Chester County Health and Education Facilities Authority

This Preliminary Official Statement and any information contained herein are subject to completion and amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2017A Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. * Preliminary, subjecttochange The dateofthisOfficial Statementis______,2017. or ofanypoliticalsubdivisionthereof.The Issuerhasnotaxingpower. deemed anobligationoftheCountyChester oroftheCommonwealthPennsylvania for thepaymentofSeries2017ABonds, norshalltheSeries2017ABondsbeor or theCommonwealthofPennsylvania or anypoliticalsubdivisionthereofispledged fully describedherein.Neitherthecredit northetaxingpowerofCountyChester Loan Agreementandfromcertainfunds heldundertheBondIndenture,allasmore solely frompaymentsmadebytheCorporation andreceivedbytheIssuerunder Dated: DateofDelivery NEW ISSUE:Book-EntryOnly to maturity.See“THESERIES2017ABONDS-RedemptionProvisions”herein. Series 2017ABondswhiletheybearinterestinanyotherratemode. 2017A BondsonlywhiletheybearinterestataLong-TermInterestRateandisnotintendedtoprovideinformationrelating tothe Term Rate,oranIndexedPutInterestRate.ThisOfficialStatementhasbeenpreparedforuseinconnectionwiththeofferingofSeries purchased inlieuofoptionalredemptionandeithercaseconvertedtobearinterestataDailyInterestRate,WeeklyBond Interest with theconditionssetforthinBondIndenture,Series2017ABondsmaturingafter______maybesubjecttomandatorytender ormaybe Official Statement.Onorafter______(whichisthefirstoptionalredemptiondateatpar),optionofCorporationandupon compliance for DTC,payableastointerestoneachApril1andOctober1,beginning2017. Beneficial OwnersoftheSeries2017ABonds. & Co.,asnomineeofDTC,istheBondholder,referenceshereintoBondholdersorregisteredownersshallmeanCedeCo.andnot meanthe thereof. Purchasers(“BeneficialOwners”)willnotreceivecertificatesrepresentingtheirbeneficialinterestintheSeries2017ABonds.So longasCede 2017A Bonds.Purchasesofbeneficialownershipinterestswillbemadeinbook-entryonlyformdenominations$5,000oranyintegral multiple as BondholderandnomineeforTheDepositoryTrustCompany(“DTC”),NewYork,York.DTCwillactSecurities theSeries successor MasterTrustee. Indenture datedasof______,2017(assupplemented,the“MasterIndenture”),betweenCorporationandU.S.BankNationalAssociation, as under an Amended and Restated Master Trust Indenture, dated as of November 1, 1997, as supplemented by a Tenth Supplement to the Master Trust ______, 2017(the“LoanAgreement”),betweentheIssuerandMainLineHealthSystem“Corporation”)aSeries2017AMasterNote, issued and securedequallybyanassignmenttotheBondTrusteeof,paymentsbereceivedIssuerpursuantaLoanAgreement, dated asof between theIssuerandU.S.BankNationalAssociation,as Bond Trustee(the “Bond Trustee”).The Series 2017ABondsarepayablesolelyfrom, Line HealthSystem),Series2017A(the“SeriesBonds”)pursuanttoaTrustIndenture,datedasof______,2017“Bond Indenture”) definitive formwillbeavailablefor deliverytoDTCinNewYork,onorabout______, 2017. Pennsylvania andfortheUnderwriter byitscounsel,SaulEwingLLP,Philadelphia,Pennsylvania.It isexpectedthattheSeries2017ABondsin for theCorporationbyitsSeniorVice PresidentandGeneralCounsel,BrianT.Corbett,Esq.,by its counsel,BallardSpahrLLP,Philadelphia, matters will be passed upon for the Issuer by its counsel, Lamb McErlane PC, West Chester, Pennsylvania. Certain legal matters will be passed upon and totheapprovaloflegality Series2017ABondsbyBallardSpahrLLP,Philadelphia,Pennsylvania, BondCounseltotheIssuer.Certainlegal entire OfficialStatement,includingtheAppendices,toobtain informationessentialtomakeaninformedinvestmentdecision. initial deliveryoftheSeries2017ABonds.See“TAXMATTERS”herein. tax andPennsylvaniacorporatenetincomeunderthelawsofCommonwealthasenactedconstruedondate exempt frompersonalpropertytaxesinPennsylvania,andtheinterestonSeries2017ABondsisPennsylvaniaincome may beindirectlysubjecttoalternativeminimumtaxundercircumstancesdescribed“TAXMATTERS”herein.TheSeries2017ABondsare purposes of either individualor corporate federal alternative minimum tax;however,interest paid tocorporateholders of theSeries 2017A Bonds assuming continuingcompliance with the requirements of thefederaltax laws. Interest on the Series 2017A Bondsisnot a preference item for The Series2017ABondswillbesubjecttooptional,extraordinaryandmandatoryredemptionpurchaseinlieuofoptional prior The Series2017ABondswillbearinterest,totheirrespectivematurities,attheLong-TermInterestRatessetforthoninsidecover of this Principal of,premium,ifany,andinterestontheSeries2017ABondswillbepaidbyBondTrusteetoCede&Co.,asBondholdernominee The Series2017ABondsareissuableasfullyregisteredbondswithoutcoupons,andwhenissued,willbeinthenameofCede & Co., The ChesterCountyHealthandEducationFacilitiesAuthority(the“Issuer”)isissuingits$105,500,000*SystemRevenueBonds(Main The Series2017ABondsareoffered bytheUnderwriter,subjecttopriorsale,withdrawalormodification ofsuchofferwithoutanynotice, This coverpagecontainscertaininformationforgeneralreference only.Itisnotasummaryofthisissue.Investorsmustreadthe The Series2017ABondsarespeciallimited obligationsoftheIssuerandarepayable In theopinionofBondCounsel,interestonSeries2017ABondsisexcludablefromgrossincomeforpurposesfederaltax, CHESTER COUNTY HEALTH AND EDUCATION FACILITIES AUTHORITY

PRELIMINARY OFFICIAL STATEMENT DATED JUNE 6, 2017 (Main LineHealthSystem),Series2017A Health SystemRevenueBonds $105,500,000* Citigroup Due: October1,*asshownoninsidecover (See “RATINGS”herein) Ratings: S&P:“AA” Moody’s: “Aa3” Fitch: “AA”

$105,500,000* CHESTER COUNTY HEALTH AND EDUCATION FACILITIES AUTHORITY Health System Revenue Bonds (Main Line Health System), Series 2017A

MATURITY SCHEDULE*

Year Principal Interest CUSIP (October 1) Amount Rate Yield Price Number† 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

$______% Term Bonds Due October 1, 2042; Yield: _____%; Price: ______; CUSIP ______†

$______% Term Bonds Due October 1, 2047; Yield: _____%; Price: ______; CUSIP ______†

$______% Term Bonds Due October 1, 2052; Yield: _____%; Price: ______; CUSIP ______†

* Preliminary, subject to change. † The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the Issuer, the Corporation or the Underwriter, and such parties are not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refundings or defeasance of such issue or the use of secondary market financial products. None of the Issuer, the Corporation or the Underwriter has agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction in the CUSIP numbers set forth above.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2017A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information in this Official Statement has been obtained from the Issuer, the Corporation and other sources considered to be reliable. Such information is not guaranteed as to accuracy or completeness and is not to be considered as a representation by the Underwriter. The Issuer neither has nor assumes any responsibility as to the accuracy or completeness of the information in this Official Statement, other than that under the headings “INTRODUCTORY STATEMENT – The Issuer”, “THE ISSUER” and “LITIGATION – The Issuer.” All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized. No dealer, broker, salesman or other person has been authorized by the Issuer, the Corporation or the Underwriter to give any information or to make any representation with respect to the Series 2017A Bonds, other than those contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Series 2017A Bonds, by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein relative to The Depository Trust Company (“DTC”) has been supplied by DTC for inclusion herein. Such information has not been independently verified by the Issuer, the Corporation or the Underwriter and none of the Issuer, the Corporation or the Underwriter makes any representation as to the accuracy or completeness of such information. The Series 2017A Bonds have not been registered under the Securities Act of 1933, nor have the Bond Indenture or the Master Indenture been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Series 2017A Bonds in accordance with applicable provisions of securities laws of the states in which the Series 2017A Bonds have been registered or qualified and the exemption from registration or qualification in the other states cannot be regarded as a recommendation thereof. The Series 2017A Bonds have not been recommended by any federal or state securities commission or regulatory authority. Any representation to the contrary may be a criminal offense. In making an investment decision investors must rely on their own examination of the terms of the offering, including the merits and risks involved. If and when included in this Official Statement, the words “expects,” “forecasts,” “projects,” “intends,” “anticipates,” “estimates,” “assumes” and analogous expressions are intended to identify forward-looking statements and such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties include, among others, changes in economic conditions and various other events, conditions and circumstances, many of which are beyond the control of the Corporation or the Issuer. Such forward-looking statements speak only as of the date of this Official Statement. The Corporation and the Issuer disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in the expectations of the Corporation or the Issuer with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The order and placement of material in this Official Statement, including the Appendices hereto, are not to be deemed a determination of relevancy, materiality or importance and this Official Statement, including the Appendices hereto, must be reviewed and considered in its entirety. No quotations from or summaries or explanations of provision of law and documents herein purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions.

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TABLE OF CONTENTS

INTRODUCTORY STATEMENT ...... 1 The Issuer ...... 1 The Corporation and the System ...... 1 Purpose of the Series 2017A Bonds ...... 2 Other Financing Plans ...... 2 The Master Indenture ...... 2 Obligated Group Affiliates, Contribution Agreement and System Affiliation Agreement ...... 3 Source of Payment and Security for the Series 2017A Bonds ...... 4 Limited Financial Covenants of the Corporation ...... 5 Concerning this Official Statement ...... 6 THE ISSUER ...... 6 Chester County Health and Education Facilities Authority ...... 6 Limited Obligations ...... 7 PLAN OF FINANCE ...... 7 ESTIMATED SOURCES AND USES OF FUNDS ...... 8 DEBT SERVICE REQUIREMENTS OF THE CORPORATION ...... 9 THE SERIES 2017A BONDS ...... 10 General ...... 10 Conversion to Another Interest Rate ...... 10 Registration and Transfer ...... 11 Redemption Provisions ...... 11 BOOK-ENTRY ONLY SYSTEM ...... 14 SECURITY FOR THE SERIES 2017A BONDS ...... 16 General ...... 16 Issuer Not Generally Liable on the Series 2017A Bonds ...... 17 The Loan Agreement ...... 17 The Series 2017A Master Note; No Collateral Security ...... 17 The Master Indenture ...... 17 Contribution Agreement ...... 18 Obligated Group Affiliates ...... 19 Substitution of Master Note ...... 20 BONDHOLDERS’ RISKS ...... 20 General ...... 20 Dependence on Obligated Group Affiliates ...... 21 Discretion of Board and Management ...... 22 Joint Operating Agreements and Joint Ventures ...... 23 Series 2017A Master Note is Unsecured ...... 23 Voting Control Under Bond Indenture and Master Indenture ...... 23 Matters Relating to Enforceability of the Master Indenture ...... 23 Bond Ratings ...... 24 Market for the Bonds ...... 24 Possible Future Legislation ...... 24 Health Care Industry Factors Affecting the Corporation and the Obligated Group Affiliates ...... 25 Challenges to the Health Care Reform Act ...... 25 Overview of Medicare and Medicaid Program ...... 27 Medicare Reimbursement ...... 27 Medicaid Reimbursement ...... 34 Exclusions from Medicare and Medicaid Participation...... 36 Commercial Insurance ...... 37

Managed Care Plans: HMO, PPO, EPO and High Deductible Plans ...... 37 Commercial Coverage Reimbursement ...... 37 Independence Blue Cross ...... 38 Health Plan Financial Pressure and Insolvency ...... 38 Physician Contracting and Relations ...... 38 The Fraud and Abuse Laws...... 38 Exposure to Liability ...... 41 Medical Professional Liability Insurance Market ...... 42 Emergency Medical Treatment and Active Labor Act ...... 42 Health Insurance Portability and Accountability Act ...... 42 Electronic Health Record Incentive Program ...... 43 Affiliation, Merger, Acquisition and Divestiture ...... 44 Other Legislative and Regulatory Actions ...... 44 Charity Care ...... 45 Tax Exemption for Nonprofit Corporations ...... 45 Federal Income Tax Exemption; IRS Audits and Penalties ...... 46 Legislation Affecting Tax Exempt Status of Interest on the Bonds ...... 47 Local Governmental Challenges to Property-Tax Exemptions ...... 47 Environmental Matters ...... 47 Interest Rate Swap Risk ...... 48 Certain Indebtedness Subject to Tender ...... 48 Potential Effects of Bankruptcy ...... 49 Corporate Compliance Program ...... 49 Antitrust ...... 50 Risks Specific To Mirmont Alcohol Rehabilitation Center ...... 50 Certain Other Risks ...... 50 CONTINUING DISCLOSURE ...... 52 LITIGATION ...... 52 The Issuer ...... 52 The Corporation ...... 52 TAX MATTERS ...... 53 Federal Tax Matters ...... 53 Pennsylvania Tax Matters ...... 53 Changes in Federal and State Tax Law ...... 54 CERTAIN LEGAL MATTERS...... 54 VERIFICATION OF MATHEMATICAL COMPUTATIONS ...... 54 FINANCIAL ADVISOR ...... 55 INDEPENDENT ACCOUNTANTS ...... 55 RATINGS ...... 55 UNDERWRITING ...... 55 OTHER MATTERS ...... 56

APPENDIX A Information Concerning Main Line Health System APPENDIX B Audited Consolidated Financial Statements of Main Line Health System for the years ended June 30, 2016 and 2015 APPENDIX C Summaries of Principal Documents APPENDIX D Proposed Form of Continuing Disclosure Agreement APPENDIX E Proposed Form of Bond Counsel Opinion

OFFICIAL STATEMENT

$105,500,000* CHESTER COUNTY HEALTH AND EDUCATION FACILITIES AUTHORITY Health System Revenue Bonds (Main Line Health System), Series 2017A

INTRODUCTORY STATEMENT

This Official Statement is provided to furnish prospective investors with information concerning the offering by the Chester County Health and Education Facilities Authority (the “Issuer”) of $105,500,000* Health System Revenue Bonds (Main Line Health System), Series 2017A (the “Series 2017A Bonds” or the “2017A Bonds”). The Series 2017A Bonds are being issued pursuant to a Trust Indenture (the “Bond Indenture”), dated as of ______, 2017, between the Issuer and U.S. Bank National Association, Philadelphia, Pennsylvania, as bond trustee (the “Bond Trustee”).

The Issuer

The Issuer is a body politic and corporate organized and existing under the Municipalities Authorities Act of the Commonwealth of Pennsylvania, as amended and supplemented (the “Act”). The Issuer is authorized under the Act, among other things, to finance or refinance buildings and facilities for health care organizations. The Series 2017A Bonds are being issued under the Act pursuant to a resolution of the Issuer adopted on May 17, 2017 (the “Resolution”) and pursuant to the Bond Indenture.

The Series 2017A Bonds are special, limited obligations of the Issuer and are payable solely from payments made by the Corporation and received by the Issuer under the Loan Agreement and from certain funds held under the Bond Indenture, all as more fully described herein. Neither the general credit of the Issuer nor the taxing power of Chester County or the Commonwealth of Pennsylvania or of any political subdivision of either of them is pledged for payment of the principal or redemption price of, or the interest on the Series 2017A Bonds, nor shall the Series 2017A Bonds be deemed an obligation of Chester County or the Commonwealth of Pennsylvania or of any political subdivision of either of them. The Issuer has no taxing power.

The Corporation and the System

Main Line Health System (the “Corporation” or “MLHS”), a Pennsylvania nonprofit corporation, is the parent of a system of health care organizations (the “System”) serving Chester County, Montgomery County, Delaware County and the western portion of the City of Philadelphia, Pennsylvania.

The Corporation’s affiliates are referred to in this Official Statement as the “MLHS Organizations.” Certain of the MLHS Organizations are subject to the control of MLHS, in its capacity as a Controlling Member of the Obligated Group pursuant to the Master Indenture, as described below. These MLHS Organizations are referred to as “Obligated Group Affiliates.” The Obligated Group Affiliates have entered into an Amended and Restated Contribution Agreement (the “A&R Contribution Agreement” as more fully described below under the caption “Obligated Group Affiliates, Contribution Agreement and System Affiliation Agreement”) by which the Obligated

* Preliminary, subject to change.

Group Affiliates agree, jointly and severally, to transfer to the Corporation, or to such person as the Corporation designates, amounts as may be required by the Corporation to provide funds for, among other purposes, the payment of debt service on the Series 2017A Bonds. As of the expected date of issuance of the Series 2017A Bonds, the Obligated Group Affiliates will include the following MLHS Organizations, all of which are Pennsylvania nonprofit corporations:

• Main Line Health, Inc. (“Main Line Health”) • Main Line Hospitals, Inc. (“Main Line Hospitals”) • Mirmont Alcohol Rehabilitation Center (“Mirmont”) • Riddle Memorial Hospital (“Riddle Memorial Hospital”)

None of the Obligated Group Affiliates is directly obligated to make payments under the Loan Agreement (as defined below) or to pay the principal or redemption price of, or interest on, the Series 2017A Bonds. The A&R Contribution Agreement provides the Corporation with a contractual basis to enable it to meet its obligations under the Master Indenture as described in this Official Statement. See APPENDIX A for additional information on the Corporation and the System. See APPENDIX B for audited consolidated financial statements of the System for the years ended June 30, 2016 and 2015.

Purpose of the Series 2017A Bonds

The proceeds of the Series 2017A Bonds are to be loaned by the Issuer to the Corporation under the terms of a Loan Agreement, dated as of ______, 2017 (the “Loan Agreement”). The Corporation is to use the Series 2017A Bond proceeds for: (i) constructing, acquiring, renovating and equipping health care and related facilities of Bryn Mawr Hospital in Bryn Mawr, Lower Merion Township, Montgomery County, Pennsylvania, (ii) constructing, acquiring, renovating and equipping health care and related facilities of Lankenau Medical Center in Wynnewood, Lower Merion Township, Montgomery County, Pennsylvania, (iii) advance refunding a portion of the Issuer’s Health System Revenue Bonds (Jefferson Health System), Series 2010A (the “Series 2010A Bonds”) which were issued for the benefit of the Corporation and certain of its affiliated organizations, and (iv) paying the costs and expenses incurred in connection with the issuance of the Series 2017A Bonds (collectively, the “Project”). See the information under the captions “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS.”

Other Financing Plans

Concurrently with, or shortly after or before the issuance of the Series 2017A Bonds, the Corporation expects the Issuer to issue its Health System Revenue Bonds (Main Line Health System), Series 2017B (the “Series 2017B Bonds”) in the approximate amount of $33,000,000 to (i) advance refund a portion of the Series 2010A Bonds and (ii) fund the costs and expenses incurred in connection with the issuance of the Series 2017B Bonds. The Series 2017B Bonds are expected to be directly purchased by a commercial bank.

The Corporation will issue Master Notes under the Master Indenture to evidence its obligations to repay the Series 2017A Bonds and the Series 2017B Bonds.

The Master Indenture

The Corporation entered into an Amended and Restated Master Trust Indenture, dated as of November 1, 1997 (the “Master Indenture”), with U.S. Bank National Association, as successor master trustee (the “Master Trustee”). The Master Indenture provides for the issuance from time to time of debt

obligations (the “Master Obligations”) by “Members.” The Corporation is a Member within the meaning of the Master Indenture. The Master Indenture defines “Obligated Group” to mean all Members. The Corporation is the only Member with respect to the Master Obligation securing the Series 2017A Bonds.

Obligated Group Affiliates, Contribution Agreement and System Affiliation Agreement

The Corporation is currently the only Member of the Obligated Group. The Corporation also acts as the Obligated Group Representative under the Master Indenture and has designated itself as the Controlling Member for each Obligated Group Affiliate. The Master Indenture requires that the Corporation, as Controlling Member, shall either (i) maintain, directly or indirectly, corporate control of the Obligated Group Affiliate or (ii) enter into a contract with the Obligated Group Affiliate, which, in either case (i) or (ii), shall be sufficient to cause the Obligated Group Affiliate to comply with the terms of the Master Indenture. As Obligated Group Representative, the Corporation also designates each Obligated Group Affiliate.

Contribution Agreement. In connection with the issuance of the Series 2017A Bonds and the Series 2017B Bonds (collectively, the “Series 2017 Bonds”), the Corporation will enter into a Second Amendment to the Amended and Restated Contribution Agreement dated as of ______, 2017 (the “Second Amendment to Contribution Agreement” and, together with the A&R Contribution Agreement, the “Contribution Agreement”) with Main Line Health, Main Line Hospitals, Mirmont and Riddle Memorial Hospital.

Under the Contribution Agreement, the Obligated Group Affiliates consent to their designation as Obligated Group Affiliates under the Master Indenture and agree to transfer to the Corporation, or such person as the Corporation designates, such amounts as the Corporation may require of them to pay the principal of and interest on the Master Obligations securing the outstanding bonds, which after the issuance of the Series 2017 Bonds will be: the portion of the Series 2010A not refunded by the Series 2017A Bonds or the Series 2017B Bonds; the Montgomery County Industrial Development Authority Health System Revenue Bonds (Jefferson Health System), Series 2012A (the “Series 2012A Bonds”); the Issuer’s Health System Revenue Bonds (Main Line Health System), Series 2015 (the “Series 2015 Bonds”); the Series 2017A Bonds; and the Series 2017B Bonds, when and if issued.

In addition, each Obligated Group Affiliate agrees in the Contribution Agreement to take all action which the Corporation may require of them to comply with the provisions of the Master Indenture and the Master Obligations, including without limitation, compliance with all requests of the Corporation pursuant to the provisions of the Master Indenture that require the Corporation to cause the Obligated Group Affiliates to take, or refrain from taking, specified actions. Each Obligated Group Affiliate agrees, jointly and severally, to transfer to (or to the order of) the Corporation such amounts as may be requested to pay debt service on all outstanding Master Indenture Obligations, including the Series 2017A Master Note (as defined below). To the extent that the Obligated Group Affiliate controls other entities (whether directly or indirectly through the ownership of voting stock, corporation membership, reserved powers, including, without limitation, the power to elect or approve members of boards of directors or trustees, or through contract), the Obligated Group Affiliate agrees to cause such entities to transfer to (or upon the order of) the Obligated Group Affiliate, amounts, and to take or refrain from taking such actions, as will enable the Obligated Group Affiliate to comply with the provisions of the Contribution Agreement.

NONE OF THE OBLIGATED GROUP AFFILIATES IS DIRECTLY OBLIGATED TO PAY THE PRINCIPAL OF OR INTEREST ON THE SERIES 2017A BONDS.

System Affiliation Agreement. The Contribution Agreement provides the Corporation with a contractual basis for meeting the requirements of a Controlling Member under the Master Indenture. In addition, the Corporation exercises direct or indirect corporate controls with respect to the Obligated Group Affiliates and the MLHS Organizations pursuant to the Amended and Restated Affiliation Agreement dated as of June 30, 2014 (as amended in connection with the issuance of the 2017 Bonds, the “System Affiliation Agreement”) which describes the relationship between and among the Corporation, the Obligated Group Affiliates and the other MLHS Organizations and contains provisions relating to the governance of the Obligated Group Affiliates and the other MLHS Organizations. The System Affiliation Agreement does not limit the ability of the Corporation to enforce its rights under the Contribution Agreement. See APPENDIX A for additional information on the governing relationship of the Corporation and the MLHS Organizations.

The Obligated Group Affiliates have granted liens to the Corporation on substantially all of their assets and revenues to secure their obligations to the Corporation under the System Affiliation Agreement. These liens run only to the Corporation and are not enforceable by the Bond Trustee or any holder of the Series 2017A Bonds.

As of the date hereof, Main Line Health is the sole Institution under the System Affiliation Agreement. The other Obligated Group Affiliates as of the date hereof (Main Line Hospitals, Mirmont and Riddle Memorial Hospital) are considered part of the Institution System comprised of Main Line Health and its related Hospitals and other Affiliates.

Institutions may be removed from the System upon the occurrence of certain events. In addition, any Institution may voluntarily withdraw from the System without cause effective July 1, 2022 by providing notice of its intent to do so by July 1, 2020.

The System Affiliation Agreement provides that if a withdrawing Institution timely sends a withdrawal notice as described in the System Affiliation Agreement, the Corporation and each Institution shall use its best efforts to refinance or discharge, on or before the voluntary withdrawal date: (i) all System Debt allocated to such Institution; (ii) all of such Institution’s Cross-Obligated Institution Debt; and (iii) all secured loans made to such Institution by the other Institutions (collectively, “Allocated Debt”). Following the voluntary withdrawal, each Institution exclusively shall be liable for its Allocated Debt and neither the Corporation nor any other Institution shall be liable therefor. Upon the refinancing or discharge of each Institution's Allocated Debt, the Corporation shall cause itself to dissolve.

If an Institution fails to repay or discharge its Allocated Debt on or before the date of voluntary withdrawal without cause as provided above, the System Affiliation Agreement provides certain remedies to the Corporation and the other Institutions on an escalating basis, which include, but are not limited to, the Corporation’s reserved power and authority to take such actions as may be necessary and appropriate to refinance and discharge such Institution’s Allocated Debt.

See APPENDIX C for definitions of capitalized terms referenced above that appear in the System Affiliation Agreement.

Source of Payment and Security for the Series 2017A Bonds

The Series 2017A Bonds are special limited obligations of the Issuer payable solely from the payments to be made by the Corporation on the Series 2017A Master Note and certain other payments and investment earnings described in the Bond Indenture and the Loan Agreement. Prospective investors should regard the payments on the Series 2017A Master Note to be the sole source of payment for the

Series 2017A Bonds. The Series 2017A Master Note is a direct, general unsecured obligation of the Corporation. An owner of the Series 2017A Master Note would be of the same rank as an unsecured general creditor of the Corporation.

To evidence its obligation to repay the borrowing under the Loan Agreement, the Corporation will issue a Master Obligation under the Master Indenture having the same principal amount respectively as the Series 2017A Bonds (the “Series 2017A Master Note”). The aggregate of the scheduled payments of principal of and interest on the Series 2017A Master Note is sufficient to pay, when due, the principal of and interest on the Series 2017A Bonds.

The Corporation has no substantial operating assets or operating revenues of its own. Its ability to pay the Series 2017A Master Note is completely dependent upon the Contribution Agreement and the exercise of its direct and indirect corporate control over the Obligated Group Affiliates to provide it with the necessary revenues. No Obligated Group Affiliate will be directly obligated under the Loan Agreement, the Master Indenture or the Series 2017A Master Note.

The Series 2017A Bonds are special limited obligations of the Issuer and are payable solely from the sources referred to in the Bond Indenture. Neither the credit nor the taxing power of the County of Chester or the Commonwealth of Pennsylvania or any political subdivision thereof is pledged for the payment of the Series 2017A Bonds, nor shall the Series 2017A Bonds be or be deemed an obligation of the County of Chester or of the Commonwealth of Pennsylvania or of any political subdivision thereof. The Issuer has no taxing power.

By the terms of the Master Indenture, the Corporation agrees to exercise all control or rights it may have with respect to the Obligated Group Affiliates, including enforcement of the Contribution Agreement, to cause the Obligated Group Affiliates to pay, loan or otherwise transfer to the Corporation such amounts as are necessary to duly and punctually pay the principal of, premium, if any, and interest on all outstanding Master Obligations, including the Series 2017A Master Note, on the dates, at the times, at the places and in the manner provided in the Master Obligations and the Master Indenture, when and as the same become payable, whether at maturity, upon call for redemption, by acceleration of maturity or otherwise.

The Series 2017A Bonds are not secured by a debt service reserve fund.

For more detailed information regarding the security for the Series 2017A Bonds, and risk factors related thereto, see the material under the captions “SECURITY FOR THE SERIES 2017A BONDS” and “BONDHOLDERS’ RISKS.”

Limited Financial Covenants of the Corporation

The Master Indenture contains very few provisions which limit the discretion of the Board of Trustees and management of the Corporation in governing the Corporation and Obligated Group Affiliates, managing their growth and conducting their business. For example, the Master Indenture contains no limitations on the amount of additional indebtedness that may be incurred by the Corporation or any Obligated Group Affiliate and does not require the Corporation or any Obligated Group Affiliate to demonstrate compliance with any earnings, capitalization or other financial test as a condition to the incurrence of additional indebtedness or to transfer cash or operating assets to unrelated entities. The Master Indenture contains no substantial limitations on the transfer of assets by the Corporation or any Obligated Group Affiliate or on entering into a merger, consolidation, asset transfer or similar transaction with any third parties. See “SECURITY FOR THE SERIES 2017A BONDS” and “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE” in APPENDIX C.

Concerning this Official Statement

This Official Statement includes the cover page, the inside cover page and the Appendices. The descriptions and summaries of the various legal documents described in this Official Statement do not purport to be comprehensive or definitive. Reference is made to each such legal document for the complete details of its terms and conditions. See APPENDIX C for definitions of capitalized terms and summaries of certain provisions of the Master Indenture, the Bond Indenture and the Loan Agreement.

THE ISSUER

Chester County Health and Education Facilities Authority

The Issuer is a body corporate and politic organized under the Act pursuant to a resolution of the Commissioners of Chester County, Pennsylvania. The Certificate of Incorporation of the Issuer was issued by the Secretary of the Commonwealth on September 21, 1972.

The governing body of the Issuer is a Board consisting of seven members appointed by the Board of Commissioners of Chester County, Pennsylvania. The terms of the members of the Board are staggered so that the term of at least one member expires each year. Members of the Board may be reappointed. The Board is authorized to exercise any and all powers conferred by the Act necessary for the financing and refinancing of construction of capital improvements. The current board members of the Issuer are shown below:

Dr. Thomas W. Clapper Chair Kathleen M. Pearse Treasurer W. Todd Reider Assistant Secretary/Treasurer Linda G. Trabucco Vice Chair Robert W. Thomas Vice Chair Arnold Kring Secretary Michael Kichline Assistant Secretary/Treasurer

The Issuer will have no responsibility for management or operation of the Project or the Corporation. The Series 2017A Bonds are limited obligations of the Issuer as described herein.

The Issuer has no taxing power and no source of funds for payment of the Series 2017A Bonds, other than the underlying contractual obligations made by or on behalf of the Corporation.

The Issuer does not and will not in the future monitor the financial condition of the Corporation or otherwise monitor the payment of the Series 2017A Bonds or compliance with the documents relating thereto. The Issuer will rely entirely upon the Bond Trustee and the Corporation to carry out their respective responsibilities under the Bond Indenture and the Loan Agreement. The Issuer has assets and may obtain additional assets in the future. However, such assets are not pledged to secure payment of the Series 2017A Bonds, and the Issuer has no obligation nor expectation of making such assets subject to the lien of the Bond Indenture.

The Issuer has not participated in the preparation of this Official Statement and neither the Issuer nor its independent contractors have furnished, reviewed, investigated or verified the information contained in this Official Statement other than the information contained in this section and in the section entitled “LITIGATION — The Issuer”. The Issuer has determined that no financial or operating data concerning the Issuer is material to any decision to purchase, hold or sell the Series 2017A Bonds, and the Issuer will not provide any such information. The Issuer has not, and will not

undertake any responsibilities to provide continuing disclosure with respect to the Series 2017A Bonds or the security therefor, and the Issuer will have no liability to holders of the Series 2017A Bonds with respect to any such disclosures.

Limited Obligations

Neither the general credit of the Issuer nor the credit or taxing power of Chester County or the Commonwealth of Pennsylvania or of any political subdivision of either of them is pledged for payment of the principal or redemption price of, or the interest on the Series 2017A Bonds, nor shall the Series 2017A Bonds be deemed an obligation of Chester County or the Commonwealth of Pennsylvania or of any political subdivision of either of them. The Issuer has no taxing power.

The Issuer has issued and has outstanding other issues of revenue bonds. However, none of such issues are payable from the revenues or secured by property pledged for the payment and security of the Series 2017A Bonds. The Issuer may continue to issue other series of bonds for the purpose of financing other projects, which other series of bonds will be secured by and be payable from the revenues of such other projects.

PLAN OF FINANCE

Capital Projects. The Corporation intends to use a portion of the Series 2017A Bond proceeds for constructing, acquiring, renovating and equipping health care and related facilities of Bryn Mawr Hospital in Bryn Mawr, Lower Merion Township, Montgomery County, Pennsylvania, including a portion of the costs of the construction of a new 257,000 square foot patient pavilion, which is expected to contain newly constructed private rooms, an intensive care unit and acute inpatient care units, and house Bryn Mawr Hospital’s maternity program, including labor and delivery rooms, postpartum beds, birthing suites and a Level III neonatal intensive care unit.

Additionally, the Corporation intends to use a portion of the Series 2017A Bond proceeds for constructing, acquiring, renovating and equipping health care and related facilities of Lankenau Medical Center in Wynnewood, Lower Merion Township, Montgomery County, Pennsylvania including the expansion and renovation of the Emergency Department to increase patient treatment capacity, improve service efficiency, reduce patient wait times, expand imaging and other ancillary service capabilities and accommodate the recently established Level II trauma program. See APPENDIX A for additional information on the capital projects being financed by the Series 2017A Bonds.

Refunding Program. Simultaneously with the issuance of the Series 2017A Bonds, the Issuer, the Bond Trustee (as Escrow Agent) and the Corporation will enter into an Escrow Deposit Agreement (the “Escrow Deposit Agreement”) to provide for the advance funding of a portion of the Series 2010A Bonds. Certain proceeds of the Series 2017A Bonds will be held as uninvested cash and/or used to purchase certain securities, the maturing principal of and interest on which, together with uninvested cash, if any, held under the Escrow Deposit Agreement, will be sufficient to pay the principal and interest due on the Series 2010A Bonds being advance refunded through and including their call date of May 15, 2020, and to redeem the Series 2010A Bonds being advance refunded on their call date at a redemption price of 100% of the principal amount redeemed. See also “VERIFICATION OF MATHEMATICAL CALCULATIONS” herein.

The Series 2017B Bonds. Concurrently with or shortly before or after the issuance of the Series 2017A Bonds, the Corporation expects the Issuer to issue the Series 2017B Bonds, the proceeds of which will be used to advance refund a portion of the Series 2010A Bonds and pay costs and expenses of issuing the Series 2017B Bonds. See “INTRODUCTORY STATEMENT — Other Financing Plans” herein.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated proceeds of the Series 2017A Bonds (exclusive of investment earnings) and the estimated uses of such funds are shown below:

Sources Par Amount of 2017A Bonds [Net] Original Issue Premium/Discount

Uses Project Fund Deposit Escrow Fund Deposit for Series 2010A Bonds Costs of Issuance *

______*Costs of Issuance includes items such as Underwriter’s discount, fees and expenses of various counsel, rating agency fees, bond issuance charges, financial advisor fees, verification agent charges, independent accountant fees, Bond Trustee and Master Trustee fees and a rounding amount.

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DEBT SERVICE REQUIREMENTS OF THE CORPORATION

The following table sets forth the schedule of the estimated annual debt service requirements on existing indebtedness of the Corporation subsequent to the issuance of the Series 2017A Bonds and the Series 2017B Bonds.(1) Fiscal Year Series 2017B Total Debt Ending Series 2017A Direct Purchase Existing Service (June 30) Bonds Debt Service (2) Debt Service (3) Requirements Principal Interest 2018 $3,766,943 $1,086,805 $11,299,469 $16,153,217 2019 5,256,200 1,074,774 11,333,774 17,664,748 2020 $610,000 5,247,050 1,077,678 10,668,858 17,603,586 2021 635,000 5,225,200 4,050,521 7,697,280 17,608,001 2022 665,000 5,195,875 4,047,610 7,697,630 17,606,115 2023 700,000 5,161,750 4,053,798 7,797,549 17,713,097 2024 735,000 5,125,875 2,562,962 9,393,963 17,817,800 2025 770,000 5,088,250 2,564,416 9,392,264 17,814,930 2026 810,000 5,048,750 2,566,465 9,503,527 17,928,742 2027 855,000 5,007,125 2,572,207 9,506,167 17,940,500 2028 895,000 4,963,375 2,562,616 9,514,210 17,935,202 2029 945,000 4,917,375 2,566,179 6,866,634 15,295,188 2030 990,000 4,869,000 2,564,850 6,878,451 15,302,300 2031 1,040,000 4,818,250 4,658,527 5,034,067 15,550,843 2032 5,880,000 4,645,250 5,036,396 15,561,646 2033 6,180,000 4,343,750 5,037,146 15,560,896 2034 6,500,000 4,026,750 5,038,396 15,565,146 2035 6,830,000 3,693,500 5,034,896 15,558,396 2036 7,185,000 3,343,125 5,041,304 15,569,429 2037 7,550,000 2,974,750 5,035,817 15,560,567 2038 7,935,000 2,587,625 5,039,146 15,561,771 2039 8,345,000 2,180,625 5,034,396 15,560,021 2040 8,770,000 1,752,750 5,041,225 15,563,975 2041 1,720,000 1,490,500 15,741,179 18,951,679 2042 1,805,000 1,402,375 15,730,817 18,938,192 2043 1,900,000 1,309,750 11,534,385 14,744,135 2044 1,995,000 1,212,375 11,561,842 14,769,217 2045 2,100,000 1,110,000 11,593,985 14,803,985 2046 2,205,000 1,002,375 3,207,375 2047 2,320,000 889,250 3,209,250 2048 2,435,000 770,375 3,205,375 2049 2,560,000 645,500 3,205,500 2050 2,695,000 514,125 3,209,125 2051 2,830,000 376,000 3,206,000 2052 2,975,000 230,875 3,205,875 2053 3,130,000 78,250 3,208,250 TOTAL $105,495,000 $110,270,893 $38,009,409 $234,084,771 $487,860,073 (1) Preliminary, subject to change. (2) Debt service on the Series 2017B Bonds assumes a fixed interest rate of 1.90%. The Series 2017B Bonds are subject to tender by the holder thereof on July 1, 2027, unless an extension is mutually agreed upon by the holder thereof and the Corporation. (3) Excludes debt service on the portion of the Series 2010A Bonds expected to be refunded. Includes debt service on the Series 2012A Bonds, the Series 2015 Bonds and the remaining portion of the Series 2010A Bonds not being refunded. The Series 2015 Bonds bear interest at a variable rate; for purposes of the schedule above, interest was assumed at a rate of 2.50%.

THE SERIES 2017A BONDS

This Official Statement summarizes certain terms of the Series 2017A Bonds only while the Series 2017A Bonds bear interest at the initial Long-Term Interest Rate. From and after the first date on which the Series 2017A Bonds are subject to optional redemption at par, the Series 2017A Bonds may be converted to bear interest at a different Interest Rate or to another Long-Term Interest Rate. Upon any such conversion, the Series 2017A Bonds may be purchased in lieu of redemption or be subject to mandatory tender. In either case, if the Series 2017A Bonds are converted to bear interest at a different Interest Rate or to another Long-Term Interest Rate, a new official statement or other disclosure document will be prepared.

General

The Series 2017A Bonds will be issued only in fully registered form in denominations of $5,000 and integral multiples thereof. The Series 2017A Bonds will bear interest at the Long-Term Interest Rate until converted to another Interest Rate and will mature in the amounts and on the dates set forth on the inside front cover page hereof. The Series 2017A Bonds will bear interest (based on a 360-day year of twelve 30-day months) from the date of their issuance, payable on April 1 and October 1 of each year, commencing October 1, 2017. The Series 2017A Bonds, as initially issued, will be dated their date of delivery. On or after ______(which is the first date on which the Series 2017A Bonds may be redeemed at the option of the Corporation at par), at the option of the Corporation, the Series 2017A Bonds maturing after ______may be subject to mandatory tender or purchased in lieu of optional redemption and in either case converted to bear interest in another Interest Rate mode as described below under “- Conversion to Another Interest Rate.” All of the Series 2017A Bonds shall bear interest in the same Interest Rate mode at any given time.

For a description of the method of payment of principal, premium, if any, and interest on the Series 2017A Bonds and matters pertaining to transfers and exchanges while registered in the name of Cede & Co., see “BOOK ENTRY ONLY SYSTEM” below.

In the event the Book-Entry Only System is discontinued, the following provisions would apply. Principal of and premium, if any, on the Series 2017A Bonds will be payable at the principal corporate trust office of the Bond Trustee, upon presentation and surrender of the Series 2017A Bonds or, with respect to any registered owner of $1,000,000 or more in principal amount of the Series 2017A Bonds, who so elects and who has presented its Series 2017A Bonds on or prior to the payment date, by wire transfer on such interest payment date. Except as otherwise provided in the Bond Indenture, interest payments on the Series 2017A Bonds shall be made to the registered owners thereof as of the March 15 and September 15 immediately preceding each interest payment date (the respective Record Dates for such payments) (i) by check or draft of the Bond Trustee mailed on the interest payment date to such registered owners at their addresses as they appear on the Bond Register or at such other addresses as are furnished to the Bond Trustee by such owners in writing no later than the Record Date or (ii) as to a registered owner of $1,000,000 or more in principal amount of the Series 2017A Bonds as of any Record Date who so elects, by wire transfer on such interest payment date.

Conversion to Another Interest Rate

The Corporation on behalf of the Issuer may, by written notice to the Issuer, the Bond Trustee, the Paying Agent and the Remarketing Agent, purchase the Series 2017A Bonds in lieu of optional redemption and elect to convert all of the Series 2017A Bonds to bear interest at a different Interest Rate or for a different Interest Rate Period, as applicable (a “Conversion”).

Notice of Proposed Conversion and of Mandatory Tender for Purchase on the Proposed Conversion Date. The Bond Indenture requires the Bond Trustee to give notice to the Registered Owners of the Series 2017A Bonds (DTC so long as DTC is the Securities Depository for the Series 2017A Bonds), by the first class mail, specifying, among other things, (i) the proposed Conversion Date; and (ii) that the Series 2017A Bonds will be subject to mandatory tender for purchase on the Conversion Date.

Failure and Rescission. In connection with a Conversion, the Bond Indenture requires that certain certificates and opinions be delivered. If any conditions to a Conversion are not satisfied or if the Corporation rescinds its election to change the Interest Rate or Interest Rate Period, the Series 2017A Bonds will not be subject to mandatory tender for purchase on the proposed Conversion Date and the Series 2017A Bonds will remain in the Long-Term Interest Rate Period and continue to bear interest at the Long-Term Interest Rate in effect immediately prior to the proposed Conversion.

Registration and Transfer

In the event the Book-Entry-Only System is discontinued, the following provisions will apply. Upon surrender of a Series 2017A Bond at the principal corporate trust office of the Bond Trustee, as bond registrar, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Bond Trustee, a Series 2017A Bond may be exchanged for fully registered Series 2017A Bonds of the same maturity, aggregating in amount the then unpaid principal amount of the Series 2017A Bonds surrendered, of Authorized Denominations.

As to any Series 2017A Bonds, the Bondholder shall be deemed and regarded as the absolute owner thereof for all purposes and none of the Issuer, the Corporation and the Bond Trustee shall be affected by any notice, actual or constructive, to the contrary.

Any Series 2017A Bonds may be registered as transferred upon the books kept for the registration and transfer of Series 2017A Bonds only upon surrender thereof to the Bond Trustee, as bond registrar, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Bond Trustee; provided, that with respect to Series 2017A Bonds bearing interest at a Long-Term Interest Rate, the Bond Trustee shall not be obliged to make any exchange or registration of transfer during the period between a Record Date and the corresponding Interest Payment Date. Upon the registration of transfer of any such Series 2017A Bonds and on request of the Bond Trustee, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Series 2017A Bond, registered in the name of the transferee or transferees, of the same maturity, aggregating in amount the then unpaid principal amount of the Series 2017A Bond surrendered, of Authorized Denominations. The Bond Trustee shall not be required to exchange or transfer (i) any Series 2017A Bonds during the 15 days next preceding the date on which notice of redemption of the Series 2017A Bonds is given, or (ii) any Series 2017A Bond called for redemption. For a description of the registration of transfer procedures while the Series 2017A Bonds are in the book-entry only system, see “BOOK-ENTRY ONLY SYSTEM” herein.

Redemption Provisions*

Mandatory Sinking Fund Redemption. The Series 2017A Bonds described below are subject to mandatory sinking fund redemption in part on October 1 in the years and amounts set forth below at a redemption price equal to the principal amount of the Series 2017A Bonds being redeemed plus accrued interest to the date of redemption:

* Preliminary, subject to change.

Redemption Date (October 1) Amount

*Stated Maturity

Redemption Date (October 1) Amount

*Stated Maturity

Optional Redemption. The Series 2017A Bonds maturing after ______are subject to optional redemption prior to maturity on or after ______by the Issuer, at the direction of the Corporation, in whole or in part at any time, at a redemption price of 100% of the principal amount thereof, plus accrued interest, if any, to the redemption date.

Extraordinary Optional Redemption. The Series 2017A Bonds (or portions of any such Series 2017A Bonds) are subject to extraordinary optional redemption in whole or in part at any time in the event of any damage to, or destruction or condemnation of, any part of the Facilities to the extent that the proceeds of any insurance or condemnation award relating thereto are not applied to the repair, reconstruction or restoration of the Facilities and the Corporation elects to use such unapplied proceeds for an extraordinary optional redemption. Any amounts deposited in the Bond Fund representing proceeds of insurance or condemnation awards will be used by the Bond Trustee at the written direction of the Corporation to redeem Series 2017A Bonds on the earliest possible date after giving the required notice of redemption. If called for redemption prior to maturity as described in this paragraph, the Series 2017A Bonds may be redeemed at a redemption price equal to the principal amount of each such Series 2017A Bond to be redeemed, without premium, plus accrued interest thereon to the Redemption Date.

Extraordinary Mandatory Redemption. The Series 2017A Bonds are also subject to mandatory redemption in whole at any time at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date in the event a change in the Constitution of the Commonwealth or the United States of America or a legislative or administrative action (whether local, state or federal), after all allowable appeals or expiration of the time therefor, causes the Bond Indenture, the Loan Agreement, the Master Indenture, the Series 2017A Master Note or the Series 2017A Bonds to become void or unenforceable or impossible of performance.

Notice of Redemption. In the event any of the Series 2017A Bonds are called for redemption, the Bond Trustee will give notice, in the name of the Issuer, of the redemption of such Series 2017A Bonds, which notice must (i) specify the Series 2017A Bonds to be redeemed, the redemption date, the redemption price, and the place or places where amounts due upon such redemption will be payable (which will be the corporate Principal Office of the Bond Trustee) and, if less than all of the Series 2017A Bonds are to be redeemed, the numbers of the Series 2017A Bonds and the portions of the Series 2017A

Bonds so to be redeemed, (ii) state any condition to such redemption, and (iii) state that on the redemption date, and upon the satisfaction of any such condition, the Series 2017A Bonds to be redeemed will cease to bear interest. CUSIP number identification will accompany all redemption notices. Such notice may set forth any additional information relating to such redemption.

Such notice is to be given by mail, postage prepaid, at least 20 days (or, in the case of acceleration of the Series 2017A Bonds, seven days) but not more than 60 days prior to the date fixed for redemption to each Holder of Series 2017A Bonds to be redeemed at its address shown on the registration books kept by the Bond Trustee; provided, however, that failure to give such notice to any Holder or any defect in such notice will not affect the validity of the proceedings for the redemption of any of the other Series 2017A Bonds. The Bond Trustee will send a second notice of redemption by certified mail return receipt requested to any registered Holder who has not submitted Series 2017A Bonds called for redemption 30 days after the redemption date, provided, however, that the failure to give any second notice by mailing, or any defect in such notice, will not affect the validity of any proceedings for the redemption of any of the Series 2017A Bonds.

Any Series 2017A Bonds and portions of Series 2017A Bonds which have been duly selected for redemption and which are paid in accordance with the Bond Indenture will cease to bear interest on the specified redemption date.

With respect to any optional redemption of Series 2017A Bonds, if at the time of mailing such notice of redemption, there shall not have been deposited with the Bond Trustee moneys sufficient to redeem all the Series 2017A Bonds called for redemption, such notice may state that the redemption is conditional, that is, subject to the deposit of the redemption moneys with the Bond Trustee not later than 12:00 p.m. on the redemption date, and such notice will be of no effect unless such moneys are so deposited.

Redemption of Portion of Series 2017A Bonds. The Series 2017A Bonds will be redeemed only in Authorized Denominations. If less than all of the Series 2017A Bonds are called for redemption, the Bond Trustee will select the Series 2017A Bonds as directed by the Borrower. In the absence of such direction the Trustee shall make such selection in a manner it deems fair and appropriate consistent with the requirements of the Indenture. Any portion of any Series 2017A Bond to be redeemed must be in an Authorized Denomination and remaining Series 2017A Bonds that have not been so called for redemption will be in Authorized Denominations.

SO LONG AS THE ONLY OWNER OF THE SERIES 2017A BONDS IS DTC, SUCH SELECTION WILL, HOWEVER, BE MADE BY DTC. If a portion of a Series 2017A Bond is called for redemption, a new Series 2017A Bond of the same series in the principal amount equal to the unredeemed portion thereof will be issued to the Holder upon surrender thereof.

Purchase in Lieu of Optional Redemption. The Series 2017A Bonds maturing after ______are subject to purchase in lieu of optional redemption prior to maturity on or after ______by the Issuer, at the direction of the Corporation, in whole or in part at any time, at a purchase price equal to the principal amount of the Series 2017A Bonds to be purchased, without premium, plus accrued interest thereon to the date of redemption. Notice of purchase in lieu of optional redemption shall be provided in the same manner as notice is provided in the case optional redemption. See “- Notice of Redemption” above. If the Series 2017A Bonds are called for purchase in lieu of optional redemption, such purchase will not extinguish the indebtedness of the Issuer evidenced thereby or modify the terms of the Series 2017A Bonds.

BOOK-ENTRY ONLY SYSTEM

The following description of The Depository Trust Company (“DTC”) New York, New York, and the procedures and record keeping with respect to beneficial ownership interests in the Series 2017A Bonds, payment of principal, interest and other payments on the Series 2017A Bonds to Direct Participants, Indirect Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such 2017A Bonds and other related transactions by and between DTC, the Direct Participants, the Indirect Participants and the Beneficial Owners is based solely on information provided by DTC, and the Issuer and the Corporation assume no responsibility therefor. Accordingly, no representations can be made concerning these matters and neither the Direct Participants, the Indirect Participants nor the Beneficial Owners should rely on the following information with respect to such matters but should instead confirm the same with DTC or the Direct Participants or the Indirect Participants, as the case may be. Information concerning DTC and the Book-Entry Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Issuer or the Corporation.

DTC will act as securities depository for the Series 2017A Bonds. The Series 2017A 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 2017A Bond certificate will be issued for each maturity of a series of the Series 2017A Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, 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 computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of 2017A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017A Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2017A Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2017A 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 2017A Bonds, except in the event that use of the book-entry system for the Series 2017A Bonds is discontinued.

To facilitate subsequent transfers, all 2017A Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2017A Bonds with DTC and their registration in the name of Cede & Co. do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2017A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the Series 2017A Bonds within a maturity of a series are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to any matter related to the Series 2017A Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2017A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, redemption premium, if any, and interest payments on the Series 2017A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the Bond Trustee on payable dates in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Issuer or the Bond Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption premium, if any, and interest to Cede & Co., (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer and the Bond Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of the Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Series 2017A Bonds at any time by giving reasonable notice to the Issuer or the Bond Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, 2017A Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book- entry only transfers through DTC (or a successor securities depository). In such event, 2017A Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Issuer believes to be reliable, but neither the Issuer nor the Corporation take any responsibility for the accuracy thereof.

THE ISSUER, THE CORPORATION, THE UNDERWRITER AND THE BOND TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE TO THE DIRECT PARTICIPANTS OR THAT THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SERIES 2017A BONDS (i) PAYMENTS OF PRINCIPAL OF, REDEMPTION PRICE OR PURCHASE PRICE, IF ANY, OR INTEREST ON THE SERIES 2017A BONDS, (ii) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTEREST IN 2017A BONDS OR (iii) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE HOLDER OF THE SERIES 2017A BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. NONE OF THE ISSUER, THE CORPORATION, THE UNDERWRITER OR THE BOND TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO ANY DIRECT PARTICIPANTS, ANY PERSON CLAIMING A BENEFICIAL OWNERSHIP INTEREST IN THE SERIES 2017A BONDS UNDER OR THROUGH DTC OR ANY DIRECT PARTICIPANT, OR ANY OTHER PERSON WHICH IS NOT SHOWN ON THE REGISTRATION BOOKS OF THE ISSUER KEPT BY THE TRUSTEE AS BEING A BONDHOLDER. THE ISSUER, THE CORPORATION, THE UNDERWRITER AND THE BOND TRUSTEE SHALL HAVE NO RESPONSIBILITY WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDE & CO., ANY DTC PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE SERIES 2017A BONDS UNDER THE BOND INDENTURE; (III) THE SELECTION BY DTC OR ANY DTC PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE SERIES 2017A BONDS; (IV) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OR INTEREST DUE WITH RESPECT TO THE SERIES 2017A BONDS; (V) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF SERIES 2017A BONDS; OR (VI) ANY OTHER MATTER.

SO LONG AS CEDE & CO. IS THE HOLDER OF THE SERIES 2017A BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BOND OWNERS OR HOLDERS OF THE SERIES 2017A BONDS SHALL MEAN CEDE & CO. OR DTC AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE SERIES 2017A BONDS.

SECURITY FOR THE SERIES 2017A BONDS

General

The Series 2017A Bonds are special, limited obligations of the Issuer payable from (i) payments or prepayments made by the Corporation on the Series 2017A Master Note or under the Loan Agreement other than certain unassigned rights, (ii) certain moneys and investments held by the Bond Trustee in the Funds held under, and to the extent provided in, the Bond Indenture, and (iii) income from the temporary investment of any of the foregoing.

Issuer Not Generally Liable on the Series 2017A Bonds

The Series 2017A Bonds are special, limited obligations of the Issuer. The Series 2017A Bonds are not a general obligation of the Issuer or general obligations, debt or bonded indebtedness of the Commonwealth of Pennsylvania or Chester County, Pennsylvania, or any political subdivision or taxing authority of any of them. Neither the credit nor the taxing power of Chester County or the Commonwealth of Pennsylvania or of any political subdivision of either of them is pledged for payment of the principal or redemption price of, or the interest on the Series 2017A Bonds. The Issuer has no taxing power, and the owners of the Series 2017A Bonds do not have the right to have excises or taxes levied by the Commonwealth of Pennsylvania or Chester County, Pennsylvania, or any political subdivision or taxing authority thereof for the payment of the principal of, premium, if any, and interest on the Series 2017A Bonds.

The Loan Agreement

The Loan Agreement provides that the Issuer shall loan the proceeds of the Series 2017A Bonds to the Corporation and that the Corporation shall repay such loan by making payments to the Bond Trustee in amounts sufficient to pay the principal of, premium, if any, and interest on the Series 2017A Bonds when due. The Loan Agreement is an unsecured, general unconditional obligation of the Corporation. The Issuer will pledge and assign certain of its rights, including the Series 2017A Master Note, under the Loan Agreement to the Bond Trustee as security for the Series 2017A Bonds.

The Series 2017A Master Note; No Collateral Security

The Corporation is to issue the Series 2017A Master Note under the Master Indenture and deliver it to the Issuer to evidence the Corporation’s obligation to make loan repayments under the Loan Agreement. The aggregate of the scheduled payments of principal and interest on the Series 2017A Master Note is scheduled to be sufficient to pay when due the principal of and interest on the Series 2017A Bonds. The Issuer is to assign the Series 2017A Master Note to the Bond Trustee as the principal source of payment and security for the corresponding Series 2017A Bonds.

The Series 2017A Master Note and any other Master Obligations issued under the Master Indenture will be general, unsecured obligations of the Corporation and are not secured by any pledge of, mortgage on or security interest in any assets of the Corporation, any Obligated Group Affiliate, or other person. No Person other than the Corporation will be directly obligated to pay the Series 2017A Master Note.

The Master Indenture

The Master Indenture imposes certain restrictions on the actions of the Corporation for the benefit of all holders of Obligations issued under the Master Indenture. Such terms include, among others, some restrictions on mortgages or other liens on the property of the Obligated Group Affiliates and maintenance of certain rates and charges for services provided by the Obligated Group Affiliates. See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE—Against Encumbrances” and “- Debt Coverage” in APPENDIX C.

Although the Master Indenture requires the Corporation to demonstrate each fiscal year that the Corporation’s Income Available for Debt Service is not less than 1.10 times the principal and interest due on the Long Term Indebtedness of the Corporation and Obligated Group Affiliates in such fiscal year, the sole remedy for a failure to maintain such ratio in any particular fiscal year is the requirement that the Corporation retain a Consultant to make recommendations with respect to the operations in order to increase such ratio to the required level in the next succeeding fiscal year. The Corporation is required to

cause each of the Obligated Group Affiliates to revise its fees or methods of operations in collection and to take such other action as will be in conformity with such recommendations, subject to applicable requirements and restrictions imposed by law. The Corporation will be deemed to be in compliance with the Debt Service Coverage Ratio Requirement and no event of default under the Master Indenture will be deemed to exist so long as the required Debt Service Coverage Ratio is at least 1.0 times coverage. In addition, if the consultant’s report states that government restrictions have been imposed which make it impossible for the 1.10 times coverage requirement to be met, then the coverage requirement shall be reduced to the maximum coverage permitted by such governmental restrictions but in no event less than 1.00 times coverage. See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE— Debt Coverage” in APPENDIX C.

The Master Indenture does not restrict the ability of the Corporation or any of the Obligated Group Affiliates to transfer property, including cash, marketable securities or receivables, to anyone, including related or affiliated persons or persons who may control the Corporation directly or indirectly, even if such actions could cause the Corporation to fail to make its debt service payment on Obligations issued under the Master Indenture. See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE—Merger, Consolidation, Sale or Conveyance” in APPENDIX C.

Under the Master Indenture, each Member covenants that it will not, and each Controlling Member agrees that it will not permit any of its Obligated Group Affiliates to, incur or to have Outstanding Indebtedness, as defined in the Master Indenture, or Master Obligations secured by Liens (whether or not such Liens constitute Permitted Encumbrances) if the aggregate principal amount of such secured Indebtedness and Master Obligations then Outstanding would exceed 25% of the aggregate principal amount of all Indebtedness and Master Obligations then Outstanding pursuant to the Master Indenture.

The Master Indenture does not otherwise limit the incurrence of additional Indebtedness or the issuance of additional Master Obligations. Additional Master Obligations may be secured by collateral which need not be pledged to secure any other Master Obligations including the Series 2017A Master Note. The Master Indenture provides that neither the Corporation nor any Obligated Group Affiliate shall create or incur or permit to be created or incurred any Lien on any Property of the Obligated Group, except for certain enumerated Permitted Encumbrances. The liens granted by each Obligated Group Affiliate to the Corporation on its assets, including its real property, to secure its internally allocated obligations to the Corporation with respect to all Master Obligations, including the Series 2017A Master Note, are Permitted Encumbrances. See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE — Against Encumbrances” in APPENDIX C.

Contribution Agreement

The Contribution Agreement provides that the Obligated Group Affiliates agree to the designation of the Corporation as the Controlling Member for purposes of the Master Indenture and agree to take all action which the Corporation may require of them in order for the Corporation to comply with the provisions of the Master Indenture. The Obligated Group Affiliates entering into the Contribution Agreement agree to transfer to the Corporation such amounts as the Corporation may require of them in order for the Corporation to pay the principal of and interest on the Master Obligations, including the Series 2010 Bonds, the Series 2012 Bonds, the Series 2015 Bonds, the Series 2017A Bonds and the Series 2017B Bonds. The Contribution Agreement creates an unsecured general obligation of the Obligated Group Affiliates to make such payments to the Corporation. The Contribution Agreement itself is not pledged to secure the payment of the Series 2017A Master Note or the Series 2017A Bonds, and the holders of the Series 2017A Bonds have no recourse against the Obligated Group Affiliates to require them to comply with the Contribution Agreement.

Obligated Group Affiliates

To become an Obligated Group Affiliate, a corporation or other entity (other than the initial Obligated Group Affiliates) must be designated as an Obligated Group Affiliate by a resolution of the Board of Trustees of the Corporation. No Obligated Group Affiliate will be directly obligated to pay the Series 2017A Master Note. However, in the Master Indenture, the Corporation has covenanted and agreed to cause each Obligated Group Affiliate to pay, loan or otherwise transfer to the Corporation such amounts as are necessary to duly and punctually pay the principal of, premium, if any, and interest on all outstanding Obligations.

Under the Master Indenture, the Corporation covenants to cause each Obligated Group Affiliate to comply with certain covenants and restrictions contained in the Master Indenture.

The Master Indenture provides that the Corporation may at any time declare an entity designated as an Obligated Group Affiliate to no longer be an Obligated Group Affiliate provided that the Corporation certifies that, following the withdrawal, the Corporation would not be in default in the performance or observance of any terms of the Master Indenture. Accordingly, there can be no assurance that any entity described herein as an Obligated Group Affiliate will continue to be such or that other Obligated Group Affiliates will be so designated. The Corporation does not have sufficient assets or revenues of its own to pay debt service on the Series 2017A Bonds.

The System Affiliation Agreement requires each Institution, and each of its Institution System Members to grant a security interest to the Corporation on its revenues and substantially all of its assets to secure the indebtedness allocated to it under the System Affiliation Agreement. In furtherance of this covenant, each of the Obligated Group Affiliates has entered into a Security Agreement with the Corporation and the other Obligated Group Affiliates, dated as of June 30, 2014 (each, a “Security Agreement” and, collectively, the “Security Agreements”), pursuant to which such Obligated Group Affiliate has granted liens to the Corporation on substantially all of its assets and revenues to secure its obligations to the Corporation under the System Affiliation Agreement. Upon the issuance of the Series 2017A Bonds, the Security Agreements will be amended to include the Series 2017A Bonds within the obligations secured by the Security Agreements. These liens run only to the Corporation and are not enforceable by the Bond Trustee or any holder of the Series 2017A Bonds.

As of the date hereof, Main Line Health is the sole Institution (as such term is defined in the System Affiliation Agreement) under the System Affiliation Agreement. The other Obligated Group Affiliates as of the date hereof (Main Line Hospitals, Mirmont and Riddle Memorial Hospital) are considered part of the Institution System (as such terms is defined in the System Affiliation Agreement) comprised of Main Line Health and its related Hospitals and other Affiliates (as such terms are defined in the System Affiliation Agreement).

The System Affiliation Agreement provides that if a withdrawing Institution timely sends a withdrawal notice as described in the System Affiliation Agreement, the Corporation and each Institution shall use its best efforts to refinance or discharge, on or before the voluntary withdrawal date: (i) all System Debt allocated to such Institution; (ii) all of such Institution’s Cross-Obligated Institution Debt (as such term is defined in the System Affiliation Agreement); and (iii) all secured loans made to such Institution by the other Institutions (collectively, “Allocated Debt”), so that following the voluntary withdrawal, each Institution exclusively shall be liable for its Allocated Debt and neither the Corporation

nor any other Institution shall be liable therefor. Upon the refinancing or discharge of each Institution's Allocated Debt, the Corporation shall cause itself to dissolve.

The ability of the Corporation to cause an Obligated Group Affiliate to make any payment, loan or transfer may not be permitted by, or may be subject to recovery for the benefit of, other creditors of such Obligated Group Affiliate under applicable fraudulent transfer, fraudulent conveyance, bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights. For a description of the effect of the Bankruptcy Code and other laws affecting creditors' rights on the ability of the Corporation to enforce the Master Indenture with respect to all Obligated Group Affiliates, including particularly any non-controlled Obligated Group Affiliate, see “BONDHOLDERS' RISKS--Matters Relating to Enforceability of the Master Indenture.”

Substitution of Master Note

In certain circumstances, the Bond Indenture requires the Bond Trustee to surrender the Series 2017A Master Note in exchange for a Substitute Note from a New Group issued pursuant to a Replacement Master Indenture (as such terms are defined in the Bond Indenture), upon the satisfaction of certain conditions, including a written notice from each Rating Agency then maintaining a rating on the Series 2017A Bonds confirming that the rating on the Series 2017A Bonds will not be lowered or withdrawn as a result of such substitution. See “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Release and Substitution of Master Note” in APPENDIX C.

BONDHOLDERS’ RISKS

General

The principal of, premium, if any, and interest on the Series 2017A Bonds are payable solely from amounts payable by the Corporation on the Series 2017A Master Note and under the Loan Agreement. No representation or assurance is given or can be made that revenues will be realized by the Corporation or the Obligated Group Affiliates in amounts sufficient to pay debt service on the Series 2017A Master Note when due or that if realized they will be available to the Corporation for such purpose. The risk factors discussed below, as well as those factors discussed under the caption “SECURITY FOR THE SERIES 2017A BONDS”, should be considered in evaluating the credit characteristics and investment quality of the Series 2017A Bonds.

The future revenues of the Corporation and the Obligated Group Affiliates will be subject, among other things, to federal and state policies, regulations and legislation affecting the health care industry, competition from other health care providers, the capability of the Corporation’s management, third-party reimbursement from payors, including government payors, pressures from third-party payors to limit and control healthcare costs, the availability and affordability of professional liability insurance, increases in the amount of bad debt, rising numbers of uninsured and underinsured individuals, the reduced benefit liability from commercial and governmental health insurance plans, health plans and thirty-party payor insolvencies, and future economic and other conditions that are impossible to predict. The ability of the Corporation and the Obligated Group Affiliates to generate future revenues has a direct effect upon the payment of the principal of, premium, if any, and interest on the Series 2017A Bonds.

Future economic and other conditions, including inflation, demand for health care services, the ability of the Corporation and the Obligated Group Affiliates to provide the services required or requested by patients, physicians’ confidence in the Corporation and the Obligated Group Affiliates, economic developments in the applicable service areas, employee relations and unionization, competition, the level of rates or charges, increased costs, availability of professional liability insurance, casualty losses, third- party reimbursement and changes in governmental regulation may adversely affect revenues and, consequently, the ability of the Corporation and the Obligated Group Affiliates to generate revenues sufficient for the payment of the principal of and interest on the Series 2017A Master Note.

Other factors that could affect the Series 2017A Bonds and the future financial condition of the Corporation and the Obligated Group Affiliates are described below. This discussion of risk factors is not, and is not intended to be, exclusive or exhaustive.

Dependence on Obligated Group Affiliates

The Corporation does not have sufficient assets or revenues of its own to pay debt service on the Series 2017A Master Note. The Corporation is dependent on its Obligated Group Affiliates to provide it with revenues sufficient to meet its debt service obligations, and the Obligated Group Affiliates are under no legal obligation to do so other than pursuant to their covenants under the Contribution Agreement. The Series 2017A Bondholders do not have the right to enforce these covenants.

The Master Indenture provides that after an entity is designated as an Obligated Group Affiliate, the Corporation may at any time declare that such entity is no longer an Obligated Group Affiliate. Accordingly, there can be no assurance that any entity described herein as an Obligated Group Affiliate or to be designated as an Obligated Group Affiliate will continue to be such or that other Obligated Group Affiliates will be so designated.

The Master Indenture obligates the Corporation to enforce the Contribution Agreement and to exercise its control over Obligated Group Affiliates to obtain funds for debt service. Such agreement by the Corporation may not be enforceable to the extent such funds (i) are requested to make payments on any Obligation which is issued for a purpose not consistent with the charitable purposes of the Obligated Group Affiliate from which such payment is requested or which is issued for the benefit of any entity other than a tax-exempt organization; (ii) are requested to be made from any property, the use of which is donor restricted or which is subject to a direct or express trust which does not permit the use of such property for such payments; or (iii) would result in the cessation or discontinuation of any material portion of the health-care or related services previously provided by the Obligated Group Affiliate from which such payment is requested. Due to the absence of clear legal precedent in this area, the extent to which the property of any Obligated Group Affiliate falls within the categories referred to above cannot be determined and could be substantial.

There is no clear precedent in the law as to whether transfers from an Obligated Group Affiliate in order to pay debt service on the Obligations issued for the benefit of another Obligated Group Affiliate may be voided by a trustee in bankruptcy in the event of a bankruptcy of the transferring Obligated Group Affiliate or by third-party creditors in an action brought pursuant to Pennsylvania fraudulent conveyances statute. Under Title 11 of the United States Code (the “Bankruptcy Code”), a trustee in bankruptcy and, under the Pennsylvania fraudulent conveyances statute, a creditor may seek to avoid any obligation incurred or transfer made by a debtor if, among other possible bases therefor, (i) the debtor has not received fair consideration or reasonably equivalent value in exchange for such obligation or transfer and (ii) the obligation was incurred or transfer made when the debtor was insolvent or rendered the guarantor “insolvent”, as defined in the Bankruptcy Code or Pennsylvania fraudulent conveyances statute, or if the guarantor was undercapitalized or became undercapitalized as a result of the obligation or transfer.

Application by courts of the tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. In an action brought by a bankruptcy trustee or creditor seeking to avoid and recover a payment made by an Obligated Group Affiliate on Obligations issued for the benefit of another Obligated Group Affiliate, a court may order the return of such payment if the court determines that (a) fair consideration or reasonably equivalent value was not received by the transferring Obligated Group Affiliate in exchange for the payment, and (b) the payment was made when the transferring Obligated Group Affiliate was insolvent or it rendered the transferring Obligated Group Affiliate insolvent, or the transferring Obligated Group Affiliate is or became undercapitalized as a result of the payment.

There exists common law authority and authority under Pennsylvania statutes for the ability of the courts to terminate the existence of a nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court’s own motion or pursuant to a petition of the Pennsylvania Attorney General or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses.

Pursuant to the terms of the System Affiliation Agreement, Institutions (as such term is defined in the System Affiliation Agreement) may be removed from the System upon the occurrence of certain events. In addition, any Institution may voluntarily withdraw from the System without cause effective July 1, 2022 by providing notice of its intent to do so by July 1, 2020. As of the date hereof, Main Line Health is the sole Institution under the System Affiliation Agreement.

The System Affiliation Agreement provides that if a withdrawing Institution timely sends a withdrawal notice as described in the System Affiliation Agreement, the Corporation and each Institution shall use its best efforts to refinance or discharge, on or before the voluntary withdrawal date all Allocated Debt, so that following the voluntary withdrawal, each Institution exclusively shall be liable for its Allocated Debt and neither the Corporation nor any other Institution shall be liable therefor. Upon the refinancing or discharge of each Institution's Allocated Debt, the Corporation shall cause itself to dissolve.

Discretion of Board and Management

The Master Indenture does not significantly restrict the ability of the Corporation to enter into transactions which could materially affect the business, organizational structure and control of the Corporation and the Obligated Group Affiliates. Such transactions could include, for example, divestitures of Obligated Group Affiliates, closure of facilities, substantial new joint ventures, and mergers, consolidations or other forms of affiliations in which control of the Corporation and the Obligated Group Affiliates could be materially changed. Given the pace of change in the health care industry, it is likely that the Corporation will be presented with opportunities to enter into transactions of such magnitude or significance. The ability of the Corporation to generate revenues from the Obligated Group Affiliates sufficient to pay debt service on the Series 2017A Master Note is dependent in large measure on the decisions of the Board of Trustees and management of the Corporation with respect to such opportunities.

Joint Operating Agreements and Joint Ventures

The Corporation and the Obligated Group Affiliates may enter into joint operating agreements, joint ventures or related management agreements with previously unrelated, tax- exempt health systems or corporations to develop regionally-based health care delivery systems or networks. These joint operating agreements and joint ventures provide for corporations to operate hospitals and other related health care assets, subject to reserve powers vested in the corporate or sponsoring organizations. The joint operating agreements and joint ventures are intended to promote the development and operation of regional tax-exempt health care provider networks. The parties to these joint operating agreements and joint ventures remain separate corporations and retain title to their assets. Each joint operating agreement and joint venture may provide for the annual sharing of net income and imposes certain operating and organizational restrictions and conditions upon the parties thereto.

The Corporation and the Obligated Group Affiliates may also be participants in ancillary joint ventures with tax-exempt or for-profit entities. Participation in joint ventures, particularly joint ventures with for-profit entities, that do not meet requirements of the Internal Revenue Code of 1986, as amended (the “Code”), potentially may (i) result in a finding of inurement or undue private benefit which could result in a loss of tax-exempt status, (ii) result in a finding of an excess benefit transaction which could result in the imposition of an excise tax on the insider involved in the transaction or on the Obligated Group Affiliates’ or the Corporation’s management that knowingly approved the transaction, or both, or (iii) result in a finding that the activity is unrelated to the exempt purpose of the Obligated Group Affiliates or the Corporation and a determination that certain income received by the tax-exempt organization from the joint- venture with the for-profit entity is taxable.

Series 2017A Master Note is Unsecured

No property of the Corporation or any Obligated Group Affiliate is mortgaged or pledged as security for the Series 2017A Master Note or the Series 2017A Bonds. The Corporation is authorized to grant Permitted Liens to certain other creditors under the Master Indenture, and such Permitted Liens may result in the obligation of the Corporation to satisfy such liens being prior to the obligation to make payments on the Series 2017A Master Note, or in other proceedings against income-producing assets of the Corporation or Obligated Group Affiliates.

Voting Control Under Bond Indenture and Master Indenture

Certain amendments to the Bond Indenture and the Loan Agreement may be made with the consent of the owners of a majority of the aggregate principal amount of the Series 2017A Bonds then outstanding under the Bond Indenture and certain amendments to the Master Indenture may be made with the consent of the owners of a majority of the aggregate principal amount of Master Obligations then outstanding. Such amendments may adversely affect the security of the holders of the Series 2017A Bonds. A majority of holders of the Master Obligations could be comprised wholly or partially of the owners of Master Obligations other than the Series 2017A Master Note.

Matters Relating to Enforceability of the Master Indenture

The practical realization of any rights upon any default under the Loan Agreement or under the Master Indenture will depend upon the exercise of various remedies specified in such instruments, as restricted by federal and state laws. The federal bankruptcy laws may have an adverse effect on the ability of the Bond Trustee and the owners of the Series 2017A Bonds to enforce their

claims granted by the Bond Indenture, the Loan Agreement or the Master Indenture. The obligation of the Corporation on the Series 2017A Master Note will be limited to the same extent as the obligations of debtors typically are affected by bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws affecting the enforcement of creditors’ rights and by the availability of equitable remedies.

The remedies available to either the Bond Trustee, any Master Trustee, the Issuer or the owners of the Series 2017A Bonds upon an event of default under the Master Indenture, the Bond Indenture, the Loan Agreement or the Series 2017A Master Note are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including, specifically, the Bankruptcy Code, the remedies provided in the Master Indenture, the Bond Indenture, the Loan Agreement and the Series 2017A Master Note may not be readily available or may be limited.

The bankruptcy of an Obligated Group Affiliate will not trigger an event of default under the Master Indenture, the Loan Agreement or the Bond Indenture. See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE — Events of Default” and “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Events of Default and Remedies” and “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT – Defaults and Remedies” in APPENDIX C.

Bond Ratings

There is no assurance that the ratings assigned to the Series 2017A Bonds will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for and marketability of the Series 2017A Bonds. See the information herein under the caption “RATINGS.”

Market for the Bonds

Subject to prevailing market conditions, the Underwriters intend, but are not obligated, to make a market in the Series 2017A Bonds. There is presently no secondary market for the Series 2017A Bonds and no assurance that a secondary market will develop. Consequently, investors may not be able to resell the Series 2017A Bonds purchased should they need or wish to do so for emergency or other purposes.

Possible Future Legislation

The Obligated Group Affiliates are subject to regulation by a number of federal, state and local governmental agencies, including those which administer the Medicare and Medicaid reimbursement programs. These agencies have broad discretion to alter or eliminate programs that contribute significantly to revenues of the Obligated Group Affiliates. As a result, the Obligated Group Affiliates are sensitive to legislative and regulatory changes to, and are affected by reductions in governmental spending for, such programs. Congress and the Pennsylvania legislatures have in the past introduced and enacted legislation that could affect health care providers, and additional legislative changes can be expected.

Future legislation, regulation or actions by the federal or state governments could dramatically alter the methods of financing and providing health care in the United States and may adversely affect the operations of the Obligated Group Affiliates, including the Obligated Group Affiliates ability to compete for patients and the levels of payments they receives for medical services. It is impossible to predict the nature of any such future legislation or the likelihood of its becoming law. Future actions by the federal, state or local governments, including agencies thereof, changing existing regulations or their

interpretation could also increase the cost of operation of the Obligated Group Affiliates and adversely affect the revenues of such organizations. At present, no determination can be made concerning whether, or in what form, such legislation could be introduced and enacted into law, and the impact on the Obligated Group Affiliates. Similarly, the impact of future cost control programs and future regulations upon the Obligated Group Affiliates financial performance cannot be determined at this time.

Health Care Industry Factors Affecting the Corporation and the Obligated Group Affiliates

The health care industry is subject to various factors that may limit the Corporation’s ability to meet its obligations to make payment of debt service on the Series 2017A Bonds, a number of which are beyond the control of the Corporation or the Obligated Group Affiliates. Among other things, the Obligated Group Affiliates are subject to significant regulatory requirements of federal, state and local governmental agencies, independent professional organizations and accrediting bodies; technological advances and changes in treatment modes; various competitive factors; changes in third party reimbursement programs; and health care reform initiatives that serve to alter the financing of, payment for and delivery of hospital services. In recent years, the United States Congress and various states have considered a number of proposals, some of which involve comprehensive health care reform. In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Health Care Reform Act”) became law. This landmark legislation has and will continue to alter health care delivery systems and the reimbursement landscape for providers and increase the number of individuals who have health care coverage substantially over the next decade. This legislation includes programs to promote universal access to affordable health care coverage, better access to primary care, quality improvements, cost-effective delivery and other long-term cost-cutting measures, most of which have been implemented or begun to be implemented. The Health Care Reform Act introduced changes to the Medicare program that are estimated by the Congressional Budget Office to reduce the cost of the program over the ten years following implementation of the Health Care Reform Act. The Health Care Reform Act reduces cost sharing by Medicare beneficiaries for certain preventive services and wellness visits and expands coverage for these services. In addition, the Health Care Reform Act includes programs that link Medicare payments for hospitals and physicians with quality outcomes and the development of new patient care models that stress primary care and community-based care. The objective of these programs is to manage chronic diseases better and to reduce inpatient admissions and other high cost care provided by health care facilities, such as hospitals and nursing homes.

The financial impact on the Obligated Group Affiliates of the increased coverage and the delivery system reforms that may continue to result from the Health Care Reform Act is impossible to predict reliably at this point. The Obligated Group Affiliates have been, and will continue to be, affected by various limits placed on reimbursement, including those limits under Medicare and Medicaid. In addition, certain of the factors noted above, which could have a significant impact on the future operations and financial condition of the Obligated Group Affiliates, are discussed in more detail below. The factors described below could have a material negative impact on the Obligated Group Affiliates operations and, consequently, the ability of the Corporation to make payments due under the Series 2017A Master Note.

Challenges to the Health Care Reform Act

President Trump and certain Congressional leaders promised a repeal of all or a portion of the Health Care Reform Act in statements concerning their respective legislative agendas. Changes to the Health Care Reform Act through regulatory action are likely. On May 4, 2017 the House of Representatives passed the American Health Care Act (H.R. 1328) (the “AHCA”). It is not currently known whether the AHCA will ultimately be enacted as law or, if enacted, what changes from the current

version of the legislation will be made prior to final enactment. In addition to legislative efforts, on January 20, 2017, President Trump issued an executive order that may be used to prevent enforcement of the individual mandate and the requirement that large employers offer coverage to their full-time workers. This has the potential to cause adverse selection and rapid cost increases in the individual market as people in good health opt out of more expensive coverage and people with high-cost health conditions remain insured. If the individual mandate is not enforced while the current individual market rules remain in place, health insurance issuers will be less able to respond to market conditions with underwriting, product and pricing flexibility and will have greater exposure to material adverse impacts on their finances and operations.

The Health Care Reform Act contemplates that the federal government will reimburse health insurance issuers for cost sharing reductions (i.e., lower deductibles, copays and co-insurance) for low- income individuals enrolled in certain qualified health plans purchased through exchanges. In a case pending in federal court, House v. Price (previously known as House v. Burwell), a federal district court held that the federal government did not have constitutional authority to pay health plan issuers offering certain coverage through the exchanges for cost sharing reductions because the U.S. Congress did not appropriate funds for the program. The Obama Administration appealed the case. Upon motion of the U.S. House of Representatives, the U.S. Court of Appeals for the District of Columbia Circuit held the case in abeyance. If the district court is upheld on appeal, or if the current Presidential Administration refuses to pay the cost sharing reductions, then health insurance issuers may not be compensated for cost sharing reductions they provided to their members and may be required to continue to provide, and this could materially impact the operations, financial position or cash flows of such health insurance issuers. Elimination of cost sharing subsidies may also make health insurance less affordable for many members, reducing the number of people who get coverage or use that coverage and disrupting the individual health insurance market. The financial impact of any of these developments on the Obligated Group Affiliates is unknown.

The Health Care Reform Act also contemplated that health insurance issuers that experienced unexpectedly high health care costs would receive payments under the temporary risk corridors program that ended in 2016. The risk corridors program set a target for exchange participating insurers to spend 80% of premium dollars on health care and quality improvement. Insurers with costs less than 3% of the target amount must pay into the risk corridors program; the funds collected were used to reimburse plans with costs that exceed 3% of the target amount. This program was intended to work in conjunction with the Health Care Reform Act's MLR provision, which requires most individual and small group insurers to spend at least 80% of premium dollars on enrollee's medical care and quality improvement expenses, or else issue a refund to enrollees. Payments overdue from the federal government to insurers through the risk corridor program remain subject to ongoing litigation.

The full ramifications of changes to the Health Care Reform Act and regulations adopted thereunder will only become apparent over time and through subsequent regulatory and judicial interpretations. Although efforts to legislatively repeal certain provisions of the Health Care Reform Act have thus far been unsuccessful, the AHCA is pending, and it is anticipated that efforts to modify the Health Care Reform Act through regulations or by limiting funding will continue. If the AHCA is not enacted into law, legislative actions to repeal or modify all or portions of the Health Care Reform Act could be proposed in the future. Uncertainty remains regarding the continued implementation of the Health Care Reform Act, which creates significant uncertainty in the health insurance and health care markets, which could materially impact the operations, financial position or cash flows of the Obligated Group Affiliates.

Overview of Medicare and Medicaid Program

Overview. Medicare and Medicaid are the commonly used names for health care reimbursement or payment programs governed by certain provisions of the federal Social Security Act Amendments of 1965. The federal government, the largest health care purchaser in the country, uses reimbursement as a key tool to implement health care policies, to allocate health care resources and to control utilization, facility and provider development and expansion, and promote the use and development of health technology. These programs reflect the national policy that persons who are aged and persons who are poor should be entitled to receive medical care regardless of ability to pay. Medicare Part A covers inpatient hospital, home health, nursing home care and certain other services, and Medicare Part B covers certain physicians’ services and the services of other health care professionals, medical supplies and durable medical equipment. Medicare Part C, the Medicare Advantage program, enables Medicare beneficiaries to choose to obtain their benefits through a variety of private, managed care, risk-based plans. Medicare Part D makes outpatient prescription drug benefits available to Medicare beneficiaries. Most Medicare hospital services are paid at a fixed rate per case under the reimbursement methods described below. Some Medicare beneficiaries, however, enroll in Medicare Advantage plans, which reimburse providers on a contractually determined basis. Health care providers that participate in the Medicare program must agree to be bound by the terms and conditions of the program such as meeting the quality standards for rendering covered services and adopting and enforcing policies to protect patients from certain discriminatory practices.

Medicaid is designed to pay providers for care given to the indigent and other persons who qualify based on certain conditions. Medicaid is funded by federal and state appropriations and is administered in Pennsylvania by the Department of Human Services (“DHS”) (formerly known as the Department of Public Welfare).

Conditions of Participation. Hospitals must comply with standards called “Conditions of Participation” to be eligible for Medicare and Medicaid reimbursement. The Centers for Medicare and Medicaid Services (“CMS”), an agency of the United States Department of Health and Human Services (“HHS”), is responsible for ensuring that hospitals meet these regulatory Conditions of Participation. Under applicable Medicare rules, hospitals accredited by The Joint Commission are deemed to meet the Conditions of Participation. Failure to maintain such accreditation or to otherwise comply with the Conditions of Participation or other applicable state licensing requirements could have a material adverse effect on the revenues of the Obligated Group Affiliates. The following table represents the current accreditation status by The Joint Commission of certain facilities of the Obligated Group Affiliates. There can be no assurance that the Facilities operated by the Obligated Group Affiliates will continue to receive such accreditation in the future. Hospital Current Accreditation Period Lankenau Medical Center 4/16/2016 through 4/16/2019 Bryn Mawr Hospital 6/4/2016 through 6/4/2019 Paoli Hospital 3/12/2016 through 3/12/2019 Riddle Hospital 6/11/2016 through 6/11/2019 Bryn Mawr Rehabilitation Hospital 4/9/2016 through 4/9/2019

Medicare Reimbursement

Overview. A substantial portion of the Obligated Group Affiliates’ revenues is derived from the Medicare program. Medicare is a federal health benefits program administered by CMS and Medicare Administrative Contractors. Available to individuals age 65 or over, and certain other classes of individuals, the Medicare program provides, among other things, health care benefits that cover, within

prescribed limits, the major costs of most medically necessary care for such individuals, subject to certain deductibles and co-payments or, in the case of the Medicare Advantage program, premiums.

Diverse and complex statutory and regulatory mechanisms, the effect of which is to limit the amount of money paid to health care providers under the Medicare program, have been enacted and approved in recent years. It is impossible to predict what effect, if any, current and future legislative initiatives will ultimately have on the operations of the Obligated Group Affiliates.

The Obligated Group Affiliates received approximately 33% of their fiscal year 2016 net patient revenues from the Medicare program. Thus, adverse developments or changes in Medicare reimbursement could have a material adverse effect on the financial condition and operations of the Obligated Group Affiliates.

Inpatient Operating Costs. Medicare payments for operating costs incurred in the delivery of inpatient hospital services are based on a prospective payment system (“PPS”) which pays acute care hospitals a fixed amount for each Medicare inpatient discharge based upon the diagnosis and certain other factors used to classify each patient into a Diagnosis Related Group (“DRG”). Discharge based rates for operating payments are adjusted annually by the use of an “update factor” based on the projected increase in a market basket inflation index which measures changes in the costs of goods and services purchased by hospitals, but the adjustments historically have not kept pace with inflation. The per-discharge payment is based on two separate payment rates: one for operating costs and one for capital-related costs.

As a general matter, payments are not adjusted for actual costs, variations in intensity of illness, or length of stay. If a hospital treats a patient and incurs less cost than the applicable DRG-based payment, the hospital is entitled to retain the difference. Conversely, if a hospital’s cost for treating the patient exceeds the DRG-based payment, the hospital generally will not be entitled to any additional payment. If, however, a case is unusually complex or expensive, it may qualify for an “outlier” payment, which is added to the DRG-adjusted base rate payment.

Medicare and Medicaid currently make additional payments to hospitals that serve a disproportionate share (“DSH”) of low-income patients. According to the Medicaid and CHIP Payment and Access Commission, the Health Care Reform Act began to incrementally decrease the federal DSH allotments. Reductions in DSH payments were based on an assumption that the Health Care Reform Act’s coverage and access provisions would substantially reduce uncompensated care provided by hospitals. Subsequent to the passage of Health Care Reform Act, other federal legislation has impacted the reduction of DSH payments.

The PPS amount and the DSH adjustments described above are calculated using formulae established by CMS that are revised periodically pursuant to federal budgetary policy. There can be no assurance that payments received by the Corporation and the Obligated Group Affiliates will be sufficient to cover all actual costs of providing inpatient hospital services to Medicare patients.

Hospitals report certain quality measures under the Hospital Inpatient Quality Initiative. Hospitals that report these measures receive the full DRG inflation update - known as the “hospital market basket”, while non-participating hospitals suffer a 2% reduction from the market basket update. The market basket update for federal fiscal year 2016 is 2.4%, and for federal fiscal year 2017 is 2.7%. The hospitals affiliated with the Obligated Group Affiliates participate in CMS’ Inpatient Hospital Quality Initiative. There is no assurance that future updates in DRG payments will keep pace with the increases in providing inpatient hospital services.

Quality-Based Initiatives. CMS periodically promulgates regulations to implement various quality improvement and patient safety programs. Two examples, the Medicare Hospital Value-Based Purchasing (“VBP”) Program and the Hospital Readmissions Reduction (“HRR”) Program, focus on and reward value of care over volume of care.

Under the VBP Program, CMS withholds 2.00% in fiscal year 2017 of all qualifying hospitals’ DRG payments and puts the withheld amounts into a fund. CMS then redistributes the amounts withheld based on how well a particular hospital scores in comparison to its peers based on the hospital’s clinical performance and patient satisfaction. In fiscal year 2016, generally 1,806 hospitals experienced a positive adjustment and 1,235 hospitals experienced a negative adjustment in their Medicare payments as a result of the VBP Program, as compared to 2015 when 1,714 experienced a positive adjustment and 1,375 experienced a negative adjustment. In 2016, the Obligated Group Affiliates’ four acute care hospitals experienced a 0.12% increase in Medicare reimbursement. There can be no assurance that future scores will be enough to recoup the full percentage payment withholding or to qualify for a bonus under the VBP program.

Similarly, beginning in 2015, CMS increased its reduction of Medicare reimbursement to 3% for hospitals experiencing excess readmissions for certain conditions under the HRR Program. The magnitude of the readmission penalty is determined by a calculation of an excess readmission ratio based on 30-day predicted versus expected readmission rates for heart attack, heart failure, pneumonia, chronic obstructive pulmonary disease, elective primary total hip and/or total knee replacement and coronary artery bypass graft (CABG) surgery. This “excess readmission ratio” is an adjustment factor that is applied to each DRG reimbursement for the fiscal year, and in that way reduces the total Medicare revenue for a hospital. In the current year, the Obligated Group Affiliates’ four acute care hospitals will experience a small reduction due to the HRR Program of 0.35%. There can be no guarantee that the Obligated Group Affiliates’ hospitals will avoid penalties or incur only small penalties under the HRR Program for excess readmissions in the future.

HRR and VBP reductions can be combined to reduce a hospital’s Medicare payments. This means that hospitals may experience a 5% reduction in 2017 when the maximum VBP penalty is capped at 2% and the maximum HRR penalty is capped at 3%.

Serious, Preventable Events. Since 2008, Medicare has not reimbursed hospitals for the increased costs associated with treating a Medicare beneficiary who acquires certain hospital-acquired conditions (“HAC”) during an inpatient stay. Hospitals are further prohibited from billing Medicare beneficiaries for any charges associated with an HAC. CMS has the authority to add or remove conditions from the list of HACs for which the Medicare program will not pay. The list of HACs has expanded to 14 categories. In fiscal year 2016, two of the Obligated Group Affiliates’ hospitals incurred a penalty of 1% of total Medicare payments, approximating $978,000 in the aggregate. While the Obligated Group Affiliates’ hospitals currently have programs in place to monitor and prevent HACs, given the difficulty inherent in completely eliminating HACs, it is likely that the Obligated Group Affiliates’ hospitals will continue to face reduced reimbursement for costs associated with treating HACs.

Outpatient Services. Medicare payments for hospital outpatient services, including hospital operating and capital costs, and certain Medicare Part B services provided to hospital inpatients also are established through a PPS methodology (“OPPS”). Under OPPS, certain services are classified into ambulatory payment classification (“APC”) groups. Services provided within an APC are similar clinically and in terms of the resources they require. Using hospital outpatient claims data from the most recent available hospital cost reports, CMS determines the median costs for the services and procedures in each APC group.

OPPS includes additional adjustments for transitional pass-through payments and outlier payments. Transitional pass-through payments are costs associated with new technology items (drugs, biologicals and medical devices) that were not reflected in the data that CMS used to calculate OPPS payment rates, and are intended to allow for adequate payment of new and innovative technology until there is enough data to incorporate the costs for these items into the base APC group.

Under OPPS, a hospital with costs exceeding the applicable payment rate would incur losses on such services provided to Medicare beneficiaries. There can be no assurance that the hospital OPPS rate, which bases payment on APC groups rather than individual services, will be sufficient to cover all of the Obligated Group Affiliates’ hospitals’ actual costs of providing hospital outpatient services to Medicare patients.

Physician Payments. Payment for physician services is provided by Medicare Part B. Under Part B, physician services are reimbursed in an amount equal to the lesser of actual charges or the amount determined under a national fee schedule known as the resource-based relative value scale (“RBVS”), which sets a relative value for each physician service, which is then multiplied by a geographic adjustment factor and a nationally-uniform conversion factor to determine the amount Medicare will pay for each service.

The nationally-uniform conversion factor was previously calculated utilizing the sustainable growth rate (“SGR”) system. The SGR was linked to changes in the United States Gross Domestic Product over a ten-year period. The SGR system was intended to keep spending growth consistent with the national economy; however, because over the last decade federal health care expenditures have continuously exceeded their targets, application of the SGR would have resulted in extreme rate cuts to physicians. As a result, Congress repeatedly enacted legislation to override projected reductions and to at least maintain physician reimbursement rates. In 2015, the SGR was repealed by the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”).

Under MACRA, CMS created a new framework to reward health care providers to provide better care rather than more care, and combined the existing quality reporting programs under one new system: the MACRA Quality Payment Program. The MACRA Quality Payment Program is comprised of the Merit-Based Incentive Payment System (“MIPS”) and Advanced Alternative Payment Models (“APMs”). Both MIPS and APMs went into effect in 2015 and will continue to be implemented over several years. MIPS and APMs are two alternative tracks for physicians. MIPS combines parts of three current programs: the physician quality reporting system, the value based payment modifier program and the EHR Incentive Program (commonly known as the “meaningful use program”). MIPS is comprised of four weighted performance categories that are used to calculate composite performance: quality; resource use (referred to as “cost”); advancing care information; and clinical practice improvement. The weighting of the categories changes over time. Adjustments may be positive or negative, so MIPS could result in significant rate reductions. The adjustments are capped (both positively and negatively) as follows: plus/minus 4% in 2019; plus/minus 5% in 2020; plus/minus 7% in 2021; and plus/minus 9% from 2022 onward.

Eligible APMs include certain accountable care organizations (e.g., Track 2 and 3 of the Medicare Shared Savings Program ACOs; next generation ACOs (f/k/a pioneer ACOs)), certain patient centered medical homes and certain bundled payment models. For 2019 through 2024, physicians who qualify for APMs earn a 5% incentive payment and are excluded from MIPS adjustments. For 2026 and after, physicians who qualify for APMs are excluded from MIPS adjustments and receive higher fee schedule updates. Eligibility for a bonus under the APMs is based on the amount of payments or number of patients, whichever is more favorable, connected with the APMs.

There can be no assurances that the current methodology for calculating physician payments under the RBRVS methodology, following the SGR’s repeal, will remain as it is presently structured. Changes to the formulae or otherwise under MACRA may negatively impact the reimbursement amounts received by the Obligated Group Affiliates’ hospitals for the cost of providing physician services.

Capital Costs. Hospitals are reimbursed on a fully prospective basis for capital costs (including depreciation and interest) related to the provision of inpatient services to Medicare beneficiaries. Payment for capital related costs for all hospitals is determined based on a standardized amount referred to as the federal rate and is calculated by multiplying the federal weight by the DRG weight for each discharge and by a geographical adjustment factor. The payments are subject to further adjustment by a DSH factor that contemplates the increased capital costs associated with providing care to low-income patients, and an indirect medical education (“IME”) factor that contemplates the increased capital costs associated with medical education programs.

There can be no assurance that the prospective payments for capital costs will be sufficient to cover the actual capital-related costs of the Obligated Group Affiliates allocable to Medicare patient stays or to provide adequate flexibility in meeting the Obligated Group Affiliates’ future capital needs.

Outlier Payments. As previously noted, hospitals are eligible to receive additional payments known as “outlier payments” under the inpatient PPS for individual cases incurring extraordinarily high costs. Costs must exceed a certain threshold in order for the hospital to be eligible to charge for outlier payments. A percentage of costs, based on the marginal cost factor, is then applied to only the costs exceeding the threshold to figure out the payment. Both operating costs and capital (asset) costs are applied when calculating the outlier payments.

After determining that some hospitals might be manipulating current hospital charge data to maximize reimbursement from Medicare for outlier payments, CMS amended the regulations on how outlier payments were to be calculated. The Office of Inspector General for HHS (“OIG”) scrutinizes outlier payments in an effort to determine whether outlier payments to the hospitals were paid in accordance with Medicare regulations or whether such payments were the result of potentially abusive billing practices. Although the Obligated Group Affiliates believe that their outlier payments have been calculated appropriately, there can be no assurance that they will not become the subject of an investigation or audit with respect to their past outlier payments, or that such an audit would not have a material adverse impact on the Obligated Group Affiliates. Moreover, there can be no assurance that any future revisions to the formula for calculating outlier payments will not reduce payments to the Obligated Group Affiliates, or that any such reduction will not have a material adverse impact on the Obligated Group Affiliates.

Medicare Advantage. Most individuals who are entitled to Medicare Part A benefits and enrolled in Medicare Part B may elect coverage under either the traditional Medicare fee-for-service program (Parts A and B) or a Medicare Advantage (“MA”) Plan. A MA plan may be offered by a coordinated care plan (such as an HMO or a PPO), a provider sponsored organization (“PSO”) (a network operated by health care providers rather than an insurance company), a private fee-for-service plan, or a combination of a medical saving account (“MSA”) and contributions to a MA plan. Each MA plan, except an MSA plan, is required to provide benefits approved by the Secretary of HHS. An MA plan will receive a monthly capitated payment from HHS for each Medicare beneficiary who has elected coverage under the plan. Health care providers, such as the Obligated Group Affiliates, must contract with MA plans at agreed upon rates on an in-network basis. If health care providers do not contract with an MA plan, services provided to such plan members may not be covered by the MA plan or may be covered at a lower reimbursement by the plan. The Obligated Group Affiliates contract with various MA plans.

The shift of Medicare eligible beneficiaries from traditional fee-for-service to MA programs was intended to increase competitive pressure to improve benefits, reduce premiums and generate cost reductions. However, because the cost of the MA programs was on average 114% higher than traditional fee-for-service, the Health Care Reform Act amended some of the MA payment methodologies. As a result, rate reductions and increased recoupment efforts in the MA program may have an impact on reimbursement from these insurance plans, which in turn may have a material negative impact upon the revenue of the Obligated Group Affiliates.

Provider-Based Standards. The Medicare program reimburses certain facilities and services (including, for example, physician offices and clinics) differently, depending upon whether they are “provider-based” or “freestanding.” A “provider-based” facility or service is an integral part of another provider, such as a hospital. Certain administrative costs and overhead of the provider organization must be allocated in part to the provider-based organization. “Freestanding” providers are not considered part of another provider for purposes of the Medicare program and stand on their own for reimbursement purposes. For any given facility or service, it is probable that one classification or the other will result in a higher aggregate reimbursement for the system as a whole. However, Section 603 of Bipartisan Budget Act of 2015 (“BBA”) changed how CMS reimburses for such provider-based outpatient services that are established on or after November 2, 2015, by excluding new off-campus provider-based outpatient departments from the OPPS starting on January 1, 2017. These sites are instead reimbursed under the applicable non-hospital payment system: the physician fee schedule or the ambulatory surgical center payment system. This may deter the Obligated Group Affiliates from establishing any new off-campus provider-based outpatient departments.

If CMS learns that a provider has treated a facility or organization as “provider-based” and the provider had not obtained a determination of that status from CMS, under strict provider-based regulations, the provider may be required to repay overpayments made by CMS due to such erroneous treatment by the provider. CMS may also review a past determination of “provider-based” status if it believes that the past determination was in error, in which case CMS will cease to treat the facility or organization as “provider-based.” In the event that the Obligated Group Affiliates’ outpatient services billed on a provider-based basis are found to be out of compliance with the current provider-based regulations, the Obligated Group Affiliates could be liable for Medicare overpayments.

CMS also issued a final rule on November 1, 2016 that further limits operation of existing provider–based departments, including requiring that provider-based departments remain at the same physical location and providing the same services. It is difficult to know what effect the final rule will have on the future operation of any of the Obligated Group Affiliates’ provider-based departments.

Audits and Withholds. Medicare-participating hospitals are subject to audits and retroactive audit adjustments with respect to reimbursement claimed under the Medicare, Medicaid and commercial programs. Although management of the Obligated Group Affiliates believes the reserves of the Obligated Group Affiliates are adequate, such adjustments could be substantial and could exceed reserves maintained therefor by the Obligated Group Affiliates. Medicare regulations also provide for withholding Medicare payment in certain circumstances, and such withholds could have a material adverse effect on the financial condition of the Obligated Group Affiliates. Management of the Obligated Group Affiliates is not aware of any situation whereby a material Medicare payment is being withheld from the Obligated Group Affiliates. See “BONDHOLDERS’ RISKS - Fraud and Abuse Laws” for exposure to audits and withholds.

Medicare-participating hospitals are also subject to Recovery Audit Contractor (“RAC”) audits. RAC auditors are authorized, in most cases, to look back three years from the date the claim was paid, and to review the appropriateness of each claim by applying the same standards and guidance as would a

Medicare contractor. The Health Care Reform Act expanded the scope of the RAC program to include Medicare Parts C and D and Medicaid. Medicaid RAC audit programs are overseen by states in accordance with federal guidelines. Medicare RAC recovery amounts have increased substantially over the last couple years. Although RACs are required to identify overpayments and underpayments, RACs have in practice collected significantly more in overpayments from providers than paid out as underpayments to providers. Furthermore, the federal and state governments have developed numerous other audit and fraud enforcement programs over the past decade increasing the likelihood that health care entities, like the Obligated Group Affiliates, participating in Medicare and Medicaid may be subject to audits, retroactive audit adjustments and re-payments with respect to reimbursement. Federal and state efforts to take monies back from providers as well as related investigations and, in some cases, criminal prosecutions for overbilling are expected to be prevalent for years to come. It is impossible to predict the effect of such efforts as any resulting future payment adjustments and/or re-payments could be material. Under certain circumstances, payments made may be determined to have been made as a consequence of improper claims subject to the federal False Claims Act or other federal statutes, subjecting the provider to civil or criminal sanctions. From July 2015 through June 2016, Medicare RACs recouped $2,150,000 in overpayments from the Obligated Group Affiliates. Increased RAC recoupment efforts and other audit programs may have a material impact upon the revenues of the Obligated Group Affiliates.

New Models for Care under the Health Care Reform Act. Among various other programs, the Health Care Reform Act directed HHS to establish and implement various ACO programs, including the Medicare shared savings program that promotes accountability for the care of Medicare beneficiaries and encourages coordination of care and other efficiencies through ACOs. If an ACO realizes savings in Medicare expenditures above an expenditure benchmark established by CMS for the group, and meets or exceeds quality performance standards established by HHS, it will be paid a share of Medicare’s savings. In certain tracks of the Medicare shared savings program, the ACO may have to refund CMS for a portion of any losses.

For a description of the ACO programs in which certain of the Obligated Group Affiliates participate, see APPENDIX A. It is unclear what effect the participation in an ACO by the Obligated Group Facilities will have on the Obligated Group Affiliates and their revenues.

The Bundled Payment Initiative Program. The Health Care Reform Act provides a number of programs designed to improve the quality of care while at the same time lowering costs. The “Bundled Payment Initiative” program is one such program comprised of four models. Under the Bundled Payment Initiative program, providers receive one payment for all services provided to a Medicare patient during an episode of care. The Bundled Payments for Care Improvement initiative Model 2, for example, involves a retrospective bundled payment arrangement under which actual expenditures are reconciled against a target price for an episode of care. The bundled payment combines payment for physicians, hospitals and other services provided during the single episode of care. The entity receiving the payment is then responsible for distributing the payment to each provider. If the providers work together to provide higher quality care at a low cost, they will realize a profit. However, if providers are unsuccessful in reducing costs, they will lose money on the Bundled Payments for Care Improvement initiative program. The Obligated Group Affiliates are not participating in the Bundled Payments for Care Improvement program. If the Obligated Group Affiliates participate in the future, there can be no guarantee that the bundled payments will be sufficient to cover all of the Obligated Group Affiliates’ actual costs of providing services to Medicare patients.

In 2015, CMS finalized a rule introducing the Comprehensive Care for Joint Replacement (“CJR”) Model, which is a bundled payment initiative that began April 1, 2016. Acute care hospitals in certain select geographic areas are required to participate in the CJR Model. Under the CJR Model, there is a retrospective review of actual payments against a Medicare target episode price. The participating

hospital may receive additional payments or be required to repay Medicare for a portion of the episode. The fixed payment to the hospital, for DRGs 469 and 470, applies to all Medicare services rendered from the date of admission to 90-days post discharge. The CJR Model is currently in 67 geographic areas, including Harrisburg-Carlisle, Pittsburgh and Reading, Pennsylvania. Although the Obligated Group Affiliates are not located in a CJR Model geographic region, the CJR Model could expand to include the geographic region where the Obligated Group Affiliates are located.

Medicaid Reimbursement

Overview. Medicaid is a partially federal funded state program of medical care for the poor. States obtain federal matching funds for their Medicaid programs by obtaining the approval of CMS for a “state plan” which conforms to Title XIX of the Social Security Act and its implementing regulations. Under broad federal guidelines, each state establishes and administers its own Medicaid program, which includes determining its own eligibility standards, determining the types, amount, duration, and scope of services, and setting the rate of payment for services. After a state plan is approved, the federal government provides federal matching funds for Medicaid expenditures. The Obligated Group Affiliates received approximately 3% of their fiscal year 2016 net patient revenues from Medicaid.

The Health Care Reform Act generally revised the Medicaid program by expanding Medicaid coverage, controlling costs and improving Medicaid service delivery for recipients, including those with mental illnesses and disabilities. Under the Health Care Reform Act, states are required to maintain the Medicaid-eligibility standards in effect on March 23, 2010 until the state health insurance exchange (where consumers can comparison shop for health insurance) is deemed by HHS to be fully operational. States are not prevented from making cuts elsewhere in the Medicaid program, such as eliminating optional benefits or reducing provider reimbursement rates.

On June 28, 2012, the United States Supreme Court upheld the Health Care Reform Act’s individual mandate provision, revised the Medicaid expansion requirement by giving states a choice to opt out of expanding eligibility without losing the entirety of their federal Medicaid funds, and generally upheld the Health Care Reform Act as a whole. As a result of the ruling, almost every individual in the United States must either obtain health coverage, through an employer, a government-sponsored program such as Medicare or Medicaid, or individual insurance, or pay a penalty. In addition, the provisions of the Health Care Reform Act originally requiring states to expand eligibility requirements for state Medicaid programs to individuals who earn up to 133% of the federal poverty level are now optional and may not go into effect in all states. Following the Supreme Court’s Medicaid expansion ruling, it was uncertain how many states would choose to expand Medicaid. As of January 1, 2017, 31 states, including Pennsylvania, expanded Medicaid. During its implementation, the Health Care Reform Act has withstood several legal challenges. As its implementation continues it may face more challenges, and it remains unclear what effect, if any, other legal challenges to certain provisions of the Health Care Reform Act will have as a whole.

Most of the Health Care Reform Act’s details are developed through regulations that will continue to be promulgated by HHS and other federal agencies and state insurance departments. Increased access to health insurance coverage may increase the demand for health care and reduce uncompensated care, yet other Medicaid reforms and cost cutting initiatives may negatively impact financial results. These efforts to reform health care, particularly cutting the cost of health care and improving quality, will continue as current health care costs trends are unsustainable.

New legislation proposed to repeal and replace the Health Care Reform Act, if enacted, could result in the substantial amendment, repeal or replacement of many provisions of the Health Care Reform Act, including the expansion of Medicated. In any event, there can be no guarantee that federal and state

programs will continue to be funded at their current rate. Budgetary and financial constraints in Pennsylvania and other states, as well as severe limitations on the method of acquiring increased federal financial participation payments through the use of provider taxes and donations, have called into question the ability of public agencies such as DHS to make adequate and timely payments to providers. Further, while expanded Medicaid coverage will likely result in fewer uninsured patients, rates paid for Medicaid patients have historically not covered the full costs of their care and there is no guarantee that the rates will ever cover the cost of such care. The interim or long-term effects of the Health Care Reform Act, or any legislation amending, repealing or replacing it, on the Obligated Group Affiliates cannot be predicted with any degree of certainty.

Inpatient Services. Payment for medical and health services is made to hospitals in an amount determined in accordance with procedures and standards established by state law under federal guidelines. In addition to such direct payments, the Obligated Group Affiliates also receives reimbursement for services to Medicaid patients from certain HMOs that have contractual arrangements with DHS to provide coverage for such patients. Providers participating in Medicaid must accept Medicaid payment rates as payment in full.

Since 1984, Medicaid payment for operating and capital-related costs of acute care services has been based on a PPS similar to the federal Medicare DRG-based PPS described above. In 2010, when the state plan was amended, Medicaid payment for inpatient hospital services was modernized by establishing a uniform base rate for all hospitals using the most current cost information, and making adjustments for differences in regional labor costs, teaching programs, and Medicaid volume. At the same time, hospital payments through the state’s Medicaid managed care program were enhanced, and additional matching Medicaid funds were obtained through the establishment of the Quality Care Assessment, a tax on hospital net inpatient revenues that allows the state to access additional federal dollars. Through Pennsylvania’s Act 49 of 2010, DHS was authorized to impose a statewide hospital assessment on the net inpatient revenue of all Pennsylvania licensed acute care hospitals, with some exclusions, from July 1, 2010 through June 30, 2013. Act 49 itself modernized Pennsylvania’s inpatient hospital fee-for-service payment system, introduced enhanced hospital payments through Pennsylvania’s Medicaid managed care program, and secured additional matching Medicaid funds through the establishment of the Quality Care Assessment.

Next, Pennsylvania’s Act 55 of 2013 reauthorized the statewide hospital assessment for an additional three years: July 1, 2013 through June 30, 2016. More recently, Pennsylvania’s Act 92 of 2015 reauthorized the statewide hospital assessment through June 30, 2018. Through the significant amount of revenue that the assessment raises, Pennsylvania has been able to: maintain an updated inpatient payment system; to make changes to existing DSH payments and supplemental payments; and generate new payments where applicable.

In addition, states must make DSH payments to qualified hospitals that provide services to a disproportionately large number of Medicaid, low income and/or uninsured patients. Often DSH payments are insufficient to cover a hospital’s costs in providing care to such patients, and in light of the DSH payment reduction, there can be no assurance that any future DSH payments will cover The Obligated Group Affiliates’ costs. There can be no assurance that future Medicaid inpatient reimbursement rates will remain at current levels, or that such rates will cover the Obligated Group Affiliates’ costs of providing inpatient care to Medicaid patients.

Serious, Preventable Events. The Health Care Reform Act required CMS to incorporate non- payment policies for certain HACs into the Medicaid regulations, including non-payment polices for provider preventable conditions. States have discretion to add additional HACs and provider preventable conditions to their non-payment policies. While the Obligated Group Affiliates’ hospitals currently have

programs in place to monitor and prevent HACs, given the difficulty inherent in completely eliminating HACs, it is likely that the Obligated Group Affiliates’ hospitals will face reduced reimbursement at some point for costs associated with treating HACs.

Outpatient Services. Medicaid provides payment for hospital outpatient services rendered based on the lower of the usual charge to the general public for the same service or the Medicaid maximum allowable fee.

Medicaid Managed Care. In Pennsylvania, Medicaid recipients may obtain benefits through managed care plans. Under the program known as “HealthChoices,” most Medicaid beneficiaries in Pennsylvania, including those in The Obligated Group Affiliates’ service area, are required to enroll in a managed care plan that provides services on a prepaid basis. The HealthChoices program has generally resulted in stricter utilization review of Medicaid-reimbursed hospital services and reduced lengths of stay and/or reimbursement compared with the previous fee-for-service system. There can be no assurance that the prepaid rates will cover expenses incurred in providing inpatient hospital care to the Medicaid recipients.

Exclusions from Medicare and Medicaid Participation.

The OIG is required to exclude from federally funded governmental program participation, including Medicaid, for not less than five years, any individual or entity who has been convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare and/or Medicaid; any criminal offense relating to patient neglect or abuse in connection with the delivery of health care; felony fraud against any federal, state or locally financed health care program; or an offense relating to the illegal manufacture, distribution, prescription or dispensing of a controlled substance. The OIG has the authority to exclude individuals and entities from participation in federal health care programs who are deemed “untrustworthy.” Additionally, there is a prohibition against employing providers and contracting with providers and vendors, including entities and individuals, who are on the OIG exclusion list. HHS also may exclude individuals or entities under certain other circumstances, such as for a conviction of fraud, theft, embezzlement, breach of fiduciary duty or other financial misconduct relating either to the delivery of health care in general or to participation in a federal, state or local government program. Exclusion means that no Medicare and/or Medicaid program payments may be made for any services rendered by an excluded party. In May 2014, the OIG proposed to implement new changes to expand its authority to exclude individuals and entities from participation in federal health care programs, among other changes. On January 19, 2017, the OIG issued a final rule, under which the OIG expanded its exclusion authority.

Any action to exclude the Obligated Group Affiliates from Medicare and/or Medicaid could have a significant adverse impact on the Obligated Group Affiliates because no program payments can be made to any provider who is excluded. Additionally, the Obligated Group Affiliates regularly check the OIG exclusion list to ensure they are not contracting with or employing providers or vendors excluded from federally funded governmental program participation, including Medicaid. The Obligated Group Affiliates believes their efforts are in compliance with the requirement that they ensure they do not employ or contract with any individual or vendor who is excluded from federal funded program participation, but there can be no assurance that these efforts will not fail to detect an individual provider or vendor employed or contracted by the Obligated Group Affiliates who is excluded from federally funded governmental program participation. Such failure could have an adverse impact on the Obligated Group Affiliates.

Commercial Insurance

In addition to government sources (e.g., Medicare and Medicaid), the Obligated Group Affiliates also receives reimbursement for services from commercial insurance plans. Most commercial insurance plans pay for covered services based on prospectively established charges or negotiated rates, subject to various limitations, coinsurance provisions and deductibles. Certain agreements contain retrospective audit clauses allowing the payor to review and adjust claims subsequent to initial payment. The Obligated Group Affiliates received approximately 63% of their fiscal year 2016 patient service revenues from commercial insurers.

No assurance can be given as to whether commercial insurance revenues received by the Obligated Group Affiliates under existing or future contractual arrangements, in addition to their other revenue sources, will be sufficient to cover the Obligated Group Affiliates’ patient care costs in the future. Similarly, no assurance can be made that retrospective audits conducted by commercial insurers will not result in the recoupment of payments already made.

Managed Care Plans: HMO, PPO, EPO and High Deductible Plans

Commercial insurers have introduced managed care plans, including HMOs, PPOs, exclusive provider organizations, limited network plans and high deductible plans (HDPs). Under these plans, there are financial incentives for subscribers to use those hospitals and other providers that contract with those insurers (“network” providers). Commercial insurers, including but not limited to those insurers who contract with the federal government to cover Medicare Advantage beneficiaries are increasingly offering limited and tiered network plans and HDPs. HDPs reimburse for preventive care without cost-sharing, but all other medical expenses are the responsibility of the subscriber until a high dollar threshold is reached. If the Obligated Group Affiliates are excluded from limited networks or top tiers of tiered networks, they may experience reduced reimbursement from commercial insurers. As HDPs proliferate, the Obligated Group Affiliates will be responsible for collecting a larger portion of their charges from the individual patients and their families resulting in higher costs of collection and likely resulting in an increase in bad debt for the Obligated Group Affiliates.

Commercial Coverage Reimbursement

Most insurers and HMOs currently negotiate contracts that provide for reimbursement to hospitals on a discounted fee-for-service basis or on a discounted fixed rate per day of care. Some services are reimbursed on an “episode of care” or “capitation” payment methodology under which a hospital is paid a predetermined rate for a particular episode of care for a patient or a periodic rate for each enrollee who is “assigned” to, or otherwise directed to receive care at, a particular hospital. In a capitation payment system, the hospital assumes an insurance risk for the cost and scope of care given to such enrollees. These contracts generally are enforceable for a stated term regardless of provider losses. The Health Care Reform Act delivery reforms in the Medicare and Medicaid programs described above, including VBP, ACOs and population health management, are also beginning to be incorporated into the reimbursement methodologies of some commercial payors.

The Obligated Group Affiliates are currently under a capitation arrangement with HMOs for certain services. If the payments under such contracts are insufficient to meet the Obligated Group Affiliates’ cost of care, the financial condition of the Obligated Group Affiliates may be adversely affected. The Obligated Group Affiliates also have contractual relationships with certain HMOs to act as a designated provider of hospital-based care for HMO members. Reimbursement under these contractual arrangements is typically based on discounted per diem payment rates negotiated with HMOs or on negotiated rates that may include capitated rates that place the risk of over-utilization or cost increase on

the Obligated Group Affiliates. Payments under HMO and PPO contracts may be insufficient to meet the Obligated Group Affiliates’ costs of care.

Independence Blue Cross

The dominant third party payors in the Obligated Group Affiliates’ market are the Independence Blue Cross entities, which pay for patient care pursuant to contractual arrangements and various formulae. There can be no assurance that the payment rates and methodology employed under these contracts will reimburse the Obligated Group Affiliates at adequate levels.

Failure to maintain contracts with Independence Blue Cross and other substantial insurance carriers could have the effect of reducing the Obligated Group Affiliates’ patient base and/or revenues. Conversely, participation may maintain or increase the patient base, but may result in reduced payment and lower net income from operations.

Health Plan Financial Pressure and Insolvency

In cases where a managed care organization is a major purchaser of services from a particular hospital, contract rate reduction, contract cancellation, inability to pay, business failure or insolvency of the managed care organization may have a substantial negative effect on that hospital’s financial condition. It is not possible at this time to predict the future financial viability of the managed care industry in general or to predict what impact the insolvency and general financial state of such organizations might have on hospitals, including the Obligated Group Affiliates.

Physician Contracting and Relations

The Obligated Group Affiliates contract with physician organizations (“POs”) (e.g., independent physician practices or associations, etc.) to provide certain specialized physician (e.g., radiology, anesthesiology, pathology, emergency medicine) and professional services. POs are separate legal entities with their own goals, obligations to shareholders, financial status, and personnel, so there are risks involved in contracting with the POs.

The success of the Obligated Group Affiliates will partially depend upon t the POs’, including their employed physicians’, abilities to perform their obligations and deliver high quality patient care in a cost-effective manner. There can be no assurance that the Obligated Group Affiliates will be able to attract, contract with and retain the requisite number of POs, or that such POs will deliver high quality health care services. If they are unable to attract a sufficient number and type of POs and physicians to practice at the Obligated Group Affiliates’ hospitals, the Obligated Group Affiliates could fail to be competitive, fail to keep or attract payor contracts, or be prohibited from operating until they have arranged for physician services necessary to provide adequate access for patients. Such occurrences could have a material adverse effect on the business or operations of the Obligated Group Affiliates.

The Fraud and Abuse Laws.

The Federal Anti-Kickback Law. The federal Anti-Kickback Law (“AKS”) is a criminal statute that prohibits the knowing and willful offer, payment or receipt of remuneration in exchange for or as an inducement to make or influence a referral of a patient for the provision of goods or services that may be reimbursed under any federal health care program. The scope of the AKS is very broad, and it potentially implicates many practices and arrangements common in the health care industry. Violation of the AKS is a felony, subject to a maximum fine of $25,000 for each criminal act, imprisonment for up to five years, both a fine and imprisonment, civil monetary penalties of up to $54,372 per violation or damages equal to three times the amount of the prohibited remuneration, as well as exclusion from the federal health care

programs. The Health Care Reform Act clarified the intent requirement to provide that a person need not have actual knowledge of the AKS or specific intent to commit a kickback violation to violate the statute. The result of this change is that the government will have less of a burden to prove a violation under the AKS. In addition, a claim that includes items or services resulting from a violation of the AKS is a false claim for purposes of the federal civil False Claims Act (discussed below).

HHS has issued regulations from time to time setting forth safe harbors that protect limited types of arrangements from prosecution under the statute. Arrangements that do not comply with the strict requirements of the safe harbors, while not necessarily illegal, face an ongoing risk of investigation or prosecution due to the broad language of the statute. The safe harbors described in the regulations are narrow and do not cover many common economic relationships between and among hospitals, including the Obligated Group Affiliates, physicians and other health care providers. The Obligated Group Affiliates have entered into arrangements with other health care providers that may not meet all of the requirements of the “safe harbor” regulations. Given the narrowness of the safe harbor regulations and the scarcity of the case law interpreting the AKS, there can be no assurances that the Obligated Group Affiliates will not be found to have violated the AKS, and if such a violation were found, that any sanctions imposed would not have a material adverse effect upon the operations and financial conditions of The Obligated Group Affiliates.

Physician Payment Sunshine Act. To increase transparency regarding the financial relationships between hospitals, doctors, and healthcare manufacturing companies, the Physician Payment Sunshine Act requires that manufacturers of drugs, medical devices and biologicals that participate in U.S. federal health care programs must report certain payments and items of value given to physicians and teaching hospitals. This information is publicly available on the CMS website. It is impossible to predict the future impact of this reporting on the Obligated Group Affiliates or whether the companies that currently provide payments to the Obligated Group Affiliates will reduce such payments to The Obligated Group Affiliates or whether the federal government will pursue investigations as a result of such reporting.

Federal False Claims Act. The federal criminal False Claims Act (“criminal FCA”) makes it illegal to submit or present a claim known to be false, fictitious or fraudulent claim to the federal government. Violation of the criminal FCA can result in imprisonment and a fine. The federal civil False Claims Act (“civil FCA”), one of the government’s primary weapons against health care fraud, allows the United States government to recover significant damages from persons or entities that submit false or fraudulent claims for payment to any federal agency through actions taken by the U.S. Attorney’s Office or the Department of Justice. The civil FCA also permits individuals to initiate actions on behalf of the government in lawsuits called qui tam actions. These qui tam plaintiffs, or “whistleblowers,” can share in the damages recovered by the government.

Under the civil FCA, health care providers may be liable if they take steps to obtain improper payments from the government by submitting false claims or failing to refund known overpayments. Civil FCA violations have been alleged solely on the existence of alleged kickback or self-referral arrangements. Even in the absence of evidence that services were not provided or not medically necessary, these cases argue that the improper business relationship tainted the subsequently submitted claims, thereby rendering the claims false under the civil FCA. In 2009, the scope of the civil FCA was expanded to include so-called “reverse false claims,” where a provider that knowingly retains a government overpayment is subject to FCA liability. The Health Care Reform Act further requires that any overpayment be reported and repaid within 60 days after the date on which overpayment was identified. Failure to do so will be considered a per se false claim under the civil FCA. The Health Care Reform Act also modified the FCA by extending the FCA to AKS violations.

Violations of the civil FCA can result in penalties up to triple the actual damages incurred by the government and also monetary penalties ranging from $10,781 to $21,563 per claim. Private individuals may also bring suit under the qui tam provisions of the civil FCA and may be eligible for to share in the government’s recovery for providing information that leads to recoveries or sanctions that arise in a variety of contexts in which health care providers operate. The Health Care Reform Act also eased the requirements for private individuals to bring suit under the civil FCA. In recent years there has been a significant increase in the number of whistleblower allegations filed under the civil FCA.

While the Obligated Group Affiliates are not aware of any violations of the criminal FCA or civil FCA, these statutes pose significant risks to all health care organizations. There can be no assurances that he Obligated Group Affiliates will not be charged with, or found to have violated, the criminal FCA or civil FCA and, if so, that any fines or other penalties would not have a material adverse effect on their operations.

Civil Monetary Penalties Law. The Civil Monetary Penalties Law under the Social Security Act (“CMP Law”) provides for the imposition of civil monetary penalties for many reasons, including against any person who submits a claim to Medicare, Medicaid or any other federal health care program that the person knows or should know is for items or services not provided as claimed; is false or fraudulent; is for services provided by an unlicensed or uncertified physician or by an excluded person; represents a pattern of claims that are based on a billing code higher than the level of service provided; or is for services that are not medically necessary. The CMP Law, among other things, also prohibits hospitals from paying physicians to limit medically necessary care. Penalties under the CMP Law include up to $10,000 for each item or service claimed, and damages of up to three times the amount claimed for each item or service, and exclusion from participation in the federal health care programs. Depending on the type of violation, different (and in some cases, higher) penalties may apply

Health care providers may be found liable under the CMP Law even when they did not have actual knowledge of the impropriety of their action. Knowingly undertaking the action is sufficient. The imposition of civil monetary penalties could have a material adverse impact on the Obligated Group Affiliates’ financial condition.

Stark Self-Referral and Payment Prohibitions. The federal Ethics in Patient Referrals Act (known as the “Stark Law”) prohibits the referral of patients for certain “designated health services” (which include inpatient and outpatient hospital services) payable by Medicare to entities with which the referring physician (or an immediate family member of such physician) has a financial relationship unless an exception applies. The statute also prohibits the entity furnishing the “designated health services” from billing the Medicare or Medicaid program for designated health services furnished pursuant to a prohibited referral. The law requires reporting of financial relationships to CMS. The Stark Law is a strict liability statute.

Violations of the Stark Law can result in refunds of the amounts collected for services rendered pursuant to a prohibited referral, civil monetary penalties of up to $23,863 for each claim arising out of such referral, and exclusion from the Medicare and Medicaid programs. The Stark Law also provides for a civil penalty of up to $159,089 for entering into an arrangement with the intent of circumventing its provisions. In certain circumstances, knowing violations may also create liability under the FCA. Due to the complexity of the Stark Law and related regulatory guidance, there can be no assurance that The Obligated Group Affiliates will not be found to have violated the Stark Law. If so, a sanction imposed based on such a violation could have a material adverse effect on the operations and/or financial condition of The Obligated Group Affiliates.

State Fraud and Abuse Laws. In addition to federal fraud and abuse laws, states also have a variety of laws related to kickbacks and referrals, which may be broader than the federal laws. Pennsylvania does not have a state law similar to the Stark Law that prohibits self-referrals in all circumstances, but it has laws and regulations prohibiting kickbacks, and a Workers’ Compensation Act and Medicaid regulations, both of which have self-referral restrictions similar to the federal Stark Law.

The Pennsylvania Workers’ Compensation Act prohibits any health care provider from referring a person for physical therapy, rehabilitation and certain other health care services to an entity in which the provider has a financial interest. The Pennsylvania Workers’ Compensation Act also prohibits any entity from submitting a claim for payment for any service furnished pursuant to a prohibited referral. Regulations implementing the Pennsylvania Workers’ Compensation Act, however, exempt from the Pennsylvania Workers’ Compensation Act referrals permitted under any of the Stark Law exceptions or the AKS safe harbors. Violations of the Pennsylvania Workers’ Compensation Act referral restrictions may subject the provider to criminal penalties, civil monetary penalties and loss or suspension of licensure.

In addition to the self-referral restrictions in the Pennsylvania Workers’ Compensation Act, the Pennsylvania Medicaid regulations prohibit a participating provider from referring a Medicaid recipient to an independent laboratory, pharmacy, radiology or other ancillary medical service in which the practitioner has an ownership interest. Management of the Obligated Group Affiliates believes that all arrangements currently in place with their physicians have been appropriately structured so as to avoid violating the Pennsylvania Workers’ Compensation Law, the Pennsylvania Medicaid regulations or state laws and regulations prohibiting kickbacks. While The Obligated Group Affiliates are not aware of any violations of applicable state fraud and abuse laws by the Obligated Group Affiliates or their practitioners, these laws may pose significant risks to the Obligated Group Affiliates. If violations of state fraud and abuse laws were found to have occurred, any penalties or sanctions imposed could have a material adverse effect upon the future operations and financial condition of the Obligated Group Affiliates.

Exposure to Liability

Due to the nature of their businesses, the Obligated Group Affiliates from time to time become involved as a defendant in medical malpractice lawsuits, and are subject to the attendant risk of substantial damage awards. The most significant source of potential liability in this regard is the negligence of physicians employed or contracted by the Obligated Group Affiliates. To the extent such physicians are employed by the Obligated Group Affiliates or regarded as agents of the Obligated Group Affiliates in the practice of medicine, the Obligated Group Affiliates could be held liable for their negligence. In addition, the Obligated Group Affiliates could be found in certain instances to have been negligent in performing their management services even if no agency relationship with the physicians were found to exist. The Obligated Group Affiliates’ contracts with third party payors generally require the Obligated Group Affiliates to indemnify such other parties for losses resulting from the negligence of physicians who were employed or managed by or affiliated with the Obligated Group Affiliates.

The Obligated Group Affiliates maintain professional and general liability insurance in amounts deemed appropriate by management, based upon statutory requirements, historical claims and the nature and risks of their businesses. There can be no assurance, however, that any insurer will remain solvent and able to meet its obligations to provide coverage for any such claim or claims, or that such coverage will continue to be available or available with sufficient limits and at a reasonable cost to adequately and economically insure the Obligated Group Affiliates’ operations in the future. A judgment against any of

the Obligated Group Affiliates in excess of such coverage could have a material adverse effect on the Obligated Group Affiliates.

Medical Professional Liability Insurance Market

Professional liability costs for Pennsylvania’s physicians and other health care providers are high. Over the years, Pennsylvania physicians and health care providers have experienced premium increases and coverage reductions in medical professional liability insurance. Reductions in medical professional liability insurance capacity have resulted from a rise in claim severity nationwide coupled with lower investment returns available to insurers. Health care entities that have self-funded programs may experience similar difficulties with respect to reinsurance on their captive insurance companies and/or with respect to insurance placements in excess of the primary coverage layers.

The effect of these developments has been to increase the operating costs of hospitals, including those of the Obligated Group Affiliates, and organizations that employ physicians and other healthcare professionals, including certain MLHS Organizations. In addition, the increase in the cost of professional liability insurance may cause established physicians to leave the most heavily affected geographical regions, including Pennsylvania, and prevent new physicians from establishing their practices in the Obligated Group Affiliates’ region. See APPENDIX A – “Insurance.” There can be no assurance that the unpredictability of jury awards and claims payouts, the reduction of coverage availability, and/or the rising cost of professional liability insurance coverage will not ultimately adversely affect the operations or financial condition of the Obligated Group Affiliates.

The Pennsylvania General Assembly has enacted laws to address these issues, including the Medical Care Availability and Reduction of Error (“MCARE”) Act and the Fair Share Act. MCARE brought reform to the area of professional liability and created the MCARE fund which, in exchange for premiums from physicians, serves as a source of recovery for claims in excess of the provider’s base insurance limits. The Fair Share Act provides that, with some exceptions, a defendant will only be responsible to pay a portion of any judgment equal to the percentage of liability found against that defendant. See “BONDHOLDERS’ RISKS - Other Legislative and Regulatory Actions” herein.

Emergency Medical Treatment and Active Labor Act

The Emergency Medical Treatment and Active Labor Act (“EMTALA”) or the federal “anti- dumping” statute imposes certain requirements on hospitals prior to discharging an emergency patient or transferring such a patient to another facility. Failure to comply with the law can result in exclusion from the Medicare and/or Medicaid programs as well as civil penalties. The failure of The Obligated Group Affiliates to meet its responsibilities under EMTALA could adversely affect the financial condition of the Obligated Group Affiliates. EMTALA and its implementing regulations are complex, and the Obligated Group Affiliates’ compliance is dependent, in part, upon the compliance of independent medical staff members. Accordingly, there can be no assurance that no violation of EMTALA will be found or, if found, that any sanction imposed would not have a material adverse effect on the operations or financial conditions of the Obligated Group Affiliates.

Health Insurance Portability and Accountability Act

Providers of health care, such as the Obligated Group Affiliates, have been impacted by certain health information requirements contained in the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (“HIPAA”), as amended in 2009 by the Health Information Technology for Economic and Clinical Health Act (“HITECH”). HIPAA mandates the adoption of detailed standards for maintaining the privacy and security of protected health information (“PHI”). HITECH made significant modifications to HIPAA including subjecting business associates to direct

regulation and enforcement by the Office of Civil Rights of HHS (“OCR”), instituting a breach notification requirement for breaches of unsecured PHI, including a breach of PHI held by a business associate, and strengthening the enforcement tools available to OCR. Additionally, under HIPAA covered entities or business associates must perform risk assessments.

On March 21, 2016, the OCR announced that it was ready to begin Phase Two of its HIPAA audit program, which included business associates. These audits, mandated by HITECH, were primarily comprised of desk audits, scheduled to be completed by the end of December 2016, followed by onsite audits. The OCR explained that some covered entities and business associates who are subject to desk audits may also be subject to onsite audits. According to the OCR, all covered entities and business associates were eligible to be audited. The audits focused on identifying compliance with specific privacy, security and breach notification requirements under HIPAA/HITECH. Subsequent to the audits, the OCR will review and analyze information from audit final reports. This information has not yet been made publicly available. Importantly, if an audit report uncovers significant noncompliance with HIPAA, it could prompt an investigation by the OCR. It is anticipated that more audit activity by the OCR will continue in the future. In July 2016, OCR conducted an audit of Main Line Healthcare, a MLHS Organization that employs physicians. As of June 6, 2017, OCR has not informed Main Line Healthcare of the results of the audit.

The financial costs of continuing compliance with HIPAA regulations are substantial and will increase as a result of HITECH, increased enforcement, and well-publicized breaches. Enforcement of HIPAA compliance has heightened in recent years and this trend is expected to continue. This includes, but is not limited to, a steady increase in the number of substantial settlements with governmental authorities as a result of breaches. If OCR conducts an investigation (whether as a result of an audit or reporting of such a breach), OCR could impose certain fines and penalties and could also require the Obligated Group Affiliates to enter into a corrective action plan. The Obligated Group Affiliates are actively engaged in continuing compliance efforts with HIPAA and HITECH. There are also costs and risks associated with vendors and contractors and it is possible that the Obligated Group Affiliates could be responsible for HIPAA violations or breaches of its vendors and contractors. The Obligated Group Affiliates have reported breaches to HHS. No guarantee can be made that the Obligated Group Affiliates will remain HIPAA/HITECH Act compliant in the future, or that OCR will not conduct an audit or investigation in connection with a reported breach. In addition, as data breaches continue to have greater exposure both inside and outside of the health care industry, and awareness of such breaches continues, private litigation is expected to increase. As a result, no assurances can be given that the Obligated Group Affiliates or any related entity will not be faced with potential private litigation in the event of a data breach.

Electronic Health Record Incentive Program

HITECH provided funding for various activities intended to promote the adoption and meaningful use of certified electronic health record (“EHR”) technology. Eligible Medicare and Medicaid providers, including acute care hospitals and other health care professionals, may be eligible to receive EHR payment incentives if they demonstrate the meaningful use of certified EHR technology and meet other program requirements. Starting in 2015, an eligible provider who does not successfully demonstrate meaningful use of certified EHR technology will be subject to reduced physician fee schedule payments. If less than 75% of eligible providers are using certified EHR technology after 2018, then the payment adjustment will decrease by an additional 1% each year until the payment adjustment reaches 95% of the Medicare covered amount. CMS has begun an audit program to assure the veracity of certifications. The System has demonstrated “meaningful use” in accordance with the Medicare EHR Incentive Program. For the fiscal years ended June 30, 2016 and 2015, the System received and recorded $2,980,000 and $4,739,000, respectively, in accordance with its method of accounting for such payments.

There can be no guarantee that the System will continue to be able to successfully demonstrate meaningful use of EHR technology, and if the System or the Obligated Group Affiliates are unable to demonstrate meaningful use in the future, it or they, respectively, may be subject to reduced Medicare payments.

Affiliation, Merger, Acquisition and Divestiture

The Obligated Group Affiliates and the Corporation evaluate and pursue, from time to time, potential acquisition merger and affiliation candidates as part of the overall strategic planning and development process. As part of its ongoing planning and property management functions, the System reviews the use, compatibility and business viability of many of the operations of the Obligated Group Affiliates, and from time to time, the Obligated Group Affiliates and the Corporation may pursue changes in the use of, or disposition of, their facilities. Likewise, the Obligated Group Affiliates and the Corporation may occasionally receive offers from, or conduct discussions with, third parties about the potential acquisition of operations or properties which may become subsidiaries or affiliates of the System in the future, or about the potential sale of some of the operations and properties which are currently conducted or owned by the Obligated Group Affiliates or the Corporation. Discussions with respect to affiliation, merger, acquisition, disposition, or change of use of facilities may be held from time to time with other parties. These may be conducted with acute care hospital facilities and may relate to potential affiliation with the System. As a result, it is possible that current organizations and assets of the System may change from time to time. The impact of any such changes on the financial performance of the System may be unknown and hard to predict.

Other Legislative and Regulatory Actions

The Obligated Group Affiliates and their operations are subject to regulation and certification by various federal, state and local government agencies and by certain non-governmental agencies such as The Joint Commission. Various health and safety laws and regulations enforced by state and local agencies apply to the Obligated Group Affiliates. Violations of certain of these standards could result in closure of certain facilities of the Obligated Group Affiliates or portions thereof, or requirements that compliance with such standards be immediately achieved. Such standards are subject to change, and there can be no assurances that in the future, the Obligated Group Affiliates’ facilities will meet any changed standards or that the Obligated Group Affiliates will not be required to expend significant sums to comply with changed standards. No assurance can be given as to the effect on the Obligated Group Affiliates’ future operations of existing laws, regulations and standards for certification or accreditation or of any future changes in such laws, regulations and standards.

Other possible federal or state legislation which could have an adverse effect on the Obligated Group Affiliates include: (i) limitations on the amount of charitable contributions which are deductible for income tax purposes; (ii) limitations on the amount or availability of tax-exempt financing for Section 501(c)(3) corporations; and (iii) regulatory limitations affecting the Obligated Group Affiliates’ ability to undertake capital projects or develop new services.

Other regulatory programs which may significantly affect the Obligated Group Affiliates are changes in governmental requirements regarding patient treatment. These regulations are embodied in patients’ bills of rights and similar programs being promulgated with greater frequency and changes in licensure requirements. All of these could increase the cost of doing business and consequently adversely affect the financial condition of the Obligated Group Affiliates.

Charity Care

Hospitals are permitted to have tax-exempt status under the Internal Revenue Code (the “Code”) because the provision of health care historically has been treated as a “charitable” enterprise. This treatment arose before most Americans had health insurance and when charitable donations were required to fund the health care provided to the sick and disabled. In accordance with their status as 501(c)(3) tax exempt organizations, the Obligated Group Affiliates render care at a discount or at no charge to individuals whose financial status qualifies them for charity care.

The Health Care Reform Act is designed to reduce uncompensated care by expanding health care coverage to a larger portion of the population, but one component of this expanded coverage, the health care exchanges, is currently experiencing defections by private insurers due to the losses they have experienced in offering plans on such exchanges. As a result, the Obligated Group Affiliates may be required to provide services for which it receives payment below cost, or for which it may receive no payment at all, from the patient or third party payors. While the Obligated Group Affiliates attempt to provide care to the poor and indigent in a prudent manner, the continuation or expansion of such policy, or the inability to properly document its indigent care, could have an adverse financial effect on the Obligated Group Affiliates. See also the discussion of Section 501(r) of the Code under “Tax Exemption for Nonprofit Corporations” below.

Tax Exemption for Nonprofit Corporations

The tax-exempt status of nonprofit corporations and exclusion of income earned by them from taxation, has been the subject of review by various federal, state and local legislative, regulatory and judicial bodies. This review has included proposals to broaden and strengthen existing federal tax law with respect to unrelated business income of nonprofit corporations. Some have posited that, with the onset of employer-sponsored health insurance and government reimbursement programs, there is no longer any justification for special tax treatment for the not-for-profit health care sector, and the availability of tax-exempt status should be eliminated.

It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of nonprofit corporations, since such actions and proposals as have been made have been vigorously challenged and contested. There can be no assurance however that future changes in the federal, state and local laws and regulations will not materially and adversely affect the operations and revenues of the Obligated Group Affiliates by requiring the Obligated Group Affiliates to pay additional income or real estate taxes.

The Health Care Reform Act added Section 501(r) to the Code, which contains four specific requirements for hospitals that wish to receive or maintain their tax-exempt status under Section 501(c)(3) of the Code. In addition to the general requirements of Section 501(c)(3) of the Code that hospitals must satisfy in order to safeguard tax-exempt status under Section 501(c)(3), hospitals also must: (i) conduct a “community health needs assessment” at least once every three years and adopt an “implementation strategy” to meet the needs identified by the assessment; (ii) establish, implement, and make widely available written policies regarding emergency medical care and financial assistance; (iii) limit the amount the hospital charges for emergency or other medically necessary care provided to patients eligible for financial assistance to not more than the amounts generally billed to insured patients; and (iv) not take extraordinary collection actions (e.g., lawsuits, liens, or other similar actions) until it has made reasonable efforts to determine whether a patient is eligible for financial assistance.

The Health Care Reform Act also adds new Sections 4959 and 6033(b)(15) to the Code. New Section 4959 imposes a $50,000 excise tax for any taxable year in which a tax-exempt hospital fails to

meet the needs assessment requirement of new Section 501(r). New Section 6033(b)(15) imposes new reporting requirements on a tax-exempt hospital. Now a hospital will have to provide a description of how the organization is addressing the needs identified in the community health needs assessment and a description of any such needs that are not being addressed, together with the reasons why such needs are not being addressed. Hospitals will have to provide this report and their audited financial statements as attachments to the IRS Form 990. The Healthcare Reform Act requires a hospital to conduct a community needs assessment every three years in order to maintain its tax-exempt status.

Other legislative changes or judicial actions with respect to the tax-exempt status of nonprofit corporations, including the provision of free care to indigents and the exemption from property taxes of such corporations, could be enacted. There can be no assurance that future changes in federal, state or local laws, rules, regulations and policies governing tax-exempt entities will not have adverse effects on the future operations of the Obligated Group Affiliates.

Federal Income Tax Exemption; IRS Audits and Penalties

Recently, the Internal Revenue Service (“IRS”) has devoted additional resources to the auditing of federally tax-exempt organizations, including tax-exempt health care organizations. The IRS intends to focus on, among other matters, the unrelated business income producing activities of health care organizations. The IRS has significantly revised Form 990, Return of Organization Exempt from Income Tax, which greatly increases the disclosure requirement of tax exempt hospitals. The expanded information gathered by the IRS will allow the IRS to more closely monitor the activities of tax-exempt organizations. In addition, this information will be made available to Congress to form the basis for possible future legislation in this area. The Corporation and the Obligated Group Affiliates are exempt from federal income taxes under Section 501(c)(3) of the Code.

The IRS has not frequently revoked the 501(c)(3) status of nonprofit health care corporations, but it could do so in the future. Loss of tax-exempt status by the Corporation or the Obligated Group Affiliates could result in loss of tax exemption of the interest on the Series 2017A Bonds and of any other tax-exempt bond-related debt of the Corporation, and defaults in other tax-exempt debt would likely be triggered. Loss of tax-exempt status by the Corporation or the Obligated Group Affiliates could also result in substantial tax liabilities on taxable income that would likely have material adverse consequences on their financial condition.

Additionally, organizations described in Section 501(c)(3) of the Code (“Tax-Exempt Organizations”), such as the Corporation and the Obligated Group Affiliates, may be subject to “intermediate sanctions” if they engage in transactions that result in private inurement. Intermediate sanctions rules permit the IRS to impose a penalty tax on (i) “disqualified persons,” such as officers, directors, trustees and other key employees who receive “excess benefits,” such as excessive compensation, from Tax-Exempt Organizations; and (ii) managers of Tax-Exempt Organizations who knowingly participate in transactions that result in the payment of excess benefits to insiders. A penalty tax is imposed on the insiders or managers personally and not on the Tax-Exempt Organization. Management of the Corporation and the Obligated Group Affiliates is not aware of any transactions that would subject the Corporation or the Obligated Group Affiliates to intermediate sanctions, but there can be no guarantee that the Corporation and the Obligated Group Affiliates will not be found to have engaged in such transactions in the future, which could subject the Corporation or the Obligated Group Affiliates to intermediate sanctions and reduced revenue.

Legislation Affecting Tax Exempt Status of Interest on the Bonds

Proposals for various amendments to the Code have been considered in connection with federal tax reform. No assurance can be given that amendments to the Code or other federal legislation will not be introduced and/or enacted which would cause the interest on the Series 2017A Bonds to be subject, directly or indirectly, to federal income taxation or adversely affect the market price of the Series 2017A Bonds or otherwise prevent the holders of the Series 2017A Bonds from realizing the full current benefit of the federal tax status of the interest thereon.

Local Governmental Challenges to Property-Tax Exemptions

Local government in many states have significantly increased efforts to challenge the exempt status of nonprofit corporations’ real property. These challenges generally have been based on either nonuse of real property for the charitable object of the Tax-Exempt Organization or inadequate levels of public benefit or uncompensated care. In Pennsylvania, these challenges have been based primarily on the organizations’ status as an “institution of purely public charity” as described in the Pennsylvania Constitution, notwithstanding the fact that Pennsylvania hospital facilities historically have been viewed as exempt from such taxes. Several of these challenges have resulted in litigation, with differing results. In some cases, however, the litigation has resulted in settlements where the Tax-Exempt Organizations have agreed to pay to the local taxing authority payments in lieu of taxes and, in at least one instance, revocation of the state real property tax exemption of the organization. Pennsylvania’s Institutions of Purely Public Charity Act (“IPPCA”) adopts a five-part test similar to that developed by the courts as the criteria for determining if an organization is an “institution of purely public charity.” A 2012 decision of the Pennsylvania Supreme Court (Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Bd. of Assessment Appeals, 615 Pa. 463 (Pa. 2012)) declared that IPPCA is subject to the determination of the courts in Pennsylvania as to the meaning of “institution of purely public charity” under the Pennsylvania Constitution, and that courts will follow Pennsylvania case law in such determination, not necessarily the test set forth in the IPPCA. This may further increase the efforts by local governments to challenge the exempt status of real property.

It is not possible to predict the scope or effect of future legislation or regulatory actions with respect to taxation of nonprofit corporations, since such actions and proposals have been vigorously challenged and contested. There can be no assurance that future changes in the laws and regulations of the federal, state or local governments will not materially and adversely affect the operations and revenues of the Corporation or the Obligated Group Affiliates by requiring the Corporation or the Obligated Group Affiliates to pay additional income or real estate taxes.

Environmental Matters

Health care providers are subject to a variety of federal, state and local environmental and occupational health and safety laws and regulations which address, among other things, hospital operations, facilities and properties. Among the type of regulatory requirements faced by hospitals are (i) air and water quality control requirements, (ii) waste management requirements, (iii) specific regulatory requirements applicable to asbestos, polychlorinated biphenyls and radioactive substances, (iv) requirements for providing notice to employees and members of the public about hazardous material handled by or located at the Obligated Group Affiliates, and (v) requirements for training employees in the proper handling and management of hazardous materials and wastes.

In their role as the owners and operators of properties and facilities, the Obligated Group Affiliates may be subject to liability for hazardous substances that may have migrated off their properties, including remediation thereof. Typical hospital operations include, but are not limited to, in various

combinations, the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants and contaminants. As such, hospital operations are particularly susceptible to the practical, financial and legal risks associated with compliance with such laws and regulations. Such risks may (i) result in damage to individuals, property or the environment, (ii) interrupt operations and increase their cost, (iii) result in legal liability, damages, injunctions or fines and (iv) result in investigations, administrative proceedings, penalties or other governmental agency actions. There is no assurance that the Obligated Group Affiliates will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Obligated Group Affiliates.

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

Interest Rate Swap Risk

The Corporation or any of the Obligated Group Affiliates may from time to time enter into interest rate swap agreements to manage interest rate risk. Swap agreements may be subject to periodic “mark-to-market” valuations and may, at any time, have a negative value (which could be substantial) to the Corporation or the Obligated Group Affiliate. Changes in the market value of any swap agreement could negatively or positively impact the Corporation’s or the Obligated Group Affiliate’s financial condition, and such impact could be material. Any future swap agreement may be subject to early termination upon the occurrence of certain specified events. If a swap agreement is terminated when such swap agreement has a negative value to the Corporation or the Obligated Group Affiliate, the Corporation or the Obligated Group Affiliate could be obligated to make a termination payment to the counterparty in the amount of such negative value, and such payment could be substantial and potentially materially adverse to the Corporation’s or the Obligated Group Affiliate’s financial condition. In the event of an early termination of a swap agreement, there can be no assurance that (i) the Corporation or Obligated Group Affiliate will receive any termination payment payable to it by the respective swap provider, (ii) the Corporation or Obligated Group Affiliate will not be obligated to make or will have sufficient monies to make a termination payment payable by it to the applicable swap provider, or (iii) the Corporation or Obligated Group Affiliate will be able to obtain a replacement swap agreement with comparable terms.

A swap agreement entered into by the Corporation or an Obligated Group Affiliate may require the Corporation or the Obligated Group Affiliate to secure its obligations in certain circumstances. If the Corporation or the Obligated Group Affiliate is unable to secure its obligations under a swap agreement with sufficient collateral, the related swap provider may have the right to terminate such swap agreement and the Corporation or the Obligated Group Affiliate could be required to make a termination payment to the swap provider, the amount of which could be substantial.

Certain Indebtedness Subject to Tender

Certain outstanding indebtedness of the Corporation permits the holder thereof to tender such indebtedness for purchase by the Corporation prior to the stated maturity thereof. See “KEY FINANCIAL RATIOS OF THE SYSTEM – Summary of Long-Term Debt” in Appendix A. No financial institution or other entity other than the Corporation has committed to provide funds to purchase such indebtedness or to refinance such indebtedness. In the event that the holder of any such indebtedness tenders it for purchase, there can be no assurance that the indebtedness will be remarketed to a new holder or that the Corporation will be able to refinance the indebtedness in lieu of remarketing. In any such case, the

Corporation will be responsible for payment of the full outstanding principal amount and accrued interest to the holder of such indebtedness upon such tender.

Potential Effects of Bankruptcy

If the Corporation were to file a petition for relief under the United States Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the corporation, and its property. In various circumstances, such property, including its accounts receivable and proceeds thereof, could be used to support the operations of the Corporation despite the claims of its creditors.

In the event of bankruptcy of the Corporation, the post-petition revenues of the Corporation will not be subject to pre-petition liens except to the extent that such revenues are proceeds of pre-petition accounts which constitute collateral under the applicable security agreement. In addition, transfers of property made by the Corporation at a time that it was insolvent in payment of or to secure an antecedent debt, including the payment of debt or the transfer of any collateral, on or after the date which is 90 days (or, if the transferee is an insider of the debtor, one year) prior to the commencement of the case under the Bankruptcy Code may be subject to avoidance as preferential transfers. Under certain circumstances a court may have the power to direct the use of a debtor’s revenues to meet expenses before paying debt service on indebtedness.

In a proceeding under Chapter 11 of the United States Bankruptcy Code, the Corporation could file a plan of reorganization which modifies the rights of creditors generally or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the court, would bind all creditors except, under very limited circumstances, creditors without notice or knowledge of the plan, and would discharge all claims against the debtor. Generally, 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. A 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 (but if all other conditions to confirmation under the Bankruptcy Code have been satisfied), it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting claims or interests impaired thereunder and does not discriminate unfairly.

Under the Bankruptcy Code and/or applicable state fraudulent conveyance law, a trustee in bankruptcy (or other recognized bankruptcy estate representative) for a related guarantor may avoid any obligation incurred by such guarantor if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the Bankruptcy Code or applicable state fraudulent conveyance laws, or the guarantor is undercapitalized. See “ – Dependence on Obligated Group Affiliates” herein for additional discussion concerning the enforceability of the Master Indenture in the context of a bankruptcy.

Corporate Compliance Program

Under Section 6401 of the Health Care Reform Act, “a provider of medical or other items or services or supplier within a particular industry” shall establish a compliance program as a condition of enrollment under Medicare and/or Medicaid. CMS has not yet promulgated regulations regarding Section 6401 of the Health Care Reform Act. Additionally, the sentencing of organizations for federal health care crimes is governed by the U.S. Federal Sentencing Guidelines (the “Sentencing Guidelines”), which permit the imposition of large fines and criminal penalties in many instances. The Sentencing Guidelines

permit fines and penalties to be reduced significantly, however, if the provider had in place at the time of the crime an effective corporate compliance program and/or accepts responsibility for its actions. As a result of the current environment of increased enforcement against health care fraud and abuse, the Obligated Group Affiliates have implemented compliance programs which include compliance plans to assist all employees in understanding and adhering to the legal and ethical standards that govern hospital and other healthcare provider operations and the provision of patient care (the “Compliance Plans”). The Compliance Plans have been designed to (i) comply with the standards set forth in the Sentencing Guidelines, (ii) meet the OIG’s Compliance Program Guidelines for Hospitals, and (iii) help assure that the Obligated Group Affiliates and their affiliates act in accordance with their mission, values and known legal duties. All new employees receive Compliance Plan education at orientation and all employees receive Compliance Plan education annually. The Obligated Group Affiliates believe that their Compliance Plans are in overall compliance with the OIG Compliance Guidance for Hospitals, but there is no guarantee that the Obligated Group Affiliates’ Compliance Plans will always remain in compliance with the Sentencing Guidelines or OIG’s Compliance Program Guidelines for Hospitals in the future.

Antitrust

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

Risks Specific To Mirmont Alcohol Rehabilitation Center

Mirmont, as a provider of inpatient and outpatient treatment for patients with drug and alcohol dependence, is regulated by the Pennsylvania Department of Drug and Alcohol Programs and subject to specific licensing requirements for drug and alcohol treatment providers under Pennsylvania law. Re- licensure is required on an annual basis. Mirmont’s current license expires on December 31, 2017.

Health insurance coverage for substance abuse treatment varies, and certain care provided by Mirmont may not be eligible for reimbursement under most commercial health insurance plans. The Health Care Reform Act requires certain health plans offered in the individual and small group markets to include certain “essential health benefits,” including coverage for mental health and substance abuse disorders. However, these requirements are not applicable to other insurance plans, including large group health plans and self-insured ERISA plans. Moreover, recent legislative efforts have focused on repealing the Health Care Reform Act generally and the “essential health benefits” requirement specifically. Given the uncertainty surrounding the Health Care Reform Act, it is unclear whether substance abuse treatment will continue to be required under certain health insurance plans, and, if not, what, if any, effect this would have on the operations or financial results of Mirmont.

Certain Other Risks

The following factors, among others, may also adversely affect the operation of health care facilities, including the facilities of the Obligated Group Affiliates, to an extent that cannot be determined at this time:

(1) increase in the costs resulting from unionization of the employees or the utilization by non- union employees of proceedings available under the National Labor Relations Act; (2) future legislation conditioning tax exempt status or access to tax exempt financing on satisfaction of various criteria, such as level of charity care, maintenance of an emergency room or changing the method of taxing unrelated business income; (3) the decrease in utilization of inpatient hospital facilities due to future medical and scientific advances, the development and requirement of the option for HMOs in labor contracts, state health plans and other health plans, preventive medicine, improved occupational health and safety and improved outpatient care; (4) the need and inherent challenges to obtain governmental approvals to undertake projects which the Corporation and the Obligated Group Affiliates deem necessary to remain competitive as to rates and charges and to maintain the quality and scope of care; (5) increase in the cost of pharmaceuticals, medical supplies, energy and other utilities, liability, casualty and other insurance, and other materials and services necessary to sustain the operations of the Obligated Group Affiliates; (6) decreases in the availability of energy and other utilities, public liability insurance, and other materials and services necessary to sustain the operations of the Obligated Group Affiliates; (7) the occurrence of terrorist activities, cyber-attacks (such as ransomware), or natural disasters, including floods or earthquakes, which could damage the Obligated Group Affiliates’ facilities or otherwise impair the operation of, and generation of revenues from, the Obligated Group Affiliates’ activities; (8) reduced demand for the health care services of the Obligated Group Affiliates that might result from decreases in population in its service area; (9) increased unemployment or other adverse economic conditions in the service area of the Obligated Group Affiliates that would increase the proportion of patients who are unable to pay fully for the cost of their care or reduce the proportion of patients who have insurance coverage for health care services; (10) any increase in the quantity of indigent care provided that is mandated by law or required due to increased needs of the community in order to maintain the charitable status of the Obligated Group Affiliates; (11) epidemics or other public health issues that may strain the Obligated Group Affiliates’ resources or disrupt their normal operations; (12) increase in the costs of health care benefits, retirement plan, or other benefit packages offered by the Obligated Group Affiliates to its employees; (13) unknown litigation, regulatory actions or other similar claims regarding the Obligated Group Affiliates or any of its affiliates; (14) the ability of the Obligated Group Affiliates to offer certain sophisticated and costly equipment for diagnosis and treatment; (15) changes in reimbursement procedures or in contracts under public or private insurance programs; (16) limitations on availability of, and increased compensation necessary to secure and retain, physicians, nursing, technical, executive and other professional personnel; and

(17) data breaches which may adversely affect the Obligated Group Affiliates’ financial results, operations and reputation.

CONTINUING DISCLOSURE

The Issuer has determined that no financial or operating data concerning it is material to any decision to purchase, hold or sell the Series 2017A Bonds, and the Issuer will not provide any such information. The Corporation has undertaken all responsibilities for any continuing disclosure to holders of the Series 2017A Bonds as described below, and the Issuer shall have no responsibility or liability to the holders or any other person with respect to such disclosures.

The Corporation has covenanted for the benefit of the holders of the Series 2017A Bonds pursuant to Rule 15c2-12 of the Securities and Exchange Commission and a Continuing Disclosure Agreement, dated as of the date of delivery of the Series 2017A Bonds (the “Continuing Disclosure Agreement”), to file with the Municipal Securities Rulemaking Board through its EMMA System (i) certain financial information and operating data relating to the Corporation on an annual basis (the “Annual Report”) within 180 days after the end of each fiscal year in each year that the Series 2017A Bonds are outstanding and (ii) notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report or the notices of certain events is set forth in the Continuing Disclosure Agreement. A proposed form of the Continuing Disclosure Agreement is attached hereto as APPENDIX D.

LITIGATION

The Issuer

There is not now pending or, to the knowledge of the Issuer, threatened against the Issuer any litigation restraining or enjoining the issuance or delivery of the Series 2017A Bonds or questioning or affecting the validity of the Series 2017A Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence of the Issuer nor the title of any of the present directors or other officials of the Issuer to their respective offices is being contested. There is no litigation pending or, to its knowledge, threatened against the Issuer, which in any manner questions the right of the Issuer to enter into the Bond Indenture or the Loan Agreement or to accept the Series 2017A Master Note in the manner provided in the Bond Indenture and the Act.

The Corporation

The Corporation has advised that no litigation, proceedings or investigations are pending or, to its knowledge, threatened against the Corporation or any Obligated Group Affiliate except (i) litigation and regulatory investigations arising in the ordinary course of business; (ii) litigation described in APPENDIX A under the captions “Insurance”, and “Litigation” or in APPENDIX B - Audited Consolidated Financial Statements of Main Line Health System and Affiliates for the Years Ended June 30, 2016 and 2015; and (iii) litigation, proceedings or investigations involving other types of claims which, if adversely determined, will not have a materially adverse effect on the operation or condition, financial or otherwise, of the Corporation and the Obligated Group Affiliates taken as a whole. No litigation, proceedings or investigations are pending or, to the knowledge of the Corporation, threatened against the Corporation or any of the Obligated Group Affiliates which in any manner question the right of such parties to enter into the transactions described herein. See APPENDIX A - “- Insurance” and “- Litigation” and “BONDHOLDERS' RISKS – Exposure to Liability” herein.

TAX MATTERS

Federal Tax Matters

In the opinion of Ballard Spahr LLP, Bond Counsel, interest on the Series 2017A Bonds is excludable from gross income for purposes of federal income tax under existing laws as enacted and construed on the date of initial delivery of the Series 2017A Bonds, assuming the accuracy of the certifications of the Issuer and the Borrower and continuing compliance by the Issuer and the Borrower with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Series 2017A Bonds is not an item of tax preference for purposes of either individual or corporate federal alternative minimum tax; however, interest on 2017A Bonds held by a corporation (other than an S corporation, regulated investment company, or real estate investment trust) may be indirectly subject to federal alternative minimum tax because of its inclusion in the adjusted current earnings of a corporate holder. Bond Counsel will express no opinion regarding other federal tax consequences of ownership or disposition of, or the accrual or receipt of interest on, the Series 2017A Bonds.

The Code establishes requirements that must be complied with subsequent to the issuance of the Series 2017A Bonds for interest thereon to be and remain excludable from gross income pursuant to Section 103 of the Code. Failure to comply with these requirements could cause the interest on the Series 2017A Bonds to be included in gross income, retroactive to the date of issue of the Series 2017A Bonds or at some later date. The requirements include, but are not limited to, (1) the provisions of Section 148 of the Code which prescribes yield and other limits within which the proceeds of the Series 2017A Bonds are to be invested and may require that certain investment earnings on the foregoing be rebated on a periodic basis to the United States, (2) use of the proceeds of the Series 2017A Bonds, and (3) use of the facilities financed with the Series 2017A Bonds. The Issuer and the Borrower have covenanted to comply with the provisions of the Code.

Original Issue Discount. The Series 2017A Bonds being offered at a discount (“original issue discount”) equal generally to the difference between the public offering price and the principal amount are referred to herein as the “Discount Bonds”. For federal income tax purposes, original issue discount on a Discount Bond accrues periodically over the term of such Discount Bond as interest which is excluded from the gross income for federal income tax purposes and subject to alternative minimum tax to the same extent as regular interest. The accrual of original issue discount increases the holder’s tax basis in the Series 2017A Bonds for determining taxable gain or loss upon sale or redemption prior to maturity. Holders should consult their tax advisors for an explanation of the accrual rules.

Original Issue Premium. The Series 2017A Bonds being offered at a premium (“original issue premium”) equal generally to the excess of their public offering price over their principal amount are referred to herein as the “Premium Bonds”. For federal income tax purposes, original issue premium is amortizable periodically over the terms of the Premium Bond through reductions in the holder’s tax basis for such Premium Bond for determining taxable gain or loss upon sale or redemption prior to maturity. Amortization of premium does not create a deductible expense or loss. Holders should consult their tax advisors for an explanation of the amortization rules.

Pennsylvania Tax Matters

Bond Counsel is also of the opinion that the Series 2017A Bonds are exempt from personal property taxes in Pennsylvania, and the interest on the Series 2017A Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax under the laws of the Commonwealth of Pennsylvania as enacted and construed on the date of initial delivery of the Series 2017A Bonds.

Changes in Federal and State Tax Law

From time to time, there are Presidential proposals, proposals of various federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein or adversely affect the marketability or market value of the Series 2017A Bonds or otherwise prevent holders of the Series 2017A Bonds from realizing the full benefit of the tax exemption of interest on the Series 2017A Bonds. Further, such proposals may impact the marketability or market value of the Series 2017A Bonds simply by being proposed. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Series 2017A Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2017A Bonds would be impacted thereby.

Purchasers of the Series 2017A Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2017A Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation.

CERTAIN LEGAL MATTERS

Certain legal matters incident to the authorization, issuance and sale of the Series 2017A Bonds will be passed upon by Ballard Spahr LLP, Philadelphia, Pennsylvania, Bond Counsel whose approving opinion will be delivered at the closing for the Series 2017A Bonds. The form of approving opinion expected to be delivered by Bond Counsel is attached hereto as APPENDIX E. Certain legal matters will be passed upon for the Issuer by its counsel, Lamb McErlane PC, West Chester, Pennsylvania. Certain legal matters will be passed upon for the Corporation by its Senior Vice President and General Counsel, Brian T. Corbett, Esq., and by its counsel, Ballard Spahr LLP, Philadelphia, Pennsylvania and for the Underwriter by its counsel, Saul Ewing LLP, Philadelphia, Pennsylvania.

The various legal opinions to be delivered concurrently with the delivery of the Series 2017A Bonds express the professional judgment of the attorneys rendering the opinion as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or the future performance of the parties to the transaction. In addition, the rendering of an opinion does not guarantee the outcome of any legal dispute that may arise out of the transaction.

VERIFICATION OF MATHEMATICAL COMPUTATIONS

Robert Thomas CPA, LLC, Shawnee Mission, Kansas (the “Verification Agent”), will deliver a report dated as of the closing date for the Series 2017A Bonds, verifying the accuracy of the mathematical computations of: (i) the adequacy of the maturing principal amount of securities and the interest income to be realized thereon, together with uninvested cash, if any, to pay the principal and interest due on the Series 2010A Bonds being advance refunded from the deposit of funds with the Escrow Agent pursuant to the terms and provisions of the Escrow Deposit Agreement, through and including their call date, and to redeem the Series 2010A Bonds being refunded on their call date at a redemption price of 100% of the principal amount redeemed and (ii) the yield on the Series 2017A Bonds and the securities held pursuant to the Escrow Deposit Agreement. Such verification will be based upon information supplied to the

Verification Agent by the Underwriter. The Verification Agent will express no opinion on the assumptions provided to it, nor as to the exemption from taxation of the interest on the Series 2017A Bonds.

FINANCIAL ADVISOR

In connection with the authorization, sale and issuance of the Series 2017A Bonds, the Corporation has retained Echo Financial Products, LLC, of King of Prussia, Pennsylvania, as its financial advisor (the “Financial Advisor”). The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness, of the information contained in this Official Statement and the Appendices hereto. The Financial Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements of the System as of June 30, 2016 and 2015 and for each of the two years in the period ended June 30, 2016 included in this Official Statement have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report appearing herein.

RATINGS

Moody’s Investors Service (“Moody’s”), S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”) and Fitch Ratings, Inc. (“Fitch”) has assigned their municipal bond ratings of “Aa3” (stable outlook), “AA” (stable outlook) and “AA” (stable outlook), respectively, to the Series 2017A Bonds.

Generally, rating agencies base their ratings on information and materials so furnished and on investigations, studies and assumptions by the rating agencies. The ratings assigned to the Series 2017A Bonds reflect only the views of Moody’s, S&P and Fitch at the time such ratings were issued, and an explanation of the significance of such ratings and the corresponding outlook may be obtained only from Moody’s, S&P and Fitch. Such ratings are not a recommendation to buy, sell or hold the Series 2017A Bonds and may be subject to revision or withdrawal at any time. There is no assurance that any such ratings will continue for any given period of time or that they will not be lowered or withdrawn entirely by any of the rating agencies, if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of any rating may have an adverse effect on the market price of the Series 2017A Bonds.

None of the Issuer, the Corporation or the Underwriter has undertaken any responsibility to maintain any particular rating on the Series 2017A Bonds. As noted above, a securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.

UNDERWRITING

The Series 2017A Bonds are being purchased by Citigroup Global Markets Inc. (the “Underwriter”) pursuant to a Bond Purchase Agreement between the Issuer and the Underwriter, and approved by the Corporation (the “Bond Purchase Agreement”). Pursuant to the Bond Purchase Agreement, the Underwriter has agreed to purchase the Series 2017A Bonds at a purchase price of $______(the principal amount of the Series 2017A Bonds, [plus/less net original issue premium/discount] of $______less an Underwriter’s discount of $______). The initial public offering price of the Series 2017A Bonds may be changed from time to time by the Underwriter. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Series 2017A Bonds if

any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, including, among others, the approval of certain legal matters by counsel.

Citigroup Global Markets Inc., the Underwriter of the Bonds, has entered into a retail distribution agreement with UBS Financial Services Inc. (“UBSFS”). Under this distribution agreement, Citigroup Global Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS. As part of this arrangement, Citigroup Global Markets Inc. may compensate UBSFS for its selling efforts with respect to the Series 2017A Bonds.

The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the Corporation and the Obligated Group Affiliates for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Corporation and the Obligated Group Affiliates.

OTHER MATTERS

The references herein to the Act, the Master Indenture, the Series 2017A Master Note, the Bond Indenture and the Loan Agreement are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and for full and complete statements of the provisions thereof reference is made to the Act, the Master Indenture, the Series 2017A Master Note, the Bond Indenture and the Loan Agreement. Copies of current drafts of such documents for the Series 2017A Bonds are on file at the corporate trust office of the Bond Trustee in Philadelphia, Pennsylvania.

The agreement of the Issuer with the holders of the Series 2017A Bonds is fully set forth in the Bond Indenture, and neither any advertisement of the Series 2017A Bonds nor this Official Statement is to be construed as constituting an agreement between the Issuer and the purchasers of the Series 2017A Bonds. So far as any statements made in this Official Statement involve estimates, projections or matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact.

CUSIP identification numbers will be printed on the Series 2017A Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Series 2017A Bonds.

The attached APPENDICES A through E are integral parts of this Official Statement and must be read together with all of the foregoing statements.

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The Corporation has reviewed the information contained herein which relates to the Corporation and the Obligated Group Affiliates and their properties and operations, including the information in APPENDICES A and B hereto, and has approved all such information for use within this Official Statement. The Issuer has duly authorized the execution and delivery of this Official Statement.

CHESTER COUNTY HEALTH AND EDUCATION FACILITIES AUTHORITY

By: Dr. Thomas W. Clapper Chair

Approved:

MAIN LINE HEALTH SYSTEM

By: Michael Buongiorno Executive Vice President and Chief Financial Officer

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APPENDIX A

INFORMATION CONCERNING MAIN LINE HEALTH SYSTEM

The information contained herein as Appendix A to this Official Statement has been provided by Main Line Health System and Affiliates

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APPENDIX A TABLE OF CONTENTS

MAIN LINE HEALTH SYSTEM OVERVIEW ...... 1 Introduction ...... 1 History ...... 1 Corporate Structure ...... 2 System Associated Foundations ...... 4 Obligated Group ...... 4 Main Line Health System Acute Care Facilities ...... 5 Main Line Health System—Lankenau Medical Center ...... 5 Main Line Health System—Bryn Mawr Hospital...... 5 Main Line Health System—Paoli Hospital ...... 6 Main Line Health System—Riddle Hospital ...... 6 Main Line Health System—Bryn Mawr Rehabilitation Hospital ...... 6 Main Line Health System—Mirmont Alcohol Rehabilitation Center ...... 6 Main Line Health System Ambulatory Health Centers ...... 7 Main Line Health Center—Broomall ...... 7 Main Line Health Center—Collegeville ...... 7 Main Line Health Center—Concordville ...... 7 Main Line Health Center—Exton Square Mall ...... 7 Main Line Health Center—Newtown Square ...... 7 Certain Other MLH Subsidiaries ...... 7 Main Line HealthCare ...... 8 Main Line Health HomeCare & Hospice ...... 8 Main Line Realty Corporation ...... 8 The Lankenau Institute for Medical Research ...... 8 Main Line Services ...... 8 Main Line Health Wellness, LLC ...... 8 Main Line Health Physician Partners, LLC ...... 8 Certain MLH Joint Ventures ...... 9 Accountable Care Organization of Pennsylvania, LLC. (d/b/a Delaware Valley ACO) ...... 9 Mountain Laurel Risk Retention Group, Inc...... 9 Five Pointe Professional Liability Company ...... 9 Bryn Mawr Surgery Center, LLC ...... 9 MLJH, LLC ...... 9 Riddle Surgical Center, LLC ...... 10 Awards and Recognitions ...... 10 GOVERNANCE ...... 10

Board of Governors/Trustees of MLHS, MLH, ML Hospitals and Riddle Memorial Hospital ...... 12 Conflict of Interest Policy ...... 13 Main Line Health System Management ...... 13 MEDICAL STAFF ...... 15 RESIDENCY PROGRAMS AND ACADEMIC AFFILIATIONS ...... 17 STRATEGIC PLAN ...... 18 PROJECT DESCRIPTION ...... 19 Bryn Mawr Hospital ...... 19 Lankenau Medical Center ...... 20 SERVICE AREA AND MARKET SHARE ...... 21 Inpatient Discharge Market Share – System Planning Zones ...... 24 Largest Employers by County for the System’s Planning Zone Service Area ...... 25 Primary Service Area ...... 26 FINANCIAL AND OPERATING INFORMATION ...... 28 Utilization ...... 28 Operating Results ...... 29 Health System Balance Sheets ...... 30 Payer Mix ...... 32 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RECENT FINANCIAL PERFORMANCE OF THE SYSTEM ...... 32 Statements of Operations – Nine Months ended March 31, 2017 and 2016 ...... 32 Balance Sheet as of March 31, 2017 ...... 33 KEY FINANCIAL RATIOS OF THE SYSTEM ...... 33 Capitalization ...... 34 Liquidity ...... 34 Investments and Investment Policy ...... 35 Summary of Long-Term Debt ...... 35 Debt Service ...... 36 OTHER INFORMATION ...... 36 Defined Benefit Pension Program ...... 36 Defined Contribution Plan ...... 36 Employees and Labor Relations ...... 37 Insurance ...... 37 Litigation ...... 38 Community Benefit ...... 38 Charity Care ...... 38 Medicaid Shortfall ...... 38 Bad Debt ...... 39 Community Health Improvement Services ...... 39 Community Health Needs Assessment and Implementation Plans ...... 39 Health Career Academy ...... 39 Subsidized Health Services ...... 40

Research ...... 40 Community Building Activities ...... 40

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MAIN LINE HEALTH SYSTEM OVERVIEW

Introduction

Main Line Health System (“MLHS”), together with its affiliates, subsidiaries and joint ventures (the “System”), is an integrated health care delivery system serving the three counties encompassing the western suburbs of Philadelphia, Chester, Delaware and Montgomery, as well as the western portion of the City of Philadelphia (collectively, the “Service Area”). MLHS is a Pennsylvania non-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).

The System encompasses a network that includes four acute care hospitals, one acute rehabilitation hospital, an inpatient substance abuse facility, four major ambulatory health centers, a Medicare-certified home health agency and hospice, a 375-physician multi-specialty group practice, a freestanding basic science and clinical research facility, six charitable foundations and, through joint ventures, an accountable care organization, a captive insurance company and three ambulatory surgery centers. With more than 11,400 employees and 2,000 physicians, the System is the recipient of numerous awards for quality care and service, including System Magnet® designation from the American Nurses Credentialing Center, the nation’s highest distinction for nursing excellence, and recognition as among the nation’s best employers by Forbes magazine. The System is committed to creating an environment of diversity, respect and inclusion and has proudly embraced the American Hospital Association’s #123forEquity Pledge to eliminate health care disparities.

The System’s hospitals, owned and operated by MLH (defined below), have 1,387 adult beds and 91 bassinets. In fiscal year 2016, MLH discharged 59,277 patients; operating revenues, gains and other support were approximately $1.62 billion; net cash provided by operating activities was approximately $233.6 million; and at June 30, 2016, cash, cash equivalents and short-term investments were approximately $260.3 million and total debt outstanding was $237.8 million. See “KEY FINANCIAL RATIOS OF THE SYSTEM – Summary of Long-Term Debt” in this Appendix A for a further discussion of MLHS’ and the MLHS Organizations’ outstanding debt.

History

The System was created in 1985 when Bryn Mawr Hospital (which at the time included Bryn Mawr Rehabilitation Hospital) and Lankenau Medical Center, then separate corporate entities, established a common parent corporation called Main Line Health, Inc. (“MLH”). MLH, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code, became their sole corporate member. Subsequently, the System continued to grow by adding Paoli Hospital in 1986, Main Line Health HomeCare and Hospice in 1993, and Riddle Health System (which included Riddle Memorial Hospital and Mirmont Treatment Center) in 2007, as well as through organic and geographic expansion of ambulatory facilities, programs, services and physician practices.

MLHS is the sole corporate member/parent of MLH. MLHS was formerly known as Jefferson Health System, Inc. (“JHS”). Prior to June 30, 2014, JHS was also the corporate parent of TJUH System, Inc., which owned and operated Thomas Jefferson University Hospital and other provider entities (“TJUH”), and Magee Rehabilitation Hospital (“Magee”). On June 30, 2014, JHS restructured in a series of transactions and agreements which resulted in (1) the separation of TJUH and Magee from JHS, (2) the assignment by JHS of its ownership interests in its accountable care organization and captive insurance companies to MLH, TJUH and Magee, and (3) the change of JHS’s name to MLHS, with MLHS continuing as the sole corporate member of MLH. MLH is currently the only direct subsidiary of MLHS.

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Corporate Structure

MAIN LINE HEALTH SYSTEM “Sole Member of Obligated Group”

Main Line Health, Inc.

49% 49% 45% Five Point 4% Main Line Professional Riddle Memorial Main Line Diversified Main Line Main Line Realty Accountable Care Liability Services, Inc. HealthCare Corporation Organization of Mountain Hospitals, Inc. Hospital Insurance Pennsylvania, LLC Laurel Risk Company d/b/a Delaware Retention Valley ACO* Group, Inc.* Bryn Mawr Mirmont Alcohol Main Line Affiliates 51% Main Line Health Hospital** Rehabilitation Imaging, LP* Center Lankenau Medical Main Line Services Main Line Health Center** Wellness LLC* Riddle Health Care Services Paoli Hospital** Main Line Health 32% Paoli Surgery HomeCare & Hospice Center, LP * 31% 51% Riddle Surgical Bryn Mawr Center, LLC* Rehabilitation Hospital**

Main Line Health Physician Partners, LLC*

The Lankenau Institute for Medical Research

51% Bryn Mawr Surgery Center LLC*

50% MLJH, LLC*

*For Profit Entities **Operating Divisions Note: Certain related entities and subsidiaries that are not material to the operations of MLHS are not included in this organizational chart.

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MLH is the sole corporate member of the following entities, each of which is a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code: Main Line Hospitals, Inc. (“ML Hospitals”), Riddle Memorial Hospital (“Riddle Memorial Hospital”), Main Line HealthCare (“Main Line HealthCare”), Main Line Realty Corporation (“ML Realty”) and Main Line Diversified Services (“Diversified”). MLH also holds a 49% ownership interest in Accountable Care Organization of Pennsylvania, LLC d/b/a Delaware Valley Accountable Care Organization, a Pennsylvania limited liability company (“DVACO”) and a 49% ownership interest in Mountain Laurel Risk Retention Group, LLC, a Vermont limited liability company (“MLRRG”).

ML Hospitals owns and operates the following operating divisions: Bryn Mawr Hospital (“Bryn Mawr”), Lankenau Medical Center (“Lankenau”), Paoli Hospital (“Paoli”) and Bryn Mawr Rehabilitation Hospital (“Bryn Mawr Rehab”). ML Hospitals also is the sole corporate member of Main Line Health Physician Partners, LLC, a Pennsylvania limited liability company, and Lankenau Institute for Medical Research (“LIMR”), a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code, and has (1) joint venture ownership interests in Bryn Mawr Surgery Center, LLC, a Pennsylvania limited liability company (“Bryn Mawr Surgery Center”) and Main Line Health Real Estate, L.P., a Pennsylvania limited partnership (“MLHRE”), and MLJH, LLC, a Pennsylvania limited liability company; and (2) (together with Riddle Memorial Hospital) a 49 percent interest in Five Pointe Professional Liability Company, a Delaware nonprofit corporation (“Five Pointe”).

Riddle Memorial Hospital, which operates, does business and is more commonly known as “Riddle Hospital”, is the sole corporate member of Mirmont Alcohol Rehabilitation Center, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code, which owns Mirmont Treatment Center (“Mirmont”), and Riddle Health Care Services, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code (“RHCS”), and has a joint venture ownership interest in Riddle Surgical Center, LLC, a Pennsylvania limited liability company (“Riddle Surgical Center”).

Diversified serves as an intermediate holding company for certain of the System’s non-acute care provider entities, including Main Line Affiliates, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code (“ML Affiliates”), and Main Line Health HomeCare & Hospice, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code (“ML HomeCare”). Diversified is also the sole corporate member of Main Line Services, a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Code.

ML Realty is the sole corporate member of Main Line Health Wellness, LLC, a Pennsylvania limited liability company (“ML Wellness”), and has joint venture ownership interests in Main Line Health Imaging, L.P., a Pennsylvania limited partnership, and Paoli Surgery Center, L.P., a Tennessee limited partnership.

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System Associated Foundations

Each of the System’s hospitals and ML HomeCare has a related charitable foundation (“Foundation”) whose exclusive purpose is to support and raise charitable contributions. Each Foundation is independent of the System and has an independent, self-perpetuating Board that is responsible for the investment, disbursement and utilization of the respective funds of each Foundation.

The Foundations are not parties to the Master Indenture and they are not obligated on the indebtedness incurred by any member of the Obligated Group under the Master Indenture.

Obligated Group

MLHS is the only Member of the Obligated Group under the Master Indenture. MLH, ML Hospitals, Riddle Memorial Hospital and Mirmont are parties, with MLHS, to an Amended and Restated Contribution Agreement dated as of June 30, 2014, as amended pursuant to a First Amendment to Contribution Agreement dated May 1, 2015 (as so amended, the “Contribution Agreement”), and are designated as Obligated Group Affiliates under the Master Indenture (each, an “Obligated Group Affiliate” and collectively, the “Obligated Group Affiliates”).

The Contribution Agreement sets forth the obligations of each Obligated Group Affiliate to take any action which may be necessary for MLHS to comply with its obligations and covenants under the Master Indenture, including without limitation, its payment of Master Indenture Obligations issued to evidence indebtedness incurred by MLHS for the benefit of the System (“System Debt”). Under the Contribution Agreement, each Obligated Group Affiliate has agreed, jointly and severally, to transfer such amounts to MLHS as may be requested by MLHS to enable it to make its required payments on Master Indenture Obligations when due. The payment obligations of MLHS under the Loan Agreement relating to the Series 2017A Bonds will be evidenced by an Obligation (the “Series 2017A Master Obligation”) issued under the Master Indenture at the time of issuance of the 2017A Bonds. The Contribution Agreement will be amended simultaneously with the issuance of the Series 2017A Bonds to expressly provide for the Obligated Group Affiliates’ obligations with respect to the Series 2017A Master Obligation. The Obligated Group Affiliates’ joint and several obligations under the Contribution Agreement are unsecured. However, each of the Obligated Group Affiliates, as Obligor, has entered into a Security Agreement pursuant to which it has granted to MLHS a lien on and security interest in substantially all of its assets to secure System Debt incurred for the benefit of and allocable to MLH. These liens and security interests run only to MLHS and are not assigned or assignable to the Master Trustee, the Bond Trustee or any holders of Master Indenture Obligations or Bonds.

In addition, MLHS and the Obligated Group Affiliates are parties to the Amended and Restated System Affiliation Agreement dated as of June 30, 2014 (the “System Affiliation Agreement”), which describes the relationship between and among MLHS, the Obligated Group Affiliates and the other MLHS affiliates and contains provisions relating to the governance of the Obligated Group Affiliates and the other MLHS affiliates. The System Affiliation Agreement does not limit the ability of MLHS to enforce its rights under the Contribution Agreement. For additional information concerning the System Affiliation Agreement, see “INTRODUCTORY STATEMENT – Obligated Group Affiliates, Contribution Agreement and System Affiliation Agreement” and “SECURITY FOR THE SERIES 2017A BONDS – Obligated Group Affiliates” in the front part of this Official Statement.

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Main Line Health System Acute Care Facilities

The following descriptions offer detail about the multiple entities that are a part of MLHS.

Main Line Health System—Lankenau Medical Center

Lankenau, a division of ML Hospitals, is recognized as a national leader in advancing new options to diagnose and treat illness, protect against disease and save lives. Located on a 93-acre campus just outside of Philadelphia, Lankenau is a 370-bed teaching hospital that includes a Level II Trauma Center and one of the nation’s leading cardiovascular centers; the Lankenau Institute for Medical Research, one of the few freestanding hospital-associated research centers in the nation; and the Annenberg Conference Center for Medical Education, which trains more than 100 new physicians each year through nationally ranked residency and fellowship programs. Lankenau has received both regional and national recognition for its excellence in providing state-of-the-art, quality care.

Lankenau has been named among the top 10 hospitals in Pennsylvania and top five in the Philadelphia metro area in U.S. News & World Report’s Best Hospitals 2016-2017, and was ranked as high-performing in four specialties: gastroenterology and GI surgery, geriatrics, orthopedics and pulmonology. Lankenau also was ranked as high-performing in all nine of the Common Core specialty areas that the publication analyzes, including: abdominal aortic aneurysm repair, aortic valve surgery, chronic obstructive pulmonary disease (“COPD”), colon cancer surgery, congestive heart failure, heart bypass surgery, hip replacement, knee replacement and lung cancer surgery. Lankenau has achieved The Joint Commission’s Gold Seal of Approval for stroke care and breast cancer care and is one of the nation’s Top Performing Hospitals for heart attack, heart failure, pneumonia and surgical care. Lankenau has also been ranked for multiple years as one of the top 50 cardiovascular hospitals in the nation by Truven Health Analytics.

Main Line Health System—Bryn Mawr Hospital

Bryn Mawr is a 292-bed acute care teaching hospital dedicated to helping the community stay well ahead on the path to lifelong health. Bryn Mawr has been named as one of the top six hospitals in the Philadelphia metro area and top 12 in the state of Pennsylvania by U.S. News & World Report’s Best Hospitals 2016-2017, and is ranked as high performing in the specialties of orthopedics and urology. US News & World Report also ranked Bryn Mawr as high performing in the following Common Core specialty areas: abdominal aortic aneurysm repair, COPD, colon cancer surgery, congestive heart failure, hip replacement, knee replacement and lung cancer surgery. Bryn Mawr’s Neuro-Cardiac Intensive Care Unit (NCICU) has also received the 2015-2018 American Association of Critical-Care Nurses (AACN) Silver-level Beacon Award for Excellence for the second time. The National Institutes of Health Commission on Cancer has accredited the Bryn Mawr Hospital Cancer Center, and the Comprehensive Breast Center has been accredited by The Joint Commission and the National Accreditation Program for Breast Centers. Bryn Mawr’s Bariatric Program has been accredited by the American Society for Metabolic and Bariatric Surgery.

Bryn Mawr offers a full range of services, including cancer care, orthopedic care, cardiovascular care, behavioral health, maternity care, bariatric surgery, neurovascular and a Level III Neonatal Intensive Care Unit, all aided by a dedicated team of health care professionals and innovative technology such as the Intuitive Surgical System’s DaVinci Robot and Navio Robotic Arm Orthopedic System. Through Bryn Mawr’s collaboration with the Jefferson Hospital for Neuroscience, the university-affiliated Neurovascular Center offers rapid access to advanced diagnostics and treatment options for stroke care. Bryn Mawr Hospital has also collaborated with Nemours/Alfred I. duPont Hospital for Children to

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include round-the-clock pediatric care for the pediatric inpatient unit and in the pediatric emergency department with additional board-certified, fellowship-trained pediatric emergency medicine physicians.

Main Line Health System—Paoli Hospital

Paoli is a 231-bed acute care hospital and Level II Regional Trauma Center. Paoli has been ranked among the top 10 hospitals in the Philadelphia Metro area by U.S. News & World Report’s Best Hospitals 2016-2017, and was ranked as high performing in the following Common Core specialty areas: abdominal aortic aneurysm repair, COPD, colon cancer surgery, congestive heart failure, hip replacement, knee replacement and lung cancer surgery. Paoli is a multi-year recipient of the Premier “Award for Quality” and Truven Health Analytics’ 100 Top Hospitals® for providing superior patient care.

Main Line Health System—Riddle Hospital

Riddle Memorial Hospital (more commonly known as Riddle Hospital) is an acute care hospital with 204 inpatient beds and 23 Transitional Care Center beds. Riddle Hospital has been nationally recognized by The Joint Commission, the Society of Chest Pain Centers and other health care rating organizations for its high quality patient care. For the fourth year in a row, Riddle Hospital has achieved designation from The Joint Commission as a Top Performer on Key Quality Measures®. Riddle Hospital was ranked among the top 10 hospitals in the Philadelphia Metro area by US News & World Report’s Best Hospitals 2016-2017, and was ranked as high performing in the specialty area of orthopedics. Riddle Hospital was also ranked as high performing in the following Common Core specialty areas: COPD, colon cancer surgery, congestive heart failure, hip replacement and knee replacement. Riddle Hospital offers a full range of services including maternity, orthopedic care and cardiovascular care—aided by a dedicated team of health care professionals and advanced technology. Riddle Hospital recently expanded and enhanced its Emergency Department to better suit the growing needs of the community it serves. Riddle Hospital’s newest medical office building is a LEED Certified Gold building, houses the Rothman Institute, the Wound Healing and Hyperbaric Center, a variety of outpatient programs, and Riddle Surgical Center.

Main Line Health System—Bryn Mawr Rehabilitation Hospital

Bryn Mawr Rehab, a leader in the field of physical medicine and rehabilitation, is a 148-bed acute rehabilitation hospital offering the full continuum of rehabilitation services, including acute inpatient care, as well as outpatient services for adults and adolescents. The range of illnesses and injuries treated at Bryn Mawr Rehab includes traumatic, mild traumatic and non-traumatic brain injury, stroke and other neurological disorders, spinal cord injury and amputee and orthopedic injuries and illnesses. In addition, Bryn Mawr Rehab is the centerpiece of the Main Line Health Outpatient Rehab Network, which provides rehabilitation services at convenient locations in Philadelphia’s western suburbs for patients of all ages.

Main Line Health System—Mirmont Alcohol Rehabilitation Center

Mirmont is a rehabilitation center founded in 1985 to provide inpatient and outpatient treatment for patients with drug and alcohol dependence. Mirmont is located on 33 acres in Lima, Delaware County, in a spacious facility that includes 115 inpatient treatment beds, treatment areas for individual and group therapy, a fitness center, and a 900-square-foot meditation hall. Treating adults age 18 and older, Mirmont’s staff—including physicians, nurses, master’s level therapists, and psychiatrists— provide medically monitored detoxification, inpatient and dual diagnosis rehabilitation, partial hospitalization and intensive outpatient programs. Mirmont’s nationally acclaimed Valor with Integrity Program for Emergency Responders (V.I.P.E.R.) provides addiction and trauma treatment for law enforcement/police, firefighters, EMTs and combat veterans. Mirmont utilizes a foundation in12-step

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recovery and trauma informed treatment complemented by holistic therapies including Mindfulness Based Stress Reduction (MBSR), meditation, yoga, supervised exercise and nutrition counseling.

Main Line Health System Ambulatory Health Centers

The System has five outpatient Health Centers within its service area to provide convenient access to its health services and wellness resources. Each Health Center offers an array of services, including hospital outpatient services organized as departments of one of the MLH Hospitals.

Main Line Health Center—Broomall

In 1998, the System opened its first ambulatory center in Broomall, Delaware County, Pennsylvania. The Broomall Health Center consists of 72,000 square feet and provides a full range of primary and multi-specialty services including laboratory, imaging, and physical rehabilitation services, senior day care, a cancer center and an urgent care center.

Main Line Health Center—Collegeville

The System opened the Collegeville Health Center location in 1997 to meet the growing health care needs of residents in Montgomery County, Pennsylvania. The Collegeville Health Center consists of 34,000 square feet and offers primary and specialty care, imaging, laboratory and physical rehabilitation services.

Main Line Health Center—Concordville

In December 2016, the System opened its newest Health Center location in Concordville, Delaware County, Pennsylvania. The Concordville Health Center, consisting of 123,000 square feet, offers extensive primary care, specialty, imaging, laboratory services, pediatric and urgent care services, the Center also houses MLH’s first “Fitness and Wellness Center,” a comprehensive, clinically based fitness and aquatic center with state of the art equipment.

Main Line Health Center—Exton Square Mall

Originally established in 2001, the System’s Health Center in Exton, located in center Chester County, Pennsylvania, was relocated from an office park setting to the Exton Square Mall. This innovative model of health care in a retail-based setting consists of 32,000 square feet and features complimentary valet parking, one-step registration, urgent care, and laboratory and imaging services.

Main Line Health Center—Newtown Square

In 2007, the System opened a Health Center in Newtown Square, Delaware County. The Newtown Square Health Center, consisting of 132,000 square feet, houses a wide range of primary and specialty services, imaging services and a cancer center. The Newtown Square Health Center is also home to Main Line Health’s Women’s Emotional Wellness Center, which offers support for individual and group therapy for women, caregivers and families.

Certain Other MLH Subsidiaries

As a complex, multi-faceted organization with a pluralistic medical staff model, MLH has strategically invested in subsidiaries and joint ventures to support MLH’s mission.

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Main Line HealthCare

Main Line HealthCare is the System employed multispecialty physician network that includes more than 375 community and hospital-based physicians spanning over 30 clinical specialties and subspecialties at more than 30 locations and 86 practice sites.

Main Line Health HomeCare & Hospice

ML HomeCare is a home health and hospice agency that provides care to residents of Bucks, Chester, Delaware, Montgomery and Philadelphia counties. ML HomeCare is Medicare and Medicaid certified and accredited by the Joint Commission. ML HomeCare employs professional team members that are dedicated to the fundamental principles of caring and responsiveness while providing the full spectrum of home health, hospice and private duty services.

Main Line Realty Corporation

Main Line Realty Corporation (“MLRC”) supports the System’s mission in the following ways: through the ownership of various on-campus medical office buildings or participation in partnerships that own on-campus medical office buildings throughout the System; by participating in several partnerships that provide specialized services such as advanced diagnostic imaging services and ambulatory surgery facilities within the System; and as owner of ML Wellness, whose purpose is to provide a medically oriented fitness and wellness regime for its members in order to improve their overall health status and reduce the need for future medical testing and procedures.

The Lankenau Institute for Medical Research

Founded in 1927, LIMR is a freestanding biomedical research center situated adjacent to Lankenau Medical Center. LIMR is one of the few freestanding, hospital-associated medical research centers in the nation. The faculty and staff at LIMR are dedicated to advancing an understanding of the causes of cancer, heart disease and diabetes. This information is used to help improve diagnosis and treatment of these diseases as well as find ways to prevent them. LIMR is also committed to extending the boundaries of human health and well-being through technology development and the training of the next generation of scientists and physicians. LIMR has recently expanded its research scope to population health through a partnership with the Thomas Jefferson University School of Population Health.

Main Line Services

Main Line Services employs most of the individuals who provide the corporate infrastructure that supports the System operating entities and units, including quality and patient safety, finance, human resources, information technology, legal, compliance, business development and marketing and development employees.

Main Line Health Wellness, LLC

ML Wellness operates a state of the art medically-directed fitness and wellness center located in the System’s Main Line Health Center in Concordville, Pennsylvania.

Main Line Health Physician Partners, LLC

Main Line Health Physician Partners, LLC (“MLH Physician Partners”) was organized in 2016 as the System’s clinically integrated network. MLH Physician Partners is the System’s exclusive vehicle for

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physician participation in DVACO’s population health initiatives and pursues other strategies to achieve clinical integration and alignment among the System and its independent and employed physicians.

Certain MLH Joint Ventures

Accountable Care Organization of Pennsylvania, LLC. (d/b/a Delaware Valley ACO)

DVACO is a limited liability company that is owned 49% by MLH, 49% by TJUH System, a controlled affiliate of Thomas Jefferson University, and 2% by Magee. DVACO’s purpose is to enhance the quality of health care and reduce the growth rate of health care costs by acting as a convener, accelerator and provider of the foundation needed to assist its participating members to transition from fee for service model, a business model focused on volume, to a model focused on population health. DVACO operates under the Medicare Shared Savings Program (MSSP) through an agreement with the Centers for Medicare and Medicaid Services (CMS). Currently DVACO is the region’s largest Medicare ACO with more than 670 primary care physicians and over 100,000 attributed Medicare beneficiaries. Additionally, DVACO currently holds three performance-based contracts with private payers, enhancing DVACO’s total number of beneficiaries to approximately 200,000 – a number that will likely increase in the future as DVACO participates with additional insurance payers in population health contracts.

Mountain Laurel Risk Retention Group, Inc.

MLRRG is a licensed captive insurance company qualified as a risk retention group domiciled in Vermont. MLRRG is owned 49% by MLH, 49% by TJUH System, and 2% by Magee. MLRRG provides primary professional liability and general liability coverage exclusively to MLHS and the other MLRRG owners.

Five Pointe Professional Liability Company

Five Pointe is a Delaware nonprofit corporation licensed as captive protective cell insurance company in Delaware and is exempt from federal income tax under Section 501(c)(3) of the Code. Five Pointe is owned 49% by ML Hospitals and Riddle, 49% by TJUH System, and 2% by Magee. Five Pointe reinsures certain risks insured by MLRRG.

Bryn Mawr Surgery Center, LLC

MLH, the Rothman Institute, certain other physicians, and Nueterra Healthcare, a healthcare management company, are collaborating to open an ambulatory surgery center on the Bryn Mawr campus in early June 2017. MLH owns 51% of Bryn Mawr Surgery Center, LLC (“Bryn Mawr Surgery Center”). Bryn Mawr Surgery Center will occupy the fourth floor of a newly constructed medical office building on Bryn Mawr Hospital’s campus. As an extension of Bryn Mawr Hospital’s orthopaedic center of excellence, this new facility will house four operating rooms, each larger than 600 square feet, and three procedure rooms. Additionally, Bryn Mawr Surgery Center will have special preoperative bays, post anesthesia care unit bays and recovery bays. More than 25 orthopaedic surgeons, as well as physicians of other specialties, will perform procedures at Bryn Mawr Surgery Center. Upon completion, Bryn Mawr Surgery Center will be the largest freestanding ambulatory surgery center in the region.

MLJH, LLC

MLH and Thomas Jefferson University have established a new company, MLJH, LLC, owned 50% by each organization, to acquire and own a 51% interest in Physician’s Care Surgical Hospital, L.P. (“PhyCare Hospital”) -- an investor-owned, 12-bed hospital located in Royersford, Pennsylvania and

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potentially other health care assets related to PhyCare Hospital. This investment and partnership extends the System’s services northwest along the U.S. Route 422 corridor, a target market for geographic expansion and growth, and further aligns the System with the Rothman Institute and Thomas Jefferson University for future growth opportunities. The acquisition by MLJH, LLC of its interest in PhyCare Hospital closed on May 25, 2017.

Riddle Surgical Center, LLC

Riddle Surgical Center, LLC (“Riddle Surgical Center”) owns and operates a multi-specialty ambulatory surgery center located on the Riddle Hospital campus in Media, Pennsylvania. Riddle Surgical Center was developed by the System, the Rothman Institute, several independent physicians and Nueterra Healthcare. The 17,500 square-foot center features four fully-equipped operating rooms and two procedure rooms with the latest medical instrumentation. Riddle Surgical Center is equipped for ear, nose and throat, gastroenterology surgery, general surgery, ophthalmologic surgery, orthopedic surgery, pain management and podiatric surgery.

Awards and Recognitions

As noted in the descriptions above, the System’s hospitals have been recognized by numerous external sources for their commitment to high-quality care and for creating a diverse and inclusive environment for all team members and patients. A few of these recognitions include:

. System Magnet Designation by the American Nurses Credentialing Center . US News and World Report “Best Regional Hospitals” . Truven “50 Top Cardiovascular Hospitals” . Truven “Top 100 Hospitals” . Independence Blue Cross “Blue Distinction for Hip and Knee Replacement” . Accredited Chest Pain Centers by the Society of Cardiovascular Patient Care . Beacon Award for Excellence by the American Association of Critical Care Nurses . Get With the Guidelines “Gold Plus Target Honor Role” by the American Heart Association . One of “America’s Best Employers” by Forbes . Best Place to work by The Philadelphia Business Journal . “Most Wired” designation by Hospitals & Health Networks

GOVERNANCE

MLHS, MLH, ML Hospitals and Riddle Memorial Hospital utilize an interlocking board and governance structure, which is mandated by their respective Bylaws. Thus, the individuals serving on the Board of Governors of MLH also serve as the governing boards of MLHS, ML Hospitals and Riddle Memorial Hospital, pursuant to their respective Bylaws (collectively, the “Board”). The Board consists of 27 trustees, of which 26 are voting and one -- the President of the ML Hospitals Medical Staff -- is non-voting. The President and Chief Executive Officer of MLH is an ex-officio voting member of the Board. The Board is self-perpetuating. Elected Trustees are nominated to the Board by the Board’s Governance Committee and elected by the full Board. Elected Trustees are elected to serve staggered terms of three years in three separate groups. Elected Trustees are limited to serving three terms, except for Trustees who serve a portion of a term due to filling an unplanned vacancy on the Board.

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The Board has seven standing committees: Executive, Quality & Patient Safety, Audit (which includes Compliance), Human Resources & Compensation, Finance (which includes an Investment Subcommittee), Governance and Research and Education. The membership of each of these Committees consists of members of the Board and other individuals appointed by the Board Chair.

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Board of Governors/Trustees of MLHS, MLH, ML Hospitals and Riddle Memorial Hospital

The following persons are the current members of the Board. Their respective names, occupations, and expiration dates of their current terms are as follows:

Current Term Board Member Title and Company Expires Stephen S. Aichele, Esq.*, 2017 (Chairman) Senior Partner, Saul Ewing LLP Reneé Amoore, R.N. President, The Amoore Group 2018 Andrea Anania Former Executive Vice President & CIO, CIGNA Corp. 2020 Ronald B. Anderson, MD Physician, Riddle Hospital 2018 David A. Berkowitz* Vice President, ECRI Institute 2018 James M. Buck III TDH/Private Equity Management Co. 2019 Former Principal and Global Account Director, Towers Cynthia DeFidelto 2019 Watson Steven Gamburg, MD MLHS Chair of Emergency Medicine 2017 George W. Gephart, Jr.* President & CEO, Academy of Natural Sciences 2017 William R. Greer, MD Internist, Paoli Hospital 2018 N. Peter Hamilton President, Aloe Investment Corporation 2019 Ellen D. Harvey* Principal, Lindsay Criswell, LLC 2020 Peter H. Havens* (Vice 2018 Chairman) Chairman and Founder, Baldwin Management LLC Steven D. Higgins* Managing Director, Baker Tilley Capital 2017 Wendell F. Holland, Esq. Partner, CFSD Group, LLC 2019 Michelle Hong, Esq. Brown Brothers Harriman 2019 Vice President, Health & Health Equity, Drexel Loretta Sweet Jemmott, PhD 2019 University John J. Lynch* (President) President & CEO, Main Line Health Ex. Officio Martha I. Macartney, Esq.* Attorney 2020 The Dr. Raymond C. & Doris N. Grandon Professor & David B. Nash, MD, MBA* Chair/ Dean, School of Population Health, 2017 Thomas Jefferson University Steven Nichtberger, MD GBF Advisors, LLC 2020 Ellen Rinaldi Principal, Planning & Development, Vanguard 2020 Physician, Rohr & Columbo Asthma, Allergy & Albert S. Rohr, MD 2018 Immunology Specialists Physician, Department of Physical Medicine & Jay W. Siegfried, MD 2018 Rehabilitation, Lankenau Medical Center William Stulginsky* Retired Partner, Pricewaterhouse Coopers 2019 John van Roden, Jr.* Independent Consultant 2018 John Walsh President & CEO, UGI Corp. 2019 ______* denotes member of the Executive Committee

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Conflict of Interest Policy

The Board has established a policy for the reporting and management of potential conflicts of interest. Each Trustee and Officer must submit an annual disclosure statement describing all financial relationships and transactions that may be perceived to be a conflict of interest. Furthermore, each of these individuals is obligated to supplement his/her annual disclosure and advise the Board of new conflicts on an ongoing basis. The Board’s Governance Committee reviews a detailed summary of the disclosure statements and recommends restrictions or remedial actions as appropriate. In addition, the detailed summary of the disclosure statements is shared with the full Board for information.

Main Line Health System Management

John J. Lynch III, 56, President and Chief Executive Officer. John J. (Jack) Lynch III has served as president and CEO since 2005, providing executive leadership to suburban Philadelphia’s most comprehensive health care system. Prior to joining the System, Lynch served nearly 20 years as an executive with the St. Luke’s Episcopal Health System in Houston, Texas, where he advanced to the position of executive vice president and chief operating officer for the system, as well as CEO of the system’s flagship facility, St. Luke’s Episcopal Hospital. A native of Washington, D.C., Lynch received his undergraduate degree from the University of Scranton in Pennsylvania and his master of health administration degree from the Washington University School of Medicine in St. Louis, Missouri.

Michael Buongiorno, 59, Executive Vice President and Chief Financial Officer. Michael (Mike) Buongiorno is the executive vice president and chief financial officer. Buongiorno joined the System in 1994 as the regional chief financial officer of Bryn Mawr Rehabilitation Hospital and Paoli Hospital—responsible for the System’s Western operations. In 1997, he was named chief financial officer and treasurer. Buongiorno received his undergraduate degree from St. Joseph’s University, Philadelphia, PA in 1979. He is a member of the American Institute of Certified Public Accountants and Pennsylvania Certified Public Accountants.

Brian T. Corbett, Esq., 58, Senior Vice President and General Counsel. Brian T. Corbett joined the System in 1994 as associate general counsel. Corbett is the chief legal officer for MLH, leads a legal department of six attorneys, serves as the secretary for MLH and all of its subsidiaries, and has oversight responsibility for the claims management and workers compensation departments. Corbett received his law degree in 1984 from Catholic University of America, Washington, D.C., and his undergraduate degree from Saint Joseph’s University in 1981. He is a member of the American Health Lawyers Association, the Health Law Section of the American Bar Association, and the Association of Corporate Counsel, and is licensed in Pennsylvania and New Jersey.

Andrea Gilbert, 63, President, Bryn Mawr Hospital. Andrea Gilbert joined the System in June 2000 as the senior vice president of Bryn Mawr Hospital. She was named president of Bryn Mawr Hospital in 2002. Gilbert has overall responsibility for the hospital, including day-to-day operations, strategic planning, clinical program development, physician recruitment, fundraising and financial operations. Before joining Bryn Mawr Hospital, Gilbert was the CEO at City Avenue Hospital in Philadelphia. Ms. Gilbert is a graduate of the University of Wisconsin and holds a master’s degree in health administration and planning from Johns Hopkins University.

James Paradis, 55, President, Paoli Hospital. James Paradis joined the System in 2003 and has held numerous positions including vice president of operations at Bryn Mawr Hospital, vice president of administration at Riddle Hospital, and vice president of administration at Paoli Hospital. He was named president of Paoli Hospital in November 2012. Paradis has overall responsibility for Paoli Hospital, including day-to-day operations, strategic planning, clinical program development, physician recruitment,

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fundraising and financial operations. Paradis is a graduate of Cornell University with a Bachelor of Science degree in agricultural economics and holds a master’s degree in business administration from the Wharton School, the University of Pennsylvania.

Gary Perecko, 60, President, Riddle Hospital. Gary L. Perecko joined the System as president of Riddle Hospital in March 2009. With more than 20 years of executive health care experience, he came to MLH from Frankford Healthcare System, where he served as chief operating officer. Perecko has overall responsibility for Riddle Hospital, including day-to-day operations, strategic planning, clinical program development, physician recruitment, fundraising and financial operations. Prior to his role at Frankford, Perecko served as president of St. Joseph Regional Medical Center in South Bend, Indiana. A diplomat with the American College of Healthcare Executives, Perecko earned a master’s degree in public health from the University of Pittsburgh.

Donna Phillips, 49, President, Bryn Mawr Rehab Hospital. Donna Phillips is a senior health care executive with more than 20 years of experience in non-profit health care management and growth. As the president of Bryn Mawr Rehab, Phillips is responsible for day-to-day operations, strategic planning, clinical program development, physician services, fundraising and financial operations of Bryn Mawr Rehab. Phillips earned her master of business administration from Eastern College and her Bachelor of Science degree in registered record administration from Long Island University.

Phillip D. Robinson, 60, President, Lankenau Medical Center. Phillip D. Robinson, FACHE, became president of Lankenau Medical Center on March 31, 2011, after serving as interim president for the prior eight months. Robinson has overall responsibility for Lankenau Medical Center, including day- to-day operations, strategic planning, clinical program development, physician recruitment, fundraising and financial operations. His prior executive positions with large hospital systems include serving as CEO of St. Joseph Medical Center in Houston, Texas, as well as CEO of two HCA health care hospitals in Texas and in Florida. Robinson holds a Master’s Degree in health administration from the Washington University School of Medicine, and an undergraduate degree from Texas A&M University.

Lydia Hammer, 63, Senior Vice President, Marketing and Business Development. Lydia Hammer is responsible for overseeing the System’s efforts in marketing, business development, strategic planning and communications. With over 25 years of health care experience, Hammer has an extensive background in both hospital management and health care consulting. Most recently, she served as director of business development for St. Christopher’s Hospital for Children in Philadelphia. Hammer holds a bachelor’s degree in political science from the University of Maryland and she earned her master of public health from the University of California, Berkeley with a specialization in health policy, planning and administration.

Kenneth E. Kirby, 68, Senior Vice President Development. Kenneth E. Kirby joined the System as senior vice president for Development in November, 2004. In this role he oversees the effort to generate philanthropic support for the System’s member hospitals. He previously served as executive vice president for the Franklin Institute, where he planned, implemented and directed a number of major fundraising efforts, including a major capital campaign that raised more than $60 million. He has experience in strategic planning, board relations and governance, government affairs, program management and marketing and public relations. Kirby has an undergraduate degree from Washington & Jefferson College, and master’s degrees from The College of William and Mary and Temple University in medical sociology and human services administration, respectively. Mr. Kirby has announced his retirement, to be effective July 1, 2017. MLHS is in the process of conducting a nationwide search for his replacement.

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JoAnn M. Magnatta, 62, Senior Vice President, Facilities Design and Construction/Real Estate. JoAnn M. Magnatta joined the System in 2001 as senior vice president of facilities design and construction. In this role she oversees the design, development and construction activities for the System. Prior to joining the System, Magnatta served as corporate vice president of real estate service and facilities at Continuum Services, a five hospital Manhattan-based system. She received her Bachelor of Arts degree in education from LaSalle University and her master’s degree in education administration from Villanova University.

Katherine Carr, 66, Senior Vice President and Chief Information Officer. Kay Carr, senior vice president and chief information officer, is responsible for the planning, implementation and support for Information Technology (IT) for the System, which also includes telecommunications and audiovisual support. Carr brings an extensive health care IT leadership background to her role. Prior to her System role, she spent four years with Encore, a leading national health care IT consulting firm, where she worked with several health systems as an interim CIO. Carr received both her Bachelor of Arts degree and a master’s degree in library science from Louisiana State University, and she is also a CPA.

Barbara Wadsworth, 52, Senior Vice President and Chief Nursing Officer. Barbara Wadsworth, senior vice president of Patient Services and the chief nursing officer (CNO) for the System, brings over 28 years of executive nursing experience to the System. In her current role, Wadsworth is responsible for the leadership of all areas of patient care service throughout the System and oversees major system initiatives surrounding patient satisfaction and superior patient experience, nursing strategic planning and embedding the culture of safety. Wadsworth holds a doctor of nursing practice, health systems leadership, from Vanderbilt University and is certified as a nurse executive, advanced, a Fellow in the American Academy of Nursing, and a Fellow in the American College of Healthcare Executives.

Paul Yakulis, 66, Senior Vice President Human Resources. Paul Yakulis, senior vice president of Human Resources, brings more than 30 years of human resource leadership expertise to the System. Prior to joining Universal Health Services as corporate vice president of Human Resources, Yakulis held human resources executive positions at Siemens (formerly Shared Medical Systems), Providian Corporation and Bankers Trust Company. A graduate of Princeton University, Yakulis has played an active role in the Main Line community, including serving as past president of the Radnor Township School Board and a past director of Radnor Township Parks and Recreation Board.

Andrew J. Norton, MD, 61, Senior Vice President and Chief Medical Officer. Andrew J. Norton, MD, FACP has been senior vice president and chief medical officer of MLH since July 2012. From 1997–2011 Norton served as senior vice president and chief medical officer for Froedtert Hospital affiliated with the Medical College of Wisconsin (MCW) in Milwaukee, where he was professor of clinical medicine. Norton earned his undergraduate degree at Saint Louis University, medical degree from Jefferson Medical College and completed his residency in Internal Medicine at MCW. Norton maintained an ambulatory clinical practice in general internal medicine for 27 years and now works on a limited basis as an academic hospitalist at Lankenau Medical Center.

MEDICAL STAFF

The System owns and operates four acute-care hospitals and one rehabilitation hospital. The four acute-care hospitals are served by the ML Hospitals Medical Staff, while Bryn Mawr Rehab is served by the Bryn Mawr Rehabilitation Hospital Medical Staff. Both Medical Staffs are appointed by ML Hospitals Board through its Quality and Patient Safety Committee. As of March 31, 2017, the two Medical Staffs included 2,119 individuals who are graduates of recognized medical, dental, and podiatry schools.

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Medical Staff members consist of licensed physicians, dentists and podiatrists and are assigned to different status categories that correlate with different rights, citizenship duties and responsibilities, and perquisites. The vast majority of Medical Staff members – over 1700 -- are assigned to the “Active” category, by virtue of their actively participating and substantially contributing to the activities of the System in an ongoing and consistent manner. Active appointees may hold office in the Medical Staff organization, serve and chair Medical Staff committees, attend and participate in any department of which they are a member, and vote on changes to the Medical Staff Bylaws, any matter presented at a Medical Staff meeting, and any department or committee meeting to which the appointee is assigned.

The other categories of the Medical Staff, including “associate,” “courtesy,” “consulting” and “emeritus,” are available for physicians, dentists and podiatrists who do not have the same level of time commitment to the Medical Staff for a variety of reasons, but still play an important role in the delivery of professional medical services to MLH’s patients.

The following table shows net changes in the “Active” Medical Staff over the past three years.

Net Changes to the ML Hospitals and Bryn Mawr Rehabilitation Hospital Active Medical Staff

2014 2015 2016 New Appointments to the Medical Staff 104 126 120 Resignations/Retirements from the Medical Staff 117 110 109 Net Change (13) 16 11

The ML Hospitals Medical Staff Bylaws require all new members to be board certified within five years of becoming board eligible/admissible to the board by the appropriate specialty board of the American Board of Medical Specialties or the AOA, the American Board of Podiatric Surgery, American Board of Podiatric Medicine, or the American Dental Association*.

* Effective January 7, 2005.

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The following table summarizes the distribution of the active Medical Staff of MLH and Bryn Mawr Rehab by specialty as of June 30, 2015 and 2016, and the nine months ended March 31, 2016 and 2017.

Fiscal Year Ended Year-to-Date June 30, March 31, Specialty 2015 2016 2016 2017

Anesthesiology 81 84 82 87 Dermatology 28 31 30 29 Emergency Medicine 52 52 51 53 Family Medicine 174 184 180 194 Medicine 483 465 476 470 Medical Hem/Onc 43 41 41 41 Neurology 23 23 23 24 Neurosurgery 13 18 18 20 Ob/Gyn 103 102 102 100 Ophthalmology 59 52 55 51 Oral Surgery/Dentistry 40 38 41 35 Orthopedic Surgery 102 102 103 109 Otolaryngology 34 30 30 28 Pathology 14 14 14 14 Pediatrics 150 153 152 158 Psychiatry 30 29 32 33 Radiation Oncology 8 8 8 8 Radiology 51 51 51 51 Physical Med & Rehab 25 24 25 23 Surgery 180 178 183 187 Urology 36 36 36 36

Total Active Physicians 1,729 1,715 1,733 1,751

Other Physicians 318 301 307 293

Total Medical Staff 2,047 2,016 2,040 2,044

Percent Board Certified 85.1% 93.5% 93.1% 96.4%

Active Average Age 52 51 51.1 51

RESIDENCY PROGRAMS AND ACADEMIC AFFILIATIONS

Graduate Medical Education (“GME”) programs at Bryn Mawr and Lankenau train more than 140 physicians each year mainly through Accreditation Council for Graduate Medical Education (“ACGME”) accredited residency and fellowship programs. Lankenau offers fully accredited residencies in Internal Medicine, Obstetrics/Gynecology, Surgery and an Osteopathic Family Medicine Program accredited by the American Osteopathic Association (AOA). The fellowship programs in Cardiovascular Disease, Electrophysiology, Interventional Cardiology, Gastroenterology, Hematology/Oncology,

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Nephrology and Pulmonary/Critical Care are also ACGME accredited. Lankenau also sponsors a minimally invasive colo-rectal fellowship program which is accredited by The Fellowship Council (TFC).

Bryn Mawr offers ACGME accredited residencies in Family Medicine and Diagnostic Radiology. Also sponsored is a Podiatric and Surgical Residency Program accredited by the Council on Podiatric Medical Education (CPME) and a Breast Surgery fellowship program accredited by the Surgical Society of Oncology (SSO).

MLH maintains a Master Academic Affiliation Agreement with Thomas Jefferson University under which Jefferson is designated as MLH’s primary academic affiliate, and MLH is recognized as one of Jefferson’s preferred academic partners. Students in Jefferson’s Sidney Kimmel Medical College and in Jefferson’s Schools of Nursing, Population Health, Pharmacy and Allied Health rotate at the System’s hospitals, and certain ML Hospitals medical staff members serve as Jefferson faculty.

MLH also maintains an Academic Affiliation with Philadelphia College of Osteopathic Medicine (PCOM) as a core clinical campus for the training of its medical students at System hospitals and physician practice locations.

While Lankenau and Bryn Mawr have always been sites for medical student training, Paoli and Riddle Hospital now regularly play a part as medical educational sites. Training at four acute care hospitals gives these medical students an opportunity to work with many different physicians, learning different clinical styles and approaches to patient care. The System has over fifty students rotating at its four acute care hospitals at all times throughout the academic year.

The System also offers a diverse curriculum of graduate and post-graduate programs in a variety of disciplines for other medical professionals wishing to further their education and professional development. The System offers training in nursing, physical therapy, occupational therapy, pharmacy, radiological science, laboratory science, bioscience studies, population health and respiratory therapy to students from numerous colleges and universities, with Thomas Jefferson University as its primary academic affiliate.

STRATEGIC PLAN

In 2016 the System Board approved a new Strategic Plan covering the period from 2016 to 2020 (the “Strategic Plan”). The Strategic Plan was a culmination of a year-long process which incorporated the input of System leaders, employees, physicians, Board members and other community constituents.

The System has five Strategic Imperatives outlined in the Strategic Plan:

1. Superior Experience—Deliver a Superior Experience for Patients, Physicians, Employees, Partners and Payers 2. Community Health—Improve the Health of the Communities We Serve 3. Highly Engaged Employees, Physicians and Partners—Develop Highly Engaged Employees, Physicians and Partners 4. Value—Deliver Outstanding Value by Continually Improving Performance 5. Research and Education—Advance Research and the Education of Future Health Care Professionals.

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Each Strategic Imperative has up to 10 goals and numerous tactics to create a structured roadmap for an actionable pathway to achieve the System vision. As part of strategy execution, members of the System’s Senior Executive Council are responsible for identifying the metrics for success for each of their areas of responsibility.

Some examples include: investing in the Delaware Valley Accountable Care Organization as a strategic vehicle to improve community wellness, improve patient outcomes, coordinate care, reduce the overall cost of care, and advance population health methods and resources; establishing ML Physician Partners, a clinically integrated network, to engage physicians and further enhance quality; continually expanding the System’s geographic presence to make it increasingly convenient for patients to receive the care they need; and—most importantly—continuing to foster a highly engaged workforce focused on delivering excellence. By working seamlessly as an integrated organization, the System expects to continue to maintain its position as a leader in the region, collaborating with physician and community partners to meet patients’ needs across the continuum.

PROJECT DESCRIPTION

As a not-for-profit organization, part of the System’s mission is to continually and responsibly reinvest in its facilities to ensure that superior patient care is available to the community it serves. Currently, the System is undergoing critically necessary facility improvements on both its Bryn Mawr and Lankenau campuses. This includes a new $254.9 million Patient Pavilion and campus modernization project at Bryn Mawr and a $52.8 million expansion of the Emergency Department at Lankenau.

Bryn Mawr Hospital

The modernization project at Bryn Mawr is the most significant facility improvement in its more than 120-year existence and the second largest capital investment in the System’s history. The new Campus Master Plan includes a seven-story, 257,000 square foot patient pavilion which will house:

. A state-of-the-art surgical suite with 12 all-new operating rooms and an additional shelled operating room for future growth . An Intensive Care Unit comprised of 18 private patient rooms, each with a full bathroom and space to accommodate family members . Two inpatient medical/surgical telemetry units (27 standard patient rooms and one concierge suite per unit), with full bathrooms and designated space for family members/visitors in every room. . A 25-bed maternity unit and nursery for post-partum patients . A Labor and Delivery unit with eight labor and delivery rooms, two C-section Suites and two Birthing Suites . A Neonatal Intensive Care Unit

The new pavilion will connect to existing hospital buildings from the ground floor to Level 4, will support 246 licensed beds*, and will have the flexibility to accommodate an additional two floors, including 48 additional licensed beds, if needed in the future. The next iteration of Bryn Mawr envisions a physical space that matches the patient-centered, quality-driven care that remains core to its mission. The modernization project is expected to be complete in the fall of 2019.

* The decrease in the number of licensed beds from 292 to 246 is consistent with the projected inpatient demand at Bryn Mawr Hospital through 2022.

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Total costs related to the Bryn Mawr Hospital modernization project are estimated to be $254.9 million. Of these costs, it is expected that $30 million will be funded with proceeds of the Series 2017A Bonds.

Lankenau Medical Center

Lankenau is embarking on an Emergency Department expansion project to meet the growing needs of the community. Originally built to handle 35,000 visits per year, Lankenau’s current Emergency Department treats about 54,000 patients each year.

Complementing Lankenau’s Level II Trauma Center certification in the fall of 2016, the expansion project will more than double the size of the current Emergency Department from 26 private patient beds to 57. The expansion project will result in an additional 32,200 square feet of space, and will include the following areas:

. Expanded triage area . Supertrack, intermediate, acute and trauma dedicated treatment areas . Radiology capabilities . Parking garage to ensure easy access

This expansion project will allow Lankenau to deliver advanced emergency services in an innovative and highly functional space that will reflect the expertise and commitment of its Emergency Department team. The enhancements and effective design of the space will significantly reduce waiting times and offer a superior patient experience.

The expansion project is expected to be complete in early 2019.

The total costs related to the Lankenau Medical Center Emergency Department expansion project are estimated to be $52.8 million. Of these costs, it is expected that $30 million will be funded with proceeds of the Series 2017A Bonds.

A portion of the proceeds of the Series 2017A Bonds will also be applied to the advance refunding of a portion of the Series 2010A Bonds, as described under “PLAN OF FINANCE” in the front part of this Official Statement.

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SERVICE AREA AND MARKET SHARE

The System has a broad presence throughout southeast Pennsylvania, with a special emphasis on Chester, Delaware, and Montgomery counties, and portions of West Philadelphia (the “Planning Zones”). The following map illustrates the System’s service area, as well as the System’s general location in Pennsylvania.

The System’s Planning Zones include all or parts of Chester (92%), Delaware (100%), Montgomery (37%) and Philadelphia (16%) counties in Pennsylvania. They encompass 88% of MLH inpatient discharges and include 619,397 2016 households, a population of 1,614,170 and an average household income of $100,714.

The map below illustrates the breadth of the System’s penetration of its Planning Zones through its hospitals, health centers, and employed medical practices.

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# Name/Practice # Name/Practice # Name/Practice 1 Riddle Hospital 13 Main Line Health Center in Collegeville 25 Bala Cynwyd Hospital Medicine Services MLHC Hematology Oncology Associates MLHC City Line Family Medicine Lankenau Heart Group Upper Providence Family Medicine MLHC Gynecology at LMC MLHC Bariatric Surgery 14 MLHC Geriatrics and IM at Shannondell 26 MLHC FM in Havertown MLHC Hem/Onc Cancer Risk Assessment & Genetics 15 MLHC Internal Medicine in Audubon-Forge Avenue 27 Hospital Medicine Services-Kindred MLHC Delaware County Surgical Associates 16 Lankenau Heart Group-Plymouth Meeting 28 MLHC OB/GYN at Lankenau-Garrett Road MLHC Endocrinology at Riddle 17 Conshohocken MLHC Primary Care in Delaware County MLHC Internal Medicine at Riddle Lankenau Heart Group 29 Main Line Health Center in Broomall MLHC Primary Care at Riddle Lawrence Park OB/GYN Bryn Mawr Family Practice MLHC Thoracic Surgery ML Endocrinology Lawrence Park OB/GYN MLHC Vascular Specialists MLHC in Conshohocken ML Surgeons Pain & Palliative Care 18 Lafayette Hill ML Endocrinology Riddle OB/GYN Associates MLHC Gynecology at LMC MLH Urgent Care/Occupational & Travel Health Urogynecology Associates of Philadelphia MLHC IM in Lafayette Hill MLHC Internal Medicine in Broomall Wound Healing & Hyperbaric Medicine Center 19 Lankenau Heart Group-Roxborough MLHC Internal Medicine in Lawrence Park 2 Mirmont Treatment Center 20 Bryn Mawr Hospital/Bryn Mawr MLHC Neurology Hospital Medicine Services ENT Associates 30 Main Line Health Center in Newtown Square MLH Psychiatric Associates Hospital Medicine Services ENT Associates 3 Main Line Health Center in Concordville MLH Psychiatric Associates Lankenau Heart Group Lankenau Heart Group MLHC Bariatric Surgery MLHC Breast Surgical Specialists MLH Urgent Care/Occupational & Travel Health MLHC Breast Surgical Specialists MLHC Neurosurgery MLHC Primary Care in Concordville MLHC Hem/Onc Cancer Risk Assessment & Genetics MLHC Primary Care in Newtown Square Riddle OB/GYN Associates MLHC Neurosurgery MLHC Surgical Associates 4 MLHC in Westtown MLHC Surgical Associates 31 MLHC in Springfield 5 Goshen Family Practice MLHC Thoracic Surgery Lankenau Heart Group 6 MLHC Primary Care in Downingtown Pain & Palliative Care MLHC Neurology 7 Main Line Health Center at Exton Square Wound Healing & Hyperbaric Medicine Center MLHC Primary Care in Delaware County Lankenau Heart Group MLHC Adult Medicine 32 Lankenau Heart Group-Philadelphia MLH Urgent Care/Occupational & Travel Health MLHC Family Medicine 33 MLHC Gynecology at LMC-Philadelphia MLHC Bariatric Surgery 21 MLHC IM in Wynnewood MLHC Family Medicine 22 MLHC Primary Care in Wynnewood MLHC Hematology Oncology Associates 23 MLHC Medicine For Women MLHC Neurology in Paoli 24 Lankenau Medical Center MLHC Surgical Associates Casey, Rosemary D. MD 8 Bryn Mawr Rehab Hospital Hospital Medicine Services Hospital Medicine Services Lankenau Heart Group-CT, EP, Interventional, General Cardiology Pain & Palliative Care Lankenau Medical Associates 9 Paoli Hospital Lankenau OB/GYN Clinical Care Center Hospital Medicine Services Mann, Barry D. MD Lankenau Heart Group Marks Colorectal Surgical Associates ML Gynecologic Oncology ML Orthopaedics & Sports Medicine MLH Psychiatric Associates ML Endocrinology MLHC Family Medicine ML Gynecologic Oncology MLHC Hematology Oncology Associates ML Primary Care MLHC Neurology in Paoli ML Surgeons MLHC Neurosurgery MLH Psychiatric Associates MLHC Primary Care Zeller MLHC Bailey and Almonte OB/GYN MLHC Thoracic Surgery MLHC Brain and Spine Center Pain & Palliative Care MLHC Geriatrics and IM in Wynnewood Urogynecology Associates of Philadelphia MLHC Gynecology at LMC Wound Healing & Hyperbaric Medicine Center MLHC Hem/Onc Cancer Risk Assessment & Genetics 10 MLHC Neurology in Paoli MLHC Neurology 11 MLHC Thoracic Surgery MLHC OB/GYN at Lankenau 12 MLHC Family Medicine in Royersford MLHC Obstetrics & GYN Associates MLHC Thoracic Surgery MLHC Vascular Specialists Pain & Palliative Care Wound Healing & Hyperbaric Medicine Center

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The total population of the System’s Planning Zones is projected to increase by 1.7% (~27,591 individuals) over the next five years, from 1,614,170 to 1,641,761. The fastest growing age cohort is the 65+ population, which is expected to grow by 16.2%, from 252.903 in 2016 to 293,790 (~40,887) in 2021.

The following tables show the population by age group in 2016, the projected population in 2021, and the 5-year percent growth. The source of data is Truven Health Analytics, 2016 and SG2, 2016.

2016 Population Geography 2016 Total 00-17 18-44 45-64 65+ System Planning Zones 1,614,170 356,955 562,428 441,885 252,903 Pennsylvania 12,806,163 2,680,000 4,358,053 3,540,559 2,227,551 United States 322,431,073 74,055,720 115,494,756 84,259,280 48,621,317

2021 Population Geography 2021 Total 00-17 18-44 45-64 65+ System Planning Zones 1,641,761 353,516 564,533 429,922 293,790 Pennsylvania 12,905,346 2,625,393 4,352,207 3,399,397 2,528,349 United States 334,341,978 74,736,465 117,531,304 84,895,866 57,178,343

2016-2021 Percent Change Geography % Total 00-17 18-44 45-64 65+ System Planning Zones 1.7% -1.0% 0.4% -2.7% 16.2% Pennsylvania 1.0% -2.0% 0.0% -4.0% 14.0% United States 4.0% 1.0% 2.0% 1.0% 18.0%

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Inpatient Discharge Market Share – System Planning Zones

The System is the market share leader in the Planning Zones with 28.2% market share in fiscal year 2016. The University of Pennsylvania Health System (“Penn Medicine”) is the primary competitor with a 19.3% share. Penn Medicine’s share has increased 1.7% over the past three years while MLH’s share has held steady with a slight decline of 0.3%. The Crozer-Keystone Health System is ranked 3rd in the Planning Zones in terms of market share and its share has decreased 1.6% over the past three years.

The following chart sets forth the number of inpatient hospital discharges for the System and certain key competitor health systems.

Fiscal Year 2016 Historical Market Share in Discharges2 System Planning Zones2 Licensed System Health System Acute Beds1 Planning Fiscal Fiscal Fiscal Total Zone Year 2014 Year 2015 Year 2016

System 1,043 51,085 44,855 28.5% 29.4% 28.2% Penn Medicine 2,213 111,094 30,647 17.6% 18.2% 19.3% Prospect Medical Holdings: Crozer-Keystone Health Systems (CKHS) 491 23,099 21,148 14.9% 13.5% 13.3% Jefferson Health3 2,067 97,831 8,755 5.5% 5.6% 5.5%

1 PA Department of Health - 2014/2015 Annual Hospital Questionnaire Report/MLH License certificates excluding NICU, Psychiatric and Comp Medical Rehab beds 2 Discharges and Market Share based on annual acute discharges (excluding Normal Newborn, Neonatology DRGs and Psychiatry); Truven Health Analytics - Pennsylvania Healthcare Cost Containment Council (PHC4), July 1, 2013 to June 30, 2016 3 Jefferson Health consists of Thomas Jefferson University and its affiliates.

The following chart sets forth the demographic comparison summary of the System’s Planning Zone and larger regional markets for 2016/2017.

Population Five Year Five Year Age 25+ Average Population Total Total Age 65+ with Geography Households Household Age 16+ Population Population Population Bachelor’s Income Unemployed Growth Growth Degree or Greater System Planning Zone 1,614,170 1.7% 16.2% 619,397 $100,714 43% 8% Southeastern PA 4,099,813 1.7% 15.6% 1,574,574 $86,360 36% 9%

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The System is the leader in market share for multiple service lines in its Planning Zones. The table below identifies the top 10 inpatient service lines by total market discharges in the System’s Planning Zones and the System’s corresponding market share percentage.

Fiscal Year 2016 System Planning Zone Market Service Line Market Discharges MLH Discharges MLH Market Share Orthopedics1 8,841 5,266 59.6% Internal Medicine 8,934 3,194 35.8% Cardiovascular2 21,474 6,669 31.1% Obstetrics and Gynecology3 23,610 7,110 30.1% General Surgery 14,104 3,949 28.0% Oncology4 9,916 2,364 23.8% Neurological Sciences5 13,009 2,855 21.9% Infectious Diseases 11,006 2,213 20.1% Pulmonary Medicine 20,057 3,812 19.0% Gastroenterology 14,945 2,704 18.1% All Other 13,151 4,719 35.9% Total 159,047 44,855 28.2%

Source: Discharges and market share based on annual acute discharges excluding Normal Newborns, Neonatology DRGs and Psychiatry; Truven Health Analytics – Pennsylvania Health Care Cost Containment Council (PHC4), July 1, 2013 to June 30, 2016 1 Orthopedic Service Line includes the following MLH defined sub-service lines: Major Joints, Orthopedics, and Spine. 2 Cardiovascular Service Line includes the following MLH defined sub-service lines: Cardiology, Interventional Cardiology, Valves, Electrophysiology, CABGs, Other CT Surgery, and VADs. 3 Obstetrics and Gynecology Service Line includes the following MLH defined sub-service lines: Obstetrics Delivery, Obstetrics-Non Deliveries, and Gynecology. [Excludes Gyn-Onc IP Discharges.] 4 Oncology Service Line includes the following MLH defined sub-service lines: Medical Oncology and Surgical Oncology. 5 Neurological Service Line includes the following MLH defined sub-service lines: Neurology and Neurosurgery.

Largest Employers by County for the System’s Planning Zone Service Area

The System’s Planning Zone service area has a large proportion of its workforce in the public service sectors of healthcare and government. The following table below identifies the top three employers by county.

County Employers Industry Vanguard Group Finance Chester QVC Network Retail County of Chester Government The Boeing Company Aerospace Delaware Crozer Keystone Health Systems (CKHS) Healthcare Delaware County Government Merck Sharp & Dohme Corp Healthcare Montgomery Abington Memorial Hospital Healthcare Main Line Health System Healthcare Trustees of the University of Pennsylvania Healthcare Philadelphia Federal Government Government City of Philadelphia Government

Source: Pennsylvania Department of Labor & Industry

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Primary Service Area

The System’s Primary Service Area (PSA) is comprised of the zip codes and cities set forth in the table below, which also shows the number of inpatient hospital discharges, households and median household income within the PSA for fiscal year 2016.

System 2016 Median Fiscal Year 2016 2016 Household Zip Code City Discharges 1 Households Income 19063 Media 2,846 14,758 $91,519 19083 Havertown 1,955 13,207 $91,310 19008 Broomall 1,515 7,341 $80,053 19087 Wayne 1,488 12,353 $112,715 19355 Malvern 1,484 9,103 $110,537 19073 Newtown Square 1,466 7,711 $100,821 19010 Bryn Mawr 1,268 7,630 $101,717 19342 Glen Mills 1,112 7,935 $86,951 19014 Aston 975 7,881 $78,560 19003 Ardmore 847 5,552 $80,949 19096 Wynnewood 772 5,405 $105,869 19312 Berwyn 620 4,233 $128,817 19004 Bala Cynwyd 532 3,507 $115,553 19041 Haverford 530 2,636 $115,217 19301 Paoli 508 2,868 $98,380 19333 Devon 446 2,965 $117,879 19072 Narberth 440 3,806 $110,610 19425 Chester Springs 381 4,988 $137,528 19085 Villanova 261 2,024 $168,718 19066 Merion Station 236 1,776 $160,440 19035 Gladwyne 232 1,471 $158,645 19345 Malvern 0 147 $84,559

1 Excludes Normal Newborns, Neonatology DRGs and Psychiatry Source: Truven Analytics

The System has significant strength within the PSA. The System’s primary competitor in the PSA is Penn Medicine. Academic Medical Centers like Penn Medicine and other major health systems have steadily increased their geographic reach throughout the years in the System’s PSA to secure a tertiary care referral base.

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The following chart sets forth the number of inpatient hospital discharges compared to its competitors.

Fiscal Year 2016 Historical Market Share Discharges System Primary Service Area Licensed Health System System Acute Beds Fiscal Fiscal Fiscal Total Primary Year 2014 Year 2015 Year 2016 Service Area System 1,043 51,000 19,914 71.1% 72.0% 69.8% Penn Medicine 2,213 110,894 3,313 10.7% 10.7% 11.6% Prospect Medical Holdings: Crozer-Keystone Health 491 23,078 2,067 8.4% 7.1% 7.2% Systems (CKHS) Jefferson Health 2,067 97,738 1,099 3.9% 3.6% 3.9%

(a) Licensed acute beds from PA Department of Health – 2014/2015 Annual Hospital Questionnaire Report/MLH License certificates, excluding NICU, Psychiatric and Comp Medical Rehab beds (b) Discharges and market share based on annual acute discharges excluding Normal Newborns, Neonatology DRGs and Psychiatry); Truven Health Analytics – Pennsylvania Health Care Cost Containment Council (PHC4), July 1, 2013 to June 30, 2016 (c) Jefferson Health consists of Thomas Jefferson University and its affiliates.

The System is the leader in market share for multiple service lines in the PSA. The table below identifies the top 10 inpatient service lines by total market discharges in the PSA and the System’s corresponding market share percentage.

Fiscal Year 2016 PSA Service Line IP Market Discharges System Market Share Cardiovascular 3,965 78.8% Orthopedics 3,463 64.3% Obstetrics and Gynecology 3,354 72.9% General Surgery 2,470 69.7% Pulmonary Medicine 2,402 81.3% Internal Medicine 2,087 69.4% Neurological Sciences 2,063 66.8% Oncology 2,004 52.2% Gastroenterology 1,630 79.0% Infectious Disease 1,530 77.5%

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FINANCIAL AND OPERATING INFORMATION

The following data should be read in conjunction with the consolidated audited financial statements and notes thereto, presented in Appendix B.

Utilization

The following table sets forth selected utilization and statistical information for the System for the years ended June 30, 2015 and 2016, and the nine-months ended March 31, 2016 and 2017.

Fiscal Year Ended Year-to-Date

June 30, March 31, 2015 2016 2016 2017 Licensed Beds 1,348 1,387 1,374 1,387

Patient Days (excluding newborns) 324,084 315,100 235,983 237,484 Admissions (excluding newborns) 62,192 59,277 44,677 44,491

Average Length of Stay - Acute 4.12 4.16 4.16 4.23

Average Length of Stay - Hospitals (excl. TCC) 5.01 5.08 5.06 5.11 Surgical Cases: Inpatient 15,555 14,752 10,998 11,076 Outpatient 23,846 23,984 17,799 18,012 Total Surgical Cases 39,401 38,736 28,797 29,088

Other Utilization: Births 7,792 7,429 5,552 5,705

Observation Cases 7,781 9,261 6,878 7,198 Total Emergency Visits 169,862 174,039 129,715 132,594 Outpatient Visits – Other 1,189,618 1,227,160 912,385 927,413

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Operating Results

The following Statements of Operations for the years ended June 30, 2015 and 2016 are derived from the audited consolidated financial statements of the System, and for the nine-months ended March 31, 2016 and 2017 are derived from the unaudited consolidated financial statements of the System.

Fiscal Year Ended Year-to-Date Dollars in Thousands June 30, March 31, 2015 2016 2016 2017 Unrestricted revenue, gains and other support: Net patient service revenue $1,563,130 $1,620,722 $1,206,832 $1,226,206 Provision for bad debts (45,539) (37,983) (27,808) (27,297) Net patient service revenue less provision for bad debts 1,517,591 1,582,739 1,179,024 1,198,909 Investment income 3,652 5,397 3,791 5,234 Other revenue 54,422 60,115 44,935 44,596 Net assets released from restrictions used for operations 10,648 12,169 7,992 10,444

Total revenues, gains and other support 1,586,313 1,660,420 1,235,742 1,259,183

Expenses: Salaries and outside fees 692,498 753,059 561,006 584,176 Employee benefits 159,072 175,419 130,752 149,996 Supplies 249,549 269,391 199,923 210,439 Professional services 101,597 101,840 74,105 85,783 Depreciation and amortization 98,791 99,550 77,849 75,457 Physician and other fees 29,809 33,170 24,697 28,396 Insurance 12,139 11,275 18,763 13,175 Utilities 18,884 18,862 14,308 14,856 Repairs and maintenance 27,103 27,766 20,880 21,358 Interest 8,460 8,337 5,930 5,404 Communication and education 17,441 18,776 13,766 14,608 Other expenses 27,600 30,742 22,431 25,272

Total expenses 1,442,943 1,548,187 1,164,410 1,228,920

Operating income before non-recurring charges 143,370 112,233 71,332 30,263 Loss on bond refinancing 120 - - -

Operating income 143,250 112,233 71,332 30,263

Non-operating investment income 63,160 22,406 24,956 21,494 Other non-operating expenses (5,255) (6,791) (11,426) (10,424)

Excess of revenues over expenses $ 201,155 $ 127,848 $ 84,862 $ 41,333

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Health System Balance Sheets

The following Balance Sheets as of June 30, 2015 and 2016 are derived from the audited consolidated financial statements and as of March 31, 2016 and 2017 are derived from the unaudited consolidated financial statements.

Fiscal Year Ended Year-to-Date Dollars in Thousands June 30 March 31, 2015 2016 2016 2017 ASSETS Current assets: Cash and cash equivalents $ 113,918 $ 136,868 $ 102,019 $ 66,198 Short-term investments 143,814 123,450 243,259 150,515 Patient accounts receivable, net of allowance for uncollectibles accounts 181,646 173,523 174,205 179,362 Other receivables 14,649 18,223 10,488 10,325 Inventories 20,607 20,694 20,515 21,306 Prepaid expenses 12,299 12,104 17,442 19,821 Assets limited as to use 12,111 10,895 12,111 10,895

Total current assets 499,044 495,757 580,039 458,422

Property and equipment, net 1,018,688 1,066,843 1,040,855 1,142,882 Assets held by affiliated foundations 422,317 416,413 398,521 457,191 Assets limited as to use: - - Internally designated by Board for plant replacement 861,795 978,022 856,400 990,043 Internally designated by Board for self-insurance 3,725 3,725 3,725 3,725 Internally designated by Board for Foundation at Paoli 5,000 5,000 5,000 - Internally designated by Board for long-term liabilities 455 366 377 313 Externally designated under bond indenture agreement 6 1 6 1

870,981 987,114 865,508 994,082

Less amounts required to meet current obligations (12,111) (10,895) (12,111) (10,895)

Assets limited as to use, excluding current portion 858,870 976,219 853,397 983,187

Long-term investments 276,576 283,076 276,229 290,263 Beneficial interest in perpetual trusts 41,100 39,529 38,907 40,047 Investments in affiliates/partnerships 40,143 32,161 28,228 28,339 Other 71,641 87,380 79,362 96,931

Total Assets $3,228,379 $3,397,378 $3,295,538 $3,497,262

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Fiscal Year Ended Year-to-Date Dollars in Thousands June 30, March 31, 2015 2016 2016 2017 LIABILITIES AND NET ASSETS

Current liabilities: Current installments of long-term debt $ 5,317 $ 5,547 $ 5,417 $ 5,847 Accounts payable 64,387 63,587 49,673 60,440 Accrued payroll and related expenses 82,351 97,553 92,305 79,113 Accrued pension 122 122 122 122 Other accrued expenses 65,798 67,612 72,864 77,833 Accrued professional liability 4,037 4,037 4,037 4,034

Total current liabilities 222,012 238,458 224,418 227,389

Long-term debt, excluding current installments 204,434 232,242 223,001 234,321 Accrued pension 266,727 513,859 256,246 518,179 Other accrued expenses 19,250 22,073 17,229 27,072 Accrued professional liability 105,847 111,485 111,432 116,983

Total liabilities 818,270 1,118,117 832,326 1,123,944

Net assets: Unrestricted 2,187,885 2,056,994 2,246,462 2,123,672 Temporarily restricted 117,615 112,285 108,879 119,639 Permanently restricted 104,609 109,982 107,871 130,007

Total net assets 2,410,109 2,279,261 2,463,212 2,373,318

Total liabilities and net assets $3,228,379 $3,397,378 $3,295,538 $3,497,262

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Payer Mix

The following table sets forth the net patient service revenue before the provision for doubtful accounts by major payer source for the years ended June 30, 2015 and 2016 and for the nine months ended March 31, 2016 and 2017.

Fiscal Year Ended Year-to-Date June 30, March 31, 2015 2016 2016 2017 Payer Mix %: Independence Blue Cross 36% 35% 35% 34% Medicare 25% 25% 25% 26% Other, including commercial payers 16% 16% 16% 16% Aetna US Healthcare 14% 13% 13% 13% HMO/PPO 9% 9% 9% 10% Medical Assistance 1% 1% 1% 1%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RECENT FINANCIAL PERFORMANCE OF THE SYSTEM

Statements of Operations – Nine Months ended March 31, 2017 and 2016

Net patient revenues (less provision for bad debts) were $1,198.9 million for the nine months ended March 31, 2017, which was $19.9 million or 1.7% more than the prior year. Inpatient net revenues were greater than the prior year actual by 2% and outpatient net revenues increased by an additional 1%. Overall, adult discharges were less than the prior year primarily due to reduced rehabilitation discharges and drug and alcohol treatment discharges. However, the System realized an increase in Trauma Cases of 30% compared to the prior year actual due to the opening of the Level II Trauma Center at the Lankenau Medical Center in September 2016. The System also experienced a shift from inpatient admissions to observation cases. Emergency department visits exceeded prior year by 2.2%, with additional increases in outpatient surgeries, home care visits and other therapy cases.

Other operating revenue, including net assets released from restrictions for the nine month period ended March 31, 2017 was $60.3 million, which exceeded the prior year period by 6.3% primarily as a result of higher investment income and increased net assets released from restriction from affiliated Foundations.

Operating expenses were $1,228.9 million for the nine month period ended March 31, 2017, which was $64.5 million, or 5.5% more than the prior year period. A significant portion of this variance was in salaries and wages due to an increase in average length of stay (patient days), merit increases, and the use of temporary help and agency staff, plus an increase of $13.2 million in defined benefit pension expense caused by a lower discount rate for the current year. Overall, on a total cost per CMI adjusted discharge basis, there was a 3.3% increase during the nine month period ended March 31, 2017 as compared to the prior year.

Operating income for the nine month period ended March 31, 2017 was $30.3 million, trailing the prior year period by $41.0 million.

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Non-operating revenue was $11.1 million for the nine month period ended March 31, 2017 compared to the prior year period of $13.5 million. The unfavorable variance was due to lower total return on investments and unrestricted contributions during the nine month period ended March 31, 2017.

Excess of revenues over expenses for the nine month period ended March 31, 2017 was $41.3 million, trailing the prior year period by $43.5 million.

Balance Sheet as of March 31, 2017

Total unrestricted and board designated cash and investments totaled $1.5 billion at March 31, 2017, which was a decrease of $30.5 million from June 30, 2016. This decrease was primarily associated with investment in property, plant and equipment of $150 million and cash flow from operations totaling $122 million during the nine month period ended March 31, 2017.

Total assets were $3.5 billion as of March 31, 2017, reflecting an increase of $100 million since June 30, 2016. Long-term borrowings (including current portion) were $240 million at March 31, 2017 which increased by $2.4 million since June 30, 2016.

Net assets have increased $94.1 million from June 30, 2016, with an increase of $66.7 million of unrestricted net assets, coupled with a $7.4 million increase in temporarily restricted net assets related to market activity, and a $20.0 million increase in permanently restricted assets from increased contributions, which included receipt of funds from the settlement of a life estate.

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KEY FINANCIAL RATIOS OF THE SYSTEM

Capitalization

The following table sets forth the System’s capitalization for the fiscal years ended June 30, 2015 and 2016 and for the nine months ended March 31, 2016 and 2017.

System Capitalization Dollars in Thousands Fiscal Year Ended Year-to-Date June 30 March 31 2015 2016 2016 2017 Bonds 2010 (fixed rate) $133,219 $129,991 $133,222 $129,984 2012 (fixed rate) 59,887 57,798 57,871 55,684 2015 (floating rate, direct purchase) 16,645 50,000 37,325 50,000 Other Obligations 0 0 0 4,500 Total Debt $209,751 $237,789 $228,418 $240,168

Total Unrestricted Net Assets $2,187,885 $2,056,994 $2,246,462 $2,123,672 Total Capitalization $2,397,636 $2,294,783 $2,474,880 $2,363,840 Net Long-Term/Debt-Capitalization 8.7% 10.4% 9.2% 10.2%

Note: The $4,500 of "Other Obligations" at March 31, 2017 represents debt of Bryn Mawr Surgery Center, LLC, a 51% owned joint venture of ML Hospitals

Liquidity

The table below sets forth the liquidity position of the System (unrestricted and certain board restricted cash and investments) at June 30, 2015 and 2016 and at March 31, 2016 and 2017.

Fiscal Year Ended Year-to-Date Dollars in Thousands June 30, March 31, 2015 2016 2016 2017 Cash and cash equivalents $113,918 $136,868 $102,019 $66,198 Unrestricted investments 392,395 380,528 494,560 413,694 Assets internally designated by Board, excluding self-insurance 867,250 983,388 861,777 990,356

Total cash and unrestricted $1,373,563 $1,500,784 $1,458,356 $1,470,248 investments

Cash expenses $1,344,152 $1,448,637 $1,086,561 $1,153,463

Days of cash on hand 373 379 369 349

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Investments and Investment Policy

The fair value of cash and cash equivalents, investments and assets whose use is limited at June 30, 2015 and 2016 by category of securities are as follows:

Dollars in Thousands Fiscal Year Ended June 30, 2015 % 2016 % Cash and cash equivalents $113,918 8.1% $136,868 8.9% Mutual funds - primarily U.S. Government 185,064 13.2% 195,244 12.8% obligations Mutual funds - marketable equity securities 92,875 6.6% 93,486 6.1% U.S. Government obligations 92,946 6.6% 178,112 11.6% Corporate bonds 687,647 48.9% 713,926 46.6% Certificates of deposit and other commercial paper 107,710 7.7% 121,097 7.9% Other, including alternative assets 125,129 8.9% 91,775 6.0% $1,405,289 100.0% $1,530,508 100.0%

Summary of Long-Term Debt

The table below sets forth the outstanding long-term debt of the System as of March 31, 2017.

Principal Bond Delivery Par Amt. Par Amt. Final Par Call Interest Pmt. Interest Series Date Issued Outstanding Maturity Date Mode Dates Pmt. Dates 2010A 7/29/2010 $164,510,000 $129,770,000 5/15/2040 5/15/2020 Fixed 5/15 5/15; 11/15

2012A 6/21/2012 $60,090,000 $51,440,000 10/1/2041 4/1/2022 Fixed 10/1 4/1; 10/1

2015(1) 5/15/2015 $50,000,000 $50,000,000 10/1/2044 Anytime Variable 10/1 Monthly

$274,600,000 $231,210,000

(1) The Series 2015 Bonds are subject to optional tender by the bondholder on May 1, 2025.

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Debt Service

The table below sets forth the maximum annual debt service (“MADS”) coverage for the years ended June 30, 2015 and 2016 and the nine months ended March 31, 2016 and 2017.

Fiscal Year Ended Year-to-Date Dollars in Thousands June 30, March 31, 2015 2016 2016 2017 Excess of revenues over expenses attributable to Main Line $201,155 $127,848 $84,862 $41,333 Health System and Affiliates Add: Depreciation and amortization expense 98,791 99,550 77,849 75,457 Interest expense 8,460 8,337 5,930 5,404 Income available for debt service $308,406 $235,735 $168,641 $122,194

Maximum annual debt service (prorated for YTD March) $15,200 $16,100 $12,086 $12,086

Debt service coverage ratio 20.29 14.64 13.95 10.11

OTHER INFORMATION

Defined Benefit Pension Program

The Main Line Health, Inc. Retirement Income Plan (“Pension Plan”) is a noncontributory defined benefit plan for the employees of MLH and certain of its controlled affiliates upon attaining 21 years of age and 1 year of service. The System contributes to the Pension Plan such amounts as are necessary on an actuarially-determined basis to provide the Pension Plan with assets sufficient to meet the defined benefits expected to be paid to the Pension Plan participants. The Pension Plan was unfunded by $514.0 million and $266.8 million for the fiscal years ended June 30, 2016 and 2015, respectively. These amounts resulted in a funded status of 65.3% for fiscal year 2016 and 77.5% for fiscal year 2015. The Pension Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). See Note 11 in Appendix B – Audited Consolidated Financial Statements of Main Line Health System and Affiliates for the years ended June 30, 2016 and 2015 for more information related to the System pension plans.

Defined Contribution Plan

The Main Line Health. Inc. Retirement Savings Plan (“RSP”) is a defined contribution plan covering all eligible employees of the System. It meets the requirements of Section 403(b) of the Internal Revenue Code of 1986, as amended. All System employees, other than leased employees, temporary employment status employees or any independent contractor, are eligible to participate in the RSP.

Contributions to the RSP include salary reduction contributions authorized by participants; matching contributions made by the System; and rollovers from another qualified plan. The System contributes 25% of the first 4% of compensation contributed by a participant, up to a maximum employer contribution of 1% of the participant’s salary. Employees are eligible for matching contributions upon commencement of employment.

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Participants are immediately vested in their RSP contributions plus actual earnings thereon. Vesting in the System’s matching contribution portion of their accounts plus actual earnings thereon occurs after two years of continuous service.

Employees and Labor Relations

The System employs approximately 11,400 people and 8,842 full time equivalents as of March 2017. The System’s relations with its employees are positive. The System has no union contracts. The System has developed strategies to recruit and retain employees in the current competitive labor market. The System has been awarded The Advisory Board Company’s 2017 Workplace of the Year Award. The annual award recognizes hospitals and health systems nationwide that have outstanding levels of employee engagement, and the System is one of 20 organizations nationwide to receive the award.

Insurance

The System has in place a comprehensive insurance program providing coverage in the areas of professional liability, commercial general liability, business automobile (including ambulances and emergency transport vehicles), excess workers’ compensation and employers liability, aviation liability (including non-owned aircraft and helipad premises), excess professional and umbrella liability, crime, fiduciary liability, directors and officers liability (including employment practices liability), network privacy and security liability, and all risk property. The insurance program, including terms, conditions, limits and retentions, is reviewed at least annually.

The System maintains its professional and general liability insurance coverage using a combination of self-insurance and alternative risk financing vehicles to fund for its potential professional and general liability claims.

Primary professional liability coverage is provided by MLRRG, a licensed captive insurance company qualified as a risk retention group domiciled in Vermont. MLRRG is reinsured by Five Pointe. Five Pointe reinsures 100% of the professional liability risks of MLH insured by MLRRG pursuant to a reinsurance agreement between Five Pointe and MLRRG that limits MLRRG’s recourse for payment of any reinsured claims against the System to the assets in the System’s protected cell. The premium charged by MLRRG to MLH is determined by an independent outside actuary based on loss and loss adjustment expense experience at a 65% confidence level and a 3% discount factor.

The Pennsylvania Medical Care Availability and Reduction of Error Fund (“MCare”) provides limits for System hospitals and employed physicians/residents in excess of the primary professional liability layer of coverage described above.

For losses in excess of the primary and MCare layers of coverage the System retains and accrues for liabilities up to $2,000,000 each medical incident/$2,000,000 aggregate excess of a $5,000,000 each and every retention. A claims made excess professional liability policy with limits of $95,000,000 per medical incident and $95,000,000 annual aggregate is purchased from Five Pointe to provide catastrophic coverage in excess of the primary professional, MCare and retained limits of coverage. Five Pointe reinsures 100% of this risk with commercial reinsurance carriers with A.M. Best ratings of at least an A-.

MLRRG also provides the primary general liability coverage for MLH. A separate umbrella limit of $95,000,000 per occurrence and $95,000,000 annual aggregate is purchased from Five Pointe to provide liability coverage in excess of the primary general liability, automobile, employers liability, and aviation liability coverages maintained by the System. This limit is 100% reinsured by commercial reinsurers with A.M. Best ratings of at least an A-.

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Litigation

Because of the nature of their operations, the Obligated Group Affiliates are subject to pending and threatened legal actions which arise in the normal course of their activities. No litigation or proceedings are pending or, to the knowledge of MLHS, threatened against MLHS or any Obligated Group Affiliate except: (i) litigation involving claims for hospital, physician or other provider professional liability in which the probable recoveries and the estimated costs and expense for defense, in the opinion of MLHS, will be entirely within the applicable insurance policy limits (subject to applicable deductibles) or within the applicable self-insurance reserves of the members of the Obligated Group; and (ii) litigation involving other types of claims that, if adversely determined, would not, in the opinion of MLHS, materially and adversely affect the financial condition of MLHS or the Obligated Group Affiliates or the results of the operations of the Obligated Group Affiliates.

Community Benefit

The System strives to be the health care provider of choice in leading and optimizing the health of all in the communities served.

Charity Care

The System provides emergency services to all patients regardless of their ability to pay. Some patients qualify for charity care based on guidelines established by the System and are therefore not responsible for payment of all of such services. These guidelines require indigency status based on federal poverty guidelines, or the patient’s financial condition to be such that requiring payment would impose a hardship on the patient. Charges for services rendered to patients who meet the System’s guidelines for charity care are not reflected in the consolidated financial statements.

The System maintains records to identify and monitor the level of charity care provided. These records include the amount of charges forgone for services and supplies furnished. Such amounts are excluded from net patient service revenue. Management estimates that the cost associated with these services for charity care provided by the System, as calculated using respective facility cost to charge ratios, approximated $6,114,000 in fiscal year 2016 and $6,853,000 in fiscal year 2015. Funds received from gifts and grants specifically to subsidize charity services were $1,453,000 for fiscal year 2016 and $1,507,000 for fiscal year 2015.

In accordance with the System’s Charity Care and Financial Assistance Policy, the System provides financial assistance in the form of discounts to uninsured patients whose income is in excess of 500% of the Federal Poverty Guidelines. The amount of financial assistance, at cost, provided during fiscal years 2016 and 2015 approximated $4,504,000 and $3,504,000, respectively.

The System has a strong commitment to the well-being of all members of the communities it serves, regardless of their ability to pay. The System has provided more than $112 million in charity care, including the Medicaid shortfall (described below), for fiscal years 2013 through 2016, contributing at least 2% of its net patient revenues each fiscal year to patients in need.

Medicaid Shortfall

Services are provided to individuals that qualify for medical assistance and who participate in the Pennsylvania Medical Assistance program. The cost of providing such services to eligible welfare recipients exceeded reimbursement by $20,345,000 and $20,109,000 in fiscal years 2016 and 2015, respectively.

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Bad Debt

The System records a provision for bad debts for estimated losses resulting from non-payment from patients. Management routinely evaluates patient account collection history, economic conditions, and trends in health care coverage in determining the sufficiency of the allowance for doubtful accounts and provision for bad debts. Accounts receivable are written off against the allowance for doubtful accounts when management determines that recovery is unlikely and collection efforts cease. MLHS recorded provisions for bad debt of $37,983,000 and $45,539,000 as of June 30, 2016 and 2015, respectively.

Community Health Improvement Services

In addition to providing direct patient charity care and in furtherance of its exempt purpose to benefit the community, the System provides sponsorships and various community services such as education, screenings and support groups for cancer patients and their families, immunization programs, rehabilitation support for amputees, stroke, and brain injury patients and their families, health wellness festivals, continuum of independent living and senior health programs, heart disease screenings, maternity care and childbirth programs, a paramedic ambulance program and other related community health programs and lectures. The System also is involved with school partnerships and helps organize educational programs for childhood and adolescent health issues, including underage drinking and smoking. Associated amounts expended for the above community services approximated $22,196,000 in fiscal year 2016 and $20,922,000 in fiscal year 2015.

Community Health Needs Assessment and Implementation Plans

The System completed a Community Health Needs Assessment (CHNA) in 2009, 2013, and 2016. During each assessment, MLH learns more about the communities it serves, which include a diverse and multicultural population of nearly 3.5 million people in its service area (West Philadelphia, Delaware County, Montgomery County and Chester County). The System uses this data to identify the health needs of those it serves and to create actionable plans to empower health and wellbeing. The CHNA is compiled by analyzing population and demographic data and comparing health indicators such as health status, health conditions and incidence and mortality rates to local, regional and national rates. Additional comparisons were made to understand influences on health, such as the use of preventive health services, access to care, mental health, and factors influencing the health of older adults.

In the latest CHNA the top issues identified were: healthy weight/ diabetes, heart health/stroke, cancer, behavioral health, injury prevention and senior care. Community Service Departments at the System’s hospitals use this data to appropriately plan their community outreach activities including educational seminars and lectures, health fairs, screening events, pop-up health food lectures, and corner- store health counseling. In any given year, the System “Screen Team” screens thousands of individuals and then connects them as necessary for follow-up care with the appropriate clinician.

Health Career Academy

The System established the Health Career Academy as a result of its commitment to engaging and educating the next generation of health care professionals. In this program, 10th through 12th grade students from Philadelphia area high schools work together in health care-related group projects, focusing on emergency room themes and public health issues. Medical students and staff from Drexel University College of Medicine, Sidney Kimmel Medical College, Temple University School of Medicine and Philadelphia College of Osteopathic Medicine partner with System employees, volunteering their time in

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the local high schools to help the students with their projects and to serve as role models from the health care industry.

Subsidized Health Services

System hospitals also subsidize several health programs throughout the system, including Lankenau Clinical Care Center, prenatal programs, community blood draws, hospital hospice services, transitional care, healthy women programs, aquatics rehabilitation, and head injury. The net cost for these subsidized programs throughout the System amounted to $3,838,000 and $2,262,000 for fiscal years 2016 and 2015, respectively. Additionally, the System invests in numerous physician based patient care programs administered by Main Line HealthCare.

Research

Research is essential for advancing health care, leading to medical breakthroughs that improve and save lives. The goal of the System is to rapidly translate research findings into clinical care that benefits its patients and the community.

As noted earlier, LIMR conducts laboratory-based and clinical investigations in a tightly knit, multidisciplinary community of scientists, nurses and physicians. LIMR receives strong support from external funders. LIMR’s revenues are derived from outside sources in the form of grants and other philanthropic support, such as the National Institutes for Health and the Bill & Melissa Gates Foundation. More than 100 clinical trials are conducted each year with a strong focus on potential treatments for cardiac and cancer patients.

In fiscal year 2016, LIMR also established the Main Line Health Center for Population Health in affiliation with the Jefferson College of Population Health to advance studies that explore the unique features of the patient population served by MLH, including research that will help the organization enhance current care models through a better understanding of the underlying social and economic challenges inherent or under-addressed in the community.

Community Building Activities

Societal wellbeing is integral to the System’s Strategic Plan. In fact, in fiscal year 2016 the System redefined its vision statement, with societal wellbeing at its core: “be the health care provider of choice by leading and optimizing the health of all in the communities we serve.” Over the past several years, the System has increasingly dedicated resources to advance population health efforts. This work includes:

. DVACO: in partnership with Thomas Jefferson University, MLH has co-founded the region’s largest accountable care organization, ensuring access to coordinated care to over 200,000 members of the communities we serve.

. Annual Health Care Disparities Colloquium: now in its sixth year, the System-wide, multidisciplinary event continues to deliver results and enhance the quality of life for all in the communities we serve by addressing potential disparities in care.

. Community Volunteers in Medicine (CVIM): Paoli Hospital provided the seed funding for this community-based medical clinic in 1996, after recognizing the challenges faced by uninsured individuals in Chester County who were forced to visit emergency rooms for non-emergent problems. Today, Paoli Hospital provides free clinical services to qualifying patients referred

A-40

by CVIM. The Wellness Farm at Lankenau Medical Center: a half-acre farm dedicated to a hands-on classroom for more than 10,000 students who come to Lankenau each year for health education. The Farm produces more than 2,000 pounds of organic produce per year, to go to farmer’s markets for patients, visitors and employees as well as to local food banks.

. Medical Student Advocate Program: Lankenau Medical Center collaborates PCOM on the Medical Student Advocate Program, which was developed to provide patients with assistance for non-medical needs to improve health outcomes. Second- and third-year PCOM students serve as non-clinical patient advocates, helping with such needs as food assistance, child care, health insurance and housing searches. PCOM students work with the Lankenau Clinical Care Center, which serves as a teaching site for 39 internal medicine residents and 26 fellows in cardiology, gastroenterology, hematology-oncology and nephrology. The students serve mostly underserved and vulnerable populations and are assigned up to five patients per semester.

The System is committed to advancing societal well-being through environmental, social and economic systems. In contracting with partners for design, construction and materials management, the Senior Leadership team is committed to purchasing decisions that protect its communities. In fact, the System has committed to environmentally sustainable efforts in all new construction projects. Through advisement of the Sheward Partnership, the System’s most recently completed master facility project was designated as the largest LEED Silver-Certified health care facility on the east coast in 2014. The System’s Supply Chain team diligently works to purchase environmentally-friendly products for use in patient care as well as all operations.

The System is one of the largest economic drivers in the region, supplying more than 10,800 jobs in Southeastern Pennsylvania. The System is actively involved in both the Main Line Chamber of Commerce and the Chamber of Commerce for Greater Philadelphia and the MLH Senior Leadership team proactively contributes to these organizations to help ensure the economic vitality of the communities we serve. The System’s CEO frequently serves on panel discussions related to regional economic trends and other senior leaders hold key board positions to positively influence the regional economy and nonprofit service.

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APPENDIX B

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF MAIN LINE HEALTH SYSTEM FOR THE YEARS ENDED JUNE 30, 2016 AND 2015

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Main Line Health System and Affiliates Consolidated Financial Statements for the Years Ended June 30, 2016 and 2015

Main Line Health System and Affiliates Table of Contents June 30, 2016 and 2015

Page(s)

Independent Auditor’s Report 1-2

Consolidated Financial Statements: Consolidated Balance Sheets 3

Consolidated Statements of Operations and Changes in Net Assets 4-5

Consolidated Statements of Cash Flows 6

Notes to Consolidated Financial Statements 7-31

Independent Auditor's Report

To Board of Governors Main Line Health System

We have audited the accompanying consolidated financial statements of Main Line Health System and Affiliates (“MLHS”), which comprise the consolidated balance sheets as of June 30, 2016 and 2015, and the related consolidated statements of operations and changes in net assets and of cash flows for the years then ended.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to MLHS’ preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of MLHS’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7042 T: (267) 330-3000, F: (267) 330-3300, www.pwc.com/us

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Main Line Health System and Affiliates as of June 30, 2016 and 2015, and the results of their operations and their changes in net assets, and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

September 29, 2016

Main Line Health, Inc. and Affiliates Consolidated Balance Sheets June 30, 2016 and 2015 (in thousands)

Assets 2016 2015 Liabilities and Net Assets 2016 2015 Current assets: Current liabilities: Cash and cash equivalents $ 136,868 $ 113,918 Current installments of long-term debt $ 5,547 $ 5,317 Short-term investments 123,450 143,814 Accounts payable 63,587 64,387 Patient accounts receivable, net of allowance for Accrued payroll and related expenses 97,553 82,351 uncollectibles accounts of $33,652 and $34,512, respectively 173,523 181,646 Accrued pension 122 122 Other receivables 18,223 14,649 Other accrued expenses 67,612 65,798 Inventories 20,694 20,607 Accrued professional liability 4,037 4,037 Prepaid expenses 12,104 12,299 Assets limited as to use 10,895 12,111

Total current assets 495,757 499,044 Total current liabilities 238,458 222,012

Property and equipment, net 1,066,843 1,018,688 Long-term debt, excluding current installments 232,242 204,434 Assets held by affiliated foundations 416,413 422,317 Accrued pension 513,859 266,727 Assets limited as to use: Other accrued expenses 22,073 19,250 Internally designated by Board for plant replacement 978,022 861,795 Accrued professional liability 111,485 105,847 Internally designated by Board for self-insurance 3,725 3,725 Internally designated by Board for Foundation at Paoli 5,000 5,000 Total liabilities 1,118,117 818,270 Internally designated by Board for long-term liabilities 366 455 Externally designated under bond indenture agreement 1 6

987,114 870,981 Net assets: Less amounts required to meet current obligations (10,895) (12,111) Unrestricted 2,056,994 2,187,885 Temporarily restricted 112,285 117,615 Assets limited as to use, excluding current portion 976,219 858,870 Permanently restricted 109,982 104,609

Long-term investments 283,076 276,576 Total net assets 2,279,261 2,410,109 Beneficial interest in perpetual trusts 39,529 41,100 Investments in affiliates/partnerships 32,161 40,143 Other 87,380 71,641

$ 3,397,378 $ 3,228,379 Total liabilities and net assets $ 3,397,378 $ 3,228,379

The accompanying notes are an integral part of these Consolidated Financial Statements.

Main Line Health, Inc. and Affiliates Consolidated Statements of Operations and Changes in Net Assets For the years ended June 30, 2016 and 2015 (in thousands)

2016 2015

Unrestricted revenue, gains and other support: Net patient service revenue $ 1,620,722 $ 1,563,130 Provision for bad debts (37,983) (45,539) Net patient service revenue less provision for bad debts 1,582,739 1,517,591

Investment income 5,397 3,652 Other revenue 60,115 54,422 Net assets released from restrictions used for operations 12,169 10,648 Total revenues, gains and other support 1,660,420 1,586,313

Expenses: Salaries and outside fees 753,059 692,498 Employee benefits 175,419 159,072 Supplies 269,391 249,549 Professional services 101,840 101,597 Depreciation and amortization 99,550 98,791 Physician and other fees 33,170 29,809 Insurance 11,275 12,139 Utilities 18,862 18,884 Repairs and maintenance 27,766 27,103 Interest 8,337 8,460 Communication and education 18,776 17,441 Other expenses 30,742 27,600

Total expenses 1,548,187 1,442,943

Operating income before non-recurring charges 112,233 143,370 Loss on bond refinancing (Note 9) - 120

Operating income 112,233 143,250

Non-operating investment income 22,406 63,160 Other non-operating expenses (6,791) (5,255)

Excess of revenues over expenses $ 127,848 $ 201,155

The accompanying notes are an integral part of these Consolidated Financial Statements.

Main Line Health, Inc. and Affiliates Consolidated Statements of Operations and Changes in Net Assets, continued For the years ended June 30, 2016 and 2015 (in thousands)

2016 2015

Increase/(decrease) in unrestricted net assets: Excess of revenues over expenses (from previous page) $ 127,848 $ 201,155 Change in net unrealized gains and losses on investments and assets held by affiliated foundations (7,058) (39,797) Assets released from restrictions - capital purchases 10,190 7,497 Other changes in pension plan assets and benefit obligations (261,658) (53,281) Other, including transfer of JHS investments and minorty interest (213) (1,476)

(Decrease)/Increase in unrestricted net assets (130,891) 114,098

Increase/(decrease) in temporarily restricted net assets: Assets released from restrictions - operations (12,169) (10,648) Assets released from restrictions - capital purchases (10,190) (7,497) Investment income 4,130 17,022 Change in net unrealized gains and losses on investments and amounts due from affiliates (6,657) (15,954) Contributions 19,595 23,045 Other (39) (100)

(Decrease)/Increase in temporarily restricted net assets (5,330) 5,868

Increase in permanently restricted net assets: Decrease in beneficial interest in perpetual trusts (1,572) (1,435) Contributions 6,884 2,744 Other 61 - Increase in permanently restricted net assets 5,373 1,309

(Decrease)/Increase in net assets (130,848) 121,275 Net assets at beginning of year 2,410,109 2,288,834 Net assets at end of year $ 2,279,261 $ 2,410,109

The accompanying notes are an integral part of these Consolidated Financial Statements.

Main Line Health System and Affiliates Consolidated Statement of Cash Flows For the years ended June 30, 2016 and 2015 (in thousands)

2016 2015 Cash flows from operating activities: Increase in net assets (130,848)$ $ 121,275 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 99,550 98,791 Loss on bond refinancing - 120 Provision for bad debts 37,983 45,539 Loss/(Gain) on disposal of equipment 154 (22) Equity on investment in Mountain Laurel Risk Retention Group (945) (806) Equity on investment in Five Pointe Professional Liability Insurance Company (516) (5,572) Dividend from Five Pointe Professional Liability Company 9,044 12,768 Changes in pension plan assets and benefit obligations 261,658 53,281 Contributions restricted for endowment and PP&E (6,884) (2,744) Net realized and unrealized gains on investments and assets held by affiliated foundations 7,797 (6,541) Equity in gains of affiliates (2,443) (4,166) Decrease in beneficial interest in perpetual trusts 1,572 1,435 Increase or (decrease) from changes in: Patient accounts receivable (29,861) (68,627) Other receivables (3,574) 7,313 Inventories (87) (229) Prepaid expenses 195 (2,443) Assets held by affiliated foundations (6,638) (9,694) Other assets, net (16,211) 7,416 Accounts payable 2,664 16 Accrued payroll and related expenses 15,202 2,948 Accrued professional liability 5,638 (10,417) Accrued pension (14,526) (24,842) Other liabilities 4,637 8,857

Net cash provided by operating activities 233,561 223,656

Cash flows from investing activities: Purchases of investments (817,814) (697,121) Proceeds from sale of investments 720,290 569,592 Additions to property and equipment, net (150,851) (89,852) Distributions/repayments from affiliates/partnerships 2,842 7,380 Net cash used for investing activities (245,533) (210,001) Cash flows from financing activities: Proceeds from contributions restricted for endowment and PP&E 6,884 2,744 Repayment of long-term debt (5,317) (21,462) Issuance of long-term debt 33,355 16,645 Net cash provided by/(used for) financing activities 34,922 (2,073) Increase in cash and cash equivalents 22,950 11,582 Cash and cash equivalents at beginning of year 113,918 102,336 Cash and cash equivalents at end of year $ 136,868 $ 113,918

Supplemental cash flow information: Cash paid for interest $ 8,345 $ 8,585

Accrued additions to property and equipment $ 8,296 $ 4,832

The accompanying notes are an integral part of these Consolidated Financial Statements. 6

Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

1. Main Line Health System and Affiliates

Main Line Health System (“MLHS”) (formerly Jefferson Health System “JHS”) is a nonprofit, nonstock, membership corporation and is the sole corporate member of Main Line Health, Inc. (“MLH”), which is the sole corporate member or direct or indirect parent corporation of Main Line Hospitals, Inc. (The Bryn Mawr Hospital, The Lankenau Hospital, Paoli Hospital, Bryn Mawr Rehabilitation Hospital), Riddle Memorial Hospital, Mirmont Alcohol Rehabilitation Center, and several other entities.

The consolidated financial statements of Main Line Health System and Affiliates present the financial position and operating results of the entities within Main Line Health System. All significant intercompany accounts and transactions have been eliminated.

Main Line Health System and affiliated organizations provide inpatient, outpatient and emergency care services through acute and rehabilitation hospitals, as well as behavioral health, long-term care, ambulatory care, home care, physician and other primary care services, principally to residents of Southeastern Pennsylvania.

2. Significant Accounting Policies

The significant accounting policies applied in preparing the accompanying consolidated financial statements are summarized below:

Adoption of Accounting Pronouncements In May 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), which eliminates the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the net asset value per share practical expedient. A reporting entity should continue to disclose information on investments for which fair value is measured at net asset value (or its equivalent) using the practical expedient to help users understand the nature and risks of the investments and whether the investments, if sold, are probable of being sold at amounts different from net asset value. MLHS adopted ASU 2015-07 on a retrospective basis during fiscal year 2016. The application of this guidance resulted in disclosure changes only.

7 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Recent Accounting Pronouncements In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for MLHS’ fiscal years beginning after December 15, 2018. Early application to financial statements that have not yet been made available for issuance is permitted for the amendments (1) requiring an entity that has elected to measure a liability at fair value to present separately as a change in net assets the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk; and (2) exempting an entity from the requirement to disclose fair value information about financial instruments not measured at fair value. MLHS elected to apply these amendments during fiscal year 2016. The application of this guidance resulted in disclosure changes only. Early adoption of the remaining updates is not permitted. MLHS is evaluating the impact this will have on the fiscal year 2020 consolidated financial statements.

In February 2016, the FASB issued ASC 842, Leases. The FASB retained a dual model that includes financing leases, which are similar to today’s capital leases, and operating leases, with expense recognized on a straight-line basis. Under the FASB's dual approach, determining whether a lease is a finance or operating lease will be based on guidance similar to the classification model under current US GAAP, but without the bright lines. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The Board decided that, lessees should be required to recognize the assets and liabilities arising from leases on the balance sheet. The Board ultimately reached the conclusion that the economics of leases can vary for a lessee and that those economics should be reflected in the financial statements; therefore, Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The standard is effective for MLHS’ fiscal year beginning after December 15, 2018. Entities are required to adopt the standard using a modified retrospective transition approach, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. Early adoption is permitted. MLHS is evaluating the impact this will have on the 2020 consolidated financial statements.

In May 2014, the FASB issued a standard on Revenue from Contracts with Customers. This standard implements a single framework for recognition of all revenue earned from customers. This framework ensures that entities appropriately reflect the consideration to which they expect to be entitled in exchange for goods and services by allocating transaction price to identified performance obligations and recognizing revenue as performance obligations are satisfied. Qualitative and quantitative disclosures are required to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard is effective for MLHS’ fiscal years beginning after December 15, 2017. MLHS is evaluating the impact this will have on the fiscal year 2019 consolidated financial statements.

8 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Use of Estimates The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management considers critical accounting policies to be those that require more significant judgments and estimates in the preparation of the financial statements. Management relies on historical experience and other assumptions believed to be reasonable relative to the circumstances in making judgments and estimates. Actual results could differ from these estimates.

Cash and Cash Equivalents Cash and cash equivalents include investments in highly liquid debt instruments having a maturity of 90 days or less when purchased. At June 30, 2016 and 2015, MLHS had cash balances in financial institutions, which exceed federal depository insurance limits. Management believes that credit risk related to these deposits is minimal.

Inventories Inventories are stated at the lower of cost or market with the cost determined using the first-in, first- out method.

Assets Held by Affiliated Foundations In accordance with authoritative accounting guidance, the Foundations are each treated, for accounting purposes only, as though they are financially interrelated to its Hospital affiliates (The Bryn Mawr Hospital, Lankenau Medical Center, Paoli Hospital, Bryn Mawr Rehabilitation Hospital, and Riddle Memorial Hospital), where the Foundations are considered the recipient organizations and the Hospital affiliates are considered the specified beneficiaries. Therefore, the consolidated financial statements reflect Assets Held by Affiliated Foundations of $416,413,000 and $422,317,000, respectively, as of June 30, 2016 and 2015 relating to cash and investments held, managed, and controlled by the Foundations. This required accounting treatment does not imply that the Foundations’ assets nor investment income, are those of their respective Hospital affiliates. Under the by-laws of each Foundation, its Board of Trustees has sole discretion whether to make any Foundation assets available, except with respect to the terms of certain restricted gifts to the Foundation or assets held by the Foundation in a special projects fund (which are available to fund Hospital requests for contributions by the Foundation for identified purposes other than voluntary or required prepayments or payments of debt).

The consolidated financial statements do not reflect or establish the legal relationship, agency or otherwise, between a Foundation and its Hospital affiliates or any right to any assets owned by a Foundation. In fact, the Foundations are separately incorporated non-membership, nonprofit corporations governed by self-perpetuating Boards of Trustees. The by-laws of each Foundation provide that all assets held by it, including assets in its Special Projects Fund, shall not be subject to attachment, execution or sequestration for any debt, obligation or liability of its Hospital affiliate or any other person or entity, and shall not be subject to pledge, assignment, conveyance or anticipation by that Hospital or any other person or entity. In particular, the Foundations are not parties to or obligated by the 1994 Master Trust Indenture, which was amended and restated by subsequent Master Trust Indentures, and assets owned by a Foundation are not subject to the lien of that Indenture, or any subsequent issuance of debt obligations of MLHS.

9 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Investments and Investment Income Investments in equity securities with readily determinable fair values and all debt securities are measured at fair value. The fair values for marketable equity and debt securities are based on quoted market prices. Equity investments in private partnerships are accounted for under the equity method, which approximates fair value. MLHS classifies its investment holdings as available for sale.

MLHS has invested in a pooled investment trust. The investments are managed in a single investment account. MLHS is allowed a degree of flexibility in allocating the percentage of funds to particular investment categories, which are fixed income, equity, and alternatives. As of June 30, 2016, the pooled investment trust has unfunded commitments to its fund managers of $1,096,000.

Investment income on unrestricted cash, short-term investments and trustee held funds are included in operating revenues. Investment income or loss on long-term investments and assets held by affiliated foundations, are included in non-operating income.

The change in unrealized gains and losses are excluded from operating and non-operating income, but included in the increase or decrease in net assets.

Gains and losses on investments sold are determined using the specific identification method, and are included in non-operating income.

Investment income restricted by donors or law is reported as an increase in temporarily or permanently restricted net assets.

Investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with these securities and the level of uncertainty related to changes in their value, it is at least reasonably possible that changes in risks in the near term could materially affect account balances and the amounts reported in the consolidated balance sheets and statements of operations and changes in net assets.

Property and Equipment Property and equipment are recorded at cost. Depreciation is expensed over the following estimated useful lives of the underlying assets by use of the straight-line method:

Building and building improvements 20 - 40 years Equipment 3 - 15 years Leasehold improvements 3 - 20 years

When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in operations.

Interest cost incurred on borrowed funds during the construction period of capital assets for projects that last 6 months or longer and whose expenditures are $5 million or greater, is capitalized as part of property and equipment as a component of the cost of constructing those assets. Repair and maintenance costs are expensed as incurred. Interest cost totaling $777,000 and $1,034,000 was capitalized to construction in progress during 2016 and 2015, respectively.

10 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Donated equipment is recorded at fair market value on the day of donation, which is then treated as cost. Donated equipment is reported as unrestricted support, and is excluded from excess of revenue over expenses, unless explicit donor stipulations specify how the donated assets must be used.

Net Patient Service Revenue Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered and are adjusted in future periods, as final settlements are determined.

Revenue from the Medicare and Medicaid programs accounted for approximately 25.6% ($353,907,000) and 1.2% ($16,699,000), respectively, of MLHS’ hospital net patient service revenue for the fiscal year ended June 30, 2016 and 25.2% ($343,039,000) and 1.1% ($14,791,000), respectively, for the fiscal year ended June 30, 2015. Most payments to MLHS from the Medicare and Medicaid programs for hospital services are made on a prospective basis. Under these programs, payments are made at a pre-determined specific rate for each discharge based on a patient’s diagnosis. Additional payments are made to MLHS for Medicare cases that have unusually high costs in comparison to national averages. Laws governing the Medicare and Medicaid programs are complex and subject to interpretation.

MLHS has also entered into agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for inpatient payments to MLHS under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates. The basis for payments to MLHS for outpatient services is generally determined by prospectively determined rates, fee schedules, and discounts from established charges.

Allowance for Doubtful Accounts MLHS records an allowance for doubtful accounts for estimated losses resulting from non-payment from patients. MLHS accounts for uncollectible balances from third-party commercial insurers as reductions to net patient service revenue rather than a provision for bad debt. Management routinely evaluates patient account collection history, economic conditions, and trends in health care coverage in determining the sufficiency of the allowance for doubtful accounts and provision for bad debts. Accounts receivable are written off against the allowance for doubtful accounts when management determines that recovery is unlikely and collection efforts cease. The allowance for doubtful accounts increased by provisions for bad debt of $37,983,000 and $45,539,000 in 2016 and 2015, respectively. The allowance for doubtful accounts decreased due to write-offs, net of recoveries, of $38,993,000 and $45,315,000 in 2016 and 2015, respectively.

Medicare Cost Reports Medicare cost reports for all years prior to 2013, for all entities, have been audited and final settled as of June 30, 2016. Reports for subsequent years have not been settled. No significant adjustments are expected.

11 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Charitable Medical Care Provided MLHS provides emergency services to all patients regardless of ability to pay. Some patients qualify for charity care based on guidelines established by MLHS and are therefore not responsible for payment of all of such services. These guidelines require indigency status based on federal poverty guidelines, or the patient’s financial condition to be such that requiring payment would impose a hardship on the patient. Charges for services rendered to patients who meet MLHS’ guidelines for charity care are not reflected in the accompanying consolidated financial statements.

MLHS maintains records to identify and monitor the level of charity care provided. These records include the amount of charges forgone for services and supplies furnished. Such amounts have been excluded from net patient service revenue. Management estimates that the cost associated with these services for charity care provided by MLHS, as calculated using respective facility cost to charge ratios, approximated $6,114,000 in 2016 and $6,853,000 in 2015. Funds received from gifts and grants specifically to subsidize charity services were $1,453,000 for fiscal year 2016 and $1,507,000 for fiscal year 2015.

Community Benefit and Services Services are provided to individuals that qualify for medical assistance, who participate in the Pennsylvania Medical Assistance program. The cost of providing such services to eligible welfare recipients exceeded reimbursement by $20,345,000 and $20,109,000 in 2016 and 2015, respectively.

In addition to providing direct patient charity care and in furtherance of its exempt purpose to benefit the community, MLHS provides sponsorships and various community services such as education, screenings and support groups for cancer patients and their families, immunization programs, rehabilitation support for amputees, stroke, and brain injury patients and their families, health wellness festivals, continuum of independent living and senior health programs, heart disease screenings, maternity care and childbirth programs, a paramedic ambulance program and other related community health programs and lectures. MLHS is also involved with school partnerships and helps organize educational programs for childhood and adolescent health issues, including underage drinking and smoking.

In accordance with the MLHS Charity Care and Financial Assistance Policy, MLHS provides financial assistance in the form of discounts to uninsured patients whose income is in excess of 500% of the Federal Poverty Guidelines. The amount of financial assistance provided during 2016 and 2015 approximated $27,131,000 and $21,272,000, respectively.

12 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Professional Liability and Other Insurance Professional liability claims are insured under a combination of captive insurer, self-insurance and excess commercial reinsurance programs. MLHS hospitals, physicians, residents and certain other individual health care providers also participate in the MCARE Fund (See Note 12).

Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by MLHS has been limited by donors or law to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained in perpetuity.

Assets Limited as to Use Assets limited as to use primarily include assets held externally, designated by trustees under indenture agreements and self-insurance arrangements, and designated assets set aside by the Board of Trustees principally for future capital improvements and self-insurance.

Beneficial Interest in Perpetual Trusts Beneficial interest in perpetual trusts represent MLHS’ interest in perpetual trusts which are administered by independent trustees and generally consist of marketable equity securities. Because the trusts are perpetual and the original corpus cannot be violated by spending, they are included in permanently restricted net assets.

Donor Restricted Gifts Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received, which is then treated as the cost basis of the assets. The gifts are reported as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction is met, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of operations and changes in net assets as net assets released from restrictions. Donor restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions in the consolidated financial statements.

Other Revenue Other revenue is derived from services other than the provision of health care services or coverage to patients or residents. This revenue consists primarily of Electronic Health Record meaningful use revenue (in conjunction with The American Recovery and Reinvestment Act of 2009), foundation program funding, federal and state grants, rental revenue, parking revenue, cafeteria revenue, and other miscellaneous revenue.

Other Non-Operating Expenses Other non-operating expenses consist primarily of foundation program expenses, which offset amounts included in other revenue.

13 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Performance Indicator MLHS’ performance indicator is excess of revenues over expenses. Changes in unrestricted net assets which are excluded from excess of revenue over expenses include the change in net unrealized gains and losses on investments and assets held by affiliated foundations; assets released from restrictions - capital purchases; other changes in pension plan assets and benefit obligations.

Income Taxes MLHS and its not-for-profit affiliates are tax-exempt pursuant to Section 501(c)(3) of the Internal Revenue Code, while its wholly owned or controlled for-profit subsidiaries, LIMR Development, Inc., Main Line Corporation, Main Line Health Wellness, LLC, and Rho-Q, Inc., are taxable corporations.

Electronic Health Record Meaningful Use In 2012, MLHS received the initial payment of the incentive relating to Electronic Health Records (EHR), as part of the American Recovery and Reinvestment Act of 2009 (ARRA). The Health Information Technology for Economic and Clinical Health Action provision within the ARRA allowed for incentives to hospitals that implement and meaningfully use EHR technology by 2014. MLHS is accounting for payments using the Gain Contingency accounting model. Accordingly, when all contingencies have been met and the funds have been received, MLHS recognizes these incentives as “other operating revenue” in the consolidated statement of operations. For the fiscal years ended June 30, 2016 and 2015, MLHS received and recorded $2,980,000 and $4,739,000, respectively, as all contingencies have been met.

Subsequent Events MLHS has performed an evaluation of subsequent events through September 29, 2016 which is the date the consolidated financial statements were issued.

3. Concentration of Credit Risk

Hospital members of MLHS grant credit without collateral to their patients, most of whom are local residents and are insured under third-party payor arrangements. The mix of receivables from patients and third-party payors at June 30 is as follows:

2016 2015

Independence Blue Cross 38% 38% Medicare 17% 16% Aetna US Healthcare 16% 16% HMO/PPO 15% 15% Other, including commerical payors 12% 11% Medical Assistance 2% 4% 100% 100%

14 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

4. Investments

Investments, including short-term and long-term investments and short-term and long-term assets limited as to use, are stated at fair value and consisted of the following at June 30:

2016 2015 (in thousands)

Mutual funds - primarily U.S. Government obligations $ 195,244 $ 185,064 Mutual funds - marketable equity securities 93,486 92,875 U.S. Government obligations 178,112 92,946 Corporate bonds 713,926 687,647 Certificates of deposit and other commercial paper 121,097 107,710 Other, including alternative assets 91,775 125,129 $ 1,393,640 $ 1,291,371

Investment income, gains and losses for assets limited as to use, cash equivalents, investments, and assets held by affiliated foundations are comprised of the following for the years ended June 30:

2016 2015 (in thousands)

Investment income included in operating income: Interest and dividends $ 5,397 $ 3,652 5,397 3,652

Investment income included in non-operating income: Interest and dividends 17,676 15,064 Net realized gains on sales of investments 4,730 48,096

22,406 63,160

$ 27,803 $ 66,812

15 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

2016 2015 (in thousands)

Investment income (temporarily restricted net assets): Interest and dividends $ 2,942 $ 2,826 Net realized gains on sales of investments 1,188 14,196

$ 4,130 $ 17,022

Other changes in unrestricted net assets: Change in unrealized gains and losses on investments and assets held by affiliated foundations $ (7,058) $ (39,797)

Other changes in temporarily restricted net assets: Change in unrealized gains and losses on investments and assets held by affiliated foundations $ (6,657) $ (15,954)

5. Fair Value of Financial Instruments

The following methods and assumptions were used by MLHS in estimating the fair value of its financial instruments:

Cash and Cash Equivalents The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value.

Investments and Assets Limited as to Use Fair values are based on quoted market prices, if available, or estimated using quoted market prices for similar securities.

Beneficial Interest in Perpetual Trusts MLHS’ share of the fair value of investments approximates its interest in perpetual trusts.

Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

The guidance establishes a hierarchical framework for measuring fair value as a basis for considering assumptions as follows:

Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities;

16 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or that can be corroborated by observable market data;

Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Financial instruments measured at fair value are based on one or more of the three valuation techniques which are as follows:

Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities,

Cost approach: Amount that would be required to replace the service capacity of an asset (i.e. replacement cost),

Income approach: Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques and option-pricing models).

The following table presents financial assets measured and recorded at fair value on a recurring basis and their level within the fair value hierarchy as of June 30, 2016:

Investments Recorded Level 1 Level 2 Level 3 at NAV Total (in thousands) Assets, at fair value: Mutual funds - primarily US government obligations $ 195,244 $ - $ - $ - $ 195,244

Mutual funds - marketable equity securities 93,227 259 - - 93,486 US Government obligations 178,112 - - - 178,112 Corporate bonds 708,524 5,402 - - 713,926 Certificates of deposit and other commercial paper 114,668 6,429 - - 121,097 Other, including alternative assets 15,330 37,364 513 38,568 91,775 Sub-total 1,305,105 49,454 513 38,568 1,393,640 Beneficial interest in perpetual trusts - - 39,529 - 39,529 $ 1,305,105 49,454$ $ 40,042 $ 38,568 1,433,169$

17 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table presents financial assets measured and recorded at fair value on a recurring basis and their level within the fair value hierarchy as of June 30, 2015:

Investments Recorded Level 1 Level 2 Level 3 at NAV Total (in thousands) Assets, at fair value: Mutual funds - primarily US government obligations $ 185,064 $ - $ - $ - $ 185,064

Mutual funds - marketable equity securities 92,826 49 - - 92,875 US Government obligations 92,946 - - - 92,946 Corporate bonds 680,599 7,048 - - 687,647 Certificates of deposit and other commercial paper 104,668 3,042 - - 107,710 Other, including alternative assets 44,872 40,554 634 39,069 125,129 Sub-total 1,200,975 50,693 634 39,069 1,291,371 Beneficial interest in perpetual trusts - - 41,100 - 41,100 $ 1,200,975 50,693$ $ 41,734 $ 39,069 1,332,471$

A roll forward of those assets classified as Level 3 within the fair value hierarchy is as follows:

Beneficial Interest in Perpetual & UniTrusts

Balance, at June 30, 2014 $ 43,189 Total gains or losses Included in other changes in temporarily and (1,455) permanently restricted net assets Balance, at June 30, 2015 $ 41,734 Total gains or losses Included in other changes in temporarily and (1,692) permanently restricted net assets Balance, at June 30, 2016 $ 40,042

There were no transfers in or out of levels 1, 2, or 3 during the years ended June 30, 2016 and 2015.

18 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table discloses the fair value and redemption frequency for those assets whose fair value is estimated using the net asset value per share (or its equivalent) practical expedient, as of June 30, 2016:

Fair Value Estimated Using Net Asset Value per Share (in thousands)

Redemption Redemption Notice Investment Fair Value Frequency Period

Global stocks - commingled funds $ 3,148 Annually 365 days Multi-strategy - commingled funds 35,420 Quarterly 90 days

$ 38,568

Fair Value Estimated Using Net Asset Value per Share (in thousands)

Redemption Redemption Notice Investment Fair Value Frequency Period

Global stocks - commingled funds $ 2,943 Annually 365 days Multi-strategy - commingled funds 36,126 Quarterly 90 days

$ 39,069

6. Investments in Affiliates / Partnerships

There are various investments in affiliates and partnerships included in the June 30, 2016 and 2015 balances. MLHS has an investment in Main Line Health Real Estate, L.P. (the “Partnership”). As of June 30, 2016 and 2015, MLHS has a 48.31% partnership interest, and the Lankenau Medical Center Foundation (the “Foundation”) has a 51.69% partnership interest. Partnership profits and losses are allocated to MLHS and the Foundation in accordance with their partnership interest percentage. MLHS accounts for its interest in the Partnership using the equity method of accounting because MLHS and the Foundation have joint control over the Partnership. MLHS’ investment in the Partnership as of June 30, 2016 and 2015 is $2,186,000 and $2,207,000, respectively. MLHS has included in non-operating investment income, its equity (loss) in earnings of the Partnership of ($65,000) and ($46,000), at June 30, 2016 and 2015, respectively.

19 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

MLHS’ has a 49% ownership interest in Mountain Laurel Risk Retention Group, Inc. (“MLRRG”) which provides primary hospital and physician professional liability, miscellaneous professional liability and general liability coverage to its members. MLHS has 49% of MLRRG’s voting rights and four of the eleven members of its Board of Directors. These rights provide MLHS with significant influence over MLRRG’s operations. MLHS accounts for its ownership interest in MLRRG using the equity method, with offsetting professional liability expense/recoveries. MLHS’ investment in MLRRG as of June 30, 2016 and 2015 is $4,578,000 and $3,633,000, respectively. MLHS has included in professional liability expense, its equity in earnings of MLRRG of $945,000 and $806,000 as of June 30, 2016 and 2015, respectively.

MLHS has a 49% ownership interest in Five Pointe Professional Liability Insurance Company (“Five Pointe”) which provides 100% reinsurance for the professional liability coverage of MLRRG to its members. Members assume 100% the net assets of their respective “Protected Cell”. MLHS has 48% of Five Pointe’s voting rights and four of the eleven members of its Board of Directors. These rights provide MLHS with significant influence over Five Pointe’s operations. MLHS accounts for its ownership interest in Five Pointe using the equity method, with offsetting professional liability expense/recoveries. MLHS’ investment in Five Pointe as of June 30, 2016 and 2015 is $19,148,000 and $27,889,000, respectively. MLHS has included in professional liability expense, its equity in earnings of Five Pointe of $516,000 and $5,572,000 as of June 30, 2016 and 2015, respectively.

MLHS has a 49% ownership interest in The Accountable Care Organization of Pennsylvania, LLC doing business as Delaware Valley ACO (“ACO”). MLHS has 31% of the ACO’s voting rights and four of the fifteen members of its Board of Managers. MLHS accounts for its ownership interest in the ACO using the equity method. MLHS’ investment in the ACO as of June 30, 2016 and 2015 is $85,000 and $128,000, respectively. MLHS has included in non-operating investment income, its equity (loss) in earnings of the ACO of ($2,455,000) and ($1,866,000) as of June 30, 2016 and 2015, respectively.

7. Property and Equipment

Property and equipment and related accumulated depreciation consisted of the following at June 30:

2016 2015 (in thousands)

Land and land improvements $ 68,383 $ 67,597 Buildings and building improvements 1,484,140 1,483,416 Equipment 680,739 862,871 Leasehold improvements 25,317 26,577 Construction-in-progress 94,771 41,112

2,353,350 2,481,573 Accumulated depreciation (1,286,507) (1,462,885)

$1,066,843 $1,018,688

Depreciation expense was $99,079,000 and $98,124,000 at June 30, 2016 and 2015, respectively.

20 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

8. Assets Held by Affiliated Foundations

Assets held by affiliated foundations related to the following net asset categories at June 30:

2016 2015 (in thousands) Unrestricted $ 263,482 $ 274,723 Temporarily restricted 88,808 90,514 Permanently restricted 64,123 57,080 $ 416,413 $ 422,317

9. Long-Term Debt

Long-term debt consisted of the following at June 30:

2016 2015 (in thousands)

Main Line Health System Revenue Bonds, Series of 2010 $ 129,990 $ 133,220 Main Line Health System Revenue Bonds, Series of 2012 57,799 59,886 Main Line Health System Revenue Bonds, Series of 2015 50,000 16,645 237,789 209,751 Less current installments (5,547) (5,317)

$ 232,242 $ 204,434

Aggregate principal repayments on the debt are due as follows:

(in thousands)

2017 $ 5,547 2018 6,011 2019 6,191 2020 5,806 2021 6,036 Thereafter 208,198

$ 237,789

MLH is party to an amended Amended and Restated Master Trust Indenture, originally dated November 1, 1997, which provides for, among other things, the issuance from time to time of general unsecured debt obligations of MLHS. Under the Master Trust Indenture MLHS is the sole member of the Obligated Group, while certain subsidiaries of MLHS (i.e., Main Line Health, Inc., Main Line Hospitals, Inc., Riddle Hospital and Mirmont Treatment Center) are Obligated Group Affiliates. Only MLHS is directly obligated to pay the bondholders the principal or interest on any bonds issued pursuant to the Master Trust Indenture.

21 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

MLHS and each Obligated Group Affiliate are parties to an Amended and Restated Contribution Agreement dated June 30, 2014 pursuant to which each Obligated Group Affiliate agrees, jointly and severally, to transfer to MLHS amounts necessary for MLHS to pay the principal of and premium, if any, and interest on all currently outstanding bonds issued under the Master Trust Indenture when due and to satisfy any other obligations of MLHS arising under the Master Trust Indenture.

MLHS entered into the Eighth Supplement to the Amended and Restated Master Trust Indenture as of May 1, 2015 in connection with the issuance of the Series 2015 Bonds (“2015 Bonds”). MLHS issued a portion of the Series 2015 Bonds (“2015 Bonds”) with a par amount of $16,645,000 through the Chester County Health and Education Facility Authority as of May 1, 2015. MLHS used the 2015 Bond proceeds to: (i) refinance a portion of the Chester County Authority’s Health System Revenue Bonds, Series 2010A, originally issued in the principal amount of $164,510,000, of which $149,370,000 in principal amount was outstanding; and (ii) pay certain expenses incurred in connection with the issuance of the 2015 Bonds. This transaction resulted in a loss on refinancing of $120,000, which is included in the June 30, 2015 consolidated statements of operations and change in net assets as a non-recurring charge.

In addition to the $16,645,000 issued in May 2015, during fiscal year 2016, the Chester County Health and Education Authority issued an additional $33,355,000 of the 2015 Bonds at par to fund the acquisition, construction, renovation, relocation, expansion and/or equipping of certain healthcare facilities of Bryn Mawr Hospital. The aggregate principal amount of the 2015 bonds is $50,000,000.

MLHS issued the Series A of 2012 Bonds (“2012A Bonds”) with a par amount of approximately $60,100,000 through the Montgomery County Industrial Development Authority, dated as of June 1, 2012. MLHS used the 2012A Bond proceeds to: (i) pay the costs associated with the acquisition, construction, renovation, relocation, expansion, and / or equipping of certain health care facilities of Main Line Health; (ii) refund all of the Pennsylvania Economic Development Financing Authority’s Main Line Health Revenue Bonds, Series 2007, in the aggregate principal amount of $34.6 million and (iii) pay the costs and expenses incurred in connection with the issuance of the Series 2012A Bonds.

MLHS issued the Series A of 2010 Bonds (“2010A Bonds”) with a par amount of approximately $164,500,000 through the Chester County Health and Education Facilities Authority, dated as of July 1, 2010. MLHS used the 2010A Bond proceeds to: (i) refinance a portion of the Chester County Authority’s Health System Revenue Bonds, Series 1997B, originally issued in the principal amount of $199,100,000, of which $176,900,000 in principal amount was outstanding; (ii) refinance all of the Chester County Authority's Health System Revenue Bonds, Series 2004A and 2004B, originally issued in the principal amount of $67,100,000, of which $67,100,000 in principal amount was outstanding; (iii) finance or reimburse certain capital expenditures for Main Line Health; and (iv) pay certain expenses incurred in connection with the issuance of the Series 2010A Bonds.

22 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

10. Commitments and Contingencies

MLHS has various lease obligations for equipment, ambulatory facilities and office space. Rental expense charged to operations was approximately $21,129,000 and $20,210,000 during 2016 and 2015, respectively.

At June 30, 2016, the minimum future lease commitments are as follows:

(in thousands)

2017 $ 19,214 2018 16,791 2019 16,071 2020 13,500 2021 11,161 Thereafter 28,345

$ 105,082

Certain future minimum lease payments related to property facilities are contingent upon the interest rates indexed to various standard financial instruments.

MLHS is involved in litigation arising in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or by accruals, and if not so covered, are without substantial merit or are of such kind, or involve such amounts, as would not have a material adverse effect on the financial position or results of operations of MLHS.

On November 20, 2009, a class action lawsuit was filed against MLHS and the Members by certain hourly employees alleging restitution for unfair business practices, injunctive relief for unfair business practices, failure to pay overtime wages, and penalties associated therewith. On September 8, 2011, the Court granted the defendants’ Motions to Dismiss all asserted claims but allowed the plaintiffs to file a second amended complaint, which they did. On August 8, 2012 the Court again granted the defendants’ Motions to Dismiss the plaintiffs’ claims in their entirety, with prejudice, and declined to exercise jurisdiction over related state law claims. On September 5, 2012, the plaintiffs appealed this decision to the U.S. Court of Appeals for the Third Circuit. On August 26, 2014 the Third Circuit Court affirmed the dismissal with prejudice of the plaintiffs’ Fair Labor Standards Act claim. Accordingly, the Third Circuit entered judgment against the plaintiffs.

23 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

After the Plaintiffs’ third amended complaint was dismissed, the Plaintiffs filed a new state law action in state court. All Defendants removed that state law action back to federal court. Plaintiffs moved to remand the state law action and the district court decision on remand was stayed until after the Third Circuit addressed Plaintiffs’ appeal of the dismissal of their federal law claims. The Third Circuit affirmed the dismissal and the District Court removed the state law action from civil suspense on October 20, 2014. On August 31, 2016 the District Court granted Plaintiffs’ Motion to Remand. Plaintiffs’ counsel will likely re-file this case in state court with a version of a Complaint that will be more consistent with the federal court’s various rulings. Management is unable to determine the cost of defending this lawsuit or the impact, if any, this action may have on its results of operations.

11. Pension Plan

MLHS had non-contributory benefit plans for the employees and retirees. Plan benefits are principally based on years of service and the employee’s compensation. MLHS’ policy is to fund annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974. Estimated employer contributions expected during fiscal year 2017 are projected to be approximately $67,322,000.

Items included in unrestricted net assets represent amounts that have not been recognized in net periodic pension expense. Amounts included in unrestricted net assets as of June 30, 2016, that are expected to be amortized and recognized as components of net periodic pension expense during fiscal year 2017 are as follows:

(in thousands) Amounts recognized in unrestricted net assets for fiscal year 2016: Prior service (credit) cost $ (1,337) Net losses/(gains) $ 38,606

The net amounts recognized in the consolidated balance sheet at June 30 are as follows:

2016 2015 (in thousands) Amounts recognized in unrestricted net assets Net actuarial loss $ 585,487 $ 325,165 Prior service credit (7,582) (8,918) $ 577,905 $ 316,247

Decrease to unrestricted net assets $ 261,658 $ 53,281

24 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table sets forth the change in the projected benefit obligation and the change in the fair value of plan assets based on the measurement date, as well as the amounts recognized in the accompanying consolidated financial statements at June 30:

2016 2015 (in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $1,187,858 $ 1,103,179 Service cost 49,117 45,990 Interest cost 55,635 48,956 Actuarial loss 222,069 20,765 Expenses paid (3,500) (2,500) Benefits paid (31,878) (28,533)

Projected benefit obligation at end of year $1,479,301 $ 1,187,857

Change in plan assets: Fair value of plan assets at beginning of year $ 921,008 $ 864,769 Actual return on plan assets 13,568 19,950 Employer contributions 66,122 67,322 Expenses paid (3,500) (2,500) Benefits paid (31,878) (28,533)

Fair value of plan assets at end of year $ 965,320 $ 921,008

Funded status at end of year $ (513,981) $ (266,849)

Amounts recognized in the consolidated balance sheet consist of: Current portion of accrued pension liability $ (122) $ (122) Non-current portion of accrued pension liability (513,859) (266,727)

$ (513,981) $ (266,849)

The following table sets forth the assumptions utilized to estimate pension obligations at June 30:

2016 2015 Assumptions used to estimate year end pension obligations Discount rate 3.82% 4.75% Rate of compensation increase 5.00% 5.00%

25 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table sets forth the periodic benefit cost activity of the applicable plan at June 30:

2016 2015 (in thousands) Periodic benefit cost Service cost $ 49,117 $ 45,990 Interest cost 55,635 48,956 Expected return on plan assets (70,075) (66,157) Amortization of prior service credit (1,337) (1,337) Actuarial loss 18,255 15,029

Net periodic benefit cost $ 51,595 $ 42,481

Weighted average assumptions used to determine periodic 2016 2015 benefit cost at June 30: Discount rate 4.75% 4.50% Expected return on plan assets 7.50% 7.50% Rate of compensation increase 5.00% 5.00%

In selecting the expected long-term rate of return on plan assets assumption, MLHS considered the average rate of earnings on the funds invested or to be invested to provide for the benefits of this plan. This included considering the plan’s asset allocation and the expected returns likely to be earned over the life of the plan.

The consolidated accumulated benefit obligation is $1,345,623,000 and $1,078,895,000 as of June 30, 2016 and 2015, respectively.

Asset Allocation The aggregate asset allocation for MLHS’ pension plan investments is as follows:

Target Percentage of Plan Assets Allocation June 30

2016 2015 Equity securities 42% 47% 50% Absolute return 13% 14% 17% Real assets 10% 4% 2% Fixed income 35% 35% 31% 100% 100% 100%

26 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table presents financial assets measured and recorded at fair value on a recurring basis and their level within the fair value hierarchy as of June 30, 2016:

Investments Recorded Level 1 Level 2 Level 3 at NAV Total (in thousands) Assets, at fair value: Mutual funds - primarily US government obligations $ - $ - $ - 158,572$ $158,572 Mutual funds - marketable equity securities 14,500 - - - 14,500 Mutual funds - fixed income securities - - - 142,265 142,265 Equity securities 61,671 - - 192,674 254,345 Certificates of deposit and other commercial paper 18,481 - 18,481 Other, including alternative assets - - - 377,157 377,157 $ 94,652 $ - $ - 870,668$ $ 965,320

There were no transfers in or out of levels 1, 2 and 3 during the year ended June 30, 2016.

The following table presents financial assets measured and recorded at fair value on a recurring basis and their level within the fair value hierarchy as of June 30, 2015:

Investments Recorded Level 1 Level 2 Level 3 at NAV Total (in thousands) Assets, at fair value: Mutual funds - primarily US government obligations $ - $ - $ - 130,173$ $130,173 Mutual funds - marketable equity securities - - - - - Mutual funds - fixed income securities 3,364 - - 140,207 143,571 Equity securities 59,508 - - 173,105 232,613 Certificates of deposit and other commercial paper 9,955 - - - 9,955 Other, including alternative assets - - - 404,696 404,696 $ 72,827 $ - $ - 848,181$ $ 921,008

There were no transfers in or out of levels 1, 2 and 3 during the year ended June 30, 2015.

27 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

Projected Pension Benefit Payments Pension benefit payments for the next ten years are currently projected by MLHS to be:

(in thousands 2017 $ 38,500 2018 42,115 2019 46,107 2020 50,391 2021 54,970 Subsequent five years 350,982

$ 583,065

MLHS has contributory retirement plans for eligible employees as defined under section 403(b) of the Internal Revenue Code. MLHS matches 25% of the first 4% of pay contributions up to a maximum match of 1%. The total expense for MLHS for these defined contribution plans was approximately $6,264,000 and $5,775,000 for the years ended June 30, 2016 and 2015, respectively.

12. Professional Liability and Other Insurance

At June 30, 2016 and 2015, MLHS has accrued professional claim liabilities of approximately $115,522,000 and $109,884,000, respectively, and has recognized professional liability expense of approximately $8,237,000 and $9,332,000, respectively. Professional liability is inclusive of MLHS’ equity in the earnings of MLRRG and Five Pointe (see Note 6). Included within other assets are recoveries from insurance claims amounting to $72,913,000 and $64,591,000 for fiscal year 2016 and 2015, respectively.

MLHS has several layers of coverage for professional liability exposures. As of June 30, 2016 and 2015 for the MLHS healthcare provider (hospital, physician) entities, the first (“primary”) layer of coverage is claims made coverage with limits of $500,000 per medical incident / $2,500,000 annual aggregate per hospital and $500,000 per medical incident and $1,500,000 annual aggregate per physician. The limits for this primary coverage layer are statutorily prescribed in Pennsylvania. As of June 30, 2016 and 2015 MLHS’ non-healthcare provider entities are provided with a shared $1,000,000 / $3,000,000 annual aggregate limit of liability respectively. In addition, a $1,000,000 per occurrence/$3,000,000 general aggregate general liability coverage limit is provided.

MLHS obtains its primary hospital and physician professional liability, miscellaneous professional liability and general liability coverages, from a policyholder-owned, Vermont - domiciled, risk retention group, MLRRG. For the professional liability coverages, MLRRG is 100% reinsured by a Delaware - domiciled, 501 (c) (3) sponsored protected cell insurance company, Five Pointe. MLRRG retains 100% of the general liability coverage exposure.

28 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

The premiums charged for the primary professional and general liability layers of coverage are determined by an independent actuary based on loss and loss adjustment expense experience and other factors, at a 65% confidence level and a 3% discount rate for fiscal years 2016 and 2015 and include a charge for premium tax and operating expenses.

The second layer of professional liability coverage for the MLHS designated healthcare providers is provided through Pennsylvania’s Medical Care Availability and Reduction of Error Fund (the “MCARE Fund”). This second layer, required by statute, consists of coverage limits of $500,000 per medical incident and $1,500,000 annual aggregate per hospital and per employed physician at June 30, 2016 and 2015. The annual assessments for MCARE Fund coverage are based on the schedule of occurrence rates approved by the Insurance Commissioner of Pennsylvania for the Pennsylvania Professional Liability Joint Underwriting Association multiplied by an annual assessment percentage. This assessment is recognized as an expense in the period incurred. No provision has been made for future MCARE Fund assessments as the MCARE Fund unfunded liability cannot be reasonably estimated.

Liabilities for MLHS for potential losses in excess of the primary and MCARE layers (if applicable) up to a $2,000,000 each professional incident/$2,000,000 aggregate buffer layer excess of a $5,000,000 each and every medical incident retention for MLHS, with the exception of Bryn Mawr Rehabilitation Hospital, and up to $2,000,000 each and every medical incident for Bryn Mawr Rehabilitation Hospital are based on actuarially determined estimates, which reflect a discount rate of 3% and a 65% confidence level. These estimates are based on historical loss and loss adjustment expense information along with certain assumptions about future events. Changes in assumptions for such considerations as medical costs and actual experience could cause these estimates to change.

During fiscal years 2016 and 2015, MLHS maintained claims made excess catastrophic professional liability insurance coverage through Five Pointe in the amount of $95,000,000 per medical incident / $95,000,000 annual aggregate after a $2,000,000 each professional incident/$2,000 aggregate buffer layer excess of a $5,000,000 each and every medical incident retention by MLHS, with the exception of Bryn Mawr Rehabilitation Hospital. The excess catastrophic professional liability insurance coverage through Five Pointe attaches after a $2,000,000 each and every medical incident retention for Bryn Mawr Rehabilitation Hospital. Five Pointe reinsured 100 percent of this risk to six insurers currently rated at least A- by AM Best. (ACE, Zurich, Lloyd Syndicates, Allied World, Endurance, Swiss Re). A separate shared limit of $95,000,000 per occurrence / $95,000,000 aggregate is also maintained to provide liability insurance coverage in excess of the primary general, auto, employers and aviation liability coverages.

Workers’ compensation exposures are insured through self-insurance and large deductible commercial insurance carriers. June 30, 2016 and 2015 reserves for workers’ compensation liabilities are recorded on a discounted basis, using a rate of 3%.

29 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

13. Functional Expenses

MLHS provides general acute and rehabilitation health care services to residents within its geographic service areas, including primary care, behavioral health care, homecare, and outpatient ambulatory services. Expenses related to providing these services at June 30 are as follows:

2016 2015 (in thousands)

Health care services $ 1,153,271 $ 1,096,972 General and administration 394,916 345,971 $ 1,548,187 $ 1,442,943

14. Related Party Transactions

MLHS has intercompany activity with MLRRG. Payments totaled $12,816,000 and $15,193,000 for professional liability insurance for the years ended June 30, 2016 and 2015, respectively.

15. Temporarily and Permanently Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at June 30:

2016 2015 (in thousands)

Medical, surgical and various other hospital based programs $ 75,383 $ 78,482 Indigent care 11,273 12,451 Fellowship and research 25,629 26,682

Total $ 112,285 $ 117,615

Investment income generated from investments related to the following permanently restricted net assets is available to support the following purposes at June 30:

2016 2015 (in thousands)

Medical, surgical and various other hospital based programs $ 41,222 $ 38,420 Indigent care 39,787 40,924 Fellowship and research 28,973 25,265

Total $ 109,982 $ 104,609

30 Main Line Health System and Affiliates Notes to Consolidated Financial Statements June 30, 2016 and 2015

In August 2008, the FASB issued authoritative guidance on the net asset classification of donor- restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Act of 2006 (UPMIFA) and additional disclosures about an organization’s endowment funds. Pennsylvania is one of three states that has not adopted UPMIFA to date, however the following disclosures are made as required by the FASB guidance.

MLHS’ endowment consists of approximately 200 individual funds established for a variety of purposes. The endowment includes both donor-restricted endowment funds, if any, and funds designated by the Board of Governors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Governors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. MLHS has interpreted the Pennsylvania State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, MLHS classifies as permanently net restricted assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund, except for beneficial interests in perpetual trusts, that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by SPMIFA.

Changes in endowment net assets consist of the following:

Temporarily Permanently Unrestricted Restricted Restricted Total (in thousands)

Net Assets, June 30, 2014 $ 11,608 $ 42,984 $ 103,300 $ 157,892 Investment return: Investment income 160 1,667 - 1,827 Net depreciation, realized and unrealized 70 784 (1,435) (581) Contributions - - 2,744 2,744 Transfers (1,096) (3,595) - (4,691) Net Assets, June 30, 2015 $ 10,742 $ 41,840 $ 104,609 $ 157,191 Investment return: Investment income 143 1,474 - 1,617 Net depreciation, realized and unrealized (1,662) (4,080) (1,572) (7,314) Contributions - - 6,884 6,884 Transfers (143) (2,793) 61 (2,875) Net Assets, June 30, 2016 $ 9,080 $ 36,441 $ 109,982 $ 155,503

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APPENDIX C

SUMMARIES OF PRINCIPAL DOCUMENTS

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DEFINITIONS OF CERTAIN TERMS IN THE BOND INDENTURE, THE LOAN AGREEMENT AND THE SYSTEM AFFILIATION AGREEMENT

Unless the context otherwise requires, the terms defined in summaries of the Bond Indenture, the Loan Agreement and the System Affiliation Agreement shall have the meanings herein specified, to be equally applicable to both singular and plural forms of any of the terms herein defined.

“Account” means each Remarketing Account, Corporation Purchase Account and Liquidity Facility Purchase Account established within a Bond Purchase Fund.

“Act” means the Municipal Authorities Act (Act of June 19, 2001, P.L. 22, as amended).

“Affiliate” means, for purposes of the System Affiliation Agreement, when used in connection with a particular entity, any corporation, partnership, trust, joint venture or other entity, now or hereafter directly or indirectly controlling, controlled by, or under common control with such entity. “Control” including “controlling,” “controlled by” and “under common control with” shall mean the power to elect through membership, ownership or otherwise 50% or more of the governing body of a corporation, partnership, trust, joint venture or other entity.

“Alternate Liquidity Facility” means a Liquidity Facility issued by a Liquidity Facility Provider to replace a then existing Liquidity Facility.

“Authorized Denominations” means (i) with respect to the Bonds which are subject to a Long- Term Interest Rate Period and with respect to Indexed Put Bonds, $5,000 or any integral multiple thereof, and (ii) with respect to the Bonds which are not described in the preceding clause (i), $100,000 or any integral multiple of $5,000 in excess of $100,000.

“Bank Bonds” means the Bonds purchased by the Liquidity Facility Provider or its assignee pursuant to a Liquidity Facility.

“Bank Bond Rate” means the rate set forth in the Liquidity Facility.

“Basic Agreements” means each of the Indenture, the Bonds and the Corporation Security Instruments.

“Beneficial Owner” means any Person which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including any Person holding a Bond through nominees, depositories or other intermediaries), or (ii) is treated as the owner of any Bond for federal income tax purposes.

“Bond Counsel” means any attorney at law or firm of attorneys selected by the Corporation and reasonably acceptable to the Trustee and the Issuer of nationally recognized standing in matters pertaining to the validity of and the tax-exempt nature of interest on bonds issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States of America.

“Bond Fund” means the fund created in the Indenture.

“Bondholder” or “Holder” means, as of any time, the registered owner of any Bond as shown in the register kept by the Trustee as bond registrar.

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“Bond Purchase Fund” means each such trust fund established with a Tender Agent pursuant to the Indenture.

“Bonds Account” means the account established within the Project Fund and so designated pursuant to the Indenture.

“Bond Year” means the period beginning on the Closing Date and ending on the day prior to the first anniversary of the Closing Date and each one year period ending on the day prior to the anniversary of the Closing Date thereafter.

“Bonds” means the Bonds from time to time Outstanding under the Indenture.

“Business Day” means any day other than a Saturday, Sunday or a day on which banks located (a) in the city in which the corporate trust office of the Trustee responsible for the administration of the Indenture is located, (b) in the city in which the corporate trust office of the Master Trustee responsible for the administration of the Master Indenture is located, (c) if applicable, in the city in which the office of the Liquidity Facility Provider at which drawings under the Liquidity Facility are to be honored is located, (d) if applicable, in the city in which the corporate trust office of the Trustee at which the Bonds may be tendered for purchase by the holders thereof is located, and (e) if applicable, in the city in which the principal office of the Remarketing Agent is located, are required or authorized to remain closed or on which The New York Stock Exchange is closed.

“Closing Date” means the date of delivery of the Bonds to the Underwriter against payment therefor.

“Code” means the Internal Revenue Code of 1986, as from time to time amended, and any regulations promulgated thereunder.

“Commonwealth” means the Commonwealth of Pennsylvania.

“Corporation” means Main Line Health System, a nonprofit corporation organized and existing under the laws of the Commonwealth, and its successors and assigns.

“Corporation Bonds” means the Bonds held by the Tender Agent for and on behalf of the Corporation, the Issuer or any affiliate of or nominee for (or any Person who owns such Bonds for the sole benefit of) the Corporation pursuant to the Indenture and the Tender Agent Agreement.

“Corporation Purchase Account” means each account with that name established within the Bond Purchase Fund pursuant to the Indenture.

“Corporation Representative” means any person or persons at the time designated in writing to the Trustee and the Issuer by a certificate signed by an authorized officer of the Corporation to represent the Corporation, which certificate shall set forth the specimen signature of such person or persons.

“Corporation Security Instruments” means each of (i) the Loan Agreement, (ii) the Master Note and (iii) each of such additional or supplemental notes and other instruments as the Corporation or any other Person from time to time may enter into in favor of the Trustee for the purpose of securing or supporting the obligations of the Corporation to pay all or any portion of the Loan Payments or for the purpose of securing all or any portion of the Bonds and as will be identified as a ”Corporation Security Instrument” for the purpose of the Indenture by written agreement of the Corporation and the Trustee, each as from time to time in effect.

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“Cost” or “Costs” or “Project Cost” or “Project Costs” in connection with the Project means all expenses which are properly chargeable thereto under generally accepted accounting principles or which are incidental to the financing of the Project, or which are otherwise financeable under the Act.

“Costs of Collection” means all reasonable attorneys’ fees and out-of-pocket expenses incurred by the Trustee and all costs and expenses associated with travel on behalf of the Trustee, which costs and expenses are directly or indirectly related to the Trustee’s efforts to collect or enforce the Bonds, the Indenture or the Corporation Security Instruments, or any of the Trustee’s rights, remedies, powers, privileges, or discretion against or in respect of the Corporation thereunder (whether or not suit is instituted in connection with any of the foregoing).

“Co-Trustee” means any Co-Trustee appointed by the Trustee pursuant to the provisions of the Indenture.

“Counsel” means an attorney or a firm of attorneys admitted to practice law in the highest court of any state in the United States of America or in the District of Columbia, including an attorney employed by the Corporation or one of its affiliates.

“Cross-Obligated Institution Debt” means, for purposes of the System Affiliation Agreement, Institution Debt that benefits one Institution, for which another Institution is also a primary obligor or guarantor, or for which another Institution has provided a credit support of any kind.

“Debt” means, for purposes of the System Affiliation Agreement, short term and long term indebtedness of all types, including, but not limited to, capitalized leases and guarantees, except “Debt” shall not include (i) trade accounts payable incurred in the ordinary course of business, or (ii) guarantees of the Debt of other Institutions or Institution System Members.

“DTC” means The Depository Trust Company, New York, New York.

“Electronic Notice” means notice transmitted through a time-sharing terminal, if operative as between any two parties, or if not operative, by telecopier, tested telex, facsimile transmission, in writing or by telephone (promptly confirmed in writing or by facsimile transmission).

“Existing Master Trust Indenture” means the Master Trust Indenture originally dated as of March 1, 1994, as previously amended, restated and supplemented, including the amendments made by the Amended and Restated Master Trust Indenture as of November 1, 1997 between the Corporation and US Bank National Association, as successor master trustee.

“Event of Default” means any of the events listed as such in the Indenture.

“Event of Insolvency” means (i) a court having jurisdiction shall enter a decree or order for relief in respect of the Corporation or any Obligated Group Affiliate in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Corporation or any Obligated Group Affiliate or for any substantial part of the property of the Corporation or any Obligated Group Affiliate, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days or (ii) the Corporation or any Obligated Group Affiliate shall commence a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Corporation or any Obligated Group Affiliate or for any substantial

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part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any corporate action in furtherance of the foregoing.

“Expiration Date” means the termination date of a Liquidity Facility or an Alternate Liquidity Facility, as extended from time to time.

“Facilities” means the facilities owned and operated by the Corporation, the costs of which are being financed or refinanced with the proceeds of the Bonds, including Bryn Mawr Hospital, an acute care teaching hospital operated by the Corporation and located in Bryn Mawr, Lower Merion Township, Montgomery County and Lankenau Medical Center, an acute care teaching hospital operated by the Corporation and located in Wynnewood, Lower Merion Township, Montgomery County, Pennsylvania.

“Favorable Opinion of Bond Counsel” means, with respect to any action relating to the Bonds, the occurrence of which requires such an opinion, a written legal opinion of Bond Counsel addressed to the Issuer, the Trustee, the Corporation and the Remarketing Agent, as applicable, to the effect that such action will not impair the exclusion of interest on the Bonds from gross income for purposes of federal income taxation or the exemption of interest on the Bonds from personal income taxation under the laws of the Commonwealth (subject to customary exceptions).

“Fitch” means Fitch Ratings, a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation will be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, will be deemed to refer to any other nationally recognized securities rating agency designated by the Corporation by notice to the Issuer and the Trustee.

“Fund” means any of the Project Fund, the Bond Fund, the Rebate Fund and the Bond Purchase Fund.

“Hospitals” means, for purposes of the System Affiliation Agreement, hospitals now or hereafter owned or operated by MLH or its Affiliates, including without limitation, (i) ML Hospitals and its divisions, The Bryn Mawr Hospital, The Lankenau Hospital, Paoli Hospital and Bryn Mawr Rehabilitation Hospital and (ii) Riddle Memorial Hospital.

“Indenture” means the Trust Indenture dated as of ______1, 2017 between the Issuer and the Trustee pursuant to which the Bonds will be issued, and any amendments and supplements thereto.

“Independent Counsel” means an attorney or firm of attorneys duly admitted to practice law before the highest court of any State of the United States and who is not a full-time employee of the Issuer or the Corporation.

“Institution” means, for purposes of the System Affiliation Agreement, MLH and any entities added as an Institution to the System in the future.

“Institution Debt” means, for purposes of the System Affiliation Agreement, Debt incurred by an Institution or any of its Institution System Members.

“Institution System” means, for purposes of the System Affiliation Agreement, an Institution and its related Hospitals and other Affiliates.

“Institution System Member” means, for purposes of the System Affiliation Agreement, an entity that is part of an Institution System.

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“Issuer” means the Chester County Health and Education Facilities Authority and its successors and assigns.

“Issuer Agreement” means each of the Indenture, the Loan Agreement, the Bonds and the Purchase Contract.

“Issuer Representative” means the Chairperson, the Vice Chairperson, the Executive Director or such other person or persons designated by certified resolution of the governing body of the Issuer to act for any of the foregoing, either generally or with respect to the execution of any particular document or other specific matter, a copy of which will be on file with the Trustee.

“Liquidity Facility” means any letter of credit, standby bond purchase agreement, line of credit, loan, guaranty or similar agreement by a Liquidity Facility Provider to provide liquidity support to pay the Tender Price of the Bonds tendered for purchase in accordance with the provisions of the Indenture, any Alternate Liquidity Facility delivered pursuant to the Indenture and with terms that are not inconsistent with the terms of the Indenture, and a Self-Liquidity Undertaking.

“Liquidity Facility Provider” means any provider of a Liquidity Facility, and its successors and permitted assigns and, upon the effective date of an Alternate Liquidity Facility, the bank or banks or other financial institution or financial institutions or other Person or Persons issuing such Alternate Liquidity Facility, their successors and assigns. If any Alternate Liquidity Facility is issued by more than one bank, financial institution or other Person, notices required to be given to the Liquidity Facility Provider may be given to the bank, financial institution or other Person under such Alternate Liquidity Facility appointed to act as agent for all such banks, financial institutions or other Persons. The Corporation or an affiliate of the Corporation may be a Liquidity Facility Provider.

“Liquidity Facility Purchase Account” means each account with that name established within a Bond Purchase Fund pursuant to the Indenture.

“Loan” means the loan by the Issuer to the Corporation of the proceeds of the Bonds pursuant to the Loan Agreement.

“Loan Agreement” or “Agreement” means the Loan Agreement dated ______, 2017 between the Issuer and the Corporation, and any amendments and supplements thereto.

“Loan Payment” means a payment by the Corporation pursuant to the Master Note of amounts which correspond to interest, or principal and interest then due on account of debt service on the Bonds, plus related fees and expenses, all in accordance with the Loan Agreement and the Master Note.

“Long-Term Interest Rate” means a term, non-variable interest rate established in accordance with the Indenture.

“Long-Term Interest Rate Period” means each period during which a Long-Term Interest Rate is in effect.

“Majority of the Bondholders” means the Holders of more than 50 percent of the aggregate principal amount of the Outstanding the Bonds.

“Main Line Health” or “MLH” means Main Line Health, Inc.

“Main Line Hospitals” or “ML Hospitals” means Main Line Hospitals, Inc.

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“Mandatory Standby Tender” means the mandatory tender of the Bonds pursuant to the Indenture upon receipt by the Trustee of written notice from the corresponding Liquidity Facility Provider that an event with respect to its Liquidity Facility has occurred which requires or gives the Liquidity Facility Provider the option to terminate such Liquidity Facility upon notice. Mandatory Standby Tender shall not include circumstances where the Liquidity Facility Provider may suspend or terminate its obligations to purchase securities without notice, in which case there will be no mandatory tender of the affected the Bonds.

“Master Indenture” means the Existing Master Indenture, as supplemented by the Tenth Supplemental Master Indenture, and as further supplemented by various supplemental indentures from time to time.

“Master Note” means the Corporation’s Series 2017A Master Note, Chester County Health and Education Facilities Authority, dated as of ______, 2017, delivered by the Corporation to the Trustee pursuant to the Master Indenture.

“Master Trustee” means U.S. Bank National Association, in its capacity as successor master trustee under the Master Indenture.

“Maturity Date” for the Bonds shall have the meaning set forth therein.

“Maximum Lawful Rate” means the maximum rate of interest on the relevant obligation permitted by applicable law.

“MLHS” means Main Line Health System.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation will be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” will be deemed to refer to any other nationally recognized securities rating agency designated by the Corporation by notice to the Issuer and the Trustee.

“Obligated Group Affiliate” has the same meaning as is given to such term in the Master Indenture. See this Appendix C, SUMMARY OF CERTAIN PROVISIONS OF THE MASSTER INDENTURE.

“Official Statement” means this Official Statement relating to the Bonds, including all appendices thereto.

“Outstanding Bonds” or “Bonds outstanding” means the amount of principal of the Bonds which has not at the time been paid, exclusive of (a) Bonds in lieu of which others have been authenticated under the Indenture, (b) principal of any Bond which has become due (whether by maturity, call for redemption or otherwise) and for which provision for payment as required in the Indenture has been made, and (c) for purposes of any direction, consent or waiver under the Indenture, Bonds deemed not to be outstanding pursuant to the Indenture. Bonds purchased by or on behalf of the Corporation in lieu of optional redemption shall remain outstanding until such Bonds are delivered to the Trustee for cancellation.

“Parent” means, for purposes of the System Affiliation Agreement, MLHS.

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“Participant” means, with respect to DTC or another Securities Depository, a member of or participant in DTC or such other Securities Depository, respectively.

“Paying Agent” means the Trustee or any other paying agent appointed in accordance with the Indenture.

“Payment Date” means each Interest Payment Date or any other date on which any principal of, premium, if any, or interest on any Bond is due and payable for any reason, including without limitation upon any redemption of Bonds pursuant to the Indenture.

“Payment Default” means any failure by the Issuer to make timely payment of principal or interest on the Bonds when due.

“Payment Obligations” means the payment obligations of the Corporation pursuant to the Loan Agreement and the Master Note, including any interest, fees, costs and other similar amounts required to be paid by the Corporation pursuant to any such obligation.

“Person” means a corporation, association, partnership, limited liability company, joint venture, trust, organization, business, individual or government or any governmental agency or political subdivision thereof.

“Principal Office” means, with respect to the Trustee or the Tender Agent, the address of such Person identified as its Notice Address in the Indenture or pursuant to the Indenture or otherwise notified in writing by such Person to the Issuer, the Corporation, the Trustee (in the case of notice by the Tender Agent), the Tender Agent (in the case of notice by the Trustee), any Liquidity Facility Provider and the Remarketing Agent.

“Project” consists generally of the financing of: (a) the construction, acquisition, renovation, and equipping of health care and related facilities of Bryn Mawr Hospital and Lankenau Medical Center; (b) the advance refunding of a portion of the Authority’s Health System Revenue Bonds (Jefferson Health System), Series 2010A; and (c) the payment of the costs and expenses incurred in connection with the issuance of the Bonds.

“Project Fund” means the fund created pursuant to the Indenture.

“Qualified Investments” means to the extent permitted by law, (i) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (ii) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): U.S. Export-Import Bank (Eximbank) - Direct obligations or fully guaranteed certificates of beneficial ownership, Farmers Home Administration (FmHA) – Certificates of beneficial ownership, Federal Financing Bank, Federal Housing Administration debentures (FHA), General Services Administration – participation certificates, Government National Mortgage Association (GNMA or “Ginnie Mae”) - GNMA - guaranteed mortgage-backed bonds, GNMA - guaranteed pass-through obligations, U.S. Maritime Administration - Guaranteed Title XI financing, U.S. Department of Housing and Urban Development (HUD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds; (iii) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S.

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government agencies (stripped securities are only permitted if they have been stripped by the agency itself): Federal Home Loan Bank System - senior debt obligations, Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”) - participation certificates, senior debt obligations, Federal National Mortgage Association (FNMA or “Fannie Mae”) - Mortgage-backed securities and senior debt obligations, Student Loan Marketing Association (SLMA or “Sallie Mae”) - senior debt obligations, Resolution Funding Corp. (REFCORP) obligations, Farm Credit System - Consolidated system-wide bonds and notes; (iv) money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2 including without limitation any mutual fund which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder, servicing agent and/or custodian, subcustodian, notwithstanding that (A) the Trustee or an affiliate of the Trustee receives fees from such funds for service it or its affiliate renders to such fund in respect of such investment, (B) the Trustee charges and collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds and (C) services performed for such funds and pursuant to the Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; (v) certificates of deposit or money market deposits secured at all times by collateral described in (i) and/or (ii) above; such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks; the collateral must be held by a third party and the Trustee must have a perfected first security interest in the collateral); (vi) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF;(vii) investment agreements, including GIC’s, Forward Purchase Agreements and Reserve Fund Put Agreements reasonably acceptable to the Liquidity Facility Provider; (viii) commercial paper rated, at the time of purchase, “Prime - 1” by Moody’s and”A-1” or better by S&P; (ix) bonds or notes issued by any state or municipality, which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such agencies; (x) federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime - 1” or”A3” or better by Moody’s and”A-1” or “A” or better by S&P; and (xi) repurchase agreements for 30 days or less. Repurchase agreements which exceed 30 days must be acceptable to the Liquidity Facility Provider.

“Rating Agency” means, as of any date, each of Moody’s, if the Bonds are then rated by Moody’s, Fitch, if the Bonds are then rated by Fitch, and S&P, if the Bonds are then rated by S&P.

“Rating Category” means a generic securities rating category, without regard, in the case of a long-term rating category, to any refinement or gradation of such long-term rating category by a numerical modifier or otherwise.

“Rebate Fund” means the rebate fund created pursuant to the Indenture.

“Record Date” with respect to the Bonds means (a) with respect to any Interest Payment Date relating to any Daily Interest Rate Period, the last Business Day of each calendar month or, in the case of the last Interest Payment Date relating to a Daily Interest Rate Period, the Business Day immediately preceding such Interest Payment Date, (b) with respect to any Interest Payment Date relating to any Weekly Interest Rate Period, any Short-Term Interest Rate Period or any Indexed Put Interest Rate Period, the Business Day immediately preceding such Interest Payment Date, and (c) with respect to any Interest Payment Date relating to any Long-Term Interest Rate Period, the 15th day of the month immediately preceding that Interest Payment Date or, in the event that an Interest Payment Date shall occur less than 15 days after the first day of a Long-Term Interest Rate Period, that first day.

“Related Documents” means the Loan Agreement, the Master Note and the Master Indenture.

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“Remarketing Account” means each account with that name established within a Bond Purchase Fund pursuant to the Indenture.

“Remarketing Agent” means any Person qualified under the Indenture to act as Remarketing Agent for the Bonds, and appointed by the Corporation with the consent of the Issuer from time to time.

“Remarketing Agreement” means a Remarketing Agreement between the Corporation and the Remarketing Agent whereby the Remarketing Agent undertakes to perform the duties of the Remarketing Agent under the Indenture.

“Replacement Self-Liquidity Undertaking” means a Self-Liquidity Undertaking issued by the Corporation to replace a then existing Liquidity Facility or Self-Liquidity Undertaking.

“Request” means a request by the Tender Agent under a Liquidity Facility or an Alternate Liquidity Facility for the payment of the Tender Price of the Bonds in accordance with the terms of the Indenture.

“Responsible Officer” means, with respect to the Trustee, any officer or authorized representative in its Corporate Trust Office or similar group administering the trusts under the Indenture or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers to whom a particular matter is referred by the Trustee because of such officer’s or authorized representative’s knowledge of and familiarity with the particular subject.

“Securities Act” means the Securities Act of 1933, as amended, and any successor thereto.

“Securities Depository” means DTC or, if applicable, any successor securities depository appointed pursuant to the Indenture.

“Securities Exchange Act” means the Securities and Exchange Act of 1934, as amended, and any successor thereto.

“Self-Liquidity Undertaking” means an agreement by the Corporation or an affiliate of the Corporation to pay the Tender Price of the Bonds tendered for purchase in accordance with the provisions of the Indenture, and any Replacement Self-Liquidity Undertaking delivered pursuant to the Indenture and with terms that are not inconsistent with the terms of the Indenture and administrative terms reasonably acceptable to the Trustee and the Tender Agent. A Self-Liquidity Undertaking shall provide that the obligation to purchase Bonds thereunder may not be suspended or terminated unless the affected Bonds are subject to Mandatory Standby Tender in accordance with the provisions of the Indenture.

“S&P” means S&P Global Ratings, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation will be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” will be deemed to refer to any other nationally recognized securities rating agency designated by the Corporation by notice to the Issuer and the Trustee.

“System” means, for purposes of the System Affiliation Agreement, any health care delivery system consisting of Parent, the Institution, the Hospitals and other Institution System Members.

“System Debt” means, for purposes of the System Affiliation Agreement, Debt incurred by Parent.

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“Tax Certificate” means the tax certificate executed by the Issuer and the Corporation in connection with the issuance of the Bonds.

“Tender Agent” means each Person qualified under the Indenture to act as Tender Agent with respect to the Bonds and so appointed by the Corporation and so acting from time to time, and its successors.

“Tender Agent Agreement” means an agreement among the Corporation, a Remarketing Agent and a Tender Agent whereby such Tender Agent undertakes to perform the duties of the Tender Agent under the Indenture with respect to the Bonds, as amended from time to time.

“Tender Date” means a date on which the Bonds are required to be purchased pursuant to the Indenture.

“Tender Price” means the purchase price to be paid to the Holders of the Bonds purchased pursuant to the Indenture, which will be equal to the principal amount thereof tendered for purchase, without premium, plus accrued interest from the immediately preceding Interest Accrual Date to the Tender Date (if the Tender Date is not an Interest Payment Date).

“Tenth Supplemental Master Indenture” means the Tenth Supplement to Master Indenture dated as of ______1, 2017 between the Corporation and the Master Trustee pursuant to which the Master Note is being issued.

“Trustee” means U.S. Bank National Association and its successors and assigns.

“Trust Estate” means the property and other rights assigned by the Issuer to the Trustee in the granting clauses of the Indenture.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, and any successor thereto.

“Unassigned Issuer’s Rights” means all of the rights of the Issuer to receive fees and expenses under the Loan Agreement, to be held harmless and indemnified under the Loan Agreement, to give the approval described in the Loan Agreement, to inspect the Facilities as provided in the Loan Agreement, to be reimbursed for attorney’s fees and expenses under the Loan Agreement and to give or withhold consent to or approval of amendments, modifications, termination or assignment of the Loan Agreement.

“Underwriter” means Citigroup Global Markets Inc.

“Uniform Commercial Code” means 13 Pa.C.S. §1101, et seq., as amended.

“United States Obligations” means direct general obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed as to full and timely payment by, the United States of America, which obligations are noncallable.

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

The following is a summary of certain provisions of the Bond Indenture. This summary does not purport to be comprehensive and reference should be made to the Bond Indenture for a full and complete statement of its provisions.

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Defeasance of Lien

When the Issuer has paid or has been deemed to have paid to the Holders of all of the Bonds, the principal and interest and premium, if any, due or to become due with respect to the Bonds at the times and in the manner stipulated therein and in the Indenture, and all other obligations owing to the Trustee under the Indenture or under the Loan Agreement have been paid or provided for with respect to the Bonds, the lien of the Indenture on the Trust Estate with respect to the Bonds shall terminate. Upon the written request of the Issuer or the Corporation, the Trustee shall, upon the termination of the lien of the Indenture, promptly execute and deliver to the Issuer, with a copy to the Corporation, an appropriate discharge of the Indenture except that, subject to the provisions of the Indenture, the Trustee shall continue to hold in trust amounts held pursuant to the Indenture for the payment of the principal of, premium, if any, and interest on the Bonds.

Outstanding Bonds will be deemed to have been paid within the meaning of the Indenture if the Trustee shall have paid to the Holders of such Bonds, or will be holding in trust for and shall have irrevocably committed to the payment of such Outstanding Bonds, moneys sufficient for the payment of all principal of and interest and premium, if any, of such Bonds to the date of maturity or redemption, as the case may be; provided that if any such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given to the Bondholders and the Corporation or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of such notice.

Outstanding Bonds also will be deemed to have been paid for the purposes of this Section if the Trustee will be holding in trust for and shall have irrevocably committed to the payment of such Outstanding Bonds cash or United States Obligations, the payments on which when due, without reinvestment, will provide moneys which, together with moneys, if any, so held and so committed, will be sufficient for the payment of all principal of and interest and premium, if any, on such Bonds to the date of maturity or redemption, as the case may be; provided, that if any of such Bonds are deemed to have been paid prior to the earlier of the redemption or the maturity thereof, the Trustee, the Issuer and the Corporation shall have received a report in form and substance acceptable to the Trustee and the Corporation of a firm of independent public accountants or other experts acceptable to the Trustee and the Corporation verifying that the payments on such United States Obligations, if paid when due and without reinvestment, will, together with any moneys so deposited, be sufficient for the payment of all principal of and interest and premium, if any, on such Bonds to the date of maturity or redemption, as the case may be; and provided, further, that if any such Bonds are to be redeemed prior to the maturity thereof, unconditional notice of such redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of such notice.

Any moneys held by the Trustee in the manner provided by the Indenture will be invested by the Trustee in the manner provided by the Indenture (but only to the extent that such investments are available) only in United States Obligations which do not contain provisions permitting redemption at the option of the issuer, the maturities or redemption dates, without premium, of which shall coincide as nearly as practicable with, but not be later than, the time or times at which said moneys will be required for the aforesaid purposes.

Notwithstanding the foregoing, Bonds purchased by the Corporation in lieu of optional redemption pursuant to the Indenture shall not be treated as paid and shall remain Outstanding under the Indenture unless such Bonds are delivered to the Trustee for cancellation.

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Funds and Accounts

Project Fund. There will be established with the Trustee a Project Fund. From time to time, the Trustee will establish such other accounts in the Project Fund as may be requested by the Corporation. Upon the issuance and delivery of the Bonds, a portion of the proceeds of the sale thereof will be deposited in the Project Fund, which will be used to pay costs incurred by the Issuer and the Corporation in connection with the construction portion of the Project. A portion of the proceeds of the Bonds also will be deposited with the trustee for the Refunded Bonds to be applied to the refunding of the Refunded Bonds. If the principal of the Bonds shall have become due and payable pursuant to the Indenture, any balance remaining in the Project Fund shall without further authorization be transferred into the Bond Fund.

Bond Fund. There will be established with the Trustee a Bond Fund, which will be used to pay when due, the principal of, premium, if any, and interest on the Bonds. Moneys will be deposited in the Bond Fund from time to time and will be applied solely to pay principal of, premium, if any and interest on the Bonds.

Bond Purchase Fund. Upon the issuance of the Bonds, there will be established with and maintained by the Tender Agent a Bond Purchase Fund; and within such Bond Purchase Fund the Tender Agent shall further establish within a separate trust account to be referred to in the Indenture as a “Remarketing Account,” a separate trust account to be referred to in the Indenture as a “Liquidity Facility Purchase Account” and a separate trust account to be referred to in the Indenture as an “Corporation Purchase Account.”

Upon receipt of the proceeds of a remarketing of the Bonds on a Tender Date, the Tender Agent shall deposit such proceeds in the Remarketing Account of the Bond Purchase Fund for application to the Tender Price of such Bonds and, if the Tender Agent is not a paying agent with respect to such Bonds, shall transmit such proceeds to the Trustee for such application. Notwithstanding the foregoing, upon receipt of the proceeds of a remarketing of Bank Bonds, the Tender Agent immediately shall pay such proceeds to the Liquidity Facility Provider.

Upon receipt from the Liquidity Facility Provider of the immediately available funds transferred to the Tender Agent, the Tender Agent shall deposit such money in the Liquidity Facility Purchase Account of the Bond Purchase Fund for the Bonds for application to the Tender Price of the Bonds required to be purchased on a Tender Date in accordance with the Indenture to the extent that the money on deposit in the Remarketing Account of the Bond Purchase Fund shall not be sufficient.

Upon receipt from the Corporation of any funds for the purchase of tendered the Bonds, the Tender Agent shall deposit such money, if any, in the Corporation Purchase Account of the Bond Purchase Fund for the Bonds for application to the Tender Price of the Bonds required to be purchased on a Tender Date in accordance with the Indenture to the extent that the money on deposit in the Remarketing Account and the Liquidity Facility Purchase Account of the Bond Purchase Fund shall not be sufficient.

Money held in the Bond Purchase Fund will be held uninvested and separate and apart from all other funds and accounts by the Tender Agent.

Investment of Moneys in Funds

Any moneys held as a part of the Project Fund or any fund other than the Bond Fund will be invested or reinvested by the Trustee, to the extent permitted by law, at the written request of and as

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directed by a Corporation Representative, in any Qualified Investments. In the absence of such direction, the Trustee shall deposit such moneys in a money market fund or funds of a quality described in the Indenture.

The Issuer covenants and certifies to and for the benefit of the Owners of the Bonds Outstanding that so long as any of the Bonds remains Outstanding, the Issuer shall not direct that moneys on deposit in any fund or account in connection with the Bonds (whether or not such moneys were derived from the proceeds of the sale of the Bonds or from any other sources), be used in a manner which will cause the Bonds to be classified as “arbitrage bonds” within the meaning of Section 148 of the Code. The Issuer further agrees to cooperate with any reasonable request of the Corporation relating to maintaining the exclusion of interest on the Bonds from gross income; provided, however, that the Issuer shall have no responsibility for directing the investment of any moneys, determining the amount of moneys subject to any applicable yield restriction under Section 148 of the Code, or calculating or paying any rebate pursuant to Section 148(f) of the Code.

The Issuer covenants that it will file such returns and make payments as directed by the Corporation (but only from moneys provided to the Issuer by or on behalf of the Corporation expressly for such purposes), if any, required to be made to the United States pursuant to the Code in order to establish or maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes.

Avoidance of Arbitrage

In reliance upon the covenant of the Corporation in the Loan Agreement regarding avoidance of arbitrage, the Issuer agrees that it will not take or cause, or fail to take or cause, any action which may cause interest on the Bonds to become includable in gross income for federal income tax purposes. Without limiting the generality of the foregoing, the Issuer agrees that it will take all actions reasonably requested by the Corporation to comply with the provisions of Section 148 of the Code, provided, however, that the Corporation and not the Issuer or the Trustee will be responsible for the computation of all amounts required to be paid pursuant to Section 148 of the Code.

Nonpresentment of Bonds

In the event any Bond is not presented for payment when the principal thereof becomes due, either at maturity, or at the date fixed for redemption thereof, or otherwise, if moneys sufficient to pay any such Bond have been deposited with the Trustee for the benefit of the Holder thereof, the Trustee is requested to hold such funds for the benefit of the Bondholder, which will thereafter be restricted exclusively to such funds for any claim of whatever nature on its part under the Indenture with respect to such Bond.

Any moneys so deposited with and held by the Trustee not so applied to the payment of the Bonds within two years after the date on which the same will have become due will be repaid by the Trustee to the Corporation and thereafter Bondholders will be entitled to look only to the Corporation for payment.

Covenant Against Encumbrances

The Issuer covenants that it will not voluntarily create any lien, encumbrance or charge upon the Loan Agreement or the Master Note, the payments made pursuant thereto or the Trust Estate, except the pledge, lien and charge for the security of the Bonds created by the Indenture.

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Release and Substitution of Master Note

The Trustee will surrender for substitution the Master Note, upon presentation to the Master Trustee prior to such surrender of the following:

(a) an original executed counterpart of a master indenture (the “Replacement Master Indenture”) executed by certain other parties named therein (collectively, the “New Group”) and the current Master Trustee or an independent corporate trustee (the “Replacement Trustee”) meeting the eligibility requirements of the Master Trustee as set forth in the Master Indenture;

(b) an original replacement note or similar obligations issued by the Corporation (the “Substitute Note”) under and pursuant to and secured by the Replacement Master Indenture, which Substitute Note has been duly authenticated by the Replacement Trustee;

(c) an opinion of Counsel addressed to the Trustee and the Issuer (in form and substance not unacceptable to the Issuer and the Trustee) to the effect that: (i) the Replacement Master Indenture has been duly authorized, executed and delivered by each member of the New Group, the Substitute Note has been duly authorized, executed and delivered by the Corporation and the Replacement Master Indenture and the Substitute Note are each a legal, valid and binding obligation of each member of the New Group, subject in each case to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity; (ii) all requirements and conditions to the issuance of the Substitute Note set forth in the Replacement Master Indenture have been complied with and (iii) registration of the Substitute Note under the Securities Act of 1933, as amended, is not required or, if registration is required, the Substitute Note has been so registered;

(d) a Favorable Opinion of Bond Counsel;

(e) written notice from each Rating Agency then maintaining a rating on the Bonds, confirming that the rating on the Bonds will not be lowered or withdrawn as a result of such substitution; and

(f) a written report of a Consultant addressed to the Trustee and the Issuer to the effect that the covenants and provisions contained in the Replacement Master Indenture are consistent with then- prevailing industry standards for comparable institutions similarly situated whose long-term debt obligations are rated in the same Rating Category as the Bonds.

Events of Default

The occurrence of any one or more of the following events will constitute an "Event of Default” under the Indenture:

(a) failure to pay interest on any Bond when due and payable;

(b) failure to pay any principal of or premium on any Bond when due and payable, whether at stated maturity or pursuant to any redemption requirement under the Indenture;

(c) failure to pay the Tender Price of the Bonds tendered for purchase in accordance with the Indenture or (ii) failure to satisfy any condition to Conversion from an Indexed Put Interest Rate Period set forth in the Indenture;

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(d) failure of the Issuer to duly and punctually perform any other of the covenants, conditions, agreements and provisions on its part contained in the Bonds or in the Indenture, which failure will continue for 60 days after written notice specifying such default and requiring the same to be remedied has been given to the Issuer and the Corporation by the Trustee; provided, however, if the failure stated in such notice cannot be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if it is possible to correct such failure and corrective action is instituted by the Issuer within the applicable period and is diligently pursued until such failure is corrected; or

(e) the occurrence of a Loan Default under the Loan Agreement. See this Appendix C,”SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT – Defaults and Remedies – Loan Defaults”.

Within five days after actual knowledge by a Responsible Officer of the Trustee of an Event of Default under subsection (a), (b), (c) or (e) above, the Trustee will give written notice, by registered or certified mail, to the Issuer, the Corporation, the Master Trustee, the Liquidity Facility Provider (if any) and the Bondholders, and upon notice as provided in the Indenture, will give similar notice of any other Event of Default.

Acceleration

If an Event of Default occurs and is continuing, then in each and every such case the Trustee may, and upon the written request of a Majority (100%, the case of an Event of Default described in clause (d) under “Events of Default” above) of the Bondholders, the Trustee will, by notice to the Issuer and the Corporation: (a) proceed to protect and enforce its rights of the owners of the Bonds under the laws of the Commonwealth and under the Loan Agreement and the Indenture by a suit, action or special proceeding in equity or at law, by mandamus or otherwise, either for the specific performance of any covenant or agreement contained in the Indenture or in aid or execution of any power in the Indenture granted or for any enforcement of any proper legal or equitable remedy as the Trustee, being advised by Counsel, will deem most effectual to protect and enforce the rights aforesaid; and (b) proceed to protect and to enforce its rights as a holder of the Master Note, on behalf of the Bondholders, in accordance with the Master Indenture.

Upon the happening of an Event of Default, then and in every such case, the Trustee may, and upon written request of the Bondholders of a Majority (100%, the case of an Event of Default described in clause (d) under “Events of Default” above) of the Bondholders, the Trustee will, by notice delivered to the Issuer and the Corporation, declare the principal of all the Bonds then Outstanding and the interest accrued thereon to be immediately due and payable. The Trustee will give notice of any Event of Default and any such declaration as soon as practicable to the Master Trustee by telephone or telecopy, promptly confirmed in writing.

However, the right of the Trustee or the owners of a Majority of the Bondholders to make any such declaration as aforesaid is subject to the condition that if, at any time after such declaration, but before the Bonds have been paid in full, all overdue installments of interest upon such Bonds, together with interest on such overdue installments of interest to the extent permitted by law, and the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums then payable by the Issuer under the Indenture (except the principal of and interest accrued since the next preceding interest date on the Bonds due and payable solely by virtue of such declaration) will either be paid by or for the account of the Issuer or provision satisfactory to the Trustee will be made for such payment, all defaults under the Bonds or under the Indenture (other than the payment of principal and interest due and payable solely by reason of such declaration) will be made good or be secured to the satisfaction of the Trustee or provision

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deemed by the Trustee to be adequate will be made therefore, then and in every such case, the Trustee may rescind such declaration and annul such default in its entirety, but no such rescission or annulment will extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon. The Trustee will give notice of any such rescission to the Master Trustee.

In lieu of or in addition to a declaration of acceleration, the Trustee also may exercise any other right or remedy available to it at law or in equity, including the appointment of a receiver to the extent permitted by law or any other right or remedy available under the Act or the Uniform Commercial Code.

Other Remedies; Rights of Bondholders

Whenever any Event of Default occurs and is continuing, the Trustee may, and upon the written request of a Majority of the Bondholders, the Trustee will take the following remedial steps:

(a) In the case of an Event of Default described in the Indenture, the Trustee may take whatever action at law or in equity is necessary or desirable to collect the Loan Payments then due or payments due under the Master Note;

(b) In the case of an Event of Default described in the Indenture, the Trustee may take whatever action the Issuer would be entitled to take, and will take whatever action the Issuer would be required to take, pursuant to the Loan Agreement in order to remedy the Event of Default in question;

(c) In the case of an Event of Default described in the Indenture, the Trustee may take whatever action at law or in equity is necessary or desirable to enforce the performance, observance or compliance by the Issuer with any covenant, condition or agreement by the Issuer under the Indenture;

(d) By mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Bondholders, and require the Issuer to carry out any agreements with or for the benefit of the Bondholders and to perform its duties under the Act or the Loan Agreement;

(e) By action or suit in equity require the Issuer to account as if it were the trustee of an express trust for the Bondholders;

(f) By action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders; and

(g) To bring suit upon the Bonds.

Upon the continuation of an Event of Default, if so requested by a Majority of the Bondholders, and if satisfactory indemnity has been furnished to it, the Trustee will exercise such of the rights and powers conferred by the Indenture, the Corporation Security Instruments or any other Basic Agreement as the Trustee, being advised by counsel, deems most effective to enforce and protect the interests of the Bondholders; provided that the Trustee may take action with respect to the Loan Agreement only to enforce the rights expressly and specifically assigned to the Trustee under the Granting Clauses of the Indenture.

No remedy under the Indenture is intended to be exclusive, and to the extent permitted by law each remedy will be cumulative and in addition to any other remedy under the Indenture or now or thereafter existing. No delay or omission to exercise any right or power will impair such right or power or constitute a waiver of any Event of Default or acquiescence therein; and each such right and power

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may be exercised as often as deemed expedient. No waiver by the Trustee or the Bondholders of any Event of Default will extend to any subsequent Event of Default.

Right of Bondholders to Direct Proceedings

Anything in the Indenture to the contrary notwithstanding, a Majority of the Bondholders will have the right, by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under the Indenture or under the Corporation Security Instruments or any other Basic Agreement in respect of the Bonds; provided that such direction will not be otherwise than in accordance with law and the Indenture and, if applicable, the Corporation Security Instruments or such other Basic Agreement and the Trustee will be indemnified to its satisfaction against the costs, expenses and liabilities which may be incurred therein or thereby.

Application of Moneys

All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this heading will, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances owing to or incurred or made by the Trustee, be deposited in the Bond Fund and the moneys in the Bond Fund will be applied as follows:

Unless the principal of all the Bonds will have become or will have been declared due and payable, all such moneys will be applied:

FIRST - To the payment to the persons entitled thereto of all installments of interest then due on the Bonds in the order of the maturity of the installments of such interest (with interest on overdue installments of such interest, to the extent permitted by law, at the rate of interest borne by the Bonds and, if the amount available will not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; and

SECOND - To the payment to the persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds which will have become due (other than the Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), (with interest on overdue installments of principal and premium, if any, to the extent permitted by law, at the rate of interest borne by the Bonds) and, if the amount available will not be sufficient to pay in full all the Bonds, due on any particular date, then to the payment ratably according to the amount of principal due on such date, to the persons entitled thereto without any discrimination or privilege; and

THIRD - To the payment to the persons entitled thereto as the same will become due of the principal of and premium, if any, and interest on the Bonds which may thereafter become due and, if the amount available will not be sufficient to pay in full the Bonds, due on any particular date, together with interest and premium, if any, then due and owing thereon, payment will be made ratably according to the amount of interest, principal and premium, if any, due on such date to the persons entitled thereto without any discrimination or privilege.

If the principal of all the Bonds will have become due or will have been declared due and payable, all such moneys will be applied to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any the Bonds over any other the Bonds, ratably, according to the amounts due, respectively, for principal and interest, to the persons

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entitled thereto without any discrimination or privilege, with interest on overdue installments of interest or principal, to the extent permitted by law, at the rate of interest borne by the Bonds.

If the principal of all the Bonds will have been declared due and payable and if such declaration will thereafter have been rescinded and annulled under the provisions of this heading, then, subject to the provisions of paragraph (b) above, in the event that the principal of all the Bonds will later become due or be declared due and payable, the moneys will be applied in accordance with the provisions of paragraph (a) above.

Rights and Remedies of Bondholders

No Holder of any of the Bonds will have any right to institute any suit, action or proceeding in equity or in law for the execution of any trust under the Indenture, or for any other remedy under the Indenture or on the Bonds unless (a) such Holder previously will have given to the Trustee written notice of an event of default as above provided, (b) a Majority of the Bondholders will have made written request of the Trustee after the right to exercise such powers or right of action, as the case may be, will have accrued, and will have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted above, or to institute such action, suit or proceeding in its name, (c) there will have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby, and (d) the Trustee will have refused or neglected to comply with such question with a reasonable period of time. The parties to the Indenture intend that no one or more Holders of the Bonds will have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture, or to enforce any right under the Indenture, except in the manner provided in the Indenture, and that all proceedings at law or in equity will be instituted, had and maintained in the manner provided in the Indenture and for the equal benefit of all Holders of the Outstanding the Bonds.

However, nothing in the Indenture will affect or impair the right of any Holder of a Bond, which is absolute and unconditional, to enforce the payment of the principal of and interest on such Holder’s the Bonds out of the moneys provided for such payment, or the obligation of the Issuer to pay the same out of the sources pledged under the Indenture, at the time and place expressed in the Indenture.

Waivers of Events of Default

The Trustee will waive any Event of Default under the Indenture and its consequences and rescind any declaration of acceleration of principal upon the written request of (a) the Holders of at least a majority in aggregate principal amount of all Outstanding the Bonds, in respect of which default in the payment of principal or interest, or both, exists or (b) a Majority of the Bondholders in the case of any other Event of Default; and provided that there will not be waived any Event of Default specified in section (a) or (b) under the caption “Events of Default” above unless prior to such waiver or rescission, the Corporation will have caused to be paid to the Trustee (i) all arrears of principal and interest (other than principal of or interest on the Bonds, which became due and payable by declaration of acceleration), with interest at the rate then borne by the Bonds on overdue installments, to the extent permitted by law, and (ii) all expenses of the Trustee in connection with such Event of Default. In case of any waiver or rescission described above, or in case any proceeding taken by the Trustee on account of any such Event of Default have been discontinued or concluded or determined adversely, then and in every such case the Issuer, the Trustee and the Holders of the Bonds will be restored to their former positions and rights under the Indenture, respectively, but no such waiver or rescission shall extend to any subsequent or other Event of Default, or impair any right consequent thereon.

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Trustee and Bondholders Entitled to all Remedies Under Act

It is the purpose of the Indenture to provide such remedies to the Trustee and the Bondholders as may be lawfully granted under the provisions of the Act; but should any remedy granted in the Indenture to be held unlawful, the Trustee and the Bondholders shall nevertheless be entitled to every other remedy provided by the Act. If is further intended that, insofar as lawfully possible, the provisions of the Indenture will apply to and be binding upon the trustee or receiver appointed under the Act.

Resignation by Trustee; Removal

The Trustee may at any time resign from the trusts created by the Indenture by giving 45 days’ written notice to the Issuer, to the Corporation, to the Liquidity Facility Provider, if any, and to each Bondholder, but such resignation will not take effect until the appointment of a successor Trustee, acceptance by the successor Trustee of such trusts and assignment to such successor Trustee of the rights of the predecessor Trustee under the Corporation Security Instruments. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee, the Issuer, the Bondholders and the Corporation and signed by the Corporation or a Majority of the Bondholders, but such removal will not take effect until the appointment of a successor Trustee and acceptance by the successor Trustee of such trusts and transfer to the successor Trustee of any Policy or Liquidity Facility then outstanding. The Trustee may also be removed at any time for any breach of trust, or for acting or proceeding in violation of, or for failing to act or proceeding in accordance with, any provision of the Indenture or any other Basic Agreement with respect to the duties and obligations of the Trustee, by any court of competent jurisdiction upon the application of the Issuer, the Corporation or a Majority of the Bondholders.

Appointment of Successor Trustee

If the Trustee under the Indenture will resign or be removed, or be dissolved, or otherwise become incapable of acting under the Indenture, or in case it will be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor will be appointed by the Corporation. If the Corporation does not appoint a successor Trustee within 45 days of the Trustee providing notice of its resignation, the Trustee may petition a court of competent jurisdiction to appoint a successor Trustee. At any time within one year after any such vacancy shall have occurred and provided a court has not appointed a successor Trustee as provided above, a Majority of the Bondholders may appoint a successor Trustee by an instrument or concurrent instruments in writing signed by or on behalf of such Holders, which appointment shall supersede any Trustee theretofore appointed by the Corporation. Each successor Trustee will be a trust company or bank having the powers of a trust company which is in good standing, has a reported capital, surplus and undivided profits of not less than $100,000,000. Any such successor Trustee will become Trustee upon giving notice to the Corporation, the Issuer and the Bondholders, if any, of its acceptance of the appointment, vested with all the property, rights and powers of the Trustee under the Indenture, without any further act or conveyance. Any predecessor Trustee shall execute, deliver and record and file such instruments as the Trustee may reasonably require to confirm or perfect any such succession.

Trustee Authorized to Vote Master Indenture Obligations; Exercise of Remedies

Except as provided below, the Trustee, as assignee of the Master Note, will be entitled to vote the Master Note or the indebtedness represented thereby in connection with any proposed amendment, change, modification, waiver or consent (hereinafter in this paragraph referred to as an “amendment”) to or in respect of the Master Indenture. The Trustee may agree to any such amendment, without obtaining the consent of or the provision of notice to the owners of the Bonds as provided in the Indenture. The

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Trustee shall exercise the rights available to it as the holder of the Master Note under the Master Trust Indenture in accordance with the terms thereof for the equal and ratable benefit and protection of the Holders of all Outstanding the Bonds.

Supplemental Indentures Not Requiring Consent of Bondholders

The Issuer and the Trustee from time to time and at any time, subject to the conditions and restrictions in the Indenture contained and to the written consent of the Corporation, may enter into an indenture or indentures supplemental to the Indenture, which indenture or indentures thereafter shall form a part of the Indenture, for any one or more or all of the following purposes:

(a) to add to the covenants and agreements of the Issuer in the Indenture contained, other covenants and agreements thereafter to be observed or to surrender, restrict or limit any right or power reserved in the Indenture to or conferred upon the Issuer;

(b) to make such provisions for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision, contained in the Indenture as may be requested or required by any nationally recognized rating agency, or in regard to matters or questions arising under the Indenture, as the Issuer may deem necessary or desirable and not inconsistent with the Indenture;

(c) to modify, amend or supplement the Indenture or any indenture supplemental to the Indenture in such manner as to permit the qualification of the Indenture and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or any state securities or trust indenture law and, if they so determine, to add to the Indenture, or any indenture supplemental to the Indenture, such other terms, conditions and provisions as may be permitted by said Trust Indenture Act of 1939 or similar federal statute or such state securities or trust indenture law;

(d) to grant additional rights and powers to the Trustee;

(e) to create such accounts or subaccounts within the funds and accounts created under the Indenture as the Corporation shall deem necessary or desirable to enable the Corporation to account for expenditures of Bond proceeds or as otherwise will be requested by the Corporation;

(f) to provide for, or modify existing provisions to, a book-entry system of registration for the Bonds;

(g) to obtain or maintain a rating on the Bonds from any Rating Agency;

(h) to make any change that, in the judgment of the Trustee, does not materially adversely affect the right of any Bondholder (and the release and substitution of the Master Indenture Note will be deemed to have no material adverse effect on the rights of any Bondholder); or

(i) to make revisions to the Indenture that will become effective only upon, and in connection with, the remarketing of the Bonds then Outstanding affected by the supplemental indenture and are applicable only to such Bonds.

In the event any Rating Agency has issued a rating of any of the Bonds, such Rating Agency or Rating Agencies, as the case may be, shall receive prior written notice from the Trustee of the proposed amendment but such notice shall not be a condition of the effectiveness of such amendment.

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Supplemental Indentures Requiring Consent of Bondholders

Upon notice to the Bondholders and with the consent of a Majority of the Bondholders which would be affected and the consent of the Corporation, the Issuer and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental to the Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any Supplemental Indenture; provided, however, that no such Supplemental Indenture shall (a) extend the fixed maturity of any bond or reduce the rate of interest thereon or extend the time for payment of interest, or reduce the amount of the principal thereof, or reduce or extend the time for payment of any premium payable on the redemption thereof, without the consent of the owners of each bond so affected, or (b) reduce the aforesaid percentage of owners of the Bonds required to approve any such Supplemental Indenture, or (c) deprive the Holders of the Bonds (except as aforesaid) of the lien created by the Indenture without the consent of all of the Bonds then Outstanding affected thereby, or (d) adversely affect the tax-exempt status of the Bonds, without the consent of the Bondholders of all the Bonds then Outstanding affected thereby. A supplement to the Indenture shall not be deemed to adversely affect the interest of the Bondholders unless it would result in the reduction, suspension or withdrawal by a Rating Agency of any securities rating then in effect with respect to the Bonds. A Liquidity Facility Provider which has purchased Bonds or a Remarketing Agent which holds Bonds which have been tendered, shall constitute a Bondholder for purposes of the provisions described in this paragraph.

Corporation Consent

Anything in the Indenture to the contrary notwithstanding, a supplemental indenture under the Indenture shall not become effective unless and until the Corporation shall have consented to the execution and delivery of such supplemental indenture.

Modification by Unanimous Consent

Notwithstanding anything contained elsewhere in the Indenture, the rights and obligations of the Corporation, the Issuer, the Trustee and the Holders of the Bonds and the terms and provisions of the Bonds and the Indenture, any other Basic Agreement or any supplemental agreement may be modified or altered in any respect with the consent of the Corporation, the Issuer, the Trustee and the Holders of all of the Bonds then Outstanding.

Execution of Amendments and Supplements by Trustee

The Trustee shall not be obligated to sign any amendment or supplement to the Indenture, the Bonds, the Master Indenture, the Loan Agreement or the Master Notes if the amendment or supplement, in the judgment of the Trustee, could adversely affect the rights, duties, liabilities, protections, privileges, indemnities or immunities of the Trustee. In signing an amendment or supplement, the Trustee (subject to the Indenture) will be fully protected in relying on an opinion of Bond Counsel stating that such amendment or supplement is authorized by the Indenture and will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds.

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Amendments to Loan Agreement and Master Note Not Requiring Consent of Bondholders

The Issuer and the Corporation may from time to time and at any time, with the consent of the Trustee, enter into a supplemental loan agreement or an amendment or supplement to the Master Note for any one or more of the following purposes:

(a) to add to the covenants and agreements of the Corporation contained therein, other covenants and agreements thereafter to be observed or to surrender, restrict or limit any right or power in the Indenture reserved to or conferred upon the Corporation;

(b) to make such provisions for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision, contained in the Loan Agreement or the Master Note, or in regard to matters or questions arising under the Loan Agreement, as the Issuer and the Corporation may deem necessary or desirable and not inconsistent therewith and which shall not materially adversely affect the interest of the registered owners of the Bonds;

(c) to make any changes in the Loan Agreement or the Master Note required in connection with a supplemental indenture authorized under the Indenture or a supplement to the Master Indenture authorized pursuant to the Indenture;

(d) to grant additional rights and powers to the Trustee or the Issuer; or

(e) to make revisions to the Loan Agreement or the Master Indenture which will be effective only upon, and in connection with, the remarketing of all of the Bonds then Outstanding.

Any supplemental loan agreement authorized by the foregoing provisions may be executed by the Issuer and the Corporation, and consented to by the Trustee, without the consent or notice to the owners of any of the Bonds at the time Outstanding.

Amendments to Loan Agreement and Master Note Requiring Consent of Bondholders

Without limiting the provisions described under the subheading “Amendments to Loan Agreement and Master Note Not Requiring Consent of Bondholders” above, if the Issuer and the Corporation propose to amend the Loan Agreement or any related Master Note in such a manner as would adversely affect the interests of the Bondholders, the Trustee shall notify the Bondholders of the proposed amendment and may consent thereto with the consent of at least a Majority of the Bondholders which would be affected by the action proposed to be taken; provided, that the Trustee shall not, without the unanimous consent of the owners of all the Bonds then Outstanding, consent to any amendment which would (a) decrease the amount payable on any Master Note or under the Loan Agreement or (b) change the date of payment of principal of or interest on the Master Note or change any of the prepayment provisions of any related Master Indenture Obligation. An amendment to the Loan Agreement or the Master Note shall not be deemed to adversely affect the interest of the Bondholders unless it would result in the reduction, suspension or withdrawal by a Rating Agency of any securities rating then in effect with respect to the Bonds. A Liquidity Facility Provider which has purchased Bonds or a Remarketing Agent which holds Bonds which have been tendered, shall constitute a Bondholder for purposes of this paragraph.

Supplements to the Master Indenture

If the consent of the Trustee, as the registered owner of the Master Note, is required for any supplement to the Master Indenture pursuant to the terms thereof, the Trustee shall consent to any such

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supplement if (a) the Trustee determines that such supplement is not of a type described in the Indenture, and (b) the Trustee has received the consent of the Holders of a Majority of the Bonds affected thereby (a Liquidity Facility Provider which has purchased Bonds or a Remarketing Agent which holds Bonds which have been tendered, shall constitute a Holder for such purpose), and (c) each Rating Agency then maintaining a rating on the Bonds confirms that such rating will not be lowered or withdrawn as a result of such supplement to the Master Indenture, and (d) in the opinion of Bond Counsel, the tax-exempt status of the Bonds will not be adversely affected; provided, however, that no such supplement to the Master Indenture shall extend the maturity of the Master Note or reduce the rate of interest thereon or extend the time for payment thereof or reduce the amount payable thereon unless corresponding changes are being made to the provisions of the Bonds pursuant to a Supplemental Indenture authorized pursuant to the Indenture.

Bonds Owned by Issuer or Corporation

In determining whether Holders of the requisite aggregate principal amount of the Bonds have concurred in any direction, consent or waiver under the Indenture or any other Basic Agreement, Bonds which are owned by the Issuer or the Corporation (unless one or more of such Persons own all of the Bonds, which are then outstanding, determined without regard to this paragraph) will be disregarded and deemed not to be outstanding for the purpose of any such determination, except that, for the purpose of determining whether the Trustee will be protected in relying on any such direction, consent or waiver, only Bonds which the Trustee knows are so owned will be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the Issuer or the Corporation (unless one or more of such Persons own all of the Bonds which are then outstanding, determined without regard to this paragraph). In case of a dispute as to such right, any decision by the Trustee taken in good faith upon the advice of counsel will afford full protection to the Trustee in accordance with the Indenture.

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT

The following is a summary of certain provisions of the Loan Agreement. This summary does not purport to be comprehensive and reference should be made to the Loan Agreement for a full and complete statement of its provisions.

Certain Covenants of the Corporation

Relating to the Tax Status of the Bonds. The Corporation covenants that it will not take (or fail to take) and shall cause the Obligated Group Affiliates to not take (or fail to take) any action or permit (or fail to permit) any action to be taken on their behalf, or cause or permit any circumstance within the Corporation’s control to arise or continue, if such action or circumstance, or its reasonable expectation on the date of issuance of the Bonds, would cause the interest on the Bonds to be includable in the gross income of owners thereof for federal income tax purposes.

Without limiting the foregoing, the Corporation covenants that (a) notwithstanding any other provision of the Loan Agreement or any other instrument, it will not make or cause to be made or permit any investment, or other use of the proceeds of the Loan or any property or investment property financed or refinanced thereby, which would cause any of the Bonds to be an “arbitrage bond” under Section 148(a) of the Code, and (b) it will comply with the requirements of such Section, including, without limitation, the requirement to make arbitrage rebate payments pursuant to Section 148(f) of the Code to the extent required therein.

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The Corporation shall comply, and shall cause the Obligated Group Affiliates to comply, with its covenants in the Tax Certificate.

Assignment of Loan Agreement

The Corporation may assign its interest in the Loan Agreement, in whole or in part, to a related Person (i.e., a Person controlling, controlled by or under common control with the Corporation without the prior written consent of the Issuer or the Trustee. Except as provided in the preceding sentence, any assignment by the Corporation of its interest in the Loan Agreement shall be subject to the prior written consent of the Issuer, which consent shall be granted by the Issuer if the Corporation shall provide the Trustee and the Issuer with; (a) a certificate of a Corporation Representative to the effect that such assignment will not result in any event of default, or event which, with the passage of time or the giving of notice or both, would constitute such event of default under the Master Indenture; (b) a Favorable Opinion of Bond Counsel, and an opinion of Bond Counsel to the effect that the Project is still a ”project” as defined in the Act upon such assignment; and (c) a true and complete copy of each such assignment and assumption of obligation.

Preservation of Tax-Exempt Status. The Corporation agrees that throughout the term of the Loan Agreement:

(a) Notwithstanding any provision in the Loan Agreement or in the Indenture to the contrary, it will not take (or permit an Obligated Group Affiliate to take) any action or permit any action to be taken on its behalf or cause or permit any circumstance within its control to arise or continue (including, without limitation, any action or circumstance which would result in the revocation or modification of its status (or the status of an Obligated Group Affiliate) as an organization described in Section 501(c)(3) of the Code), if such action or circumstance would adversely affect the validity of the Bonds or cause the interest on the Bonds to be included in the gross income of the Holders thereof for purposes of federal income taxation.

(b) Except in connection with a purchase of the Bonds in lieu of optional redemption, neither it nor any Person related to it within the meaning of Section 147(a)(2) of the Code shall purchase bonds of the Issuer in an amount related to the total amount payable under and secured by the Loan Agreement.

(c) It shall not carry on or permit to be carried on in the Facilities, or any other property now or hereafter owned by the Corporation or an Obligated Group Affiliate (or with the proceeds of Bonds, or the proceeds of any loan refinanced with the proceeds of Bonds), any trade or business the conduct of which would cause the interest on the Bonds to be included in the gross income of the Holders thereof for purposes of federal income taxation.

(d) It will cooperate with the Issuer in the preparation and filing of any information, report or other document with respect to the Bonds which may at any time be required, in the judgment of the Issuer, to be filed with the Internal Revenue Service pursuant to the Code.

Arbitrage Rebate. As provided in the Indenture, the Trustee will invest moneys held by the Trustee as directed by the Corporation. The Issuer and the Corporation covenant with each other and with the holders of the Bonds that, notwithstanding any other provision of the Loan Agreement or any other instrument, they will neither make nor instruct the Trustee to make any investment or other use of the proceeds of the Bonds, or take or omit to take any other action which would cause the Bonds to be arbitrage bonds under Section 148 of the Code and the regulations thereunder, and that they will comply with the requirements of the Code and regulations throughout the terms of the Bonds.

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The Corporation shall determine or retain an experienced arbitrage rebate consultant (a ”Rebate Consultant”) to determine, within 60 days after each Bond Year the amount required to be rebated to the United States pursuant to Section 148(f) of the Code, as calculated from the date of original delivery of the Bonds. Notwithstanding the foregoing, the Corporation shall not be required to make such determination, except as required in connection with making the payments to the United States Treasury described under the next paragraph, if during the preceding Bond Year there have been no investments made of amounts on deposit in any fund or account established under the Indenture in "nonpurpose investments” (as defined in Section 148(f)(6) of the Code) having a yield higher than the end yield of the Bonds and the Corporation shall not be required to make such determination with respect to any portion of the Bonds which is, or is reasonably expected to be, exempt from rebate by virtue of the six-month, 18- month, or two-year construction issue rebate exemptions of Section 148 of the Code. The Corporation shall notify the Trustee in writing if such determination is not required to be made and the basis therefore.

The Corporation shall at its option either pay to the Trustee for deposit in the Rebate Fund, or pay, or cause to be paid, to the United States Treasury (a) not less frequently than 60 days after the end of every fifth Bond year, an amount, as determined by the Corporation or a Rebate Consultant, at least equal to 90% of the amount required to be rebated pursuant to Section 148(f) of the Code, with respect to the Bonds, giving effect to any prior payments made pursuant to this paragraph, and (b) not later than 60 days after the retirement of the last Bonds, 100% of the aggregate amount required to be rebated pursuant to Section 148(f) of the Code.

If the Corporation has directed the Issuer to elect that in lieu of arbitrage rebate, a portion of the Bonds shall be subject to penalties on unspent proceeds in the event of failure to comply with the two- year schedule of expenditures for construction issues pursuant to Section 148(f)(4)(C) of the Code, the Corporation or the Rebate Consultant shall calculate the penalty as of the end of each six-month period from the date of issuance of the Bonds and shall pay over such amount to the United States Treasury Department within 90 days after each six-month period any penalty amount due.

The Loan Agreement provides that the sections thereunder relating to arbitrage rebate may be amended or deleted upon receipt by the Trustee and the Issuer of a Favorable Opinion of Bond Counsel.

The Corporation will pay to or for the account of the Issuer all amounts needed to comply with the requirements of Section 148 of the Code, concerning arbitrage bonds, including Section 148(f), which requires generally a rebate payment to the United States of arbitrage profit from investment of the proceeds of the Bonds in obligations other than tax-exempt obligations. The obligation of the Corporation to make such payments is unconditional and is not limited to funds representing the proceeds of the Bonds or income from the investment thereof or any other particular source.

Concerning Facilities and Projects. The proceeds of the Bonds shall be applied by the Trustee to the payment of the Costs of the Project or other purposes for which the Bonds were issued in accordance with the Indenture, and pending such application, such money shall be invested and reinvested in accordance with the Indenture. The Corporation shall complete the Project with reasonable dispatch and shall pay that portion of the Cost of completing the Project as may be in excess of the money available therefor under the Indenture. If after exhaustion of the money in the Project Fund, the Corporation should pay any portion of the Costs of the Project, it shall not be entitled to any reimbursement therefor from the Issuer or the Trustee, and shall not be entitled to any abatement, diminution or postponement of Loan Payments or other amounts payable under the Loan Agreement.

The Corporation may, at its option and at its own cost and expense, at any time and from time to time, revise the description of the Project and/or make such additions, deletions and changes to the Project as it may deem to be desirable for its uses and purposes, provided that (a) such additions and changes

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shall constitute part of the Project, (b) the Corporation shall supplement the description of and information pertaining to the Project by filing with the Issuer and the Trustee such supplemental information as is necessary to reflect such additions, deletions and changes so that the Issuer and the Trustee will be able to ascertain the nature and cost of the facilities included in the Project and covered by the Loan Agreement; (c) such additions and changes will not result in a misuse of Bond Proceeds; and (d) if an addition, deletion or change is substantial in relation to the Bonds, the Corporation shall have first obtained and filed with the Issuer and the Trustee a Favorable Opinion of Bond Counsel. In any case, the Corporation shall obtain the Issuer’s approval of the addition of the Project of any proposed facilities or any other changes not generally described in the description of the Project on the date of the delivery of the Loan Agreement, and the Corporation shall delete any facilities from the Project if such deletion is necessary, in the opinion of Bond Counsel, to avoid a misuse of Bond Proceeds or to maintain the exclusion from gross income of interest on the Bonds under the Code.

Maintenance, Recording. The Corporation will, at its expense, take all necessary action to maintain and preserve the Loan Agreement so long as the Master Note is outstanding.

Corporation to Perform Certain Covenants Under Indenture and Master Indenture. The Corporation acknowledges that it has received an executed copy of the Indenture, that it is familiar with its provisions and agrees to be bound to the fullest extent permitted by law to all provisions thereof directly or indirectly relating to it, that it will take all such actions as are required or contemplated of it under the Indenture to preserve and protect the rights of the Trustee and of the Holders thereunder and that it will not take or effect any action which would cause a default thereunder or jeopardize such rights.

The Corporation shall perform its covenants under the Master Indenture, as amended from time to time, or any successor agreement thereto while the Master Indenture or any successor agreement is in effect.

The Loan; Repayment

Master Note. In order to evidence the Loan and the obligation of the Corporation to repay the same, the Corporation shall execute and deliver to the Trustee, as assignee and pledgee of the Issuer, the Master Note. The Master Note shall be dated the date of the initial authentication of the Bonds and shall provide for payment of amounts, which among other things, correspond as to time and amount with payments due on the Bonds. The Master Note shall be an obligation secured under the Master Indenture. All payments received under the Master Note shall be credited against the loan payment obligations of the Corporation set forth in the Loan Agreement.

Obligations Unconditional. All payment and other obligations of the Corporation under the Loan Agreement and under the Master Note are and shall be direct, general and unconditional obligations of the Corporation. The Corporation will pay without abatement, diminution or deduction (whether for taxes, loss of use, in whole or in part, of the Facilities or otherwise) all such amounts regardless of any cause or circumstance whatsoever, which may now exist or may arise, including without limitation, any defense, set-off, recoupment or counterclaim which the Corporation may have or assert against the Issuer, the Trustee, any Bondholder or any other person.

Repayment. The obligation to pay the Loan shall be a direct, general unconditional obligation of the Corporation. The Corporation shall pay or cause to be paid to the Trustee, as assignee of the Issuer, for deposit in the Bond Fund the following sums as repayments of the Loan at the following times:

(a) On or before the close of business on the day preceding each Interest Payment Date for the Bonds, or on any other date on which interest on the Bonds due under the Indenture, the amount

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which, together with other available funds in the Bond Fund established under the Indenture, is necessary to provide for the payment of interest on the Bonds becoming due on such Interest Payment Date.

(b) On or before the close of business on the day preceding each principal payment date or mandatory sinking fund redemption date for the Bonds or on any other date on which principal is due under the Indenture, the amount which, together with other available funds in the Bond Fund established under the Indenture, is necessary to provide for the payment of the principal amount or mandatory redemption amount of the Bonds becoming due on such principal payment date or in accordance with the mandatory sinking fund schedule set forth in the Indenture.

Prepayment. The Corporation shall be permitted, so long as all amounts which have become due under the Loan Agreement have been paid, at any time and from time to time, upon 45 days written notice to the Issuer and the Trustee (which notice will be given at least five Business Days prior to the date upon which the Trustee is required to send notice of redemption to Bondholders pursuant to the terms of the Indenture or such shorter notice period as is acceptable to the Trustee), to prepay all or any part of the amounts payable under the Loan Agreement together with such other amounts as will be sufficient to purchase or redeem all or a portion of the Bonds in accordance with the Indenture. All sums prepaid in accordance with this paragraph will be applied to the redemption or purchase of the Bonds in the manner and to the extent provided in the Indenture. At the request of the Corporation or the Trustee, the Issuer shall take all steps required of it under the applicable provisions of the Indenture or the Bonds to effect the redemption of all or a portion of the Bonds. A prepayment shall not relieve the Corporation of its obligations under the Loan Agreement until the Bonds have been paid in full or provision for the payment thereof has been made in accordance with the Loan Agreement and the Indenture.

Defaults and Remedies

Loan Defaults. Each of the following shall constitute a “Loan Default” under the Loan Agreement:

(a) failure by the Corporation to pay any Loan Payment or other payment required to be paid under the Loan Agreement or under the Master Note on or before the date on which such Loan Payment is due and payable;

(b) failure by the Corporation to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Loan Agreement other than the failure referred to in the Loan Agreement for a period of 30 days after written notice specifying such failure and requesting that it be remedied, is given to the Corporation by the Issuer or the Trustee, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, that if the failure stated in the notice is correctable but cannot be corrected within the applicable period, no Loan Default will be deemed to have occurred or to exist if, and so long as, the Corporation shall commence such observance or performance within such 30-day or extended period and shall diligently and continuously prosecute the same to completion (the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Corporation within the applicable period and diligently pursued until such failure is corrected);

(c) failure by the Corporation to pay the Tender Price of Tendered Bonds at the times, in the amounts and in the manner set forth in the Loan Agreement;

(d) the filing by the Corporation of a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing by the Corporation of an answer consenting to, admitting the material allegations of or otherwise not controverting, or the failure

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of the Corporation to timely controvert, a petition filed against it seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of such petition or answer by the Corporation or the failure of the Corporation to timely controvert such a petition, with respect to relief under the provisions of any other now existing or future applicable bankruptcy, insolvency or other similar law of the United States of America or any state thereof;

(e) the entry of an order for relief, which is not stayed, against the Corporation under Title 11 of the United States Code, as now constituted or hereafter amended, or the entry of an order, judgment or decree by operation of law or by a court having jurisdiction, which is not stayed, adjudging the Corporation a bankrupt or insolvent under, or ordering relief against the Corporation under, or approving as properly filed a petition seeking relief against the Corporation under, the provisions of any other now existing or future applicable bankruptcy or insolvency or other similar law of the United States of America or any state thereof, or appointing a receiver, liquidator, assignee, sequestrator, trustee or custodian of the Corporation or of all or any substantial portion of the property of the Corporation, or ordering the reorganization, winding up or liquidation of the affairs of the Corporation, or the expiration of 60 days after the filing of any involuntary petition against the Corporation seeking any of the relief described in this subheading without the petition being dismissed prior to that time;

(f) an event of default shall occur and be continuing under the Indenture; or

(g) receipt of notice from the Master Trustee to the effect that an “event of default” under the Master Indenture shall have occurred and be continuing.

The foregoing provision (b) of this heading is subject to the following limitation: if by reason of force majeure, the Corporation is unable in whole or in part to carry out the agreements on its part under the Loan Agreement, the Corporation shall not be deemed in default during the continuance of such inability. The term “force majeure” as used in the Loan Agreement shall mean, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides, earthquakes; fires; storms; droughts; floods; explosions; or breakage or accident to machinery, transmission pipes or canals.

Remedies. Whenever any Loan Default shall have occurred and be continuing, the Issuer and the Trustee shall, in addition to any other remedies provided in the Loan Agreement or by law, have the right, at its or their option without any further demand or notice, to take one or any combination of the following remedial steps:

(a) declare all amounts due under the Loan Agreement to be immediately due and payable, and upon notice to the Corporation the same will become immediately due and payable without further notice or demand; or

(b) declare all amounts due under the Master Note to be immediately due and payable, and upon notice to the Corporation the same will become immediately due and payable without further notice or demand; or

(c) take whatever other action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due under the Loan Agreement or under the Master Note or to enforce any other rights of the Trustee or the Issuer under the Loan Agreement or as the owner of a Master Indenture Obligation (as defined in the Master Indenture) issued under the Master Indenture.

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Any amounts collected pursuant to action under this heading will be paid into the Bond Fund pro-rata and applied in accordance with the provisions of the Indenture.

Unassigned Issuer Rights

Notwithstanding anything in the Loan Agreement to the contrary, upon the occurrence of an Event of Default thereunder that constitutes a breach of a provision of the Loan Agreement that is an Unassigned Issuer Right, the Issuer reserves the right to exercise (or refrain from exercising) remedies under the Loan Agreement with respect to such Event of Default; provided however that the Issuer shall give the Corporation at least ten days prior written notice of its intent to exercise such remedies. Any Event of Default occurring under the Loan Agreement that constitutes a breach of a provision thereof that is an Unassigned Issuer Right may not be waived without first obtaining the prior written consent of the Issuer.

Amendments, Changes and Modifications

The Loan Agreement may not be amended by the Issuer and the Corporation unless such amendment is consented to in writing by the Trustee and made in accordance with the Indenture. Copies of any such amendments will be provided to the Rating Agencies.

SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE

The following is a summary of certain provisions of the Amended and Restated Master Trust Indenture dated as of November 1, 1997 and supplements thereto (collectively, the “Master Indenture”). This summary does not purport to be comprehensive and reference should be made to the Master Indenture for a full and complete statement of its provisions.

Definitions of Certain Terms

Unless the context otherwise requires, the terms defined in this summary shall, for all purposes of this summary, have the meanings herein specified, to be equally applicable to both singular and plural forms of any of the terms herein defined.

“Annual Debt Service” means for each Fiscal Year the sum (without duplication) of (1) the aggregate amount of principal and interest becoming due and payable in such Fiscal Year on all Long- Term Indebtedness then Outstanding and (2) the aggregate amount of Master Indenture Obligation Payments becoming due and payable in such Fiscal Year, (in either case by scheduled maturity, acceleration, mandatory redemption or otherwise), less any amounts of such principal, interest or Master Indenture Obligation Payments to be paid during such Fiscal Year from (a) the proceeds of Indebtedness or (b) moneys or Governmental Obligations deposited in trust for the purpose of paying such principal, interest or Master Indenture Obligation Payments; provided that if a Financial Product Agreement has been entered into by any Member or Obligated Group Affiliate with respect to Long-Term Indebtedness, interest on such Long-Term Indebtedness will be included in the calculation of Annual Debt Service by including for each Fiscal Year an amount equal to the amount of interest payable on such Long-Term Indebtedness in such Fiscal Year at the rate or rates stated in such Long-Term Indebtedness plus any Financial Agreement Payments payable in such Fiscal Year minus any Financial Agreement Receipts receivable in such Fiscal Year; provided that in no event shall any calculation made pursuant to this clause result in a number less than zero being included in the calculation of Annual Debt Service.

“Annual Required Debt Service Coverage Ratio” means, for any Fiscal Year, the ratio determined by dividing Income Available for Debt Service by Annual Debt Service for such Fiscal Year.

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“Book Value” means, when used in connection with Property, Plant and Equipment or other Property of any Member or Obligated Group Affiliate, the value of such property, net of accumulated depreciation, as it is carried on the books of such Member or Obligated Group Affiliate and in conformity with generally accepted accounting principles, and when used in connection with Property, Plant and Equipment or other Property of the Obligated Group, means the aggregate of the values so determined with respect to such Property of each Member and Obligated Group Affiliate determined in such a way that no portion of such value of Property of any Member or Obligated Group Affiliate is included more than once.

“Controlling Member” means the Member designated by the Obligated Group Representative to establish and maintain control over an Obligated Group Affiliate.

“Corporation” means Main Line Health System, a Pennsylvania nonprofit, nonstock corporation, or any corporation that is the surviving, resulting or transferee corporation in any merger, consolidation or transfer of assets permitted under the Master Indenture.

“Fair Market Value,” when used in connection with Property, means the fair market value of such Property as determined by either:

(1) an appraisal of the portion of such Property which is real property made within five years of the date of determination by a “Member of the Appraisal Institute” and by an appraisal of the portion of such Property which is not real property made within five years of the date of determination by any expert, provided that any such appraisal will be performed by a person or firm which (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in any Member or Obligated Group Affiliate and (c) is not connected with any Member or Obligated Group Affiliate as an officer, employee, promoter, trustee, partner, director or person performing similar functions, adjusted for the period, not in excess of five years, from the date of the last such appraisal for changes in the implicit price deflator for the gross national product as reported by the United States Department of Commerce or its successor agency, or if such index is no longer published, such other index certified to be comparable and appropriate in an Officer’s Certificate delivered to the Master Trustee; or

(2) a bona fide offer for the purchase of such Property made on an arm’s length basis within six months of the date of determination, as established by an Officer’s Certificate.

“Financial Products Agreement” means an interest rate swap, cap, collar, option, floor, forward or other hedging agreement, arrangement or security, however denominated, identified to the Master Trustee in a certificate of the Obligated Group. Representative as having been entered into by a Member or an Obligated Group Affiliate with a Qualified Provider not for investment purposes but with respect to Indebtedness (which Indebtedness will be specifically identified in the certificate of the Obligated Group Representative) for the purpose of (1) reducing or otherwise managing the Member’s or Obligated Group Affiliate’s risk of interest rate changes or (2) effectively converting the Member’s or Obligated Group Affiliate’s interest rate exposure, in whole or in part, from a fixed rate exposure to a variable rate exposure, or from a variable rate exposure to a fixed rate exposure.

“Financial Product Payments” means payments periodically required to be paid to a counterparty by a Member or an Obligated Group Affiliate pursuant to a Financial Products Agreement.

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“Financial Product Receipts” means amounts periodically required to be paid to a Member or an Obligated Group Affiliate by a counterparty pursuant to a Financial Products Agreement.

“Fiscal Year” means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereafter designated by the Obligated Group Representative as the fiscal year of the Obligated Group.

“Governing Body” means, when used with respect to any Member or Obligated Group Affiliate, its board of directors, board of trustees or other board or group of individuals in which all of the powers of such Member or Obligated Group Affiliate are vested, except for those powers reserved to the corporate membership of such Member or Obligated Group Affiliate by the articles of incorporation or bylaws of such Member or Obligated Group Affiliate.

“Government Issuer” means any municipal corporation, political subdivision, state, territory or possession of the United States, or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof, which obligations would constitute Related Bonds under the Master Indenture.

“Government Obligations” means: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America; (2) obligations issued or guaranteed by any agency, department or instrumentality of the United States of America if the obligations issued or guaranteed by such entity are rated in one of the two highest rating categories of a Rating Agency (without regard to any gradation of such rating category); (3) certificates which evidence ownership of the right to the payment of the principal of and interest on obligations described in clauses (1) and/or (2), provided that such obligations are held in the custody of a bank or trust company in a special account separate from the general assets of such custodian; and (4) obligations the interest on which is excluded from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986, and the timely payment of the principal of and interest on which is fully provided for by the deposit in trust of cash and/or obligations described in clauses (1), (2) and/or (3).

“Guaranty” means all loan commitments and all obligations of any Member or Obligated Group Affiliate guaranteeing in any manner whatever, whether directly or indirectly, any obligation of any other Person which would, if such other Person were a Member or an Obligated Group Affiliate, constitute Indebtedness.

“Holder” whenever used with respect to an Master Indenture Obligation, means the registered owner of any Master Indenture Obligation in registered form or the bearer of any Master Indenture Obligation in coupon form which is not registered or is registered to bearer.

“Immaterial Affiliate” means a Person (whether or not an Obligated Group Affiliate) whose total net assets, as shown on its financial statements for its most recently completed fiscal year, were less than 10% of the combined or consolidated net assets of the Members and the Obligated Group Affiliates.

“Income Available for Debt Service” means, as to any period of time, the excess of revenues over expenses (or, in the case of for-profit Members or Obligated Group Affiliates, net income after taxes) of the Obligated Group for such period, to which will be added depreciation, amortization and interest (and Master Indenture Obligation Payments to the extent that such Master Indenture Obligation Payments are treated as an expense during such period of time in accordance with generally accepted accounting principles), provided that no such determination shall include (1) any gain or loss resulting from (a) the

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extinguishment of Indebtedness, (b) any disposition of capital assets not made in the ordinary course of business, (c) any discontinued operations or (d) adjustments to the value of assets or liabilities resulting from changes in generally accepted accounting principles, (2) unrealized gains on marketable securities held by a Member or an Obligated Group Affiliate as of the last date of such period of time, (3) unrealized losses on marketable securities held by a Member or an Obligated Group Affiliate as of the last date of such period of time unless such losses represent a permanent decline in value of such securities in accordance with generally accepted accounting principles or (4) any nonrecurring items of an extraordinary nature which do not involve the receipt, expenditure or transfer of assets.

“Indebtedness” means any Guaranty (other than any Guaranty by any Member or Obligated Group Affiliate of Indebtedness of any other Member or Obligated Group Affiliate) and any obligation of any Member or Obligated Group Affiliate (1) for borrowed money, (2) with respect to leases which are considered capital leases or (3) under installment sale agreements, in each case as determined in accordance with generally accepted accounting principles, provided, however, that if more than one Member or Obligated Group Affiliate shall have incurred or assumed a Guaranty of a Person other than a Member or an Obligated Group Affiliate, or if more than one Member or Obligated Group Affiliate will be obligated to pay any obligation, for purposes of any computations or calculations under the Master Indenture such Guaranty or obligation will be included only one time.

“Independent Consultant” means a firm (but not an individual) which (1) is in fact independent, (2) does not have any direct financial interest or any material indirect financial interest in any Member or any Obligated Group Affiliate, (3) is not connected with any Member or any Obligated Group Affiliate as an officer, employee, promoter, trustee, partner, director or person performing similar functions and (4) is a certified public accounting firm, a nationally recognized investment banker or a nationally recognized professional management consultant, and designated by the Obligated Group Representative qualified to pass upon questions relating to the financial affairs of facilities of the type or types operated by the Obligated Group and having the skill and experience necessary to render the particular opinion or report required by the provision of the Master Indenture in which such requirement appears.

“Industry Restrictions” means federal, state or other applicable governmental laws or regulations or general industry standards or general industry conditions placing restrictions and limitations on the rates, fees and charges to be fixed, charged and collected by the Members or Obligated Group Affiliates.

“Lien” means any mortgage or pledge of, or security interest in, or lien or encumbrance on, any Property, excluding Liens applicable to Property in which any Member or Obligated Group Affiliate has only a leasehold interest, unless the Lien is with respect to such leasehold interest.

“Loan Agreement” means the Loan Agreement dated as of ______1, 2017, by and between the Issuer and the Corporation.

“Long-Term Indebtedness” means Indebtedness having an original maturity greater than one year or renewable at the option of a Member or an Obligated Group Affiliate for a period greater than one year from the date of original incurrence or issuance thereof unless, by the terms of such Indebtedness, no Indebtedness is permitted to be outstanding thereunder for a period of at least 30 consecutive days during each calendar year.

“Master Indenture Obligation” means any obligation of the Obligated Group issued pursuant to the Master Indenture, as a joint and several obligation of each Member, which may be in any form set forth in a Related Supplement, including, but not limited to, bonds, obligations, debentures, reimbursement agreements, Loan Agreement or leases. Reference to a Series of Master Indenture

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Obligations or to Master Indenture Obligations of a Series means Master Indenture Obligations or Series of Master Indenture Obligations issued pursuant to a single Related Supplement.

“Master Indenture Obligation Payments” means payments (however designated) required under any Master Indenture Obligation then Outstanding which does not constitute Indebtedness.

“Material Obligated Group Affiliate” means any Obligated Group Affiliate whose total net assets, as shown on its financial statements for its most recently completed fiscal year, were equal to or greater than 10% of the combined or consolidated net assets of the Members and the Obligated Group Affiliates for the most recently completed Fiscal Year of the Obligated Group.

“Member” means the Corporation and each other Person which is obligated under the Master Indenture to the extent and in accordance with the Master Indenture, from and after the date upon which such Person joins the Obligated Group, but excluding any Person which withdraws from the Obligated Group to the extent and in accordance with the Master Indenture, from and after the date of such withdrawal.

“Obligated Group” means the Corporation and each other Person which becomes and is a Member of the Obligated Group pursuant to the terms of the Master Indenture.

“Obligated Group Affiliate” means any Person which has been so designated by the Obligated Group Representative in accordance with the Master Indenture so long as such Person has not been further designated by the Obligated Group Representative as no longer being an Obligated Group Affiliate in accordance with the Master Indenture. The Tenth Supplemental Master Indenture lists Main Line Health, Inc., Main Line Hospitals, Inc., Mirmont Alcohol Rehabilitation Center and Riddle Memorial Hospital, as the current Obligated Group Affiliates.

“Obligated Group Representative” means the Corporation or such other Member (or Members acting jointly) as may have been designated pursuant to written notice to the Master Trustee executed by all of the Members.

“Officer’s Certificate” means a certificate signed by an Authorized Representative of the Obligated Group Representative.

“Outstanding,” when used with reference to Indebtedness or Master Indenture Obligations means as of any date of determination, all Indebtedness or Master Indenture Obligations theretofore issued or incurred and not paid and discharged other than (1) Master Indenture Obligations theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, (2) Master Indenture Obligations in lieu of which other Master Indenture Obligations have been authenticated and delivered or which have been paid pursuant to the provisions of a Related Supplement regarding mutilated, destroyed, lost or stolen Master Indenture Obligations unless proof satisfactory to the Master Trustee has been received that any such Master Indenture Obligation is held by a bona fide purchaser, (3) any Master Indenture Obligation held by any Member of the Obligated Group and (4) Indebtedness deemed paid and no longer outstanding pursuant to the terms thereof; provided, however, that if two or more obligations which constitute Indebtedness represent the same underlying obligation (as when an Master Indenture Obligation secures an issue of Related Bonds and another Master Indenture Obligation secures repayment obligations to a bank under a letter of credit which secures such Related Bonds) for purposes of the various financial covenants contained in the Master Indenture, but only for such purposes, only one of such Master Indenture Obligations will be deemed Outstanding and the Master Indenture Obligation so deemed to be Outstanding will be that Master Indenture Obligation which produces the greatest amount of Maximum Annual Debt Service to be included in the calculation of such covenants.

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“Permitted Encumbrances” means and, includes:

(1) Any judgment lien or notice of pending action against any Member or Obligated Group Affiliate so long as (a) such judgment or pending action is being contested and execution thereon is stayed or while the period for responsive pleading has not lapsed or (b) the judgment has been paid or (c) the judgment is covered by insurance;

(2) (a) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law affecting any Property to (i) terminate such right, power, franchise, grant, license or permit (provided that the exercise of such a right would not materially and adversely affect the value thereof) or (ii) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Property; (b) any liens on any Property for taxes, assessments, levies, fees, water and sewer charges and other governmental and similar charges, and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and laborers, have been due for less than 60 days; (c) easements, rights-of- way, servitudes, restrictions and other minor defects, encumbrances and irregularities in the title to any Property which do not materially impair the use of such Property or materially and adversely affect the value thereof; (d) rights reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such Property in any manner, or materially and adversely affect the value thereof; and (e) to the extent that it affects title to any Property, the Master Indenture;

(3) Liens arising by reason of good faith deposits with any Member or Obligated Group Affiliate in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Member or Obligated Group Affiliate to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(4) Any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Member or Obligated Group Affiliate to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit sharing plans or other similar social security plans, or to share in the privileges or benefits required for companies participating in such arrangements, and any Lien in the nature of a banker’s lien or right of setoff with respect to deposits which any Member or Obligated Group Affiliate is not required to maintain with the bank in question;

(5) Any Lien arising by reason of any escrow established to pay debt service with respect to Indebtedness;

(6) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds;

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(7) Liens on moneys deposited by patients or others with any Member or Obligated Group Affiliate as security for or as prepayment for the cost of patient care, and any rights of residents of life care, elderly housing or similar facilities to entrance fees, endowment or similar funds deposited by or on behalf of such residents;

(8) Liens on Property received by any Member or Obligated Group Affiliate through gifts, grants or bequests; provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased or modified so as to apply to any Property of any Member or Obligated Group Affiliate not previously subject to such Lien unless such Lien following such increase or modification otherwise qualifies as a Permitted Encumbrance under the Master Indenture;

(9) Statutory rights of the United States of America by reason of federal funds made available under 42 U.S.C. Section 291 et seq. and similar rights under other federal and state statutes;

(10) Liens on funds established pursuant to the terms of any Related Supplement, Related Bond Indenture or related document in favor of the Master Trustee, a Related Bond Trustee or the registered owner of the Indebtedness issued pursuant to such related Supplement, Related Bond Indenture or related document;

(11) Liens constituting reservations contained in patents granted by the United States of America or any state thereof;

(12) Liens constituting rights of third-party payers to recoup excess reimbursement to any Member or Obligated Group Affiliate;

(13) Liens granted to insurance companies on the proceeds of insurance policies (provided that such Lien shall secure an amount not exceeding the premium owed to any such insurance company by a Member or an Obligated Group Affiliate);

(14) Liens required by any federal, state or local government as a condition to its making a grant or loan (except Loan made solely from the proceeds derived from the sale of Related Bonds) to, or its guaranteeing or insuring part or all of Indebtedness of, a Member or an Obligated Group Affiliate, but only if such Lien is limited to Property the acquisition of which has not been financed, directly or indirectly, with proceeds of Master Indenture Obligations or Related Bonds;

(15) Statutory rights of landlords with respect to the personal property of Members or Obligated Group Affiliates that are their tenants;

(16) Liens junior to Liens in favor of the Master Trustee in accordance with the Master Indenture;

(17) Liens in favor of the Master Trustee securing all Outstanding Master Indenture Obligations equally and ratably;

(18) Liens which are existing on the date of execution of the Master Indenture or existing on the date any Person becomes a Member of the Obligated Group or an Obligated Group Affiliate, provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased or modified to apply to any Property of any Member

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or Obligated Group Affiliate not subject to such Lien on such date, unless such Lien following such increase or modification otherwise qualifies as a Permitted Encumbrance under the Master Indenture;

(19) Liens on Property of a Person at the time such Person engages in a merger, consolidation, sale or conveyance pursuant to the Master Indenture; provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased or modified to apply to any Property of any Member or Obligated Group Affiliate not subject to such Lien on such date, unless such Lien following such increase or modification otherwise qualifies as a Permitted Encumbrance under the Master Indenture;

(20) Liens granted by a Member or Obligated Group Affiliate to another Member or Obligated Group Affiliate;

(21) Liens securing Indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the property subject to such Liens; provided that such Liens shall not apply to any property theretofore owned by a Member or Obligated Group Affiliate other than any theretofore unimproved real property on which the property so constructed or improved is located; and

(22) Any other Lien, provided that the aggregate Value of Property subject to Liens created or permitted to exist pursuant to this clause (22) shall not exceed 15% of the total net assets of the Obligated Group (as shown on the financial statements of the Obligated Group for most recent fiscal year for which financial statements are available immediately preceding the date that such Lien is created).

“Person” means an individual, corporation, firm, association, partnership, trust or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

“Property” means any and all rights, titles and interests in and to any and all property of any Member, whether real or personal, tangible or intangible and wherever situated.

“Property, Plant and Equipment” means all Property of any Member which is considered property, plant and equipment of any Member under generally accepted accounting principles.

“Qualified Provider” means any financial Corporation or insurance company which is a party to a Financial Products Agreement if the unsecured long-term debt obligations of such financial Corporation or insurance company (or of the parent or a subsidiary of such financial Corporation or insurance company if such parent or subsidiary guarantees the performance of such financial Corporation or insurance company under such Financial Products Agreement), or obligations secured or supported by a letter of credit, contract, guarantee, agreement, insurance policy or surety bond issued by such financial Corporation or insurance company (or such guarantor parent or subsidiary), (1) in the case of Financial Product Agreements with a term of less than ten years, are rated in one of the three highest rating categories of a national rating agency (without regard to any gradation of such rating category) at the time of the execution and delivery of the Financial Products Agreement and (2) in the case of Financial Product Agreements with a term of ten years or more, are rated in one of the two highest rating categories of a national rating agency (without regard to any gradation of such rating category) at the time of the execution and delivery of the Financial Products Agreement.

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“Rating Agency” means Fitch Investors Service, L.P., Moody’s Investors Service, Inc., Standard & Poor’s Rating Service (a division of The McGraw-Hill Companies, Inc.) and any other national rating agency then rating Master Indenture Obligations or Related Bonds.

“Related Bonds” means the revenue bonds or other obligations issued by any Government Issuer, the proceeds of which are loaned or otherwise made available to a Member or an Obligated Group Affiliate in consideration of the execution, authentication and delivery of an Master Indenture Obligation or Master Indenture Obligations to or for the order of such Government Issuer.

“Related Bond Indenture” means any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds are issued.

“Related Bond Issuer” means the Government Issuer of any issue of Related Bonds.

“Related Bond Trustee” means the trustee and its successors in the trusts created under any Related Bond Indenture, and if there is no such trustee, means the Related Bond Issuer.

“Related Supplement” means an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture.

“Required Payment” means any payment, whether at maturity, by acceleration, upon proceeding for redemption or otherwise, including the purchase price of Related Bonds tendered or deemed tendered for purchase pursuant to the terms of a Related Bond Indenture, required to be made by any Member under the Master Indenture, any Related Supplement or any Master Indenture Obligation.

“Series 2017A Master Note” shall mean the promissory note of the Corporation, constituting a Master Indenture Obligation, evidencing the Corporation’s obligation to repay the loan made to the Corporation under the Loan Agreement.

“Tenth Supplemental Master Indenture” means the Tenth Supplement to Amended and Restated Master Trust Indenture dated as of ______1, 2017 between the Corporation and the Master Trustee pursuant to which the Series 2017A Master Note is being issued.

“Value,” when used with respect to Property, means the aggregate value of all such Property, with each component of such Property valued, at the option of the Obligated Group Representative, at either its Fair Market Value or its Book Value.

The Master Indenture Generally

The Master Indenture authorizes the issuance of Master Indenture Obligations by the Obligated Group, which may be unsecured general obligations or, to the extent permitted by the Master Indenture, secured by a claim on Property. The Series 2017A Master Note is unsecured. A Master Indenture Obligation is stated in the Master Indenture to be a joint and several obligation of the Corporation and any future Members of the Obligated Group. The Corporation is the sole Member of the Obligated Group at this time. The following are summaries of certain provisions of the Master Indenture. Other provisions are summarized in this Official Statement under the caption “SECURITY FOR THE SERIES 2017A Bonds.” This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Master Indenture.

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Authorization, Issuance and Form of Master Indenture Obligations

Each Member authorizes to be issued from time to time Master Indenture Obligations or Series of Master Indenture Obligations, without limitation as to amount, except as provided in the Master Indenture or as may be limited by law, and subject to the terms, conditions and limitations established in the Master Indenture and in any Related Supplement. The Series 2017A Master Note is to be issued as a Master Indenture Obligation pursuant to the Tenth Supplemental Master Indenture and in order to secure the Loan.

Payments by Obligated Group Affiliates with Respect to Master Indenture Obligations

Each Member jointly and severally agrees to pay or cause to be paid promptly all Required Payments at the place, on the dates and in the manner provided in the Master Indenture or in any Related Supplement or Master Indenture Obligation, and faithfully to observe and perform all of the conditions, covenants and requirements of the Master Indenture, any Related Supplement and any Master Indenture Obligation. Each Member acknowledges that the time of such payment and performance is of the essence of the Master Indenture Obligations under the Master Indenture.

The obligation of each Member with respect to Required Payments shall not be abrogated, prejudiced or affected by:

(a) the granting of any extension, waiver or other concession given to any Member by the Master Trustee or any Holder or by any compromise, release, abandonment, variation, relinquishment or renewal of any of the rights of the Master Trustee or any Holder or anything done or omitted or neglected to be done by the Master Trustee or any Holder in exercise of the authority, power and discretion vested in them by the Master Indenture, or by any other dealing or thing which, but for this provision, might operate to abrogate, prejudice or affect such obligation; or

(b) the liability of any other Member under the Master Indenture ceasing for any cause whatsoever, including the release of any other Member pursuant to the provisions of the Master Indenture or any Related Supplement from membership in the Obligated Group; or

(c) any Member’s failing to become liable as, or losing eligibility to become, a Member of the Obligated Group with respect to an Master Indenture Obligation.

Subject to the provisions of the Master Indenture permitting withdrawal from the Obligated Group, the obligation of each Member to make Required Payments is a continuing one and is to remain in effect until all Required Payments have been paid in full in accordance with the Master Indenture. All moneys from time to time received by the Obligated Group Representative or the Master Trustee to reduce liability on Master Indenture Obligations, whether from or on account of the Members or otherwise, will be regarded as payments in gross without any right on the part of any one or more of the Members to claim the benefit of any moneys so received until the whole of the amounts owing on Master Indenture Obligations has been paid or satisfied and so that in the event of any such Member’s filing bankruptcy, the Obligated Group Representative or the Master Trustee will be entitled to prove up the total indebtedness or other liability on Master Indenture Obligations Outstanding as to which the liability of such Member has become fixed.

Each Master Indenture Obligation will be a primary obligation and shall not be treated as ancillary to or collateral with any other obligation and will be independent of any other security so that the covenants and agreements of each Member under the Master Indenture will be enforceable without first having recourse to any such security or source of payment and without first taking any steps or

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proceedings against any other Person. The Obligated Group Representative and the Master Trustee are each empowered to enforce each covenant and agreement of each Member under the Master Indenture and to enforce the making of Required Payments. Each Member authorizes each of the Obligated Group Representative and the Master Trustee to enforce or refrain from enforcing any covenant or agreement of the Members under the Master Indenture and to make any arrangement or compromise with any particular Member or Members as the Obligated Group Representative or the Master Trustee may deem appropriate, consistent with the Master Indenture and any Related Supplement. Each Member waives in favor of the Obligated Group Representative and the Master Trustee all rights against the Obligated Group Representative, the Master Trustee and any other Member. insofar as is necessary to give effect to any of the provisions of the Master Indenture.

Transfers from Obligated Group Affiliates. Each Controlling Member agrees that it shall cause each of its Obligated Group Affiliates to pay, loan or otherwise transfer to the Obligated Group Representative such amounts as are necessary to enable the Members to comply with the provisions of the Master Indenture including without limitation the provisions of the Master Indenture described above under “Payments by Obligated Group Affiliates with Respect to Master Indenture Obligations.”

Designation of Obligated Group Affiliates.

(a) The Obligated Group Representative by resolution of its Governing Body may from time to time designate Persons as Obligated Group Affiliates in addition to those that currently are Obligated Group Affiliates. In connection with such designation, the Obligated Group Representative shall designate for each Obligated Group Affiliate a Member to serve as the Controlling Member for such Obligated Group Affiliate. Main Line Health, Inc., Main Line Hospitals, Inc., Mirmont Alcohol Rehabilitation Center and Riddle Memorial Hospital are the current Obligated Group Affiliates. The Corporation is the Controlling Member for each of the Obligated Group Affiliates. The Obligated Group Representative shall at all times maintain an accurate and complete list of all Persons designated as Obligated Group Affiliates (and of the Controlling Members for such Obligated Group Affiliates) and file such list with the Master Trustee annually on or before August 1 of each year.

(b) Each Controlling Member shall cause each of its Obligated Group Affiliates to provide the Obligated Group Representative with a resolution of its Governing Body accepting such Person’s designation as an Obligated Group Affiliate and acknowledging the provisions of the Master Indenture which affect the Obligated Group Affiliates. So long as such Person is designated as an Obligated Group Affiliate, the Controlling Member of such Obligated Group Affiliate shall either (i) maintain, directly or indirectly, control of such Obligated Group Affiliate, including the power to direct management, policies, disposition of assets and other actions of the Obligated Group Affiliate to the extent necessary to cause such Obligated Group Affiliate to comply with the terms of the Master Indenture, whether through the ownership of voting securities, by contract, corporate membership, reserved powers or the power to appoint corporate members, trustees or directors, or otherwise or (ii) execute and have in effect such contracts or other agreements which the Obligated Group Representative and the Controlling Member, in the judgment of their respective Governing Bodies, deem sufficient for the Controlling Member to cause such Obligated Group Affiliate to comply with the terms of the Master Indenture.

(c) Each Controlling Member covenants and agrees that it will cause each of its Obligated Group Affiliates to comply with any and all directives of the Controlling Member given pursuant to the provisions of the Master Indenture.

(d) Any Person shall cease to be an Obligated Group Affiliate (and thus not subject to the terms of the Master Indenture) upon adoption of a resolution of the Governing Body of the Obligated Group Representative declaring such Person no longer an Obligated Group Affiliate. The Obligated

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Group Representative shall give each Rating Agency then rating any Obligations or Related Bonds 30 days prior notice of any Person ceasing to be an Obligated Group Affiliate.

Maintenance of Properties, Etc. Each Member agrees to, and each Controlling Member agrees to cause each of its Obligated Group Affiliates to:

(a) maintain its Property, Plant and Equipment in accordance with all valid and applicable governmental laws, ordinances, approvals and regulations including, without limitation, such zoning, sanitary, pollution and safety ordinances and laws and such rules and regulations thereunder as may be binding upon it, provided, however, that no Member or Obligated Group Affiliate will be required to comply with any law, ordinance, approval or regulation as long as it shall in good faith contest the validity thereof;

(b) maintain and operate its Property, Plant and Equipment in reasonably good working condition, and from time to time make or cause to be made all needful and proper replacements, repairs and improvements so that the operations of such Member or Obligated Group Affiliate will not be materially impaired;

(c) pay and discharge all applicable taxes, assessments, governmental charges of any kind whatsoever, water rates, meter charges and other utility charges which may be or have been assessed or which may have become Liens upon the Property, Plant and Equipment, and will make such payments or cause such payments to be made in due time to prevent any delinquency thereon or any forfeiture or sale of any part of the Property, Plant and Equipment, and, upon request, will furnish to the Master Trustee receipts for all such payments, or other evidences satisfactory to the Master Trustee; provided, however, that no Member or Obligated Group Affiliate will be required to pay any tax, assessment, rate or charge as long as it shall in good faith contest the validity thereof, and as long as it shall have set aside reserves with respect thereto that, in the opinion of the Governing Body of the Obligated Group Representative, are adequate;

(d) pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Master Indenture Obligations issued and Outstanding under the Master Indenture) the validity, amount or collectability of which is being contested in good faith;

(e) all times comply with all terms, covenants and provisions of any Liens at such time existing upon its Properties or any part thereof or securing any of its Indebtedness noncompliance with which would have a material adverse effect on the operations of the Obligated Group or its Properties; and

(f) use its best efforts (as long as it is in its best interests and will not materially adversely affect the interests of the Holders) to maintain all permits, licenses and other governmental approvals necessary for the operation of its Properties.

(g) Nothing in the Master Indenture will be construed to require a Member or Obligated Group Affiliate to maintain any permit, license or other governmental approval, or to continue to operate or maintain any Property, Plant or Equipment, if, in the reasonable good faith judgment of the Member or Obligated Group Affiliate, such permit, license, governmental approval or Property, Plant or Equipment is, or within the next succeeding 24 calendar months is reasonably expected to become, inadequate, obsolete, unsuitable, undesirable or unnecessary for the business of the Obligated Group and failure to maintain or operate such permit, license, governmental approval, Property, Plant or Equipment will not materially adversely impair the operation of the Obligated Group and the Obligated Group Affiliate.

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Against Encumbrances. Each Member agrees that it will not, and each Controlling Member agrees that it will not permit any of its Obligated Group Affiliates to, create, assume or suffer to exist any Lien upon the Property of the Obligated Group, except for Permitted Encumbrances. Each Member further covenants that it will not, and each Controlling Member agrees that it will not permit any of its Obligated Group Affiliates to, incur or to have Outstanding Indebtedness or Obligations secured by Liens (whether or not such Liens constitute Permitted Encumbrances) if the aggregate principal amount of such secured Indebtedness and Obligations then Outstanding would exceed 25% of the aggregate principal amount of all Indebtedness and Obligations then Outstanding.

Debt Coverage. Within 150 days after the end of each Fiscal Year (commencing with the Fiscal Year ending June 30, 1998) the Obligated Group Representative shall compute the Annual Required Debt Service Coverage Ratio for the Members and the Obligated Group Affiliates for such Fiscal Year and furnish to the Master Trustee an Officer’s Certificate setting forth the results of such computation. The Obligated Group Representative agrees that if at the end of such Fiscal Year the Annual Required Debt Service Coverage Ratio shall have been less than 1.1 to 1, it will promptly employ an Independent Consultant to make recommendations as to a revision of the rates, fees and charges of the Members and the Obligated Group Affiliates or the methods of operation of the Members and the Obligated Group Affiliates to increase the Annual Debt Service Coverage Ratio to at least 1.1 to 1 for subsequent Fiscal Years (or, if in the opinion of the Independent Consultant, the attainment of such level is impracticable, to the highest practicable level). Copies of the recommendations of the Independent Consultant will be filed with the Master Trustee. Each Member shall, and each Controlling Member shall cause each of its Obligated Group Affiliates to, promptly upon its receipt of such recommendations, subject to applicable requirements or restrictions imposed by law, revise its rates, fees and charges or its methods of operation or collections and shall take such other action as will be in conformity with such recommendations.

If the Members and the Obligated Group Affiliates comply in all material respects with the reasonable recommendations of the Independent Consultant with respect to their rates, fees, charges and methods of operation or collection, the Members and the Obligated Group Affiliates will be deemed to have complied with the covenants described in the preceding paragraph for such Fiscal Year, notwithstanding that the Annual Required Debt Service Coverage Ratio will be less than 1.1 to 1; provided, however, that an Event of Default shall exist if the Annual Required Debt Service Coverage Ratio is less than 1 to 1 for any Fiscal Year. Nevertheless, neither the Members nor the Obligated Group Affiliates will be excused from taking any action or performing any duty required under the Master Indenture and no other Event of Default will be waived by the operation of the provisions described in the preceding paragraph.

Notwithstanding the foregoing, Members and Obligated Group Affiliates may permit the rendering of services or the use of their Property without charge or at reduced charges, at the discretion of the Governing Body of such Member or Obligated Group Affiliate, to the extent necessary for maintaining its tax-exempt status and its eligibility for grants, Loan, subsidies or payments from governmental entities, or in compliance with any recommendation for free services that may be made by an Independent Consultant.

Merger, Consolidation, Sale or Conveyance. Each Member agrees that it will not, and each Controlling Member agrees that it will not permit its Obligated Group Affiliates to, merge or consolidate with any other Person that is not a Member or an Obligated Group Affiliate or sell or convey all or substantially all of its assets to any Person that is not a Member or an Obligated Group Affiliate unless:

(a) After giving effect to the merger, consolidation, sale or conveyance,

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(i) the successor or surviving corporation (hereinafter, the “Surviving Corporation”) will be a Member or Obligated Group Affiliate, or

(ii) the Surviving Corporation shall

(A) be a corporation organized and existing under the laws of the United States of America or any State thereof and

(B) in the case of a transaction involving a Member, be a Member pursuant to the provisions of the Master Indenture and, pursuant to the Related Supplement required by the provisions of the Master Indenture, and shall have expressly assumed in writing the due and punctual payment of all Required Payments of the disappearing Member under the Master Indenture; and

(b) The Master Trustee receives an Officer’s Certificate to the effect that no Member, immediately after the date of the proposed merger, consolidation, sale or conveyance, would be in default in the performance or observance of any covenant or condition of the Master Indenture or any Master Indenture Obligation issued under the Master Indenture; and

(c) So long as any Related Bonds are Outstanding, the Master Trustee receives a Favorable Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that. under then existing law, the consummation of such merger, consolidation, sale or conveyance, in and of itself, would not result in the inclusion of interest on such Related Bonds in gross income for purposes of federal income taxation and that such merger, consolidation, sale or conveyance complies with the provisions of the Master Indenture, and

(d) The Master Trustee receives an Opinion of Counsel, in form and substance satisfactory to the Master Trustee, to the effect that (i) all conditions relating to such merger, consolidation, sale or conveyance have been complied with and it is proper for the Master Trustee to join in the execution of any instrument required to be executed and delivered; (ii) the Surviving Corporation meets the conditions set forth in the Master Indenture and is liable on all Master Indenture Obligations then Outstanding; and (iii) under then existing law, such merger, consolidation, sale or conveyance will not subject any Master Indenture Obligations to the registration provisions of the Securities Act of 1933, as amended (or that such Master Indenture Obligations have been so registered if registration is required); and

(e) The Surviving Corporation will be substituted for its predecessor in interest in all Master Indenture Obligations and agreements then in effect which affect or relate to any Master Indenture Obligation, and the Surviving Corporation shall execute and deliver to the Master Trustee appropriate documents in order to effect the substitution.

From and after the effective date of such substitution (as set forth in the above-mentioned documents), the Surviving Corporation will be treated as though it were a Member or an Obligated Group Affiliate, as the case may be, as of the date of the execution of the Master Indenture and shall thereafter have the right to participate in transactions under the Master Indenture relating to Master Indenture Obligations to the same extent as the other Members and Obligated Group Affiliates. All Master Indenture Obligations issued under the Master Indenture on behalf of a Surviving Corporation shall have the same legal rank and benefit under the Master Indenture as Master Indenture Obligations issued on behalf of any other Member.

Except as may be expressly provided in any Related Supplement, the ability of any Member or Obligated Group Affiliate to merge or consolidate with any Person that is a Member or Obligated Group

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Affiliate after such merger or consolidation or to sell or convey all or substantially all of its assets to any Person that is a Member or Obligated Group Affiliate after such sale or conveyance is not limited by the provisions of the Master Indenture.

Membership in Obligated Group. Additional Members may be added to the Obligated Group from time to time, provided that prior to such addition the Master Trustee receives:

(a) a copy of a resolution of the Governing Body of the proposed new Member which authorizes the execution and delivery of a Related Supplement and compliance with the terms of the Master Indenture; and

(b) a Related Supplement executed by the Corporation, the new Member and the Master Trustee pursuant to which the proposed new Member

(i) agrees to become a Member, and

(ii) agrees to be bound by the terms of the Master Indenture, the Related Supplements and the Master Indenture Obligations, and

(iii) irrevocably appoints the Obligated Group Representative as its agent and attorney-in-fact and grants to the Obligated Group Representative full power to execute Related Supplements authorizing the issuance of Master Indenture Obligations or Series of Master Indenture Obligations; and

(c) an Opinion of Counsel to the proposed new Member to the effect that the proposed new Member has taken all necessary action to become a Member, and upon execution of the Related Supplement, such proposed new Member will be bound by the terms of the Master Indenture; and

(d) an Officer’s Certificate to the effect that immediately after the addition of the proposed new Member, no Member would be in default in the performance or observance of any term of the Master Indenture; and

(e) a Favorable Opinion of Bond Counsel to the effect that the addition of the proposed new Member:

(i) will not, in and of itself, result in the inclusion of interest on any Related Bonds in gross income for purposes of federal income taxation; and

(ii) will not cause the Master Indenture or any Master Indenture Obligations to be subject to registration under federal or state securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred).

Withdrawal from Obligated Group. Any Member may withdraw from the Obligated Group and be released from further liability or obligation under the provisions of the Master Indenture, provided that prior to such withdrawal the Master Trustee receives an Officer’s Certificate to the effect that immediately following the withdrawal of such Member, no remaining Member would be in default in the performance or observance of any term of the Master Indenture.

Upon compliance with the conditions contained in the Master Indenture and described above, the Master Trustee shall execute any documents reasonably requested by the withdrawing Member to

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evidence the termination of such Member’s obligations under the Master Indenture, under all Related Supplements and under all Master Indenture Obligations.

Preparation and Filing of Financial Statements, Reports and Other Information

(a) Each Member covenants that it will keep, and each Controlling Member covenants that it will cause the Obligated Group Affiliates to keep, adequate records and books of accounts in which complete and correct entries will be made (said books will be subject to the inspection of the Master Trustee during regular business hours after reasonable notice).

(b) The Obligated Group Representative covenants that it will furnish to the Master Trustee:

(i) As soon as practicable, but in no event more than five months after the last day of each Fiscal Year beginning with the Fiscal Year ending June 30, 1998, (a) a financial report for each Member for such Fiscal Year certified by a firm of nationally recognized independent certified public accountants approved by the Obligated Group Representative prepared on a combined or consolidated basis to include the results of operations of all Persons required to be consolidated or combined with such Member in accordance with generally accepted accounting principles and containing an audited combined balance sheet as of the end of such Fiscal Year and an audited combined statement of operations and changes in net assets for such Fiscal Year and an audited combined statement of cash flows for such Fiscal Year; (b) an accompanying unaudited balance sheet, statement of operations and changes in net assets prepared on a combined basis to reflect only the operations of the Members and Material Obligated Group Affiliates which have been required in accordance with generally accepted accounting principles to be included in such report, showing in each case in comparative form the financial figures for the preceding Fiscal Year; and (c) a statement to the effect that nothing has come to the attention of such accountants in connection with the performance of their audit for such Fiscal Year that would cause such accountants to believe that the Corporation failed to comply with any term, covenant, provision, or condition relating to Debt Coverage in the Master Indenture, insofar as it relates to accounting matters, or if such accountant shall have knowledge of any such failure to comply, it shall disclose in such statement such failure and the date thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any failure); provided that such accountants may qualify their statements to the effect that the audit was not primarily directed at obtaining knowledge of such noncompliance.

(ii) If the reports referred to in subsection (i) above do not include the results of operations of any Material Obligated Group Affiliate, as soon as practicable, but in no event more than five months after the last day of each Fiscal Year, beginning with the Fiscal Year ending June 30, 1998, a financial report for such Material Obligated Group Affiliate for such Fiscal Year certified by a firm of nationally recognized independent certified public accountants approved by the Obligated Group Representative, prepared on a combined or consolidated basis to include the results of operations of all Persons required to be consolidated or combined with such Material Obligated Group Affiliate in accordance with generally accepted accounting principles, and containing an audited combined balance sheet as of the end of such Fiscal Year and an audited combined statement of changes in operations and changes in net assets for such Fiscal Year and an audited combined statement of cash flows for such Fiscal Year, together with an accompanying unaudited balance sheet, statement of operations and changes in net assets prepared on a combined basis to reflect only the operations of the Material Obligated Group Affiliates, showing in each case in comparative form the financial figures for the preceding Fiscal Year, and the statement that such accountants have obtained no knowledge of any default by such Material Obligated Group Affiliate in the fulfillment of any of the terms, covenants, provisions or

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conditions of the Master Indenture, or if such accountant shall have obtained knowledge of any such default or defaults, they shall disclose in such statements the default or defaults and the dates thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default).

(iii) As soon as practicable, but in no event more than six months after the last day of each Fiscal Year, beginning with the Fiscal Year ending June 30, 1998, a balance sheet, statement of operations and changes in net assets including all the Members and Material Obligated Group Affiliates prepared based on the accompanying unaudited combined schedules delivered with the audited financial statements described in subsections (i) and (ii) above (such balance sheet, statement of operations and changes in net assets being referred to in the Master Indenture as the “Obligated Group Financial Statements”); together with a certificate of the chief financial officer of the Obligated Group Representative stating that the Obligated Group Financial Statements were prepared in accordance with generally accepted accounting principles (except for required consolidations) and that the Obligated Group Financial Statements reflect the results of the operations of only the Members and the Material Obligated Group Affiliates and all Members and Material Obligated Group Affiliates are included.

(iv) At the time of the delivery of the Obligated Group Financial Statements, a certificate of the chief financial officer of the Obligated Group Representative, stating that the Obligated Group Representative has made a review of the activities of each Member and Material Obligated Group Affiliate during the preceding Fiscal Year for the purpose of determining whether or not the Members and Material Obligated Group Affiliates have complied with all of the terms, provisions and conditions of the Master Indenture and that each Member and Material Obligated Group Affiliate has kept, observed, performed and followed each and every covenant, provision and condition of the Master Indenture on its part to be performed and is not in default in the performance or observance of any of the terms, covenants, provisions or conditions, or if any Member or Material Obligated Group Affiliate will be in default such certificate shall specify all such defaults and the nature thereof.

(v) Notwithstanding the foregoing, the audited and unaudited financial statements referred to above may include the results of operation and financial position of Immaterial Affiliates, and such results of operation and financial position may be considered as if they were a portion of the results of operation and financial position of the Members and the Obligated Group Affiliates for all purposes of the Master Indenture.

Events of Default

Each of the following events will be an Event of Default under the Master Indenture:

(a) Failure on the part of the Obligated Group to make due and punctual payment of the principal of, redemption premium, if any, or interest on any Master Indenture Obligation.

(b) Any Member shall fail to observe or perform any other covenant or agreement under the Master Indenture (including covenants or agreements contained in any Related Supplement or Master Indenture Obligation) for a period of 30 days after the date on which written notice of such failure, requiring the failure to be remedied, shall have been given to the Obligated Group Representative by the Master Trustee or to the Obligated Group Representative and the Master Trustee by the Holders of 25% in aggregate principal amount of Outstanding Master Indenture Obligations (provided that if such failure can be remedied but not within such 30-day period, such failure shall not become an Event of Default for

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so long as the Obligated Group Representative shall diligently proceed to remedy the failure in accordance with and subject to any directions or limitations of time established by the Master Trustee).

(c) Any Member shall default in the payment of Indebtedness (other than Indebtedness secured by an Master Indenture Obligation) in an aggregate outstanding principal amount equal to the greater of one million dollars ($1,000,000) or one percent (1%) of the aggregate principal amount of all Long-Term Indebtedness of the Obligated Group then Outstanding, and any grace period, for such payment shall have expired, or an event of default as defined in any mortgage, indenture or instrument under which any Indebtedness is secured or evidenced, shall occur; provided, however, that such default shall not constitute an Event of Default within the meaning of the Master Indenture, if, within 30 days or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, (i) any Member good faith commences proceedings to contest the existence or payment of such Indebtedness, and (ii) sufficient moneys are deposited in escrow with a bank or trust company or a bond acceptable to the Master Trustee is posted for the payment of such Indebtedness.

(d) A court having jurisdiction shall enter a decree or order for relief in respect of any Member in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of any Member or for any substantial part of the Property of any Member, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days.

(e) Any Member shall commence a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of any Member or for any substantial part of its Property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any corporate action in furtherance of the foregoing.

(f) An event of default shall exist under any Related Bond Indenture.

(g) An event of default shall exist under any agreement with the insurer of any Related Bonds or Obligations.

The Obligated Group Representative agrees that, as soon as practicable, and in any event within ten days after such event, the Obligated Group Representative shall notify the Master Trustee of any event which is an Event of Default under the Master Indenture which has occurred and is continuing, which notice shall state the nature of such event and the action which the Members of the Obligated Group propose to take with respect thereto.

Acceleration; Annulment of Acceleration

(a) Upon the occurrence and during the continuation of an Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than 50% in aggregate principal amount of Outstanding Master Indenture Obligations, shall, by notice to the Obligated Group Representative, declare all Outstanding Master Indenture Obligations immediately due and payable. Upon such declaration of acceleration, all Outstanding Master Indenture Obligations will be immediately due and payable. If the terms of any Related Supplement give a Person the right to consent to acceleration of the Master Indenture Obligations issued pursuant to such Related Supplement, the Master Indenture Obligations issued pursuant to such Related Supplement may not be accelerated by the Master

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Trustee unless such consent is properly obtained pursuant to the terms of such Related Supplement. In the event of acceleration, an amount equal to the aggregate principal amount of all Outstanding Master Indenture Obligations, plus all interest accrued thereon and, to the extent permitted by applicable law, which accrues on such principal and interest to the date of payment, will be due and payable on the Master Indenture Obligations.

(b) At any time after the Master Indenture Obligations have been declared to be due and payable, and before the entry of a final judgment or decree in any proceeding instituted with respect to the Event of Default that resulted in the declaration of acceleration, the Master Trustee may annul such declaration and its consequences if:

(i) the Obligated Group has paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all payments then due on all Outstanding Master Indenture Obligations (other than payments then due only because of such declaration); and

(ii) the Obligated Group has paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all fees and expenses of the Master Trustee then due; and

(iii) the Obligated Group has paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all other amounts then payable by the Obligated Group under the Master Indenture; and

(iv) every Event of Default (other than a default in the payment of the principal or other payments of such Master Indenture Obligations then due only because of such declaration) has been remedied.

No such annulment shall extend to or affect any subsequent Event of Default or impair any right with respect to any subsequent Event of Default.

Additional Remedies and Enforcement of Remedies

(a) Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than 50% in aggregate principal amount of the Outstanding Master Indenture Obligations (and upon indemnification of the Master Trustee to its satisfaction for any such request), shall, proceed to protect and enforce its rights and the rights of the Holders under the Master Indenture by such proceedings as the Master Trustee may deem expedient, including but not limited to:

(i) Enforcement of the right of the Holders to collect amounts due or becoming due under the Master Indenture Obligations;

(ii) Civil action upon all or any part of the Master Indenture Obligations;

(iii) Civil action to require any Person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Master Indenture Obligations to account as if it were the trustee of an express trust for the Holders of Master Indenture Obligations;

(iv) Civil action to enjoin any acts which may be unlawful or in violation of the rights of the Holders of Master Indenture Obligations; and

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(v) Enforcement of any other right or remedy of the Holders conferred by law or by the Master Indenture.

(b) Regardless of the occurrence of an Event of Default, if requested in writing by the Holders of not less than 50% in aggregate principal amount of the Outstanding Master Indenture Obligations (and upon indemnification of the Master Trustee to its satisfaction for such request), the Master Trustee shall institute and maintain such proceedings as it may be advised will be necessary or expedient (i) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation of the Master Indenture, or (ii) to preserve or protect the interests of the Holders. However, the Master Trustee shall not comply with any such request or institute and maintain any such proceeding that is in conflict with any applicable law or the provisions of the Master Indenture or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interests of the Holders not making such request.

Application of Moneys After Default. During the continuance of an Event of Default, all moneys received by the Master Trustee pursuant to any right given or action taken under the provisions of the Master Indenture relating to Events of Default (after payment of the costs of the proceedings resulting in the collection of such moneys and payment of all fees, expenses and other amounts owed to the Master Trustee) will be applied as follows:

(a) Unless all Outstanding Master Indenture Obligations have become or have been declared due and payable (or if any such declaration is annulled in accordance with the terms of the Master Indenture):

First: To the payment of all installments of interest then due on the Master Indenture Obligations in the order of their due dates, and, if the amount available is not sufficient to pay in full all installments due on the same date, then to the payment thereof ratably, according to the amounts of interest due on such date, without any discrimination or preference; and

Second: To the payment of all installments of principal then due on the Master Indenture Obligations (whether at maturity or by call for redemption) in the order of their due dates, and, if the amount available is not sufficient to pay in full all installments due on the same date, then to the payment thereof ratably, according to the amounts of principal due on such date, without any discrimination or preference.

If all Outstanding Master Indenture Obligations have become or have been declared due and payable (and such declaration has not been annulled under the terms of the Master Indenture), to the payment of the principal and interest then due and unpaid on the Master Indenture Obligations, and, if the amount available is not sufficient to pay in full the whole amount then due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, of interest over principal, of any installment over any other installment or of any Master Indenture Obligation over any other Master Indenture Obligation, according to the amounts due respectively for principal and interest, without any discrimination or preference.

Such moneys will be applied at such times as the Master Trustee shall determine, having due regard for the amount of moneys available and the likelihood of additional moneys becoming available in the future. Upon any date fixed by the Master Trustee for the application of such moneys to the payment of principal, interest on the amounts of principal to be paid on such date shall cease to accrue. The Master Trustee shall give such notices as it may deem appropriate of the deposit with it of such moneys or of the fixing of such dates. The Master Trustee shall not be required to make payment to the Holder of any

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unpaid Master Indenture Obligation until such Master Indenture Obligation (and all unmatured interest coupons, if any) is presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Master Indenture Obligations have been paid under the terms of the Master Indenture described above and all fees and expenses of the Master Trustee have been paid, any balance remaining will be paid to the Person entitled to receive such balance. If no other Person is entitled thereto, then the balance will be paid to the Obligated Group Representative, its successors or such Person as a court of competent jurisdiction may direct.

Remedies Vested in the Master Trustee. All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Master Indenture Obligations may be enforced by the Master Trustee without the possession of any of the Master Indenture Obligations or the production thereof in any proceeding relating thereto. Any proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining any Holders as plaintiffs or defendants. Subject to the provisions of the Master Indenture described above under “Application of Moneys After Default,” any recovery or judgment will be for the equal benefit of the Holders of the Outstanding Master Indenture Obligations.

Master Trustee to Represent Holders. The Master Trustee is irrevocably appointed as trustee and attorney-in-fact for the Holders for the purpose of exercising on their behalf the rights and remedies available to the Holders under the provisions of the Master Indenture, the Master Indenture Obligations, any Related Supplement and applicable provisions of law. The Holders, by taking and holding the Master Indenture Obligations, will be conclusively deemed to have so appointed the Master Trustee.

Holders Control of Proceedings. If an Event of Default has occurred and is continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of at least a majority in aggregate principal amount of Outstanding Master Indenture Obligations shall have the right (upon the indemnification of the Master Trustee to its satisfaction) to direct the method and/or place of conducting any proceeding to be taken in connection with the enforcement of the terms of the Master Indenture. Such direction must be in writing, signed by such Holders and delivered to the Master Trustee. However, the Master Trustee shall not follow any such direction that is in conflict with any applicable law or the provisions of the Master Indenture or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interests of the Holders not joining in such direction. Nothing described in this paragraph shall impair the right of the Master Trustee to take any other action authorized by the Master Indenture which it may deem proper and which is not inconsistent with such direction by Holders.

Waiver of Event of Default. No delay or omission of the Master Trustee or of any Holder to exercise any right with respect to any Event of Default shall impair such right or will be construed to be a waiver of or acquiescence to such Event of Default. Every right and remedy given under the Master Indenture to the Master Trustee and the Holders may be exercised from time to time and as often as may be deemed expedient by them.

The Master Trustee may waive any Event of Default which in its opinion has been remedied before the entry of a final judgment or decree in any proceeding instituted by it under the provisions of the Master Indenture, or before the completion of the enforcement of any other remedy under the Master Indenture.

Upon the written request of the Holders of at least a majority in aggregate principal amount of Outstanding Master Indenture Obligations, the Master Trustee shall waive any Event of Default under the Master Indenture and its consequences; provided, however, that, except under the circumstances set forth

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in the Master Indenture, the failure to pay the principal of, premium, if any, or interest on any Master Indenture Obligation when due may not be waived without the written consent of the Holders of all Outstanding Master Indenture Obligations.

In case of any waiver by the Master Trustee of an Event of Default, the Members, the Master Trustee and the Holders will be restored to their former positions and rights. No waiver shall extend to, or impair any right with respect to, any other Event of Default.

Supplements and Amendments

(a) Supplements Not Requiring Consent of Holders. The Obligated Group Representative (acting for itself and as agent for each Member) and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Related Supplements for any of the following purposes:

(i) To correct any ambiguity or formal defect or omission in the Master Indenture which does not materially and adversely affect the interests of the Holders;

(ii) To correct, or supplement any provision which may be inconsistent with any other provision, or to make any other provision with respect to matters or questions arising under the Master Indenture and which does not materially and adversely affect the interests of the Holders;

(iii) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority, or to add to the covenants of and restrictions on the Members;

(iv) To qualify the Master Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal law from time to time in effect;

(v) To create and provide for the issuance of an Master Indenture Obligation or Series of Master Indenture Obligations as permitted under the Master Indenture;

(vi) To obligate a successor to any Member as provided in the Master Indenture; or

(vii) To add a new Member as provided in the Master Indenture.

(viii) To modify, alter, amend, add to, or rescind the provisions discussed under the caption “Preparation and Filing of Financial Statements, Reports and Other Information” above.

In addition to the above provisions, the Obligated Group Representative (acting for itself and as agent for each Member) and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Related Supplements for the purpose of modifying, altering, amending, adding to or rescinding any of the terms contained in the Master Indenture (except the provisions described in clauses (a) through (c) described below under the caption “Supplements Requiring Consent of Holders); provided that (i) at the time of the execution and delivery of the Related Supplement, the Master Indenture Obligations then Outstanding (or the Related Bonds secured by Master Indenture Obligations then Outstanding) are rated by a nationally recognized rating agency; (ii) the Master Trustee receives written confirmation from each rating agency then rating the Master Indenture Obligations then Outstanding (or the Related Bonds secured by Master Indenture Obligations then Outstanding) to the effect that such rating agency’s rating of such Master Indenture Obligations (or such Related Bonds) will not be reduced or withdrawn as a result of the execution and delivery of such Related Supplement;

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(iii) the Master Trustee receives a written report of an Independent Consultant to the effect that the proposed modification, alteration, amendment, addition or rescission of the terms of the Master Indenture to be effected by the execution and delivery of such Related Supplement are consistent with then prevailing industry standards for comparable Corporations similarly situated; (iv) the Master Trustee receives an Opinion of Counsel to the effect that the execution and delivery of such Related Supplement will not result in the Master Indenture Obligations then Outstanding becoming invalid or unenforceable; and (v) the Master Trustee receives a Favorable Opinion of Bond Counsel to the effect that the execution and delivery of such Related Supplement will not result in the interest on any Related Bonds becoming includable in gross income under Section 103 of the Internal Revenue Code of 1986.

(b) Supplements Requiring Consent of Holders. Other than Related Supplements referred to in the preceding paragraph and subject to the terms contained in the Master Indenture, the Holders of not less than a majority in aggregate principal amount of the Outstanding Master Indenture Obligations shall have the right to consent to and approve the execution by the Obligated Group Representative (acting for itself and as agent for each Member) and the Master Trustee of such Related Supplements as will be deemed necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding any of the terms contained in the Master Indenture; provided, however, that nothing shall permit or be construed as permitting a Related Supplement which would:

(i) Extend the stated maturity of or time for paying interest on any Master Indenture Obligation or reduce the principal amount of or the redemption premium or rate of interest or method of calculating interest payable on any Master Indenture Obligation without the consent of the Holder of such Master Indenture Obligation;

(ii) Modify, alter, amend, add to or rescind any of the terms or provisions contained in the Master Indenture so as to affect the right of the Holders of any Master Indenture Obligations in default as to payment to compel the Master Trustee to declare the principal of all Master Indenture Obligations to be due and payable, without the consent of the Holders of all Outstanding Master Indenture Obligations; or

(iii) Reduce the aggregate principal amount of Outstanding Master Indenture Obligations the consent of the Holders of which is required to authorize such Related Supplement without the consent of the Holders of all Master Indenture Obligations then Outstanding.

Satisfaction and Discharge of Master Indenture

The Master Indenture shall cease to be of further effect if:

(a) all Master Indenture Obligations previously authenticated (other than any Master Indenture Obligations which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in any Related Supplement) and not cancelled are delivered to the Master Trustee for cancellation; or

(b) all Master Indenture Obligations not previously cancelled or delivered to the Master Trustee for cancellation are paid; or

(c) a deposit is made in trust with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between a Member and such bank or trust company in form acceptable to the Master Trustee) in cash or Government Obligations or both, sufficient to pay at maturity or upon redemption all Master Indenture Obligations not previously cancelled or delivered to the Master Trustee for cancellation, including principal and interest due or to become due to

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such date of maturity or redemption date, as the case may be; and all other sums payable under the Master Indenture by the Members are also paid.

The Master Trustee, on demand of the Members or any thereof and at the cost and expense of the Members, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture. The Members shall cause a report to be prepared by a firm nationally recognized for providing verification services regarding the sufficiency of funds for such discharge and satisfaction provided pursuant to clause (c) described above, upon which report the Master Trustee may rely.

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APPENDIX D

PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT

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CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement dated as of ______, 2017 (this “Disclosure Agreement”) is executed and delivered by Main Line Health System (as further defined below, the “Corporation”) in connection with the issuance by the Chester County Health and Education Facilities Authority (the “Issuer”) of its $______Health System Revenue Bonds (Main Line Health System), Series 2017A (the “Bonds”). The Corporation, intending to be legally bound, hereby covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Corporation for the benefit of the Bondholders from time-to-time of the Bonds and in order to assist the Participating Underwriter in complying with SEC Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth above or in the Indenture (defined below), which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Corporation pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Bondholder” or “Holder” shall mean any registered holder of Bonds, provided however that with respect to any Bond registered in “street name” or the name of a nominee such as The Depository Trust Company, such terms shall mean the beneficial owner of that Bond as defined in SEC Rule 13d-3.

“Corporation” shall mean Main Line Health System or any successor Obligated Person that assumes either by operation by law or by contract or both (i) the obligation to provide amounts to pay debt service on the Bonds when due and (ii) the obligations of the Corporation under this Disclosure Agreement.

“Dissemination Agent” shall mean, initially, Digital Assurance Certification, LLC, or any successor Dissemination Agent designated in writing by the Corporation and which has filed with the Corporation a written acceptance of such designation..

“EMMA” shall mean the Electronic Municipal Market Access System maintained by the MSRB.

“Fiscal Year” shall mean the fiscal year of the Corporation.

“Indenture” shall mean the Trust Indenture by and between the Issuer and the Trustee, dated as of ______, 2017, relating to the Bonds, as the same may be amended and supplemented.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

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“MSRB” shall mean the Municipal Securities Rulemaking Board, or any successor organization.

“Obligated Person” shall have the meaning set forth in the Rule, provided that the sole objective criteria used to select the Obligated Person shall be the entity obligated to repay all debt service with respect to the relevant Bonds.

“Official Statement” shall mean the Official Statement with respect to the Bonds dated ______, 2017.

“Participating Underwriter” shall mean Citigroup Global Markets Inc., as underwriter of the Bonds.

“Repository” shall mean each nationally recognized municipal securities information repository under the Rule. As of the date hereof, the Securities and Exchange Commission has appointed EMMA to act as the sole Repository. Any information filed in connection with this Disclosure Agreement shall be filed with EMMA at http://emma.msrb.org/, in the format prescribed by EMMA for such filings, and any future Repository as may be required under the Rule.

“Rule” shall mean Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as heretofore amended, and as such Rule may be hereafter amended from time-to-time.

“Trustee” shall mean U.S. Bank National Association, in its capacity as Trustee under the Indenture.

SECTION 3. Provision of Reports.

(a) The Corporation shall, or shall cause the Dissemination Agent to, not later than one hundred eighty (180) days after the last day of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2017, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement. If the Corporation files the information directly, it shall send a written notice to the Dissemination Agent that the Annual Report has been filed.

(b) If the Corporation is unable to provide any Annual Report to the Repository by the date required in subsection (a), the Corporation shall provide, or shall cause the Dissemination Agent to provide, notice of such failure to the Repository electronically within ten (10) Business Days of the required date of such Annual Report. If the Corporation files such notice directly, it shall send a written notice to the Dissemination Agent that the failure notice has been filed.

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(c) In the event that audited financial statements are not available by the required date for any Annual Report, the Corporation shall provide, or shall cause the Dissemination Agent to provide, to the Repository in lieu thereof, unaudited financial statements. Audited financial statements of the Corporation not submitted as part of the Annual Report shall be provided to the Repository, if and when available to the Corporation, and in any event not more than thirty (30) days after receipt thereof from the Corporation’s auditors.

(d) The Corporation shall promptly provide, or cause the Dissemination Agent to provide, written notice of any change in its Fiscal Year to the Repository.

SECTION 4. Content of Reports.

(a) The Corporation’s Annual Report shall contain or incorporate by reference the following information with respect to the relevant Fiscal Year:

(i) audited financial statements containing the consolidated financial information of the Corporation and Affiliates for the prior Fiscal Year. Audited financial statements shall also include at a minimum the independent auditor’s report and notes. The financial statements shall, subject to Section 3(c) hereof, be audited by either a certified public accountant or an independent public accountant.

(ii) Financial and operating data of the type set forth in the tables (except with respect to pension information) under the headings “MEDICAL STAFF”; “FINANCIAL AND OPERATING INFORMATION – Utilization” and “– Payer Mix”; “KEY FINANCIAL RATIOS OF THE SYSTEM – Liquidity,” “– Summary of Long Term Debt,” and “– Debt Service”; and “OTHER INFORMATION – Defined Benefit Pension Program” in Appendix A to the Official Statement, unless such information is included in the audited financial statements of the Corporation, together with a narrative explanation if necessary to avoid misunderstanding regarding the presentation of financial and operating data concerning the Corporation.

(b) Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues on behalf of the Corporation, which have been submitted to the Repository or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available on the Repository. The Corporation shall clearly identify each such other document so incorporated by reference.

(c) If any information described in Section 4(a) above can no longer be generated because the operations to which such information relates have been materially changed or discontinued, a statement to that effect shall satisfy the obligations of the Corporation under this Section 4, provided however that the Corporation shall, to the greatest extent feasible, provide in lieu thereof similar information with respect to any substitute or replacement operations.

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SECTION 5. Reporting of Significant Events.

(a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds:

1. Principal and interest payment delinquencies;

2. Non payment-related defaults, if material;

3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers, or their failure to perform;

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bond, or other material events affecting the tax status of the Bonds;

7. Modifications to rights of Holders, if material;

8. Bond calls (other than mandatory sinking fund redemptions), if material, and tender offers;

9. Defeasances;

10. Release, substitution, or sale of property securing repayment of any Bonds, if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the Corporation (for the purposes of the event identified in subsection 5(a)(12), 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 U.S. 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

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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);

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.

(b) For any of the Listed Events that require the evaluation of a materiality standard, the Corporation shall make such determination in accordance with securities laws in effect at the time of such Listed Event.

(c) Upon the occurrence of a Listed Event, the Corporation shall file, or cause the Dissemination Agent to file, a notice of such occurrence with the Repository in a timely manner not in excess of ten (10) Business Days after the occurrence of the Listed Event.

SECTION 6. Accounting Standards. The financial statements described in Section 4(a)(i) above shall be audited in accordance with both (a) generally accepted accounting principles applicable in the preparation of financial statements as such principles are from time-to-time promulgated by the Financial Accounting Standards Board, or such other body recognized as authoritative by the American Institute of Certified Public Accountants or any successor body (“GAAP”), and (b) applicable federal and state auditing statutes, regulations, standards and/or guidelines; provided however that the Corporation may from time-to-time modify its accounting principles to the extent necessary or desirable to comply with changes in either GAAP or applicable federal and state statutes, regulations, standards and/or guidelines. Any such modification of accounting standards to conform to changes in either GAAP or applicable federal or state auditing statutes, regulations, standards or guidelines shall not constitute an amendment to this Disclosure Agreement within the meaning of Section 9 hereof, provided that such modifications are disclosed in the first Annual Report to be provided subsequent to such modifications.

SECTION 7. Termination of Reporting Obligation. The Corporation’s obligations under this Disclosure Agreement shall terminate upon (a) the legal defeasance, prior redemption or payment in full of all of the Bonds or (b) the assumption by a successor Obligated Person of all of the obligations of the prior Obligated Person both hereunder and under the Bonds.

SECTION 8. Dissemination Agent. The Corporation may, from time-to-time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such agent, with or without appointing a successor Dissemination Agent. The Corporation has appointed Digital Assurance Certification, LLC, as initial Dissemination Agent hereunder. The Dissemination Agent shall have only such duties as

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are specifically set forth in this Disclosure Agreement, and no implied duties or obligations shall be implied against the Dissemination Agent under this Agreement or any other document. The Dissemination Agent shall be entitled to conclusively rely on any information, calculations or reports provided by the Corporation. The Corporation agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, cost, expense, claim, action, suit and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees and attorneys’ fees and expenses in connection with enforcement of its rights hereunder) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross negligence or willful misconduct. The obligations of the Corporation under this Section 8 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 9. Amendments. (a) Notwithstanding any other provision of this Disclosure Agreement, the Corporation may modify or amend this Disclosure Agreement upon receipt of a written opinion of nationally recognized bond counsel to the effect that the amendment is permitted under the Rule; provided that any modification or amendment affecting the rights, duties, immunities or liabilities of the Dissemination Agent shall require the Dissemination Agent’s written consent. The Corporation shall provide written notice of any modification or amendment to this Disclosure Agreement to the Dissemination Agent within two (2) Business Days of its execution. The Corporation acknowledges and agrees that the current SEC interpretation of the Rule requires satisfaction of the following preconditions for any amendment:

(i) the modification or amendment is being made in connection with a change of circumstances that arises from a change in legal requirements, change in law, change in the identity, nature or status of the Corporation, or change in the type of business conducted by the Corporation;

(ii) this Disclosure Agreement, as amended, would have complied with the requirements of the Rule as of the date of issuance of the relevant Bonds, after taking into account any amendment or interpretations of the Rule, as well as any change in circumstances; and

(iii) the modification or amendment does not materially adversely affect the interests of Bondholders, as determined either by a party unaffiliated with the Corporation (such as the Trustee or nationally recognized bond counsel) or by an approving vote of a majority of Bondholders.

(b) The Corporation shall report any modification or amendment of this Disclosure Agreement as required by the Rule. To the extent required by the Rule, the Corporation shall include as a component of the first Annual Report to be provided subsequent to the relevant amendment a copy of the amendment, together with a notice explaining in narrative form both (i) the reasons for the amendment and (ii) the impact of the change in the type of operating data or financial information being provided. To the extent required by the Rule, if the amendment relates to changes in accounting principles to be followed in preparing financial statements, the first Annual Report to be provided subsequent to the relevant amendment shall

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also include a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles and a qualitative (and to the extent reasonably feasible, quantitative) discussion of the differences in the accounting principles and the impact of the change in the accounting principles upon the presentation of the financial information. Written notice of any such change in accounting principles shall be provided in a timely fashion to the Repository.

SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Corporation from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, notice of occurrence of a Listed Event or other notice, in addition to that which is required by this Disclosure Agreement. If the Corporation chooses to include any information in any Annual Report, notice of occurrence of a Listed Event or other notice, in addition to that which is specifically required by this Disclosure Agreement, the Corporation shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, notice of occurrence of a Listed Event or other notice.

SECTION 11. Default. In the event of a failure of the Corporation to comply with any provision of this Disclosure Agreement, the Trustee, any Participating Underwriter or any Bondholder may take such actions as may be necessary and appropriate, including seeking a writ of mandamus or specific performance by court order to cause the Corporation to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Corporation to comply with this Disclosure Agreement shall be an action to compel performance; provided however that nothing herein shall limit any Bondholder’s rights under applicable federal securities law.

SECTION 12. Severability. In case any section or provision of this Disclosure Agreement or any covenant, stipulation, obligation, agreement, or action, or any part thereof, made, assumed, entered into or taken under this Disclosure Agreement, or any application thereof, is for any reason held to be illegal or invalid or is at any time inoperable, such illegality, invalidity or inoperability shall not affect the remainder thereof or any other section or provision or the Disclosure Agreement, or any other covenant, stipulation, obligation, agreement, act or action, or part thereof, made, assumed, entered into or taken under this Disclosure Agreement, which shall at the time by construed and enforced as if such illegal or invalid or inoperable portion were not contained therein.

SECTION 13. Entire Agreement. This Disclosure Agreement contains the entire agreement of the Corporation with respect to the subject matter hereof relating the Bonds, provided however that this Disclosure Agreement shall be interpreted and construed with reference to and in pari materia with the Rule.

SECTION 14. Captions. The captions or headings herein shall be solely for convenience of reference and shall in no way define, limit or describe the scope or intent of any provisions or sections hereof.

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SECTION 15. Beneficiaries. This Disclosure Agreement is being entered into solely for the benefit of the Dissemination Agent, the Trustee, the Participating Underwriter and Bondholders from time-to-time of the Bonds, and nothing in this Disclosure Agreement expressed or implied is intended to or shall be construed to give to any other person or entity any legal or equitable right, remedy or claim under or in respect of this Disclosure Agreement or any covenants, conditions or provisions contained herein.

SECTION 16. Governing Law. This Disclosure Agreement shall be deemed to be a contract made under the laws of the Commonwealth of Pennsylvania, and all provisions hereof shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to the choice of law principles thereof, and, to the extent necessary, in accordance with the Rule and federal securities laws.

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IN WITNESS WHEREOF, the Corporation has caused this Disclosure Agreement to be duly executed as of the day and year first above written.

MAIN LINE HEALTH SYSTEM

By: Name: Title:

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APPENDIX E

PROPOSED FORM OF BOND COUNSEL OPINION

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PROPOSED FORM OF BOND COUNSEL OPINION

Re: $______Chester County Health and Education Facilities Authority Health System Revenue Bonds (Main Line Health System), Series 2017A

Ladies and Gentlemen:

We have acted as bond counsel to the Chester County Health and Education Facilities Authority (the “Authority”) in connection with the issuance of $______aggregate principal amount of its Health System Revenue Bonds (Main Line Health System), Series 2017A (the “Bonds”). The Bonds are being issued under and pursuant to the provisions of the Municipality Authorities Act (Act of June 19, 2001, P.L. 22, as amended) (the “Act”) and a Trust Indenture dated as of ______1, 2017 (the “Indenture”) between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). Capitalized terms used but not defined herein have the meanings given to such terms in the Indenture.

The Bonds are being issued at the request of Main Line Health System (“System”) to provide funds which will be used to finance certain costs of a project (the “2017 Project”) consisting generally of (i) the construction, acquisition, renovation and equipping of health care and related facilities of Bryn Mawr Hospital and Lankenau Medical Center; (ii) the advance refunding of a portion of the Authority’s Health System Revenue Bonds (Jefferson Health System), Series 2010A and (iii) the payment of the costs and expenses incurred in connection with the issuance of the Bonds.

Concurrently with the issuance of the Bonds, the Authority and System are entering into a Loan Agreement dated as of ______1, 2017 (the “Loan Agreement”), providing for the loan of the proceeds of the Bonds to System to pay certain costs of the 2017 Project. Under the Loan Agreement, System is obligated to make loan payments in the amounts and at the times necessary to pay, when due, the principal or purchase price of, premium, if any, and interest on the Bonds. Under the Indenture, the Authority has assigned certain of its rights and interests under the Loan Agreement, including its right to receive the payments under the Loan Agreement in respect of the Bonds, to the Trustee for the benefit of the holders of the Bonds.

System has represented in the Loan Agreement that each of System, Main Line Health, Inc. (“MLH”), Main Line Hospitals, Inc. (“Hospitals”), Riddle Memorial Hospital (“Riddle”) and Mirmont Alcohol Rehabilitation Center (“Mirmont” and, together with MLH, Hospitals and Riddle, the “Obligated Group Affiliates”) has been determined to be and is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code of 1986, as amended (the “Code”), by virtue of being an organization described in Section 501(c)(3) of the Code. Neither System nor any Obligated Group Affiliate is a “private foundation” as defined in Section 509(a) of the Code and neither System nor any Obligated Group Affiliate has taken any action to impair its status as an exempt organization. In the Loan Agreement, System has covenanted that, throughout the term of the Loan Agreement, it will not carry on or permit to be carried on, and will cause the Obligated Group Affiliates not to carry on or permit to be carried on, in the Facilities (as such term is defined in the Loan Agreement) or any other property now or

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hereafter owned by it any trade or business the conduct of which would cause the interest on the Bonds to be included in the gross income of the Holders thereof for purposes of federal income taxation.

Under the Indenture and the Loan Agreement, the Authority and System, respectively, have covenanted that they will comply with the requirements of Section 148 of the Code pertaining to arbitrage bonds. In addition, an officer of the Authority responsible for issuing the Bonds and an authorized officer of System have each executed a certificate stating the reasonable expectations of the Authority and System on the date of issue of the Bonds as to future events that are material for the purposes of such requirements of the Code. The Authority also has delivered to us for filing with the Internal Revenue Service a report of the issuance of the Bonds as required by the Code as a condition of the exclusion from gross income of the interest on the Bonds for federal income tax purposes.

In our capacity as bond counsel we have examined such documents, records of the Authority and other instruments as we deemed necessary to enable us to express the opinions set forth below, including original counterparts or certified copies of the Indenture, the Loan Agreement and the other documents listed in the closing memorandum in respect of the Bonds filed with the Trustee. We also assume that the Indenture and the Loan Agreement have been duly authorized, executed and delivered by, and are valid and binding obligations of, the parties thereto other than the Authority. We also have examined an executed Bond, authenticated by the Trustee.

Based on the foregoing, it is our opinion that:

1. The Authority is a body corporate and politic validly existing under the laws of the Commonwealth of Pennsylvania, with full power and authority to undertake the financing of the 2017 Project, to execute, deliver and perform its obligations under the Loan Agreement and the Indenture, and to issue and sell the Bonds.

2. The Loan Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, except as the rights created thereunder and enforcement thereof may be limited by bankruptcy, insolvency or other laws or equitable principles affecting the enforcement of creditors’ rights generally.

3. The issuance and sale of the Bonds have been duly authorized by the Authority. The Bonds have been duly executed and delivered by the Authority and are legal, valid and binding limited obligations of the Authority enforceable against the Authority in accordance with their terms and entitled to the benefit and security of the Indenture, except as the rights created thereunder and enforcement thereof may be limited by bankruptcy, insolvency or other laws or equitable principles affecting the enforcement of creditors’ rights generally.

4. Under the laws of the Commonwealth of Pennsylvania as presently enacted and construed, interest on the Bonds is exempt from Pennsylvania personal income tax and corporate net income tax, and the Bonds are exempt from personal property tax in Pennsylvania.

5. Interest on the Bonds is excludable from gross income for purposes of federal income tax under existing laws as enacted and construed on the date of initial delivery of the Bonds, assuming the accuracy of the certifications of the Authority and System and continuing compliance by the Authority, System, and the Obligated Group Affiliates with the requirements of the Code. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate federal alternative minimum tax (“AMT”); however, interest on the Bonds held by a corporation (other than an S corporation, regulated investment company, or real estate investment trust) may be indirectly subject to federal AMT

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because of its inclusion in the adjusted current earnings of a corporate holder. We express no opinion regarding other federal tax consequences relating to ownership or disposition of, or the accrual or receipt of interest on, the Bonds.

We express no opinion herein with respect to the adequacy of the security for the Bonds or the sources of payment for the Bonds or with respect to the accuracy or completeness of any information pertaining to the offering for sale of the Bonds. We are not rendering any opinion with respect to the priority of the lien of the Indenture.

We call your attention to the fact that the Bonds are limited obligations of the Authority payable only out of certain revenues of the Authority including payments to be made by System pursuant to the Loan Agreement and certain other moneys available therefor as provided in the Indenture, and that the Bonds do not pledge the credit or taxing power of the Commonwealth of Pennsylvania or any political subdivision thereof. The Authority has no taxing power.

Very truly yours,

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CHESTER COUNTY HEALTH AND EDUCATION FACILITIES AUTHORITY • Health System Revenue Bonds (Main Line Health System), Series 2017A