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R2002-0177 12-09-02RESOLUTION NO. 2002-177 RESOLUTION EXPRESSING THE CITY'S INTEREST IN PARTICIPATING IN A PROPOSED HOSPITAL PROJECT IN COOPERATION WITH DIVERS!FIF_,D MUNICIPAL FINANCE CORPORATION AND PEARLAND COMMUNITY HOSPITAL, SUBJECT TO CERTAIN PARAMETERS AND CONDITIONS; AND RESOLVING OTHER MATTERS RELATING THERETO STATE OF TEXAS § COUNTIES OF BR_AZORIA AND HARRIS § CITY OF PEARLAND § WHEREAS, Diversified Municipal Finance Corporation ("DMFC") and Pearland Community Hospital ("PCH") have proposed to the City Council (the "City Council") of the City of Pearland, Texas (the "City") to develop a 130-bed full service hospital (the "Project") to be located in the City and have further proposed a financing and operating structure /'or the Project that includes a lease-purchase agreement between DMFC and the City (the "Lease- Purchase Agreement") and a sublease of the Project by the City to PCH (the "Sublease Agreement"); WHEREAS, DMFC and PCtt have made certain representations regarding the Project to the City, including an analysis of the need for the Project and the necessity of the City's participation in the Project in order to facilitate the financing thereof; WHEREAS, DMFC and PCH have also represented to the City that the City would not have any legal, financial or other liability in connection with the Project and that repayment of any certificates of participation or other debt instruments (the "COPs") issued to finance the Project would be limited solely to the revenues of the Project; WHEREAS, DMFC and PCH have requested that the City Council express its willingness to participate in the Project, and the City Council desires to provide such an expression of interest subject to certain parameters and conditions set forth in this Resolution. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. Preamble. The facts and recitations contained in the preamble of this Resolution are hereby found and declared to be true and correct. Section 2. Description of Proposed Financing of the Proiect. DMFC and PCH have represented to the City that DMFC will arrange for the sale of its COPs through a placement agent or underwriter (the "Underwriter") and that the proceeds from the sale of the COPs will be used to (i)develop the Project, (ii)provide capitalized interest and reserve funds required in connection with the financing, and (iii) pay certain costs of issuance of the COPs. DMFC and PCH have further represented to the City that the proceeds from the sale of the COPs will not be HOU:2077612.4 sufficient to finance the purchase of equipment required to operate the Project and certain other start-up costs. DMFC and PCH have represented that such equipment and start-up costs will be financed through third-party financings (the "Equipment/Start-Up Financings"). Finally, during a presentation to City Council on October 14, 2002 (the "Council Presentation"), DMFC and PCH made additional representations to the City regarding the Project, including the following: (a) the consultants and third-parties selected to design, construct, acquire, operate and maintain the Project; (b) the approximate costs of the financing of the Project, including projected interest rates on the COPs and underwriters discount; and (c)the community need for and proposed location of the Project. Section 3. Non-Binding City Expression of Interest. By adoption of this Resolution, the City Council officially expresses its interest in the proposed Project and confirms that it will give strong consideration to the Project upon its satisfaction as to the parameters and conditions set forth in Exhibit A hereto. The City's expression of interest provided herein is intended to be of a non-binding nature, and the City's satisfaction as to the parameters and conditions is in the sole and exclusive discretion of the City Council. Upon presentation by DMFC and PCH to the City of a Project satisfying the parameters and conditions set forth in Exhibit A, the City Council of the City will give such Project strong consideration and may at such time agree to the City's participation in the Project; provided, however, the City will be under no legal obligation to participate in the Project at such time and may in its sole discretion determine not to do so. Section 4. Authorization of Other Matters Relating Thereto. The Mayor, City Manager and other officers, employees and agents of the City are hereby authorized and directed to do any and all things necessary or desirable to carry out this Resolution. Section 5. Effective Date. This Resolution shall take effect immediately upon passage. Section 6. Public Meeting. It is officially found, determined and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place and subject matter of the public business to be considered at such meeting, including this Resolution, was given all as required by the Texas Government Code, Chapter 551, as amended. PASSED AND APPROVED this 9thday of I)ecember ., 2002. Mayor City of Pearland, Texas ATTEST: ),~y of Fearland, Te HOU:20776124 EXHIBIT A PARAMETERS AND CONDITIONS REGARDING PROPOSAL BY DIVERSIFIED MUNICIPAL FINANCE CORPORATION AND PEARLAND COMMUNITY HOSPITAL GENERAL 1. As part of the required documentation for the Project and the financing, DMFC and PCH shall provide the City with a market analysis or Project feasibility study completed by a market analyst or feasibility consultant determining that the Project as proposed is feasible. Such market analyst or feasibility consultant shall be recognized in the field of financial and operations of non-profit community hospitals. 2. As part of the required documentation for the Project and the financing, DMFC and PCH shall provide substantiation that all participants in the development and financing of the Project are experienced and have appropriate credit histories and backgrounds. 3. The preliminary design and construction plans for the Project shall comply with applicable City, county, state and federal standards. FINANCIAL 1. The structure of the COP transaction is satisfactory to the City and the true interest cost on the COPs shall not exceed 9.5 %. 2. The costs of issuance of the COPs (including underwriter's compensation) shall not exceed 5 % of the principal amount of the COPs. Such percentage shall exclude financially prudent debt service reserves and capitalized interest. 3. The City shall be reimbursed for all of its actual and reasonable costs associated with its participation in the Project including, but not limited to, legal and financial advisory fees and expenses. Neither DMFC or PCH assumes any liability for the payment of any such costs if the Project is not funded. 4. As part of the required documentation for the Project and the financing, the City and its legal counsel and financial advisor shall review and approve all Placement Agent/Underwriter disclosure materials related to the sale of the COPs and the Project. 5. Review and approval by the City of the Equipment/Start-up Financings, including all documentation. 6. All of the other representations made to the City Council in the Council Presentation on October 14, 2002 shall be completed and substantiated to the satisfaction of the City Council. A-1 LEGAL 1. Review and approval by the City and its legal counsel of substantially final financing and operating documentation, including appropriate documentation clearly providing that the City has no financial or legal liability associated with the construction, development, financing or operation of the Project including, but not limited to, full and complete indemnification of the City, City Council and City staff and agents with regard to any and all aspects of the Project. 2. The documentation to be provided in connection with the Project and the financing shall not create any liens or encumbrances on any City assets or property in connection with the City's participation in the Project. 3. Confirmation to the City that all of the investment risks associated with an investment in the COPs have been adequately disclosed by the Placement Agent/Underwriter to investors. 4. All investors in the COPs will be required to provide an industry standard "investment letter" and DMFC and the Placement Agent/Underwriter will undertake to prohibit the secondary market sale of COPs to unsophisticated investors. A~2