria (the "Alexandria Positioning" or the "Positioning"). The Alexandria Positioning represents the culmination of sustained Board examination occurring over the course of more than four years and is driven by the Goodwin House mission, vision, values and its commitment to financial discipline and long-term viability. The Positioning is intended to enable Goodwin House to maintain its reputation for quality care and services and to address current and future consumer expectations regarding the delivery of health care services in an intimate, personalized home-like environment. The Alexandria Positioning will update the services, facilities and amenities at Goodwin House Alexandria as follows: 1) Construction of a five-story building (currently referred to as the "Center of Excellence," or "COE") into which Goodwin House Alexandria's existing skilled nursing and memory care components will be relocated upon completion; the COE will also include auditorium and meeting spaces to be made available for broader use within the internal Goodwin House Alexandria and broader City of Alexandria communities; 2) The renovation, expansion and improvement of certain components of existing buildings comprising the Goodwin House Alexandria campus (the "Existing Building Improvements") as follows: (a) (b) (c) Upon completion of the COE, the renovation and repurposing of the first and second floors of Goodwin House Alexandria's original 1967 building (currently housing the skilled nursing and memory care components) to create additional revenue-generating residential apartments and assisted living apartments; Upgrading and expanding certain common areas and amenities of the Goodwin House Alexandria buildings, principally dining venues and other functional spaces; and Expansion and improvement of certain service functions in Goodwin House Alexandria's older buildings, including but not limited to service elevators, loading docks and food storage capacities in order to improve operating efficiencies. Rationale In 2010, with the $120 million Goodwin House Bailey's Crossroads redevelopment and expansion completed and stabilized (see "General - Goodwin House Bailey's Crossroads" in "THE GOODWIN HOUSE COMMUNITIES" herein), the Goodwin House Board of Trustees and Management focused on the redevelopment of Goodwin House Alexandria, the Corporation's original continuing care retirement community. Goodwin House Alexandria, whose original buildings date to 1967, had undergone a significant expansion in the mid-1990's, modernizing the physical plant of the original building, adding a pool and upgraded amenities, and expanding residential living by 131 independent living apartments in a new 15-story tower apartment building. Not addressed at that time, however, was the Goodwin House Alexandria health center, where 80 skilled nursing care beds were offered in two different locations, with 68 beds, mostly two-person and some three-person shared units, on the second floor and 12 private rooms dedicated to memory support on the first floor. Goodwin House retained the market research firm SB&A to conduct an analysis of Goodwin House Alexandria's product and program in light of the organization's desire for optimal long-term strategic positioning and economic viability. The results of this study identified the need for better dining options, more flexible and consumer-responsive dining venues, and private health care rooms. The study noted that the Goodwin House A-15

74 Alexandria health care offerings must evolve into a primarily private or all-private room model in order to meet consumer expectations and for Goodwin House to maintain its market competitive position. The Board of Trustees created a Positioning Task Force charged with determining a plan for the long-term financial viability and competitive sustainability of the Goodwin House Alexandria campus, with a key priority to achieve all or mostly all private health care accommodations on the campus. After various financial, architectural and actuarial analyses, the Board of Trustees and Management concluded that the goal of achieving all or primarily all private healthcare accommodations could not be achieved within the existing footprint of the campus and that reducing healthcare capacity (in an effort to secure private accommodations within the existing footprint) would be actuarially unsustainable. Studies of the existing buildings further determined that existing floor area ratios were inadequate to support significant expansion and that rezoning would be a necessary step should a new health care facility be envisioned. The Positioning Task Force initiated efforts to determine a new health care building design that would meet clinical excellence and quality of life goals; would be economically viable to construct and operationally effective; would be market responsive and competitive; would offer flexibility in a changing health care climate; and could meet the complex constructability and approval constraints of a tight urban site. Parallel efforts began to obtain the land use permissions necessary to support such an expansion. These multi-faceted efforts bringing together design, pricing, consumer research and land use disciplines resulted in the Alexandria Positioning, as herein described. Components The Center of Excellence. The centerpiece of the Alexandria Positioning is the proposed Center of Excellence a new, five-story building which will house Goodwin House Alexandria's skilled nursing care and memory care services and programs. Consistent with the Goodwin House mission to "support, honor and uplift the lives of older adults," its vision to "expand the places and ways we serve older adults," and its stated purpose from its Articles of Incorporation to provide "exemplary" residential and health care services, the Center of Excellence will represent an innovative health care delivery model often referred to as the "small house" model of care. The design of each of four nursing care floors will consist of two small houses, each of which will serve 10 residents. An additional 10-room small house, to be licensed by the Virginia Department of Social Services, on the first floor will provide memory support care. Each small house will include a living room, dining room, kitchen, and a private bedroom and bath for each resident. This model seeks to replicate the home environment and enhance the knowledge of resident needs while improving the sight lines of staff to enable viewing of and interaction with residents from any place in the house. Existing Building Improvements. The Existing Building Improvements will consist of the following three components: Repurposing of Existing Health Care Facilities. Completion of the COE will enable Goodwin House to repurpose the Goodwin House Alexandria second floor skilled nursing area and the existing first floor memory support area, both currently licensed for skilled care and together comprising the existing 80 beds of skilled nursing care. These spaces will be converted to new revenue-generating apartments, yielding an additional eleven assisted living apartments and nine residential living apartments on the second floor, five additional residential living apartments on the first floor, and two additional residential living apartments on the fourth floor; Upgrading and Improvement of Dining and Community Spaces. The Alexandria Positioning will also include an upgrading and expansion of amenities in the original building, including (a) reprogramming the first floor residential living dining venues to achieve greater alignment with current and future consumer expectations; and (b) improving the existing first floor community spaces to achieve more effective utilization and consumer satisfaction; and A-16

75 Upgrading and Improvement of Service Functions. This element of the Alexandria Positioning will address food delivery, transportation, storage and production issues inherent in a 47-year old building, including the addition of a new three-stop service elevator, first floor food storage, and other improvements to the two below-ground levels of the original building. Health Care and Residential Living Capacity Post-Positioning Upon completion of the Positioning, Goodwin House Alexandria's unit/bed complement will be as follows: Units/Beds Available Pre- Construction Units/Beds Put Into Service Units/Beds Taken Out of Service Units/Beds Available Post- Construction Independent Living Apartments Assisted Living Apartments Assisted Living Memory Support Health Center Beds Memory Support Nursing Project Team Total Project Manager. The Project Manager for the Alexandria Positioning is Advanced Project Management, Inc., Chantilly, Virginia ("APM" or the "Project Manager"). APM is a professional program, project and construction management firm with over 20 years of experience in the metropolitan Washington, DC area and significant experience on projects requiring concise logistical planning for constrained urban sites. The firm's focus is high quality management services and client advocacy during planning, design, construction, and start-up. The majority of APM's clients are in the Washington, DC metropolitan area, allowing the firm to provide immediate and onsite project management. APM served as Project Manager for the Goodwin House Bailey's Crossroads redevelopment and expansion (see "General - Goodwin House Bailey's Crossroads" in "THE GOODWIN HOUSE COMMUNITIES" herein), bringing in a complex project ahead of schedule and on budget. APM has extensive experience managing construction projects within occupied conditions and developing projects on restricted sites, having completed 46 projects under such conditions. APM has served as Project Manager for more than 120 construction projects totaling more than $1 billion, including the following recent Northern Virginia and metropolitan Washington, DC projects: Goodwin House Bailey's Crossroads Campus Expansion and Redevelopment (CCRC) - $120 Million Program (2004 to 2010) Vinson Hall Campus Expansion (CCRC) - $86 Million Program (2011 to 2016) The Washington DC National Cathedral - $50 Million Program (2006 to 2016) Pre-Construction Consulting Center of Excellence. Whiting-Turner Contracting Company, Inc. ("Whiting-Turner") has been engaged to provide pre-construction services for the Center of Excellence component of the Alexandria Positioning. Headquartered in Baltimore, Maryland, Whiting-Turner's Northern Virginia office will have primary responsibility for pre-construction services, including estimating, scheduling analysis, and design constructability reviews. Incorporated in 1934, Whiting-Turner was ranked 4 th in the United States in domestic construction as of September 2014, by Engineering News Record (based on domestic construction revenues) and provides construction management "at risk," general contracting, pre-construction and design-build services to clients in the higher education, biotechnology, high technology, corporate headquarters, high-end commercial and industrial markets. Whiting-Turner employs over 2,500 administrative and supervisory individuals nationally, with A-17

76 approximately 300 in the Washington, DC area, as well as 750 skilled laborers nationally, with approximately 50 in the Washington, DC area. Whiting-Turner has provided "at-risk" construction management services for nearly 60 years, principally in the eastern United States, and served as general contractor for the Goodwin House Bailey's Crossroads redevelopment and expansion project (see "General - Goodwin House Bailey's Crossroads" in "THE GOODWIN HOUSE COMMUNITIES"). Pre-Construction Consulting Existing Building Improvements. Vantage Construction Corporation ("Vantage") has been engaged to provide pre-construction consulting services for the Existing Building Improvements component of the Alexandria Positioning. Vantage is a full service general contractor based in Sterling, Virginia and will have primary responsibility for pre-construction services including estimating and phasing, schedule analysis, and constructability reviews relating to the Existing Building Improvements. Incorporated in 2004, Vantage is experienced in all aspects of commercial construction from tenant fit-out projects to complex base buildings. Some of its recent construction projects under occupied conditions include the Goodwin House Alexandria Generator and Cool Room; Bethesda Crossing Core & Façade Upgrades; Draper Laboratories Phase 2; and 8218 Wisconsin Core Upgrades. Architect. Perkins Eastman is serving as architect for the Alexandria Positioning. Perkins Eastman is an international planning, design, and consulting firm founded in The firm has nine offices across the US and five overseas, with a professional staff of more than 850. The firm has completed projects in 46 states and 40 countries. Perkins Eastman has extensive experience in working with senior living organizations to reinvent their communities for the future consumer. The firm has been instrumental in changing the culture of long-term care beginning with a small-scale memory support residence for individuals with Alzheimer's disease to the creation of a new national prototype for The Green House project. Perkins Eastman senior living continuum experience includes continuing care retirement communities, independent living apartments and cottages, assisted living, long term care environments, memory support and geriatric healthcare facilities. Perkins Eastman has 20 principals committed to senior living, 30 AIA Design for Aging awards, 100+ industry citations for excellence, 500+ master plans for senior living communities, 35,000+ skilled nursing rooms, and 600+ completed projects, 90% of which integrate architecture and interior design services. Small House Operations and Design Consultant. Dr. Jude Rabig is serving as small house operations and design consultant for the Alexandria Positioning. Dr. Rabig is a nationally recognized leader in small house design and operations. As the first Director of the Robert Wood Johnson-funded National Green House Project, Dr. Rabig designed the operating small house model, authored and delivered the training curriculum, and created materials for replicating the small house model on a larger scale. She has over 20 years of executive experience in health care, nursing home care, and gerontology and is a Center of Medicare and Medicaid Services Innovation Advisor, an Atlantic Philanthropies Hartford Foundation Practice Change Fellow, and President and CEO (2006 to present) of Rabig Consulting. She holds a PhD in gerontology and a business certificate from Stanford School of Business. Dr. Rabig's work with Goodwin House began in 2013, assisting the Positioning Task Force in the design and development of the Goodwin House small house model, with emphasis on person-centered care, clinical excellence, financial feasibility, operating effectiveness, and design congruence with philosophy of care principles. Goodwin House intends to continue the relationship with Dr. Rabig through the first year of normalized small house operations. Construction Pricing, Procurement, Schedule and Permits Architectural design phases for a construction project such as the Center of Excellence and other aspects of the Alexandria Positioning typically include three phases: schematic design; design development and construction documents. The design of the Alexandria Positioning has followed this sequence, with particular emphasis on the design, pricing and construction procurement of the Center of Excellence as the fundamental component of the Positioning. A-18

77 Center of Excellence Construction Pricing. During the schematic design phase, Goodwin House, Perkins Eastman, Whiting- Turner and APM (see "- Project Team," above) consulted to determine project goals and requirements, establish the architectural program and required functions, estimate usage scale and square footages, and identify zoning and jurisdictional restrictions relating to the Center of Excellence. Upon final schematic design in 2014, APM conducted pricing analyses to establish the construction budget for the Center of Excellence, to which APM applied design contingency of 10%, and an escalation model of 4-5% in deriving a project budget for the Center of Excellence of $37.9 million. The design development phase for the Center of Excellence followed to further develop the schematic design and to layer in mechanical, electrical, plumbing, structural, and architectural details. During design development, Goodwin House, Perkins Eastman, Whiting-Turner and APM collaborated to produce floor plans, sections and elevations with full dimensions for the Center of Excellence, including material specifications. Working with Whiting-Turner, APM conducted cost estimate updates and audits at 50% and 100% design development documents in November 2014 and January 2015, respectively, in order to ensure that scope and pricing trends remained positive. As a result of these pricing exercises, APM determined that design development pricing remained within the schematic design budget pricing of $37.9 million and that price escalation remained within the intended escalation model. The Center of Excellence is more than 50% through the third and final design phase construction documents which will result in complete construction documents and specifications for final pricing. APM has obtained preliminary bids on the building superstructure (foundations, garage, long span concrete, etc.), which have come in below the design development phase budget. The bids on this portion of Center of Excellence, constituting nearly 15% of total construction costs, support Goodwin House's expectation that the overall construction will be bought on budget. Contract Procurement. Goodwin House and APM expect to identify four or more qualified general contractors including Whiting-Turner to bid the Center of Excellence construction work. These bidders will be selected based upon their experience with (1) constrained sites, (2) similar building construction types, (3) health care projects generally, and (4) previous work with the Goodwin House project team. These firms will compete on a "best value" basis, where the final contractor selection will give due consideration to the entire competition criteria, not just price. In addition to price, the criteria will include schedule, acceptance of contracting terms, strength of project team and the financial strength of the contractor's organization. The bidding process is expected to commence June 2015, and will use a "guaranteed maximum price" (GMP) contracting process, using 100% construction documents as the basis for the bid. APM will oversee all elements of the construction bidding process and the final contract negotiations with the selected general contractor, expected to be complete by July 31, Construction Schedule. In addition to the detailed attention given to developing GMP pricing, the project team has given equal attention to the master and construction schedule processes to assure the construction start meshes well with the bidding, ordering and permit processes. At each step in the design process, APM developed detailed schedules and jointly analyzed them with Whiting-Turner; key construction sequences such as the mass excavation and the concrete operation have also been vetted with subcontractors to assure a high degree of expert input on these key systems. Based on this process, the construction period for the Center of Excellence is expected to total 67 weeks September 2015 to December 2016 from the date of issue of the foundation-to-grade notice to proceed expected in September Building Permits. Goodwin House and APM submitted 60% construction document plans to the City of Alexandria on April 10, 2015 in order to obtain an initial building permit known as a foundation-to-grade ("FTG") permit to allow commencement of construction in advance of receiving the final building permit. The FTG permit is expected on September 15, 2015, with initial excavation and foundation phase projected to commence immediately thereafter. Final permit and bid documents are expected by early August 2015, with submission to the City and expected receipt of the final building permit in January This approach will allow for an advanced start of the mass excavation, the development of the deep foundations, parking garage and first floor while the balance of the A-19

78 permit is being processed, so that general construction can begin when the final building permit is issued, which is expected to occur in January Existing Building Improvements Construction Pricing. During the schematic design phase for the Existing Building Improvements, completed in March 2015, Goodwin House, Perkins Eastman, Vantage and APM (see "- Project Team," above) consulted to determine project goals and requirements, and establish the architectural program and required functions. APM and Vantage have developed detailed budget pricing in order to finalize the scope of work to be carried over into the design development and construction document phases. This set of estimates will include subcontractor input on mechanical, electrical and plumbing work in order to secure highly credible estimates that will be used to affirm the final budget. Contract Procurement. The bidding process is expected to commence in the third quarter of 2016 and will make use of a "guaranteed maximum price" contract process using 100% construction documents as the basis for the bid. APM will oversee all elements of the construction bidding process and the final contract negotiations with the selected general contractor. This process is expected to be complete by the end of the third quarter of 2016 and construction is expected to start in March Construction Schedule. The phasing strategy for the Existing Building Improvements will commence upon completion of the commissioning and occupancy of the Center of Excellence, expected in March, 2017, enabling the Existing Building Improvements work to be performed in vacated spaces and with full access for a more fluid construction project. The total estimated time to completion is six months, anticipated to occur in September The phased approach will reduce the overall construction process by six months, while mitigating cost and impact on staff and residents. Building Permits. APM is charged with submitting and securing building permits for the Existing Building Improvements portion of the Positioning. The permitting process will be organized by sub-projects, managed and running concurrently, but with each sub-project having its own process and delivery date. The anticipated subprojects are (1) the repurposing of the existing health care facilities and (2) the upgrading and improvement of dining and community spaces and the upgrading and improvement of service functions (see "- Components" above). Permit submissions to the City of Alexandria for the Existing Building Improvements will occur in September 2015, with permits expected to be received by January Summary of Project Budget The table below sets forth the total anticipated project costs for the Alexandria Positioning: Item Budgeted Cost Construction Costs Center of Excellence $37,935,875 Existing Building Improvements 13,215,546 FF&E, Technology & Other Hard Costs 4,257,064 Professional Fees (A/E, Project Management,) 8,351,154 Contingency 4,468,461 Total Project Costs $68,228,100 Certificate of Public Need and Zoning Approvals Certificate of Public Need. As a new licensed nursing care building, the Center of Excellence requires the approval of the Virginia Department of Health, Office of Licensure and Certification, evidenced by the issuance of a Certificate of Public Need ("COPN"). A-20

79 Goodwin House submitted its application for issuance of a non-competitive COPN on March 26, The Center of Excellence will not increase Goodwin House Alexandria's current licensure allotment of 80 nursing home beds, but instead will simply relocate its already existing allotment to a newly constructed building. Since Goodwin House is not proposing an increase in its licensed bed allotment, it expects to receive approval of its COPN application in the Department's review cycle beginning May 10, 2015, with issuance of the COPN anticipated by on or about September 8, City of Alexandria Zoning Approvals. Goodwin House has followed a two-step approval process to achieve the necessary zoning approvals for the Positioning from the City of Alexandria. First, Goodwin House in 2012 gained City approval for the inclusion of the Goodwin House Alexandria site in the Beauregard Small Area Plan (the City's master plan for the area within which Goodwin House Alexandria is located), with a designated senior housing overlay, thus preserving future Goodwin House senior housing development rights and creating the opportunity for the GHA Positioning program as well as subsequent development on the site. Second, Goodwin House secured in January 2015 unanimous City approval of its applications for the rezoning, preliminary site plan, and development special use permit (DSUP) approvals required to develop the Center of Excellence. The property also received Coordinated Development District approval, which preserves the right for future development on the site. Alternative Plan for Use of Bond Proceeds Goodwin House's ability to pursue the Positioning to completion is dependent upon a number of significant external events, or "externalities," including the following: Receipt of a COPN for the Center of Excellence from the Virginia Department of Health, expected on or about September 8, 2015 (see "- Certificate of Public Need and Zoning Approvals," above); Procurement of a GMP construction contract for the Center of Excellence with an experienced, bonded general contractor, expected on or about July 31, 2015 (see "- Construction Pricing, Procurement, Scheduling and Permits - Center of Excellence - Construction Pricing," and "- Center of Excellence Contract Procurement," above). Receipt of a FTG building permit for the Center of Excellence, expected September 15, 2015, followed by receipt of a full building permit, expected in January 2016 (see "- Construction Pricing, Procurement, Scheduling and Permits - Center of Excellence - Building Permit," above). Given the rigor with which it has pursued the planning and development of the Positioning, the capabilities and experience of the members of its project team (See "Project Team," above) and its previous record in working successfully with government agencies such as the Virginia Department of Health and the City of Alexandria, Goodwin House is highly confident that each of the referenced externalities will be resolved favorably within the current parameters and timeline for execution of the Positioning. In the event that Goodwin House is unable to secure or accomplish any of the described externalities, it has developed an alternative plan for the use of Series 2015 Bond proceeds for other specified capital purposes in a manner that would meet mission and strategic objectives, would sustain the validity and tax-exempt status of the Bonds and would not materially or adversely affect Goodwin House s financial performance. Under this alternative plan for the uses of Series 2015 Bond proceeds, Goodwin House would, upon the material failure or delay of any of the externalities described above, suspend the use of such proceeds for the Positioning and would re-direct the funds for the payment of capital uses to address identified capital, mission and strategic needs on the Goodwin House Alexandria campus (see "- Overview," "- Rationale" and "- Components" above). Such capital uses would include (a) additional structural and program improvements to the health care facilities in Goodwin House Alexandria s original buildings made necessary by continuing to locate its skilled nursing and memory care components in the existing facility; (b) the upgrading and improvement of dining and A-21

80 community spaces on the first floor of the original building; (c) upgrading and improvement of service functions in the original building; and (d) capital expenditures, physical plant improvements and other identified capital needs of the Goodwin House Alexandria community (collectively, the "Alternative Plan Capital Uses"). The Alternative Plan Capital Uses have been identified and reviewed with Bond Counsel for compliance with federal tax and state law constraints such that the use of bond proceeds for such capital expenditures should not adversely affect the validity or tax-exempt status of the Series 2015 Bonds, assuming that Goodwin House complies with all covenants set forth in its tax compliance agreement executed upon the issuance of the Series 2015 Bonds. In the event the Positioning is abandoned in favor of Alternative Plan Capital Uses, management believes that Goodwin House's financial performance would not be materially adversely affected. The Positioning is anticipated to be only moderately accretive to revenue (from the additional independent living and assisted living apartments in the Existing Building Improvements). While Goodwin House would lose the benefit of such accretive revenues and would have to absorb "sunk costs" in the Positioning upon the re-direction of expenditures to Alternative Plan Capital Uses, it would not contribute the $25 million in cash equity intended to support the Positioning construction. Balancing these factors, Goodwin House believes that its pro forma debt service coverage and liquidity metrics would be the same or slightly improved by the redirection of funds away from the Positioning to Alternative Plan Capital Uses. [The remainder of this page in intentionally left blank] A-22

81 MARKET AREA Primary Market Area for the Facilities Based on the origin of current residents, Goodwin House believes its primary market area (both independent living and assisted living) will continue to consist of the following Northern Virginia zip codes: 22003, 22041, 22042, 22044, 22046, 22202, 22203, 22204, 22205, 22206, 22207, 22301, 22302, 22304, 22305, 22310, 22311, and Goodwin House Alexandria expects to fill any vacant or newly created residential living units from its priority club list. This list has grown by more than 40 households in the past two years and numbers 192 households. Additionally, a number of applicants to Goodwin House at Home have decided either to move to a Goodwin House community or join its priority club. Goodwin House has learned from its Goodwin House at Home members and prospects that Goodwin House at Home membership is viewed as a strategic, potential bridge to eventual residence in a Goodwin House continuing care retirement community. Eligible Households in the Primary Market Area To qualify for residency in Goodwin House, a prospective resident generally must be at least 65 years of age, and demonstrate sufficient financial resources to pay the required entrance and monthly service fees and other expenses related to independent living not provided for in the resident contract. Prior to admission, Goodwin House reviews each prospective resident's individual information, on a case-by case basis, and may consider accepting persons who do not meet the criteria described above but can demonstrate other financial resources to pay the required entrance and monthly fees. The following table represents market research commissioned by Goodwin House in 2012 and projects the data through 2017, when the Alexandria Positioning is expected to be completed. The data includes income-eligible households for Goodwin House Alexandria within the primary market area. Age 65 to 74 Income Eligible Households 2012 (Estimated) 2017 (Projected) Income $75,000 and greater 23,618 33,934 Percentage of Income Eligible Households 51% 53% Age 75 and over Income $75,000 and greater 14,294 16,800 Percentage of Income Eligible Households 40.8% 43% Source: Nielsen. A-23

82 Market Area Real Estate Trends Goodwin House believes that the majority of its residents sell their current primary residence prior to moving to one of its communities. The following map summarizes real estate trends in the Northern Virginia market. The map directly correlates to the properties owned by members of Goodwin House's Priority Clubs. The February 2015 estimated median value of a home owned by a homeowner age 65 and over in Goodwin House's primary market area is $545,910 (an increase of 9.8% over 2014), as compared to a weighted average entrance fee of $279,788 for Goodwin House Alexandria apartments and $275,235 for Goodwin House Bailey's Crossroads apartments, respectively, in each case under a Standard Contract option. (See "Sources of Revenue" in "THE GOODWIN HOUSE COMMUNITIES" herein.) A-24