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This Preliminary Official Statement has not been approved by the Authorities and the Obligated Group, and the information herein is subject to completion and amendment without notice. 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 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. A definitive Official Statement will be made available prior to the delivery of these securities. * Preliminary; subjecttochange. tax imposedonindividualsandcorporations,subjecttolimitations orexceptionsdescribedunder“ of theholdersforpurposesfederalincometaxationand(ii)willnot beanitemoftaxpreferenceforpurposesthefederalalternativeminimum as counseltotheUnderwriters. counsel totheFayetteAuthority,King&SpaldingLLPhasservedas counsel toPHCandtheObligatedGroup,Balch&BinghamLLPhasserved Authority, Fortson,Bentley&Griffin,P.A.,hasservedascounsel to theClarkeAuthority,McNally,Fox,Grant&Davenport,P.C.,hasservedas

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on U I Tax Status.Underexistingstatutes,regulations,rulingsandcourtdecisions,interest ontheBonds(i)willnotbeincludedingrossincome Source of Payment. The Bonds of each series are limited obligations of each Authority payable solely out of the respective Trust Estate Authorizing Documents. TheBondsarebeingissuedbytheAuthoritiespursuanttoseparatetrustindentures(collectively,“Bond Legal Opinions.King&SpaldingLLPhasservedasbondcounselandwilldeliverits opinionswithrespecttotheBondsinsubstantially Redemption. TheBondsaresubjecttoredemptionpriormaturityashereindescribed. Form andDateofDelivery.TheBondsarebeingissuedunderthebookentrysystemmaintained byTheDepositoryTrustCompany Pricing TermsandPaymentDates. Pricing information for the Bonds, including principal maturities, interest rates, payment dates and T Purpose ofFinancing.TheBondsarebeingissuedtoprovidefinancingforthebenefit Issuers. The$195,540,000*RevenueBonds(PiedmontHealthcare,Inc.Project),Series2016A(the“FultonBonds”)arebeingissuedbythe Underwriters. TheBondsarebeingpurchasedfrom theAuthoritiesby Risk Factors.Foradescriptionofcertainriskfactors involvedinaninvestmenttheBonds,see“ nified

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PRICING INFORMATION Initial Maturity Principal Interest CUSIP (July 1) Amount Rate Price Yield Number

$______Serial Bonds

$______Term Bonds

$185,145,000* The Hospital Authority of Clarke County, Georgia Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A

PRICING INFORMATION Initial Maturity Principal Interest CUSIP (July 1) Amount Rate Price Yield Number

$______Serial Bonds

$______Term Bonds

$48,740,000* Hospital Authority of Fayette County Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A

PRICING INFORMATION Initial Maturity Principal Interest CUSIP (July 1) Amount Rate Price Yield Number

$______Serial Bonds

$______Term Bonds

______

*Preliminary; subject to change.

Date of Bonds. The Bonds will be dated as of the date of their initial delivery. There will be no accrued interest payable as part of the initial offering price.

Authorized Denominations. The Bonds may be issued in denominations of $5,000 or any integral multiple thereof.

Interest Payment Dates. Interest on the Bonds is payable on January 1 and July 1 of each year, beginning January 1, 2017.

Principal Payment Dates. The Bonds mature on July 1 in years and amounts as shown above.

Redemption Prior to Maturity. The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS—Redemption Prior to Maturity.”

USE OF THIS OFFICIAL STATEMENT

No broker, dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by the Authorities, the Obligated Group or the Underwriters. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authorities or the Obligated Group since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale.

The CUSIP numbers are included in this Official Statement for the convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for a particular series or maturity of Bonds will remain the same after the date of issuance and delivery of the Bonds. None of the Authorities, PHC, the Bond Registrar, Bond Counsel or the Underwriters assumes any responsibility for the accuracy of such numbers.

The Authorities have not reviewed or approved, and do not represent or warrant in any way, the accuracy or completeness of any of the information set forth in this Official Statement, including the appendices hereto other than the statements set forth under the captions “INTRODUCTION,” “THE AUTHORITIES” and “NO LITIGATION—The Authorities” (insofar as such information relates to each respective Authority). The Authorities make no representation hereunder whatsoever as to the creditworthiness of PHC or the Obligated Group or the ability of PHC to pay the principal and interest on the Bonds. No member of the Board of Directors, officer, director, agent or employee of any of the Authorities shall be personally liable for any obligations of the respective Authority relating to the issuance of the Bonds.

The Underwriters have provided the following sentence for inclusion in this Official Statement: the Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forward-looking statements.” In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. All projections, forecasts, assumptions, expressions of opinions, estimates and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement.

The Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or with any state securities commission.

In connection with the offering of the Bonds, the Underwriters may overallot or effect transactions which stabilize or maintain the market price of the Bonds offered hereby at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

U.S. Bank National Association, as Bond Trustee and Master Trustee, has not reviewed, provided or undertaken to determine the accuracy of any of the information contained in this Official Statement and makes no representation or warranty, express or implied, as to any matters contained in this Official Statement, including, but not limited to, (i) the accuracy or completeness of such information, (ii) the validity of the Bonds or the Series 2016 Master Indenture Obligations, or (iii) the tax-exempt status of the Bonds.

TABLE OF CONTENTS Page

INTRODUCTION ...... 1 General ...... 1 Plan of Finance ...... 1 Security and Sources of Payment for the Bonds ...... 2 The Obligated Group ...... 3 Tax Exemption...... 4 Description of the Bonds ...... 4 Bond Trustee, Paying Agent and Bond Registrar ...... 5 Legal Authority ...... 5 Offering and Delivery of the Bonds ...... 5 Other Information ...... 5

PIEDMONT HEALTHCARE, INC...... 6

THE AUTHORITIES ...... 6

THE BONDS ...... 6 Separate Series ...... 6 Pricing Information ...... 6 Date and Denominations ...... 7 Computation of Interest Accrual ...... 7 Book Entry System ...... 7 Persons Deemed Holders of Bonds ...... 7 Interest on Overdue Payments ...... 7 Redemption Prior to Maturity ...... 7 General Provisions Respecting Redemption ...... 9

SECURITY FOR THE BONDS ...... 10 Limited Obligation ...... 10 The Loan Agreements and the Series 2016 Master Indenture Obligations ...... 10 Master Indenture ...... 11

PLAN OF FINANCE ...... 13

BONDHOLDER’S RISKS ...... 14 Introduction ...... 14 Bankruptcy and Creditors’ Rights; Limits on Claims Against Members; Other Matters Concerning the Financing Documents ...... 14 Risks Relating to the Bonds and the Related Financing Documents ...... 15 General ...... 16 Significant Risk Areas Summarized ...... 16 Nonprofit Healthcare Environment ...... 19 Patient Service Revenue ...... 20 Health Care Reform ...... 23 Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures ...... 25 Government Regulation of Relationships between Hospitals, Physicians and Other Providers and Suppliers ...... 25 Privacy and Security of Health Information ...... 28 Enforcement Activity ...... 30 Business Relationships and Other Business Matters ...... 32 Tax-Exempt Status and Other Tax Matters...... 36 Other Risks ...... 37

NO LITIGATION ...... 38 The Authorities ...... 38 The Obligated Group ...... 38

RATINGS ...... 38

FINANCIAL STATEMENTS ...... 39

FINANCIAL ADVISOR ...... 39

UNDERWRITING ...... 39

DISCLOSURE OF RELATIONSHIPS ...... 40

CONTINUING DISCLOSURE ...... 40

TAX EXEMPTION ...... 41

VERIFICATION OF CERTAIN MATHEMATICAL COMPUTATIONS ...... 42

OTHER LEGAL MATTERS ...... 43

MISCELLANEOUS ...... 43

APPENDIX A — INFORMATION ABOUT PIEDMONT HEALTHCARE, INC. APPENDIX B — FINANCIAL STATEMENTS OF PIEDMONT HEALTHCARE, INC. AND AFFILIATES FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 APPENDIX C — FORMS OF OPINIONS OF BOND COUNSEL APPENDIX D — SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE APPENDIX E — FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX F — THE DTC BOOK ENTRY SYSTEM

OFFICIAL STATEMENT

relating to

$195,540,000* Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A

$185,145,000* $48,740,000* The Hospital Authority of Clarke Hospital Authority of Fayette County County, Georgia Revenue Anticipation Certificates Revenue Anticipation Certificates (Piedmont Healthcare, Inc. (Piedmont Healthcare, Inc. Project), Series 2016A Project), Series 2016A

INTRODUCTION

General

This Official Statement, dated as shown on the cover page hereof, is provided to furnish information concerning the issuance and sale of (i) $195,540,000* aggregate principal amount of Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fulton Bonds”) issued by the Development Authority of Fulton County (the “Fulton Authority”), (ii) $185,145,000* aggregate principal amount of Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A (the “Clarke Certificates”) issued by The Hospital Authority of Clarke County, Georgia (the “Clarke Authority”), and (iii) $48,740,000* aggregate principal amount of Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fayette Certificates”) issued by the Hospital Authority of Fayette County (the “Fayette Authority”). The Fulton Bonds, the Clarke Certificates and the Fayette Certificates are collectively referred to herein as the “Bonds.” The Fulton Authority, the Clarke Authority and the Fayette Authority are sometimes referred to herein individually as an “Authority” and sometimes collectively as the “Authorities.” Each of the Authorities is a public body corporate and politic of the State of Georgia. Certain capitalized terms used herein are defined in APPENDIX D hereto.

The Bonds are being issued to provide financing for Piedmont Healthcare, Inc., a Georgia non-profit corporation (“PHC” or “Piedmont Healthcare”), and its affiliates.

This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page, the inside cover page and the Appendices, and the documents summarized or described herein. Investors should fully review the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or otherwise to use it without the entire Official Statement.

Plan of Finance

Fulton Bonds. The proceeds from the sale of the Fulton Bonds will be used to (i) advance refund the Fulton Authority’s Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2009A (the “Fulton Refunded Bonds”), which

* Preliminary; subject to change.

are currently outstanding in the aggregate principal amount of $172,245,000 and (ii) finance or refinance the cost of certain additions or improvements to the healthcare facilities operated by PHC in Fulton County, Georgia.

Clarke Certificates. The proceeds derived from the sale of the Clarke Certificates will be used to refund the Clarke Authority’s (i) Revenue Certificates (Athens Regional Medical Center Project), Series 2007 (the “Refunded Series 2007 Certificates”) and (ii) Refunding Revenue Certificates (Athens Regional Medical Center Project), Series 2012 (the “Refunded Series 2012 Certificates” and, together with the Refunded Series 2007 Certificates, the “Clarke Refunded Certificates”). The Clarke Refunded Certificates are currently outstanding in the aggregate principal amount of $195,460,000.

Fayette Certificates. The proceeds from the sale of the Fayette Certificates will be used to finance the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital in Fayette County, Georgia. See “PLAN OF FINANCE”.

Security and Sources of Payment for the Bonds

The Fulton Bonds are being issued by the Fulton Authority pursuant to a Trust Indenture dated as of November 1, 2016 (the “Fulton Indenture”) between the Fulton Authority and U.S. Bank National Association, as trustee (in such capacity, the “Fulton Trustee”). The Fulton Bonds are limited obligations of the Fulton Authority payable solely from and secured by the Trust Estate (as defined in the Fulton Indenture), including revenues received under the related Loan Agreement and the related Series 2016 Master Indenture Obligation issued under the Master Indenture. The Fulton Authority will loan the proceeds of the Fulton Bonds to PHC pursuant to a Loan Agreement dated as of November 1, 2016 (the “Fulton Agreement”) between PHC and the Fulton Authority, to be applied for the purposes described herein.

The Clarke Certificates are being issued by the Clarke Authority pursuant to a Trust Indenture dated as of November 1, 2016 (the “Clarke Indenture”) between the Clarke Authority and U.S. Bank National Association, as trustee (in such capacity, the “Clarke Trustee”). The Clarke Certificates are limited obligations of the Clarke Authority payable solely from and secured by the Trust Estate (as defined in the Clarke Indenture), including revenues received under the related Loan Agreement and the related Series 2016 Master Indenture Obligation issued under the Master Indenture. The Clarke Authority will loan the proceeds of the Clarke Certificates to PHC pursuant to a Loan Agreement dated as of November 1, 2016 (the “Clarke Agreement”) between PHC and the Clarke Authority, to be applied for the purposes described herein.

The Fayette Certificates are being issued by the Fayette Authority pursuant to a Trust Indenture dated as of November 1, 2016 (the “Fayette Indenture,” and the Fulton Indenture, the Clarke Indenture and the Fayette Indenture are sometimes individually referred to as a “Bond Indenture” and sometimes collectively referred to as the “Bond Indentures”) between the Fayette Authority and U.S. Bank National Association, as trustee (in such capacity, the “Fayette Trustee” and, together with the Fulton Trustee and the Clarke Trustee, the “Bond Trustee”). The Fayette Certificates are limited obligations of the Fayette Authority payable solely from and secured by the Trust Estate (as defined in the Fayette Indenture), including revenues received under the related Loan Agreement and the related Series 2016 Master Indenture Obligation issued under the Master Indenture. The Fayette Authority will loan the proceeds of the Fayette Certificates to PHC pursuant to a Loan Agreement dated as of November 1, 2016 (the “Fayette Agreement,” and the Fulton Agreement, the Clarke Agreement and the Fayette Agreement are sometimes collectively referred to as the “Loan Agreements”) between PHC and the Fayette Authority, to be applied for the purposes described herein.

THE BONDS AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR GENERAL OBLIGATION OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING FULTON COUNTY, THE UNIFIED GOVERNMENT OF ATHENS-CLARKE COUNTY AND FAYETTE COUNTY, WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION. NEITHER THE STATE OF GEORGIA NOR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING FULTON COUNTY, THE UNIFIED GOVERNMENT OF ATHENS-CLARKE COUNTY AND FAYETTE COUNTY, SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF THE BONDS, THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE TRUST ESTATE PLEDGED THEREFOR UNDER THE RELATED BOND INDENTURE, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING FULTON COUNTY, THE UNIFIED GOVERNMENT OF

ATHENS-CLARKE COUNTY AND FAYETTE COUNTY, IS PLEDGED TO THE PAYMENT OF THE BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO. NONE OF THE AUTHORITIES HAS ANY TAXING POWER.

PHC’s payment obligation under each Loan Agreement will be evidenced by a separate Master Indenture Obligation (each, a “Series 2016 Master Indenture Obligation”) each dated the date of issuance of the respective series of the Bonds. The Series 2016 Master Indenture Obligations are issued and secured under that certain Amended and Restated Master Trust Indenture dated November __, 2016 (the “Amended and Restated Master Indenture”), amending and restating the Master Trust Indenture dated March 1, 1999, as amended and supplemented (the “Original Master Indenture”), each between U.S. Bank National Association (as successor to SunTrust Bank, Atlanta under the Original Master Indenture), as master trustee (in such capacity, the “Master Trustee”), and the following members of the Obligated Group: PHC, Piedmont Hospital, Inc., Piedmont Healthcare Foundation, Inc., Piedmont Medical Care Corporation, The Piedmont Clinic, Inc., Fayette Community Hospital, Inc., Piedmont Mountainside Hospital, Inc., Piedmont Newnan Hospital, Inc., Piedmont Heart Institute Physicians, Inc., Piedmont Heart Institute, Inc., Piedmont Henry Hospital, Inc., Piedmont Newton Hospital, Inc., and Piedmont Athens Regional Medical Center, Inc. (collectively, the “Obligated Group”). The Amended and Restated Master Indenture, as supplemented and amended by a First Supplemental Master Trust Indenture, a Second Supplemental Master Trust Indenture, a Third Supplemental Master Trust Indenture, and a Fourth Supplemental Master Trust Indenture, each dated November __, 2016, between PHC, as Credit Group Representative, on behalf of itself and each member of the Obligated Group, and the Master Trustee, is referred to herein as the “Master Indenture”. For more information regarding the amendment and restatement of the Original Master Indenture, see “SECURITY FOR THE BONDS—Master Indenture” herein. By purchasing any of the Bonds, purchasers will be deemed to have approved the amendment and restatement of the Original Master Indenture.

The members of the Obligated Group, as it may exist from time to time, have jointly and severally covenanted to promptly pay, or cause to be paid, all payments on obligations secured under the Master Indenture (the “Master Indenture Obligations”), including the Series 2016 Master Indenture Obligations, the Master Indenture Obligations currently outstanding (the “Existing Master Indenture Obligations”) and any additional Master Indenture Obligations hereinafter executed and delivered by any member of the Obligated Group as described herein. As security for their Master Indenture Obligations, the members of the Obligated Group have pledged their Gross Receivables to the Master Trustee. The Master Indenture permits other parties to become members of the Obligated Group under certain circumstances, and permits members of the Obligated Group to be released from their obligations under the Master Indenture under certain circumstances. As security for the Bonds, each Authority will pledge and assign to the Bond Trustee the Trust Estate set forth in the respective Bond Indenture. See “SECURITY FOR THE BONDS.” Except as described herein under “TAX EXEMPTION,” the Bonds of each series are separate series and are not cross-collateralized or cross-defaulted, although a default by the Obligated Group on any of the Series 2016 Master Indenture Obligations could lead to a default under the Master Indenture with respect to all Master Indenture Obligations secured thereunder.

The Obligated Group

The Obligated Group is an integrated health system that operates the following healthcare facilities in north central Georgia:

• Piedmont Atlanta Hospital, a 529-bed not-for-profit, general and specialty acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of the entire Atlanta metropolitan area; • Piedmont Fayette Hospital, a 221-bed not-for-profit acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of Fayette County, Georgia; • Piedmont Henry Hospital, a 215-bed not-for-profit acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of Henry County, Georgia; • Piedmont Mountainside Hospital, a 52-bed not-for-profit acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of Pickens County, Georgia; • Piedmont Newnan Hospital, a 136-bed not-for-profit acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of Coweta County, Georgia; • Piedmont Newton Hospital, a 97-bed not-for-profit acute care hospital providing inpatient, outpatient and emergency care services primarily for residents of Newton County, Georgia;

• Piedmont Athens Regional, a 359-bed not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of the Unified Government of Athens-Clarke County, Georgia; and • certain other medical facilities described herein.

Certain information with respect to the Obligated Group is furnished in this Official Statement. See “APPENDIX A—INFORMATION ABOUT PIEDMONT HEALTHCARE, INC.” and “APPENDIX B—FINANCIAL STATEMENTS OF PIEDMONT HEALTHCARE, INC. AND AFFILIATES FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015”. Effective October 1, 2016, Piedmont Athens Regional Medical Center, Inc. (“PARMC”) became affiliated with PHC pursuant to the terms of an Affiliation Agreement dated August 19, 2016 (the “Affiliation Agreement”) by and among PHC, PARMC and Athens Regional Health Services, Inc. and a long term lease with the Clarke Authority. PARMC is a member of the Obligated Group. The audited financial statements of PHC and its Affiliates included as APPENDIX B do not include any financial information for PARMC. PARMC’s audited financial statements for the fiscal years ended September 30, 2015 and 2014 are available on the MSRB’s Electronic Municipal Market Access System (EMMA) website at www.emma.msrb.org (base CUSIP number 181685). PARMC’s financial statements will become part of the consolidated PHC audited financials beginning with the fiscal year ending June 30, 2017.

All information in this Official Statement concerning the Obligated Group has been provided by the Obligated Group and has not been independently verified by any of the Authorities, and the Authorities make no representations or warranties, express or implied, as to the accuracy or completeness of such information.

Tax Exemption

In the opinion of King & Spalding LLP, Bond Counsel, assuming the accuracy of certain representations and certifications and compliance with certain tax covenants, interest on the Bonds is not includable in gross income for federal income tax purposes under existing statutes, rulings and court decisions, and under applicable regulations, and will not be treated as an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations, but such interest will be taken into account in determining adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on certain corporations. For a discussion of the limitations on such opinion, certain of the assumptions underlying such opinions and certain tax consequences incident to the receipt of interest on, or the ownership of the Bonds, see “TAX EXEMPTION.” See “APPENDIX C—FORMS OF OPINIONS OF BOND COUNSEL” for the forms of opinions Bond Counsel proposes to deliver in connection with the issuance of each series of the Bonds.

Description of the Bonds

Pricing Terms. See the pricing terms on the inside cover of this Official Statement for principal maturities, interest rates and payment dates for each series of Bonds.

Redemption. The Bonds are subject to optional and mandatory redemption prior to maturity. See “THE BONDS—Redemption Prior to Maturity.”

Denominations. The Bonds are issuable in authorized denominations of $5,000 and integral multiples of $5,000.

Registration; Transfer and Exchange. Ownership of each series of the Bonds will be registered on the registration books of the respective Authority maintained by U.S. Bank National Association, as bond registrar (the “Bond Registrar” or “Registrar”). The Bonds will initially be issued as book-entry only securities. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. Ownership of the Bonds may be registered as transferred or exchanged in the manner described under “APPENDIX F— THE DTC BOOK ENTRY SYSTEM.”

For a more complete description of the Bonds and the documentation pursuant to which they were issued, see “THE BONDS” and “SECURITY FOR THE BONDS.”

Bond Trustee, Paying Agent and Bond Registrar

U.S. Bank National Association will act as Bond Trustee, Paying Agent and Bond Registrar for the Bonds. The principal corporate trust office of the Bond Trustee is 1349 W. Peachtree Street, N.W., Suite 1050, Atlanta, Georgia 30309.

Legal Authority

The Fulton Bonds are being issued and secured pursuant to the Development Authorities Law (O.C.G.A. §36-62-1 et seq.), as amended (the “Development Authorities Law”) and pursuant to a resolution of the Fulton Authority authorizing the issuance of the Fulton Bonds adopted on June 28, 2016, as supplemented on October [__], 2016 (as supplemented, the “Fulton Resolution”).

The Clarke Certificates and the Fayette Certificates are being issued and secured pursuant to the Hospital Authorities Law (O.C.G.A. §31-7-70 et seq.), as amended (the “Hospital Authorities Law”) and pursuant to a resolution of the Clarke Authority authorizing the issuance of the Clarke Certificates adopted on August 23, 2016, as supplemented on October [__], 2016 (as supplemented, the “Clarke Resolution”), and a resolution of the Fayette Authority authorizing the issuance of the Fayette Certificates adopted on August 17, 2016, as supplemented on October [__], 2016 (as supplemented, the “Fayette Resolution”).

Offering and Delivery of the Bonds

The Bonds are offered when, as and if issued by each Authority and received by the Underwriters, subject to receipt of the approving opinion of King & Spalding LLP, Bond Counsel, and the opinion of King & Spalding LLP, as counsel to the members of the Obligated Group. Certain legal matters will be passed upon for the Fulton Authority by its counsel, Arnall Golden Gregory LLP, for the Clarke Authority by its counsel, Fortson, Bentley & Griffin, P.A., for the Fayette Authority by its counsel, McNally, Fox, Grant & Davenport, P.C., and for the Underwriters by their counsel, Balch & Bingham LLP. It is expected that the Bonds will be available for delivery on or about November __, 2016.

None of the Authorities has provided any information concerning the respective Authority (except as provided under “THE AUTHORITIES”) or its financial condition, nor has it agreed to provide any such disclosure in the future. PHC has undertaken all responsibilities for any continuing disclosure to bondholders as described below, and the Authorities will have no obligation to the bondholders or any other person with respect to Securities and Exchange Commission Rule 15c2-12.

PHC has covenanted in a Continuing Disclosure Agreement for the Bonds (the “Disclosure Agreement”) for the benefit of the holders and beneficial owners of the Bonds (i) to furnish certain financial information and operating data relating to PHC (the “Annual Report”) by not later than 150 days after the end of each fiscal year of PHC, (ii) to furnish certain financial information and operating data relating to PHC (the “Quarterly Report”) by not later than 60 days after the end of each fiscal quarter (other than the final quarter) of PHC, and (iii) to provide notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report, the Quarterly Report or the notices of material events is contained in “APPENDIX E—FORM OF CONTINUING DISCLOSURE AGREEMENT.”

For certain information regarding compliance by PHC with its obligations under certain continuing disclosure agreements relating to bonds outstanding for its benefit, see “CONTINUING DISCLOSURE.”

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. All references in this Official Statement to the Bond Indentures, the Loan Agreements, the Master Indenture, the Series 2016 Master Indenture Obligations and the Disclosure Agreement are qualified in their entirety by reference to such documents, copies of which are available upon request from, and upon payment of a reasonable copying charge to, Piedmont Healthcare, Inc., 2727 Paces Ferry Road, Building 2, Suite 700, Atlanta, Georgia 30339,

Attn: Vice President-Finance, or from the Bond Trustee. All references to the Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto contained in the Bond Indenture.

The foregoing Introduction contains only a brief summary of certain information contained in this Official Statement. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Official Statement.

PIEDMONT HEALTHCARE, INC.

Certain information with respect to PHC and the other members of the Obligated Group and their financial condition, operations and properties is included as APPENDIX A and APPENDIX B to this Official Statement.

THE AUTHORITIES

Each of the Authorities is either a public body corporate and politic of the State of Georgia created pursuant to the Development Authorities Law of the State of Georgia (O.C.G.A. Section 36-62-1, et seq., as amended) or the Hospital Authorities Law of the State of Georgia (O.C.G.A. Section 31-7-70, et seq., as amended) with the power to perform acts in its corporate capacity and in its corporate name necessary and proper to carry out the purposes enumerated in its enabling law, including the full power to authorize, issue and deliver the portion of the Bonds being issued by such Authority and to use the proceeds of the Bonds issued by it for the purposes described herein. The Bonds will be limited obligations as described under “SECURITY FOR THE BONDS.” None of the Authorities has participated in the preparation of this Official Statement and none of the Authorities has nor will assume any responsibility as to the accuracy or completeness of any information contained herein (other than the information relating to it under the headings “INTRODUCTION”, “THE AUTHORITIES” and “NO LITIGATION⎯The Authorities”), all of which information has been furnished by others. The Authorities have no taxing power.

THE BONDS

The following is a summary of certain provisions of the Bonds. Reference is made to each series of the Bonds and to the related Bond Indenture for a more detailed description of such provisions. Capitalized terms used in this section and not defined herein are used with the meanings assigned to them in the related Bond Indenture. The discussion herein is qualified by such reference. See “APPENDIX D⎯SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE.”

Separate Series

Except as described herein under “TAX EXEMPTION,” each series of Bonds is a separate series of bonds or certificates, is issued under a separate Bond Indenture, and is not cross-defaulted or cross-collateralized. Except for the respective maturity dates, interest rates and redemption provisions, the Bonds of each series contain substantially identical provisions. An event of default with respect to any series of the Bonds is not necessarily an event of default as to all Bonds, although each series of the Bonds is secured by a Master Indenture Obligation issued under the Master Indenture, and an event of default with respect to any series of the Bonds could lead to an event of default under the Master Indenture which would affect all series of bonds or certificates secured by Master Indenture Obligations issued under the Master Indenture.

Pricing Information

See the pricing terms on the inside cover of this Official Statement for principal maturities, interest rates and payment dates for each series of Bonds. The Bonds will be subject to redemption prior to maturity. See “THE BONDS– Redemption Prior to Maturity.”

Date and Denominations

The Bonds will be dated as of the date of initial delivery. The Bonds will be issuable in denominations of $5,000 or any multiple thereof.

Computation of Interest Accrual

Interest on the Bonds shall be computed on the basis of a 360-day year consisting of 12 months of 30 days each.

Book Entry System

The Bonds are being issued in electronic form under the Book Entry System procedures of The Depository Trust Company (“DTC”). While the Bonds are in the Book Entry System, the method and procedures for payment of the Bonds and matters pertaining to transfers and exchanges of the Bonds will be governed by the rules and procedures of the Book Entry System. If the Book Entry System is discontinued, the Bond Indenture contains alternate provisions for the method of payment and for transfers and exchanges. See APPENDIX F for a description of the DTC Book Entry System. See APPENDIX D for information regarding the applicable Bond Indenture provisions for a particular series of Bonds if the Book Entry System is terminated.

Persons Deemed Holders of Bonds

While the Book Entry System is in effect, the Bond Trustee will pay interest on the Bonds to DTC, and interest will be distributed to the Bondholders in accordance with the rules and regulations of DTC. The Book Entry System is expected to be in effect until the Bonds are retired. If the Book Entry System is terminated, the interest due on any Interest Payment Date with respect to the Bonds will be payable to the holders of record on the Record Date for such Interest Payment Date, which is specified in the Bond Indentures.

Interest on Overdue Payments

Interest will be payable on overdue principal on a Bond and (to the extent legally enforceable) on any overdue installment of interest on such Bond at the interest rate applicable to such Bond.

Redemption Prior to Maturity

Redemption of Fulton Bonds Prior to Maturity. The Fulton Bonds will be subject to optional or mandatory redemption as follows:

Optional Redemption. The Fulton Bonds maturing on or after July 1, ____ may be redeemed prior to their respective maturities at the option of PHC, either in whole or in part at any time (in such order of maturities as may be specified by PHC) on or after July 1, ____ in the manner and subject to the provisions of the related Bond Indenture, at a redemption price of par, together with accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Fulton Bonds maturing on July 1, ____, are subject to mandatory sinking fund redemption on July 1, ____ and each July 1 thereafter, in accordance with respective Bond Indenture, at a redemption price equal to the principal amount of each Bond (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the July 1, ____ amount to be paid rather than redeemed):

July 1 of the Year Principal Amounts

(maturity)

Redemption of Clarke Certificates Prior to Maturity. The Clarke Certificates will be subject to optional or mandatory redemption as follows:

Optional Redemption. The Clarke Certificates maturing on or after July 1, ____ may be redeemed prior to their respective maturities at the option of PHC, either in whole or in part at any time (in such order of maturities as may be specified by PHC) on or after July 1, ____ in the manner and subject to the provisions of the related Bond Indenture, at a redemption price of par, together with accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Clarke Certificates maturing on July 1, ____, are subject to mandatory sinking fund redemption on July 1, ____ and each July 1 thereafter, in accordance with respective Bond Indenture, at a redemption price equal to the principal amount of each Certificate (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the July 1, ____ amount to be paid rather than redeemed):

July 1 of the Year Principal Amounts

(maturity)

Redemption of Fayette Certificates Prior to Maturity. The Fayette Certificates will be subject to optional or mandatory redemption as follows:

Optional Redemption. The Fayette Certificates maturing on or after July 1, ____ may be redeemed prior to their respective maturities at the option of PHC, either in whole or in part at any time (in such order of maturities as may be specified by PHC) on or after July 1, ____ in the manner and subject to the provisions of the related Bond Indenture, at a redemption price of par, together with accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Fayette Certificates maturing on July 1, ____, are subject to mandatory sinking fund redemption on July 1, ____ and each July 1 thereafter, in accordance with respective Bond Indenture, at a redemption price equal to the principal amount of each Certificate (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the July 1, ____ amount to be paid rather than redeemed):

July 1 of the Year Principal Amounts

(maturity)

General Provisions Respecting Redemption

Option to Purchase or Apply Bonds to Mandatory Sinking Fund Obligations. At its option, to be exercised on or before the 45th day next preceding any sinking fund redemption date, PHC may (a) deliver to the related Bond Trustee for cancellation Bonds of the related series in any aggregate principal amount desired or (b) receive a credit in respect of its sinking fund redemption obligation for the Bonds of the related series which prior to such date have been redeemed (otherwise than through the operation of the mandatory sinking fund redemption) and cancelled by the Bond Trustee and not theretofore applied as a credit against any prior mandatory sinking fund redemption obligation. Each Bond so delivered or previously redeemed shall be credited by the Bond Trustee at 100% of the principal amount thereof on the obligation of PHC on such sinking fund redemption date and any excess shall be credited on the future sinking fund redemption obligations in such order as may be specified by PHC, and the principal amount of Bonds of such series to be redeemed by operation of the sinking fund shall be accordingly reduced.

Purchase in Lieu of Redemption. PHC shall have the option to purchase the Bonds in lieu of optional redemption. If a Bond has been called for optional redemption, PHC may exercise its right of purchase by delivery to the related Bond Trustee on or prior to the Business Day preceding the optional redemption date of written notice from PHC specifying that the Bond shall not be redeemed, but instead shall be purchased pursuant to the related Bond Indenture. Upon delivery of such notice from PHC, the Bonds shall not be redeemed, but shall instead be subject to mandatory tender on the date that would have been the optional redemption date at a purchase price equal to the redemption price that would have been payable with respect to such Bonds. PHC’s option to purchase in this manner shall be effective whether or not the notice of optional redemption sent to Holders indicates that PHC has exercised, or intends to exercise, such option. No further or additional notice to Holders shall be required in connection with the purchase in lieu of redemption. The Bonds purchased in such manner (i) shall not be cancelled or retired, but shall continue to be outstanding, (ii) shall be delivered to, or as directed by, PHC, and (iii) shall continue to bear interest at the rate provided for in the related Bond Indenture.

Selection of Bonds To Be Redeemed. If less than all of the Bonds of a series are to be redeemed, the particular Bonds to be redeemed shall be selected in such order of maturities as may be specified in writing by PHC. If less than all of the Bonds of a single series, maturity and coupon are to be redeemed, any Bond of such series, maturity and coupon outstanding in a denomination of greater than $5,000 may be called for partial redemption in the principal amount of $5,000 or any integral multiple thereof, and for the purpose of determining the Bonds to be redeemed or the amount of any such Bond in a principal amount in excess of $5,000 to be partially redeemed, the related Bond Trustee shall treat the entire principal amount of the Bonds of such series, maturity and coupon then outstanding as if the same were separate Bonds of $5,000 each and shall assign separate numbers to each for the purpose of determining the particular Bonds or the principal amount of any such Bond in a denomination greater than $5,000 to be redeemed by lot. Redemptions need not be pro rata among series. PHC may elect to redeem any or all of one series of the Bonds without redeeming any bonds of any other series.

Partially Redeemed Bonds. In case any Bond shall be redeemed in part only, upon the surrender of such Bond for partial redemption, the related Bond Trustee shall authenticate and shall deliver or cause to be delivered to or upon the written order of the owner thereof a Bond or Bonds of the same maturity and interest rate, in any authorized denominations, for the unredeemed portion of such partially-redeemed certificate. Any Bond, a portion of which has been redeemed as contemplated by the related Bond Indenture, shall be considered to be outstanding only in an amount reduced by the portion thereof so redeemed whether or not it has been surrendered.

Notice of Redemption. Notice of redemption (unless waived) shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date to the owners of the Bonds to be redeemed at the addresses appearing in the registration books maintained by the related Bond Trustee. PHC and the related Bond Trustee may agree as to any additional or other means of giving notices of redemption with respect to the Bonds. Provided that notice is mailed as provided in the related Bond Indenture, neither failure of any owner of a Bond to receive such notice, nor any defect therein, shall affect the validity of the proceedings to redeem any Bond as to which proper notice was mailed. Such notice may state that it is conditional on the occurrence of certain events, and if such events do not occur, then such redemption shall be cancelled. The related Bond Trustee shall give notice of such cancellation to the owners of the Bonds in the same manner as giving notice of redemption.

Effect of Redemption Call. Notice having been given in the manner and under the conditions provided in the related Bond Indenture, and moneys for the payment of the redemption price being held by the related Bond Trustee, all as provided in the related Bond Indenture, the Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Bonds on such date, interest on the Bonds so called for redemption shall cease to accrue, such Bonds shall cease to be entitled to any lien, benefit or security under the related Bond Indenture, and the owners of such Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof.

Notices to Securities Depository. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the related Bond Trustee will provide the notices of redemption specified in the related Bond Indenture only to the Securities Depository. See “APPENDIX F—THE DTC BOOK ENTRY SYSTEM.”

SECURITY FOR THE BONDS

Limited Obligation

The Bonds do not constitute a debt or a general obligation or a pledge of the faith and credit of the State of Georgia or of any political subdivision thereof, including Fulton County, the Unified Government of Athens-Clarke County and Fayette County. Neither the State of Georgia nor any political subdivision of the State of Georgia, including Fulton County, the Unified Government of Athens-Clarke County and Fayette County, shall be obligated to pay the principal of, redemption premium (if any) or interest on the Bonds. Neither the faith and credit nor the taxing power of the State of Georgia, or any political subdivision thereof, is pledged to the payment of the principal of, redemption premium (if any) or interest on the Bonds. None of the Authorities has any taxing power.

The Bonds are limited obligations of the respective issuing Authority, payable solely from the Trust Estate which is assigned and pledged to the related Bond Trustee by the respective Authority under the related Bond Indenture. The Trust Estate is defined in each Bond Indenture to include (i) all right, title and interest of the respective Authority in and to the related Loan Agreement and the related Series 2016 Master Indenture Obligation, including, but not limited to, the present and continuing right to make claim for, collect, receive and receipt for any of the sums, amounts, income, revenues, issues and profits and any other sums of money payable or receivable under the related Loan Agreement (except payments to indemnify the respective Authority thereunder and payments of the respective Authority’s fees and expenses) and the related Series 2016 Master Indenture Obligation, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the respective Authority is or may become entitled to do under the related Loan Agreement and the related Series 2016 Master Indenture Obligation; (ii) all moneys and securities held by the related Bond Trustee in any and all of the funds and accounts established under the related Bond Indenture; and (iii) any and all other property from time to time hereafter by delivery or by writing conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder by the respective Authority or by anyone on its behalf or with its written consent to the related Bond Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof.

The Loan Agreements and the Series 2016 Master Indenture Obligations

Under each Loan Agreement, PHC has agreed to execute and deliver to the respective Authority the related Series 2016 Master Indenture Obligation under which PHC agrees to make payments to the respective Authority in

such amounts and at such times as shall be necessary to pay the principal, redemption premium (if any) and interest on the related series of the Bonds. Pursuant to the Master Indenture, the members of the Obligated Group jointly and severally covenanted to promptly pay, or cause to be paid, all amounts due and payable under the Master Indenture as to each Series 2016 Master Indenture Obligation.

Master Indenture

Amendment and Restatement of Original Master Indenture; Purchase of Bonds is Deemed Consent to Amended and Restated Indenture. Certain members of the Obligated Group entered into a Master Trust Indenture, dated as of March 1, 1999 (the “1999 Master Indenture”), which has been amended and supplemented from time to time to add members to the Obligated Group, make amendments to certain covenants in the 1999 Master Indenture, and to authorize the issuance under such 1999 Master Indenture of obligations to secure indebtedness of members of the Obligated Group. Immediately prior to the issuance of the Bonds, the obligations issued under the 1999 Indenture secure, and provide for the payment of, the obligations of the Obligated Group with respect to the following: (i) Series 2009A Fulton Bonds, (ii) Series 2009A Fayette Bonds, (iii) Series 2009C Fulton Bonds, (iv) Series 2010 Coweta Bonds, (v) Series 2014A Fulton Bonds, (vi) Series 2014A Henry Bonds, (vii) Series 2014A Fayette Bonds, (viii) Series 2014B Fulton Bonds, (ix) Series 2014B Fayette Bonds, (x) a revolving line of credit maintained with SunTrust Bank, (xi) a guaranty and reimbursement agreement between PHC and the Hospital Authority of Henry County, (xii) a direct loan provided by Bank of America, N.A., (xiii) a guaranty and reimbursement agreement between PHC and the Clarke Authority, and (xiv) seven separate swap confirmations between PHC and SunTrust Bank (collectively, the “Existing Master Indenture Obligations”). Immediately prior to the issuance of the Bonds, the outstanding principal amount or notional amount of the Existing Master Indenture Obligations is approximately $668,870,105 in the aggregate. See “DEBT STRUCTURE OF THE OBLIGATED GROUP” in APPENDIX A.

In connection with the issuance of the Bonds, PHC determined that a number of the provisions of the 1999 Master Indenture should be updated and modernized to reflect current market practices as well as the current credit standing of the Obligated Group. Accordingly, the 1999 Master Indenture is being amended and restated in its entirety. The summary of the Master Indenture attached hereto as APPENDIX D reflects the amendment and restatement.

The amendment and restatement of the 1999 Master Indenture requires the consent of the holders of not less than a majority of the Original Master Indenture obligations outstanding at the time of execution of the amendment and restatement. For purposes of the 1999 Master Indenture, holders of the Bonds will be deemed to be holders of a like principal amount of the Series 2016 Master Indenture Obligations. Purchasers of the Bonds, by purchasing the Bonds, will be deemed to have irrevocably consented to the amendments reflected in the amended and restated Master Indenture, as will future holders of the Bonds. The consent of the holders of the Bonds, together with certain other consents being obtained by the Obligated Group, will constitute more than the requisite majority of the obligations outstanding under the Original Master Indenture to amend and restate. The Existing Master Indenture Obligations, other than the Master Indenture Obligation that secures the Series 2009A Fulton Bonds, which are being refunded, will continue to be secured under the Master Indenture on a parity with the Series 2016 Master Indenture Obligations issued to secure the respective series of Bonds. The holders of the Bonds will be secured under the terms of the Master Indenture by the respective Series 2016 Master Indenture Obligations on parity with the holders of the Existing Master Indenture Obligations and any other Master Indenture Obligations (as defined below) issued pursuant to the Master Indenture.

Special Covenants. In addition to the security of the Master Indenture and the covenants contained therein, Bank of America, N.A. and Specialized Lending, LLC (collectively, the “Lenders”) have the benefit of certain special covenants contained in the First Supplemental Master Trust Indenture relating to the Series 2009C Fulton Bonds and the direct loan provided to PHC by the Lenders. Such special covenants are described in APPENDIX D—SUMMARY OF FIRST SUPPLEMENTAL MASTER TRUST INDENTURE AND COVENANTS. The holders of the Bonds will not have the benefit of the special covenants contained in the First Supplemental Master Trust Indenture.

General. The Master Indenture provides for the issuance of notes or obligations (referred to in the Master Indenture as “Master Indenture Obligations”) to evidence or secure indebtedness of Members of the Obligated Group (as it may exist from time to time). The Master Indenture Obligations constitute unconditional obligations of the

Members. The Master Indenture Obligations are joint and several obligations of the Members. All Master Indenture Obligations are secured on an equal and proportionate basis.

Series 2016 Master Indenture Obligations. Each Series 2016 Master Indenture Obligation will be issued as a Master Indenture Obligation under the Master Indenture. PHC will issue the Series 2016 Master Indenture Obligations under the Master Indenture to evidence and secure its payment obligations under the respective Loan Agreements. The holders of the Series 2016 Master Indenture Obligations and the holders of all other Master Indenture Obligations, whether now outstanding or issued in the future in accordance with the terms of the Master Indenture, are entitled to the equal and proportionate benefit of the Master Indenture. For a description of other outstanding indebtedness of PHC secured by the Master Indenture, see APPENDIX A. A summary of the pertinent terms of the Master Indenture is attached to this Official Statement as APPENDIX D.

Additional Master Indenture Obligations. The Master Indenture permits Members of the Obligated Group to issue additional Master Indenture Obligations from time to time under certain circumstances and subject to the terms of the Master Indenture, which Master Indenture Obligations are equally and ratably secured under the Master Indenture with each Series 2016 Master Indenture Obligation. In addition, the Master Indenture permits the members of the Obligated Group to incur certain other types of indebtedness, including certain guarantees, under the circumstances, and to the extent, permitted by the Master Indenture. See “APPENDIX D⎯SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE.” The Obligated Group has previously issued Master Indenture Obligations which are secured on a parity under the Master Indenture with the Series 2016 Master Indenture Obligations, and, subject to the terms of the Master Indenture, may issue such additional Master Indenture Obligations in the future.

Security for Obligations. As security for their obligations to pay amounts under each Series 2016 Master Indenture Obligation and any other Master Indenture Obligations secured under the Master Indenture, the Members of the Obligated Group have granted to the Master Trustee a security interest in the “Gross Receivables” (as defined in the Master Indenture) received by the Obligated Group. Prior to the occurrence of an Event of Default under the Master Indenture, the Members of the Obligated Group are not required to deposit their Gross Receivables with the Master Trustee. If an Event of Default exists, the Master Trustee may exercise all rights and remedies with respect to the Gross Receivables that are available to a secured party under the provisions of applicable law, including that the Master Trustee may give notice (a “Gross Receivables Notice”) to the Credit Group Representative that it will take possession of all cash and other proceeds from the Gross Receivables received or receivable by the Obligated Group after the date of such Gross Receivables Notice. After receipt of any Gross Receivables Notice, the Credit Group Representative shall cause the Obligated Group Members immediately to remit to the Master Trustee any cash or other proceeds from the Gross Receivables that are received by the Obligated Group after the date of any Gross Receivables Notice until such time as notified by the Master Trustee in writing that such Gross Receivables Notice has been revoked. The enforcement of the pledge of the Gross Receivables may be limited by a number of factors.

Financial and Operating Covenants. The Master Indenture imposes various financial and operating covenants, including (i) a debt service coverage ratio, (ii) restrictions on liens, (iii) restrictions on the disposition of assets, and (iv) restrictions on additional indebtedness. For a description of these covenants, and the rights and remedies arising from failure to comply with these covenants, see APPENDIX D.

Obligated Group Members. The current Members of the Obligated Group will be the sole entities responsible for the payment of the Series 2016 Master Indenture Obligations and other Master Indenture Obligations secured under the Master Indenture from time to time and for performance of the covenants and agreements set forth in the Master Indenture. Subject to certain conditions, the Master Indenture permits additional entities to become members of the Obligated Group, and permits the Credit Group Representative to designate entities as Designated Affiliates for the purposes of the Master Indenture. The Credit Group Representative shall designate for each Designated Affiliate an Obligated Group Member to establish and maintain control over such Designated Affiliate (the Designated Affiliates, together with the Obligated Group, being herein referred to collectively as the “Credit Group”) to make such payments and perform such covenants and agreements as are necessary for the Credit Group to comply with the Master Indenture. The Master Indenture also permits members of the Obligated Group and Designated Affiliates to withdraw from the Credit Group under specified conditions, whereupon such withdrawing members of the Obligated Group and Designated Affiliates will cease to be bound by the Master Indenture, including the guaranty described above. The Obligated Group does not have a present plan or intention to cause or permit any

other entities to join the Credit Group as Obligated Issuers or Designated Affiliates or to permit the withdrawal of any member of the Credit Group.

As described in APPENDIX A, PHC has affiliates which are not Members of the Obligated Group. While those entities are not obligated on the Master Indenture Obligations, their financial information is included in the consolidated audited financial statements of PHC, and is taken into account in determining compliance with certain covenants and tests under the Master Indenture. See APPENDIX D. Similarly, PARMC has affiliates which are not Members of the Obligated Group, and when PARMC’s financial statements are included in the consolidated audited financial statements of PHC, beginning with the fiscal year ended September 30, 2017, the financial information for such affiliates will be included in the consolidated audited financial statements of PHC.

See “APPENDIX D⎯SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE” for further information regarding the Master Indenture, including a discussion of the conditions under which entities will be permitted to join or withdraw from the Credit Group, the provisions regarding the incurrence of, and security for, additional Master Indenture Obligations or other Indebtedness and the various financial and operating covenants of, and agreements to be performed by, the Credit Group.

PLAN OF FINANCE

The following table sets forth the estimated sources and uses of the proceeds of the Bonds.

Fulton Bonds Clarke Certificates Fayette Certificates

Sources of Funds: Principal amount of obligations $195,540,000* $185,145,000* $48,740,000* Net original issue premium (discount) Total Sources of Funds

Uses of Funds: Deposit to Escrow Fund for Clarke Refunded Certificates Deposit to Escrow Fund for Fulton Refunded Bonds Costs of 2016 Projects Costs of Issuance (1) Total Uses of Funds ______

*Preliminary; subject to change. Note (1): Includes underwriters’ discount, legal and accounting fees, financial advisor fees, printing costs, rating agency fees and other costs of issuance.

Clarke Refunded Certificates. Effective October 1, 2016, Athens Regional Medical Center, Inc. affiliated with PHC and changed its name to Piedmont Athens Regional Medical Center, Inc. The Affiliation Agreement requires PHC to redeem or defease the Clarke Refunded Certificates no later than March 1, 2017. A portion of the proceeds of the Bonds, together with other funds held for the payment of the Clarke Refunded Certificates, will be used to effect this defeasance. A portion of the proceeds of the Clarke Certificates as shown above will be deposited with The Bank of New York Mellon Trust Company, N.A., in its capacity as escrow agent and as trustee for the Clarke Refunded Certificates under an Escrow Deposit Agreement, dated as of November 1, 2016 (the “Clarke County Escrow Deposit Agreement”) and applied to purchase a portfolio of securities and to make a cash deposit which will provide funds at times and in amounts to pay principal and interest on the Refunded Clarke Certificates up to and including the first dates on which such Refunded Clarke Certificates may be called for redemption, and to redeem the remaining Refunded Clarke Certificates of each such series on the respective redemption date at a redemption price of

par. The Refunded Series 2007 Certificates will be called for redemption on January 1, 2017, and the Refunded Series 2012 Certificates will be called for redemption on January 1, 2022.

Fulton Refunded Bonds. Pursuant to a Trust Indenture dated as of November 1, 2009 (the “2009 Bond Indenture”), the Fulton Authority issued the Series 2009 Bonds to provide financing or refinancing for the acquisition and construction of certain improvements on or near the campus of Piedmont Atlanta Hospital in Fulton County, Georgia. In order to provide for the refunding of the Series 2009 Bonds, PHC, the Fulton Authority and U.S. Bank National Association in its capacity as escrow agent and as trustee for the Series 2009 Bonds will enter into an Escrow Deposit Agreement dated as of November 1, 2016 (the “Fulton County Escrow Agreement”). A portion of the proceeds of the Fulton Bonds, together with money from the funds established under the 2009 Bond Indenture, will be applied to purchase a portfolio of securities and to make a cash deposit which will provide funds at times and in amounts to pay principal and interest on the Series 2009 Bonds up to and including June 15, 2019, and to redeem the Series 2009 Bonds maturing thereafter at a redemption price of par.

Financing of the 2016 Projects. The proceeds of the Fayette Certificates will be used to finance the cost of the acquisition, construction, installation and equipping of healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital, including expansion of the emergency room and certain operating room facilities. The proceeds of the Fayette Certificates will be deposited in the Project Fund established under the related Bond Indenture and disbursed to PHC by the related Bond Trustee pursuant to the provisions of the related Bond Indenture.

A portion of the proceeds of the Fulton Bonds as shown above will be used to finance the cost of the acquisition, construction, installation and equipping of healthcare facilities, equipment and improvements on or near the Fulton County campus of Piedmont Atlanta Hospital, including renovations to the Women’s Center, ER observation unit, cardiovascular operating room, transplant unit, and the relocation of the dialysis center to enable patient room build out. The proceeds of the Fulton Bonds to be applied for such purpose will be deposited in the Project Fund established under the related Bond Indenture and disbursed to PHC by the related Bond Trustee pursuant to the provisions of the related Bond Indenture.

BONDHOLDER’S RISKS

Introduction

The following section describes certain risk factors affecting or relating to the payment of and security for the Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of the Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following special factors along with all other information described elsewhere or incorporated by reference in this Official Statement, including the Appendices hereto, in evaluating the Bonds.

Bankruptcy and Creditors’ Rights; Limits on Claims Against Members; Other Matters Concerning the Financing Documents

The Bonds of each series are payable by the Authorities solely from the Trust Estate pledged to the payment of such series of the Bonds under the related Bond Indenture. Enforcement of remedies under the Bond Indentures, the Master Indenture, the Loan Agreements and the Series 2016 Master Indenture Obligations may be limited or restricted by laws relating to bankruptcy and rights of creditors, and by application of general principles of equity applicable to the availability of specific performance or other equitable relief and may be substantially delayed in the event of litigation or statutory remedy procedures.

While organizations described in Section 501(c)(3) of the Internal Revenue Code (“Exempt Organizations”) such as the members of the Obligated Group are not subject to involuntary bankruptcy, such entities do have the right voluntarily to file a petition in bankruptcy. In any bankruptcy proceedings for PHC or a member of the Obligated Group, payments made by any of them during the 90-day (or one-year, for “insiders” as defined in the federal Bankruptcy Code) period immediately preceding the filing of such bankruptcy petition may be avoidable as preferential transfers to the extent such payments allow the recipients to receive more than they would have received

in the event of any such debtor’s liquidation. Such a bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such member and its property and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of a trustee. If the Bankruptcy Court so ordered, the property of such debtor, including accounts receivable and proceeds thereof, could be used for its financial rehabilitation. The rights of the Bond Trustees or Master Trustee to enforce claims for payment could be delayed during the pendency of the bankruptcy proceeding.

Any member of the Obligated Group that is the subject of a bankruptcy petition could file a plan of reorganization for the adjustment of its debts in any such proceeding, which plan could include provisions modifying or altering the rights of creditors generally or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which conditions are that the plan be feasible and that it shall have been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.

In the event of bankruptcy of a member of the Obligated Group, there is no assurance that certain covenants, including tax covenants, contained in the Bond Indentures, the Loan Agreements or other documents would survive. Accordingly, any member of the Obligated Group as a debtor in possession or a bankruptcy trustee appointed by the Bankruptcy Court could take action that might adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

The legal right and practical ability of the Bond Trustees and the Master Trustee to enforce rights and remedies may be limited by laws relating to bankruptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors’ rights. Enforcement of such rights and remedies will depend upon the exercise of various remedies specified by such documents, which, in many instances, may require judicial actions that are subject to discretion and delay, that otherwise may not be readily available or that may be limited by certain legal or equitable principles.

Each Series 2016 Master Indenture Obligation is cross-defaulted and secured on a parity with all other Master Indenture Obligations under the Master Indenture. Further, an Event of Default under the Master Indenture or a Loan Default under the related Loan Agreement constitutes an Event of Default under the related Bond Indenture. See “APPENDIX D—SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE.”

Risks Relating to the Bonds and the Related Financing Documents

Additional Debt. The Master Indenture permits PHC to incur additional long-term indebtedness and short-term indebtedness without the consent of or notice to the Authorities, the Bond Trustees or any bondholder upon the satisfaction of certain conditions. PHC also maintains a line of credit with a commercial bank. See “APPENDIX A—INFORMATION ABOUT PIEDMONT HEALTHCARE, INC.”

Secondary Market and Prices. The Underwriters will not be obligated to engage in secondary trading or to repurchase any of the Bonds, and no representation is made concerning the existence of any secondary market for the Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Bonds, and no assurance can be given that the Bonds can be resold at their initial offering price for any period of time.

Early Redemption of Bonds. Prospective purchasers of the Bonds should consider carefully all possible factors which may cause the Bonds to be redeemed earlier than projected. These include the possibilities that PHC may elect to prepay its obligations under the related Loan Agreement and that PHC may default under the related Loan Agreement with the result that the maturity of the Bonds is accelerated.

No Redemption Upon Loss of Tax Exemption. There is no provision for a redemption of the Bonds or payment of additional interest on the Bonds if interest on the Bonds becomes includable in gross income for federal income tax purposes, and the Authorities shall not be liable for any such payment whatsoever. In the event that interest on the Bonds becomes includable in gross income for purposes of federal income taxation, the value and marketability of the Bonds would likely be adversely affected.

Modification of the Master Indenture Provisions Relating to Variable Rate Indebtedness and Balloon Indebtedness; Other Modifications of the Bond Indentures or the Master Indenture.

As described in “APPENDIX D—SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE,” the Bond Indentures and the Master Indenture permit modifications of the Bond Indentures or the Master Indenture, respectively, in some cases with the consent of a majority of the owners of the Bonds outstanding under such Bond Indenture, or in the case of the Master Indenture, with the consent of a majority of the owners of the Master Indenture Obligations outstanding under the Master Indenture.

Special Bank Covenants under Master Indenture. PHC and the other members of the Obligated Group have entered into financing or loan agreements with commercial lenders for the purpose of obtaining loans and may do so again in the future. The covenants contained in such documents may be different than the covenants contained in the Master Indenture. See “APPENDIX D – SUMMARY OF FIRST SUPPLEMENTAL MASTER TRUST INDENTURE AND COVENANTS” for a description of such existing covenants.

General

The Obligated Group is subject to a wide variety of federal and state regulatory actions and legislative and policy changes by those governmental and private agencies that administer Medicare, Medicaid, and other payors and are subject to actions by, among others, The Joint Commission, the Centers for Medicare and Medicaid Services (“CMS”) of the U.S. Department of Health and Human Services (“DHHS”), the Attorney General of the State of Georgia, and other federal, state, and local government agencies. The future financial condition of the Obligated Group could be adversely affected by, among other things, changes in the method and amount of payments to the Obligated Group by governmental and nongovernmental payors, the financial viability of these payors, increased competition from other health care entities, the costs associated with responding to governmental inquiries and investigations, demand for health care, other forms of care or treatment, changes in the methods by which employers purchase health care for employees, capability of management, changes in the structure of how health care is delivered and paid for, future changes in the economy, demographic changes, availability of physicians, nurses, and other health care professionals, and malpractice claims and other litigation. These factors and others may adversely affect the ability of the Obligated Group to make payments required under the Bond Indenture and, consequently, may adversely affect the ability to make payments due on the Bonds. In addition, the tax-exempt status of the members of the Obligated Group and, therefore, of the Bonds, could be adversely affected by, among other things, an adverse determination by a governmental entity, noncompliance with governmental regulations or legislative changes.

Significant Risk Areas Summarized

Certain of the primary risks associated with the operations of the Obligated Group are briefly summarized in general terms below and are explained in greater detail in subsequent sections. The occurrence of one or more of these risks could have a material adverse effect on the financial conditions and results of operations of the Obligated Group and, in turn, the ability of the Obligated Group to make payments under the Agreements and the Series 2016 Master Indenture Obligations.

Disruption in the Credit Markets and Economic Factors. Domestic and international financial crises over the past few years have adversely affected the U.S. and international economies, undermined confidence in the financial sector, reduced the availability of credit and contributed to great volatility in the financial markets, reduced business activity and employment, increased business failures and decreases in personal income and increases in the incidence of poverty. There has been a particularly acute impact upon the financial sector causing many banks and other financial institutions to seek additional capital, to merge, and in some cases, to fail.

The members of the Obligated Group have significant holdings in a broad range of investments, and market fluctuations have affected and will continue to affect materially the value of those investments. More stringent credit requirements could adversely affect the ability of the members of the Obligated Group to obtain credit or otherwise access credit markets.

Reliance on Medicare. Inpatient hospitals rely to a high degree on payment from the federal Medicare program, which is undergoing significant changes and payment pressures as a result of government budgetary pressures as well as Health Care Reform. See “BONDHOLDERS’ RISKS—Health Care Reform” herein. These changes create uncertainty and could have a material adverse impact on hospitals’ payment stream from Medicare.

Non-Compliance with Conditions of Participation. The Obligated Group’s continued participation in the Medicare and Medicaid programs is dependent upon satisfactory compliance with Conditions of Participation (“COPs”) in the Medicare program. COPs are the standards that a health care provider must meet in order to be accredited by CMS to participate in the Medicare and Medicaid programs. See “BONDHOLDERS’ RISKS—Enforcement Activity – Compliance with Conditions of Participation” herein.

Managed Care Exposure. Certain health care markets, including many communities in Georgia, are strongly impacted by managed care. In those areas, managed care companies have significant influence over the rates, utilization and competition of hospitals and other health care providers. Rate pressure imposed by managed care payors may have a material adverse impact on health care providers, particularly if major purchasers or governmental authorities put increasing pressure on payors to restrain rate increases. Business failures by managed care companies also could have a material adverse impact on contracted hospitals and other health care providers in the form of payment shortfalls or delay, and/or continuing obligations to care for managed care patients without receiving payment. In addition, disputes with non-contracted payors are increasing and may result in an inability to collect billed charges from these payors.

Capital Needs vs. Capital Capacity. Hospital and other health care operations are capital intensive. Regulation, technology, and physician/patient expectations require constant and often significant capital investment. Total capital needs may outstrip capital capacity. Furthermore, capital capacity of hospitals and health systems may be reduced as a result of recent credit market dislocations, and it is uncertain how long those conditions may persist.

Government Fraud Enforcement. Fraud in government funded health care programs is a significant concern of DHHS and many states and is one of the federal government’s prime law enforcement priorities. The federal government and, to a lesser degree, state governments impose a wide variety of extraordinarily complex and technical requirements intended to prevent over-utilization based on economic inducements, misallocation of expenses, overcharging and other forms of fraud in the Medicare and Medicaid programs as well as other state and federally-funded health care programs. This body of regulation impacts a broad spectrum of hospital and other health care provider commercial activity, including billing, accounting, recordkeeping, medical staff oversight, physician contracting and recruiting, cost allocation, clinical trials, discounts and other functions and transactions.

Violations and alleged violations may be deliberate, but also frequently occur in circumstances where management is unaware of the conduct in question as a result of mistake, or where the individual participants do not know that their conduct is in violation of law. Violations may occur and be prosecuted in circumstances that are highly technical in nature and do not have the traditional elements of fraud, and enforcement actions may extend to conduct that occurred in the past. The government periodically conducts widespread investigations covering categories of services or certain accounting or billing practices. In addition, as described herein under “BONDHOLDERS’ RISKS—Health Care Reform,” ACA (as defined herein) will result in provider enrollment screening, enhanced oversight periods for new providers and suppliers, and enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs, and by requiring Medicare and Medicaid program providers and suppliers to establish compliance programs.

Violations and Sanctions. The government and/or private “whistleblowers” often pursue aggressive investigative and enforcement actions. The government has a wide array of civil, criminal and monetary penalties, including withholding essential hospital and other health care provider payments from the Medicare or Medicaid programs, or exclusion from those programs. Aggressive investigation and prosecutorial tactics, negative publicity, and threatened penalties of a catastrophic nature can be, and often are, used to force settlements, payment of fines, and

prospective restrictions that may have a materially adverse impact on hospital and other health care provider operations, financial condition and reputation. Multi-million dollar fines and settlements are common. These risks are generally uninsured. Government enforcement and private whistleblower suits may increase in the hospital sector. Most large hospital and other health care provider systems are likely to be adversely impacted.

Shortage of Clinical Professionals. From time to time, a shortage of physicians and nursing and other technical personnel occur which may have its primary impact on hospitals. Various studies have predicted that physician and nursing shortages will become more acute over time and grow to significant proportions. In addition, shortages of other professional and technical staff such as pharmacists, therapists, laboratory technicians and others may occur or worsen. Hospital operations, patient and physician satisfaction, financial condition and future growth could be negatively affected by physician and nursing and other technical personnel shortages, resulting in material adverse impact to hospitals.

Technical and Clinical Developments. New clinical techniques and technology, as well as new pharmaceutical and genetic developments and products, may alter the course of medical diagnosis and treatment in ways that are currently unanticipated, and that may dramatically change medical and hospital care. These could result in higher hospital costs, reductions in patient populations, lower utilization of hospital service and/or new sources of competition for hospitals.

Costs and Restrictions from Governmental Regulation. Nearly every aspect of hospital operation and health care delivery is regulated, in some cases by multiple agencies of government. The level and complexity of regulation appears to be increasing, bringing with it operational limitations, enforcement and liability risks, and significant and sometimes unanticipated cost increases.

Proliferation of Competition. Hospitals increasingly face competition from specialty providers of care and ambulatory care facilities. This may cause hospitals to lose essential inpatient or outpatient market share. Competition may be focused on services or payor classifications where hospitals realize their highest margins, thus negatively affecting programs that are economically important to hospitals. These new sources of competition may have a material adverse impact on hospitals, particularly where a group of a hospital’s principal physician admitters may curtail their use of a hospital service in favor of competitive facilities.

Increasing Consumer Choice; Increased Patient Responsibility for Costs. Hospitals and other health care providers face increased pressure to be transparent and provide information about cost and quality of services, which may lead to a loss of business as consumers and others make choices about where to receive health care services based upon cost and quality. In addition, many employers are shifting additional responsibility for costs onto consumers in the form of higher co-insurance obligations and deductibles. This may result in patients delaying or foregoing needed care.

Labor Costs and Disruption. Hospitals are labor intensive. Labor costs, including salary, benefits and other liabilities associated with the workforce, are a significant component of hospital expenses and therefore have significant impact on hospital operations and financial condition. Overall costs of the hospital workforce are high, and turnover is high. Pressure to recruit, train and retain qualified employees is expected to accelerate.

The following factors may materially increase hospital costs of operation:

General Economic Conditions; Bad Debt and Indigent Care. Hospitals and health care providers are economically influenced by the environment in which they are located. To the extent that state, county or city governments are unable to provide a safety net of medical services, pressure is applied to local hospitals and providers to increase free care. Economic downturns and lower funding of state Medicaid programs may increase the number of patients treated by hospitals who are uninsured, underinsured or otherwise unable to pay for some or all of their care. These conditions may give rise to increased bad debt and higher indigent care utilization. At the same time, nonoperating revenue from investments may be reduced or eliminated. These factors may have a material adverse impact on hospitals.

Tax-exempt hospitals often treat large numbers of indigent patients who are unable to pay in full for their medical care. General economic conditions that affect the number of employed individuals who have health coverage

affects the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, state and federal health care programs (including Medicare and Medicaid) may increase the frequency and severity of indigent treatment by such hospitals and other providers. It also is possible that future legislation could require that tax-exempt hospitals and other providers maintain minimum levels of indigent care as a condition to federal income tax exemption or exemption from certain state or local taxes.

Pension and Benefit Funds. As large employers, hospitals may incur significant expenses to fund pension and benefit plans for employees and former employees, and to fund required workers’ compensation benefits. Funding obligations in some cases may be erratic or unanticipated and may require significant commitments of available cash needed for other purposes.

Medical Liability Litigation and Insurance. Medical liability litigation is subject to public policy determinations and legal and procedural rules that may be altered from time to time, with the result that the frequency and cost of such litigation, and resultant liabilities, may increase in the future. Hospitals may be affected by negative financial and liability impacts on physicians. Costs of insurance, including self-insurance, may increase dramatically.

Nonprofit Healthcare Environment

As nonprofit tax-exempt organizations, the members of the Obligated Group are subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including its operation for charitable purposes. At the same time, the members of the Obligated Group conduct large-scale complex business transactions and are major employers in their respective geographic areas. There can often be a tension between the rules designed to regulate a wide range of charitable organizations and the day-to-day operations of a complex health care organization.

Recently, an increasing number of the operations or practices of health care providers have been challenged or questioned to determine if they are consistent with the regulatory requirements for nonprofit tax-exempt organizations. These challenges are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are examinations of core business practices of the health care organizations. Areas that have come under examination have included pricing practices, billing and collection practices, charitable care, methods of providing and reporting community benefit, executive compensation, exemption of property from real property taxation, private use of facilities financed with tax-exempt bonds and others. These challenges and questions have come from a variety of sources, including state attorneys general, the Internal Revenue Service (the “IRS”), labor unions, Congress, state legislatures and patients, and in a variety of forums, including hearings, audits, and litigation.

Action by Purchasers of Hospital Services and Consumers. Major purchasers of hospital services also could take action to restrain hospital charges or charge increases. Additionally and as a result of increased public scrutiny, it is also possible that the pricing strategies of hospitals may be perceived negatively by consumers, and hospitals may be forced to reduce fees for their services. Decreased utilization could result, and hospitals’ revenues may be negatively impacted. In addition, consumers and groups on behalf of consumers are increasing pressure for hospitals and other health care providers to be transparent and provide information about cost and quality of services that may affect future consumer choices about where to receive health care services.

Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain nonprofit health care providers by state and local taxing authorities have been challenged on the grounds that the health care providers were not engaged in charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. The real property tax exemptions of the members of the Obligated Group have not been placed under review by state or local authorities.

The foregoing are some examples of the challenges and examinations facing nonprofit health care organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations and may indicate an increasingly more difficult operating environment for health care organizations, including the members of the Obligated Group. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on hospitals.

Patient Service Revenue

The Medicare Program. Medicare is a federal program that provides certain health care benefits to beneficiaries who are 65 years of age or older, disabled or qualify for the End Stage Renal Disease program. Medicare Part A covers inpatient services and certain other services, and Medicare Part B covers certain physicians services, medical supplies and durable medical equipment. The Medicare Advantage Program, also known as Medicare Part C, enables Medicare beneficiaries who are entitled to Part A and are enrolled in Part B to choose to obtain their benefits through a variety of risk-based plans. Medicare Part D is the prescription drug benefit.

Medicare is administered by CMS, an agency of DHHS, which delegates to the states the process for certifying those organizations to which CMS will make payment. The rule-making authority of DHHS is substantial and the rules are extensive and complex. Substantial deference is given by courts to rules promulgated by DHHS.

Medicare claims are processed by non-government organizations or agencies that contract to serve as the fiscal agent between providers and the federal government to locally process Medicare’s institutional and provider claims. The contractors apply the Medicare coverage rules to determine the appropriateness of claims. CMS selects organizations (generally insurance companies) to act as contractors in various states or regions and enters into a “prime contract” with each. Most Medicare services are paid for on a fee-for-service basis under the reimbursement methods described below. Some Medicare recipients, however, enroll in Medicare Advantage managed care plans which may reimburse providers on a fee for service or capitated basis.

To achieve and maintain Medicare certification, hospitals must meet CMS’s “Conditions of Participation” on an ongoing basis. Compliance is determined by the state and/or an appropriate accrediting organization. The requirements for Medicare certification are subject to change, and, therefore, it may be necessary for hospitals to effect changes from time to time in their facilities, equipment, personnel, billing, policies and services to address such changing requirements. As the population ages, more people will become eligible for the Medicare program. Current projections indicate that demographic changes and continuation of current cost trends will exert significant and negative forces on the overall federal budget.

Approximately 45%, 46% and 47%, respectively, of the gross patient service revenues of the Obligated Group (not including revenues from physician services) were derived from the Medicare program for the fiscal years that ended June 30, 2014, 2015 and 2016. As a consequence, any adverse development or change in Medicare reimbursement could have a material adverse effect on the financial condition and results of operations of the Obligated Group.

Federal Budget Cuts. The Budget Control Act of 2011 (the “BCA”) mandates significant reductions and spending caps on the federal budget for federal fiscal years 2012 through 2021. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (“ATRA”) which prevented many – but not all – of the federal spending reductions from going into effect. The modified spending reductions took effect on March 1, 2013, resulting in a 2% across the board payment cut for all Medicare providers, including the members of the Obligated Group, beginning on April 1, 2013. Without further action by Congress, the spending cuts are scheduled to continue through federal fiscal year 2025. However, because Congress may make changes to the federal budget in the future, it is impossible to predict the impact any spending cuts that are approved may have upon the Obligated Group. Similarly, it is impossible to predict whether any automatic reductions to Medicare may be triggered in lieu of other spending cuts that may be proposed by Congress. These reductions could be implemented disproportionately for hospitals and could have an adverse effect on the financial condition of the Obligated Group.

Hospital Inpatient Reimbursement. Medicare Part A pays acute care hospitals for most inpatient services under a payment system known as the “Prospective Payment System” or “PPS.” Separate PPS payments are made for inpatient operating costs, inpatient capital-related costs and outpatient services.

Acute care hospitals such as those operated by the Obligated Group are generally paid a specified amount toward their operating costs for inpatient services provided to Medicare beneficiaries based on established categories of treatments or conditions known as diagnosis related groups (“DRGs”). The amount paid for each DRG is established prospectively by CMS, based on the estimated intensity of hospital resources necessary to furnish care for

each principal diagnosis and is not related directly to a hospital’s actual costs. For certain Medicare beneficiaries who have unusually costly hospital stays (“outliers”), CMS will provide additional payments above those specified for the DRG. Outlier payments cease to be available upon the exhaustion of such patient’s Medicare benefits or a determination that acute care is no longer necessary, whichever occurs first. There is no assurance that any of these payments will cover the actual costs incurred by a hospital. In addition, recent revisions to the outlier regulations, implemented in order to curb outlier payment abuse, may adversely affect hospitals’ ability to receive such subsidies. In addition to outlier payments, DRG payments are adjusted for area wage differentials on a yearly basis.

The Secretary of DHHS is required to review annually the DRG categories to take into account any new procedures and reclassify DRGs and recalibrate the DRG relative weights that reflect the relative hospital resources used by hospitals with respect to discharges classified within a given DRG category. There is no assurance that the Obligated Group will be paid amounts that will reflect adequately changes in the cost of providing health care or in the cost of health care technology being made available to patients. CMS may only adjust DRG weights on a budget-neutral basis.

Health care providers will likely be further subject to decreased reimbursement as a result of implementation of recommendations of the Medicare payment advisory board, whose directive is to reduce Medicare cost growth. The advisory board’s recommended reductions will be automatically implemented unless Congress adopts alternative legislation that meets equivalent savings targets. To date, the advisory board has not made any recommended reductions. Industry experts also expect that government cost reduction actions may be followed by private insurers and payors.

Reimbursement of Hospital 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. Thus, capital costs are reimbursed exclusively on the basis of a standard federal rate (based on average national costs of capital), subject to certain adjustments (such as for disproportionate share, and outlier cases) specific to each hospital. Hospitals are reimbursed at 100% of the standard federal rate for all capital costs. This applies to the standard federal rate before the application of the adjustment factors for outliers, exceptions and budget neutrality.

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

Hospital Outpatient Reimbursement. Hospital outpatient services, including hospital operating and capital costs, are reimbursed on a PPS basis. Several Part B services are specifically excluded from this rule, including certain physician and non-physician practitioner services, ambulance, clinical diagnostic laboratory services and nonimplantable orthotics and prosthetics, physical and occupational therapy, and speech language pathology services.

Under the hospital outpatient PPS (“OPPS”), predetermined amounts are paid for designated services furnished to Medicare beneficiaries. CMS classifies outpatient services and procedures that are comparable clinically and in terms of resource use into ambulatory payment classification (“APC”) groups. 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. Subsequently, a payment rate is established for each APC. Depending on the services provided, a hospital may be paid for more than one APC for a patient visit.

OPPS rates are adjusted annually based on the hospital inpatient market basket percentage increase. There can be no assurance that the hospital OPPS rate, which bases payment on APC groups rather than on individual services, will be sufficient to cover the actual costs of the Obligated Group allocable to Medicare patient care. Hospitals that fail to report data related to seven required quality measures will have their market basket percentage increase reduced by two percentage points.

In addition to the APC rate, there is a predetermined beneficiary coinsurance amount for each APC group. There can be no assurance that the beneficiary will pay this amount.

Medicare Payment for Preventable Medical Errors. The Deficit Reduction Acts of 2005 and 2007 (collectively, the “DRA”) required the Secretary of DHHS to select at least two conditions that are: (1) high cost, high

volume or both; (2) identified through coding as a complicating condition or major complicating condition that, when present as a secondary diagnosis at discharge, results in payment at a higher MS-DRG; and (3) reasonably preventable through application of evidence-based guidelines. Such conditions are referred to as “hospital acquired conditions.” The DRA further required hospitals to begin reporting on claims for discharges, beginning October 1, 2007, whether the selected conditions were present on admission. In its 2008 Inpatient Prospective Payment System (“IPPS”) Rule, CMS selected eight conditions in furtherance of this mandate. These included seven conditions identified by the National Quality Forum as “never events.” In the 2009 IPPS Rule, CMS finalized several more conditions, within three categories. All of the conditions have payment implications when acquired during an inpatient stay for discharges on or after October 1, 2008. In December 2008, the OIG issued three reports relating to adverse events in hospitals and the need to improve patient safety. The incidence of adverse events and their payment implications continues to be an area of focus for regulators.

Medicare Audits and Withholdings. Hospitals participating in Medicare and Medicaid are subject to audits and retroactive audit adjustments with respect to reimbursement claimed under those programs, and the representations upon which such reimbursements are claimed. There can be no assurance any such future adjustments will not be material or that the Obligated Group’s reserves for such purpose will be adequate to cover any such adjustments. Both Medicare and Medicaid regulations also provide for withholding payments in certain circumstances. Any such withholding with respect to the Obligated Group could have a material adverse effect on the financial condition and results of operations of the Obligated Group. In addition, contracts between hospitals and third-party payors often have contractual audit, setoff and withhold provisions that may cause substantial, retroactive adjustments. Such contractual adjustments also could have a material adverse effect on the financial condition and results of operations of the Obligated Group. No assurance can be given that in the future a Medicare payment or other payment will not be withheld that would materially and adversely affect the financial condition or results of operations of the Obligated Group.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established the Medicare Recovery Audit Contract (“RAC”) program initially as a demonstration program to identify improper Medicare payments. RACs are paid on a contingency fee basis, receiving a percentage of the improper overpayments and underpayments they collect from providers. RACs can review the last four years of provider claims for the following types of services: hospital inpatient and outpatient, skilled nursing facility, physician, ambulance and laboratory, as well as durable medical equipment. The RACs use automated software programs to identify potential payment errors in such areas as duplicate payments, fiscal intermediaries’ mistakes, medical necessity and coding, and identified significant overpayments for collection in the demonstration states. The Tax Relief and Healthcare Act of 2006 expanded the RAC program to all 50 states. ACA extended RACs to Medicaid.

In light of the complexity of the regulations relating to the Medicare program, and the nature of ongoing audits and compliance activities as described above, there can be no assurance that the Obligated Group will not be the subject of any such activities.

Health Plans and Managed Care. Most private health insurance coverage is provided by various types of “managed care” plans, including health maintenance organizations (“HMOs”) and preferred provider organizations (“PPOs”) that generally use discounts and other economic incentives to reduce or limit the cost and utilization of health care services. Medicare and Medicaid also purchase hospital care using managed care options. Payments to hospitals from managed care plans typically are lower than those received from traditional indemnity or commercial insurers.

Managed care plans have replaced indemnity insurance as the prime source of nongovernmental payment for hospital services, and hospitals must be capable of attracting and maintaining managed care business, often on a regional basis. Regional coverage and aggressive pricing may be required. However, it is also essential that contracting hospitals be able to provide the contracted services without significant operating losses, which may require multiple forms of cost containment.

Many HMOs and PPOs currently pay providers on a negotiated fee-for-service basis or, for institutional care, on a fixed rate per day of care, which, in each case, usually is discounted from the usual and customary charges for the care provided. Currently, the Obligated Group has no managed care capitated contracts for its facilities (inpatient and outpatient services).

Often, managed care contracts are enforceable for a stated term, regardless of hospital losses and may require hospitals to care for enrollees for a certain time period, regardless of whether the HMO is able to pay the hospital. Hospitals from time to time have disputes with managed care payors concerning payment and contract interpretation issues.

Failure to maintain contracts could have the effect of reducing the Obligated Group’s market share and net patient service revenue. Conversely, participation may result in lower net income if participating hospitals are unable to adequately contain their costs. Thus, managed care poses one of the most significant business risks (and opportunities) the hospitals face.

For fiscal years ended June 30, 2014, 2015 and 2016, the Obligated Group received approximately 38%, 38% and 37%, respectively, of gross patient service revenues (not including revenues from physician services) from managed care plans (excluding Medicare and Medicaid managed care plans).

Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures. Health plans, Medicare, Medicaid, employers, trade groups and other purchasers of health services, private standard-setting organizations and accrediting agencies increasingly are using statistical and other measures in efforts to characterize, publicize, compare, rank and change the quality, safety and cost of health care services provided by hospitals and physicians. Published rankings such as “score cards,” tiered hospital networks with higher co-payments and deductibles for non-emergent use of lower-ranked providers, “pay for performance” and other financial and non-financial incentive programs are being introduced to affect the reputation and revenue of hospitals and the members of their medical staffs and to influence the behavior of consumers and providers such as the members of the Obligated Group. Measures of quality based on clinical outcomes of patient care, reduction in costs, patient satisfaction, and investment in health information technology are prevalent. Measures of performance set by others that characterize a hospital negatively may adversely affect its reputation and financial condition.

Health Care Reform

Federal Health Care Reform. The Patient Protection and Affordable Care Act, as subsequently amended by the Health Care and Education Reconciliation Act of 2010 (collectively, referred to herein as the “ACA”) is intended to address disparities in the cost and delivery of health care. As a result of the ACA, substantial changes have occurred and are anticipated to continue to occur in the United States health care system. The changes to various aspects of the health care system in the ACA including, among many other changes, substantial adjustments to Medicare reimbursement, establishment of individual mandates for health care coverage, extension of coverage to certain populations, provision of incentives for employer-provided health care insurance, restrictions on physician-owned hospitals, increased efficiency, more stringent federal health care program integrity requirements, increased regulatory oversight, and increased federal and state enforcement activities. The provisions of the ACA that encourage or mandate health care coverage for individuals can be expected to reduce the amount of uncompensated care that tax-exempt hospitals provide. However, revisions to the Medicare reimbursement program could also reduce revenues. In June 2012, the Supreme Court upheld most provisions of the ACA, while limiting the power of the federal government to penalize states for refusing to expand Medicaid, and on June 25, 2015, the Supreme Court issued a decision ruling that health insurance subsidies under the ACA would be available in all states, including those with federally-facilitated health insurance exchanges. At this time, it is not possible to predict the outcomes of any legislative attempts to amend or repeal the ACA or any judicial interpretations of the ACA. Therefore, the impact of the ACA on the operations of the System, and as a result, the Credit Group, cannot be currently ascertained, and it may have a material impact, either positive or negative, on its respective operations.

Many insurers have begun to terminate their participation in the ACA insurance exchanges, thus limiting consumer choices of insurance. This may increase the number of uninsured people which could adversely affect the members of the Credit Group.

The Medicaid Program. Medicaid is a combined federal and state program created by certain provisions of the federal Social Security Act, under which the federal government supplements funds provided by the states for medical assistance to eligible persons. Medicaid is a state-administered medical assistance program that reimburses, among other things, hospital care costs for the medically indigent, primarily including children, pregnant women,

blind and disabled individuals, and the elderly. Each state sets its own guidelines regarding eligibility, services, and reimbursement according to a state Medicaid plan that CMS must approve in order for the state to receive federal matching funds.

The Georgia Medicaid program is administered by the Georgia Department of Community Health, Division of Medical Assistance. In order for Georgia to continue to receive funding for the cost of its Medicaid program from the federal government, it must administer its program in accordance with federal statutes and regulations. The federal government has on occasion cut off Medicaid funds to states that were not in compliance with such laws and regulations. Any such federal action taken with respect to the Georgia Medicaid program would likely have an adverse effect upon the Obligated Group.

Reimbursement under the Medicaid program is subject to the timely appropriation of sufficient funds by state legislatures, as well as complexities inherent in claims’ processing and cost-report settlement under each state’s Medicaid program. The federal and state governments, including Georgia, have considered, and are continuing to consider, changes to Medicaid funding, particularly in light of the budget crises facing many states. The United States Congress recently approved an increase in Medicaid funding to states; however, the federal government continues to explore long-term options to the funding difficulties with Medicaid. Certain additional proposals being examined may ultimately result in reduced federal Medicaid funding to the states, which could adversely impact the amount of revenue received by the Obligated Group.

While the ACA provides incentives for states to expand their Medicaid eligibility requirements, the U.S. Supreme Court, in National Federation of Independent Business v. Sebelius, struck down ACA provisions eliminating federal Medicaid funding for those states that do not accept the new funds as an unlawful coercion of the states by the federal government. Therefore, states have the option to accept or not accept the new federal Medicaid funds with the attached conditions without risking the loss of all federal Medicaid funding. Although certain states have opted to fund Medicaid expansion in the near term, no state is obligated to maintain expanded Medicaid eligibility in future years. At this time, Georgia has voted against federal Medicaid expansion, and two laws were recently enacted in the Georgia legislature to block efforts at Medicaid expansion. During the 2013–2014 Regular Session of the General Assembly, the legislature passed House Bill 990, prohibiting Medicaid expansion through an increase in the income threshold without prior legislative approval, and also passed House Bill 943, prohibiting state and local employees from advocating for Medicaid expansion. The future of Medicaid expansion in Georgia therefore remains unclear.

Since the ACA has passed, Georgia has not expanded its Medicaid program. The Georgia Chamber of Commerce has commissioned a health care access task force to provide recommendations and proposals for expanding access to medical services for the underinsured and uninsured in Georgia. The task force finalized its proposals in the summer of 2016 to prepare for debate in the January 2017 General Assembly session. It remains unclear what the outcome of these efforts to expand coverage under Medicaid will be, and further, what financial and operational impact any such expansion will have on the Obligated Group.

Georgia has implemented a hospital bed tax of 1.45% of hospital net revenues to fund its Medicaid Program.

For each of the fiscal years ended June 30, 2014, 2015 and 2016, the Obligated Group received approximately 9%, 8% and 8%, respectively, of gross patient service revenues (not including revenues from physician services) from Medicaid.

Changes in qualification criteria, covered benefits, and reimbursement amounts could have a material effect on the Obligated Group’s net revenue and operating margin. With increased benefit limitations and more restrictive payments for services, reductions in reimbursement could be materially greatly than current estimates and could result in more uninsured patients. Accordingly, there can be no assurance that Medicaid payments are or will continue to be adequate.

Medicaid Payment for Preventable Medical Errors. On June 6, 2011, CMS published a final rule implementing Provider Preventable Conditions (PPCs) as authorized by section 2702 of the ACA. The provisions of this rule prohibit federal payments to States under section 1903 of the Social Security Act for any amounts expended for providing medical assistance for health care-acquired conditions. The final rule became effective July 1, 2011, and CMS provided States with an additional year to meet these new requirements.

Medicare and Medicaid Audits. Under the ACA, recovery audits were expanded to include Medicaid by requiring states to contract with RACs to conduct such audits. In addition, CMS has instituted a Medicaid Integrity Program, modeled on the Medicare Integrity Program. Medicaid Integrity Program contractors assist state Medicaid agencies by analyzing Medicaid claims data to identify high-risk areas and potential vulnerabilities and conducting post-payment field audits and desk review audits of Medicaid provider payments.

Medicare and Medicaid audits may result in reduced reimbursement or repayment obligations related to past alleged overpayments and may also delay Medicare and Medicaid payments to providers pending resolution of the appeals process. The ACA explicitly gives DHHS the authority to suspend Medicare and Medicaid payments to a provider or supplier during a pending investigation of fraud. The ACA also amended certain provisions of the FCA (as defined herein) to include retention of overpayments as a violation. It also added provisions respecting the timing of the obligation to identify, report and reimburse overpayments. The effect of these changes on existing programs and systems of the Obligated Group cannot be predicted.

Disproportionate Share Payments. Medicare and Medicaid programs provide additional payment for hospitals that serve a disproportionate share of certain low income patients. The Obligated Group is currently qualified for disproportionate share payments through Medicaid. The ACA substantially reduces Medicare and Medicaid disproportionate share payments beginning October 1, 2013 and through at least 2020. There can be no assurance that the Obligated Group will continue to qualify for disproportionate share status in the future or continue to receive distributions at current levels. There also can be no assurance that disproportionate share payments will not be further decreased or eliminated in the future. Please note that subsequent to the required ACA Medicaid DSH reductions, two separate pieces of legislation were passed into law that delayed the scheduled ACA Medicaid DSH cuts.

State Budget. Many states, including Georgia, face significant financial challenges, including erosion of general fund tax revenues, falling real estate values, slowing economic growth and higher unemployment, each of which may continue or worsen over the coming years. These factors have resulted in a sizeable shortfall between anticipated revenues and spending demands.

The financial challenges facing states may negatively affect health care organizations in a number of ways. Some states, including Georgia, may enact legislation designed to reduce their Medicaid expenditures through eligibility restrictions (causing a greater number of indigent, uninsured or underinsured patients) and additional reductions in Medicaid payment rates. The ACA provides for significant expansions to the Medicaid program, and the BCA may shift further funding responsibility from the Federal government to state governments, exacerbating the states’ financial challenges.

Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures

Health plans, Medicare, Medicaid, employers, trade groups and other purchasers of health services, private standard-setting organizations and accrediting agencies increasingly are using statistical and other measures in efforts to characterize, publicize, compare, rank and change the quality, safety and cost of health care services provided by hospitals and providers. The ACA shifts payments from paying for volume to paying for value, based on various health outcome measures. Published rankings such as “score cards,” “pay for performance” and other financial and non-financial incentive programs are being introduced to affect the reputation and revenue of hospitals, the members of their medical staffs and other providers and to influence the behavior of consumers and providers such as the Obligated Group. Currently prevalent are measures of quality based on clinical outcomes of patient care, reduction in costs, patient satisfaction, and investment in health information technology. Measures of performance set by others that characterize a hospital or provider negatively may adversely affect its reputation and financial condition.

Government Regulation of Relationships between Hospitals, Physicians and Other Providers and Suppliers

Health care “fraud and abuse” laws have been enacted at the federal and state levels to broadly regulate the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under these laws, hospitals and other health care providers can be penalized

for a wide variety of conduct, including submitting claims for services that are not provided, billing in a manner that does not comply with government requirements or including inaccurate billing information, billing for services deemed to be medically unnecessary, or billings accompanied by an illegal inducement to utilize or refrain from utilizing a service or product.

Federal and state governments have a broad range of criminal, civil and administrative sanctions available to penalize and remediate health care fraud, including the exclusion of a hospital or other health care provider from participation in the Medicare and Medicaid programs, civil monetary penalties, and suspension of Medicare and Medicaid payments. Fraud and abuse cases may be prosecuted by one or more government entities and/or private individuals, and more than one of the available sanctions may be, and often are, imposed for each violation.

Laws governing fraud and abuse may apply to hospitals and other health care providers, and to nearly all individuals and entities with which a hospital or other health care provider does business. Fraud investigations, settlements, prosecutions and related publicity can have a material adverse effect on hospitals and other health care providers. See “Enforcement Activity” herein. Major elements of these often highly technical laws and regulations are generally summarized below.

False Claims Act. The federal False Claims Act (“FCA”) makes it illegal to submit or present a false, fictitious or fraudulent claim for payment or approval for payment for which the federal government provides, or reimburses at least some portion of the requested money or property to the federal government, and may include claims that are simply erroneous. The ACA amends the FCA by expanding the numbers of activities that are subject to civil monetary penalties to include, among other things, failure to report and return known overpayments within statutory limits. Because the term “knowingly” is defined broadly under the law to include not only actual knowledge but also deliberate ignorance or reckless disregard of the facts, the FCA can be used to punish a wide range of conduct. FCA investigations and cases have become common in the health care field and may cover a range of activity from intentionally inflated billings, to highly technical billing infractions, to allegations of inadequate care. Violation or alleged violation of the FCA can result in settlements that require multi-million dollar payments and compliance agreements. The FCA also permits individuals to initiate civil actions on behalf of the government in lawsuits called “qui tam” actions. Qui tam plaintiffs, or “whistleblowers,” can share in the damages recovered by the government or recover independently if the government does not participate. The FCA has become one of the government’s primary weapons against health care fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion or reputation damage that could have a material adverse impact on a hospital or other health care provider.

Federal legislation creates financial incentives for states to enact analogous false claims acts. The legislation also imposes financial penalties on any state that does not require health care providers receiving more than $5 million in annual Medicaid revenues to adopt policies and train employees on the federal and state false claims acts.

On May 20, 2009, the Fraud Enforcement Recovery Act of 2009 (the “FERA”) was signed into law, which modified and clarifies certain provisions of the False Claims Act. In part, the FERA amends the False Claims Act such that the False Claims Act penalties may now apply to any person, including an organization that does not contract directly with the government, who knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim paid in part by the federal government. As discussed above under “BONDHOLDERS’ RISKS—Health Care Reform,” ACA will result in increased regulation and enforcement of fraud and abuse. ACA expands the scope of the False Claims Act, and therefore may lead to an increase in False Claims Act lawsuits.

In addition to prohibiting “traditional” false claims based on improper claim amounts or claims for services that were not provided properly or at all, the FCA also is being used increasingly to enforce other fraud and abuse laws, based on so-called “certification” theories. In a certification case, an FCA action is based on the premise that when submitting government program claims, health care providers expressly or impliedly certify compliance with all applicable laws and regulations, such that failure to comply with any such laws or regulations transforms an otherwise valid claim into a false claim. Certification approaches have been used successfully to support FCA actions based on alleged violations of, among other laws, the Anti-Kickback Law and the Stark law, and the ACA codified this theory. The FCA has become one of the government’s primary weapons against health care fraud. FCA violations or alleged violations could lead to multi-million dollar settlements, government program exclusion and reputation damage that could have a material adverse impact on a hospital or other health care provider.

Federal Fraud and Abuse Provisions. The federal “Anti-Kickback Law” is a felony criminal statute that prohibits anyone from knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for, among other things, a referral (or to induce a referral) for any item or service that may be paid by any federal or state health care program. The Anti-Kickback Law potentially may apply to many common health care transactions between persons and entities with which a hospital or health care system does business, including hospital-physician joint ventures, hospital-physician integration vehicles (such as a medical foundation), accountable care organizations, medical director agreements, physician recruitment agreements, physician office leases, purchases from vendors, and other transactions. As noted in “BONDHOLDERS’ RISKS—Health Care Reform,” ACA contains provisions intended to increase regulation and enforcement of fraud and abuse. Included in ACA is a requirement that a Medicare self-referral disclosure protocol (“SRDP”) is established, which will require providers to self-report potential violations of the Anti-Kickback Law.

The Anti-Kickback Law can be prosecuted either criminally or civilly. Each criminal violation is subject to a fine of up to $25,000 for each act (which may be each item or each bill sent to a federal program), imprisonment for up to five years and/or exclusion from the Medicare and Medicaid programs. In addition, civil monetary penalties of $10,000 per item or service in noncompliance (which may be each item or each bill sent to a federal program) or an “assessment” of three times the amount claimed may be imposed. Violation or alleged violation of the Anti-Kickback Law can result in settlements that require multi-million dollar payments and compliance agreements and potentially also exclusion from participation in federal or state health care programs.

Restrictions on Self-Referrals. The federal Ethics in Patient Referrals Act, the so-called “Stark” statute, prohibits the referral by a physician of Medicare/Medicaid patients for certain designated health services (including inpatient and outpatient hospital services, clinical laboratory services, and various diagnostic imaging services) to entities with which the referring physician has a financial relationship, unless the relationship fits within a stated statutory or regulatory exception. It also prohibits a hospital or other health care provider furnishing the designated services from billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited referral. The government does not need to prove that the entity knew that the referral was prohibited to establish a Stark Law violation. If certain substantive and technical requirements are not met, many ordinary business practices and economically desirable arrangements between hospitals and physicians will likely constitute “financial relationships” within the meaning of the Stark Law, thus triggering the prohibition on referrals and billing. Most providers of the designated health services with physician relationships have some exposure to liability under the Stark Law. Recent changes to the regulations issued under the Stark Law have rendered illegal a number of common arrangements under which physician-owned entities provide services and/or equipment to hospitals and may increase risk of violation due to lack of clarity of the technical requirements.

Medicare may deny payment for all services related to a prohibited referral and a hospital or other health care provider that has billed for prohibited services is obligated to notify and refund the amounts collected from the Medicare program. For example, if an office lease between a hospital and a large group of heart surgeons is found to violate the Stark Law, a hospital could be obligated to repay CMS for the payments received from Medicare for all of the heart surgeries performed by all of the physicians in the group for the duration of the lease, a potentially significant amount. The government may also seek substantial civil monetary penalties, and in some cases, a hospital or other health care provider may be liable for fines up to three times the amount of any monetary penalty, and/or be excluded from the Medicare and Medicaid programs. Potential repayments to CMS, settlements, fines or exclusion for a Stark Law violation or alleged violation could have a material adverse impact on a hospital or other health care provider. Increasingly, the federal government is prosecuting violations of the Stark Law under the FCA, based on the argument that claims resulting from an illegal referral arrangement are also false claims for FCA purposes. See the discussion under the subheading “False Claims Act” above.

The Stark Law is very detailed and complex. In addition, CMS has been very active in recent years in revising existing regulations and promulgating new regulations to close perceived loopholes and otherwise to impose new restrictions that have caused hospitals and other health care providers to completely revise the nature of certain common transactions with physicians. Government enforcement authorities have become increasingly active in bringing Stark enforcement actions. In addition, given its complexity and potential to generate very large financial damages and penalties, whistleblowers are bringing Stark-based FCA actions with increasing frequency. Potential

repayments to CMS, settlements, fines or exclusion for a Stark violation or alleged violation could have a material adverse impact on a hospital or other health care provider.

Several recent cases have demonstrated the government’s ability to use the Stark Law, together with the FCA, to extract very large penalties for noncompliance.

Georgia Provider Self-Referral Act. The Georgia Provider Self-Referral Act (the “Provider Self-Referral Act”) prohibits a healthcare provider from referring a patient for the provision of a “designated health service” to an entity in which the healthcare provider is an investor or has an investment interest, subject to certain exemptions. A healthcare provider is any physician or other person licensed, certified or registered under the laws of the State of Georgia to provide healthcare services. Designated health services means any healthcare procedure, service or item provided by a healthcare provider.

Penalties for violation of the anti-referral provisions of the Provider Self-Referral Act could be applied to many joint business activities between hospitals and physicians, physician recruiting and retention programs, physician referral services, hospital-physician service and management contracts, loans to physicians, space and equipment rentals and other service and vendor relationships. The Obligated Group will conduct certain activities of these general types and similar activities. While management of the Obligated Group does not believe that the Obligated Group is or will be involved in any prohibited activity and is not aware of any challenge or investigation with respect to these matters, there can be no assurance that such challenge or investigation will not occur in the future. If the Obligated Group’s activities are determined to violate the anti-referral provisions of these laws, this determination may have a materially adverse effect on its financial position, especially if violations are identified and prosecuted and result in exclusion from reimbursement programs or substantial fines.

Georgia Insurance Law; False Claims Provisions. Georgia law prohibits submitting a false claim or making a false record or statement in order to secure reimbursement from an insurance company or an HMO. Violation of this prohibition may lead to the imposition of civil or criminal penalties. In 2007, Georgia enacted the State False Medicaid Claims Act (“SFMCA”), which was modeled on the federal False Claims Act and designed to enhance Georgia’s anti-fraud efforts in the area of Medicaid fraud. SFMCA allows for civil monetary penalties of $5,500 to $11,000 for each false claim submitted to defraud the State Medicaid program and treble the damages sustained by the Georgia Medicaid program as a result of the acts. SFMCA also empowers individuals to bring civil actions on behalf of the State and obtain a share of the recovery. While the management of the Obligated Group believes the Obligated Group is in substantial compliance with these laws, there can be no assurance that its operations will not become the subject of an investigation in the future.

Privacy and Security of Health Information

HIPAA; Privacy Requirements. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, adds additional criminal sanctions for health care fraud and applies to all health care benefit programs, whether public or private. HIPAA also provides for punishment of a health care provider for knowingly and willfully embezzling, stealing, converting or intentionally misapplying any money, funds or other assets of a health care benefit program. A health care provider convicted of health care fraud could be excluded from Medicare or Medicaid.

HIPAA also addresses the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of the HIPAA statute and regulations or authorized by the patient. HIPAA’s confidentiality provisions extend not only to patient medical records, but also to a wide variety of health care clinical and financial settings where patient privacy restrictions often impose new communication, operational, accounting and billing restrictions. These add costs and create potentially unanticipated sources of legal liability.

HIPAA imposes civil monetary penalties for violations and criminal penalties for obtaining or using individually identifiable health information. Such penalties range from $100 to a maximum $50,000 per violation and/or imprisonment, depending on the violator’s degree of intent and the extent of the harm resulting from the violation. The maximum penalty for violations of the same HIPAA provision in a calendar year range is $1,500,000.

HIPAA’s administrative simplification provisions are enforced by the Office for Civil Rights of DHHS (“OCR”). Violation of HIPAA can result in settlements that require multi-million dollar payments and resolution agreements. Beginning in 2011, OCR began sending strong messages to the health care industry that, regardless of size, covered entities must take action and will be held accountable for safeguarding their patients’ health information. Due to the highly technical nature of the HIPAA regulations and the enhanced enforcement activities of OCR, the risk of an infraction and financial penalty is elevated.

In February 2009, the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) was enacted. The Recovery Act includes broad, sweeping changes to the HIPAA provisions regarding confidentiality of patient medical records. In general, the Recovery Act increases penalties for violations of patient medical record confidentiality and strengthens enforcement and oversight. The Recovery Act and resulting regulations also established a framework for the implementation of a nationally-based health information technology program. For more information regarding this program, see “The HITECH Act” below.

Additionally, other federal laws and state laws address the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of relevant federal and state statutes and regulations or authorized by the patient. These add costs and create potentially unanticipated sources of legal liability.

The HITECH Act. Provisions in the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), enacted as part of the Recovery Act, increase the maximum civil monetary penalties for violations of HIPAA and grant enforcement authority of HIPAA to state attorneys general. The HITECH Act also (i) extends the reach of HIPAA beyond “covered entities,” (ii) imposes a breach notification requirement on HIPAA covered entities, (iii) limits certain uses and disclosures of individually identifiable health information, and (iv) restricts covered entities’ marketing communications.

The HITECH Act also established programs under Medicare and Medicaid to provide incentive payments for the “meaningful use” of certified electronic health record (“EHR”) technology. Beginning in 2011, the Medicare and Medicaid EHR incentive programs began providing incentive payments to eligible professionals and eligible hospitals for demonstrating meaningful use of certified EHR technology. Health care providers demonstrate their meaningful use of EHR technology by meeting objectives specified by CMS for using health information technology and by reporting on specified clinical quality measures. Beginning in 2015, hospitals and physicians who have not satisfied the performance and reporting criteria for demonstrating meaningful use will have their Medicare payments significantly reduced. Management of the Obligated Group does not anticipate that compliance with the HITECH Act will have a material adverse effect on the operations of the Obligated Group.

Security Breaches and Unauthorized Releases of Personal Information. Federal, State and local authorities are increasingly focused on the importance of protecting the confidentiality of individuals’ personal information, including patient health information. Many states have enacted laws requiring businesses to notify individuals of security breaches that result in the unauthorized release of personal information. In some states, notification requirements may be triggered even where information has not been used or disclosed, but rather has been inappropriately accessed. State consumer protection laws may also provide the basis for legal action for privacy and security breaches and frequently, unlike HIPAA, authorize a private right of action. In particular, the public nature of security breaches exposes health organizations to increased risk of individual or class action lawsuits from patients or other affected persons, in addition to government enforcement. Failure to comply with restrictions on patient privacy or to maintain robust information security safeguards, including taking steps to ensure that contractors who have access to sensitive patient information maintain the confidentiality of such information, could consequently damage a health care provider’s reputation and materially adversely affect business operations.

The Obligated Group has established programs and procedures to comply with HIPAA and the HITECH Act, and management of the Obligated Group is not aware of any pending or threatened claim of violation of either or both of such acts. However, there can be no assurance that no such violation has not occurred or will not occur, and if found that any sanction would not have a material adverse effect on the operation or the financial condition or the results of operations of the Obligated Group.

Red Flags Rule. On November 9, 2007, six federal agencies, including the Federal Trade Commission (“FTC”), published what has come to be known as the “Red Flags Rule.” This rule, promulgated pursuant to the Fair and Accurate Credit Transactions Act of 2003, requires financial institutions and creditors to develop and implement written identity theft prevention programs. The programs must be developed for the identification, detection and response to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft. The FTC has interpreted the definition of “creditors” to include health care providers. However, The Red Flag Program Clarification Act of 2010, Public Law 111-319, that was signed into law on December 18, 2010, amends the definition of the term “creditor” and may exclude certain service providers, including hospitals, from the requirements of the Red Flags Rule, based on how a service provider uses credit reporting agencies. It is not known whether the Members of the Obligated Group are subject to the Red Flags Rule as amended. Failure to comply with the rule could result in penalties of $2,500 per violation under the Fair Credit Reporting Act. Enforcement of the rule commenced on December 31, 2010. Management of the Obligated Group is not aware of any pending or threatened claim of violation of the Fair Credit Reporting Act.

Enforcement Activity

Enforcement activity against health care providers has increased, and enforcement authorities have adopted aggressive approaches. In the current regulatory climate, it is anticipated that many hospitals and physician groups will be subject to an audit, investigation, or other enforcement action regarding the health care fraud laws mentioned above. In addition, enforcement agencies increasingly pursue sanctions for violations of health care fraud and abuse laws through administrative actions. Administrative regulations may require less proof of a violation than do criminal laws, and, thus, health care providers may have a higher risk of imposition of monetary penalties as a result of administrative enforcement actions.

Enforcement authorities are often in a position to compel settlements by providers charged with or being investigated for false claims violations by withholding or threatening to withhold Medicare, Medicaid and/or similar payments and/or by instituting criminal action. Judicial resolution of a dispute with the government may be unavailable as a practical matter because a hospital may not want to run the risk of an adverse result which could jeopardize the continued viability of the organization. The cost of defending such an action, the time and management attention consumed, and the facts of a case may dictate settlement. For these reasons an additional risk is that a hospital is subject to new and untested interpretations of applicable law and regulations of the enforcement authorities for which redress by judicial process may not be available as a practical matter. Therefore, regardless of the merits of a particular case, a hospital could experience materially adverse settlement costs, as well as materially adverse costs associated with implementation of any settlement agreement. Prolonged and publicized investigations could be damaging to the reputation and business of a hospital, regardless of outcome.

Certain acts or transactions may result in violation or alleged violation of a number of the federal health care fraud laws described above, and therefore penalties or settlement amounts often are compounded. Generally these risks are not covered by insurance. Enforcement actions may involve multiple hospitals in a health system, as the government often extends enforcement actions regarding health care fraud to other hospitals in the same organization. Therefore, Medicare fraud related risks identified as being materially adverse as to a hospital could have materially adverse consequences to a health system taken as a whole.

Exclusions from Medicare or Medicaid Participation. The government may exclude a hospital from Medicare/Medicaid program participation that is convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state health care program, any criminal offense relating to patient neglect or abuse in connection with the delivery of health care, 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 government also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, 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 from the Medicare/Medicaid program means that a hospital would be terminated from participation and no program payments can be made. Any hospital exclusion could be a materially adverse event. In addition, exclusion of hospital employees may be another source of potential liability for hospitals or health systems.

Compliance with Conditions of Participation. CMS, in its role of monitoring participating providers’ compliance with conditions of participation in the Medicare program, may determine that a provider is not in compliance with its conditions of participation. In that event, a notice of termination of participation may be issued or other sanctions potentially could be imposed.

Increased Enforcement Affecting Research. In addition to increasing enforcement of laws governing payment and reimbursement, the federal government has also stepped up enforcement of laws and regulations governing the conduct of clinical trials at hospitals. DHHS elevated and strengthened its Office of Human Research Protection, one of the agencies with responsibility for monitoring federally funded research. In addition, the National Institutes of Health significantly increased the number of facility inspections that these agencies perform. The Food and Drug Administration (“FDA”) also has authority over the conduct of clinical trials performed in hospitals when these trials are conducted on behalf of sponsors seeking FDA approval to market the drug or device that is the subject of the research. Moreover, the Office of Inspector General of DHHS, in its “Work Plans,” has included several enforcement initiatives related to reimbursement for experimental drugs and devices (including kickback concerns). The United States Department of Justice may also become involved in enforcement actions relating to the use of federal funds or submission of information to federal agencies. There have been a number of recent government investigations and settlements involving hospital use of federal grant funding in connection with clinical trials and also a settlement involving the submission of claims to Medicare for services provided in a clinical trial. These agencies’ enforcement powers range from substantial fines and penalties to exclusion of researchers and suspension or termination of entire research programs, and errors in billing of the Medicare or Medicaid programs for care provided to patients enrolled in clinical trials that is not eligible for Medicare reimbursement can subject certain members of the Obligated Group to sanctions as well as repayment obligations.

EMTALA. The Emergency Medical Treatment and Active Labor Act (“EMTALA”) is a federal civil statute that requires hospitals to treat or conduct a medical screening for emergency conditions and to stabilize a patient’s emergency medical condition before releasing, discharging or transferring the patient. A hospital that violates EMTALA is subject to civil penalties of up to $50,000 per offense and exclusion from the Medicare and Medicaid programs. In addition, a hospital may be liable for any claim by an individual who has suffered harm as a result of a violation of EMTALA.

Licensing, Surveys, Investigations and Audits. Health facilities are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements of state licensing agencies and accrediting bodies such as the Joint Commission. Renewal and continuation of certain of these licenses, certifications and accreditations are based on inspections or other reviews generally conducted in the normal course of business of health facilities. Loss of, or limitations imposed on, hospital licenses or accreditations could reduce hospital utilization or revenues, or a hospital’s ability to operate all or a portion of its facilities.

Environmental Laws and Regulations. Hospitals are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations. These include but are not limited to: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the hospital; and requirements for training employees in the proper handling and management of hazardous materials and wastes.

Hospitals may be subject to requirements related to investigating and remedying hazardous substances located on their property, including such substances that may have migrated off the property. Typical hospital operations include the handling, use, storage, transportation, disposal and/or 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 the environmental laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations and/or increase their cost; may result in legal liability, damages, injunctions or fines; and may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and may not be covered by insurance.

Business Relationships and Other Business Matters

Integrated Physician Groups. Hospitals and health care systems often own, control or have affiliations with relatively large physician groups. Generally, the sponsoring hospital or health care system is the primary capital and funding source for such alliances and may have an ongoing financial commitment to provide growth capital and support operating deficits. These types of alliances are generally designed to respond to trends in the delivery of medicine to better integrate hospital and physician care, to increase physician availability to the community and/or to enhance the managed care capability of the affiliated hospitals and physicians. These goals may not be achieved, however, and an unsuccessful alliance may be costly and counterproductive to all of the above-stated goals.

These types of alliances are likely to become increasingly important to the success of hospitals in the future as a result of changes to the health care delivery and reimbursement systems that are intended to restrain the rate of increases of health care costs, encourage coordinated care, promote collective provider accountability and improve clinical outcomes. The ACA authorizes several alternative payment programs for Medicare that promote, reward or necessitate integration among hospitals, physicians and other providers.

Whether these programs will achieve their objectives and be expanded or mandated as conditions of Medicare participation cannot be predicted. However, Congress and CMS have clearly emphasized continuing the trend away from the fee-for-service reimbursement model, which began in the 1980s, with the introduction of the prospective payment system for inpatient care, and toward an episode-based payment model that rewards use of evidence-based protocols, quality and satisfaction in patient outcomes, efficiency in using resources, and the ability to measure and report clinical performance. This shift is likely to favor integrated delivery systems, which may be better able than stand-alone providers to realize efficiencies, coordinate services across the continuum of patient care, track performance and monitor and control patient outcomes. Changes to the reimbursement methods and payment requirements of Medicare, which is the dominant purchaser of medical services, are likely to prompt equivalent changes in the commercial sector, because commercial payors frequently follow Medicare’s lead in adopting payment policies.

While payment trends may stimulate the growth of integrated delivery systems, these systems carry with them the potential for legal or regulatory risks. Many of the risks discussed herein regarding the current regulatory environment, may be heightened in an integrated delivery system. The foregoing laws were not designed to accommodate coordinated action among hospitals, physicians and other health care providers to set standards, reduce costs and share savings, among other things. Although CMS and the agencies that enforce these laws are expected to institute new regulatory exceptions, safe harbors or waivers that will enable providers to participate in payment reform programs, there can be no assurance that such regulations will be forthcoming or that any regulations or guidance issued will sufficiently clarify the scope of permissible activity. State law prohibitions or state law requirements, such as insurance laws regarding licensure and minimum financial reserve holdings of risk-bearing organizations, may also introduce complexity, risk and additional costs in organizing and operating integrated delivery systems. Tax-exempt hospitals also face the risk in affiliating with for-profit entities that the Internal Revenue Service will determine that compensation practices or business arrangements result in private benefit or private use or generate unrelated business income for the hospitals.

In addition, integrated delivery systems present business challenges and risks. Inability to attract or retain participating physicians may negatively affect managed care, contracting and utilization. The technological and administrative infrastructure necessary both to develop and operate integrated delivery systems and to implement new payment arrangements in response to changes in Medicare and other payor reimbursement is costly. Hospitals may not achieve savings sufficient to offset the substantial costs of creating and maintaining this infrastructure.

The ability of hospitals or health care systems to conduct integrated physician operations may be altered or eliminated in the future by legal or regulatory interpretation or changes, or by health care fraud enforcement. In addition, participating physicians may seek their independence for a variety of reasons, thus putting a hospital or health care system’s investment at risk, and potentially reducing its managed care leverage and/or overall utilization.

Hospital Pricing. Inflation in hospital costs may evoke action by legislatures, payors or consumers. It is possible that legislative action at the state or national level may be taken with regard to the pricing of health care services, which in turn could adversely affect the Obligated Group’s patient service revenues.

Physician Medical Staff. The primary relationship between a hospital and physicians who practice in it is through the hospital’s organized medical staff. Medical staff bylaws, rules and policies establish the criteria and procedures by which a physician may have his or her privileges or membership curtailed, denied or revoked. Physicians who are denied medical staff membership or certain clinical privileges or who have such membership or privileges curtailed or revoked often file legal actions against hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of the hospital governing body to adequately oversee the conduct of its medical staff may result in hospital liability to third parties.

Physician Supply. Sufficient community-based physician supply is important to hospitals and other health care providers. CMS annually reviews overall physician reimbursement formulas for Medicare and Medicaid. Changes to such physician reimbursement formulas by CMS could lead to physicians ceasing to accept Medicare and/or Medicaid patients. Regional differences in reimbursement by commercial and governmental payors, along with variations in the costs of living, may cause physicians to avoid locating their practices in communities with low reimbursement or high living costs. Hospitals and health systems may be required to invest additional resources in recruiting and retaining physicians, or may be required to increase the percentage of employed physicians in order to continue serving the growing population base and maintain market share. The physician to population ratio in Georgia is below the national average, and the shortage of physicians could become a significant issue for a hospital in Georgia.

Competition Among Health Care Providers. Increased competition from a wide variety of sources, including but not limited to other hospitals and health care systems, inpatient and outpatient health care facilities, long-term care and skilled nursing services facilities, clinics, joint venture arrangements with physicians and others, may adversely affect the utilization and revenues of hospitals. Existing and potential competitors may not be subject to various restrictions applicable to hospitals, and competition, in the future, may arise from new sources.

Competition may be focused on services or payor classifications where hospitals realize their highest margins, thus negatively affecting programs that are economically important to hospitals. These new sources of competition may have a material adverse impact on hospitals, particularly where a group of a hospital’s principal physician admitters may curtail their use of a hospital service in favor of competitive facilities. Commercial outpatient services, currently among the most profitable for hospitals, may be lost to competitors who can provide these services in an alternative, less costly setting. Freestanding ambulatory surgery centers, for example, may divert significant commercial outpatient volumes traditionally performed at full-service hospitals, which rely upon the revenues generated from commercial outpatient services to fund other less profitable services, and thus the decline of such business may result in the significant reduction of profitable income to the hospital. For example, a large hospital may rely heavily on its outpatient orthopedic surgery programs to generate a revenue stream that may cover certain fixed overhead costs. If a significant number of such a hospital’s orthopedic surgeons develop their own specialty surgery center and take with them their patient base, a hospital could experience a rapid and dramatic decline in net revenues that is not proportionate to the number of patient admissions or patient days lost. It is also possible that the competing specialty entity would not be subject to any regulatory requirements to accept indigent patients or beneficiaries of other payor and government programs, leaving low-pay patient populations in the full-service hospital. In certain cases, such an event could be materially adverse to a hospital.

Additionally, scientific and technological advances, new procedures, drugs and devices, preventive medicine and outpatient health care delivery may reduce both inpatient and outpatient utilization and revenues of a hospital in the future or otherwise lead the way to new avenues of competition. In some cases, hospital investment in facilities and equipment for capital-intensive services may be lost as a result of rapid changes in diagnosis, treatment or clinical practice brought about by new technology or new pharmacology.

Alternative and Integrated Delivery Systems. The members of the Obligated Group face increased competition from other hospital facilities and integrated health care delivery systems in their service areas, from HMOs and from other entities providing health care services to the population which the Obligated Group presently serves. The Obligated Group does, and in the future will, face increased competition from other hospitals and skilled nursing facilities and from other health care providers that offer comparable health care services to the population which each of the members presently serves. This competition could include the establishment, construction or

renovation of hospitals, skilled nursing facilities, HMOs, ambulatory surgical centers, private laboratories and radiological services.

Increased competition also has resulted from: (i) the development of alternative health care delivery systems (such as HMOs and PPOs) in the service areas of the Obligated Group, competition with other hospitals to provide health care services to enrollees of HMOs and PPOs, and competition for patients with delivery systems of HMOs and PPOs providing services at their own or other facilities; (ii) competition for enrollees between traditional insurers, whose patients generally have a free choice of hospitals, and HMOs and PPOs, which may own their own hospitals or substantially restrict the hospitals and physicians from which their enrollees can receive services; (iii) competition for patients between physicians, who generally use hospitals, and non-physician practitioners such as nurse-midwives, nurse practitioners, chiropractors, physical and occupational therapists and others, who may not generally use hospitals; and (iv) competition from nursing homes, home health agencies, ambulatory care facilities, ambulatory surgical centers, rehabilitation and therapy centers, physician group practices, and other nonhospital providers which provide services for which patients currently rely on hospitals.

Health Care Worker Classification. Health care providers, like all businesses, are required to withhold income taxes from amounts paid to employees. If the employer fails to withhold the tax, the employer becomes liable for payment of the tax imposed on the employee. On the other hand, businesses are not required to withhold federal taxes from amounts paid to a worker classified as an independent contractor. The IRS has established criteria for determining whether a worker is an employee or an independent contractor for tax purposes. If the IRS were to reclassify a significant number of hospital independent contractors (e.g., physician medical directors) as employees, back taxes and penalties could be material.

Staffing. From time to time, the health care industry has suffered from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. In addition, aging medical staffs and difficulties in recruiting physicians are leading to physician shortages. A significant factor underlying this trend includes a decrease in the number of persons entering such professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital-specific shortages. Competition for physicians and employees, coupled with increased recruiting and retention costs will increase hospital operating costs, possibly significantly. This trend could have a material adverse impact on hospitals.

Professional Liability Claims and General Liability Insurance. In recent years, the number of professional and general liability suits and the dollar amounts of damage recoveries have increased in health care nationwide, resulting in substantial increases in malpractice insurance premiums, higher deductibles and generally less coverage. Professional liability and other actions alleging wrongful conduct and seeking punitive damages are often filed against health care providers. Insurance does not provide coverage for judgments for punitive damages.

Litigation also arises from the corporate and business activities of hospitals, from a hospital’s status as an employer or as a result of medical staff or provider network peer review or the denial of medical staff or provider network privileges. As with professional liability, many of these risks are covered by insurance, but some are not. For example, some antitrust claims or business disputes are not covered by insurance or other sources and may, in whole or in part, be a liability of the Obligated Group if determined or settled adversely.

There is no assurance that hospitals will be able to maintain coverage amounts currently in place in the future, that the coverage will be sufficient to cover malpractice judgments rendered against a hospital or that such coverage will be available at a reasonable cost in the future.

Other Class Actions. Hospitals have long been subject to a wide variety of litigation risks, including liability for care outcomes, employer liability, property and premises liability, and peer review litigation with physicians, among others. In recent years, consumer class action litigation has emerged as a potentially significant source of litigation liability for hospitals and health systems. These class action suits have most recently focused on hospital billing and collections practices, and they may be used for a variety of currently unanticipated causes of action. Since the subject matter of class action suits may involve uninsured risks, and since such actions often involve alleged large classes of plaintiffs, they may have material adverse consequences on hospitals and health systems in the future.

Information Systems. The ability to adequately price and bill health care services and to accurately report financial results depends on the integrity of the data stored within information systems, as well as the operability of such systems. An ongoing commitment of significant resources is required to maintain, protect and enhance existing information systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards. There can be no assurance that efforts to upgrade and expand information systems capabilities, protect and enhance these systems, and develop new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future.

Electronic media are also increasingly being used in clinical operations, including the conversion from paper to electronic medical records, computerization of order entry functions and the implementation of clinical decision-support software. The reliance on information technology for these purposes imposes new expectations on physicians and other workforce members to be adept in using and managing electronic systems. It also introduces risks related to patient safety, and to the privacy, accessibility and preservation of health information. See “BONDHOLDERS’ RISKS—Privacy and Security of Health Information” above. Technology malfunctions or failure to understand and use information systems properly could result in the dissemination of or reliance on inaccurate information, as well as in disputes with patients, physicians and other health care professionals. Health information systems may also be subject to different or higher standards or greater regulation than other information technology or the paper-based systems previously used by health care providers, which may increase the cost, complexity and risks of operations. All of these risks may have adverse consequences on hospitals and other health care providers.

Antitrust. Enforcement of the antitrust laws against healthcare 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 healthcare providers is still evolving, and enforcement activity by federal and state agencies appears to be increasing. At various times, healthcare 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 be subject to criminal and civil enforcement by federal and state agencies, as well as by private litigants.

From time to time, the Obligated Group may be involved in a variety of activities that could receive scrutiny under the antitrust laws, and it cannot be predicted when or to what extent liability may arise. With respect to payor contracting, the Obligated Group may, from time to time, be involved in joint contracting activity with hospitals or their providers. The precise degree to which joint contracting activities may expose the participants to antitrust risk from governmental or private sources is dependent on a number of factual matters which may change from time to time.

Hospitals, including those of the Obligated Group, regularly have disputes regarding credentialing and peer review, and may be subject to liability in this area. In addition, hospitals occasionally indemnify medical staff members who are involved in such credentialing or peer review activities, and may also be liable with respect to such indemnity.

Court decisions have also established private causes of action against hospitals that use their local market power to promote ancillary healthcare businesses in which they have an interest. Such activities may result in monetary liability for the participating hospitals under certain circumstances where a competitor suffers business damage.

The ability to consummate mergers, acquisitions or affiliations may also be impaired by the antitrust laws resulting in the inability of the Obligated Group to fulfill its strategic plans. Liability in any of these or other antitrust areas of liability may be substantial, depending on the facts and circumstances of each case.

Georgia Certificate of Need Law. The State of Georgia has a certificate of need law (the “CON Law”) which regulates various types of activities and expenditures made by or on behalf of health facilities, including hospitals. The purpose of the CON Law is to prevent unnecessary duplication of expensive health care services in an effort to contain health care costs. Under the CON Law, hospitals must obtain prior approval of capital expenditures above certain levels or expenditures involving new services. The members of the Obligated Group have received a certificate of

need, if required, for all of their current activities. However, there can be no assurance that the members of the Obligated Group will receive certificates of need that may be required for future capital expenditures or new services. In addition, the statutory and regulatory requirements of the CON Law may be amended in the future in ways that are adverse to the members of the Obligated Group.

In its current form, the CON Law may limit or even prevent the members of the Obligated Group from undertaking certain activities and expenditures that are financially advantageous, including the acquisition of new, sophisticated diagnostic and treatment equipment. At the same time, the CON Law may allow competitors to undertake activities or expenditures for which a member of the Obligated Group has been denied a certificate of need. In addition, the members of the Obligated Group may be required to incur substantial expenditures in order to obtain a certificate of need for any future activities, including consulting fees and legal fees for preparation of applications, review of competing applications, preparation of written comments, and participation in public hearings, administrative hearings, litigation, and appeals. For all of these reasons, the CON Law and regulations could adversely affect the financial condition of the members of the Obligated Group. Further, if the CON Law were to be repealed, additional market participants and competitors may begin competing with the members of the Obligated Group in a way not currently permitted. Therefore, a repeal of the CON Law could adversely affect the members of the Obligated Group.

Tax-Exempt Status and Other Tax Matters

Maintenance of Tax-Exempt Status of Interest on the Bonds. The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States Treasury, and a requirement that the Authorities file an information report with the IRS. Each of the Authorities has covenanted in its respective Bond Indenture and PHC has covenanted in each Loan Agreement that it will comply with such requirements. Future failure by any of the Authorities or by a member of the Obligated Group to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Bonds as taxable, retroactively to the date of issuance. Each of the Authorities has covenanted in its respective Bond Indenture and PHC has covenanted in each Loan Agreement that that it will not take any action or refrain from taking any action that would cause interest on the Bonds to be included in gross income for federal income tax purposes.

IRS officials have recently invested more resources in audits of tax-exempt bonds, including the use of bond proceeds, in the charitable organization sector, with specific review of private use. In addition, under its compliance check program initiated in 2007, the IRS has from time to time sent post-issuance compliance questionnaires to several hundred nonprofit corporations that have borrowed on a tax-exempt basis regarding their post-issuance compliance with various requirements for maintaining the federal tax exemption of interest on their bonds. The questionnaire includes questions relating to the borrower’s (i) record retention, which the IRS has particularly emphasized, (ii) qualified use of bond-financed property, (iii) arbitrage yield restriction and rebate requirements, (iv) debt management policies, and (v) voluntary compliance and education. IRS representatives indicate that more questionnaires will be sent to additional nonprofit organizations.

In 2007 the IRS released a redesigned Form 990. The Form 990 is the annual information return filed by tax-exempt organizations, including nonprofit exempt health care organizations. The new Form 990 applies to tax years beginning on or after January 1, 2008. As a result of this new Form 990, health care organizations now have significantly increased compliance and reporting obligations, particularly relating to community benefit, executive, physician and officer compensation, joint ventures, collection and billing practices and charity care. According to the IRS, the redesign of Form 990 was based on three guiding principles: (1) enhancing transparency to provide the IRS and the public with a realistic picture of the organization; (2) promoting compliance by accurately reflecting the organization’s operations so the IRS may efficiently assess the risk of noncompliance; and (3) minimizing the burden on filing organizations

The hospital-specific reporting obligations generally are set forth in a schedule to the Form 990 (Schedule H) and apply for tax years beginning on or after January 1, 2009. On Schedule H, hospitals and health systems must report how they provide community benefit, community building activities, specify certain billing and collection

practices, identify charity care and bad debt practices, describe certain joint venture activities, including percentage ownership and/or control by the tax-exempt entity, certain interested persons and physicians and provide a description of affiliated operated health care facilities. Schedule K requires detailed information related to all outstanding bond issues of tax-exempt borrowers, including information regarding operating, management and research contracts as well as private use compliance. Tax-exempt organizations must also complete Schedule J, which requires reporting of compensation information for the organizations’ officers, directors, trustees, key employees, and other highly compensated employees.

There is no assurance that an IRS review relating to the charitable activities of the Obligated Group and its affiliates would not adversely affect the market value of the Bonds or of other outstanding tax exempt indebtedness of the Obligated Group. Additionally, the Bonds or other tax-exempt obligations issued for the benefit of the Obligated Group may be, from time to time, subject to examinations or audits by the IRS.

The Obligated Group believes that the Bonds properly comply with the tax laws. In addition, on the date of issuance of the Bonds, Bond Counsel will render an opinion with respect to the tax-exempt status of the Bonds, as described under the caption “TAX EXEMPTION.” No ruling with respect to the Bonds has been or will be sought from the IRS, however, and opinions of counsel are not binding on the IRS or the courts. There can be no assurance that an examination of the Bonds will not adversely affect the Bonds or the market value of the Bonds. See “TAX EXEMPTION” herein. In addition, as described under “TAX EXEMPTION,” from time to time, there are legislative proposals in Congress that, if enacted, could cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, adversely affect the market value of the Bonds or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of such interest. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted, such legislation would apply to bonds issued prior to enactment.

Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code. As tax-exempt organizations, the members of the Obligated Group are limited with respect to their use of practice income guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other means of recruiting and retaining physicians. Uncertainty in this area has been reduced somewhat by the issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and has issued a detailed audit guide suggesting that field agents scrutinize numerous activities of hospitals in an effort to determine whether any action should be taken with respect to limitations on or revocation of their tax-exempt status or assessment of additional tax. Any suspension, limitation, or revocation of any member’s tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Obligated Group and might lead to loss of tax exemption of interest on the Bonds.

Other Risks

Pressures on the Georgia state budget may negatively impact healthcare funding. Many states, including Georgia, face severe financial challenges, including erosion of general fund tax revenues, falling real estate values, slower economic growth and higher unemployment. Shortfalls between state revenues and spending demands, along with balanced budget requirements, have in the past and may in the future result in cutbacks to state-funded healthcare programs such as Medicaid. These economic conditions and the resulting shortfalls are expected to continue in the current fiscal year and may continue in future fiscal years. Since federal payments and the amounts appropriated by the Georgia legislature for the payment of Medicaid claims have not, historically, been sufficient to reimburse hospitals for their actual costs of providing services to Medicaid patients, the financial challenges facing the State of Georgia may negatively affect members of the Obligated Group in a number of ways. They may lead to a greater number of indigent patients who are unable to pay for their care and a greater number of individuals who qualify for Medicaid. They may cause the State of Georgia to seek to generate revenue or reduce expenses by changing eligibility requirements for Medicaid recipients, changing the method of or reducing the amount of payments to hospitals for Medicaid services, delaying actual payments due to hospitals for Medicaid services, increasing the frequency of regulatory investigations, and/or changing the tax-exempt treatment of charitable organizations’ income or real estate.

The Obligated Group cannot predict what actions might be taken in future years by the Georgia legislature to address the state’s financial challenges. Georgia’s actions will likely depend on national and state economic conditions and other factors that are unknown at this time.

The Obligated Group has entered into Swap Agreements and Swap Agreements carry risks. The Obligated Group has entered into a number of interest rate swap agreements (the “Swap Agreements”) with financial counterparties. See APPENDIX A for more information regarding the terms and purpose of each Swap Agreement. Swap Agreements carry certain risks.

Under certain circumstances, the Swap Agreements will be subject to termination prior to their respective scheduled termination dates. Following any such termination, either the Obligated Group or the counterparty may then owe a termination payment to the other, depending upon market conditions at the termination date. If the Obligated Group owes a termination payment to the counterparty, there can be no assurance that the Obligated Group will have sufficient funds to pay a termination payment to the counterparty, or that the Obligated Group will be able to obtain replacement swap agreements with comparable terms. If the counterparty owes a termination payment to the Obligated Group, and the counterparty faces financial difficulties, it is possible that the Obligated Group may not receive the benefit of having entered into the Swap Agreements and, if owed a termination payment by the counterparty, the Obligated Group may not receive it. In either case, payment due upon early termination may be substantial. There are also provisions in the Swap Agreements where, under certain circumstances, the Obligated Group would have to deliver collateral to the counterparty or a third-party custodian as security for its obligations under the Swap Agreements.

To the extent that the Swap Agreements were entered into to hedge against the interest rate risk of variable rate bonds, the floating rates payable by the counterparty may not in fact match the interest rates that the Obligated Group is actually paying on those related variable rate bonds.

NO LITIGATION

The Authorities

There is no controversy or litigation of any nature now pending against any of the Authorities for which service has been perfected restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings and authority under which they are issued nor, to the knowledge of any of the Authorities, is any such litigation threatened. There is no litigation pending for which service has been perfected which in any manner questions the power of any of the Authorities to issue the Bonds and to secure the Bonds in accordance with the provisions of the Bond Indentures, nor is there now pending any litigation which in any manner questions the powers of any of the Authorities nor, to the knowledge of any such Authority, is any such litigation threatened.

The Obligated Group

There is no action, suit, proceeding, inquiry or investigation at law or before or by any court, public board or body known to the Obligated Group to be pending or threatened against any member of the Obligated Group nor, to its knowledge, is there any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the validity of the Bonds, the Loan Agreements, the Series 2016 Master Indenture Obligations, the Master Indenture or the Bond Indentures.

RATINGS

Moody’s Investors Service and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., have assigned the Bonds long-term ratings of “Aa3” (negative outlook) and “AA-” (stable outlook), respectively. Any desired explanation of the significance of such ratings should be obtained from the rating agencies furnishing such ratings. Generally, rating agencies base their ratings on the information and materials furnished to the agencies and on investigations, studies and assumptions made by the agencies. There is no assurance that such ratings will continue for any given period of time or that they will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Any such change or withdrawal of such ratings could have an adverse effect on the market price of the Bonds.

FINANCIAL STATEMENTS

The financial statements of PHC and its Affiliates as of June 30, 2016 and 2015 and for the two years then ended are included in APPENDIX B. The financial statements as of June 30, 2016 and 2015 and for the two years then ended have been audited by KPMG LLP, independent auditors, as stated in their report appearing herein.

Effective October 1, 2016, PARMC became affiliated with PHC pursuant to the terms of the Affiliation Agreement and a long term lease with the Clarke Authority. PARMC is a member of the Obligated Group. The audited financial statements of PHC and its Affiliates included as APPENDIX B do not include any financial information for PARMC. PARMC’s audited financial statements for the fiscal years ended September 30, 2015 and 2014 are available on the MSRB’s Electronic Municipal Market Access System (EMMA) website at www.emma.msrb.org (base CUSIP number 181685). PARMC’s financial statements will become part of the consolidated PHC audited financials beginning with the fiscal year ending June 30, 2017.

FINANCIAL ADVISOR

PHC has retained Kaufman, Hall & Associates, LLC, Skokie, Illinois, as financial advisor in connection with the issuance of the Bonds. Although Kaufman, Hall & Associates, LLC has assisted in the preparation of this Official Statement, Kaufman, Hall & Associates, LLC was not and is not obligated to undertake, and has not undertaken to make, an independent verification and assumes no responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith, Incorporated, on behalf of itself, Goldman, Sachs & Co. and SunTrust Robinson Humphrey, Inc. (collectively, the “Underwriters”), has agreed with the Fulton Authority and PHC, subject to certain conditions, to purchase all but not less than all of the Fulton Bonds at a purchase price of $______(which reflects a net original issue premium of $______). The Underwriters have agreed with the Clarke Authority and PHC, subject to certain conditions, to purchase all but not less than all of the Clarke Certificates at a purchase price of $______(which reflects a net original issue premium of $______). The Underwriters have agreed with the Fayette Authority and PHC, subject to certain conditions, to purchase all but not less than all of the Fayette Certificates at a purchase price of $______(which reflects a net original issue premium of $______). PHC is paying the Underwriters’ compensation ($______aggregate compensation for all Bonds) with its own funds.

The initial public offering prices of the Bonds may be changed from time to time by the Underwriters. The Underwriters may also allow a concession from the public offering prices of the Bonds to certain dealers and others. PHC has agreed to indemnify the Underwriters against certain liabilities arising under the securities laws with respect to this Official Statement and the offering of the Bonds.

The Bond Purchase Agreement relating to the Fulton Bonds provides that the obligation of the Underwriters to purchase the Fulton Bonds is conditioned upon the issuance of the Fulton Bonds, the Clarke Certificates and the Fayette Certificates. The Certificate Purchase Agreement relating to the Clarke Certificates provides that the obligation of the Underwriters to purchase the Clarke Certificates is conditioned upon the issuance of the Fulton Bonds, the Clarke Certificates and the Fayette Certificates. The Certificate Purchase Agreement relating to the Fayette Certificates provides that the obligation of the Underwriters to purchase the Fayette Certificates is conditioned upon the issuance of the Fulton Bonds, the Clarke Certificates and the Fayette Certificates.

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage services. Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various investment banking

services for the Authorities, PHC or the Obligated Group, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities, which may include credit default swaps) and financial instruments (including bank loans) 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 Authorities, PHC or the Obligated Group.

The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

SunTrust Robinson Humphrey, Inc. (“STRH”), one of the underwriters of the Bonds, has entered into an agreement (the “Distribution Agreement”) with SunTrust Investment Services, Inc. (“STIS”) for the retail distribution of certain municipal securities offerings, including the Bonds. Pursuant to the Distribution Agreement, STRH will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Bonds with STIS. STRH and STIS are both subsidiaries of SunTrust Banks, Inc. SunTrust Robinson Humphrey is the trade name for certain capital markets and investment banking services of SunTrust Banks and its subsidiaries.

DISCLOSURE OF RELATIONSHIPS

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, including commercial and investment banking services, financial advisory services and investment management services. Certain of the Underwriters and their respective affiliates have, from time to time, performed various services for PHC or the Obligated Group or entered into business transactions with PHC or the Obligated Group, for which they received or will receive customary fees and expenses. For example, Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith, Incorporated, maintains a commercial banking relationship with PHC or other members of the Obligated Group and is the lender under a direct loan transaction with PHC. PHC maintains its primary commercial banking relationship with SunTrust Bank, an affiliate of SunTrust Robinson Humphrey, Inc. SunTrust Bank is also the swap counterparty under seven separate interest rate swaps with PHC with an aggregate approximate notional amount of $125,520,000. In addition, Goldman Sachs & Co. provides certain strategic financial advice to PHC and certain members of the Obligated Group from time to time. The Underwriters and their respective affiliates may perform similar services for PHC and the Obligated Group in the future.

U.S. Bank National Association (“U.S. Bank”) is acting both as trustee with respect to the Bonds and as master trustee under the Master Indenture. The master trustee is required under the Master Indenture to act for the benefit of all holders of Master Indenture Obligations issued under the Master Indenture, and the trustee will be the holder of the respective Master Indenture Obligations securing the respective series of Bonds. A conflict may arise in connection with U.S. Bank acting in both capacities.

CONTINUING DISCLOSURE

When the Bonds are issued, PHC will enter into a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”) pursuant to the requirements of Rule 15c2-12 (“Rule 15c2-12”) adopted by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. The Continuing Disclosure Agreement will be entered into by PHC for the benefit of the holders of the Bonds and will obligate the Obligated Group to provide certain information annually and quarterly (for each of the first three quarters of the fiscal year) and to file notice of the occurrence of certain events. The proposed form of Continuing Disclosure Agreement is attached as APPENDIX E.

Failure by PHC to comply with the provisions of the Continuing Disclosure Agreement will not constitute an event of default under the Bond Indentures or any related financing documents; however, nothing in the Continuing Disclosure Agreement precludes the holder of any Bond from seeking a court order requiring PHC to comply with its obligations under the Continuing Disclosure Agreement, and the failure to comply will itself be a reportable event under Rule 15c2-12 and the Continuing Disclosure Agreement.

In connection with the prior issuance of certain obligations on behalf of the Obligated Group, PHC has entered into other continuing disclosure agreements under Rule 15c2-12. During the past five years, PHC has failed to file certain information required to be filed pursuant to those agreements, or has failed to file all of such information on a timely basis, as follows:

• PHC’s annual filings for the fiscal year 2015 did not include certain financial ratio information required to be included in such annual filings. The financial ratio information was filed approximately 90 days late;

• PHC’s annual filings for the fiscal year 2013 in connection with certificates issued on behalf of Piedmont Henry Hospital did not include certain revenue and expense information required to be included in such annual filings. In addition, the annual report required to be filed by Henry County in such fiscal year was filed approximately 40 days late;

• PHC’s annual filings for the fiscal year 2012 did not include certain utilization statistics required to be included in such annual filings. The financial ratio information was subsequently included in the 2013 annual report;

• Annual filings for the last four fiscal years made in connection with bonds or certificates issued on behalf of Piedmont Athens Regional Medical Center did not include certain information relating to insurance coverage maintained by Clarke County;

• PHC’s annual filings for the fiscal years 2011 through 2013 did not include certain financial information related to uncompensated care and percentage of revenue contributed by the various members of the Obligated Group. That information was included in a corrective filing dated February 20, 2014 made by PHC on the Electronic Municipal Market Access (“EMMA”) site maintained by the Municipal Securities Rulemaking Board (which may be found at www.emma.msrb.org) with respect to Base CUSIP numbers 223658, 359900, and 31222T; and

• Certain bonds or certificates of the Obligated Group have been insured by a bond insurance company. The rating on the bonds insured by this bond insurance company has been changed at various times over the past several years. Not all rating changes on the bonds insured by this bond insurance company were reported by PHC, but the rating changes on bonds secured by policies issued by this bond insurance company were widely publicized in the market and were publicly available to investors.

As of the date of this Official Statement, PHC believes it has filed all required information under its continuing disclosure agreements.

TAX EXEMPTION

In the opinion of King & Spalding LLP, Bond Counsel, which, as to each series, will be dated the date of issuance of the Bonds, under existing statutes, rulings and court decisions, and under applicable regulations, interest on the Bonds of such series is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. No opinion will be expressed with respect to any other federal tax consequences relating to the receipt or accrual of interest on, or ownership of, the Bonds. Bond Counsel has not undertaken to notify the Authorities, the

Bond Trustees, PHC, the Underwriters, the owners of the Bonds or any other person or entity of any change in law or fact after the date of such opinion which might affect any of the opinions expressed therein. Such opinions as to the Bonds will be in substantially the forms attached hereto as part of APPENDIX C.

Under existing Treasury Regulations, the Bonds are treated as a single “issue” of obligations for certain federal income tax purposes, and the exclusion of interest on the Bonds from gross income for federal income tax purposes may be dependent upon whether the interest on all such obligations is so excluded. In concluding the interest on the Bonds is not includable in gross income for federal income tax purposes, Bond Counsel will (i) rely as to certain factual matters upon representations of the Authorities and PHC with respect to, among other things, the use of the proceeds of the Bonds and the obligations refunded thereby, the design, scope, function, cost and reasonably expected remaining economic useful life of the facilities financed or refinanced with the Bonds, and the qualification of PHC as an organization described in Section 501(c)(3) of the Code, without undertaking to verify the same by independent investigation, and (ii) assume the continued compliance by the Authorities and PHC with their respective covenants relating to the use of the proceeds of the Bonds and compliance with other requirements of the Code and applicable regulations. The inaccuracy of any such representations or noncompliance with such covenants may cause interest on the Bonds to become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds.

Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, banks, thrift institutions, and other financial institutions, foreign corporations which conduct a trade or business in the United States, property and casualty insurance corporations, S corporations, individual recipients of social security or railroad retirement benefits, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Bonds. Purchasers of the Bonds should consult their tax advisors as to the applicability of such collateral federal tax consequences.

In the opinion of Bond Counsel, under existing statutes, interest on each series of the Bonds is exempt from all present state income taxation within the State of Georgia. Interest on each series of the Bonds may or may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws. Purchasers of the Bonds should consult their tax advisors as to the taxable status of the Bonds in a particular state or local jurisdiction other than Georgia.

From time to time, there are legislative proposals in Congress that, if enacted, could cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, adversely affect the market value of the Bonds or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of such interest. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted, such legislation would apply to bonds issued prior to enactment. Purchasers of the Bonds should consult their tax advisors regarding the effect of any such legislation. 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 Bonds, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest the Bonds, or as to the consequences of owning or receiving interest on the Bonds, as of any future date. Bond Counsel has not agreed to notify the Issuer or the owners of the Bonds as to any event subsequent to the issuance of the Bonds that might affect the tax treatment of interest on the Bonds, the market value of the Bonds or the consequences of owning or receiving interest on the Bonds.

The opinion of Bond Counsel as to each series of the Bonds will be dated the date of issuance of the Bonds, and Bond Counsel has not undertaken to notify the Authorities, PHC, the Underwriters, or the purchasers of the Bonds of any change in law or fact after the date of issuance of the Bonds which might affect any of the opinions expressed in the opinion of Bond Counsel.

VERIFICATION OF CERTAIN MATHEMATICAL COMPUTATIONS

The accuracy of (a) arithmetical computations of the adequacy of the maturing principal amounts of the cash and securities held in the escrows created under the Fulton County Escrow Deposit Agreement or the Clarke County Escrow Deposit Agreement, the interest thereon and certain cash balances to pay, when due, the principal of, and the

interest on the Fulton Bonds and the Refunded Clarke County Refunded Bonds until the date on which they are to be called for redemption and to redeem prior to their respective maturities those of the Fulton Refunded Bonds and the Clarke County Refunded Bonds maturing after the date fixed for redemption, and (b) the arithmetical computations supporting the conclusion that the Bonds are not “arbitrage bonds” under the Internal Revenue Code, will be verified by Causey Demgen & Moore P.C. Such verification shall be based upon information supplied to Causey Demgen & Moore P.C. by PHC.

OTHER LEGAL MATTERS

Legal matters incident to the authorization and issuance of the Bonds are subject to the approving opinion of King & Spalding LLP, Bond Counsel. Certain legal matters will be passed upon for the Fulton Authority by its counsel, Arnall Golden Gregory LLP; for the Clarke Authority by its counsel, Fortson, Bentley & Griffin, P.A.; for the Fayette Authority by its counsel, McNally, Fox, Grant & Davenport, P.C.; for PHC and the Obligated Group by its counsel, King & Spalding LLP; and for the Underwriters by their counsel, Balch & Bingham LLP.

MISCELLANEOUS

The summaries and descriptions herein and incorporated herein of the Loan Agreements, the Series 2016 Master Indenture Obligations, the Bond Indentures, the Master Indenture and any other documents relating to the Bonds and not purporting to be quoted in full are qualified in their entirety by reference to the complete provisions of such documents, copies of which may be obtained from the Obligated Group and from the Underwriters during the period of the offering and from the Bond Trustees thereafter.

The distribution of this Official Statement by the Authorities has been duly authorized by the Authorities and approved by PHC.

DEVELOPMENT AUTHORITY OF FULTON COUNTY

By: Chairman

THE HOSPITAL AUTHORITY OF CLARKE COUNTY, GEORGIA

By: Chairperson

HOSPITAL AUTHORITY OF FAYETTE COUNTY

By: Chairman Approved by:

PIEDMONT HEALTHCARE, INC.

By: Executive Vice President and Chief Financial Officer

APPENDIX A

INFORMATION ABOUT PIEDMONT HEALTHCARE, INC.

[THIS PAGE INTENTIONALLY LEFT BLANK]

INFORMATION ABOUT PIEDMONT HEALTHCARE, INC.

TABLE OF CONTENTS

Page

INTRODUCTION ...... A-1 Overview of Piedmont Healthcare and the Obligated Group ...... A-1 History of Piedmont Healthcare and the Piedmont System ...... A-1 Members of the Obligated Group ...... A-3 Piedmont System Entities that are not Obligated Group Members ...... A-4 Strategic Framework ...... A-5 System Accolades ...... A-5 Community Programs ...... A-6 GOVERNANCE AND MANAGEMENT OF SYSTEM ...... A-7 Governing Bodies of Affiliates and Powers Reserved to Piedmont Healthcare ...... A-7 Governing Body of Piedmont Healthcare ...... A-7 Executive Administration ...... A-8 FACILITIES AND SERVICES OF THE PIEDMONT SYSTEM ...... A-11 Description of Major Facilities and Operations of the Obligated Group...... A-11 Description of Major Facilities and Operations of Entities which are not a part of the Obligated Group ...... A-12 Acquisition of Piedmont Athens ...... A-12 Future Capital Projects ...... A-13 Patient Services ...... A-15 Medical Staff ...... A-15 Employees, Employee Relations and Labor Organizations ...... A-17 Educational Programs ...... A-18 SERVICE AREA AND MARKET SHARE ...... A-19 Primary Service Area ...... A-19 Competitors ...... A-19 ECONOMIC AND DEMOGRAPHIC INFORMATION ...... A-21 Population ...... A-21 Employment ...... A-22 Major Employers ...... A-23 Income ...... A-25 Housing ...... A-25 Banking ...... A-26 DEBT STRUCTURE OF THE OBLIGATED GROUP ...... A-27 Current Financing Plan ...... A-27 Outstanding Debt ...... A-27 Security for Payment of Outstanding Debt ...... A-28 Short-Term Debt ...... A-28 Guarantees ...... A-28 Debt of Affiliates that are not Obligated Group Members ...... A-28 Anticipated Debt ...... A-28 Hedge Agreements ...... A-28 Annual Debt Service Requirements ...... A-29 UTILIZATION AND FINANCIAL INFORMATION ...... A-32 Utilization Statistics ...... A-32 Sources of Revenue ...... A-32 Consolidated Statements of Operations ...... A-33 Consolidated Balance Sheets ...... A-34 Management’s Discussion and Analysis of Results of Operations ...... A-37 MISCELLANEOUS ...... A-38 Litigation ...... A-38

Employee Retirement Plans ...... A-38 Insurance Coverage ...... A-38 Indigent and Charity Care ...... A-38 Licensure, Accreditation and Professional Memberships ...... A-39

Table 1. Piedmont System Hospitals ...... A-2 Table 2. Organization Chart ...... A-4 Table 3. Strategic Framework ...... A-5 Table 4. Board of Directors of Piedmont Healthcare...... A-8 Table 5. Utilization Statistics for Piedmont Athens ...... A-13 Table 6. Capital Improvement Projects ...... A-14 Table 7. Patient Services ...... A-15 Table 8. Medical Staff by Department ...... A-17 Table 9. Market Share in the Atlanta MSA ...... A-20 Table 10. Population ...... A-21 Table 11. Employment by Sector ...... A-22 Table 12. Comparative Unemployment Rates ...... A-22 Table 13. Largest Employers ...... A-23 Table 14. Household Income ...... A-25 Table 15. Residential Construction ...... A-25 Table 16. Banking Statistics ...... A-26 Table 17. Pro Forma Debt of Obligated Group ...... A-27 Table 18. Interest Rate Swaps ...... A-29 Table 19. Pro Forma Annual Debt Service Requirements ...... A-31 Table 20. Selected Utilization Statistics ...... A-32 Table 21. Sources of Revenue by Payor Source ...... A-32 Table 22. Consolidated Statements of Operations ...... A-33 Table 23. Consolidated Balance Sheets ...... A-35 Table 24. Financial Ratios ...... A-36 Table 25. Analysis of Indigent and Charity Care ...... A-39 Table 26. Licensed Beds, by Hospital ...... A-39

INTRODUCTION

Overview of Piedmont Healthcare and the Obligated Group

Piedmont Healthcare, Inc. (“Piedmont Healthcare” or “PHC”) is a Georgia not-for-profit corporation that serves as the parent organization of a healthcare system (the “System” or “Piedmont System”) based in Atlanta, Georgia. The Piedmont System is comprised of seven acute care hospitals, six of which are located in the Atlanta metropolitan statistical area (MSA) and one of which is located in Athens, Georgia, approximately 70 miles northeast of Atlanta. The System includes approximately 1,471 beds in service at its seven hospitals and more than 80 outpatient facilities and clinics. The System includes combined medical staff with over 1,400 physicians, approximately 920 of which are employed by the System. The flagship hospital of the System is Piedmont Atlanta Hospital, a 529-bed tertiary care hospital located in Atlanta, Georgia. The most recent addition to the System, Piedmont Athens Regional Medical Center, is a 359-bed hospital located in Athens, Georgia. Piedmont Athens Regional became part of the System on October 1, 2016. The System parent, Piedmont Healthcare, provides centralized management services to its subsidiaries, including accounting, human resources, IT, financial management, revenue cycle, supply chain and advisory support. These centralized services result in greater operating efficiencies and allow its affiliated organizations to provide outstanding healthcare and education to their surrounding communities. The System also has a captive insurance company and owns a 50% interest in an insurance entity.

History of Piedmont Healthcare and the Piedmont System

The Piedmont System traces its origin to 1905, when Piedmont Sanatorium, a 10-bed facility in a 15-room family residence in downtown Atlanta began operations. The Sanatorium changed its name to Piedmont Hospital in 1925. In 1940, Piedmont Hospital reorganized as a not-for-profit organization under the Georgia Hospital Services Non-Profit Corporation Act.

By 1950, Piedmont Hospital had grown to 140 beds and occupied an entire city block. In 1957, Piedmont Hospital relocated to a 250-bed facility at its present location on Peachtree Road in the North Atlanta community of Buckhead.

In the nearly 60 years since opening the Buckhead campus, six additional hospitals have been added to the System, as well as related entities providing outpatient and related healthcare services. In 1983, Piedmont Healthcare was organized to act as the “parent” corporation of Piedmont Hospital and other Piedmont System entities. The map in the following table shows the location of the hospitals currently comprising the Piedmont System.

A-1 Table 1. Piedmont System Hospitals

A-2 Members of the Obligated Group

The following Piedmont System entities are members of the Obligated Group established pursuant to the Master Indenture referred to in the front portion of this Official Statement:

The Parent. The parent organization for the Piedmont System:

Piedmont Healthcare, Inc. (“Piedmont Healthcare” or “PHC”).

Piedmont Hospitals. The seven entities that operate the Piedmont System hospitals:

Piedmont Hospital, Inc. (“Piedmont Atlanta”), which operates Piedmont Atlanta Hospital, the flagship hospital of the Piedmont System located in Atlanta, Georgia.

Fayette Community Hospital, Inc. (“Piedmont Fayette”), which operates Piedmont Fayette Hospital, a community hospital located in Fayetteville, Georgia. This is the only acute care hospital in Fayette County.

Piedmont Henry Hospital, Inc. (“Piedmont Henry”), which operates Piedmont Henry Hospital, a community hospital located in Stockbridge, Georgia. This is the only acute care hospital in Henry County.

Piedmont Mountainside Hospital, Inc. (“Piedmont Mountainside”), which operates Piedmont Mountainside Hospital, a community hospital located in Jasper, Georgia. This is the only acute care hospital in Pickens County. Piedmont Mountainside also operates a stand-alone emergency department.

Piedmont Newnan Hospital, Inc. (“Piedmont Newnan”), which operates Piedmont Newnan Hospital, a community hospital located in Newnan, Georgia. This is the only acute care hospital in Coweta County.

Piedmont Newton Hospital, Inc. (“Piedmont Newton”), which operates Piedmont Newton Hospital, a community hospital located in Covington, Georgia. This is the only acute care hospital in Newton County.

Piedmont Athens Regional Medical Center, Inc. (“Piedmont Athens”), which operates Piedmont Athens Regional Medical Center, a hospital located Athens, Georgia, the most recent addition to the Piedmont System.

Related Entities. The following entities that support the operations of the Piedmont System hospitals or provide related health care services:

Piedmont Healthcare Foundation, Inc. (the “Piedmont Foundation”), which provides fundraising support for the Piedmont System.

Piedmont Medical Care Corporation (“PMCC”), which operates the Piedmont Physician Group (“PPG”), which has more than 200 primary care and certain specialist and hospital-based physicians in over 50 offices throughout Georgia.

The Piedmont Clinic, Inc. (the “Piedmont Clinic”), which operates the Clinically Integrated Network (“CIN”), with a 1,500-member physician network.

Piedmont Heart Institute, Inc. (“Piedmont Heart Institute”), which provides cardiovascular research and education.

Piedmont Heart Institute Physicians, Inc. (“Piedmont Heart Institute Physicians”), which employs cardiovascular and other specialists in over 26 offices across Georgia.

A-3 After giving effect to consolidation for purposes of financial reporting, members of the Obligated Group account for 100% of net patient revenue of the Piedmont System and 98% of total assets of the Piedmont System. For a discussion of the effect of consolidation on financial covenants related to Income Available for Debt Service under the Master Indenture see “SECURITY FOR THE BONDS—Master Indenture” in the front portion of the Official Statement.

Piedmont System Entities that are not Obligated Group Members

The following entities in the Piedmont System are not members of the Obligated Group:

Amster-McRae Insurance Company (“AMIC”), which is a captive insurance company that insures the hospital professional liability and commercial general liability risks of Piedmont System entities.

Piedmont WellStar HealthPlans, Inc. (“Piedmont WellStar HealthPlans” or “PWHP”), is an insurance entity in which Piedmont Healthcare has a 50% interest. PWHP is in the process of winding down its operations and is expected to be closed by December 2017.

Piedmont Atlanta Surgery Center, LLC (“PASC”), which operates a multispecialty ambulatory surgery center in Atlanta, Georgia. PASC is wholly owned by Piedmont Atlanta. Although PASC is not a member of the Obligated Group, it is consolidated with Piedmont Atlanta for financial reporting.

Athens Regional Physician Services, Inc. (“ARPS”), a subsidiary of Piedmont Athens that operates physician practice groups. ARPS is wholly owned by Piedmont Athens. Although ARPS is not a member of the Obligated Group, it will be consolidated with Piedmont Athens for financial reporting.

Table 2. Organization Chart

* Piedmont Healthcare, Inc. is also a member of the Obligated Group. ** Piedmont Athens joined Piedmont Healthcare as a member of the Obligated Group as of October 1, 2016.

A-4 Strategic Framework

The following illustration describes Piedmont Healthcare’s long-term Strategic Framework and Direction.

Table 3. Strategic Framework

System Accolades

• Named one of the nation’s “MOST WIRED” healthcare systems, Healthcare’s Most Wired, 2015 – 2016

• AJC TOP WORKPLACES, TOP 25 LARGE EMPLOYERS CATEGORY, Atlanta Journal and Constitution, 2016

• Supply Chain, ECRI Institute’s HEALTHCARE SUPPLY CHAIN ACHIEVEMENT AWARD, 2016

• REVENUE CYCLE AWARD, Healthcare Business Insight, 2015

• FIRST PRIZE, Quality Assurance/Improvement/Transplant Pharmacoeconomics Category, the 23rd annual United Network for Organ Sharing (UNOS) Transplant Management Forum, 2015

A-5 • Affiliate of MD Anderson Cancer Network®, a program of The University of Texas MD Anderson Cancer Center

• Partnership with the Cleveland Clinic, the nation’s #1 heart program

Community Programs

Piedmont Healthcare provides a variety of community benefit programs and activities to help better both the physical and fiscal health of the communities it serves. These programs reach tens of thousands of members of Piedmont Healthcare’s communities each year, and are designed to be the building blocks for healthy lifestyles. Among Piedmont Healthcare’s community benefit programs are:

• staffing, lab services, and electronic medical record support for charitable clinics; • healthy lifestyles programming aimed at increasing community engagement in exercise and nutrition education; • funding for after-hours “Safety Net” clinics in two metropolitan Atlanta communities; • various programs designed to streamline post-discharge care coordination for high-risk patients; and • support for programming structured to serve the more vulnerable members of our Piedmont Healthcare communities.

Cancer Wellness at Piedmont Healthcare provides complimentary services and programs for anyone affected by cancer, at any phase of the disease. Piedmont Healthcare also participates annually in cancer survivor events, some in coordination with other non-profit organizations. Piedmont Atlanta “Sixty Plus” Older Adult Services provides caregiver services and programs for older adults at low or no cost to the community.

Piedmont Healthcare’s community partners include, among others:

• American Cancer Society • American Heart Association • Atlanta Regional Commission • Center for Black Women’s Wellness • Community Farmers Markets • Coweta Samaritan Clinic • Fayette C.A.R.E. Clinic • Good Samaritan Health Center Atlanta • Good Samaritan Health & Wellness Center Jasper • Grant Park Clinic • Healing Bridge Clinic • Hands of Hope Clinic • HOPE Atlanta • It’s the Journey, Inc. • March of Dimes • MedShare International • Mercy Care Atlanta • Pickens County Health Department • Susan G. Komen Foundation • The Health Initiative • The Salvation Army • Willing Helpers Clinic

A-6

GOVERNANCE AND MANAGEMENT OF SYSTEM

Governing Bodies of Affiliates and Powers Reserved to Piedmont Healthcare

Each entity affiliated with Piedmont Healthcare, including the Obligated Group members, has a separate board of directors responsible for quality, safety, and service; community benefit; credentialing; and philanthropy. However, for all of these entities, the Board of Directors of Piedmont Healthcare has the exclusive power to approve:

• capital expenditures or the incurrence of indebtedness • amendments to the entity’s articles of incorporation or bylaws • short-term and long-term capital and operating budgets • certain acquisitions, sales, transfers, or other dispositions of assets • reorganizations, mergers, consolidations, liquidations, dissolutions, and any voluntary filing of a petition in bankruptcy • appointments and reappointments to the boards • decisions affecting clinical and service quality

Governing Body of Piedmont Healthcare

A 21-member board of directors (the “Piedmont Healthcare Board”) governs Piedmont Healthcare. The Piedmont Healthcare Board meets on at least a quarterly basis. The bylaws of Piedmont Healthcare provide that the majority of directors will be community directors and that the term for each director shall be three years with a maximum of three terms. A director appointed to fill an unexpired vacancy of less than two years may be reappointed for up to three additional three-year terms. Upon completion of three full terms of service, a director is eligible for reappointment after a one-year break in service. The Piedmont Healthcare CEO serves as an ex-officio member of the Piedmont Healthcare Board.

Members of the Piedmont Healthcare Board appoint the Chair for one two-year term.

The Governance and Nominating Committee of the Piedmont Healthcare Board serves as the Nominating Committee. In the event of a vacancy, the Governance and Nominating Committee appoints a successor, who is subject to approval by a majority vote of the Piedmont Healthcare Board.

Information concerning the members of the Piedmont Healthcare Board is set forth in the following table.

A-7 Table 4. Board of Directors of Piedmont Healthcare

Name and Office Occupation

William A. Blincoe, M.D. Physician Kevin Brown President & CEO, Piedmont Healthcare Frank N. Cole, M.D. Physician Tye Darland General Counsel, Georgia Pacific Wm. Ronald Duffey, Vice Chair Retired Bank Executive Michael D. Garrett Retired Executive, Georgia Power David Hanna Chairman & CEO, Atlanticus Holdings Corporation Samuel B. Hay, III Partner, Fowler Properties Lila Hertz Community Volunteer James H. Hopkins Founder/President – Strategic Ventures Group, LLC Cheryl K. Legette Chief Operating Officer, Girls Scouts of Historic Georgia Harry M. McFarling, III, M.D., Chair Physician Amy Medendorp Retired Bank Executive Charles J. (Jeff) Mills Community Volunteer Greg Morrison Sr. VP/CIO, Cox Enterprises Roderick D. Odom, Jr. Retired Executive, BellSouth Network David M. Sailors, M.D. President – University Surgical Vascular Todd Schmidt, M.D. Physician Jay Singh, M.D. Physician John W. Somerhalder, II Retired CEO, AGL Resources Ramon Suarez, M.D. Physician

Executive Administration

The Piedmont Healthcare President and Chief Executive Officer is appointed by and serves at the direction of the Piedmont Healthcare Board. The senior management and officers of Piedmont Healthcare’s subsidiary organizations are appointed by and serve at the direction of the Piedmont Healthcare President and Chief Executive Officer.

Kevin Brown, age 49, was named President and Chief Executive Officer of Piedmont Healthcare in May, 2013. Mr. Brown previously served as Chief Executive Officer of Swedish Health Services in Seattle, Washington, after serving as that system’s Chief Strategic Officer, leading the development and oversight of the Strategic Planning Office. Before that time, Mr. Brown acted as the Senior Vice President and Chief Administrative Officer for Swedish Health Services and had operational responsibility for the Ambulatory Care Division. He also had operational responsibility for Swedish/Ballard, a 163-bed community hospital, and Swedish/Issaquah, a greenfield 175-bed community hospital that opened in July, 2011. Prior to joining Swedish Health Services, Mr. Brown worked for the Providence Health System leading various strategic and business development projects. He also spent five years in the early 1990’s working as part of the start-up management team for PacifiCare of Washington. Mr. Brown earned his Bachelor’s Degree in Business Administration and Marketing from the University of Wisconsin-Eau Claire and a Master’s Degree in Healthcare Administration from Arizona State University.

Gregory A. Hurst, age 59, is the Chief Operating Officer of Piedmont Healthcare. Mr. Hurst leads system operations and assumes accountability for operations of Piedmont Fayette, Piedmont Henry, Piedmont Mountainside, Piedmont Newnan, Piedmont Newton and AMIC, as well as managed care and strategic business development. Previously, he was Executive Vice President of Strategy and Chief Financial Officer for Piedmont Healthcare. His work in the hospital industry spans three decades. Prior to joining Piedmont Healthcare in October, 2000, Mr. Hurst worked at several hospitals and held regional positions with California-based Tenet Healthcare Corporation. Mr. Hurst is a graduate of Emory University’s School of Business and is a Certified Public Accountant in the state of Georgia.

A-8 Michael McAnder, age 56, is the Chief Financial Officer of Piedmont Healthcare. He joined Piedmont Healthcare in 2015. Mr. McAnder came to Piedmont Healthcare from Kaiser Permanente where he served as Senior Vice President of Financial Operations. He led the national supply chain management, decision support, revenue cycle, consumer financial service experience, financial shared services, continuity management and PeopleSoft ERP implementation functions. Mr. McAnder has a proven track record of leading financial systems to streamline processes, optimizing benefit realization and delivering on goals and objectives. He has also worked for Allina Hospitals and Clinics in Minneapolis, Minnesota; Banner Health in Phoenix, Arizona; and Lutheran Healthcare Network in Mesa, Arizona.

Leigh Hamby, M.D., age 53, is currently the Chief Quality Officer and Chief Medical Officer of Piedmont Healthcare. He joined Piedmont Healthcare in 2001 as Vice President and Chief Quality Officer. After attending college and Medical School at Emory University, he successfully completed a residency in general surgery at the University of Kentucky. Dr. Hamby practiced in General Surgery in Dothan, Alabama, where he served as Chairman of Surgery and Trauma Medical Director. Dr. Hamby is board certified in General Surgery and is a Fellow of the American College of Surgeons. While in private practice, he completed his Master’s of Healthcare Administration at The University of Alabama at Birmingham. Dr. Hamby left private practice to complete a post- graduate fellowship in the Department of Veterans Affairs as a VA Quality Scholar. After his fellowship, he served as the Quality Management Officer for the Southeast Region (VISN 7) of the VA Healthcare System in Atlanta. Dr. Hamby is an Associate Professor at the Rollins School of Public Health at Emory University where he teaches quality improvement methodology. Dr. Hamby has published more than 30 articles in peer-reviewed journals and has written two book chapters. He has served as an Examiner for the Malcolm Baldrige National Quality Award since 2003, and has given over 100 presentations on Patient Safety and Quality both regionally and nationally.

Vicki Cansler, age 62, joined Piedmont Healthcare in February, 2013, as the Chief Human Resources Officer. Ms. Cansler began her career at Glenwood Regional Medical Center in West Monroe, Louisiana. She spent the majority of her career in Texas, first at Children’s Hospital in Dallas, and then with CIGNA when it was still a staff-model business. Ms. Cansler was eventually named Vice President of Human Resources for CIGNA’s Healthcare Division. Ms. Cansler has also served as the Senior Vice President of Human Resources for both HealthMarkets, a private equity-owned individual health insurance company based in Texas, and Blue Cross Blue Shield of Tennessee. She also held senior human resources positions with Booz, Allen and Hamilton in Virginia; Deloitte & Touche LLP in Dallas; and Pan American Life Insurance Company in New Orleans. During Ms. Cansler’s strategic consulting tenure at Deloitte, she worked extensively with healthcare providers such as Methodist Healthcare System, North Shore Long Island Jewish Health System, and Ochsner Health Care System. Ms. Cansler also served as a principal with the Leadership Research Institute where she provided business development, organizational, human resources and leadership consulting services for global and domestic clients.

Matt Gove, age 45, joined Piedmont Healthcare in 2011 and serves as the Chief Consumer Officer. As Chief Consumer Officer, Mr. Gove is responsible for overseeing the marketing, communications and external affairs operations for the System. Prior to joining Piedmont Healthcare, Mr. Gove was a core member of the executive team that engineered an $80 million operational turnaround and raised more than $300 million for capital improvements at Grady Health System in Atlanta, helping revive the critical safety net institution. As Grady’s senior vice president of Marketing and External Affairs, he helped reposition the Atlanta institution, establishing a new look and feel and reconnecting Grady to business, media and community stakeholders. Mr. Gove’s background also includes experience in commercial real estate and journalism. Mr. Gove holds a bachelor’s degree in Psychology from Georgia State University and serves on Georgia State University’s Marketing Roundtable. He also serves on the boards of Zoo Atlanta and Park Pride. He is a Building Committee member for the College Football Hall of Fame/Atlanta Hall Management and serves on the communications and marketing committees of the Atlanta Regional Commission and Georgia Organics.

Geoff Brown, age 60, joined Piedmont Healthcare in 2014 and serves as the Chief Information Officer. As Chief Information Officer, Mr. Brown oversees the Information Systems department. He provides strategic direction, overall accountability and responsibility for Piedmont’s technology systems, software and applications, as well as development, maintenance and security of the Piedmont network. Mr. Brown previously served as the SVP and CIO at Inova Health System in northern Virginia. He has over 30 consecutive years in progressive experience in Information Technology (IT), management, consulting and strategic planning. Before joining Inova, he served as Vice President and CIO for the Grady Health System. Prior to that, he was an associate hospital administrator and

A-9 CIO for Atlanta Medical Center and South Fulton Medical Center. Mr. Brown earned a B.S. in Business Administration and was awarded an American Management Association Certification from Oglethorpe University in Atlanta, Georgia.

Mark Guza, age 68, joined Piedmont Healthcare in March, 2011, and serves as the Chief Compliance Officer. As Chief Compliance Officer, Mr. Guza is responsible for all compliance, privacy and government appeals operations for the System. Mr. Guza began his professional career as a law clerk with the Supreme Court of Georgia, transitioned to an associate position with a small general practice firm, and then joined the Department of Health and Human Services (“DHHS”), Office of General Counsel as Assistant Regional Counsel, where he served for 25 years. During his tenure with the DHHS office, Mr. Guza advised the Centers for Medicare & Medicaid Services and represented the agency in litigation of Medicare and Medicaid reimbursement disputes, civil penalties, termination of Medicare provider agreements, EMTALA compliance, and Peer Review Organization disputes. While with the Office of General Counsel, Mr. Guza also managed a team of nine attorneys responsible for enforcement litigation of health care provider and supplier regulatory matters. In 2003, he joined Arnall Golden Gregory, LLP, in Atlanta, as Of Counsel, concentrating in the areas of Medicare and Medicaid reimbursement, regulatory compliance, EMTALA compliance, Anti-Kickback Statue, Stark, and False Claims Act. Mr. Guza also represented hospital systems, physician practices, and other healthcare-related clients in associated litigation matters, and conducted training for clients on EMTALA requirements. Mr. Guza received his undergraduate degree from Emory University and his law degree from the University of Georgia School of Law.

Michelle Fisher, age 45, is the Chief Strategy and Performance Improvement Officer of Piedmont Healthcare. Ms. Fisher joined Piedmont Healthcare in February 2003 and currently provides oversight for the following system-wide functions: project management, strategic planning and facilitating business development activities. Over her career with Piedmont Healthcare, Ms. Fisher has held several positions including management engineer, senior analyst, project manager, director of planning and business development and VP, Strategy, Business Development and Project Management and overseeing PHC’s Office of Stewardship. Ms. Fisher graduated from the University of North Carolina at Chapel Hill in Business Administration and received her graduate degree in Healthcare Administration from Washington University School of Medicine in St. Louis.

Denise Ray, age 58, is the Chief Nursing Executive of Piedmont Healthcare and is President and CEO of Piedmont Mountainside. Ms. Ray joined Piedmont Healthcare in 2008, first as the COO for Piedmont Atlanta, and then as a Piedmont Healthcare Senior Vice President for Integration. Prior to joining Piedmont Healthcare, Ms. Ray was the Chief Nursing Officer and Senior Vice President of Operations of Erlanger Health Care System, a 728-bed Level I acute care trauma center, in Chattanooga, Tennessee. Ms. Ray has many years of progressive healthcare experience in many facets of hospital leadership and program development. She has a Bachelor’s of Science in Nursing from the University of Tennessee in Chattanooga, Tennessee, and a Master’s of Business Administration from Southern Adventist University in Collegedale, Tennessee. In addition, she received her Lean Healthcare Certificate from Belmont University through the Massey Graduate School of Business.

Sidney “Sid” Kirschner, age 81, was appointed Chief of Philanthropy in January, 2016. Prior to this role, Mr. Kirschner was President and CEO of Piedmont Medical Care Corporation, Piedmont Heart Institute Physicians, and Piedmont Heart Institute. Mr. Kirschner formerly served as President and CEO of Piedmont Heart Institute Physicians. He is also the former Chairman and Chief Executive Officer of Northside Hospital in Atlanta. Before joining Northside Hospital, Mr. Kirschner was the Chairman, President and CEO of National Service Industries (“NSI”), a Fortune 500 company. He also previously served as President of the Electric Motor Division of General Dynamics Corporation and Head of School for The Alfred & Adele Davis Academy in Sandy Springs. Mr. Kirschner also serves on the board of directors for numerous organizations. Mr. Kirschner graduated from the New Mexico School of Mines.

Teresa L. Wilson, age 52, joined Piedmont Healthcare in March, 2008, and is the Vice President of Corporate Finance and Treasurer for Piedmont Healthcare. Ms. Wilson provides overall financial leadership and accountability for system-wide accounting, consolidation, and reporting including, but not limited to: accounts payable; payroll; general accounting; consolidation; financial reporting; tax compliance; treasury; cash management; investment management; debt management; and financial policy, procedure, and controls at PHC. Ms. Wilson has over twenty years of experience in healthcare. A certified public accountant and MBA, Ms. Wilson began her career at Ernst & Young where she was a member of their healthcare audit group. After leaving Ernst & Young,

A-10 Ms. Wilson worked for 12 years at Jewish Hospital HealthCare Services headquartered in Louisville, Kentucky spending five years in Corporate Finance and seven years as a hospital chief financial officer. In 2005, Ms. Wilson joined University Surgical Associates, the largest multi-specialty surgical practice in Kentucky, as their Chief Operating Officer/Chief Financial Officer. Upon moving to Atlanta in 2008, Ms. Wilson joined the physician services branch of PHC as their chief financial officer until assuming her current position on January 1, 2012.

FACILITIES AND SERVICES OF THE PIEDMONT SYSTEM

Description of Major Facilities and Operations of the Obligated Group

Piedmont Atlanta Hospital is a 529-bed general and specialty acute-care hospital providing inpatient, outpatient, and emergency care services primarily for residents of the entire Atlanta metropolitan area. Services include, but are not limited to, complex cardiovascular care, a cancer center, and the Transplant Institute. Piedmont Atlanta provides services at its main 26-acre campus located on Peachtree Street between downtown Atlanta and the Atlanta neighborhood of Buckhead, and at four off-site locations.

Piedmont Fayette Hospital is a 221-bed acute-care hospital located in Fayetteville, Georgia, 34 miles southwest of Atlanta, near Interstate Highway I-85. Piedmont Fayette provides inpatient, outpatient, and emergency care primarily for residents of Fayette County, Georgia. Piedmont Fayette provides services at its main campus as well as at one off-site location.

Piedmont Henry Hospital is a 215-bed acute-care hospital located in Stockbridge, Georgia, which is owned by the Hospital Authority of Henry County and leased to Piedmont Henry under a lease agreement with a remaining term of approximately 36 years. This facility is located approximately 30 miles southeast of Atlanta, near I-75. Piedmont Henry Hospital provides inpatient, outpatient, and emergency care primarily for residents of Henry County, Georgia. Piedmont Henry provides its services at its main campus in Stockbridge, as well as at two off-site locations. Piedmont Henry’s lease from the Hospital Authority of Henry County includes a skilled nursing facility, the business operations of which are entirely managed by UHS Pruitt.

Piedmont Mountainside Hospital is a 52-bed acute-care hospital located in Jasper, Georgia, approximately 55 miles north of Atlanta. Piedmont Mountainside Hospital provides inpatient, outpatient, and emergency care primarily for residents of Pickens County and surrounding areas of north Georgia. Piedmont Mountainside also operates an off-site outpatient center in Ellijay, Georgia.

Piedmont Newnan Hospital is a 136-bed acute-care hospital located in Newnan, Georgia, approximately 42 miles southwest of Atlanta and 22 miles west of Piedmont Fayette. Piedmont Newnan Hospital provides inpatient, outpatient, and emergency care primarily for residents of Coweta County, Georgia. Piedmont Newnan provides services at its main campus in Newnan as well as at three off-site locations.

Piedmont Newton Hospital is a 97-bed acute-care hospital located in Covington, Georgia, which is owned by the Hospital Authority of Newton County and leased to Piedmont Newton under a lease agreement with a remaining term of approximately 39 years. The facility is located approximately 40 miles southeast of Atlanta and 25 miles east of Piedmont Henry Hospital. Piedmont Newton Hospital provides inpatient, outpatient, and emergency care primarily for residents of Newton County, Georgia.

Piedmont Athens Regional Medical Center (or Piedmont Athens Regional) is a 359-bed acute-care hospital located in Athens, Georgia, approximately 70 miles northeast of Atlanta, which is owned by the Hospital Authority of Clarke County and leased to Piedmont Athens under a lease agreement with a term of approximately 40 years. Piedmont Athens Regional is a regional referral center for northeast Georgia. Piedmont Athens provides its services at its main campus in Athens, Georgia, where the University of Georgia is located, as well as at a number of off-site locations including four urgent care centers.

PMCC provides centralized management and support services to the PMCC-owned practices of its physicians, including administrative services, financial management such as billing and collections, and human

A-11 resources services support. PMCC operates PPG, a group of over 200 primary care and other specialist and hospital- based physicians practicing in more than 50 locations across Georgia.

Piedmont Clinic is a Clinically Integrated Network (“CIN”) with more than 1,400 physician members that unifies healthcare providers, including hospitals, physicians, and other types of care providers, in working toward common goals in the areas of quality, performance, efficiency, and value. Healthcare providers within the network develop and sustain clinical initiatives with the goal of meeting the Institute for Healthcare Improvement’s Triple Aim: improve the patient experience of care; improve the health of populations; and reduce the per capita cost of healthcare.

Piedmont Heart Institute provides cardiovascular research and educational services for the benefit of the Piedmont Healthcare affiliates.

Piedmont Heart Institute Physicians operates offices providing cardiovascular and other specialty physician services. Piedmont Heart Institute Physicians provides centralized management and support services, including administrative services, financial management such as billing and collections, and human resources services support, to the owned practices of its physicians. Piedmont Heart Institute Physicians includes more than 85 cardiovascular physicians, extenders, and other specialists in 26 locations across Georgia.

Piedmont Foundation generates and manages funds for Piedmont Healthcare and its tax-exempt subsidiaries. Piedmont Foundation performs various fundraising activities in order to provide philanthropic support for Piedmont Healthcare and its affiliates.

Description of Major Facilities and Operations of Entities which are not a part of the Obligated Group

Piedmont WellStar HealthPlans is a taxable, for-profit health insurance corporation that is a 50/50 joint venture between Piedmont Healthcare and WellStar Health System. PWHP is in the process of winding down and its operations are expected to be closed by December 2017.

AMIC is a foreign corporation domiciled in the Cayman Islands and insures the hospital and physician professional liability and commercial general liability risks of Piedmont Healthcare and its affiliates.

PASC is a wholly owned subsidiary of Piedmont Atlanta which provides multispecialty surgical services in an outpatient setting.

ARPS acquires and operates physician practices related to the operations of Piedmont Athens. ARPS currently employs approximately 37 primary care physicians.

Acquisition of Piedmont Athens

Piedmont Athens became a part of the Piedmont System on October 1, 2016 when Piedmont Healthcare became the sole member of Piedmont Athens. Piedmont Athens has also become a member of the Obligated Group. Piedmont Athens owns and operates Piedmont Athens Regional Medical Center, a 359-bed hospital located in Athens, Georgia. The acquisition of Piedmont Athens extends the Piedmont System into the Athens MSA, which is adjacent to the Atlanta MSA where the other six hospitals of the Piedmont System are located.

Utilization information for Piedmont Athens prior to the acquisition is contained in the following table:

A-12 Table 5. Utilization Statistics for Piedmont Athens

Fiscal Year Ended September 30 2013 2014 2015 Acute admissions 19,186 18,512 18,765 Acute patient days 80,015 83,859 86,020 Percent occupancy 72.1% 74.2% 74.9% Average length of stay 4.14 4.54 4.39 Total emergency room visits 81,067 80,574 82,570 Total outpatient visits 325,910 315,243 313,900 Total urgent care visits 99,749 96,555 105,320 Total physician visits 253,437 250,543 264,968 Inpatient surgeries 10,465 9,969 9,822 Outpatient surgeries 3,866 3,466 3,249 Open heart cases 295 321 371 Deliveries 2,543 2,538 2,548

Approximately 49% of the patients treated at Piedmont Athens Regional in fiscal year 2015 were residents of the Athens MSA. Piedmont Athens has the leading market share in the Athens MSA. For fiscal year 2015, its market share was approximately 44%. St. Mary’s Health Care System had the second highest market share, with approximately 21%. Prior to the acquisition, the Piedmont System market share in the Athens MSA was less than 1%.

For fiscal year ended September 30, 2015, Piedmont Athens reported $402 million in total assets, $118 million in net assets, $424 million in net patient revenue, and $40 million EBIDA. The outstanding bonds of Piedmont Athens are being refunded with proceeds of the Bonds offered pursuant to this Official Statement.

The operations of Piedmont Athens are not reflected in the audited financial statements of the Piedmont System included in APPENDIX B. No pro forma or combining financial statements for the Piedmont System and Piedmont Athens are being presented in this Official Statement for periods prior to the date (October 1, 2016) when Piedmont Athens became part of the Piedmont System. Pursuant to its continuing disclosure undertakings with respect to its tax-exempt bonds, Piedmont Athens has made filings on EMMA with respect to its operations and financial statements for prior periods. That information can be found on the MSRB’s filing system at emma.org, reference CUSIP No. 181685HN1.

Future Capital Projects

Piedmont Healthcare conducts a comprehensive planning and budgeting process designed to translate Piedmont Healthcare’s long-range plan into “rolling” five-year operating income and capital improvement projections. The long-range plan is a strategic plan developed by Piedmont Healthcare based upon input from its medical staff, Board members, facility leadership, department managers, and other key stakeholders, and it outlines the vision and strategic direction for the organization over the next five years. To identify, coordinate, and approve the initiatives that support the long-range plan, Piedmont Healthcare entities participate in critical planning processes on an annual basis.

A key result of the comprehensive planning and budgeting process is the preparation of a detailed capital expenditure budget, outlining routine/replacement capital as well as strategic capital.

With respect to routine/replacement capital, Piedmont Healthcare expects to spend approximately 50% of operating free cash flow per annum in each of the next 3 years.

With respect to strategic capital, Piedmont Healthcare is planning a major replacement and expansion project at Piedmont Atlanta that will include a new bed tower and 114 additional inpatient beds along with various

A-13 smaller projects which require or have been submitted for the approval of the State Health Planning Division of Georgia’s Department of Community Health.

The project for Piedmont Atlanta Hospital (which is currently in design) has two phases. The first phase includes the new bed tower and 114 additional inpatient beds. Construction on this phase is expected to begin in fiscal year 2017 and is expected to be completed by fiscal year 2019. This phase is expected to cost $450 million, of which Piedmont Healthcare plans to fundraise $150 million with a lead gift of $75 million already pledged. Piedmont Healthcare expects to borrow for phase one costs no sooner than fiscal year 2019. Phase two consists of completion of seven shelled floors in the new bed tower. A final decision on implementation of phase two has not been made yet. Any borrowing for phase two will be after fiscal year 2019.

Table 6. Capital Improvement Projects

Certificate of Estimated Project Description Need Status Costs

Piedmont Fayette Hospital – renovation of main surgical suite Letter of intent filed $ 5,500,000

Piedmont Newnan Hospital – renovation to add interventional CON application radiology and cath lab filed 9/2016 4,925,000

Piedmont Newton Hospital – renovation and expansion of CON application emergency department filed 8/2016 8,680,000

Piedmont Atlanta Hospital – new bed tower and addition of 114 CON application inpatient beds filed 8/2016 450,000,000

Total – all projects $469,105,000

A-14 Patient Services

In addition to the services listed below, Piedmont Healthcare also offers many advanced services at its flagship Piedmont Atlanta Hospital including the following: open-heart surgery; Gamma Knife stereotactic surgery; robotic surgery; renal, pancreas, liver, and heart transplantation.

The Piedmont System hospitals offer:

Table 7. Patient Services

Inpatient Services

• cardiovascular services • medical • diabetes management and • neonatal intensive care education • oncology • endoscopy • orthopedic surgery • general surgery • rehabilitation • geriatric care • urology • hospitalist services • women’s services, including • intensive care maternity • intensivist services • wound care/hyperbarics

Outpatient Services

• cardiac rehabilitation • mammography • chemotherapy • MRI • clinical laboratory and • neurophysiology pathology • outpatient surgery • computerized tomography • physical therapy (CT) scanning • positron emission tomography • diabetes management and (PET) scan education • pulmonary function • emergency services • radiation therapy • endoscopy • rehabilitation • general radiology • sleep studies • interventional cardiac • ultrasound catheterization • wound care/hyperbarics • interventional radiology

Medical Staff

As of June 30, 2016, there were 1,356 physicians on the Piedmont Atlanta medical staff. The medical staff is divided into the categories of active, ambulatory care, consulting, and coverage. There are 802 physicians in the active category. The medical staff is further organized into 11 departments representing 70 specialties. Ninety-nine percent of Piedmont Atlanta’s active medical staff is Board Certified or eligible to sit for their Board examination. There are 302 physicians located on the Piedmont Atlanta campus and 10 off-campus satellite primary care centers.

As of June 30, 2016, there were 633 physicians on the Piedmont Fayette medical staff. The medical staff is divided into the categories of active, ambulatory care, consulting, and coverage. There are 394 physicians in the active category. The medical staff is further organized into seven departments representing 54 specialties. Ninety-

A-15 nine percent of Piedmont Fayette’s active medical staff is Board Certified or eligible to sit for the Board examination. Piedmont Fayette has three off-campus satellite primary care centers.

As of June 30, 2016, there were 638 physicians on the Piedmont Henry medical staff. The medical staff is divided into the categories of active, ambulatory care, consulting, and coverage. There are 339 physicians in the active category. The medical staff is further organized into nine departments representing 48 specialties. Ninety- eight percent of Piedmont Henry’s active medical staff is Board Certified or eligible to sit for the Board examination. Piedmont Henry has three off-campus satellite primary care centers.

As of June 30, 2016, there were 277 physicians on the Piedmont Mountainside medical staff. The medical staff is divided into the categories of active, ambulatory care, consulting, and coverage. There are 121 physicians in the active category. The medical staff is further organized into two medical staff departments representing 32 specialties. Ninety-eight percent of Piedmont Mountainside’s active medical staff is Board Certified or eligible to sit for the Board examination. Piedmont Mountainside has six off-campus satellite primary care centers.

As of June 30, 2016, there were 453 physicians on the Piedmont Newnan medical staff. The medical staff is divided into the categories of active, ambulatory care, consulting, and coverage. There are 226 physicians in the active category. The medical staff is further organized into nine medical staff departments representing 46 specialties. Ninety-nine percent of Piedmont Newnan’s active physicians are Board Certified or eligible to sit for the Board examination. Piedmont Newnan has nine off-campus satellite primary care centers.

As of June 30, 2016, there were 263 physicians on the Piedmont Newton medical staff. The medical staff is divided into the categories of active, courtesy, consulting, telemedicine and associate coverage. There are 132 physicians in the active category. The medical staff is further organized into two medical staff departments representing 30 specialties. Ninety-nine percent of Piedmont Newton’s active physicians are Board Certified or eligible to sit for the Board examination. Piedmont Newton has one off-campus primary care center.

As of June 30, 2016, there were 486 active medical staff at Piedmont Athens Regional.

Employed Physicians. As of September 30, 2016, the Piedmont System had 351 employed physicians on the medical staff of Piedmont Atlanta Hospital, 170 on the medical staff of Piedmont Fayette Hospital, 102 on the medical staff of Piedmont Henry Hospital, 115 on the medical staff of Piedmont Mountainside Hospital, 178 on the medical staff of Piedmont Newnan Hospital, and 4 on the medical staff of Piedmont Newton Hospital.

A-16 The following is a profile of the medical staff of Piedmont Healthcare’s six hospitals by hospital medical staff department as of June 30, 2016.

Table 8. Medical Staff by Department

Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Medical Staff Departments (1) Atlanta Fayette Henry Mountainside Newnan Newton

Anesthesia 54 42 15 0 16 0 Cardiovascular Services 143 0 0 0 0 0 Diagnostics & Therapeutics 0 61 0 0 0 0 Emergency Medicine 21 34 26 0 26 0 Family Practice 0 0 30 0 0 0 Hospitalist 0 0 0 0 72 0 Medicine 562 299 275 204 146 161 Neuroscience 48 0 0 0 0 0 Orthopedic Surgery 96 0 0 0 0 0 Pathology 11 0 12 0 10 0 Pediatrics 0 42 58 0 36 0 Radiology 63 0 57 0 40 0 Surgery 193 110 131 73 78 102 Transplant Services 16 0 0 0 0 0 Women and Newborn 149 45 34 0 29 0

Total Medical Staff 1,356 633 638 277 453 263

______

Note (1): Each Piedmont System hospital organizes its own medical staff and determines the number of medical staff departments for its staff. Thus, the specialists in each department at one hospital are not necessarily comparable to the specialists in departments at other hospitals in the System. For example, anesthesiologists at Piedmont Mountainside are included in the department of surgery, but anesthesiologists at Piedmont Atlanta are in a separate department. For a discussion of the number of specialists at each System hospital, see the narrative prior to Table 8.

Employees, Employee Relations and Labor Organizations

Piedmont Healthcare employed a total of 7,769 full-time-equivalent nursing and other clinical services personnel as of June 30, 2016.

In the fiscal year ended June 30, 2016, Piedmont Atlanta, Piedmont Fayette, Piedmont Henry, Piedmont Mountainside, Piedmont Newnan, and Piedmont Newton collectively employed an average of 134 additional full- time equivalent contract personnel per week from nursing agencies and experienced an annual nursing staff turnover rate of 16%, 18%, 21%, 18%, 20% and 21%, respectively.

Approximately 65% of Piedmont Healthcare’s registered nurses have a Bachelor of Science or Master’s Degree in Nursing. Piedmont Atlanta, Piedmont Fayette, Piedmont Henry, Piedmont Mountainside, Piedmont Newnan, and Piedmont Newton offer professional development, continuing education programs, and other learning opportunities in order to recruit and retain their respective nursing staffs. Among the programs offered are advanced practice for Registered Nurses, Licensed Practical Nurses, and Nursing Assistants; scholarship programs; and universal clinical affiliation for Registered Nurses. Affiliations with several nursing schools including Emory University Nell Hodgson Woodruff School of Nursing, Georgia State University, Kennesaw University, and Georgia Baptist College of Nursing of Mercer University are maintained.

A-17 None of the employees of Piedmont Healthcare or its affiliated entities is represented by labor organizations or is covered by collective bargaining agreements, and the executive administration of Piedmont Healthcare is not aware of any union organizing efforts at the present time. The executive administration of Piedmont Healthcare believes that employee relations are good.

Educational Programs

Piedmont Healthcare provides educational programs, including continuing education programs for its medical staff, nursing staff, and other healthcare professionals.

Piedmont is proud to support the community through several patient education programs to support continued health. Piedmont offers childbirth classes, diabetes management and healthy heart programs across the Atlanta area. Through Piedmont Healthcare’s Student Affiliate Program, students pursuing a variety of healthcare professions at a number of area colleges and universities have the opportunity to gain clinical experience at a Piedmont facility.

Piedmont Atlanta offers a variety of opportunities for medical students to learn from Piedmont physicians while they are in school via preceptor or similar programs. Piedmont Atlanta currently has relationships with Emory, Medical College of Georgia and Mercer University School of Medicine. Affiliation agreements are in place for surgical residents in general surgery, gynecology, transplant, hepatology, and orthopedics. In addition, Piedmont Atlanta offers similar opportunities for physician assistant (“PA”) students and pharmacy students.

Nursing students from programs in the Atlanta area − including Emory University, Georgia State University, Georgia Perimeter College, Brenau University, Kennesaw State University, Mercer University, Georgia Health Sciences University, Clayton State University and West Georgia University − have completed clinical education at Piedmont Healthcare facilities.

The RN Residency Program is designed for new and experienced nurses who want to transition into the work environment or change specialties. Piedmont Atlanta offers residency programs in general acute-care areas and in several specialty areas including medical/surgical, NICU, Women’s Services, Emergency Department and cardiovascular, transplant, perioperative and intermediate care.

Piedmont Healthcare offers employees a tuition assistance program when employees pursue degrees related to their positions, and it offers its physician and executive leaders the opportunity to participate in the Piedmont Leadership Academy (“PLA”). PLA101 is a 10-week course for physicians who want to know more about effective healthcare leadership. The course is a basic “boot camp” to familiarize physicians with the important components of healthcare leadership and is comprised of both onsite and online modules. PLA201, a more intense development opportunity for graduates of the PLA101 course encourages and supports physicians moving into formal position with a focus on adaptive leadership, developing teams and managing change through others. Continued development in PLA301, which will incorporate a fellowship opportunity for physicians and executive leaders to co- op across the country, will be launched in fall of 2017.

Piedmont Healthcare and Mercer University have co-launched a unique Healthcare Quality & Process Improvement Certification program that incorporates traditional methods from Lean, Six Sigma, E. Deming’s Continuous Quality Improvement, Systems Thinking, Science of Safety, and Human Factors Design. In addition, the program covers the soft skills needed to drive sustained improvements, including team leadership, collaboration, change management, negotiation, and empathic listening. A diverse team of Piedmont Healthcare physicians, service coaches, and patient safety and quality leaders developed the program internally. The custom certification requires passing a knowledge check exam and, more importantly, the completion of a Capstone Improvement Project. The Capstone Improvement Project must demonstrate an attempt to realize benefits in the area of Quality, Service, Safety, or Financial Performance.

A-18 SERVICE AREA AND MARKET SHARE

Primary Service Area

The six Piedmont System hospitals located in the Atlanta MSA consider the Atlanta MSA to be their primary market. In fiscal year 2015 approximately 93% of the patients treated at these hospitals were residents of the Atlanta MSA and approximately 7% of the patients treated were residents outside the Atlanta MSA. Piedmont Atlanta serves as a regional referral center in Georgia with highly specialized services that attract patients from a wider service area. Approximately 10% of the patients treated at Piedmont Atlanta in fiscal year 2015 were residents from outside the Atlanta MSA.

Piedmont Athens considers the Athens MSA to be its primary market. See “FACILITIES AND SERVICES OF THE SYSTEM – Acquisition of Piedmont Athens”.

Competitors

Five of the six Piedmont System hospitals in the Atlanta MSA – Piedmont Fayette, Piedmont Henry, Piedmont Mountainside, Piedmont Newnan, and Piedmont Newton – are the sole hospital provider in the counties in which they are located. Piedmont Atlanta is located in the City of Atlanta, where several other large hospital systems are headquartered that provide services comparable to Piedmont Atlanta and also serve the greater Atlanta MSA.

The primary competitors for the Piedmont System in the Atlanta MSA are as follows:

WellStar Health System is a nonprofit community hospital system with eleven hospitals in the Atlanta MSA and a total of 2,746 licensed beds, having recently acquired five of its hospitals from Tenet. Its flagship hospital, WellStar Kennestone Hospital, is located in Marietta, Georgia.

Northside Hospital System is a nonprofit community hospital system with three hospitals in the Atlanta MSA and 853 licensed beds. Its flagship hospital, Northside Hospital, is located in Sandy Springs, north of downtown Atlanta.

Emory Health System is nonprofit system affiliated with Emory University, and its Emory University Hospital, located in Atlanta, serves as the primary teaching hospital for Emory University School of Medicine. Emory Health System has a total of six hospitals and 1,456 beds in the Atlanta MSA.

Grady Health System is a nonprofit system that operates Grady Memorial Hospital, a 953-bed hospital in Atlanta specializing in trauma care that serves as a teaching hospital for Emory University School of Medicine and Morehouse College School of Medicine. The Grady Health System also has a series of primary care facilities in the Atlanta area.

Gwinnett Health System is a nonprofit system with two hospitals with a total of 464 beds. Its hospitals are in Lawrenceville and Duluth, Georgia, which are in the northeast portion of the Atlanta MSA.

A-19 The following table shows the relative market share of the Piedmont System and its primary competitors in the Atlanta MSA.

Table 9. Market Share in the Atlanta MSA

Fiscal Year Ended June 30 System Name 2012 2013 2014 2015 2016 (1) WellStar Health System (2) 15.6% 15.5% 15.4% 15.4% 22.1% Piedmont Healthcare System 11.8% 13.2% 13.2% 14.9% 14.7% Emory Health System 11.0% 13.1% 13.4% 13.4% 13.5% Northside Health System (3) 9.7% 10.0% 10.6% 11.6% 11.9% Gwinnett Health System (3) 6.0% 6.4% 6.5% 6.5% 6.8% Grady Health System 6.6% 6.6% 6.4% 6.5% 6.4% Tenet Healthcare (2) 7.8% 7.0% 7.1% 7.0% - ______

Note (1): Through second quarter of fiscal year 2016. Note (2): WellStar acquired the Atlanta-area Tenet hospitals in 2015. Note (3): In September 2015 Northside and Gwinnett issued press releases announcing a nonbinding letter of intent to combine the two systems. No further public information is available about the status of this transaction or its expected completion. Source: GHA Inpatient Database. Based on inpatient admissions; does not reflect outpatient services. Excludes ages 0-14 and normal newborns. Includes general hospitals only.

A-20 ECONOMIC AND DEMOGRAPHIC INFORMATION

Population

The following table sets forth comparative historical population statistics and estimates for the areas and years indicated.

Table 10. Population

% % Change Change 2000- 2016 2021 2016- 2000 2010 2010 Estimate Projected 2021 Atlanta MSA1 4,263,477 5,286,728 24.0% 5,736,343 6,102,347 6.4% Athens MSA2 166,079 192,541 15.9% 201,051 209,397 4.2% State of Georgia 8,186,491 9,687,653 18.3% 10,241,260 10,736,776 4.8% United States 281,421,942 308,745,538 9.7% 322,431,073 334,341,965 3.7% ______

Note (1): The Atlanta-Sandy Springs-Roswell, Georgia Metropolitan Statistical Area (“MSA”) includes the following counties: Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Cobb, Coweta, Dawson, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Morgan, Newton, Paulding, Pickens, Pike, Rockdale, Spaulding, and Walton. Note (2): The Athens-Clarke County MSA includes the following counties: Clarke, Madison, Oconee, and Oglethorpe. Source: Nielsen.

A-21 Employment

The following table sets forth employment levels by non-farm sector.

Table 11. Employment by Sector 2015 Annual Averages (000s)

Atlanta MSA Athens MSA Number % of Number % of Employed Total Employed Total

Total Non-Farm Employment 2,418.0 100.0% 81.3 100.0% Goods-Producing 261.9 10.8% 9.4 11.6% Manufacturing 155.5 6.4% 6.7 8.2% Mining, Logging & Construction 106.4 4.4% 2.8 3.4% Service-Providing 1,839.7 76.1% 49.8 61.3% Trade, Transportation & Utilities 547.1 22.6% 14.6 17.9% Information 81.7 3.4% 0.6 0.7% Financial Activities 149.9 6.2% 3.5 4.3% Professional & Business Services 432.7 17.9% 7.0 8.6% Education & Health Services 301.6 12.5% 12.2 15.0% Leisure & Hospitality 264.5 10.9% 9.8 12.1% Other Services 62.2 2.6% 2.1 2.6% Unclassified - Industry Unassigned 9.1 0.4% 0.2 0.3% Total - Private Sector 2,110.8 87.3% 59.2 73.1% Government 307.3 12.7% 21.9 26.9% ______

Source: Georgia Department of Labor

The following table sets forth comparative unemployment rates.

Table 12. Comparative Unemployment Rates

Annual Average August 2011 2012 2013 2014 2015 2016* Atlanta MSA 9.9% 8.8% 7.8% 6.7% 5.6% 5.0% Athens MSA 9.0% 8.3% 7.4% 6.5% 5.5% 5.0% State of Georgia 10.2% 9.2% 8.2% 7.1% 5.9% 5.2% United States 8.9% 8.1% 7.4% 6.2% 5.3% 4.9% ______

*August 2016 preliminary; not seasonally adjusted. Source: Bureau of Labor Statistics

A-22 Major Employers

The following table sets forth major public and private sector employers.

Table 13. Largest Employers

Atlanta MSA

Employer Product/Industry Employees Delta Air Lines Inc. Airline 30,813 Emory University Private University 24,535 Gwinnett County Public Schools Public Education 20,770 AT&T Inc. Communications 16,950 United Parcel Service Inc. Shipping 15,252 WellStar Health System Inc. Health Care System 14,500 Cobb County School District Public Education 13,998 Emory Healthcare Health Care System 12,166 Fulton County Schools Public Education 12,000 Northside Hospital Inc. Health Care System 10,973 Publix Super Markets Inc. Grocery Stores 10,022 The Home Depot Inc. Home Improvement Stores 10,000 Piedmont Healthcare Health Care System 9,308 Georgia Institute of Technology Public University 8,962 Cox Enterprises Inc. Communications & Auto Serv. 8,269 Children's Healthcare of Atlanta Health Care System 6,801 State Farm, Southeastern Market Area Insurance 6,200 SunTrust Banks Inc. Banking 5,989 Northeast Georgia Health System Health Care System 5,551 Turner Broadcasting System Inc. Communications 5,421 Lockheed Martin Aeronautics Co. Aeronautics 5,200 Gwinnett County Government County Government 4,459 Grady Health System Health Care System 4,381 Metro. Atlanta Rapid Transit Authority (MARTA) Government Agency 4,301 Wells Fargo & Co. Banking 4,253 ______

Source: Atlanta Business Chronicle; as of December 31, 2015; Piedmont Healthcare employees: Piedmont Healthcare, Inc.; includes Atlanta MSA employees only.

A-23

Athens MSA

Employer Product/Industry Employees The University of Georgia Public University 9,800 Athens Regional Medical Center (1) Health Care System 3,384 Clarke County School District Public Education 2,800 Pilgrim's Food Processing 1,800 Athens-Clarke County Government 1,619 Caterpillar Excavators and Tractors 1,700 St. Mary's Health Care System Health Care System 1,348 Dial America Telemarketing 500 Power Partners, Inc. Transformers, Chillers, Solar Panels 480 Baldor Industrial Motors 480 Carrier Transicold Truck Refrigeration Units 450 Merial Animal Health Products 450 Burton & Burton Balloons & Gift Products 300 Skaps Non-Woven Plastics 235 Noramco, Inc. Medical Grade Products 210 CertainTeed Fiberglass Insulation 200 McCann Aerospace Machining Aerospace Products 200 Evergreen Packaging Food Grade Cartons & Printing 170 Eaton Automotive Parts 150 NKC - Nakanishi Metals Works Co., Ltd. Automotive Parts 141 ______

Note (1): Athens Regional Medical Center is now part of the Piedmont System. Source: Athens-Clarke County Economic Development Department; as of February, 2016

A-24 Income

The following table shows annual household income information for the year indicated.

Table 14. Household Income 2016 Estimates

Percent of Households Annual Income Median Annual Income $250,000 & Household below $15,000 Above Income Atlanta MSA 11.2% 3.9% $58,310 Athens MSA 20.9% 2.1% $40,317 Georgia 14.2% 2.9% $50,075 United States 12.3% 3.6% $55,551 ______

Source: Nielsen

Housing

The following table presents information about residential building permits for the years indicated.

Table 15. Residential Construction

Atlanta MSA Athens MSA Total Total Housing $ Value Housing $ Value Year Units (000s) Units (000s) 2011 8,634 $1,400,186 327 $51,732 2012 14,380 $2,323,023 619 $104,811 2013 24,297 $3,713,479 1,079 $183,781 2014 26,683 $4,391,656 932 $145,395 2015 30,342 $5,318,834 1,159 $183,401 ______

Source: U.S. Census Bureau

A-25 Banking

The following table sets forth information relating to bank deposits for the years indicated.

Table 16. Banking Statistics

Atlanta MSA Athens MSA Total Total Number of Deposits Number of Deposits As of 6/30 Institutions ($ millions) Institutions ($ millions) 2011 115 $115,626 18 $2,978 2012 108 $120,990 18 $3,006 2013 104 $123,584 18 $3,286 2014 100 $132,644 18 $3,412 2015 97 $146,148 18 $3,747 % Growth 2011-2015 -16% 26% 0% 26%

______

Source: FDIC

A-26 DEBT STRUCTURE OF THE OBLIGATED GROUP

Current Financing Plan

The financing plan for the Bonds offered pursuant to this Official Statement includes (i) refunding of debt of Piedmont Athens that Piedmont Healthcare assumed and agreed to refund in connection with the acquisition of Piedmont Athens, (ii) refunding of debt of the Obligated Group with respect to Piedmont Atlanta, and (iii) financing of capital improvements at Piedmont Fayette and Piedmont Atlanta. See “PLAN OF FINANCE” in the front portion of this Official Statement.

Outstanding Debt

After giving effect to the issuance of the Bonds and the current financing plan, the Obligated Group will have the following debt outstanding:

Table 17. Pro Forma Debt of Obligated Group

Outstanding Principal Balloon Payment or Balance (1) Purchase Date Fixed Rate Debt Series 2016A Fulton Bonds (2) $ 195,540,000 Not applicable Series 2016A Clarke Certificates (2) 185,145,000 Not applicable Series 2016A Fayette Certificates (2) 48,740,000 Not applicable Series 2014A Fayette Certificates 11,420,000 Not applicable Series 2014A Fulton Bonds 23,635,000 Not applicable Series 2014A Henry Certificates 51,830,000 Not applicable Series 2012 Newton Certificates (3) 10,860,000 Not applicable Series 2010 Coweta Certificates 100,000,000 Not applicable Series 2009A Fayette Certificates 35,895,000 Not applicable Series 2006 Newton Certificates (3) 4,905,000 Not applicable Subtotal $667,970,000

Variable Rate Debt Series 2014B Fayette Certificates (4) $28,175,000 November 19, 2024 Series 2014B Fulton Bonds (4) 61,415,000 November 19, 2024 Series 2012 Henry Certificates (5) 34,799,391 July 1, 2021 Series 2009C Fulton Bonds (5) 25,650,000 Not applicable Subtotal $150,039,391

Miscellaneous Capitalized leases and notes (3) $7,956,131

Total Debt $825,965,522

Note (1): For the Series 2016A Bonds and Certificates, this is the expected principal balance upon issuance. These amounts are preliminary and subject to change. For all other debt, this is the principal balance as of June 30, 2016. Note (2): These bonds and certificates are the “Bonds” offered pursuant to this Official Statement. Note (3): This debt is not secured by the Master Indenture. All other debt in this table is secured by the Master Indenture. Note (4): These bonds and certificates evidence direct loans from SunTrust Bank. Note (5): These bonds and certificates evidence direct loans from Bank of America, N.A.

A-27 Security for Payment of Outstanding Debt

When the Bonds are issued, all debt of the Obligated Group identified in Table 17 will be secured by the Master Indenture other than (i) the Series 2012 Newton Certificates, (ii) the Series 2006 Newton Certificates, and (iii) the capitalized leases and notes identified under “Miscellaneous” in Table 17. See “SECURITY FOR THE BONDS” in the front portion of this Official Statement.

The lenders that have made direct loans to the Obligated Group (see notes 4 and 5 in Table 17) are secured by the Master Indenture. The direct lenders will consent to the delivery of the amended and restated Master Indenture in connection with the issuance of the Bonds. One of the direct lenders, Bank of America, N.A. (“BANA”), will also have certain financial and operating covenants in its loan and security documents that are more restrictive than the Master Indenture covenants. Those covenants are for the sole benefit of BANA. BANA will have the sole discretion whether to waive any default in the covenants of their respective loan and security documents. Piedmont Healthcare is not in default under any of the direct lending covenants and does not expect to be in default under such covenants in the foreseeable future. Piedmont Healthcare intends to file copies of the amended loan and security documents for its direct loans with the MSRB under the EMMA filing system when the Bonds are issued.

The Master Indenture provides for a pledge of revenues by the Obligated Group, but no mortgage or other lien on the facilities of the Obligated Group has been granted for the benefit of the holders of the Bonds, the holders of other Master Indenture obligations, or the direct lending banks. The Master Indenture permits the creation of certain liens that may not be for the holders of all Master Indenture obligations. See APPENDIX D for the provisions of the Master Indenture relating to permitted liens on property of the Obligated Group.

Short-Term Debt

The Obligated Group will not have any outstanding short-term debt when the Bonds are issued other than regularly scheduled principal payments on the outstanding debt.

Piedmont Healthcare has a line of credit (the “Line of Credit”) with SunTrust Bank (“SunTrust”) that allows Piedmont Healthcare to draw up to $1 million for general corporate purposes. The line of credit expires in 2018. Piedmont Healthcare has not drawn under the line of credit; no amount is due under this credit facility. The Line of Credit is secured by the Master Indenture.

Guarantees

The Obligated Group members have not guaranteed the outstanding debt of any other entity.

Debt of Affiliates that are not Obligated Group Members

The affiliates of Piedmont Healthcare that are not Obligated Group members do not have any debt outstanding.

Anticipated Debt

The Obligated Group expects to incur a significant amount of debt in connection with its future capital improvements plans. See “FACILITIES AND SERVICES OF THE SYSTEM – Future Capital Projects”.

The Obligated Group expects that portions of its outstanding debt will be refunded over the next three years. The amount of debt outstanding is not expected to increase significantly as a result of any refunding.

Hedge Agreements

Piedmont Healthcare has entered into seven variable-to-fixed interest rate swap agreements with SunTrust Bank. Piedmont Healthcare’s payment obligations under these interest rate swaps are secured by Obligations issued under the Master Indenture. Each of the interest rate swaps is recorded at fair value. Changes in the fair value of the interest rate swaps are recognized in the statement of operations.

A-28

A summary of Piedmont Healthcare’s interest rate swaps is set forth in the following table.

Table 18. Interest Rate Swaps

As of September 30, 2016 Piedmont Approximate Healthcare Counterparty Notional Approximate Expiration Effective Date Pay Rate Pay Rate Amount Fair Value Date

July 1, 1999 4.84% Floating $10,285,714 $(952,025) March 1, 2019 March 21, 2002 4.21 Floating 4,714,286 (372,584) March 1, 2019 May 4, 2005 3.17 Floating 15,000,000 (1,538,947) March 1, 2024 May 4, 2005 3.20 Floating 5,300,000 (704,840) June 1, 2026 November 1, 2007 3.19 Floating 44,070,000 (13,823,907) June 1, 2035 December 1, 2007 3.80 Floating 29,150,000 (11,860,037) June 1, 2037 December 1, 2007 3.64 Floating 17,000,000 (6,536,931) June 1, 2037

Entering into hedge agreements such as those described above creates a variety of risks to Piedmont Healthcare, including the following:

• Under certain circumstances, the hedge agreements are subject to termination prior to their scheduled termination date and prior to the maturity of the related bonds. In the event of an early termination of an agreement, there can be no assurance that (i) Piedmont Healthcare will receive any termination payment payable to it by the provider, (ii) Piedmont Healthcare will have sufficient amounts to pay a termination payment payable by it to the provider, or (iii) Piedmont Healthcare will be able to obtain a replacement agreement with comparable terms. Payments due upon early termination may be substantial.

• For certain of these hedge agreements, the floating rates payable by the provider are intended to approximate the variable interest rate on a series of related bonds. There is, however, no guarantee that such rates will match at all times or at any time. To the extent of a mismatch, Piedmont Healthcare is exposed to “basis risk” in that the floating rate it receives from a provider pursuant to a derivative agreement will not equal the variable interest rate it is required to pay on the related revenue certificates.

Annual Debt Service Requirements

The following table contains estimated annual debt service requirements on all long-term debt of the Obligated Group secured by the Master Indenture that will be outstanding when the Bonds are issued. The table reflects the following assumptions, inclusions and omissions:

Debt secured by Master Indenture. The table includes all long-term debt of the Obligated Group secured by the Master Indenture, as well as the Series 2006 Newton Certificates and the Series 2012 Newton Certificates. Excluded from the table are the capitalized lease obligations and notes identified under “Miscellaneous” in Table 17 above.

Line of Credit. The table does not include any payments under the Line of Credit, which is also secured by the Master Indenture. No advances under the Line of Credit are outstanding.

Scheduled mandatory redemption requirements. The principal of long-term debt with scheduled mandatory redemption requirements (e.g., term bonds) is shown as payable in accordance with the scheduled mandatory redemption, unless such long-term debt is subject to a balloon payment prior to maturity.

A-29 Balloon payments and purchase requirements. The outstanding principal of debt subject to balloon payments or purchase requirements is shown as payable on the scheduled maturity date of the balloon or the date of required purchase of such debt, without giving effect to expected refinancing or “smoothing provisions” contained in the Master Indenture with respect to debt incurrence and debt service coverage tests.

Estimated Interest Payments. Interest on variable rate long-term debt was estimated based on current market conditions. For purposes of this Preliminary Official Statement, interest on the Bonds is also estimated based on current market conditions.

Unamortized premium. The table does not include any unamortized premium with respect to bonds issued with original issue premium.

Hedge agreements. The table does not include the effect of cash flows associated with any interest rate swap agreements.

Future Debt. The table does not include additional debt expected with respect to the Obligated Group’s future capital plans. See “FACILITIES AND SERVICES OF THE SYSTEM – Future Capital Projects”.

A-30 Table 19. Pro Forma Annual Debt Service Requirements

Fiscal Year Principal Payments Estimated Interest Total Ended June 30 Bonds (1) Other Debt (2) Payments (3) Debt Service

2017 $ 0 $12,400,000 $ 7,571,838 $19,971,838 2018 8,140,000 15,780,000 32,464,188 56,384,188 2019 6,610,000 16,525,000 31,900,578 55,035,578 2020 6,945,000 17,315,000 31,343,573 55,603,573 2021 8,595,000 18,120,000 30,368,833 57,083,833 2022 9,015,000 42,264,391 29,045,899 80,325,290 2023 9,490,000 11,490,000 27,812,688 48,792,688 2024 9,990,000 6,470,000 26,888,423 43,348,423 2025 10,070,000 4,370,000 26,215,087 40,655,087 2026 10,450,000 4,600,000 25,596,498 40,646,498 2027 9,320,000 8,530,000 25,008,328 42,858,328 2028 9,810,000 8,865,000 24,380,502 43,055,502 2029 10,310,000 9,210,000 23,721,272 43,241,272 2030 17,535,000 9,580,000 22,858,685 49,973,685 2031 18,430,000 13,650,000 21,693,687 53,773,687 2032 19,385,000 14,235,000 20,377,862 53,997,862 2033 9,875,000 14,820,000 19,307,983 44,002,983 2034 10,225,000 15,440,000 18,551,819 44,216,819 2035 16,010,000 6,895,000 17,532,338 40,437,338 2036 21,375,000 2,530,000 16,532,213 40,437,213 2037 18,845,000 6,000,000 15,591,206 40,436,206 2038 12,040,000 13,650,000 14,745,875 40,435,875 2039 12,540,000 14,305,000 13,591,350 40,436,350 2040 13,060,000 14,990,000 12,384,575 40,434,575 2041 13,600,000 15,715,000 11,123,150 40,438,150 2042 14,095,000 16,505,000 9,835,575 40,435,575 2043 14,745,000 17,275,000 8,416,000 40,436,000 2044 15,570,000 18,075,000 6,790,250 40,435,250 2045 16,375,000 18,980,000 5,081,875 40,436,875 2046 37,525,000 0 2,910,625 40,435,625 2047 39,450,000 0 986,250 40,436,250 Total $429,425,000 $388,584,391 $580,629,022 $1,398,638,413 ______

Note (1): Includes all three series of Bonds offered pursuant to this Official Statement. Principal amounts are preliminary, subject to change. Note (2): Includes all debt other than the Bonds and the capital leases and notes under “Miscellaneous” in Table 17. Note (3): For purposes of this Preliminary Official Statement, interest requirements on the Bonds are estimated based on current market conditions. For variable rate debt, interest requirements are estimated based on variable rates currently in effect for such debt.

Coverage Tests Under Master Indenture. The Master Indenture includes alternative methods for calculating debt service coverage ratios for purposes of debt incurrence tests and the annual coverage test. Table 19 does not reflect refinancing assumptions, “smoothing provisions” or other provisions that adjust expected debt service requirements for purposes of these tests. See the definitions of “Maximum Annual Debt Service” and Debt

A-31 Service Coverage Ratio” and Sections 3.09 and 3.12 of the Master Indenture in APPENDIX D. For a calculation of coverage ratios in accordance with the Master Indenture, see Table 24 below.

UTILIZATION AND FINANCIAL INFORMATION

Utilization Statistics

The following table sets forth selected utilization information for the Piedmont System. The table does not include utilization information for Piedmont Athens, which became part of the Piedmont System on October 1, 2016. For historical utilization information for Piedmont Athens, see “FACILITIES AND SERVICES OF THE SYSTEM – Acquisition of Piedmont Athens”.

Table 20. Selected Utilization Statistics

Fiscal Year Ended June 30 2014 2015 2016

Licensed Beds 1,063 1,063 1,250 Staffed Beds 1,015 1,015 1,112 Inpatient Admissions 61,760 64,316 68,772 Inpatient Census Days 288,560 301,582 320,637 Observation Patients 16,346 18,161 21,974 Average Length of Stay 4.7 4.7 4.7 Average Daily Census 791 826 876 Outpatient Visits 531,145 548,016 570,942 Emergency Room Visits 262,883 280,144 331,371 Deliveries 9,642 9,801 10,061 Inpatient Surgery Cases 20,135 20,843 21,614 Outpatient Surgery Cases 31,561 31,327 34,928 Case Mix Index (entire system) 1.63 1.67 1.72 Case Mix Index (Piedmont Atlanta) 1.96 2.01 2.10

Sources of Revenue

Historically, the major portion of Piedmont Healthcare’s patient service revenue has been received from third-party payment and insurance programs. It is anticipated that this trend will continue. Piedmont Healthcare maintains agreements with the Federal Government under the Medicare program, the State of Georgia under the Medicaid program, commercial insurance carriers, and certain managed care programs that govern payment to Piedmont Healthcare for services rendered to patients covered by these programs. The following table sets forth the percentage distribution of Piedmont Healthcare’s gross patient service revenue by payor source. This table excludes revenue of Piedmont Athens.

Table 21. Sources of Revenue by Payor Source

Fiscal Year Ended June 30 2014 2015 2016 Gross Revenue by Payor Medicare 45% 46% 47% Medicaid 8 8 8 Managed Care 38 38 37 Self, Insurance and Other 9 8 8

Total 100% 100% 100%

A-32 The supplementary combining statements included in the financial statements in APPENDIX B show the net patient service revenue for each member of the Obligated Group other than Piedmont Athens.

Consolidated Statements of Operations

The following table presents a comparative summary of Piedmont Healthcare’s consolidated statements of operations for the last three fiscal years. This information has been derived from the audited consolidated financial statements for Piedmont Healthcare for the years indicated and should be read in conjunction with the consolidated financial statements of Piedmont Healthcare included as APPENDIX B to the Official Statement.

Piedmont Newton was acquired on October 1, 2015. Results of operations for Piedmont Newton are not reflected in fiscal years 2014 and 2015. Piedmont Athens was acquired on October 1, 2016. Results of operations of Piedmont Athens are not reflected in fiscal years 2014 through 2016. For historical financial information about Piedmont Athens see “FACILITIES AND SERVICES OF THE SYSTEM – Acquisition of Piedmont Athens”.

Table 22. Consolidated Statements of Operations (in thousands)

Fiscal Year Ended June 30 2014 2015 2016

Unrestricted revenue, gains, and other support: Patient service revenue $1,860,041 $2,008,895 $2,224,016 Provision for bad debt (264,747) (228,529) (321,683) Net patient service revenue 1,595,294 1,780,366 1,902,333 Other revenue 62,064 75,941 80,863 Contribution received in acquisition of Piedmont Newton ------13,786 Total revenue, gains, and other support 1,657,358 1,856,307 1,996,982

Expenses: Salaries and benefits 884,004 939,629 1,052,801 Supplies and other expenses 592,271 665,805 705,639 Depreciation and amortization 94,216 87,145 87,852 Interest 25,941 26,216 27,729 Total expenses 1,596,432 1,718,795 1,874,021 Operating income 60,926 137,512 122,961

Nonoperating income (expense): Investment income (loss), net 83,244 3,458 (15,538) Loss from equity investment (12,018) (30,070) (3,100) Change in fair value of interest rate swaps (2,694) (2,095) (7,108) Total nonoperating income (expense) 68,532 (28,707) (25,746)

Excess of revenue, gains, and other support over expenses 129,458 108,805 97,215

Net assets released from restrictions used for purchase of property and equipment 2,592 3,043 1,188 Pension adjustments (27,364) (24,761) (46,097) Other (370) (545) (468) Change in unrestricted net assets $104,316 $86,542 $51,838

A-33 Consolidated Balance Sheets

The following table presents a comparative summary of Piedmont Healthcare’s consolidated balance sheets for the last three fiscal years. This information has been derived from the audited consolidated financial statements for Piedmont Healthcare for the years indicated and should be read in conjunction with the consolidated financial statements of Piedmont Healthcare included as APPENDIX B to the Official Statement.

Piedmont Newton was acquired on October 1, 2015. Assets and liabilities for Piedmont Newton are not reflected in the balance sheets for fiscal years 2014 and 2015. Piedmont Athens was acquired on October 1, 2016. Assets and liabilities of Piedmont Athens are not reflected in the balance sheets for fiscal years 2014 through 2016. For historical financial information about Piedmont Athens, see “FACILITIES AND SERVICES OF THE SYSTEM – Acquisition of Piedmont Athens”.

A-34 Table 23. Consolidated Balance Sheets (in thousands)

As of June 30 2014 2015 2016 Current Assets Cash and cash equivalents $227,530 $449,450 $512,131 Patient accounts receivable 251,182 236,343 252,591 Current portion of self-insurance investments 8,177 9,003 8,537 Other current assets 75,896 91,420 109,337 Total current assets: 562,785 786,216 882,596

Investments and assets limited as to use 593,802 588,391 573,724 Property and equipment, net 805,515 784,272 821,535 Self-insurance investments 32,716 28,473 33,469 Beneficial interest in perpetual trust 8,263 7,918 7,298 Other assets 113,880 106,495 115,642

Total assets $2,116,961 $2,301,765 $2,434,264

Current Liabilities Current portion of long-term debt $10,425 $11,565 $15,320 Accounts payable and accrued expenses 190,852 234,493 258,165 Estimated third-party payor settlements 24,747 22,784 27,024 Current portion of self-insurance reserves 24,815 24,651 23,376 Total current liabilities: 250,839 293,493 323,885

Self-insurance reserves 50,048 49,404 42,035

Long-term debt, net of current maturities 484,120 509,928 513,091 Other long-term liabilities 118,766 150,754 211,549 Note payable to a bank 39,519 37,224 34,799 Medical office building financing obligations 44,615 43,559 43,121

Total liabilities 987,907 1,084,362 1,168,480

Net Assets Unrestricted 1,086,139 1,172,681 1,224,519 Temporarily restricted 19,932 21,402 18,033 Permanently restricted 22,983 23,320 23,232 Total net assets: 1,129,054 1,217,403 1,265,784

Total liabilities and net assets $2,116,961 $2,301,765 $2,434,264

A-35 Table 24. Financial Ratios (in thousands of dollars)

Historic Pro Forma Including Piedmont Athens Fiscal Year Ended June 30 for Fiscal Year 2014 2015 2016 2016 (9)

Liquidity Unrestricted cash and investments $798,103 $1,014,922 $1,063,586 $1,134,820 Restricted cash and investments 23,129 22,919 22,269 32,663 Total cash and investments $821,232 $1,037,841 $1,085,855 $1,167,483 Days’ cash on hand (1) 194 227 218 185 Total direct debt (2) 534,064 558,717 563,210 830,078 Cash-to-direct debt (3) 149% 182% 189% 137%

Debt Service Coverage Income available for debt service (4) $252,309 $224,261 $219,904 $261,979 Current annual debt service requirement (5) $37,841 $41,401 $40,664 N/A Current annual debt service coverage (6) 6.67 5.42 5.41 N/A Maximum annual debt service (7) $44,236 $44,236 $44,236 $44,236 Maximum annual debt service coverage (8) 5.70 5.07 4.97 5.92

______

Note (1): Days’ cash on hand is (a) unrestricted cash and investments as of the end of the fiscal year divided by (b) cash operating expenses for that fiscal year / actual days in the year. Note (2): Total direct debt as of the end of the fiscal year indicated. For pro forma total debt, see “DEBT STRUCTURE”. The Obligated Group did not have any guaranty or other indirect debt outstanding during those fiscal years and will not have any outstanding when the Bonds are issued. Note (3): Cash-to-direct debt is unrestricted cash and investments as percentage of total direct debt. Note (4): Calculated in accordance with the Master Indenture definition of “Income Available for Debt Service”. See APPENDIX D. Note (5): Includes actual principal and interest payments during the fiscal year. Does not include optional prepayments or redemptions or debt service refinanced or refunded. Note (6): Income available for debt service for the fiscal year divided by current annual debt service coverage requirement for the fiscal year. Note (7): Assumed level payment on total direct debt of the Obligated Group as of the date of this Official Statement ($825,965,522 – See Table 17) amortized over 30 years at Bond Buyer Index rate as of October 16, 2016 (3.38%). This is one of two methods for calculating “Maximum Annual Debt Service” under the Master Indenture. Note (8): Income available for debt service for the fiscal year indicated divided by maximum annual debt service (see note 7). Note (9): The liquidity ratios shown in this column add the unrestricted and restricted cash balances of Piedmont Athens as of June 30, 2016 (unaudited) to the unrestricted and restricted cash balances of Piedmont Healthcare for the Fiscal Year ending June 30, 2016 (audited). Similarly, the Income Available for Debt Service shown in this column has been derived by annualizing Piedmont Athens’ Income Available for Debt Service for the 9 months ended June 30, 2016 (unaudited) and adding it to Piedmont Healthcare’s Income Available for Debt Service for Fiscal Year ending June 30, 2016 (audited).

A-36 Management’s Discussion and Analysis of Results of Operations

Revenue, Gains, and Other Support. Piedmont Healthcare’s revenues, gains, and other support increased by $140.7 million from $1,856.3 million in fiscal year 2015 to $1,997.0 million in fiscal year 2016. Revenues, gains, and other support consists primarily of net patient service revenue, which increased $122.0 million (approximately 6.9%) from $1,780.4 million in fiscal year 2015 to $1,902.3 million in fiscal year 2016. The increase in net patient service revenue is attributable primarily to increased volumes in the hospitals between fiscal year 2015 and 2016 and the acquisition of Piedmont Newton Hospital in October 2015. Piedmont Newton Hospital contributed approximately $54.3 million of net patient service revenue in fiscal year 2016. Other revenue, which is comprised mainly of professional office building rents, parking fees, concierge medicine revenues, and cafeteria sales, increased from $75.9 million in fiscal year 2015, to $80.9 million in fiscal year 2016. Approximately $1.8 million of this increase is related to Piedmont Newton. The remainder of this increase is due primarily to an increase in concierge medicine revenues and rental income on medical office buildings.

Piedmont Healthcare’s provision for bad debt increased $93.2 million from $228.5 million in fiscal year 2015, to $321.7 million in fiscal year 2016. As a percentage of patient service revenue, bad debt expense increased from 11.4% in fiscal year 2015 to 14.5% in fiscal year 2016. The increase in the provision for bad debt in fiscal year 2016 is primarily related to an increase in gross charges relating to self-pay patients primarily in the emergency departments at the hospitals.

Piedmont Healthcare acquired Piedmont Newton Hospital in October 2015 and recorded a contribution of approximately $13.8 million during fiscal year 2016 as a result of the acquisition.

Expenses. Total operating expenses increased 9.0% between fiscal years 2015 and 2016, increasing $155.2 million from $1,718.8 million in fiscal year 2015, to $1,874.0 million in fiscal year 2016. The net increase in total expenses includes an increase in salaries and benefits of $113.2 million (approximately 12.0%) and an increase in supplies and other expenses of $39.8 million (approximately 6.0%).

The increase in salaries and benefits included $32.4 million attributable to Piedmont Newton. The remainder of the increase is due to the increase in net patient service revenue, patient volumes, annual pay rate increases, a pension settlement charge in fiscal year 2016 of $11.5 million and an increase in health insurance costs. The increase in supplies and other expenses was due to increases in drugs and medical supplies related to increased patient volumes and increases in the cost of certain drugs and medical supplies. The increase in drugs and medical supplies was slightly offset by a decrease in consulting expense in fiscal year 2016.

Nonoperating Income. Non-operating income consists of investment income, loss from equity investment, and change in fair value of interest rate swaps. Investment income, which consists of interest income, net gains and losses from sales of securities, and unrealized net gains and losses, decreased $19.1 million from a gain of $3.5 million in fiscal year 2015 to a net loss of $15.6 million in fiscal year 2016. The decrease in investment income is due primarily to a reduction in realized gains on investments of $23.7 million offset by a decrease in unrealized losses on investments of $4.5 million. The decrease in realized gains is due primarily to fewer sales of unrealized gain positions and reduced dividend payments.

Net realized gains on investments were $7.3 million, $30.9 million and $11.4 million for the years ended June 30, 2016, 2015 and 2014, respectively. In the years ended June 30, 2016 and 2015, Piedmont Healthcare had net unrealized losses on investments of $36.2 million and $40.7 million and in the year ended June 30, 2014 Piedmont Healthcare had net unrealized gains on investments of $57.0 million.

The decrease in losses from PWHP is due to the fact that Piedmont Healthcare wrote off its investment in PWHP at the end of fiscal year 2015 since PWHP was ceasing operations in fiscal year 2016. As such, the fiscal year 2016 losses of PWHP were not reflected by Piedmont Healthcare.

The fair value of Piedmont Healthcare’s interest rate swaps decreased by $7.1 million from June 30, 2015 to June 30, 2016.

A-37 Change in Unrestricted Net Assets. The excess of revenues, gains and other support over expenses was $97.2 million in fiscal year 2016, representing a decrease of $11.6 million from $108.8 million in fiscal year 2015. Overall, unrestricted net assets increased by $51.8 million in fiscal year 2016. The increase is due primarily to the fiscal year 2016 excess of revenues, gains and other support of $97.2 million offset by an increase in the pension liability related to the net actuarial loss of $46.1 million.

Liquidity. Piedmont Healthcare’s primary sources of liquidity include cash on hand, deposits with banks and short-term investments. These liquid assets increased from $449.5 million as of June 30, 2015 to $512.1 million as of June 30, 2016. The increase resulted primarily from improvements in collections of patient accounts receivable.

Utilization Growth. Piedmont Healthcare experienced an overall increase in total business volume during fiscal year 2016: Inpatient admissions in fiscal year 2016 increased 6.9% from fiscal year 2015; outpatient encounters increased by 22,926 (approximately 4.2%) from 548,016 in fiscal year 2015 to 570,942 in fiscal year 2016; and fiscal year 2016 emergency room visits increased by 18.3% over fiscal year 2015.

Outstanding and Proposed Debt. Piedmont Healthcare and the other members of the Obligated Group are obligated with respect to a number of tax-exempt bond issues, all of which are secured by Obligations issued under the Master Trust Indenture.

MISCELLANEOUS

Litigation

Piedmont Healthcare and the entities for which Piedmont Healthcare acts as a parent corporation are involved in litigation arising in the course of ordinary business. Management estimates that these matters will be resolved without a material adverse effect on the future financial position or results of operations of Piedmont Healthcare.

Employee Retirement Plans

Piedmont Healthcare has a trusteed noncontributory defined benefit pension plan (the “Plan”) covering a portion of Piedmont Healthcare employees. On September 20, 2012, the Plan was amended to reflect a benefit accrual freeze as of December 31, 2014. Therefore, no further benefit accruals will be provided for additional credited service or earnings after that date. In addition, all participants became fully vested in the Plan as of December 31, 2014.

Piedmont Healthcare offers employees the opportunity to participate in a 401(k) plan, which began January 1, 2009. Additionally, Piedmont Healthcare offers two nonqualified deferred compensation plans that are available to certain highly compensated employees.

For further information about the plans, see the notes to the audited consolidated financial statements of Piedmont Healthcare included in APPENDIX B.

Insurance Coverage

Piedmont Healthcare carries liability insurance for the types of claims and in amounts that are customary for similar enterprises. Piedmont Healthcare also carries property damage insurance on buildings and other physical assets.

Indigent and Charity Care

Piedmont Healthcare provides indigent and charity care without charge or at reduced rates to qualified patients. The amount of this care has increased in recent years as a result of increases in gross patient revenue, which are expected to continue into the future due to projected growth in volume. A large portion of this indigent and

A-38 charity care results from emergency room admissions. Piedmont Healthcare maintains records to identify and monitor the level of indigent and charity care it provides, which includes the amount of foregone charges for services and supplies furnished pursuant to its indigent and charity policies. Future impacts to the amount of indigent and charity care may be adversely impacted by changes in the general economic conditions in the market, which could cause indigent and charity care to grow at rates greater than the expected growth in volume.

The approximate amounts of indigent and charity care provided by Piedmont Healthcare, based on foregone charges, and the percentage of gross revenues represented by indigent and charity care charges for the past three fiscal years are set forth below.

Table 25. Analysis of Indigent and Charity Care (in thousands)

Fiscal Year Ended June 30 2014 2015 2016

Charity/Indigent Care Charges $154,465 $130,430 $156,303 Percentage of Gross Revenues 2.50% 1.90% 1.95%

Licensure, Accreditation and Professional Memberships

Piedmont Healthcare’s hospitals are licensed by the State of Georgia Department of Human Resources Health Facilities Licensure and Certification Unit. The following table lists the number of licensed beds, by hospital.

Table 26. Licensed Beds, by Hospital

Number of Piedmont Facility Licensed Beds Piedmont Atlanta 529 Piedmont Fayette Hospital 221 Piedmont Mountainside Hospital 52 Piedmont Newnan Hospital 136 Piedmont Henry Hospital 215 Piedmont Newton Hospital 97 Piedmont Athens Regional 359 Total 1,609

Piedmont Atlanta, Piedmont Fayette, Piedmont Mountainside, Piedmont Newnan, Piedmont Henry and Piedmont Newton are approved for participation in the Medicare and Medicaid reimbursement programs. Piedmont Atlanta, Piedmont Fayette, Piedmont Mountainside, Piedmont Henry and Piedmont Newnan are fully accredited by DNV GL Healthcare USA, Inc. (“DNV”). Piedmont Newton is fully accredited by The Joint Commission (“JCAHO”). The most recent DNV accreditation, effective for a three-year period, was received in 2014 for Piedmont Atlanta, Piedmont Fayette, Piedmont Henry, Piedmont Mountainside and Piedmont Newnan. The most recent JCAHO accreditation, effective for a three-year period, was received in 2014 for Piedmont Newton. Piedmont Atlanta, Piedmont Fayette, Piedmont Mountainside, Piedmont Newnan, Piedmont Henry and Piedmont Newton are members of the Georgia Hospital Association.

A-39 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B

FINANCIAL STATEMENTS OF PIEDMONT HEALTHCARE, INC. AND AFFILIATES FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015

[THIS PAGE INTENTIONALLY LEFT BLANK] PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidated Financial Statements June 30, 2016 and 2015 (With Independent Auditors’ Report Thereon)

PIEDMONT HEALTHCARE, INC. AND AFFILIATES

Table of Contents

Page(s)

Independent Auditors’ Report 1–2

Consolidated Financial Statements:

Consolidated Balance Sheets 3

Consolidated Statements of Operations 4

Consolidated Statements of Changes in Net Assets 5

Consolidated Statements of Cash Flows 6

Notes to Consolidated Financial Statements 7–40

Supplementary Consolidating Schedules 41–43

KPMG LLP Suite 2000 303 Peachtree Street, N.E. Atlanta, GA 30308-3210

Independent Auditors’ Report

The Board of Directors Piedmont Healthcare, Inc. and Affiliates:

We have audited the accompanying consolidated financial statements of Piedmont Healthcare, Inc. and Affiliates, which comprise the consolidated balance sheets as of June 30, 2016 and 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Piedmont Healthcare, Inc. and Affiliates as of June 30, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

Other Matter Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information included in Schedules 1 and 2 is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Atlanta, Georgia September 27, 2016

PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidated Balance Sheets June 30, 2016 and 2015

Assets 2016 2015 (In thousands) Current assets: Cash and cash equivalents $ 512,131 449,450 Patient accounts receivable, net of allowance for doubtful accounts of $302,596 and $245,850 in 2016 and 2015, respectively 252,591 236,343 Current portion of self-insurance investments 8,537 9,003 Other current assets 109,337 91,420 Total current assets 882,596 786,216 Investments and assets limited as to use 573,724 588,391 Property and equipment, net 821,535 784,272 Self-insurance investments, net of current portion 33,469 28,473 Beneficial interest in perpetual trust 7,298 7,918 Other assets 115,642 106,495 Total assets $ 2,434,264 2,301,765 Liabilities and Net Assets Current liabilities: Current portion of bonds payable $ 15,320 11,565 Accounts payable and accrued expenses 258,165 234,493 Estimated third-party payor settlements 27,024 22,784 Current portion of self-insurance reserves 23,376 24,651 Total current liabilities 323,885 293,493 Bonds payable, net of current portion 513,091 509,928 Medical office building financing obligation 43,121 43,559 Note payable to a bank 34,799 37,224 Self-insurance reserves, net of current portion 42,035 49,404 Accrued pension cost 109,997 58,161 Other long-term liabilities 101,552 92,593 Total liabilities 1,168,480 1,084,362 Net assets: Unrestricted 1,224,519 1,172,681 Temporarily restricted 18,033 21,402 Permanently restricted 23,232 23,320 Total net assets 1,265,784 1,217,403 Total liabilities and net assets $ 2,434,264 2,301,765

See accompanying notes to consolidated financial statements.

3 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidated Statements of Operations Years ended June 30, 2016 and 2015

2016 2015 (In thousands) Unrestricted revenue, gains, and other support: Patient service revenue $ 2,224,016 2,008,895 Provision for bad debt (321,683) (228,529) Net patient service revenue 1,902,333 1,780,366 Other revenue 80,863 75,941 Contribution received in acquisition of Piedmont Newton 13,786 — Total revenue, gains, and other support 1,996,982 1,856,307 Expenses: Salaries and benefits 1,052,801 939,629 Supplies and other expenses 705,639 665,805 Depreciation and amortization 87,852 87,145 Interest 27,729 26,216 Total expenses 1,874,021 1,718,795 Operating income 122,961 137,512 Nonoperating (expense) income: Investment (loss) income, net (15,538) 3,458 Loss from equity investment (3,100) (30,070) Change in fair value of interest rate swaps (7,108) (2,095) Total nonoperating (expense) income (25,746) (28,707) Excess of revenue, gains, and other support over expenses 97,215 108,805 Net assets released from restrictions used for purchase of property and equipment 1,188 3,043 Pension adjustments (46,097) (24,761) Other (468) (545) Change in unrestricted net assets $ 51,838 86,542

See accompanying notes to consolidated financial statements.

4 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidated Statements of Changes in Net Assets Years ended June 30, 2016 and 2015

2016 2015 (In thousands) Unrestricted net assets: Excess of revenue, gains, and other support over expenses $ 97,215 108,805 Net assets released from restrictions used for purchase of property and equipment 1,188 3,043 Pension adjustments (46,097) (24,761) Other (468) (545) Change in unrestricted net assets 51,838 86,542 Temporarily restricted net assets: Contributions 4,097 6,566 Net assets released from restrictions used for purchase of property and equipment (1,188) (3,043) Net assets released from restrictions used for operations (5,643) (2,122) Other (635) 69 Change in temporarily restricted net assets (3,369) 1,470 Permanently restricted net assets: Contributions 532 682 Change in beneficial interest in perpetual trust (620) (345) Change in permanently restricted net assets (88) 337 Change in net assets 48,381 88,349 Net assets at beginning of year 1,217,403 1,129,054 Net assets at end of year $ 1,265,784 1,217,403

See accompanying notes to consolidated financial statements.

5 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidated Statements of Cash Flows Years ended June 30, 2016 and 2015

2016 2015 (In thousands) Operating activities: Change in net assets $ 48,381 88,349 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 87,852 87,145 Contributions restricted in acquisition of Piedmont Newton (13,183) — Net unrealized losses on investments 36,228 40,726 Net realized gains on investments (7,303) (30,955) Change in beneficial interest in perpetual trust 620 345 Gain on exchange of buildings — (5,125) Amortization of bond discount (premium) 38 (2,309) Provision for bad debt 321,683 228,529 Pension adjustments 46,097 24,761 Change in fair value of interest rate swaps 7,108 2,095 Contributions restricted for long-term investment (4,629) (7,277) (Increase) decrease in: Patient accounts receivable (327,274) (213,691) Other current assets (14,654) 9,336 Other assets (6,716) 4,332 (Decrease) increase in: Accounts payable and accrued expenses 11,735 42,771 Estimated third-party payor settlements 4,677 (1,963) Self-insurance reserves (8,644) (808) Accrued pension cost 5,739 (9,316) Other long-term liabilities (81) 6,759 Net cash provided by operating activities 187,674 263,704 Investing activities: Purchases of investments and assets limited as to use (94,988) (166,838) Proceeds from sale of investments and assets limited as to use 81,378 168,895 Capital expenditures (103,077) (53,463) Net cash used in investing activities (116,687) (51,406) Financing activities: Contributions restricted for long-term investment 4,629 7,277 Repayments on note payable to a bank (2,425) (2,295) Repayments of indebtedness (10,510) (12,890) Proceeds from issuance of bonds — 168,880 Bond redemptions — (151,350) Proceeds from letters of credit — 94,735 Repayments on letters of credit — (94,735) Net cash (used in) provided by financing activities (8,306) 9,622 Net increase in cash and cash equivalents 62,681 221,920 Cash and cash equivalents at beginning of year 449,450 227,530 Cash and cash equivalents at end of year $ 512,131 449,450 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 27,961 26,043 Income taxes 485 — Supplemental schedule of noncash investing and financing activities: Bond proceeds held by a trustee $ — 24,861 Exchange of medical office buildings — 9,179 Capital lease obligations — 8,316

See accompanying notes to consolidated financial statements.

6 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(1) Organization and General The Board of Directors of Piedmont Healthcare, Inc. and Affiliates (collectively, PHC) appoints the governing boards of:

Piedmont Atlanta Hospital, Inc. (Atlanta). Atlanta, located in Atlanta, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of the Atlanta metropolitan area. Admitting physicians are primarily practitioners in the local area. Piedmont Fayette Hospital, Inc. (Fayette). Fayette, located in Fayetteville, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of Fayette County. Piedmont Mountainside Hospital, Inc. (Mountainside). Mountainside, located in Jasper, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of Pickens County. Piedmont Newnan Hospital, Inc. (Newnan). Newnan, located in Newnan, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of Coweta County. Piedmont Henry Hospital (Henry). Henry, located in McDonough, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of Henry County. Piedmont Newton Hospital (Newton). Newton, located in Covington, Georgia, is a not-for-profit acute care hospital providing inpatient, outpatient, and emergency care services primarily for residents of Newton County. Piedmont Medical Care Corporation (PMCC). PMCC is a taxable, not-for-profit entity whose purpose is to develop a network of primary care, hospital-based and certain specialty physicians for the benefit of the PHC affiliates. Piedmont Heart Institute Physicians, Inc. (PHIP). PHIP is a taxable, not-for-profit entity whose purpose is to provide an integrated cardiovascular healthcare delivery program for the benefit of the PHC affiliates. Piedmont Heart Institute, Inc. (PHI). PHI is a not-for-profit entity whose purpose is to provide cardiovascular research services for the benefit of the PHC affiliates. Amster-McRae Insurance Company (AMIC). AMIC was incorporated on December 10, 2003, under the laws of the Cayman Islands. AMIC insures the hospital professional liability and commercial general liability risks of PHC and certain PHC affiliates. Piedmont Clinic, Inc. (the Clinic). The Clinic is a physician-hospital organization whose purpose is to negotiate contracts with various managed care payors for the PHC affiliates. Piedmont Atlanta Surgery Center, LLC (PASC). PASC, located in Atlanta, Georgia, is a multispecialty ambulatory surgery center.

7 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

Piedmont Healthcare Foundation, Inc. (the Foundation). The Foundation’s primary purpose is to raise funds for PHC.

(2) Significant Accounting and Reporting Policies A summary of the significant accounting and reporting policies followed by PHC in the preparation of its consolidated financial statements is presented below:

(a) Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles and include the accounts of PHC, Atlanta, Fayette, Mountainside, Newnan, Henry, Newton, PMCC, PHIP, PHI, AMIC, the Clinic, PASC and the Foundation. All significant intercompany transactions and accounts have been eliminated in consolidation.

(b) Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include the determination of the allowance for doubtful accounts, allowance for contractual adjustments, fair value of investments and assets limited as to use and interest rate swaps, reserves for general and professional liability, workers’ compensation and health insurance claims, third-party payor settlements and the actuarial determined liability related to PHC’s defined-benefit pension plan.

(c) Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, deposits with banks, and investments in highly liquid debt instruments with maturities of three months or less when purchased, excluding amounts limited as to use. PHC invests cash not required for immediate operating needs principally with major financial institutions with strong credit ratings. By policy, the amount of credit exposure to any one institution is limited, and such investments are generally not collateralized.

(d) Investments and Investment Income Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying consolidated balance sheets. Investment income or loss (including unrealized and realized gains and losses on investments, interest and dividends) is included in the excess of revenue, gains, and other support over expenses unless the income or loss is restricted by donor or law. PHC accounts for investment transactions on a settlement-date basis. All of PHC’s investment portfolio is classified as trading, with unrealized gains and losses included in excess of revenue, gains, and other support over expenses. Fair values are based on quoted market prices if available, or estimated using quoted market prices for similar securities. PHC invests in alternative investments, which provide PHC with a proportionate share of the fair value 8 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

of the fund returns. PHC accounts for its ownership interests in the alternative investments based upon the equity method. Accordingly, PHC’s share of the alternative investments’ income or loss, both realized and unrealized, is recognized as investment income. Alternative investments held by the noncontributory defined-benefit plan are accounted for at estimated fair value. The cost of substantially all securities sold is based on the average cost method.

PHC classifies investments with maturities of less than one year from the balance sheet date when purchased as short-term and investments with maturities of greater than one year from the balance sheet date when purchased as long-term.

(e) Assets Limited as to Use These assets are limited as to use by debt instruments or designations by PHC’s governing board for plant replacement, expansion of certain facilities, purchase of equipment, and payment of certain future debt service requirements.

(f) Inventory Inventory is valued at average cost. Inventory consists primarily of pharmaceuticals and medical supplies and is recorded within other current assets in the accompanying consolidated balance sheets.

(g) Property and Equipment Property and equipment acquisitions are recorded at cost, with the exception of donated items which are recorded at fair value at the date of donation. Expenditures for renewals and improvements are charged to the property accounts. For properties sold or retired, the cost and related accumulated depreciation are removed from the property accounts. Any resulting gains or losses are included in other revenue. Replacements, maintenance, and repairs that do not improve or extend the life of the respective assets are charged to operations. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method. The ranges of estimated useful lives are 10–25 years for land improvements, 15–40 years for buildings and fixtures, and 3– 20 years for equipment.

Gifts of long-lived assets such as land, buildings, or equipment are reported as unrestricted support and are excluded from excess of revenue, gains, and other support over expenses, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used, and gifts of cash or other assets that must be used to acquire long-lived assets, are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service.

(h) Software and Software Development Costs Software and software development costs include costs incurred by PHC to develop software for internal use in medical records maintenance, physician order entry, and clinical documentation.

9 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

Costs of software developed for internal use are accounted for in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40, Internal Use Software. In accordance with ASC 350-40, internal and external costs incurred to develop internal use computer software during the application development stage are capitalized. Application development stage costs generally include software configuration, coding, installation of hardware and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized.

All other costs incurred in connection with an internal software project, including maintenance, minor upgrades, enhancements, and training, are expensed as incurred. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the related software applications (3–12 years).

(i) Long-Lived Assets PHC periodically reviews long-lived assets, such as property and equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized to the extent that the carrying amount of an asset exceeds its fair value. Assets to be disposed of are separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheet. In the period in which the disposal group is sold or classified as held-for-sale, the results of its operations are classified as discontinued operations in the consolidated statement of operations. Management believes that the long-lived assets in the accompanying consolidated balance sheets are appropriately valued at June 30, 2016 and 2015 and no related impairment losses were recognized during the years then ended.

(j) Other Assets Other assets include goodwill of $62,133,000 at June 30, 2016 and 2015. In accordance with ASC 350, Intangibles – Goodwill and Other, PHC evaluates its goodwill annually for potential impairment. No impairment losses on goodwill were recognized for the years ended June 30, 2016 or 2015.

(k) Beneficial Interest in Perpetual Trust PHC is the beneficiary of six separate endowments held in trust by a local bank, with fair values at June 30, 2016 and 2015 aggregating $7,298,000 and $7,918,000, respectively. The beneficial interest at June 30, 2016 and 2015 has been recorded in long-term assets at fair value and the change in value for the years then ended has been recorded as a change in permanently restricted net assets.

(l) Vacation Policy PHC accrues employee vacation pay as earned by the employee.

10 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(m) Advertising Costs Advertising costs are expensed as incurred and approximated $8,438,000 and $8,457,000 for the years ended June 30, 2016 and 2015, respectively, and are included in supplies and other expenses on the accompanying consolidated statements of operations.

(n) Estimated Malpractice Costs The provision for estimated medical malpractice claims includes estimates of the ultimate costs for both reported claims and claims incurred but not reported and are included in self-insurance reserves on the accompanying consolidated balance sheets.

(o) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by PHC is restricted by donors for a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by PHC in perpetuity, with related investment earnings generally available for unrestricted or donor restricted purposes.

(p) Net Patient Service Revenue, Patient Accounts Receivable, and Allowance for Doubtful Accounts PHC has agreements with third-party payors that provide for payments to PHC at amounts different from their established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, and includes estimated retroactive revenue adjustments under reimbursement agreements with third-party payors due to future audits, reviews, and investigations. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and such amounts are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews, and investigations.

Net patient service revenue is summarized below (in thousands):

Year ended June 30 2016 2015 Patient service charges $ 7,998,670 6,868,304 Less contractual adjustments and other deductions 5,774,654 4,859,409 Patient service revenue 2,224,016 2,008,895 Less provision for bad debt 321,683 228,529 Net patient service revenue $ 1,902,333 1,780,366

Recognition of patient service revenue (gross patent service charges less contractual adjustments and other deductions) is dependent on factors such as proper completion of medical charts following a patient visit, medical coding of charts and processing charts through PHC’s billing systems, and verification of patient representations at the time services are rendered as to the payors responsible for payment of PHC’s services. Patient service revenue is recorded based on the information known at the

11 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

time of billing which is subject to change. For example, patient payor information may change following an initial attempt to bill for services due to a change in payor status. Such changes in payor status have an impact on recorded net revenue due to different contractual agreements among payors. These changes in patient revenue are recognized in the period that the changes in payor become known.

The provision for bad debt is based upon management’s assessment of historical and expected net collections considering business and economic conditions, trends in healthcare coverage, and other collection indicators. Periodically, management assesses the adequacy of the allowance for doubtful accounts based upon historical write-off experience by payor category. The results of this review are then used to make any modifications to the provision for bad debt to establish an appropriate allowance for uncollectible receivables. PHC’s presentation of the provision for bad debt at the reporting entity level is based on an entity-wide assessment of significance.

Patient service revenue, net of contractual adjustments and other discounts and before the provision for bad debt, recognized from major payor sources are as follows (in thousands): Year ended June 30 2016 2015 Third-party payors, net of contractual allowances $ 1,959,796 1,835,103 Self-pay patients 264,220 173,792 Patient service revenue $ 2,224,016 2,008,895

PHC records a provision for bad debt in the period services are provided related to self-pay patients. For receivables associated with patients who have third-party coverage, PHC analyzes contractually due amounts and provides an allowance for doubtful accounts and a provision for bad debt, if necessary. Accounts receivable are written off after collection efforts have been undertaken in accordance with PHC’s policies. The allowance for doubtful accounts was 55% and 51% of patient accounts receivable after contractual allowances as of June 30, 2016 and 2015, respectively.

(q) Charity Care PHC provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Amounts determined to qualify as charity care are not reported as patient service revenue.

(r) Excess of Revenue, Gains, and Other Support over Expenses The consolidated statements of operations include excess of revenue, gains, and other support over expenses. Changes in unrestricted net assets, which are excluded from excess of revenue, gains, and other support over expenses, consistent with industry practice, include pension adjustments and contributions of long-lived assets (including assets acquired using contributions, which by donor restriction, are to be used for the purposes of acquiring such assets).

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(s) Pledges Receivable and Donor-Restricted Gifts Unconditional promises to give cash and other assets to PHC are reported at fair value at the date the promise is received. Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is received or the date the donor conditions are substantially met. Gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations 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 accompanying consolidated financial statements.

In February 2016, PHC was awarded a conditional grant by The Marcus Foundation, Inc. totaling $75,000,000 to support a portion of the construction of the Marcus Heart and Vascular Center. The grant is conditional upon incurring qualified expenditures toward and completion of the donor-stipulated construction project. As of June 30, 2016, PHC had not recognized any revenue related to the grant.

(t) Interest Expense PHC incurred interest expense totaling approximately $27,729,000 and $26,216,000 for the years ended June 30, 2016 and 2015, respectively. There was no interest capitalized in 2016 and 2015.

(u) Electronic Health Record Incentive Payments The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive payments beginning in 2011 for eligible hospitals and professionals that adopt and meaningfully use certified electronic health record (EHR) technology. PHC has recognized approximately $0 and $1,334,000 of Medicaid incentive payments and $5,553,000 and $9,368,000 of Medicare incentive payments in other revenue in the accompanying consolidated statements of operations for the years ended June 30, 2016 and 2015, respectively. PHC recognizes income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.

(v) Income Taxes Piedmont Healthcare, Inc., Atlanta, Fayette, Mountainside, Newnan, Henry, Newton, PHI and the Foundation, are organizations exempt from federal income tax pursuant to U.S. Revenue Code (IRC) Section 501(a), as organizations described in Section 501(c)(3), of the Internal Revenue Code of 1986, as amended, and state income tax. AMIC is exempt from federal and local income tax pursuant to the laws of the Government of the Cayman Islands. There is currently no taxation imposed on income or capital gains by the Government of the Cayman Islands. If any form of tax legislation were to be enacted, AMIC has been granted an exemption until the year 2024. PMCC is a taxable, not-for-profit entity that operated in a net loss position for financial reporting and tax purposes during the years ended June 30, 2016 and 2015. The Clinic is a taxable, not-for-profit entity that operated in a net 13 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

income position for financial reporting and tax purposes during the years ended June 30, 2016 and 2015. PHIP is a taxable, not-for-profit entity that operated in a net loss position for financial reporting and tax purposes during the years ended June 30, 2016 and 2015. PASC is a limited liability company of Atlanta.

At June 30, 2016 and 2015, Atlanta (as it relates to unrelated business income), PMCC, the Clinic, and PHIP had net operating loss carryforwards totaling approximately $630,846,000 and $528,224,000, respectively, which expire at various dates between 2019 and 2033. PMCC, the Clinic, and PHIP had deferred income tax assets totaling approximately $236,039,000 and $212,965,000 at June 30, 2016 and 2015, respectively. The deferred income tax assets, which consist primarily of net operating loss carryforwards and differences relating to allowances for doubtful accounts and accruals, was offset by a full valuation allowance.

PHC accounts for income taxes under the provisions of the Income Taxes Topic of ASC (ASC 740). Under the requirements of ASC 740, tax-exempt organizations may be required to record an obligation as the result of a tax position they have historically taken on various uncertain tax exposure items. There were no material uncertain tax positions at June 30, 2016 and 2015.

(w) Prior Year Reclassifications Certain reclassifications have been made to the fiscal year 2015 consolidated financial statements to conform to the fiscal year 2016 presentation. These reclassifications had no impact on the results of operations, change in net assets or cash flows in the accompanying consolidated financial statements.

(x) Defined-Benefit Pension Plan PHC accounts for its defined-benefit pension plan in accordance with ASC 715, Compensation– Retirement Benefits. ASC 715 requires an entity to recognize in its balance sheet an asset for a defined-benefit postretirement plan’s overfunded status or a liability for a plan’s underfunded status; measure a defined-benefit postretirement plan’s assets and obligations that determine its funded status at the end of the employer’s fiscal year; and recognize changes in the funded status of a defined-benefit postretirement plan as a separate line item or items within changes in unrestricted net assets, apart from expenses, in the year in which the changes occur. Certain PHC employees participate in PHC’s trusteed noncontributory defined-benefit pension plan (the Plan). The Plan’s benefits are based on a combination of years of service and the employee’s compensation. PHC’s funding policy is to contribute annually to the Plan an amount sufficient to meet the minimum funding standards of Employee Retirement Income Security Act (ERISA) or an amount sufficient to maintain the Plan on a sound actuarial basis, as certified by an enrolled actuary. Plan assets consist primarily of common stocks, alternative investments, fixed-income investments, and cash equivalents. On September 20, 2012, the PHC Board of Directors and PHC management approved a freeze of the Plan effective December 31, 2014, whereby participants cease to accrue further benefits for service rendered subsequent to December 31, 2014.

(y) Subsequent Events PHC evaluated events and transactions occurring subsequent to June 30, 2016 through September 27, 2016, the date the consolidated financial statements were available to be issued. During this period,

14 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

there were no subsequent events that required recognition in the accompanying consolidated financial statements. See note 17 for additional disclosures.

(z) Recent Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 changed the requirements for reporting discontinued operations. This ASU limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have a major effect on an entity’s operations and financial results. As a result, companies expect to report fewer discontinued operations under the new standard than would otherwise be reported under previous requirements. The new standard is effective for any disposals of components of a company in annual reporting periods beginning after December 15, 2014. PHC implemented the provisions of ASU 2014-08, which had no impact to the accompanying consolidated financial statements, effective July 1, 2015.

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information 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 new standard is effective for annual reporting periods beginning after December 15, 2017. PHC will implement the provisions of ASU 2014-09 as of July 1, 2018. PHC has not yet determined the impact of the new standard on its current policies for revenue recognition.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases, and makes other conforming amendments to U.S. GAAP. ASU 2016-02 requires, among other changes to the lease accounting guidance, lessees to recognize most leases on-balance sheet via a right of use asset and lease liability, and additional qualitative and quantitative disclosures. ASU 2016-02 is effective for annual periods in fiscal years beginning after December 15, 2019, permits early adoption and mandates a modified retrospective transition method. PHC is required to adopt ASU 2016-02 on July 1, 2019. PHC expects ASU 2016-02 to add significant right of use assets and lease liabilities to its consolidated balance sheet and it is evaluating other effects that the new standard will have on the consolidated financial statements.

The FASB issued ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, in August 2016. ASU 2016-14 is intended to improve the guidance on net asset classification as well as the information presented in the financial statements and financial statement notes regarding liquidity, financial performance and cash flows for not-for-profit entities. ASU 2016-14 is effective for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. PHC is required to adopt ASU 2016-14 by July 1, 2018. PHC has not determined the impact of ASU 2016-14 on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the Emerging Issues Task Force. ASU 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and 15 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

payments in the statement of cash flows with the intent of reducing diversity in practice with respect to eight types of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted and entities must apply the guidance retrospectively to all periods presented. PHC has not determined the impact of ASU 2016-15 on its consolidated financial statements.

(3) Acquisitions Effective October 1, 2015, PHC entered into an affiliation agreement with Piedmont Newton Hospital (f/k/a Newton Health System, Inc.) whereby it became the sole corporate member of the entity. Although no consideration was transferred, PHC assumed all the assets and liabilities of Newton as of the acquisition date. As part of the acquisition, PHC assumed Newton’s lease with the Newton County Hospital Authority (the Authority). The lease covers all the assets and liabilities of Newton at the inception of the lease. At the termination of the lease, the assets and liabilities revert back to the Authority. In connection with the acquisition and PHC’s assumption of the lease, the lease term was extended to expire in 40 years. The total cost of the Newton acquisition has been allocated to the assets acquired and liabilities assumed based upon their respective fair values in accordance with ASC 958-805, Not-for-Profit Entities – Business Combinations.

Based on the purchase price allocation as of June 30, 2016, PHC recorded the fair value of all assets acquired and liabilities assumed, resulting in a contribution of approximately $13,786,000 being recorded as a contribution received in acquisition on the accompanying 2016 consolidated statement of operations.

A summary of the purchase price allocation, including assumed liabilities, follows (in thousands): Assets: Cash $603 Net patient accounts receivable 10,656 Other current assets 3,222 Assets limited as to use 5,072 Property and equipment 22,424 Other assets 2,631 Liabilities: Current liabilities (11,938) Long-term debt (17,388) Other liabilities (1,496) Contribution $ 13,786

The Newton operating results have been included in the consolidated statements of operations since the acquisition date. The revenue, gains and other support; operating loss and change in unrestricted net assets attributable to PHC related to the acquired Newton operations for the period from October 1, 2015 through June 30, 2016 were approximately $56,135,000, $6,369,000 and $19,793,000, respectively. The unaudited

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pro forma combined summary of operations, which gives effect to including the acquired Newton operating results as if the acquisition had occurred as of July 1, 2014, follows (in thousands): Year ended June 30 2016 2015 Revenue, gains, and other support $ 2,006,766 1,933,924 Operating income 109,121 138,504 Change in unrestricted net assets 32,833 90,308

Pro forma adjustments to operating income and change in unrestricted net assets include adjustments to record Newton’s operating results on a consolidated basis and to record depreciation expense based on the estimated fair value assigned to the long-lived assets acquired. These pro forma results are not necessarily indicative of the actual results of operations that would have occurred if the acquisition had occurred on July 1, 2014.

(4) Net Patient Service Revenue PHC has agreements with third-party payors that provide for payments to PHC at amounts different from its established rates. A summary of payment arrangements with major third-party payors is as follows:

(a) Medicare and Medicaid PHC renders care to patients covered by the Medicare and Medicaid programs. Inpatient acute care services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Medicare reimburses for outpatient services based on a prospective outpatient payment system similar to the inpatient system.

Inpatient services rendered to Medicaid program beneficiaries are reimbursed under a prospective payment reimbursement methodology. Outpatient services are reimbursed under a cost-based methodology. PHC is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by PHC and audits thereof by the Medicaid fiscal intermediary.

Services rendered under these programs are recorded at established rates and reduced to the estimated amount due from the third-party payors through recording of contractual adjustments and other discounts. Because PHC cannot pursue collections for the contractual or discounted amounts, they are not reported as revenue.

Net patient service revenue from the Medicare and Medicaid programs accounted for approximately 32% and 4%, respectively, of PHC’s net patient service revenue for the year ended June 30, 2016. Net patient service revenue from the Medicare and Medicaid programs accounted for approximately 33% and 5%, respectively, of PHC’s net patient service revenue for the year ended June 30, 2015. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Net patient service revenue is reported at the estimated net

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realizable amounts from the Medicare and Medicaid programs for services rendered and includes estimated retroactive revenue adjustments due to future audits, reviews, and investigations.

Final settlement has been reached for all Medicare and Medicaid cost reports prior to fiscal year 2013. PHC has recorded amounts due to Medicare and Medicaid of $27,024,000 and $22,784,000 at June 30, 2016 and 2015, respectively, as an estimate of final third-party payor settlements for open cost report years. Management recorded a favorable change in estimate to net patient service revenue in the accompanying consolidated statements of operations related to third-party settlements of $4,689,000 and $3,689,000 for the years ended June 30, 2016 and 2015, respectively. The amounts due to Medicare and Medicaid represent management’s best estimates of final settlements.

(b) Managed Care and Other Payors PHC has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations (HMOs), and preferred provider organizations. The bases for payments to PHC under these agreements include prospectively determined rates per discharge, discounts from established charges, and daily rates.

(c) Georgia Provider Payment Agreement Act Effective July 1, 2010, the State of Georgia imposed a fee on not-for-profit hospitals based on net revenue levels as defined by the State of Georgia. Included in supplies and other expenses in the accompanying consolidated statements of operations for the years ended June 30, 2016 and 2015 is approximately $18,751,000 and $12,972,000, respectively, relating to this fee.

(5) Charity Care and Community Benefits PHC provides care to patients who meet certain criteria under its charity care policy without charge or at amounts significantly less than its established rates. Amounts determined to qualify as charity care are not reported as revenue or patient accounts receivable in the accompanying consolidated financial statements.

PHC maintains records to identify and monitor the level of charity care it provides. These records include the amount of charges forgone for services furnished under its charity care policy. The cost of providing this charity care was estimated to be approximately $36,226,000 and $25,785,000 for years ended June 30, 2016 and 2015, respectively. PHC estimates the direct and indirect costs of providing charity care by applying a cost to gross charges ratio to the gross uncompensated charges associated with providing charity care to patients.

PHC offers many other wellness and educational services to the community at low and, in some cases, no cost. PHC also partners with five charitable clinics to provide supportive services for low-income patients, including the provision of free laboratory and diagnostic services to clinic patients at no charge. PHC operates 24-hour emergency rooms that provide care to all patients regardless of ability to pay. The costs for these services are included in operating expenses in the accompanying consolidated statements of operations.

18 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(6) Investments (a) Investments and Assets Limited as to Use The composition of investments and assets limited as to use is set forth in the following table (in thousands): June 30 2016 2015 Investments internally designated for capital acquisition: Cash and short-term investments $ 8,298 3,221 Corporate obligations 18,782 18,863 Fixed-income securities 94,748 92,942 Corporate stocks 55,760 59,253 Mutual funds 220,661 227,517 Alternative investments 153,206 163,676 551,455 565,472 Assets limited as to use: Cash and short-term investments 335 131 Corporate obligations 758 765 Fixed-income securities 3,826 3,767 Corporate stocks 2,252 2,402 Mutual funds 8,911 9,220 Alternative investments 6,187 6,634 22,269 22,919 Totals $ 573,724 588,391

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(b) Alternative Investments Alternative investments included in investments and assets limited as to use at June 30, 2016 and 2015 and related net unrealized gains and losses for the years then ended consist of the following (in thousands):

Estimated fair value Net unrealized (losses) gains June 30 Year ended June 30 2016 2015 2016 2015 Lighthouse Diversified Fund $ 28,211 31,677 (3,465) 1,813 Archipelago Holdings Ltd Offshore Fund 31,260 32,783 (1,523) 1,250 Titan Masters International Fund 26,808 29,805 (2,997) 1,511 Clarion Lion Properties ING Fund 25,468 22,873 1,906 2,159 LSV Emerging Markets Equity Fund 19,538 23,025 (3,232) (1,415) Harvest MLP Income II Fund 28,108 30,147 (4,833) (2,821) $ 159,393 170,310 (14,144) 2,497

Net unrealized (losses) gain are included in investment income in the accompanying consolidation statements of operations: Redemption Redemption frequency notice period Lighthouse Diversified Fund Monthly 90 days Archipelago Holding Ltd Offshore Fund Quarterly 45 days Titan Masters International Fund Quarterly 65 days Clarion Lion Properties ING Fund Quarterly 90 days LSV Emerging Markets Equity Fund Monthly 7 days Harvest MLP Income II Fund Monthly 30 days

(c) Investment (Loss) Income, Net Investment (loss) income, net related to investments and assets limited as to use is comprised of the following (in thousands): Year ended June 30 2016 2015 Interest income $ 13,009 13,675 Net realized and unrealized losses on investments (28,925) (9,771) Other 378 (446) Investment (loss) income, net $ (15,538) 3,458

20 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(7) Property and Equipment A summary of property and equipment, net follows (in thousands): June 30 2016 2015 Land and land improvements $ 66,898 65,916 Buildings and fixtures 982,782 941,645 Equipment 760,989 712,051 1,810,669 1,719,612 Less accumulated depreciation 1,038,609 954,216 772,060 765,396 Construction in progress 49,475 18,876 Property and equipment, net $ 821,535 784,272

Depreciation and amortization expense for the years ended June 30, 2016 and 2015 totaled approximately $87,852,000 and $87,145,000, respectively. Amortization of capitalized software costs of approximately $9,899,000 and $9,676,000 is included in depreciation and amortization expense in the accompanying consolidated statements of operations for the years ended June 30, 2016 and 2015, respectively.

Capitalized software and software development costs included in property and equipment were as follows (in thousands): June 30 2016 2015 Capitalized software and software development costs $ 82,468 76,391 Less accumulated amortization 35,748 25,782 Capitalized software and software development costs, net $ 46,720 50,609

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Based on the amortizable capitalized software and software development costs that have been placed into service at June 30, 2016, the estimated amortization expense for the succeeding five fiscal years and thereafter is as follows (in thousands): Year ending June 30: 2017 $ 9,635 2018 8,721 2019 6,379 2020 5,936 2021 5,498 Thereafter 10,551 $ 46,720

At June 30, 2016 and 2015, PHC’s remaining commitment for software and construction contracts approximated $49,263,000 and $12,234,000, respectively.

During fiscal 2012, PHC completed construction of a new Piedmont Newnan hospital. In May 2012, the operations of Newnan were transferred to the new hospital. At that time, the replaced hospital building and certain assets that were not transferred to the new hospital were written down to fair value less estimated cost to sell. The building and related assets of $3,050,000 are classified as held-for-sale and are included in other current assets in the accompanying consolidated balance sheets at June 30, 2016 and 2015. Sale of the assets is expected to occur within one year.

In August 2006, Fayette entered into a ground lease with Piedmont Fayette Medical Office Building, LLC (PFB), whereby Fayette is leasing real property to PFB. In accordance with ASC 840, Leases, Fayette is considered the owner of the Medical Office Building (Fayette MOB) during the construction period and thereafter due to Fayette’s continuing involvement in the Fayette MOB. Accordingly, the value of the building and the construction notes paid by the developer are included in the accompanying consolidated balance sheets. At June 30, 2016 and 2015, the net book value of the Fayette MOB included in buildings and fixtures totaled approximately $13,516,000 and $13,911,000, respectively, and the related Medical Office Building financing obligation approximated $14,242,000 and $14,840,000, respectively.

In August 2005, Atlanta entered into a ground lease with Piedmont Physicians Plaza, L.P. (PPP), whereby Atlanta is leasing real property to PPP. In accordance with ASC 840, Atlanta is considered the owner of the Medical Office Building (Piedmont MOB) during the construction period and thereafter due to Atlanta’s continuing involvement in the MOB. Accordingly, the cost of the building and the related financing obligation are included in PHC’s consolidated balance sheets. At June 30, 2016 and 2015, the net book value of the Piedmont MOB included in buildings and fixtures totaled approximately $15,264,000 and $16,264,000, respectively, and the related Medical Office Building financing obligation approximated $28,878,000 and $28,719,000, respectively.

22 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(8) Long-Term Debt (a) Bonds Payable Bonds payable consists of the following (in thousands): June 30 2016 2015 Series 2006, fixed interest rate of 4.50%, interest payments due semi-annually, payable through 2024 $ 4,905 — Series 2007, fixed interest rate of 2.47%, interest payments due semi-annually, payable through 2024 11,131 — Series 2010, fixed interest rates ranging from 4.50% to 5.00%, interest payments due semi-annually, payable through 2045 100,000 100,000 Series 2009A, fixed interest rates ranging from 4.375% to 5.25%, interest payments due semi-annually, payable through 2024 208,140 208,140 Series 2009C, variable interest rates (0.76% and 0.57% at June 30, 2016 and 2015, respectively), interest payments due monthly, payable through 2019 25,650 33,185 Series 2014A, fixed interest rates ranging from 3.00% to 5.00%, interest payments due semi-annually, payable through 2044 87,125 88,475 Series 2014B, variable interest rates (0.96% and 0.77% at June 30, 2016 and 2015, respectively) interest payments due monthly, payable through 2034 92,270 92,270 Unamortized original issue premium (discount), net 4,383 4,583 Unamortized debt issuance costs (5,193) (5,160) 528,411 521,493 Less current maturities (15,320) (11,565) $ 513,091 509,928

On November 19, 2014, the Development Authority of Fulton County, the Hospital Authority of Fayette County and the Hospital Authority of Henry County issued $87,730,000, $42,060,000 and $53,420,000, respectively, in Revenue Bonds Series 2014A and 2014B (the Series 2014 Bonds) on behalf of PHC. The proceeds of the Series 2014 Bonds were used to redeem previously outstanding Series 2004 and Series 2009B Revenue Bonds and for certain construction projects. The Series 2014 Bonds have been issued on a tax-exempt basis and are secured under a master trust indenture with all members of the Obligated Group (Piedmont Healthcare, Inc. and all of its affiliates exclusive of AMIC) which provides for, among other things, the deposit of revenue with the master trustee in the event of certain defaults, pledges of accounts receivable, pledges not to encumber property and limitations on additional borrowings.

23 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

Included in other current assets on the accompanying June 30, 2016 and 2015 consolidated balance sheets is $24,861,000 of bond proceeds from the Series 2014, Bonds, currently being held by a trustee which will be remitted to PHC upon completion of certain construction projects.

On October 27, 2010, the Coweta County Development Authority issued $100,000,000 in Revenue Bonds Series 2010 (the Series 2010 Bonds) on behalf of PHC. The proceeds of the Series 2010 Bonds were used to construct a replacement hospital for Newnan. The Series 2010 Bonds have been issued on a tax-exempt basis and are secured under a master trust indenture with all members of the Obligated Group (Piedmont Healthcare, Inc. and all of its affiliates exclusive of AMIC) which provides for, among other things, the deposit of revenue with the master trustee in the event of certain defaults, pledges of accounts receivable, pledges not to encumber property and limitations on additional borrowings.

On November 24, 2009, the Development Authority of Fulton County and the Hospital Authority of Fayette County issued $304,345,000 and $79,540,000, respectively, ($383,885,000 collectively) in Revenue Bonds Series 2009A, 2009B and 2009C (the Series 2009 Bonds) on behalf of PHC. The proceeds of the Series 2009 Bonds were used primarily to redeem previously outstanding Series 2007, Series 2005, Series 2001, and Series 1999 Revenue Bonds and fully repay a line of credit totaling approximately $65,000,000. The Series 2009 Bonds have been issued on a tax-exempt basis and are secured under a master trust indenture with all members of the Obligated Group (Piedmont Healthcare, Inc. and all of its affiliates exclusive of AMIC) which provides for, among other things, the deposit of revenue with the master trustee in the event of certain defaults, pledges of accounts receivable, pledges not to encumber property and limitations on additional borrowings. The Series 2009B Bonds were repaid in full ($94,735,000) with proceeds from the Series 2014B Bonds.

The Series 2009B Bonds had an option to be put to PHC by the bondholder. In connection with the Series 2009B Bonds, PHC entered into letter of credit agreements totaling approximately $106,188,000 to secure the Series 2009B Bonds. The letters of credit were terminated when the Series 2009B Bonds were repaid. All fees payable under the letter of credit agreements were the responsibility of PHC.

In connection with the acquisition of Newton effective October 1, 2015, PHC assumed responsibility for payment of the Authority’s outstanding revenue certificates through the lease agreement described in note 3.

In April 2006, the Newton County Hospital Authority issued $8,930,000 Revenue Certificates, Series 2006 (the Series 2006 Bonds). The certificates were issued for the purpose of financing certain capital additions and improvements to Newton’s facilities and paying costs of issuance of the Series 2006 Bonds. The Series 2006 bonds have been issued on a tax exempt basis and are secured by a pledge of and lien on the gross revenues derived by Newton and payments made by Newton County, Georgia to Newton pursuant to a contract between Newton and Newton County. Under the terms of the Series 2006 Bonds, Newton is required to maintain certain deposits with a trustee for payment of bond principal and interest. Such deposits are included in investments and assets limited as to use on the accompanying June 30, 2016 consolidated balance sheet. At the acquisition date, the stated value of the Series 2006 Bonds approximated $5,405,000; however, they were recorded at their fair value

24 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

upon acquisition. At June 30, 2016, the stated value and carrying value of the Series 2006 Bonds approximated $4,905,000.

In May 2007, the Newton County Hospital Authority issued $17,225,000 Revenue Refunding Certificates, Series 2007 (the Series 2007 Bonds). The certificates were issued for the purpose of advance refunding Piedmont Newton’s Series 1999 bonds and paying costs of issuance of the 2007 bonds. The Series 2007 Bonds have been issued on a tax exempt basis and are secured by a pledge of and lien on the gross revenues derived by Newton and payments made by Newton County, Georgia to Newton pursuant to a contract between Newton and Newton County. Under the terms of the 2007 Bonds, Newton is required to maintain certain deposits with a trustee for payment of bond principal and interest. Such deposits are included in investments and assets limited as to use on the accompanying June 30, 2016 consolidated balance sheet. At the acquisition date, the stated value of the Series 2007 Bonds approximated $11,985,000; however, they were recorded at their fair value upon acquisition. At June 30, 2016, the stated value of the Series 2007 Bonds approximated $10,860,000 and the carrying value approximated $11,131,000.

In April 2004, the Hospital Authority of Henry County issued $60,000,000 Revenue Certificates, Series 2004 (the Series 2004 Bonds). The certificates were used primarily to finance construction, renovation and equipping of certain additions and improvements to Henry and related facilities and to finance a portion of Henry’s capital equipment purchases for a period not to exceed three years. At the acquisition date, the stated value of the Series 2004 Bonds approximated $57,980,000, but they were recorded at their fair value of $60,266,000. At June 30, 2014, the stated value of the Series 2004 Bonds approximated $57,085,000 and the carrying value approximated and $59,099,000. The 2004 Bonds were repaid in full $(56,615,000) with proceeds from the Series 2014B Bonds.

Scheduled principal repayments on the Series 2014, Series 2010, Series 2009, Series 2007 and Series 2006 Bonds are as follows (in thousands): Year ending June 30: 2017 $ 15,320 2018 13,215 2019 13,810 2020 15,365 2021 16,055 Thereafter 455,185 $ 528,950

(b) Note Payable to a Bank Effective February 1, 2012, PHC entered into a note payable with a bank. The proceeds of the note totaling approximately $44,819,000 were used to fully repay Henry’s Series 1999 Bonds during fiscal year 2013. Amounts outstanding at June 30, 2016 and 2015 totaled $34,799,000 and $37,224,000, respectively. Effective June 29, 2016, the note was refinanced and certain terms were amended. Previous to June 29, 2016, the note bore interest at a rate of 1.8% per annum payable monthly. Effective June 29, 2016, the note bears interest at a rate of the London InterBank Offered Rate

25 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(LIBOR) floating rate plus 0.65% (1.11% as of June 30, 2016) and the payment terms are as follows: $2,565,000 due on July 1, 2017, $2,715,000 due on July 1, 2018, $1,950,000 due on July 1, 2019, $2,065,000 due on July 1, 2020, and the remaining principal of $25,504,000 due on July 1, 2021.

(c) Line of Credit During fiscal year 2010, PHC entered into a line of credit for $70,000,000 with a local bank with an interest rate based on 30-day LIBOR plus 0.75% and a maturity date of December 31, 2011. During fiscal year 2012, PHC entered into an amendment to the line of credit, which reduced available borrowings to $1,000,000 and extended the maturity to December 31, 2012. On December 17, 2012, PHC entered into an amendment to the line of credit, which extended the maturity to December 31, 2015 and revised the interest rate to LIBOR plus 0.60%. On October 7, 2013, PHC entered into an amendment to the line of credit, which increased available borrowing to $70,000,000. On December 7, 2015, PHC entered into an amendment to the line of credit which reduced available borrowing to $1,000,000 and extended the maturity to December 31, 2018. There were no outstanding borrowings on the line of credit at June 30, 2016 or 2015.

(d) Interest Rate Swap Agreements PHC has seven interest rate swap agreements that are not accounted for as cash flow hedges. These interest rate swaps are primarily utilized to economically hedge PHC’s exposure to variable interest rates under its debt obligations. The change in value of the interest rate swaps is reported as a component of nonoperating (expense) income in the period it occurs. At June 30, 2016 and 2015, the total notional amount of PHC’s interest rate swaps was approximately $125,520,000 and $129,120,000, respectively.

These interest rate swap agreements expose PHC to credit losses in the event of nonperformance by the counterparty to the financial instruments. The counterparty is a creditworthy financial institution and PHC management believes the counterparty will be able to fully satisfy its obligations under the contracts.

PHC’s interest rate swaps are reported at estimated fair value in the accompanying consolidated balance sheets as follows (in thousands): June 30 2016 2015 Other long-term liabilities $ 33,537 26,429

26 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The effects of PHC’s interest rate swaps on the accompanying consolidated statements of operations are as follows (in thousands): Year ended June 30 2016 2015 Loss recognized in nonoperating expense $ 7,108 2,095 Loss recognized in supplies and other expenses 4,325 4,570 $ 11,433 6,665

(9) Medical Office Buildings As discussed in note 7, PHC is considered the owner of the Fayette MOB and the Piedmont MOB for financial reporting purposes. In accordance with ASC 840, Leases, PHC has reflected the operations of the Piedmont and Fayette MOBs in its consolidated financial statements which resulted in other revenue of approximately $6,011,000, interest expense of approximately $5,305,000, and supplies and other expenses of approximately $2,141,000, for the year ended June 30, 2016 and other revenue of approximately $5,843,000, interest expense of approximately $4,597,000, and supplies and other expenses of approximately $2,231,000, for the year ended June 30, 2015.

(10) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets available primarily for capital purchases, education and geriatric services were approximately $18,033,000 and $21,402,000 at June 30, 2016 and 2015, respectively.

Permanently restricted net assets are summarized as follows, whose investment income is to be used according to the purpose description below (in thousands): June 30 2016 2015 Support of education $ 1,064 823 Beneficial interest in perpetual trust 7,298 7,918 Support of specific services 14,870 14,579 $ 23,232 23,320

(11) Employee Benefits (a) Pension Plan PHC has a trusteed noncontributory defined-benefit pension plan (the Plan) covering certain PHC employees. The Plan’s benefits are based on a combination of years of service and the employee’s compensation. PHC’s funding policy is to contribute annually to the Plan an amount sufficient to meet the minimum funding standards of ERISA or an amount sufficient to maintain the Plan on a sound

27 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

actuarial basis, as certified by an enrolled actuary. Plan assets consist primarily of common stocks, alternative investments, guaranteed investment contracts, and cash equivalents.

In fiscal year 2008, the PHC Board of Directors approved the freezing of the Plan for participation purposes, so that employees hired or re-hired on and after July 1, 2008 are not eligible to participate in the Plan. Then-current participants had the option under the “Choice” program to continue to accrue benefits in the Piedmont Healthcare Retirement Plan or to participate in the new Piedmont 401(k) plan, which began on January 1, 2009. Approximately 64% of active participants elected to continue to accrue benefits in the defined-benefit pension plan.

On September 20, 2012, the Plan was amended to reflect a freeze as of December 31, 2014. Therefore, no further benefit accruals will be provided after that date for additional credited service or earnings. In addition, all existing participants became fully vested as of December 31, 2014.

The following cumulative amounts have not yet been recognized in the net periodic cost, and are recognized as a reduction to unrestricted net assets (in thousands): June 30 2016 2015 Actuarial losses $ 139,986 93,889 Prior service cost — — Total $ 139,986 93,889

Changes in the Plan’s obligations and assets resulted in the following changes in unrestricted net assets (in thousands): Year ended June 30 2016 2015 Amortization of prior service cost $ — — Amortization of net actuarial loss 13,133 915 Net actuarial loss during the year (59,230) (25,676) Total $ (46,097) (24,761)

The unrecognized loss included in unrestricted net assets and expected to be recognized in net periodic pension cost during the year ended June 30, 2017 is approximately $3,148,000.

28 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table presents a reconciliation of the beginning and ending balances of the Plan’s projected benefit obligation, the fair value of plan assets, the funded status of the Plan, and the accumulated benefit obligation (in thousands): June 30 2016 2015 Change in benefit obligation: Projected benefit obligation, beginning of year $ 387,257 378,509 Service cost 2,000 1,420 Interest cost 17,995 17,327 Benefits paid (10,560) (9,956) Settlements (32,872) — Actuarial loss 39,181 1,165 Administrative expenses paid from pension trust (2,698) (1,208) Projected benefit obligation, end of year $ 400,303 387,257 Accumulated benefit obligation $ 400,303 387,257 Change in Plan assets: Fair value of Plan assets, beginning of year $ 329,096 335,793 Actual return (loss) on Plan assets 2,340 (533) Employer contributions 5,000 5,000 Benefits paid (10,560) (9,956) Settlements (32,872) — Administrative expenses paid from pension trust (2,698) (1,208) Fair value of Plan assets, end of year $ 290,306 329,096 Funded status of the Plan $ (109,997) (58,161)

The unfunded status of the Plan of approximately $109,997,000 and $58,161,000 at June 30, 2016 and 2015, respectively, is recognized in the accompanying consolidated balance sheets as accrued pension cost. No Plan assets are expected to be returned to PHC during the fiscal year ending June 30, 2017.

During the year ended June 30, 2016, the Plan offered a bulk lump-sum payment window. Benefits paid from the Plan relating to this bulk lump-sum window totaled approximately $32,872,000 and resulted in a curtailment charge of $11,498,000, which is included in salaries and benefits in the accompanying consolidated statement of operations for the year ended June 30, 2016.

29 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table sets forth the components of net periodic benefit cost (in thousands): Year ended June 30 2016 2015 Components of net periodic benefit cost: Service cost $ 2,000 1,420 Interest cost 17,995 17,327 Expected return on Plan assets (22,389) (23,977) Curtailment charge 11,498 — Amortization of prior service cost — — Amortization of net actuarial loss 1,635 915 Total net periodic benefit cost $ 10,739 (4,315)

The actuarial assumptions used in the accounting for the net periodic cost for the Plan were as follows: Year ended June 30 2016 2015 Discount rate 4.72% 4.64% Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on Plan assets 6.95 7.25

The actuarial assumptions used to determine the year-end benefit obligations for the Plan were as follows:

June 30 2016 2015 Discount rate 3.96% 4.72% Rate of increase in future compensation levels N/A N/A

PHC uses fair value as the market-related value of assets in calculating the expected return on Plan assets component of net periodic pension expense for the years ended June 30, 2016 and 2015.

No contributions are expected to be paid to the Plan during fiscal year 2017.

Benefits expected to be paid in each of the next five fiscal years are as follows: fiscal year 2017 $13,118,000; fiscal year 2018 $14,372,000; fiscal year 2019 $15,523,000, fiscal year 2020 $16,657,000 and fiscal year 2021 $17,679,000. For fiscal years 2022–2026, the aggregate benefits expected to be paid is $101,476,000.

30 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The following table sets forth the asset allocation for the Plan:

June 30 2016 2015 Growth/equity securities 43% 47% Hedge funds/private equity 14 15 Fixed income securities 43 38 100% 100%

The target allocation for the Plan is as follows: June 30 2016 2015 Growth/equity securities 57% 50% Hedge funds/private equity 13 15 Fixed income securities 30 35 100% 100%

To develop the expected long-term rate of return on assets assumption, PHC considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the Plan’s portfolio.

The investment strategy of the Plan is to ensure, over the long-term life of the Plan, an adequate pool of assets along with contributions by PHC to satisfy the benefit obligations to participants and beneficiaries. PHC desires to achieve market returns consistent with a prudent level of diversification. All investments are made solely in the interest of the Plan’s participants and beneficiaries for the exclusive purposes of providing benefits to such participants and their beneficiaries and defraying the expenses related to administering the Plan. The target allocation of all assets is to reflect proper diversification in order to reduce the potential of a single security or single sector of securities having a disproportionate impact on the portfolio. In an effort to maintain the overall risk level of the portfolio within an acceptable range, the relative mix of asset classes will be rebalanced back toward the target allocations as opportunities permit, but in any event not less often than annually. The use of futures and options contracts will be limited to liquid instruments listed and actively traded on major exchanges (except for short-term funds) to over-the-counter options or forward contract positions executed with major dealers. No derivatives strategy may be used if it would subject the portfolios to greater variance than would be the case with the physical portfolio under a worst case scenario. Short-term funds may use only exchange-traded futures contracts and options–specifically prohibited are any off-exchange instruments and any exotic or structured securities, as well as notes whose interest rate is tied to security with a maturity of more than one year. PHC utilizes an outside investment consultant to implement its investment strategy.

31 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The fair value of plan assets of the Plan measured at fair value on a recurring basis was determined using the following inputs (note 15) at June 30, 2016 (in thousands): Level 1 Level 2 Level 3 Total Cash and short-term investments $ 1,849 — — 1,849 Corporate obligations 422 7,920 — 8,342 Fixed-income securities 25,878 — — 25,878 Corporate stocks 20,513 — — 20,513 Mutual funds 132,065 — — 132,065 Total assets at fair value 180,727 7,920 — 188,647 Investments measured at NAV as a practical expedient 101,659 $ 290,306

The fair value of plan assets of the Plan measured at fair value on a recurring basis was determined using the following inputs (note 15) at June 30, 2015 (in thousands): Level 1 Level 2 Level 3 Total Cash and short-term investments $ 8,412 — — 8,412 Corporate obligations 489 7,942 — 8,431 Fixed-income securities 34,882 — — 34,882 Corporate stocks 23,104 — — 23,104 Mutual funds 153,996 — — 153,996 Total assets at fair value 220,883 7,942 — 228,825 Investments measured at NAV as a practical expedient 100,271 $ 329,096

The above 2015 table includes investments totaling approximately $48,646,000 which were determined during 2016 to have readily determinable fair values as defined in ASU 2015-10, Technical Corrections, and have been reclassified from investments measured at NAV as a practical expedient to Level 1 above as an immaterial correction of an error.

All investments at June 30, 2016 and 2015 were in domestic investments.

The fair values of the securities included in Level 1 were determined through quoted market prices. The fair values of Level 2 financial assets for the corporate obligations were determined through evaluated bid prices provided by third-party pricing services where quoted market prices are not

32 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

available. The fair value of Level 2 alternative investments was determined based on the use of net asset value per share as a practical expedient in accordance with ASC 820.

(b) Deferred Compensation Plans PHC also offers two nonqualified deferred compensation plans, which are available to certain highly compensated PMCC and PHIP employees. These plans permit such employees to defer the receipt and taxation of all or a portion of their salary until future years. The deferred compensation is available for distribution to employees upon the election by the employee, provided the distribution election with respect to the deferred amounts has been made for a minimum of one year prior to the date of distribution.

All deferrals are held as part of PHC’s general assets and are subject to the claims of PHC’s general creditors. Employees’ rights to the payment of benefits under these plans are equal to those of general and unsecured creditors of the PHC. PHC has no liability for losses under the deferred compensation plans.

The amounts recorded for the deferred compensation plans are approximately $38,360,000 and $36,004,000 at June 30, 2016 and 2015, respectively, and are recorded within other long-term liabilities in the accompanying consolidated balance sheets.

(c) 401(k) Plan PHC offers, as the sponsor, a deferred tax annuity plan (the 401(k) Plan) pursuant to Section 401(k) of the Internal Revenue Code of 1986 covering substantially all employees of PHC. PHC contributes 100% of pretax contributions up to the first 3% of eligible pay and 50% of pretax contributions up to the next 2% into the 401(k) Plan and may make an additional discretionary contribution. PHC recognized as salaries and benefits expense approximately $34,158,000 and $24,236,000 for the years ended June 30, 2016 and 2015, respectively, related to the 401(k) Plan. No discretionary contributions were made during the years ended June 30, 2016 and 2015.

(12) Concentrations of Credit Risk PHC grants credit without collateral to its patients, most of whom are local residents and are insured under third-party payor agreements. The mix of gross receivables from patients and third-party payors was as follows: June 30 2016 2015 Medicare 26% 26% Medicaid 13 13 Other third-party payors 43 42 Patients 18 19 100% 100%

33 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

PHC recognizes that revenue and receivables from government agencies and third-party payors are significant to its operations. PHC does not believe that there are significant credit risks associated with these sources of revenue.

As of June 30, 2016 and 2015, PHC had approximately $514,737,000 and $463,384,000, respectively, in funds deposited with various financial institutions in excess of Federal Deposit Insurance Corporation limits.

(13) Commitments and Contingencies (a) General and Professional Liability Insurance PHC has a self-insurance program for general and professional liability coverage through AMIC. AMIC insures PHC with professional liability and commercial general liability risks of PHC affiliates, namely Atlanta, Mountainside, Fayette, Newnan, Henry, PHIP and PMCC, on a claims-made basis for the hospital professional liability and on an occurrence basis for the commercial general liability. The insurance policies between PHC and AMIC are $5,000,000 per occurrence and $20,000,000 aggregate annual limit for coverage effective May 1, 2003 through April 30, 2005, and $5,000,000 per occurrence and $19,000,000 aggregate annual limit for coverage effective May 1, 2005 through April 30, 2014 returning to $5,000,000 per occurrence and $20,000,000 aggregate annual limit for coverage effective May 1, 2014 through April 30, 2016 and changing to $5,000,000 per occurrence and $21,000,000 annual aggregate as of May 1, 2016. The per occurrence general liability limit provided by AMIC was reduced from $5,000,000 to $2,000,000 on May 1, 2011 and remains at that level. Effective May 1, 2012, the professional and general liability coverage for Henry was added to AMIC coverage at a limit of $2,000,000 for both professional and general liability.

AMIC is consolidated by PHC. PHC records the reported and estimated incurred-but-not-reported liability based on an actuarial study at June 30, 2016 and 2015, which totaled approximately $49,863,000 and $58,277,000, respectively, and is recorded as self-insurance reserves in the accompanying consolidated balance sheets. Commercial insurance has been obtained on a claims-made (professional liability) and on an occurrence (general liability) basis to provide for excess coverage.

The general and professional self-insurance reserves included in the accompanying consolidated balance sheets include estimates of the ultimate costs for claims incurred but not reported through June 30, 2016 and 2015, applicable to the general and professional liability self-insurance plans for PHC. PHC has employed independent actuaries to estimate the ultimate costs, if any, of the settlement of such claims. Accrued malpractice and general losses have been discounted at 2% at June 30, 2016 and 2015.

(b) Other Self-Insurance Programs PHC self-insures a portion of its workers’ compensation liability exposure up to $450,000 per claim at June 30, 2016 and 2015. Reserves for the self-insurance program are established to provide for estimated claims losses and applicable legal expenses for any claims incurred, both reported and unreported, through June 30, 2016 and 2015, and are recorded in the accompanying consolidated financial statements. PHC recorded the reported and estimated incurred-but-not-reported liability for its claims at June 30, 2016 and 2015, which totaled approximately $4,621,000 and $4,462,000,

34 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

respectively. Commercial insurance has been obtained on an occurrence basis to provide for excess coverage.

The workers’ compensation self-insurance reserves included in the accompanying consolidated balance sheets include estimates of the ultimate costs for claims incurred but not reported through June 30, 2016 and 2015. PHC has employed independent actuaries to estimate the ultimate costs, if any, of the settlement of such claims. Accrued workers’ compensation losses have been discounted at 2% at June 30, 2016 and 2015.

PHC is self-insured for employee health benefits for its subsidiaries with reinsurance for high dollar claims. Effective January 1, 2016, QualCare, Inc., a Cigna Company (QualCare), became the plan administrator for PHC’s health benefits. Prior to that, beginning, January 1, 2014, Piedmont WellStar HealthPlans, Inc. (PWHP), a 50% owned subsidiary of PHC, (note 16) administered the plan for PHC’s health benefits. At June 30, 2016 and 2015, PHC recorded $10,927,000 and $11,316,000, respectively, as an estimated liability for health benefit claims within the current portion of self-insurance reserves line item in the accompanying consolidated balance sheets.

The employee health benefits self-insurance reserves in the accompanying consolidated balance sheets include estimates of the ultimate costs for claims incurred but not reported through June 30, 2016 and 2015, applicable to the employee health benefits self-insurance plans. PHC has employed independent actuaries to estimate the ultimate costs, if any, of the settlement of such claims. Accrued employee health benefits losses have not been discounted due to the short-term nature of the payout of these liabilities.

In the opinion of management, adequate provision has been made for losses that may occur from the asserted and unasserted claims for all self-insurance programs.

(c) Operating Leases PHC leases various equipment and facilities under operating leases expiring at various dates through fiscal year 2099. Total rent expense in fiscal years 2016 and 2015 for all operating leases was approximately $41,708,000 and $43,932,000, respectively, and is included in supplies and other expenses on the accompanying consolidated statements of operations.

The following is a schedule by year of future minimum lease payments under operating leases that have initial or remaining lease terms in excess of one year (in thousands): Year ending June 30: 2017 $ 29,727 2018 28,941 2019 27,194 2020 25,614 2021 22,474 Thereafter 86,517 $ 220,467

35 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(d) Litigation and Other Commitment and Contingencies PHC is involved in litigation arising in the ordinary course of business. Liabilities for loss contingencies arising in the ordinary course of business are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. After consultation with legal counsel, management estimates that these matters will be resolved without a material adverse effect on PHC’s future financial position or results of operations.

(14) Functional Expenses PHC does not present expense information by functional classification because its resources and activities are primarily related to providing healthcare services. Further, since PHC receives substantially all of its resources from providing healthcare services in a manner similar to a business enterprise, other indicators contained in these consolidated financial statements are considered important in evaluating how well management has discharged their stewardship responsibilities.

(15) Fair Value of Financial Instruments PHC applies ASC 820, Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Certain of the PHC’s financial assets and financial liabilities are measured at fair value on a recurring basis, including money market investments, fixed income and equity instruments, and interest rate swap agreements. The three levels of the fair value hierarchy defined by ASC 820 and a description of the valuation methodologies used for instruments measured at fair value are as follows:

Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that PHC has the ability to access.

Level 2 – Financial assets and liabilities whose values are based on pricing inputs that are either directly observable or that can be derived or supported from observable data as of the reporting date. Level 2 inputs may include quoted prices for similar assets or liabilities in nonactive markets or pricing models whose inputs are observable for substantially the full term of the asset or liability.

Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value of the financial asset or financial liability and are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

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.

36 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The fair value of financial assets and financial liabilities measured at fair value on a recurring basis was determined using the following inputs at June 30, 2016 (in thousands):

Assets Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 512,131 — — 512,131 Investments and assets limited as to use: Cash and short-term investments 8,633 — — 8,633 Corporate obligations 1,142 18,398 — 19,540 Fixed-income securities 98,574 — — 98,574 Corporate stocks 58,012 — — 58,012 Mutual funds 229,572 — — 229,572 Total investments and assets limited as to use at fair value 395,933 18,398 — 414,331 Self-insurance investments: Corporate obligations 526 4,954 — 5,480 Treasury inflation protection securities — 5,088 — 5,088 Fixed-income securities 8,436 — — 8,436 Mortgage-backed securities — 6,068 — 6,068 Mutual funds 16,934 — — 16,934 Total self-insurance investments 25,896 16,110 — 42,006 Beneficial interest in perpetual trust — — 7,298 7,298 Total assets at fair value $ 933,960 34,508 7,298 975,766 Investments and assets limited as to use measured at NAV as a practical expedient 159,393 1,135,159

Liabilities Interest rate swaps $ — 33,537 — 33,537

37 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The fair value of financial assets and financial liabilities measured at fair value on a recurring basis was determined using the following inputs at June 30, 2015 (in thousands):

Assets Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 449,450 — — 449,450

Investments and assets limited as to use: Cash and short-term investments 3,352 — — 3,352 Corporate obligations 1,294 18,334 — 19,628 Fixed-income securities 96,709 — — 96,709 Corporate stocks 61,655 — — 61,655 Mutual funds 236,737 — — 236,737 Total investments and assets limited as to use 399,747 18,334 — 418,081

Self-insurance investments: Corporate obligations 368 4,761 — 5,129 Treasury inflation protection securities — 4,554 — 4,554 Fixed-income securities 7,209 — — 7,209 Mortgage-backed securities — 5,697 — 5,697 Mutual funds 14,887 — — 14,887 Total self-insurance investments 22,464 15,012 — 37,476

Beneficial interest in perpetual trust — — 7,918 7,918 Total assets at fair value $ 871,661 33,346 7,918 912,925

Investments and assets limited as to use measured at NAV as a practical expedient 170,310 1,083,235

Liabilities Interest rate swaps $ — 26,429 — 26,429

The above 2015 table includes investments totaling approximately $25,914,000 which were determined during 2016 to have readily determinable fair values as defined in ASU 2015-10, Technical Corrections, and have been reclassified from investments measured at NAV as a practical expedient to Level 1 above as an immaterial correction of an error.

Investments and assets limited as to use at June 30, 2016 and 2015 were in domestic investments.

38 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

The fair values of the securities included in Level 1 were determined through unadjusted quoted market prices. The fair value of Level 2 and Level 3 financial assets and liabilities were determined as follows:

Corporate obligations, treasury inflated protection securities, and mortgage-backed securities – These Level 2 investments were determined through evaluated bid prices provided by third-party pricing services where quoted market values are not available. There is not significant subjectivity in the fair value estimate due to changes in the unobservable inputs.

Beneficial interest in perpetual trust – The fair values of these related financial assets were determined from the fair value of the underlying assets contributed to the trusts. Based on the nature of the underlying assets, there is not significant subjectivity in the fair value estimate due to changes in the unobservable inputs.

Interest rate swaps – The fair values of these financial liabilities interest rate swaps were determined based on the present value of expected future cash flows using discount rates appropriate with the risks involved. The analysis reflects contractual terms of the interest rate swaps and uses observable market-based inputs, such as discount rates interpolated based on relevant swap curves. In addition, credit valuation adjustments are included to reflect nonperformance risk. PHC pays fixed rates ranging from 3.17% to 4.84% and receives cash flows based on 67% of one month LIBOR.

The following is the reconciliation of the beginning and ending balances of Level 3 financial assets measured at fair value on a recurring basis (in thousands): 2016 2015 Beginning balance $ 7,918 8,263 Change in beneficial interest in perpetual trust (620) (345) Ending balance $ 7,298 7,918

Change in beneficial interest in perpetual trust is included within permanently restricted net assets in the accompanying consolidated statements of changes in net assets.

The carrying values of patient accounts receivable, pledges receivable, and accounts payable and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these financial instruments. The fair value of PHC’s fixed-rate bonds is derived using Level 2 market-observable inputs, such as risk-free rates, yield curves and credit spreads for debt that is actively traded and has similar maturities and credit ratings. The fair value of PHC’s fixed rate bonds and note payable approximated $461,502,000 compared to a carrying value of approximately $411,301,000 at June 30, 2016, and approximated $469,492,000 compared to a carrying value of approximately $433,839,000 at June 30, 2015. The carrying value approximates fair value for all other long-term debt at June 30, 2016 and 2015.

39 (Continued) PIEDMONT HEALTHCARE, INC. AND AFFILIATES Notes to Consolidated Financial Statements June 30, 2016 and 2015

(16) Related Party Transactions PWHP is a health insurance company owned 50% by PHC and 50% by WellStar Health System (WHS). Included in loss from equity investment within nonoperating income in the accompanying consolidated statements of operations for the years ended June 30, 2016 and 2015 are losses of $3,100,000, relating to a capital contribution and $30,070,000, relating to the operations of PWHP, respectively.

As of June 30, 2015, based on current operating results and future plans of PWHP, PHC determined that its investment in PWHP has no value. As a result, PHC’s investment in PWHP then totaling $9,904,000 and expected future Reimbursement Adjustment Payments (as defined) of $4,653,000 were written off as of June 30, 2015. This write-off is included in loss from equity investment in the accompanying consolidated statement of operations for the year ended June 30, 2015.

Effective January 1, 2014, PWHP became the plan administrator for PHC’s health benefits (note 13(b)). During the years ended June 30, 2016 and 2015, PHC paid $5,116,000 and $6,715,000, respectively, to PWHP for fees relating to administration of its health benefits and wellness programs. In addition, in accordance with the Risk Sharing Addendum to the related Joint Venture Agreement, PHC pays Reimbursement Adjustment Payments (as defined) to PWHP based on the aggregate cost of Covered Items and Services Rendered to Assigned Members (as defined) and Shared Risk Members (as defined). Included in the $30,070,000 loss from equity investment on the accompanying 2015 consolidated statements of operations for the year ended June 30, 2015 is $13,349,000 relating to the Reimbursement Adjustment Payments. The Reimbursement Adjustment Payments paid in the year ended June 30, 2016 did not exceed the related amount accrued as of June 30, 2016.

(17) Subsequent Events On August 19, 2016, PHC, Athens Regional Health Services, Inc. and Athens Regional Medical Center, Inc. (ARMC) entered into an Affiliation Agreement (the Affiliation Agreement) which will be effective as of October 1, 2016. Under the terms of the Affiliation Agreement, PHC will become the sole member of ARMC. Although no consideration is to be transferred, PHC will assume all the assets and liabilities of ARMC as of the acquisition date. As part of the acquisition, PHC will guarantee ARMC’s lease with The Hospital Authority of Clarke County, Georgia (the Authority). The lease covers certain land, buildings, fixtures, improvements, mechanical systems and parking areas.

40 Schedule 1 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidating Balance Sheet June 30, 2016 (In thousands)

* Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont * Amster- Piedmont Fayette Mountainside Newnan Henry Newton Medical Heart Institute Piedmont Piedmont Healthcare Piedmont Piedmont Mc-Rae Hospital, Hospital, Hospital, Hospital, Hospital, Hospital, Care Physicians, Heart Institute, Clinic, Foundation, Healthcare, Atlanta Insurance Assets Inc. Inc. Inc. Inc. Inc. Inc. Corporation Inc. Inc. Inc. Inc. Inc. Surgery Ctr Company Eliminations Consolidated Current assets: Cash and cash equivalents $ 2,800 372 27 1,874 990 5,492 3,391 1,311 — 9,653 — 483,098 — 3,123 — 512,131 Patient accounts receivable, net 121,645 37,468 9,029 21,551 27,013 10,223 15,677 10,035 (75) — (4) 29 — — — 252,591 Current portion of self-insurance assets — — — — — — — — — — — — — 8,537 — 8,537 Other current assets 42,191 6,545 1,554 6,321 8,312 5,329 2,396 1,587 1,646 4,235 22 28,631 — 568 — 109,337 Due from related parties 1,170 — — — 1,987 — (291) — — (1,848) — 16,297 — 13,619 (30,934) — Total current assets 167,806 44,385 10,610 29,746 38,302 21,044 21,173 12,933 1,571 12,040 18 528,055 — 25,847 (30,934) 882,596 Assets limited as to use 545,860 — — — — 2,901 — — — — 24,963 — — — — 573,724 Property and equipment, net 232,671 115,393 26,058 148,255 160,093 22,174 8,954 2,864 404 274 — 104,395 — — — 821,535 Self-insurance investments — — — — — — — — — — — — — 33,469 — 33,469 Beneficial interest in perpetual trust 7,298 — — — — — — — — — — — — — — 7,298 Other assets 34,524 1,130 17,180 12,634 (1,615) 389 31,327 16,793 53 — 16 96,919 — — (93,708) 115,642 Total assets $ 988,159 160,908 53,848 190,635 196,780 46,508 61,454 32,590 2,028 12,314 24,997 729,369 — 59,316 (124,642) 2,434,264 * Effective March 1, 2016, the operations of Piedmont Atlanta Surgery Center are included in Piedmont Hospital, Inc.

Unaudited – see accompanying independent auditors’ report.

41 (Continued) Schedule 1 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidating Balance Sheet Information (Continued) June 30, 2016 (In thousands)

* Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont * Amster- Piedmont Fayette Mountainside Newnan Henry Newton Medical Heart Institute Piedmont Piedmont Healthcare Piedmont Piedmont Mc-Rae Hospital, Hospital, Hospital, Hospital, Hospital, Hospital, Care Physicians, Heart Institute, Clinic, Foundation, Healthcare, Atlanta Insurance Liabilities and Net Assets Inc. Inc. Inc. Inc. Inc. Inc. Corporation Inc. Inc. Inc. Inc. Inc. Surgery Ctr Company Eliminations Consolidated Current liabilities: Current portion of long-term debt $ 13,385 — — — 240 1,695 — — — — — — — — — 15,320 Accounts payable and accrued expenses 52,176 22,497 5,405 10,958 15,803 9,645 27,284 10,711 6,846 1,009 48 93,770 (26) 890 1,149 258,165 Estimated third-party payor settlements 11,296 3,594 2,883 3,862 4,693 679 17 — — — — — — — — 27,024 Current portion of long-term debt reserves 3,840 1,472 434 839 1,292 568 1,736 845 — — — 3,813 — 8,537 — 23,376 Due to related parties — — — — 1,992 — — 461 — — — 14,785 48 14,798 (32,084) — Total current liabilities 80,697 27,563 8,722 15,659 24,020 12,587 29,037 12,017 6,846 1,009 48 112,368 22 24,225 (30,935) 323,885 Long-term debt, net of current portion 440,603 — — — 58,394 14,094 — — — — — — — — — 513,091 Medical Office Building financing obligation 28,879 14,242 — — — — — — — — — — — — — 43,121 Note payable to a bank 34,799 — — — — — — — — — — — — — — 34,799 Self-insurance reserves 1,108 272 68 147 261 29 849 285 — — — 20,628 — 18,388 — 42,035 Accrued pension cost — — — — — — — — — — — 109,997 — — — 109,997 Other long-term liabilities 43,235 305 517 879 3,706 276 28,367 16,040 — — — 8,227 — — — 101,552 Total liabilities 629,321 42,382 9,307 16,685 86,381 26,986 58,253 28,342 6,846 1,009 48 251,220 22 42,613 (30,935) 1,168,480 Net assets (deficit): Unrestricted 324,069 117,601 44,472 172,848 109,881 19,521 3,198 4,247 (5,183) 11,305 18,030 477,939 (22) 16,703 (90,090) 1,224,519 Temporarily restricted 11,743 925 69 1,102 518 1 3 1 365 — 6,713 210 — — (3,617) 18,033 Permanently restricted 23,026 — — — — — — — — — 206 — — — — 23,232 Total net assets (deficit) 358,838 118,526 44,541 173,950 110,399 19,522 3,201 4,248 (4,818) 11,305 24,949 478,149 (22) 16,703 (93,707) 1,265,784 Total liabilities and net assets $ 988,159 160,908 53,848 190,635 196,780 46,508 61,454 32,590 2,028 12,314 24,997 729,369 — 59,316 (124,642) 2,434,264 * Effective March 1, 2016, the operations of Piedmont Atlanta Surgery Center are included in Piedmont Hospital, Inc.

Unaudited – see accompanying independent auditors’ report.

42 Schedule 2 PIEDMONT HEALTHCARE, INC. AND AFFILIATES Consolidating Summary of Revenues and Expenses Information Year ended June 30, 2016 (In thousands)

* Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont Piedmont * Amster- Piedmont Fayette Mountainside Newnan Henry Newton Medical Heart Institute Piedmont Piedmont Healthcare Piedmont Piedmont Mc-Rae Hospital, Hospital, Hospital, Hospital, Hospital, Hospital, Care Physicians, Heart Institute, Clinic, Foundation, Healthcare, Atlanta Insurance Inc. Inc. Inc. Inc. Inc. Inc. Corporation Inc. Inc. Inc. Inc. Inc. Surgery Ctr Company Eliminations Consolidated Unrestricted revenues, gains, and other support: Patient service revenue $ 918,982 349,666 90,345 240,198 302,488 63,064 170,739 85,108 — — — — 3,426 — — 2,224,016 Provision for bad debt 81,355 66,089 18,916 55,555 70,986 8,771 8,646 11,262 — — — — 103 — — 321,683 Net patient service revenue 837,627 283,577 71,429 184,643 231,502 54,293 162,093 73,846 — — — — 3,323 — — 1,902,333 Other revenue 27,259 5,706 755 1,487 1,500 1,841 11,304 5,682 8,923 12,402 261 37,542 — 18,655 (52,454) 80,863 Contribution received in acquisition — — — — — 13,786 — — — — — — — — — 13,786 Total revenues, gains and other support 864,886 289,283 72,184 186,130 233,002 69,920 173,397 79,528 8,923 12,402 261 37,542 3,323 18,655 (52,454) 1,996,982 Expenses: Salaries and benefits 255,323 104,043 27,558 62,966 90,142 32,409 181,307 105,824 6,745 5,864 1,475 178,184 961 — — 1,052,801 Supplies and other expenses 304,249 81,090 20,283 49,642 79,243 28,808 11,150 18,975 1,903 6,200 239 107,918 2,182 15,647 (21,890) 705,639 Depreciation and amortization 29,273 10,574 3,262 9,150 9,042 922 2,149 709 122 121 — 22,096 432 — — 87,852 Interest 9,839 6,053 1,292 7,176 7,082 406 355 105 — 18 — 25,967 — — (30,564) 27,729 Intercompany allocations 205,433 60,003 16,290 40,731 41,662 — (21,564) (46,085) 153 — — (296,623) — — — — Total expenses 804,117 261,763 68,685 169,665 227,171 62,545 173,397 79,528 8,923 12,203 1,714 37,542 3,575 15,647 (52,454) 1,874,021 Operating income (loss) 60,769 27,520 3,499 16,465 5,831 7,375 — — — 199 (1,453) — (252) 3,008 — 122,961 Non-operating income (expense) : Investment income (loss) 8,979 140 15 (7) 5 42 — — (1) — (839) (23,041) — (831) — (15,538) Loss from equity investment — — — — — — — — — — — (3,100) — — — (3,100) Change in fair value of interest rate swaps (7,108) — — — — — — — — — — — — — — (7,108) Excess (deficiency) of revenues, gains, and other over expenses $ 62,640 27,660 3,514 16,458 5,836 7,417 — — (1) 199 (2,292) (26,141) (252) 2,177 — 97,215 * Effective March 1, 2016, the operations of Piedmont Atlanta Surgery Center are included in Piedmont Hospital, Inc.

Unaudited – see accompanying independent auditors’ report.

43 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX C

FORMS OF OPINIONS OF BOND COUNSEL

[THIS PAGE INTENTIONALLY LEFT BLANK] 1180 Peachtree Street Atlanta, Georgia 30309-3521 Main: 404/572-4600 Fax: 404/572-5100

November 16, 2016

Development Authority of Fulton County Merrill Lynch, Pierce, Fenner & Smith, Atlanta, Georgia Incorporated, on behalf of itself, Goldman, Sachs & Co. and SunTrust Piedmont Healthcare, Inc. Robinson Humphrey, Inc. Atlanta, Georgia c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated U.S. Bank National Association, as trustee New York, New York Atlanta, Georgia

Re: $______Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A

To the Addressees:

We have acted as Bond Counsel in connection with the issuance by the Development Authority of Fulton County (the “Fulton Authority”) of its $______in aggregate principal amount Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fulton Bonds”). We have examined the law and such certified proceedings and other documents and materials as we have deemed necessary to render this opinion, including a copy of the validation proceeding concluded in the Superior Court of Fulton County, Georgia, with respect to the Fulton Bonds and certain other obligations described therein. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate.

The Fulton Bonds are being issued pursuant to the Development Authorities Law of the State of Georgia (O.C.G.A. § 36-62-1, et seq., as amended, the “Act”), a resolution of the Fulton Authority adopted on June 28, 2016, as supplemented by a resolution adopted on October 27, 2016, and a Trust Indenture, dated as of November 1, 2016 (the “Bond Indenture”), between the Fulton Authority and U.S. Bank National Association, as bond trustee (in such capacity, the “Bond Trustee”). The Fulton Bonds are being sold to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representative”), on behalf of itself, Goldman Sachs & Co. and SunTrust Robinson Humphrey, Inc. (collectively, the “Underwriters”), pursuant to a Bond Purchase Agreement, dated October 27, 2016, among Piedmont Healthcare, Inc. (“PHC”), the Fulton

C-1 November 16, 2016 Page 2

Authority and the Representative, on behalf of the Underwriters. The Fulton Bonds are being issued for the purpose of (i) financing or refinancing, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Atlanta Hospital in Fulton County, Georgia (the “2016 Fulton Project”); and (ii) refunding all of the outstanding Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2009A (the “Refunded Bonds”), issued in the original aggregate principal amount of $172,245,000.

The Fulton Authority and PHC are entering into a Loan Agreement, dated as of November 1, 2016 (the “Agreement”), under which the Fulton Authority has agreed to issue the Fulton Bonds and loan the proceeds of the sale thereof to PHC for the purposes described above. The obligation of PHC to repay the loan made pursuant to the Agreement will be evidenced by a promissory note, dated the date of this opinion (the “2016-1 Master Note”), under which PHC has agreed to make payments sufficient to provide for the payment of the principal of, redemption premium (if any) and interest on the Fulton Bonds as the same become due and payable.

The 2016-1 Master Note is secured under an Amended and Restated Master Trust Indenture, dated November 16, 2016 (the “Restated Master Indenture”), among the Obligated Group Members (as defined therein and, collectively, the “Obligated Group”), including PHC, and U.S. Bank National Association, as master trustee (in such capacity, the “Master Trustee”), as supplemented from time to time by various supplemental indentures, including the Second Supplemental Master Trust Indenture, dated November 16, 2016, among PHC, as in its capacity as “Credit Group Representative” as defined in the Restated Master Indenture (in such capacity, the “Credit Group Representative”), and the Master Trustee (the Restated Master Indenture, as so supplemented, the “Master Indenture”). Under the Master Indenture, each Obligated Group Member has agreed, among other things, to guarantee the obligations of each other member of the Obligated Group secured under the Master Indenture. In addition, the Obligated Group has pledged to the Master Trustee to secure obligations issued from time to time under the Master Indenture the “Gross Receivables” (as defined in the Master Indenture). Under the terms of the Master Indenture, additional obligations may be issued and secured thereunder from time to time in accordance with the terms of the Master Indenture which rank on a parity as to lien on the trust estate created thereunder, including the Gross Receivables, with the lien thereon created in favor of the 2016-1 Master Note. The Master Indenture permits additions to, and withdrawals from, the Obligated Group as described therein.

Under the Bond Indenture, the Fulton Authority has assigned to the Bond Trustee and pledged to the payment of the Fulton Bonds the trust estate (the “Trust Estate”) which includes (i) all right, title and interest of the Fulton Authority in the Agreement and the 2016-1 Master Note (except for certain unassigned rights as described in the Bond Indenture) and (ii) all moneys and securities held from time to time by the Bond Trustee in certain funds and accounts created under the Bond Indenture. The Fulton Bonds are subject to registration of transfer and exchange, to optional redemption and to mandatory sinking fund redemption in accordance with the Bond Indenture.

C-2 November 16, 2016 Page 3

Within 15 days of the sale and issuance of the Fulton Bonds, the Hospital Authority of Fayette County (the “Fayette Authority”) and The Hospital Authority of Clarke County, Georgia (the “Clarke Authority” and, together with the Fulton Authority and the Fayette Authority, the “Issuers”) are selling and issuing certain other obligations, the proceeds of which are being loaned to PHC, including the:

(i) Hospital Authority of Fayette County Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A, in the aggregate principal amount of $______(the “Fayette Certificates”); and

(ii) The Hospital Authority of Clarke County, Georgia Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A, in the aggregate principal amount of $______(the “Clarke Certificates”).

The proceeds of the sale of the Fayette Certificates are expected to be used to finance or refinance, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital in Fayette County, Georgia (the “Fayette Project”). The proceeds of the sale of the Clarke Certificates are expected to be used to refund certain obligations previously issued to finance or refinance certain bonds previously issued for the benefit of Piedmont Athens Regional Medical Center, Inc. in Athens-Clarke County, Georgia. Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, the Fulton Bonds, the Clarke Certificates and the Fayette Certificates (collectively, the “Composite Bonds”) are a single issue of obligations for certain purposes under the Code, and the exclusion from gross income for federal income tax purposes of the interest on each series of the Composite Bonds is dependent upon whether the interest on the other series of the Composite Bonds is excluded from gross income for federal income tax purposes. We are delivering an opinion with respect to each other series of the Composite Bonds substantially to the same effect as this opinion.

As to questions of fact material to our opinion, we have relied upon (i) representations of the Issuers and PHC, (ii) certified proceedings and other certifications of public officials furnished to us, (iii) certifications by officials of PHC, and (iv) representations of PHC relating to, among other things, the use of the proceeds of the Composite Bonds and the obligations refunded thereby, the design, scope, function, cost and reasonably expected weighted average economic life of the facilities financed or refinanced with the proceeds of the Composite Bonds, the purpose for which PHC is organized and the nature of its activities, and the status of PHC as an entity described in Section 501(c)(3) of the Code, contained in certifications of PHC, dated the date of this opinion, without undertaking to verify the same by independent investigation.

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to compliance by the Fulton Authority or the Underwriters with any federal or state statute, rule or regulation which may be applicable to the offer or sale of the Fulton Bonds.

Based upon our examination, we are of the opinion, as of the date hereof and under existing law as follows:

1. The Fulton Authority is a validly existing public body corporate and politic of the State of Georgia with full power and authority (a) to issue and sell the Fulton Bonds, (b) to loan the proceeds from the sale of the Fulton Bonds to PHC for the purposes described in the Agreement and (c) to execute, deliver and perform its obligations under the Bond Indenture and the Agreement.

2. The Bond Indenture and the Agreement have been duly authorized, executed and delivered by the Fulton Authority and constitute valid and binding obligations of the Fulton Authority. The Bond Indenture creates a valid security interest in, or lien on, the Trust Estate.

3. The Fulton Bonds have been duly authorized, executed and delivered by the Fulton Authority and are valid and binding limited obligations of the Fulton Authority, secured by the Bond Indenture and payable by the Fulton Authority solely from the Trust Estate.

4. Under existing statutes, rulings and court decisions, and under applicable regulations and proposed regulations, interest on the Fulton Bonds is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding any other federal tax consequences caused by the receipt or accrual of interest on, or ownership of, the Fulton Bonds. In rendering this opinion, we have assumed continuing compliance by the Issuers and PHC with their respective covenants regarding certain requirements of the Code that must be satisfied subsequent to the issuance of the Composite Bonds in order that the interest on the Composite Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Failure to comply with such covenants could cause interest on the Composite Bonds to be included in federal gross income retroactive to the date of issuance of the Composite Bonds.

5. Under existing statutes, the interest on the Fulton Bonds is exempt from all present State of Georgia income taxation.

The rights of the owners of the Fulton Bonds and the enforceability of the Fulton Bonds, the Agreement and the Bond Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditor’s rights generally and principles of equity applicable to the availability of specific performance or other equitable relief. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly so stated. We have not undertaken to notify you of any

C-4 November 16, 2016 Page 5 change in law or fact after the date of this opinion which might affect any of the advice in this opinion.

Very truly yours,

KING & SPALDING LLP

By:

C-5 1180 Peachtree Street Atlanta, Georgia 30309-3521 Main: 404/572-4600 Fax: 404/572-5100

November 16, 2016

The Hospital Authority of Clarke Merrill Lynch, Pierce, Fenner & Smith, County, Georgia Incorporated, on behalf of itself, Athens, Georgia Goldman, Sachs & Co. and SunTrust Robinson Humphrey, Inc. Piedmont Healthcare, Inc. c/o Merrill Lynch, Pierce, Fenner & Smith Atlanta, Georgia Incorporated New York, New York U.S. Bank National Association, as trustee Atlanta, Georgia

Re: $______The Hospital Authority of Clarke County, Georgia Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A

To the Addressees:

We have acted as Bond Counsel in connection with the issuance by The Hospital Authority of Clarke County, Georgia (the “Clarke Authority”) of its $______in aggregate principal amount Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Clarke Certificates”). We have examined the law and such certified proceedings and other documents and materials as we have deemed necessary to render this opinion, including a copy of the validation proceeding concluded in the Superior Court of Athens-Clarke County, Georgia, with respect to the Clarke Certificates and certain other obligations described therein. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate.

The Clarke Certificates are being issued pursuant to the Hospital Authorities Law of the State of Georgia (O.C.G.A. § 31-7-70, et seq., as amended, the “Act”), a resolution of the Clarke Authority adopted on August 23, 2016, as supplemented by a resolution adopted on October 27, 2016, and a Trust Indenture, dated as of November 1, 2016 (the “Certificate Indenture”), between the Clarke Authority and U.S. Bank National Association, as bond trustee (in such capacity, the “Bond Trustee”). The Clarke Certificates are being sold to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representative”), on behalf of itself, Goldman Sachs & Co. and SunTrust Robinson Humphrey, Inc. (collectively, the “Underwriters”), pursuant to a Bond Purchase Agreement, dated October 27, 2016, among Piedmont Healthcare, Inc. (“PHC”), the Clarke Authority and the Representative, on behalf of the Underwriters. The Clarke Certificates are being issued for the purpose of (i) refunding the outstanding The Hospital Authority of Clarke County, Georgia Revenue Certificates (Athens Regional Medical Center Project), Series

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2007 (the “Series 2007 Certificates”) issued in the original aggregate principal amount of $155,490,000; and (ii) refunding the outstanding The Hospital Authority of Clarke County, Georgia Refunding Revenue Certificates (Athens Regional Medical Center Project), Series 2012 (the “Series 2012 Certificates” and, together with the Series 2007 Certificates, the “Refunded Certificates”), issued in the original aggregate principal amount of $65,705,000.

The Clarke Authority and PHC are entering into a Loan Agreement, dated as of November 1, 2016 (the “Agreement”), under which the Clarke Authority has agreed to issue the Clarke Certificates and loan the proceeds of the sale thereof to PHC for the purposes described above. The obligation of PHC to repay the loan made pursuant to the Agreement will be evidenced by a promissory note, dated the date of this opinion (the “2016-2 Master Note”), under which PHC has agreed to make payments sufficient to provide for the payment of the principal of, redemption premium (if any) and interest on the Clarke Certificates as the same become due and payable.

The 2016-2 Master Note is secured under an Amended and Restated Master Trust Indenture, dated November 16, 2016 (the “Restated Master Indenture”), among the Obligated Group Members (as defined therein and, collectively, the “Obligated Group”), including PHC, and U.S. Bank National Association, as master trustee (in such capacity, the “Master Trustee”), as supplemented from time to time by various supplemental indentures, including the Third Supplemental Master Trust Indenture, dated November 16, 2016, among PHC, as in its capacity as “Credit Group Representative” as defined in the Restated Master Indenture (in such capacity, the “Credit Group Representative”), and the Master Trustee (the Restated Master Indenture, as so supplemented, the “Master Indenture”). Under the Master Indenture, each Obligated Group Member has agreed, among other things, to guarantee the obligations of each other member of the Obligated Group secured under the Master Indenture. In addition, the Obligated Group has pledged to the Master Trustee to secure obligations issued from time to time under the Master Indenture the “Gross Receivables” (as defined in the Master Indenture). Under the terms of the Master Indenture, additional obligations may be issued and secured thereunder from time to time in accordance with the terms of the Master Indenture which rank on a parity as to lien on the trust estate created thereunder, including the Gross Receivables, with the lien thereon created in favor of the 2016-2 Master Note. The Master Indenture permits additions to, and withdrawals from, the Obligated Group as described therein.

Under the Certificate Indenture, the Clarke Authority has assigned to the Bond Trustee and pledged to the payment of the Clarke Certificates the trust estate (the “Trust Estate”) which includes (i) all right, title and interest of the Clarke Authority in the Agreement and the 2016-2 Master Note (except for certain unassigned rights as described in the Certificate Indenture) and (ii) all moneys and securities held from time to time by the Bond Trustee in certain funds and accounts created under the Certificate Indenture. The Clarke Certificates are subject to registration of transfer and exchange, to optional redemption and to mandatory sinking fund redemption in accordance with the Certificate Indenture.

Within 15 days of the sale and issuance of the Clarke Certificates, the Development Authority of Fulton County (the “Fulton Authority”) and the Hospital Authority of Fayette

C-7 November 16, 2016 Page 3

County (the “Fayette Authority” and, together with the Clarke Authority and the Fulton Authority, the “Issuers”) are selling and issuing certain other obligations, the proceeds of which are being loaned to PHC, including the:

(i) Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A, in the aggregate principal amount of $______(the “Fulton Bonds”); and

(ii) Hospital Authority of Fayette County Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A, in the aggregate principal amount of $______(the “Fayette Certificates”).

The proceeds of the sale of the Fulton Bonds are expected to be used to (i) finance or refinance, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Atlanta Hospital in Fulton County, Georgia (the “Fulton Project”), and (ii) refund certain obligations previously issued to finance or refinance certain bonds previously issued for the benefit of Piedmont Hospital in Fulton County, Georgia. The proceeds of the sale of the Fayette Certificates are expected to be used to finance or refinance, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital in Fayette County, Georgia (the “Fayette Project”). Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, the Clarke Certificates, the Fulton Bonds and the Fayette Certificates (collectively, the “Composite Bonds”) are a single issue of obligations for certain purposes under the Code, and the exclusion from gross income for federal income tax purposes of the interest on each series of the Composite Bonds is dependent upon whether the interest on the other series of the Composite Bonds is excluded from gross income for federal income tax purposes. We are delivering an opinion with respect to each other series of the Composite Bonds substantially to the same effect as this opinion.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement, dated October 27, 2016 (the “Official Statement”) relating to the Composite Bonds or any other offering material relating to the Composite Bonds. We express no opinion as to compliance by the Clarke Authority or the Underwriters with any federal or state statute, rule or regulation which may be applicable to the offer or sale of the Clarke Certificates.

C-8 November 16, 2016 Page 4

Based upon our examination, we are of the opinion, as of the date hereof and under existing law as follows:

1. The Clarke Authority is a validly existing public body corporate and politic of the State of Georgia with full power and authority (a) to issue and sell the Clarke Certificates, (b) to loan the proceeds from the sale of the Clarke Certificates to PHC for the purposes described in the Agreement and (c) to execute, deliver and perform its obligations under the Certificate Indenture and the Agreement.

2. The Certificate Indenture and the Agreement have been duly authorized, executed and delivered by the Clarke Authority and constitute valid and binding obligations of the Clarke Authority. The Certificate Indenture creates a valid security interest in, or lien on, the Trust Estate.

3. The Clarke Certificates have been duly authorized, executed and delivered by the Clarke Authority and are valid and binding limited obligations of the Clarke Authority, secured by the Certificate Indenture and payable by the Clarke Authority solely from the Trust Estate.

4. Under existing statutes, rulings and court decisions, and under applicable regulations and proposed regulations, interest on the Clarke Certificates is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding any other federal tax consequences caused by the receipt or accrual of interest on, or ownership of, the Clarke Certificates. In rendering this opinion, we have assumed continuing compliance by the Issuers and PHC with their respective covenants regarding certain requirements of the Code that must be satisfied subsequent to the issuance of the Composite Bonds in order that the interest on the Composite Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Failure to comply with such covenants could cause interest on the Composite Bonds to be included in federal gross income retroactive to the date of issuance of the Composite Bonds.

5. Under existing statutes, the interest on the Clarke Certificates is exempt from all present State of Georgia income taxation.

The rights of the owners of the Clarke Certificates and the enforceability of the Clarke Certificates, the Agreement and the Certificate Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditor’s rights generally and principles of equity applicable to the availability of specific performance or other equitable relief. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly so stated. We have not

C-9 November 16, 2016 Page 5 undertaken to notify you of any change in law or fact after the date of this opinion which might affect any of the advice in this opinion.

Very truly yours,

KING & SPALDING LLP

By:

C-10 1180 Peachtree Street Atlanta, Georgia 30309-3521 Main: 404/572-4600 Fax: 404/572-5100

November 16, 2016

Hospital Authority of Fayette Merrill Lynch, Pierce, Fenner & Smith, County Incorporated, on behalf of itself, Fayetteville, Georgia Goldman, Sachs & Co. and SunTrust Robinson Humphrey, Inc. Piedmont Healthcare, Inc. c/o Merrill Lynch, Pierce, Fenner & Smith Atlanta, Georgia Incorporated New York, New York U.S. Bank National Association, as trustee Atlanta, Georgia

Re: $______Hospital Authority of Fayette County Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A

To the Addressees:

We have acted as Bond Counsel in connection with the issuance by Hospital Authority of Fayette County (the “Fayette Authority”) of its $______in aggregate principal amount Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fayette Certificates”). We have examined the law and such certified proceedings and other documents and materials as we have deemed necessary to render this opinion, including a copy of the validation proceeding concluded in the Superior Court of Fayette County, Georgia, with respect to the Fayette Certificates and certain other obligations described therein. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate.

The Fayette Certificates are being issued pursuant to the Hospital Authorities Law of the State of Georgia (O.C.G.A. § 31-7-70, et seq., as amended, the “Act”), a resolution of the Fayette Authority adopted on August 17, 2016, as supplemented by a resolution adopted on October 26, 2016, and a Trust Indenture, dated as of November 1, 2016 (the “Certificate Indenture”), between the Fayette Authority and U.S. Bank National Association, as bond trustee (in such capacity, the “Bond Trustee”). The Fayette Certificates are being sold to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representative”), on behalf of itself, Goldman Sachs & Co. and SunTrust Robinson Humphrey, Inc. (collectively, the “Underwriters”), pursuant to a Certificate Purchase Agreement, dated October 26, 2016, among Piedmont Healthcare, Inc. (“PHC”), the Fayette Authority and the Representative, on behalf of the Underwriters. The Fayette Certificates are being issued for the purpose of financing or refinancing, in whole or in

C-11 November 16, 2016 Page 2

part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital located in Fayette County, Georgia (the “2016 Fayette Project”).

The Fayette Authority and PHC are entering into a Loan Agreement, dated as of November 1, 2016 (the “Agreement”), under which the Fayette Authority has agreed to issue the Fayette Certificates and loan the proceeds of the sale thereof to PHC for the purposes described above. The obligation of PHC to repay the loan made pursuant to the Agreement will be evidenced by a promissory note, dated the date of this opinion (the “2016-3 Master Note”), under which PHC has agreed to make payments sufficient to provide for the payment of the principal of, redemption premium (if any) and interest on the Fayette Certificates as the same become due and payable.

The 2016-3 Master Note is secured under an Amended and Restated Master Trust Indenture, dated November 16, 2016 (the “Restated Master Indenture”), among the Obligated Group Members (as defined therein and, collectively, the “Obligated Group”), including PHC, and U.S. Bank National Association, as master trustee (in such capacity, the “Master Trustee”), as supplemented from time to time by various supplemental indentures, including the Fourth Supplemental Master Trust Indenture, dated November 16, 2016, among PHC, as in its capacity as “Credit Group Representative” as defined in the Restated Master Indenture (in such capacity, the “Credit Group Representative”), and the Master Trustee (the Restated Master Indenture, as so supplemented, the “Master Indenture”). Under the Master Indenture, each Obligated Group Member has agreed, among other things, to guarantee the obligations of each other member of the Obligated Group secured under the Master Indenture. In addition, the Obligated Group has pledged to the Master Trustee to secure obligations issued from time to time under the Master Indenture the “Gross Receivables” (as defined in the Master Indenture). Under the terms of the Master Indenture, additional obligations may be issued and secured thereunder from time to time in accordance with the terms of the Master Indenture which rank on a parity as to lien on the trust estate created thereunder, including the Gross Receivables, with the lien thereon created in favor of the 2016-3 Master Note. The Master Indenture permits additions to, and withdrawals from, the Obligated Group as described therein.

Under the Certificate Indenture, the Fayette Authority has assigned to the Bond Trustee and pledged to the payment of the Fayette Certificates the trust estate (the “Trust Estate”) which includes (i) all right, title and interest of the Fayette Authority in the Agreement and the 2016-3 Master Note (except for certain unassigned rights as described in the Certificate Indenture) and (ii) all moneys and securities held from time to time by the Bond Trustee in certain funds and accounts created under the Certificate Indenture. The Fayette Certificates are subject to registration of transfer and exchange, to optional redemption and to mandatory sinking fund redemption in accordance with the Certificate Indenture.

Within 15 days of the sale and issuance of the Fayette Certificates, the Development Authority of Fulton County (the “Fulton Authority”) and The Hospital Authority of Clarke County, Georgia (the “Clarke Authority” and, together with the Fayette Authority and the Fulton

C-12 November 16, 2016 Page 3

Authority, the “Issuers”) are selling and issuing certain other obligations, the proceeds of which are being loaned to PHC, including the:

(i) Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fulton Bonds”) in the aggregate principal amount of $______; and

The proceeds of the sale of the Fulton Bonds are expected to be used to (i) finance or refinance, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Atlanta Hospital in Fulton County, Georgia (the “Fulton Project”), and (ii) refund certain obligations previously issued to finance or refinance certain bonds previously issued for the benefit of Piedmont Atlanta Hospital in Fulton County, Georgia. The proceeds of the sale of the Clarke Certificates are expected to be used to refund certain obligations previously issued to finance or refinance certain bonds previously issued for the benefit of Piedmont Athens Regional Medical Center in Athens-Clarke County, Georgia. Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, the Fayette Certificates, the Fulton Bonds and the Clarke Certificates (collectively, the “Composite Bonds”) are a single issue of obligations for certain purposes under the Code, and the exclusion from gross income for federal income tax purposes of the interest on each series of the Composite Bonds is dependent upon whether the interest on the other series of the Composite Bonds is excluded from gross income for federal income tax purposes. We are delivering an opinion with respect to each other series of the Composite Bonds substantially to the same effect as this opinion.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement, dated October 27, 2016 (the “Official Statement”) relating to the Composite Bonds or any other offering material relating to the Composite Bonds. We express no opinion as to compliance by the Fayette Authority or the Underwriters with any federal or state statute, rule or regulation which may be applicable to the offer or sale of the Fayette Certificates.

C-13 November 16, 2016 Page 4

Based upon our examination, we are of the opinion, as of the date hereof and under existing law as follows:

1. The Fayette Authority is a validly existing public body corporate and politic of the State of Georgia with full power and authority (a) to issue and sell the Fayette Certificates, (b) to loan the proceeds from the sale of the Fayette Certificates to PHC for the purposes described in the Agreement and (c) to execute, deliver and perform its obligations under the Certificate Indenture and the Agreement.

2. The Certificate Indenture and the Agreement have been duly authorized, executed and delivered by the Fayette Authority and constitute valid and binding obligations of the Fayette Authority. The Certificate Indenture creates a valid security interest in, or lien on, the Trust Estate.

3. The Fayette Certificates have been duly authorized, executed and delivered by the Fayette Authority and are valid and binding limited obligations of the Fayette Authority, secured by the Certificate Indenture and payable by the Fayette Authority solely from the Trust Estate.

4. Under existing statutes, rulings and court decisions, and under applicable regulations and proposed regulations, interest on the Fayette Certificates is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding any other federal tax consequences caused by the receipt or accrual of interest on, or ownership of, the Fayette Certificates. In rendering this opinion, we have assumed continuing compliance by the Issuers and PHC with their respective covenants regarding certain requirements of the Code that must be satisfied subsequent to the issuance of the Composite Bonds in order that the interest on the Composite Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Failure to comply with such covenants could cause interest on the Composite Bonds to be included in federal gross income retroactive to the date of issuance of the Composite Bonds.

5. Under existing statutes, the interest on the Fayette Certificates is exempt from all present State of Georgia income taxation.

The rights of the owners of the Fayette Certificates and the enforceability of the Fayette Certificates, the Agreement and the Certificate Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditor’s rights generally and principles of equity applicable to the availability of specific performance or other equitable relief. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly so stated. We have not

C-14 November 16, 2016 Page 5 undertaken to notify you of any change in law or fact after the date of this opinion which might affect any of the advice in this opinion.

Very truly yours,

KING & SPALDING LLP

By:

C-15 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX D

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE

[THIS PAGE INTENTIONALLY LEFT BLANK] SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES, THE LOAN AGREEMENTS AND THE MASTER INDENTURE

The following is a summary of certain provisions of the Bond Indentures, the Agreements, the Master Indenture and certain terms used in the Official Statement. The summary does not purport to be complete and is qualified in its entirety by express reference to the Bond Indentures, the Agreements and the Master Indenture.

DEFINITIONS

“2016 Master Note” shall mean with respect to the Fulton Bonds, the 2016-1 Master Note, with respect to the Clarke Certificates, the 2016-2 Master Note, and with respect to the Fayette Certificates, the 2016-3 Master Note.

“2016-1 Master Note” shall mean the 2016-1 Master Note, dated the date of issuance of the Fulton Bonds, delivered by PHC pursuant to the Master Indenture and relating to the Fulton Bonds.

“2016-2 Master Note” shall mean the 2016-2 Master Note, dated the date of issuance of the Clarke Certificates, delivered by PHC pursuant to the Master Indenture and relating to the Clarke Certificates.

“2016-3 Master Note” shall mean the 2016-3 Master Note, dated the date of issuance of the Fayette Certificates, delivered by PHC pursuant to the Master Indenture and relating to the Fayette Certificates.

“2016 Project” shall mean with respect to the Fulton Bonds, the Fulton Project, and with respect to the Fayette Certificates, the Fayette Project.

“Act” shall mean with respect to the Fulton Bonds, the Development Authorities Law of the State of Georgia (O.C.G.A. Section 36-62-1, et seq.), as amended, and with respect to the Clarke Certificates and Fayette Certificates, the Hospital Authorities Law of the State of Georgia (O.C.G.A. Section 31-7-70, et seq.), as amended.

“Affiliate” of any specified Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, (i) “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the power to appoint and remove its directors, the ownership of voting securities, by contract, membership or otherwise; and (ii) the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” shall mean the loan agreement between PHC and the applicable Authority, under which such Authority has agreed to issue the applicable series of Series 2016 Bonds and to lend the proceeds thereof to PHC and PHC has agreed to execute and deliver to the applicable Bond Trustee the related 2016 Master Note relating to the Series 2016 Bonds.

“Annual Debt Service” means for each Fiscal Year the sum (without duplication) of the aggregate amount of principal and interest scheduled to become due and payable in such Fiscal Year on all Long-Term Indebtedness of the Credit Group then Outstanding (by scheduled maturity, acceleration, mandatory redemption or otherwise, but not including purchase price becoming due as a result of mandatory or optional tender or put), less any amounts of such principal or interest to be paid during such Fiscal Year from (a) the proceeds of Indebtedness or (b) moneys or Government Obligations subject to an Irrevocable Deposit for the purpose of paying such principal or interest; provided that if an Identified Financial Product Agreement has been entered into by any Member with respect to Long-Term Indebtedness and the counterparty thereto has not defaulted in the payment obligations thereunder, interest on such Long-Term Indebtedness shall 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 Product Payments under an Identified Financial Product Agreement payable in such Fiscal Year minus any Financial Product Receipts under an Identified Financial Product Agreement receivable in such Fiscal Year.

“Authority” shall mean with respect to the Fulton Bonds, the Fulton Authority, with respect to the Clarke Certificates, the Clarke Authority, and with respect to the Fayette Certificates, the Fayette Authority.

“Authorized Authority Representative” shall mean the Chairman or Vice Chairman or any other individual designated from time to time to the Bond Trustee by a certificate signed by an authorized signatory of the Authority to represent the Authority, which certificate shall set forth the specimen signature of such person or persons.

“Authorized PHC Representative” shall mean the Chief Financial Officer or Treasurer of PHC or the person or persons at the time designated from time to time in writing to the Bond Trustee and the Authority by a certificate signed by an authorized signatory of PHC to represent PHC, which certificate shall set forth the specimen signature of such person or persons.

“Balloon Indebtedness” means Long-Term Indebtedness, 20% or more of the principal of which (calculated as of the date of issuance) becomes due during any period of 12 consecutive months absent acceleration if such maturing principal amount is not required to be amortized below such percentage by mandatory redemption prior to such 12-month period, but not including (i) the portion of such Long-Term Indebtedness that is equal to the aggregate of the principal payments to be made on such Long-Term Indebtedness in each year in which the total principal due in such year is less than 20% of the initial aggregate principal amount of such Long-Term Indebtedness and (ii) payments of purchase price of indebtedness that is subject to tender by the owner thereof.

“Bond Counsel” shall mean an attorney or firm of attorneys of national recognition experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds and who is selected or employed by PHC and not unacceptable to any recipient of the opinion required to be rendered by such Counsel.

“Bond Indenture” shall mean with respect to the Fulton Bonds, the Fulton Indenture, with respect to the Clarke Certificates, the Clarke Indenture, and with respect to the Fayette Certificates, the Fayette Indenture.

“Bond Owner” or “Owner of Series 2016 Bonds” or “Owners” or “Holders” or “registered Owners” shall mean the Person(s) in whose name(s) any Series 2016 Bond or Bonds are registered from time to time in accordance with the applicable Bond Indenture.

“Book Value” means, when used in connection with Property, Plant and Equipment or other Property of any Credit Group Member, the value of such property, net of accumulated depreciation, as it is carried on the books of the Credit Group Member in conformity with GAAP, and when used in connection with Property, Plant and Equipment or other Property of the Credit Group, means the

D-2 aggregate of the values so determined with respect to such Property of each Credit Group Member determined in such a way that no portion of such value of Property of any Credit Group Member is included more than once.

“Business Day” shall mean any day excluding Saturday, Sunday or any day which shall be in the City of Atlanta, Georgia, the City of New York, New York, or the State in which the Bond Trustee’s Principal Office or Designated Office is located, a legal holiday or a day on which banking institutions are authorized or obligated by law or administrative order to close or any other days designated as Business Days in any supplement or amendment to the Bond Indenture.

“Clarke Authority” shall mean The Hospital Authority of Clarke County, Georgia and its successors and assigns.

“Clarke Certificates” shall mean any one or all of The Hospital Authority of Clarke County, Georgia Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016, issued pursuant to the Clarke Indenture.

“Clarke Indenture” shall mean the Indenture of Trust, dated as of November 1, 2016, between the Clarke Authority and the Bond Trustee, relating to the Clarke Certificates.

“Clarke Refunded Certificates” shall mean the presently outstanding The Hospital Authority of Clarke County, Georgia Revenue Certificates (Athens Regional Medical Center Project), Series 2007, issued in the original aggregate principal amount of $155,490,000, and the presently outstanding The Hospital Authority of Clarke County, Georgia Refunding Revenue Certificates (Athens Regional Medical Center Project), Series 2012, issued in the original aggregate principal amount of $65,705,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and any temporary, final or proposed Treasury Regulations relating thereto as may be applicable.

“Commitment Indebtedness” means any Master Indenture Obligation issued to secure any Financial Product Agreement or to evidence a reimbursement or other repayment obligation of a Credit Group Member under a reimbursement agreement or similar agreement relating to a credit facility or liquidity facility which provides support or liquidity for Indebtedness.

“Completion Indebtedness” means any Long-Term Indebtedness incurred for the purpose of financing the completion of construction or equipping of any project for which Long-Term Indebtedness or Interim Indebtedness has theretofore been incurred in accordance with the provisions hereof, to the extent necessary to provide a completed and fully equipped facility of the type and scope contemplated at the time such Long-Term Indebtedness or Interim Indebtedness was incurred, in accordance with the general plans and specifications for such facility as originally prepared in connection with such Long- Term Indebtedness or Interim Indebtedness as such plans and specifications may be modified to deal with exigencies (if any) not anticipated at commencement of construction (or matters encountered beyond budgeted-for contingencies) as certified by an Officer’s Certificate.

“Controlling Member” means the Obligated Group Member designated by the Credit Group Representative to establish and maintain control over a Designated Affiliate.

“Cost” or “Costs” in connection with any 2016 Project, shall mean all expenses which are properly chargeable thereto under Generally Accepted Accounting Principles or which are incidental to the financing, acquisition, construction and installation of the 2016 Project, or which are otherwise financeable under the Act, including, without limiting the generality of the foregoing:

D-3

(a) amounts payable to contractors and costs incident to the award and performance of contracts;

(b) cost of labor, materials, facilities and services furnished by PHC or the Authority, and their employees or others, materials and supplies purchased by PHC or any Affiliate thereof or the Authority or others, and permits and licenses obtained by PHC, the Authority or others;

(c) engineering, architectural, legal, accounting and other professional and advisory fees, as well as the fees and expenses of the Bond Trustee;

(d) printing, engraving, legal fees, accounting fees, placement fees and costs, underwriting discount and other expenses of financing and issuing the Series 2016 Bonds, including any fees or other expenses charged by the Authority;

(e) costs, fees and expenses in connection with the acquisition of real and personal property or rights therein, including premiums for title insurance;

(f) costs of equipment;

(g) amounts required to repay temporary loans or advances PHC’s funds made to finance Costs of such Project;

(h) costs of site improvements, including demolition, performed in anticipation of the Project; and (i) Costs of Issuance.

“Costs of Issuance” or “Cost of Issuance” shall include (but shall not be limited to):

(a) counsel fees (including Bond Counsel, underwriter’s counsel, Authority counsel, counsel to PHC and the Obligated Group, as well as any other specialized counsel fees incurred in connection with the issuance of the Series 2016 Bonds);

(b) financial advisor fees, if any, incurred by or for the benefit of PHC in connection with the issuance of the Series 2016 Bonds;

(d) paying agent and certifying and authenticating agent fees related to issuance of the Series 2016 Bonds;

(e) accountant’s fees related to issuance of the Series 2016 Bonds;

(f) printing costs (if any);

(g) costs incurred in connection with the validation of the Series 2016 Bonds; and

(h) any other fees and expenses incurred in connection with the issuance of the Series 2016 Bonds.

D-4

“Counsel” shall mean a lawyer duly admitted to practice law before the highest court of any state in the United States of America or the District of Columbia, or any law firm, who or which, as the case may be, is not unsatisfactory to any recipient of the opinion required to be rendered by such Counsel.

“County” shall mean with respect to the Fulton Bonds, Fulton County, with respect to the Clarke Certificates, the Unified Government of Athens-Clarke County, and with respect to the Fayette Certificates, Fayette County.

“Credit Group” or “Credit Group Members” means all Obligated Group Members and Designated Affiliates.

“Days Cash on Hand” shall mean, for the period tested, the sum of unrestricted and unencumbered (i) cash, (ii) cash equivalents and (iii) marketable debt and equity securities (whether or not designated as such by a governing body), divided by the quotient of (x) operating expenses less depreciation and amortization divided by (y) the number of calendar days in the period. Notwithstanding any of the foregoing to the contrary, Days Cash on Hand shall not include (A) self-insurance funds, (B) proceeds of any short-term borrowings including, without limitation, internal affiliate loans and draws on lines of credit regardless of the maturity date of the line of credit, (C) proceeds of accounts receivable financings or factoring, (D) proceeds of put debt not supported by a liquidity facility with term-out features, (E) funds or investments subject to any donor restrictions, permanent or temporary, inconsistent with the use of such funds or investments for the payment of Required Payments or operating expenses, regardless of whether such funds or investments are considered restricted for purposes of generally accepted accounting principles or (F) any collateral required pursuant to the terms of a Financial Product Agreement that has been posted.

“Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Income Available for Debt Service by Maximum Annual Debt Service.

“Designated Affiliate” means any Person which has been so designated by the Credit Group Representative in accordance with the Master Indenture so long as such Person has not been further designated by the Credit Group Representative as no longer being a Designated Affiliate in accordance with the Master Indenture.

“Designated Office” when referring to the Bond Trustee shall mean the office of the bond Trustee so designated by written notice to the Authority and PHC, which initially shall be as follows: U.S. Bank National Association, 1349 W. Peachtree Street, N.W., Suite 1050, Atlanta, Georgia 30309, Attention: Corporate Trust Department.

“Disposition” means a conveyance, gift, transfer, sale, lease or other disposition of assets.

“Existing Master Indenture Obligations” means those obligations issued under the Master Trust Indenture, dated as of March 1, 1999, as amended and supplemented, among the Obligated Group Members and the Master Trustee, as described under the heading “MANAGEMENT’S DISCUSSION AND ANALYSIS – Outstanding Debt” in APPENDIX A to the Official Statement.

“Fayette Authority” shall mean the Hospital Authority of Fayette County and its successors and assigns.

“Fayette Certificates” shall mean any one or all of the Hospital Authority of Fayette County Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A, issued pursuant to the Fayette Indenture.

D-5

“Fayette Indenture” shall mean the Indenture of Trust, dated as of November 1, 2016, between the Fayette Authority and the Bond Trustee, relating to the Fayette Certificates.

“Fayette Project” shall mean the financing or refinancing, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Fayette Hospital in Fayette County, Georgia.

“Financial Product Agreement” means any interest rate exchange agreement, hedge or similar arrangement, including, inter alia, an interest rate swap, asset swap, a constant maturity swap, a forward or futures contract, cap, collar, option, floor, forward or other hedging agreement, arrangement or security, direct funding transaction or other derivative, however denominated and whether entered into on a current or forward basis, excluding however commodity (including power) forward purchase agreements.

“Financial Product Extraordinary Payments” means any payments required to be paid to a counterparty by an Obligated Group Member pursuant to a Financial Product Agreement in connection with the termination thereof, tax gross-up payments, expenses, default interest, and any other payments or indemnification obligations to be paid to a counterparty by an Obligated Group Member under a Financial Product Agreement, which payments are not Financial Product Payments.

“Financial Product Payments” means regularly scheduled payments required to be paid to a counterparty by an Obligated Group Member pursuant to a Financial Product Agreement and excluding Financial Product Extraordinary Payments.

“Financing Documents” shall mean the Bond Indenture, the Master Indenture, the Second Supplemental Master Indenture, the Third Supplemental Master Indenture, the Fourth Supplemental Master Indenture, the Agreement, the 2016 Master Note, and any other documents relating to the Series 2016 Bonds issued under the Bond Indenture.

“Fiscal Year” means the period beginning on October 1 of each year and ending on the next succeeding September 30, or any other twelve-month period hereafter designated by the Credit Group Representative as the fiscal year of the Credit Group.

“Fourth Supplemental Master Indenture” shall mean the Fourth Supplemental Master Trust Indenture between PHC and the Master Trustee authorizing the issuance of the 2016-3 Master Note relating to the Fayette Certificates.

“Fulton Authority” shall mean the Development Authority of Fulton County and its successors and assigns.

“Fulton Bonds” shall mean any one or all of the Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A, issued pursuant to the Fulton Indenture.

“Fulton Indenture” shall mean the Indenture of Trust, dated as of November 1, 2016, between the Fulton Authority and the Bond Trustee, relating to the Fulton Bonds.

“Fulton Project” shall mean the financing or refinancing, in whole or in part, the cost of the acquisition, construction, installation and equipping of certain healthcare facilities, equipment and improvements on or near the campus of Piedmont Hospital in Fulton County, Georgia.

D-6

“Fulton Refunded Bonds” shall mean the presently outstanding portion of the Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2009A issued in the original aggregate principal amount of $172,245,000.

“Gross Receivables” means all of the accounts, chattel paper, instruments and general intangibles (all as defined in the UCC) of each Obligated Group Member, as are now in existence or as may be hereafter acquired and the proceeds thereof; excluding, however, all Restricted Moneys.

“Guaranty” means any obligation of any Credit Group Member guaranteeing, directly or indirectly, any obligation of any other Person which would, if such other Person were a Credit Group Member, constitute Indebtedness.

“Income Available for Debt Service” means, unless the context provides otherwise, with respect to the Credit Group as to any period of time, net income, or excess of revenues over expenses (excluding income from all Irrevocable Deposits) before depreciation, amortization, and interest expense (including Financial Product Payments and Financial Product Receipts on Identified Financial Product Agreements), as determined in accordance with GAAP and as shown on the Credit Group Financial Statements; provided, that no determination thereof shall take into account:

(a) gifts, grants, bequests, donations or contributions, to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of principal of, redemption premium and interest on Indebtedness or the payment of operating expenses;

(b) the net proceeds of insurance (other than business interruption insurance) and condemnation awards;

(d) any gain or loss resulting from the sale, exchange or other disposition of assets not in the ordinary course of business;

(e) any gain or loss resulting from any discontinued operations;

(f) any gain or loss resulting from pension terminations, settlements or curtailments;

(g) any unusual charges for employee severance;

(h) adjustments to the value of assets or liabilities resulting from changes in GAAP;

(i) unrealized gains or losses on investments, including “other than temporary” declines in Book Value;

(j) gains or losses resulting from changes in valuation of any hedging, derivative, interest rate exchange or similar contract (including Financial Product Agreements);

(k) any Financial Product Extraordinary Payments or similar payments on any hedging, derivative, interest rate exchange or similar contract that does not constitute a Financial Product Agreement;

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(l) unrealized gains or losses from the write-down, reappraisal or revaluation of assets; or

(m) other nonrecurring items of any extraordinary nature which do not involve the receipt, expenditure or transfer of assets.

“Indebtedness” means any Guaranty (other than any Guaranty by any Credit Group Member of Indebtedness of any other Credit Group Member) and any obligation of any Credit Group Member (a) for repayment of borrowed money, (b) with respect to finance leases or (c) under installment sale agreements; provided, however, that if more than one Credit Group Member shall have incurred or assumed a Guaranty of a Person other than a Credit Group Member, or if more than one Credit Group Member shall be obligated to pay any obligation, for purposes of any computations or calculations under the Master Indenture such Guaranty or obligation shall be included only one time. Financial Product Agreements and physician income guaranties shall not constitute Indebtedness.

“Interest Account” shall mean the account of such name established in the Sinking Fund pursuant to the Bond Indenture.

“Interest Payment Date” shall mean January 1 and July 1 of each year, commencing January 1, 2017.

“Interim Indebtedness” means Indebtedness with an original maturity not in excess of one year, the proceeds of which are to be used to provide interim financing for capital improvements in anticipation of the issuance of Long-Term Indebtedness. Interim Indebtedness shall be considered Long-Term Indebtedness for purposes of the Master Indenture.

“Investment Securities” shall mean any one or more of the following investments, if and to the extent the same are then legal investments under the applicable laws of the State for moneys proposed to be invested therein:

(a) the local government investment pool created in Chapter 83 of Title 36 of the Official Code of Georgia Annotated, as amended;

(b) bonds or obligations of the Authority, or bonds or obligations of the State of Georgia, or of other counties, municipal corporations, and political subdivisions of the State of Georgia;

(c) bonds or other obligations of the United States or of subsidiary corporations of the United States government which are fully guaranteed by such government;

(d) obligations of and obligations guaranteed by agencies or instrumentalities of the United States government, including those issued by the Federal Land Bank, Federal Home Loan Bank, Federal Intermediate Credit Bank, Bank for Cooperatives and any other such agency or instrumentality now or hereafter in existence; provided, however, that all such obligations shall have a current credit rating from a nationally recognized rating service of at least one of the three highest rating categories available and have a nationally recognized market;

(e) bonds or other obligations issued by any public housing agency or municipal corporation in the United States, which such bonds or obligations are fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States government, or project notes issued by

D-8 any public housing agency, urban renewal agency, or municipal corporation in the United States which are fully secured as to payment of both principal and interest by a requisition, loan, or payment agreement with the United States government;

(f) certificates of deposit of national or state banks located within the State of Georgia which have deposits insured by the Federal Deposit Insurance Corporation and certificates of deposit of federal savings and loan associations and state building and loan or savings and loan associations located within the State of Georgia which have deposits insured by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Georgia Credit Union Deposit Insurance Corporation, including the certificates of deposit of any bank, savings and loan association, or building and loan association acting as depository, custodian, or trustee for any proceeds of any bonds. The portion of such certificates of deposit in excess of the amount insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Georgia Credit Union Deposit Insurance Corporation, if any, shall be secured by deposit, with the Federal Reserve Bank of Atlanta, Georgia, or with any national or state bank or federal savings and loan association or state building and loan or savings and loan association located within the State of Georgia or with a trust office located within the State of Georgia, of one or more of the following securities in an aggregate principal amount equal at least to the amount of such excess: direct and general obligations of the State of Georgia or other states or of any county or municipal corporation in the State of Georgia, obligations of the United States or subsidiary corporations referred to in paragraph (c) above, obligations of the agencies and instrumentalities of the United States government referred to in paragraph (d) above, or bonds, obligations, or project notes of public housing agencies, urban renewal agencies, or municipalities referred to in paragraph (e) above;

(g) securities of or other interests in any no-load, open-end management type investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, or any common trust fund maintained by any bank or trust company which holds such proceeds as trustee or by an affiliate thereof so long as:

(i) the portfolio of such investment company or investment trust or common trust fund is limited to the obligations referred to in paragraph (c) and (d) above and repurchase agreements fully collateralized by any such obligations;

(ii) such investment company or investment trust or common trust fund takes delivery of such collateral either directly or through an authorized custodian;

(iii) such investment company or investment trust or common trust fund is managed so as to maintain its shares at a constant net asset value; and

(iv) securities of or other interests in such investment company or investment trust or common trust fund are purchased and redeemed only through the use of national or state banks having corporate trust powers and located within the State of Georgia; and

(h) interest-bearing time deposits, repurchase agreements, reverse repurchase agreements, rate guarantee agreements, or other similar banking arrangements with a bank or trust company having capital and surplus aggregating at least $50 million or with any government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York having capital aggregating at least $50 million or with any corporation which is subject to registration with the Board of Governors of the Federal Reserve System pursuant to

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the requirements of the Bank Holding Company Act of 1956, provided that each such interest- bearing time deposit, repurchase agreement, reverse repurchase agreement, rate guarantee agreement or other similar banking arrangement shall permit the moneys so placed to be available for use at the time provided with respect to the investment or reinvestment of such moneys; and

(i) any other investments authorized by the laws of the State of Georgia from time to time.

“Lien” means any mortgage or pledge of, or security interest in, or lien or encumbrance on, any Property of an Obligated Group Member (i) which secures any Indebtedness or any other obligation of such Obligated Group Member or (ii) which secures any obligation of any Person other than an Obligated Group Member, and excluding liens applicable to Property in which an Obligated Group Member has only a leasehold interest unless the lien secures Indebtedness of that Obligated Group Member.

“Loan” shall mean the advance of funds by the Authority to PHC in a principal amount equal to the aggregate principal amount of the Series 2016 Bonds made pursuant to the Agreement.

“Loan Default” shall mean a Loan Default as defined in the Agreement relating to the Series 2016 Bonds.

“Loan Obligation” shall mean PHC’s obligation to repay the Loan as evidenced by the 2016 Master Note.

“Loan Payment” shall mean a payment by PHC pursuant to the 2016 Master Note of amounts which correspond to interest, or principal and interest on account of debt service on the Series 2016 Bonds, plus related fees and expenses, all in accordance with Article V of the Agreement and the 2016 Master Note.

“Long-Term Indebtedness” means Indebtedness other than Short-Term Indebtedness. For purposes of the Master Indenture, Indebtedness in the form of commercial paper or in the form of a Master Indenture Obligation issued to secure Related Bonds in the form of commercial paper shall be treated as Long-Term Indebtedness.

“Master Indenture” Amended and Restated Master Trust Indenture, dated November ___, 2016, among the Obligated Group Members and the Master Trustee, as supplemented or amended by various supplemental or amendatory indentures from time to time.

“Master Indenture Obligation” means each of the Existing Master Indenture Obligations and any obligation of the Obligated Group issued pursuant to the Master Indenture, as a joint and several obligation of each Obligated Group Member, which may be in any form set forth in a Related Supplement, including, but not limited to, bonds, notes, obligations, debentures, reimbursement agreements, loan agreements, Financial Product Agreements or leases. Reference to a Series of Master Indenture 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 Trustee” shall mean U.S. Bank National Association, and its successors and assigns.

“Maximum Annual Debt Service” means the projected maximum annual payment necessary to amortize all of the Credit Group’s Outstanding Long-Term Indebtedness, as of the date of determination, to be determined by the Credit Group Representative using either of the following methods as chosen by the Credit Group Representative:

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(n) Projection Based on Adjusted Annual Payments. Maximum Annual Debt Service may be projected based on the greatest amount of Annual Debt Service becoming due and payable in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year; provided, however, that for the purposes of computing Maximum Annual Debt Service:

(i) with respect to a Guaranty, (i) if the Credit Group Members have made a payment pursuant to such Guaranty, 100% of the Annual Debt Service (calculated as if such Person were a Credit Group Member) guaranteed by the Credit Group Members under the Guaranty shall be included in the calculation of Annual Debt Service in the year in which such payment was made and for two Fiscal Years thereafter and (ii) otherwise, there shall be included in the calculation of Annual Debt Service a percentage of the Annual Debt Service (calculated as if such Person were a Credit Group Member) guaranteed by the Credit Group Members under the Guaranty, based on the ratio of Income Available for Debt Service of the Person whose indebtedness is guaranteed by the Credit Group Member (calculated as if such Person were a Credit Group Member), over the Annual Debt Service of such Person (calculated as if such Person were a Credit Group Member) (the “Ratio”). The applicable percentage of Annual Debt Service on such indebtedness shall be included in the calculation of Annual Debt Service, as follows:

Percentage of Annual Debt Service on such Ratio Indebtedness to be Included

Less than 2.0 20% 2.0 or greater 0%

(ii) if interest on Long-Term Indebtedness is payable pursuant to a variable interest rate formula (or if Financial Product Payments under an Identified Financial Product Agreement or Financial Product Receipts under an Identified Financial Product Agreement are determined pursuant to a variable rate formula), the interest rate on such Long-Term Indebtedness (or the variable rate formula for such Financial Product Payments under an Identified Financial Product Agreement or Financial Product Receipts under an Identified Financial Product Agreement) for periods when the actual interest rate cannot yet be determined shall be assumed to be equal to (i) if such Long-Term Indebtedness (or Identified Financial Product Agreement) was Outstanding during the 12 calendar months immediately preceding the date of calculation, an average of the interest rates per annum which were in effect, and (ii) if such Long-Term Indebtedness (or Identified Financial Product Agreement) was not Outstanding during the 12 calendar months immediately preceding the date of calculation, at the election of the Credit Group Representative, either (x) an average of the SIFMA Swap Index during the 12 calendar months immediately preceding the date of calculation or (y) an average of the interest rates per annum which would have been in effect for any 12 consecutive calendar months during the 18 calendar months immediately preceding the date of calculation, as specified in a Certificate of the Credit Group Representative or, at the sole option of the Credit Group Representative, such interest rate as shall be specified in a written statement from an investment banking or financial advisory firm selected by the Credit Group Representative;

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(iii) if moneys or Government Obligations have been deposited in an Irrevocable Deposit with a trustee or escrow agent in an amount, together with earnings thereon, sufficient to pay all or a portion of the principal of or interest on Long-Term Indebtedness as it comes due, such principal or interest, as the case may be, to the extent provided for, shall not be included in computations of Maximum Annual Debt Service;

(iv) debt service on Long-Term Indebtedness incurred to finance capital improvements shall be included in the calculation of Maximum Annual Debt Service only in proportion to the amount of interest on such Long-Term Indebtedness which is payable in the then current Fiscal Year from sources other than proceeds of such Long- Term Indebtedness (other than proceeds deposited in debt service reserve funds) held by a trustee or escrow agent for such purpose; and

(v) with respect to Balloon Indebtedness or Interim Indebtedness, such Balloon Indebtedness or Interim Indebtedness shall be treated, at the sole option of the Credit Group Representative, as Long-Term Indebtedness bearing interest at an interest rate equal to either (i) a fixed rate equal to the Index Rate or (ii) such interest rate as shall be specified in a written statement from an investment banking or financial advisory firm selected by the Credit Group Representative, and with substantially level debt service over a period of up to 30 years (which period shall be designated by the Credit Group Representative) from the date of calculation.

(o) Projection Based on Assumed Level Annual Payments. Maximum Annual Debt Service may be projected based on assumed level annual payments, determined as follows:

(i) The amount of principal and interest payable during each year on such Long-Term Indebtedness after the date of determination shall be projected assuming (A) that the principal balance of such Long-Term Indebtedness (after adjustment as provided in paragraph (b)(2) of this definition) on the date of determination will be refinanced, (B) that such principal balance will be payable over a term of 30 years, (C) that such principal balance will bear interest at the Index Rate, and (D) that debt service on such Long-Term Indebtedness will be payable in equal annual installments sufficient to pay both principal and interest;

(ii) If any Credit Group Member has paid, directly or indirectly, any principal or interest with respect to a Guaranty at any time during the 24-month period next preceding such determination, 100% of the principal balance guaranteed by such Credit Group Member shall be included in the projection. If the Credit Group Member has not paid, directly or indirectly, any principal or interest on a Guaranty at any time during the 24-month period next preceding such determination, only 20% of the principal balance guaranteed by such Credit Group Member shall be included in the projection; and

(iii) if moneys or Government Obligations have been deposited in an Irrevocable Deposit with a trustee or escrow agent in an amount, together with earnings thereon, sufficient to pay all or a portion of the principal of or interest on Long-Term Indebtedness as it comes due, such principal (or portion thereof), to the extent provided for, shall not be included in such projection.

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“Nonrecourse Indebtedness” means any Indebtedness which is not a general obligation of the obligor of such Indebtedness and which is secured by a Lien on Property, Plant and Equipment acquired or constructed with the proceeds of such Indebtedness, liability for which is effectively limited to the Property, Plant and Equipment subject to such Lien with no recourse, directly or indirectly, to any other Property of any Credit Group Member absent extraordinary events such as fraud, insolvency or waste.

“Officer’s Certificate” means a certificate signed by an Authorized Representative of the Credit Group Representative.

“Outstanding” or “outstanding” in connection with any Series 2016 Bonds, shall mean as of the time in question, all Series 2016 Bonds which have been authenticated and delivered under the Bond Indenture, except:

(a) Series 2016 Bonds theretofore canceled or required to be canceled pursuant to the Bond Indenture;

(b) Series 2016 Bonds deemed to have been paid in accordance with the Bond Indenture; and

(c) Series 2016 Bonds in substitution for which other Series 2016 Bonds have been authenticated and delivered pursuant to the Bond Indenture.

In determining whether the registered owners of a requisite aggregate principal amount of Series 2016 Bonds outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Bond Indenture, Series 2016 Bonds which, to the actual knowledge of the Bond Trustee, are held by or on behalf of PHC or any Affiliate thereof shall be disregarded for the purposes of any such determination unless all such Series 2016 Bonds are so owned.

“Paying Agent” shall mean (i) the bank or trust company meeting the qualifications of the Paying Agent under the Bond Indenture and which accepts the responsibilities and duties of the Paying Agent under the Bond Indenture pursuant to a written agreement among the Bond Trustee, the Authority, PHC and the bank or trust company agreeing to serve as the Paying Agent, or (ii) the Bond Trustee.

“Person” shall mean an individual, a corporation, a partnership, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, a governmental unit or an agency, political subdivision or instrumentality thereof or any other group or organization of individuals.

“PHC” shall mean Piedmont Healthcare, Inc., a Georgia nonprofit corporation, and its successor and assigns.

“Principal Account” shall mean the account of such name established in the Sinking Fund pursuant to the Bond Indenture.

“Project” shall mean with respect to the Fulton Bonds, the Fulton Project, and with respect to the Fayette Certificates, the Fayette Project.

“Property” with respect to the shall mean any and all rights, titles and interests in and to any and all property whether real or personal, tangible or intangible, including cash, wherever situated. With respect to the Master Indenture, “Property” means any and all rights, titles and interests in and to any and all assets of any Credit Group Member, whether real or personal, tangible or intangible and wherever situated, other than donor restricted funds as determined in accordance with GAAP. For purposes of

D-13 performing certain calculations under the Master Indenture, the Credit Group Representative may treat “total assets” as shown on the Credit Group’s audited financial statements as the Book Value of the Credit Group’s Property.

“Property, Plant and Equipment” means all Property of any Credit Group Member which is considered property, plant and equipment of such Credit Group Member under GAAP.

“Rating Agency” shall mean Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc., Moody’s Investors Service, Inc. or Fitch, Inc., whichever has provided and is maintaining a rating for the Series 2016 Bonds, and shall include their respective successors and assigns. If any such corporation which has provided a rating for the Series 2016 Bonds shall no longer perform the functions of a securities rating service, such corporation shall thereafter be deemed to refer to any other nationally recognized rating service which provides a rating for the Series 2016 Bonds, as shall be designated by PHC, upon notice to the Bond Trustee and the Authority.

“Redemption Account” shall mean the account established in the Sinking Fund pursuant to and further described in the Bond Indenture.

“Redemption Date” shall mean each date on which Series 2016 Bonds are to be redeemed pursuant to the Bond Indenture.

“Redemption Price” with respect to a Series 2016 Bond, shall mean the principal amount of such Series 2016 Bond plus the applicable premium, if any, payable upon redemption thereof under the Bond Indenture.

“Related Bonds” means the revenue bonds, revenue anticipation certificates, notes or other obligations (including, without limitation, installment sale or lease obligations evidenced by certificates of participation) issued by any Government Issuer, the proceeds of which are loaned or otherwise made available to a Credit Group Member in consideration of the execution, authentication and delivery of a Master Indenture Obligation or Master Indenture Obligations to or for the order of such Government Issuer. Without limiting the foregoing, “Related Bonds” includes revenue bonds, revenue anticipation certificates, notes or other obligations (including, without limitation, installment sale or lease obligations evidenced by certificates of participation) issued by any Government Issuer, which are secured by the Existing Master Indenture Obligations.

“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 without limitation, Financial Product Payments, Financial Product Extraordinary Payments and 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 Obligated Group Member pursuant to any Related Supplement or any Master Indenture Obligation.

“Restricted Moneys” means the proceeds of any grant, gift, bequest, contribution or other donation (and, to the extent subject to the applicable restrictions, the investment income derived from the investment of such proceeds) specifically restricted by the donor or grantor to an object or purpose inconsistent with their use for the payment of Required Payments.

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“Second Supplemental Master Indenture” shall mean the Second Supplemental Master Trust Indenture between PHC and the Master Trustee authorizing the issuance of the 2016-1 Master Note relating to the Fulton Bonds.

“Series 2016 Bond” or “Series 2016 Bonds” shall mean any one or all of the Fulton Bonds, the Clarke Certificates or the Fayette Certificates, as the case may be.

“Short-Term Indebtedness” means all Indebtedness (other than Interim Indebtedness and Indebtedness in the form of commercial paper (or in the form of a Master Indenture Obligation issued to secure Related Bonds in the form of commercial paper)) having an original maturity less than or equal to one year and not renewable at the option of a Credit Group Member for a term greater than one year from the date of original incurrence or issuance, or Indebtedness with a maturity greater than one year or renewable at the option of a Credit Group Member for a term greater than one year, if by the terms of such Indebtedness, for a period of at least 20 consecutive days during each calendar year no Indebtedness is permitted to be Outstanding thereunder. For purposes of this definition, (i) only the stated maturity of Indebtedness (and not any tender or put right of the holder of such Indebtedness) shall be taken into account in determining if such Indebtedness constitutes Short-Term Indebtedness and (ii) classification of Indebtedness as current or short-term under GAAP shall not be controlling. Interim Indebtedness shall not constitute Short-Term Indebtedness for any purpose under the Master Indenture.

“Subordinated Indebtedness” means Long-Term Indebtedness specifically subordinated as to payment and security to the payment of all Required Payments and other obligations of the Credit Group Members under the Master Indenture.

“Supplemental Indenture” shall mean any indenture amending or supplementing the Bond Indenture which may be entered into in accordance with the provisions of the Bond Indenture.

“Third Supplemental Master Indenture” shall mean the Third Supplemental Master Trust Indenture between PHC and the Master Trustee authorizing the issuance of the 2016-2 Master Note relating to the Clarke Certificates.

“Total Revenues” means, for the period of calculation in question, the sum of operating revenue (including net patient service revenue, premium revenue and other revenue and nonoperating gains (losses)), as shown on the Credit Group Financial Statements for the most recent Fiscal Year.

“Transaction Test” means, with respect to any specified transaction, that (i) no Event of Default or Default then exists and (ii) if such transaction had occurred as of the first day of the first full Fiscal Year preceding such transaction for which Credit Group Financial Statements are available, the Credit Group would be able to satisfy the conditions for the issuance of $1.00 of additional Long-Term Indebtedness as of the date of such transaction.

THE AGREEMENT

Issuance of the Series 2016 Bonds and Loan

The Authority has undertaken to issue the Series 2016 Bonds in accordance with the Bond Indenture. Upon the issuance and delivery thereof, an amount equal to the aggregate principal amount of the Series 2016 Bonds shall be loaned to PHC by disbursing the proceeds of the sale of such Series 2016 Bonds in accordance with the provisions of the Bond Indenture.

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Unless and until so disbursed, moneys or investments in any fund established under the Bond Indenture shall be trust funds pledged to and held solely for the security and benefit of the Owners of the Series 2016 Bonds, subject to the provisions of the Agreement and the Bond Indenture permitting the investment or use of such moneys.

Assignment of the Authority’s Rights

As a source of payment for the Series 2016 Bonds, the Authority, pursuant to the Bond Indenture, will assign to the Bond Trustee pursuant to the Bond Indenture all the Authority’s rights in the Agreement (except the Authority’s rights to indemnity or payment under the Agreement). PHC consents to such assignment and agrees to make payment of all sums assigned by the Authority directly to the Bond Trustee without defense or set-offs by reason of any dispute between PHC and the Authority.

Loan Term

PHC’s obligations under the Agreement will commence on the date of the execution and delivery thereof and will terminate after payment in full of the Loan and all other amounts due under the Agreement or the 2016 Master Note; provided, however, that certain covenants and obligations in the Agreement relating to the tax status of the Series 2016 Bonds, compensation and indemnity, and attorney’s fees and other expenses shall survive the termination of the Agreement and the payment in full of the amounts due under the Agreement and under the 2016 Master Note.

Covenants Relating to the Tax Status of the Bonds

PHC has covenanted that it will not take (or fail to take) any action or permit (or fail to permit) any action to be taken on its behalf, or cause or permit any circumstance within its control to arise or continue, if such action or circumstance, or its reasonable expectation on the date of issuance of the Series 2016 Bonds, would cause the interest on the Series 2016 Bonds to be includable in the gross income of owners thereof for federal income tax purposes.

Without limiting the foregoing, PHC has covenanted that, notwithstanding any other provision of the Agreement or any other instrument, it will neither make nor 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 use would cause any of the Series 2016 Bonds to be an “arbitrage bond” under Section 148(a) of the Code, bonds described in paragraph (3) or (4) of Section 149(d) of the Code relating to restrictions on advance refundings, “hedge bonds” under Section 149(g) of the Code or “private activity bonds” under Section 141 of the Code (other than obligations described in Section 145 of the Code), and that it will comply with the requirements of such Sections, including, without limitation, the requirement to make arbitrage rebate payments pursuant to Section 148(f) of the Code to the extent required therein.

Without limiting the generality of the foregoing, PHC and the Authority have agreed for the benefit of the owners of the Series 2016 Bonds as follows:

(i) that, during the term of the Agreement, and for such period thereafter as may be required by applicable law, PHC will fully comply with all effective rules, rulings and regulations promulgated by the Department of the Treasury or the Internal Revenue Service which are applicable to the Series 2016 Bonds or the proceeds thereof;

(ii) that PHC shall take all action required from time to time to comply with the rebate requirements of Section 148(f) of the Code. PHC has agreed to provide the Bond Trustee

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and the Authority with a copy of any reports or returns filed with the Internal Revenue Service or the Department of the Treasury pursuant to Section 148(f) of the Code upon request;

(iii) all property acquired with the proceeds of the Series 2016 Bonds, the Fulton Refunded Bonds or the Clarke Refunded Certificates or any income from the investment thereof will be owned by a 501(c)(3) organization as defined in Section 150(a)(4) of the Code or a “governmental unit” within the meaning of Section 150(a)(2);

(iv) the proceeds of the Series 2016 Bonds and the income from the investment thereof will be applied such that the Series 2016 Bonds would not be “private activity bonds” within the meaning of Section 141 of the Code if (A) organizations described in Section 501(c)(3) of the Code were treated as governmental units with respect to their activities which do not constitute unrelated trades or business, determined by applying Section 513(a) of the Code, and (B) paragraphs (1) and (2) of Section 141(b) of the Code were applied by substituting five percent for ten percent each place it appears and substituting “net proceeds” for “proceeds” each place it appears;

(v) the amount of the Costs of Issuance of the Series 2016 Bonds financed from proceeds of the Series 2016 Bonds will not exceed two percent of the sale proceeds of the Series 2016 Bonds;

(vi) the proceeds of the Series 2016 Bonds will be applied to the payment of the costs of construction of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds so that the average maturity of the Series 2016 Bonds will not exceed 120% of the average reasonably expected economic life of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds (determined in the manner provided in Section 147(b) of the Code);

(vii) none of the proceeds of the Series 2016 Bonds will be used to provide any airplane, skybox or other private luxury box, facility primarily used for gambling or store the principal business of which is the sale of alcoholic beverages for consumption off-premises; and

(viii) PHC will not enter into, or permit any other entity to enter into any lease, management agreement, use agreement, hospital-based physician contract or other similar agreement relating to any facilities refinanced with the proceeds of the Series 2016 Bonds unless (i) such agreement complies with the terms of Rev. Proc. 97-13 as supplemented, modified or replaced from time to time (including as modified by Notice 2014-67), or (ii) PHC receives an opinion of counsel experienced in matters relating to Section 103 of the Code to the effect that entering into such agreement will not, by itself, adversely affect the exclusion from gross income of interest on the Series 2016 Bonds for federal income tax purposes.

Indemnity

In the Agreement, PHC has agreed to release the Authority from, has agreed that the Authority and the Bond Trustee shall not be liable for, and has agreed to indemnify, defend and hold the Authority and the Bond Trustee harmless against, any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the facilities financed or refinanced by the Series 2016 Bonds or the use thereof. PHC shall indemnify and hold harmless the Authority and the Bond Trustee from and against all causes of action, legal or equitable, arising by reason of any act of PHC or the failure of PHC or any of its agents or employees to fulfill any duty toward the Authority or the Bond Trustee or toward the public or toward any person or persons whomsoever PHC or the Authority or the Bond Trustee may owe in connection with the facilities financed or refinanced with the

D-17 proceeds of the Series 2016 Bonds. PHC further has agreed to indemnify, defend and hold the Authority and the Bond Trustee harmless against any claim arising out of or in connection with contracts for the construction of the Project or the purchase of material or supplies for the Project, whether such claims are made by a party to such contracts, by a seller of material or supplies, by PHC, by any state, federal or local government, or any agency or instrumentality thereof, for payment of any sum, including but not limited to any taxes, or by any third party. PHC shall at its own cost and expense defend any such actions which may be brought against the Authority or the Bond Trustee as aforementioned, whether or not such actions have any basis in law or in fact, and shall pay all amounts which may be recovered therein against the Authority or the Bond Trustee. PHC has agreed to indemnify and hold harmless the Authority and the Bond Trustee against any and all losses, claims, damages, expenses (including without limitation reasonable counsel fees and expenses) and liabilities arising from, in connection with, or as a result of the issuance of the Series 2016 Bonds, the execution and delivery of the Agreement, the Master Indenture and all related documents (including the 2016 Master Note) or the performance and observance by or on behalf of PHC of those things on the part of PHC agreed to be performed or observed thereunder. No member of the board of directors, officer, director, agent, servant, assignee or employee of PHC shall be personally liable for the obligations of PHC created under the Agreement.

Nothing contained in the Agreement shall be construed to provide for indemnification of, or payment of expenses to, the Authority or Trustee as a result of the Authority’s or the Bond Trustee’s negligence or willful misconduct. Failure by PHC to make payments required under the provisions described in the preceding paragraphs will not constitute a Loan Default under the Agreement.

Encumbrance, Sale, Lease or Disposition of the Facilities Financed or Refinanced with Proceeds of Series 2016 Bonds

Subject to the Master Indenture, PHC may encumber, sell, lease and dispose of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, in whole or in part, without the prior written consent of the Authority or the Bond Trustee, provided that in connection with any such encumbrance, sale, lease or disposition of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, in whole or in part, other than in the ordinary course of business, PHC shall provide the Bond Trustee with (i) a certificate to the effect that such encumbrance, sale, lease or disposition 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 and (ii) an opinion of Bond Counsel to the effect that such encumbrance, sale, lease or disposition is authorized or permitted under the terms of the Act and will not, by itself, result in the interest on the Series 2016 Bonds becoming includable in gross income for federal income tax purposes. No such encumbrance, sale, lease or disposition shall relieve PHC from its obligations under the Agreement or under the 2016 Master Note.

Maintenance and Operation of Facilities Financed or Refinanced with Proceeds of Series 2016 Bonds

Subject to the Master Indenture, PHC shall be responsible for operating the facilities financed or refinanced with the proceeds of the Series 2016 Bonds and maintaining the facilities financed or refinanced with the proceeds of the Series 2016 Bonds in good working order; provided, however, that nothing in the Agreement shall require PHC to operate or maintain the facilities financed or refinanced with the proceeds of the Series 2016 Bonds or any part thereof if it determines that it is not in its best interests to do so.

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Insurance

The Authority shall not have any obligation to keep or maintain or cause to be kept or maintained the facilities financed or refinanced with proceeds of the Series 2016 Bonds or a portion thereof insured. Subject to the Master Indenture, PHC shall be responsible for maintaining, or causing to be kept and maintained, insurance in accordance with the provisions of the Master Indenture.

Additions, Modifications and Improvements

Subject to the Master Indenture, PHC may remodel, renovate, or improve all or any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds or any of its other properties or make additions, modifications or improvements thereon or thereto as it, in its discretion, may deem desirable for its purposes and uses.

Operating Contracts

Subject to the Master Indenture and the provisions of the Agreement relating to maintaining the tax-exempt status of the Series 2016 Bonds, PHC may contract for the performance by others of all or substantially all of the operations or services at or in connection with the facilities financed or refinanced with the proceeds of the Series 2016 Bonds or any portion of its facilities provided that no such contract shall (i) result in an event of default or an event which, with the lapse of time or the giving of notice would constitute such an event of default under the terms of the Master Indenture or (ii) adversely affect the exclusion of interest on the Series 2016 Bonds from gross income for federal income tax purposes.

Limitation of Liability of Members of Authority

No covenant, agreement or obligation contained in the Agreement shall be deemed to be a covenant, agreement or obligation of any member, officer, director, employee or agent of Authority in his or her individual capacity, and neither the members of the Authority nor any officer or director thereof executing the Series 2016 Bonds shall be liable personally on the Series 2016 Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No member, officer, director, employee or agent of Authority shall incur any personal liability with respect to any other action taken by him or her pursuant to the Agreement or the Bond Indenture, provided such member, officer, director, employee or agent acts in good faith.

Loan Payments; Issuance of Note

In order to evidence the Loan and the obligation of PHC to repay the same, PHC shall, contemporaneously with the execution and delivery of the Agreement, execute and deliver to the Bond Trustee, as assignee and pledgee of the Authority under the Bond Indenture, the 2016 Master Note which provides for payments which correspond as to time and amount with the payments due on the Series 2016 Bonds. PHC has agreed to make prompt payment to the Bond Trustee for the account of the Authority of all amounts payable on the 2016 Master Note when due; provided, however, that if for any reason the amounts paid by PHC on the 2016 Master Note, together with any other amounts available in the Sinking Fund, are not sufficient to pay the principal of, premium (if any) and interest on the Series 2016 Bonds when due, PHC agrees to pay the amount required to make up such deficiency.

Obligations Unconditional

PHC’s obligations under the Agreement and the 2016 Master Note are continuing, unconditional and absolute, and are independent of and separate from any obligations of the Authority, and shall not be

D-19 diminished or deferred for any reason whatsoever, irrespective of the doing of any act or the omission thereof by the Authority or the Bond Trustee, irrespective of the existence of any other circumstances which might otherwise constitute a legal or equitable defense or discharge of the obligations of PHC under the Agreement, including without limitation (i) any matters of abatement, setoff, counterclaim, recoupment, defense or other right PHC may have against the Authority or the Bond Trustee, suppliers of any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds or anyone for any reason whatsoever; (ii) compliance with specifications, conditions, design, operation, disrepair or fitness for use of, or any damage to or loss or destruction of any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, any condemnation or sale in anticipation of condemnation of all or any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, or any interruption or cessation in the use or possession thereof by PHC, for any reason whatsoever; (iii) any insolvency, bankruptcy, reorganization or similar proceedings by or against PHC; (iv) any failure of any supplier to deliver any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds for any reason whatsoever except as otherwise provided in the Agreement; (v) any acts or circumstances that may constitute failure of consideration, sale, loss, destruction or condemnation of or damage to the facilities financed or refinanced with the proceeds of the Series 2016 Bonds; or (vi) any change in the tax or other laws of the United States of America or of the State of Georgia or any political subdivision of either or any failure of the Authority to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or in connection with the Agreement. None of the provisions described in this paragraph shall be construed to release the Authority from the performance of any of the agreements on its part contained in the Agreement; and in the event the Authority should fail to perform any such agreement on its part, PHC may institute such action against the Authority as PHC may deem necessary to compel such performance so long as such action shall not constitute a violation of the Agreement on the part of PHC described in the preceding sentence. PHC has waives, to the extent permitted by applicable law, any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender the Agreement except in accordance with the express terms of the Agreement. The parties to the Agreement intend that the payments made pursuant to the 2016 Master Note shall be paid to the Bond Trustee on behalf of the Authority without diminution of any kind.

Assignment by Issuer or Trustee

The Agreement and the 2016 Master Note, including the right to receive payments required to be made by PHC under the Agreement and under the 2016 Master Note, and to compel or otherwise enforce performance by PHC, may be assigned in whole or in part to one or more assignees or subassignees by the Authority or the Bond Trustee at any time subsequent to its execution without the necessity of obtaining the consent of PHC. PHC expressly acknowledges that all right, title and interest of the Authority in and to the Agreement and the 2016 Master Note (excluding the Authority’s right to indemnification, fees and expenses) has been assigned to the Bond Trustee, as security for the Series 2016 Bonds as provided in the Bond Indenture, and that if any Event of Default shall occur, the Bond Trustee shall be entitled to act under the Agreement in the place and stead of the Authority (other than with respect to matters to which the Authority is entitled to consent) and may sell or otherwise realize value on the Trust Estate held to secure payment of the Series 2016 Bonds.

PHC has consented to such assignment and has agreed to make the payments due under the 2016 Master Note directly to the Bond Trustee or its agent and agrees that, as to the Bond Trustee, its obligation to make the payments required by the 2016 Master Note and to observe and perform all other covenants, conditions and agreements under the Agreement shall be absolute and unconditional, irrespective of any rights of set-off, recoupment or counterclaim it might otherwise have against the Authority, the Bond Trustee, or any manufacturer or supplier of any portion of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds. Prior to prepayment in full of the 2016 Master

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Note, PHC will not suspend or discontinue any such payment or fail to observe and perform any of its other covenants, conditions and agreements under the Agreement, and will not terminate the Agreement for any cause, including, without limitation, failure of PHC to complete the acquisition, construction and installation of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, failure of consideration, failure of title to any part or all of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, or commercial frustration of purpose, or any damage to or destruction or condemnation of all or any part of the facilities financed or refinanced with the proceeds of the Series 2016 Bonds, or any change in the tax or other laws of the United States of America, the State or any political subdivision thereof, or any failure of the Authority to observe and perform any covenants, conditions and agreements, whether express or implied, or any duty, liability or obligation arising out of or in connection with the Agreement or the Bond Indenture. PHC may, however, after giving to the Authority and the Bond Trustee ten days’ notice of its intention to do so, at its own expense and in its own name, or in the name of the Authority, prosecute or defend any action or proceeding or take any other action involving third persons which PHC deems necessary or desirable in order to secure or protect any of its rights under the Agreement. Upon receipt by the Authority and the Bond Trustee of an indemnity or indemnities from PHC satisfactory in all respects to the Authority and the Bond Trustee, the Authority and the Bond Trustee shall reasonably cooperate with PHC and will take all reasonable and necessary action, at PHC’s sole cost and expense, to effect the substitution of PHC for the Authority or the Bond Trustee in any such action or proceeding if PHC shall so request. PHC has approved the Bond Indenture and consented to said assignment and appointment.

Loan Defaults

The occurrence of any of the following events constitutes a “Loan Default” under the Agreement: (i) failure by PHC to pay any Loan Payment or other payment required to be paid under the Bond Indenture or under the 2016 Master Note on or before the date on which such Loan Payment is due and payable; (ii) subject to certain limitations enumerated in the Agreement, failure by PHC to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Agreement, other than the failure referred to in the preceding clause (a), for a period of 30 days after written notice specifying such failure and requesting that it be remedied, is given to PHC by the Authority or the Bond Trustee; (iii) certain events of insolvency, bankruptcy, liquidation, and reorganization initiated with or without PHC’s consent; (iv) an event of default shall occur under the Bond Indenture; or (v) a default under the Master Indenture shall have occurred, which default is not cured or waived and extends beyond any period of grace with respect thereto.

Remedies

Whenever any Loan Default shall have occurred and be continuing, the Authority and the Bond Trustee shall, in addition to any other remedies provided in the 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: (i) declare all amounts due under the 2016 Master Note to be immediately due and payable, and upon written notice to PHC the same shall become immediately due and payable without further notice or demand; or (ii) 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 Agreement or to enforce any other rights of the Bond Trustee or the Authority under the Agreement or as the owner of an Obligation issued under the Master Indenture.

Notwithstanding the foregoing, any declaration of acceleration pursuant to clause (i) above shall be rescinded upon rescission of any declaration of acceleration of the Series 2016 Bonds pursuant to the Bond Indenture.

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THE BOND INDENTURE

Establishment of Funds

Sinking Fund. The Bond Indenture provides for the creation and establishment with the Bond Trustee for the benefit of the owners of the Series 2016 Bonds of a Sinking Fund, which shall be held in trust by the Bond Trustee separate and apart from all other deposits or funds. Moneys in the Sinking Fund constitute part of the Trust Estate and shall be applied as provided in the Bond Indenture. The Bond Indenture provides for the creation within the Sinking Fund of the following three accounts: (i) the Interest Account, into which shall be deposited accrued interest received upon the sale of the Series 2016 Bonds and all amounts paid by PHC pursuant to the 2016 Master Note with respect to interest on the Series 2016 Bonds; (ii) the Principal Account, into which shall be deposited amounts paid by PHC pursuant to the 2016 Master Note with respect to the payment of the principal of the Series 2016 Bonds on any maturity date; and (iii) the Redemption Account, into which shall be deposited amounts paid by PHC pursuant to the 2016 Master Note with respect to any redemption of the Series 2016 Bonds, together with other amounts (if any) transferred as provided in the Bond Indenture for redemption of Series 2016 Bonds.

Project Fund. The Fulton Indenture and the Fayette Indenture provide for the creation and establishment with the Bond Trustee of a trust fund to be designated the Project Fund, which shall be expended in accordance with the provisions of the Agreement. The Bond Trustee will, from time to time, establish such accounts in the Project Fund as may be requested by PHC. Moneys received from the investment of moneys in the Project Fund will be deposited into the Project Fund. There will be deposited into the Project Fund, the amounts specified in the Bond Indenture. The Bond Trustee is authorized and directed to make each disbursement from the Project Fund required by the provisions of the Agreement. Moneys in the Project Fund may also be invested as provided in the Bond Indenture.

The Bond Trustee shall keep and maintain adequate records pertaining to the Project Fund and all receipts and disbursements therefrom, including records of all requisitions made pursuant to the Agreement and, after the Project has been completed and a Completion Certificate has been filed as provided in the Agreement, the Bond Trustee shall, upon the written request of and at the expenses of PHC, file an accounting thereof with the Authority and PHC. The Bond Trustee shall be entitled to rely conclusively on the statements of fact and certifications contained in any requisition or Completion Certificate furnished to the Bond Trustee. Upon receipt of each requisition, the Bond Trustee shall pay the obligations set forth in such requisition out of money in the Project Fund, and each such obligation shall be paid by check signed by one or more officers or employees of the Bond Trustee designated for such purpose by the Bond Trustee or by wire transfer. If for any reason PHC should decide prior to the payment of any item in a requisition not to pay such item, PHC shall give written notice of such decision to the Bond Trustee and thereupon the Bond Trustee shall not make such payment; provided, however, that the Bond Trustee shall have no liability of any kind whatsoever arising by reason of its failure to receive such notice or effect any such decision not to pay any such item unless a showing is made that the Bond Trustee was grossly negligent with regard to such matter.

The completion of the Project and payment or provision for payment of all Costs of the Project shall be evidenced by the filing with the Bond Trustee of the Completion Certificate required by the Agreement. As soon as practicable and in any event not more than 60 days from the date of the certificate referred to in the preceding sentence, any balance remaining in the Project Fund (except amounts PHC shall have directed the Bond Trustee in writing to retain for any Cost of the Project not then due and payable) shall without further authorization be transferred into the Sinking Fund and thereafter applied in the manner provided in the Agreement.

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If the principal of the Series 2016 Bonds shall have become due and payable after an Event of Default under the Bond Indenture, any balance remaining in the Project Fund shall without further authorization be transferred into the Sinking Fund.

The Authority makes no warranty, express or implied, that moneys paid into the Project Fund or otherwise available to complete the Project will be sufficient to pay all costs therefor.

Investment of Moneys in Funds

Any moneys held as a part of any fund other than the Sinking Fund shall be invested or reinvested by the Bond Trustee, to the extent permitted by law, at the written request of and as directed by an Authorized PHC Representative; provided, however, that all such moneys shall be invested only in Investment Securities. Any moneys held as a part of the Sinking Fund shall be invested or reinvested by the Bond Trustee, at the written direction of PHC, to the extent permitted by law, in only in Investment Securities with such maturities as shall be required in order to assure full and timely payment of amounts required to be paid from the Sinking Fund.

The Bond Trustee may make any and all such investments through its own bond or investment department or the bond or investment department of any bank or trust company under common control with the Bond Trustee. All such investments shall at all times be a part of the fund or account from which the moneys used to acquire such investments shall have come and all income and profits on such investments shall be credited to, and losses thereon shall be charged against, such fund. All investments under the Bond Indenture shall be registered in the name of the Bond Trustee, as Trustee under the Bond Indenture. All investments under the Bond Indenture shall be held by or under the control of the Bond Trustee. The Bond Trustee shall sell and reduce to cash a sufficient amount of investments of funds in any account of the Sinking Fund whenever the cash balance in such account of the Sinking Fund is insufficient, together with any other funds available therefor, to pay the principal of, premium, if any, and interest on the Series 2016 Bonds when due. The Bond Trustee shall not be liable or responsible for any reduction in value or loss with respect to any investment made in accordance with the instructions received from an Authorized PHC Representative.

The Authority has covenanted and certified to and for the benefit of the Holders of the Series 2016 Bonds from time to time Outstanding that so long as any of the Series 2016 Bonds remain Outstanding, the Authority shall not direct that moneys on deposit in any fund or account in connection with the Series 2016 Bonds (whether or not such moneys were derived from the proceeds of the sale of the Series 2016 Bonds or from any other sources), be used in a manner which will cause the Series 2016 Bonds to be classified as “arbitrage bonds” within the meaning of Section 148 of the Code. The Authority further has agreed to cooperate with any reasonable request of PHC relating to maintaining the exclusion of interest on the Series 2016 Bonds from gross income; provided, however, that the Authority 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 Authority has covenanted that it will file such returns and make payments as directed by PHC (but only from moneys provided to the Authority by or on behalf of PHC 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 Series 2016 Bonds from gross income for federal income tax purposes.

Notwithstanding any provision of the Bond Indenture to the contrary, the Bond Trustee shall not be liable or responsible for any calculation or determination which may be required in connection with or

D-23 for the purpose of complying with Section 148 of the Code or any applicable Treasury Regulations (the “Arbitrage Rules”), including, without limitation, the calculation of amounts required to be paid to the United States under the provisions of the Arbitrage Rules, the maximum amount which may be invested in “nonpurpose obligations” as defined in the Code and the fair market value of any investments made under the Bond Indenture, it being understood and agreed that the sole obligation of the Bond Trustee with respect to investments of funds under the Bond Indenture shall be to invest the moneys received by the Bond Trustee pursuant to the instructions of the Authorized PHC Representative. The Bond Trustee shall have no responsibility for determining whether or not the investments made pursuant to the direction of the Authorized PHC Representative or any of the instructions received by the Bond Trustee pursuant to the provisions described under this heading comply with the requirements of the Arbitrage Rules of the Agreement and shall have no responsibility for monitoring the obligations of PHC or the Authority for compliance with the provisions of the Agreement or the Bond Indenture with respect to the Arbitrage Rules.

Series 2016 Bonds Are Not General Obligations

The Series 2016 Bonds do not now and shall never constitute a general obligation or debt or pledge of the faith and credit of the Authority, nor a debt or pledge of the faith and credit of the State of Georgia or any political subdivision or municipality thereof, and each covenant and undertaking by the Authority in the Bond Indenture, in the Series 2016 Bonds and in any other agreement of the Authority to make payments is not a general obligation of the Authority or a debt or a pledge of the faith and credit of the State of Georgia or any political subdivision or municipality thereof. The principal of and premium, if any, and interest on the Series 2016 Bonds is a special, limited obligation payable solely from the Trust Estate. Nothing in the Bond Indenture shall be construed as requiring the Authority to use any funds or revenues from any source other than as described herein.

Arbitrage Covenant

In reliance upon the covenant of PHC in the Agreement, the Authority has agreed that it shall not take or cause, or fail to take or cause, any action which may cause interest on the Series 2016 Bonds to become includable in gross income of the owners thereof for federal income tax purposes or which would render the interest on any of the Series 2016 Bonds subject to Georgia income taxation. Without limiting the generality of the foregoing, the Authority has agreed that it will take all actions reasonably requested by PHC to comply with the provisions of Section 148 of the Code, including particularly Section 148(f) of the Code; provided, however, that PHC and not the Authority or the Bond Trustee shall be responsible for the computation of all amounts required to be paid pursuant to Section 148 of the Code and for directing the Bond Trustee to pay such amounts as and when the same are due and payable.

Events of Default; Acceleration of Maturity

Any one or more of the following events constitutes an “Event of Default” under the Bond Indenture:

(a) failure to make payment of the principal or redemption price of any Series 2016 Bond when the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise;

(b) failure to make payment of any installment of interest on any Series 2016 Bond when same shall become due and payable;

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(d) failure of the Authority to duly and punctually perform any other of the covenants, conditions, agreements and provisions on its part contained in the Series 2016 Bonds or in the Bond Indenture, which failure shall continue for 60 days after written notice specifying such default and requiring the same to be remedied has been given to the Authority and PHC by the Bond Trustee; provided, however, if the failure stated in such notice cannot be corrected within the applicable period, the Bond 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 Authority within the applicable period and is diligently pursued until such failure is corrected; or

(e) an “Event of Default” shall occur under the Master Indenture.

If such an Event of Default shall occur, then in each and every such case the Bond Trustee may, and (i) upon the written request of the owners of 25% of the outstanding principal amount of Series 2016 Bonds affected by each Event of Default, or (ii) upon the occurrence of an Event of Default described in the foregoing clause (e), the Bond Trustee shall, upon receiving indemnity or security satisfactory to it, proceed to protect and enforce its rights and the rights of the owners of the Series 2016 Bonds 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 Bond Indenture or in aid or execution of any power herein granted or for any enforcement of any proper legal or equitable remedy as the Bond Trustee, being advised by Counsel, shall deem most effectual to protect and enforce the rights aforesaid.

Upon the happening of an Event of Default, then and in every such case, the Bond Trustee may, and (i) upon written request of the owners of at least 25% of the outstanding principal amount of the Series 2016 Bonds or (ii) upon the occurrence of an Event of Default described in the foregoing clause (e), the Bond Trustee shall, by notice in writing delivered to the Authority and PHC, declare the principal of all Series 2016 Bonds then outstanding and the interest accrued thereon to be immediately due and payable. The Bond Trustee shall give notice of any such declaration as soon as practicable to the Master Trustee by telephone or telecopy, promptly confirmed in writing.

The right of the Bond Trustee or the owners of not less than 25% of the Series 2016 Bonds to make any such declaration as aforesaid, however, is subject to the condition that if, at any time after such declaration, but before the Series 2016 Bonds shall have been paid in full, all overdue installments of interest upon such certificates, 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 Bond Trustee, and all other sums then payable by the Authority under the Bond Indenture (except the principal of, and interest accrued since the next preceding interest payment date on, the Series 2016 Bonds due and payable solely by virtue of such declaration) shall either be paid by or for the account of the Authority or provision satisfactory to the Bond Trustee shall be made for such payment, all defaults under the Series 2016 Bonds or under the Bond Indenture (other than the payment of principal and interest due and payable solely by reason of such declaration) shall be made good or be secured to the satisfaction of the Bond Trustee or provision deemed by the Bond Trustee to be adequate shall be made therefor, then and in every such case, the owners of 25% of the outstanding principal amount of the Series 2016 Bonds, by written notice to the Authority, PHC and the Bond Trustee, may rescind such declaration and annul such default in its entirety or, if the Bond Trustee shall have acted upon direction of the owners of not less than 25% of the outstanding principal amount of the Series 2016 Bonds, unless there shall have been delivered to the Bond Trustee written direction to the contrary by the owners of 25% of the outstanding principal amount of the Series 2016 Bonds, the Bond Trustee may rescind such declaration and annul such default in its entirety, but no such rescission or annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon. The Bond Trustee shall give notice of any such rescission to the Master Trustee.

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Upon any such acceleration, all moneys in the Project Fund shall be transferred to the Interest Account of the Sinking Fund until there is on deposit therein an amount sufficient to pay all accrued and unpaid interest to the date of acceleration and then to the Principal Account of the Sinking Fund. In lieu of or in addition to a declaration of acceleration, the Bond Trustee may also 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 laws of the State, including but not limited to, the Uniform Commercial Code of the State of Georgia.

Notice of Default

The Bond Trustee shall, within 30 days after the occurrence of an Event of Default, mail to the owners of the Series 2016 Bonds and the Master Trustee notice of all events of default known to the Bond Trustee unless such defaults shall have been cured before the giving of such notice; provided that except in the case of default in the payment of principal of (or premium, if any) or interest on any of the Series 2016 Bonds, the Bond Trustee shall be protected in withholding such notice from the owners of the Series 2016 Bonds if and so long as the board of directors, the executive committee or a trust committee of directors or responsible officers of the Bond Trustee in good faith determines that the withholding of such notice is in the best interests of the owners of the Series 2016 Bonds.

Right of Bond Owners to Control Proceedings

The owners of a majority of the outstanding principal amount of the Series 2016 Bonds shall have the right, by an instrument in writing executed and delivered to the Bond Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Bond Trustee under the Bond Indenture in respect of the Series 2016 Bonds; provided that such direction shall not be otherwise than in accordance with law and the Bond Trustee shall be indemnified to its satisfaction against the costs, expenses and liabilities which may be incurred therein or thereby.

Right of Bond Owners to Institute Suit

No owner of any of the Series 2016 Bonds shall have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust under the Bond Indenture, or for any other remedy under the Bond Indenture or on the Series 2016 Bonds unless (a) such owner previously shall have given to the Bond Trustee written notice of an Event of Default as provided in the Bond Indenture; (b) the owner, or owners, of 25% of the outstanding principal amount of the Series 2016 Bonds shall have made written request of the Bond Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Bond Trustee a reasonable opportunity either to proceed to exercise the powers granted in the Bond Indenture, or to institute such action, suit, or proceeding in its name; (c) there shall have been offered to the Bond Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; and (d) the Bond Trustee shall have refused or neglected to comply with such request within a reasonable period of time; and such notification, request, offer of indemnity and refusal or neglect have been declared in every such case, at the option of the Bond Trustee, to be conditions precedent to the execution of the powers and trusts of this Indenture or for any other remedy under the Bond Indenture. The parties to the Bond Indenture intend that no one or more owners of the Series 2016 Bonds shall have any right in any manner whatever by his, her or their action to affect, disturb or prejudice the security of the Bond Indenture, or to enforce any right under the Bond Indenture, except in the manner provided in the Bond Indenture, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner provided in the Bond Indenture and for the equal benefit of all owners of the outstanding Series 2016 Bonds.

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Nothing contained in the Bond Indenture shall, however, affect or impair the right of any owner of a Series 2016 Bond, which is absolute and unconditional, to enforce the payment of the principal of and interest on such owner’s Series 2016 Bonds out of the moneys provided for such payment, or the obligation of the Authority to pay the same out of the sources pledged to the Bond Indenture, at the time and place expressed in the Bond Indenture.

Suits by Trustee

All rights of action under the Bond Indenture, or under any of the Series 2016 Bonds, enforceable by the Bond Trustee, may be enforced by it without the possession of any of the Series 2016 Bonds, or the production thereof on the trial or other proceeding relative thereto, and any such suit, or proceeding, instituted by the Bond Trustee shall be brought in its name for the ratable benefit of the owners of the Series 2016 Bonds affected by such suit or proceeding, subject to the provisions of the Bond Indenture.

Remedies Cumulative

No remedy in the Bond Indenture conferred upon or reserved to the Bond Trustee or to the Owners of the Series 2016 Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given under the Bond Indenture or now or hereafter existing at law or in equity or by statute.

Waiver of Default

No delay or omission of the Bond Trustee or of any of the Owners of any Series 2016 Bond to exercise any right or power shall be construed to be a waiver of any such default, or an acquiescence therein; and every power and remedy granted by the Bond Indenture to the Bond Trustee and the owners of the Series 2016 Bonds, respectively, may be exercised from time to time, and as often as may be deemed expedient.

Application of Moneys after Default

The Authority covenants that if an Event of Default shall happen and shall not have been remedied, the Bond Trustee shall apply all moneys, securities and funds received by the Bond Trustee pursuant to any right given or action taken under the applicable provisions of the Bond Indenture as follows and in the following order:

(i) Fees, Charges, Expenses and Liabilities of Trustee -- to the payment of the reasonable and proper fees, charges, expenses and liabilities of the Bond Trustee (including collection fees and expenses and counsel fees and expenses of the Bond Trustee);

(ii) Principal or Redemption Price and Interest -- to the payment of the interest and principal or redemption price then due on the Series 2016 Bonds, as follows:

(a) Unless the principal of all Series 2016 Bonds shall have become due and payable, all such moneys shall be applied

first: to the payment to the persons entitled thereto of all installments of interest then due, in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably,

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according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference;

second: to the payment to the persons entitled thereto of the unpaid principal of any of the Series 2016 Bonds which shall have become due (other than Series 2016 Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Indenture), in the order of their due dates, with interest on such Series 2016 Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Series 2016 Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the amount of such interest due on such date, and then to the payment of such principal, ratably according to the amount of such principal due on such date, to the persons entitled thereto without any discrimination or preference; and

third: to the payment of the redemption premium on and the principal of any Series 2016 Bonds called for redemption pursuant to the provisions of the Bond Indenture.

(b) If the principal of all the Series 2016 Bonds shall have become due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Series 2016 Bonds, with interest thereon as aforesaid, 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 Series 2016 Bond over any other Series 2016 Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.

Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions described under this heading, such moneys shall be applied by the Bond Trustee at such times, and from time to time, as the Bond Trustee in its sole discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future; provided, however, that nothing in the Bond Indenture shall be construed to permit the Bond Trustee to fail to liquidate investment obligations in the Sinking Fund and to apply amounts credited to such funds to the payment of debt service on the Series 2016 Bonds when due. The setting aside of such moneys in trust for the proper purpose shall constitute proper application by the Bond Trustee; and the Bond Trustee shall incur no liability whatsoever to the Authority, to PHC, to any owner of a Series 2016 Bond or to any other person for any delay in applying any such funds, so long as the Bond Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of the Bond Indenture as may be applicable at the time of application by the Bond Trustee. Whenever the Bond Trustee shall exercise such discretion in applying such funds, it shall fix the date (which shall be an Interest Payment Date unless the Bond Trustee shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal paid on such date shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the fixing of any such date and of the endorsement to be entered on each Series 2016 Bond on which payment shall be made, and shall not be required to make payment to the owner of any Series 2016 Bond until such Series 2016 Bond shall be presented to the Bond Trustee for appropriate endorsement, or some other procedure deemed satisfactory by the Bond Trustee.

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Resignation of Trustee

The Bond Trustee may at any time resign by giving written notice to the Authority and PHC and by giving to the Owners of the Series 2016 Bonds notice by first class mail. Upon receiving such notice of resignation, PHC, with the approval of the Authority, shall promptly appoint a successor Bond Trustee by an instrument in writing. If no successor Bond Trustee shall have been so appointed and have accepted such appointment within 30 days after the mailing of such notice to the Owners of the Series 2016 Bonds, the resigning Bond Trustee may petition any court of competent jurisdiction for the appointment of a successor Bond Trustee, or any Owner of the Series 2016 Bonds who has been a bona fide Owner of a Series 2016 Bond or Series 2016 Bonds for at least six months may, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Bond Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Bond Trustee.

Removal of Trustee

So long as there exists no Event of Default and no event which, with the passage of time or the giving of notice or both, will become an Event of Default, PHC, with the approval of the Authority, may remove the Bond Trustee and appoint a successor Trustee by an instrument in writing, or any Owner of a Series 2016 Bond may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Bond Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Bond Trustee and appoint a successor Trustee.

The Owners of a majority of the Outstanding principal amount of the Series 2016 Bonds may at any time remove the Bond Trustee and appoint a successor Trustee by an instrument or concurrent instruments in writing signed by such Series 2016 Bond Owners. Such successor Trustee shall be a corporation authorized under applicable laws to exercise corporate trust powers and may be incorporated under the laws of the United States of America or of any state thereof and need not have its principal office or place of business in the State. Such successor Trustee shall satisfy the minimum combined capital, surplus and undivided profits requirement set forth in the Bond Indenture.

PHC, subject to the approval of the Authority and the Owners of a majority of the Series 2016 Bonds may at any time remove the Bond Trustee for cause and appoint a successor Trustee by an instrument in writing signed by PHC and accompanied by an instrument or concurrent instruments in writing signed by such Series 2016 Bond Owners and the Authority approving such removal and appointment.

Appointment of Successor Bond Trustee

Any resignation or removal of the Bond Trustee and appointment of a successor bond trustee pursuant to any of the provisions of the Bond Indenture shall become effective upon acceptance of appointment by the successor Bond Trustee as provided in the Bond Indenture.

Notwithstanding any other provision of the Bond Indenture, no removal, resignation or termination of the Bond Trustee (or any other Paying Agent) shall take effect until a successor shall be appointed.

No Bond Trustee or Paying Agent that has resigned or been removed under the Bond Indenture shall be liable for any act or omission of any successor Bond Trustee or Paying Agent.

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Any successor Trustee appointed as provided in the Bond Indenture shall execute, acknowledge and deliver to the Authority and to its predecessor Bond Trustee an instrument accepting such appointment thereunder, and thereupon the resignation or removal of the predecessor Bond Trustee shall become effective and such successor Bond Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of its predecessor in the trusts under the Bond Indenture, with like effect as if originally named as Bond Trustee under the Bond Indenture; but nevertheless, the Bond Trustee ceasing to act shall cause the 2016 Master Note to be registered to such Bond Trustee and, on the written request of the Authority or PHC or the request of the successor Bond Trustee, the Bond Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Bond Trustee, upon the trusts herein expressed, all the rights, powers and trusts of the Bond Trustee so ceasing to act. Upon request of any such successor Bond Trustee, the Authority shall execute any and all instruments in writing more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and duties. Any Bond Trustee ceasing to act shall, nevertheless, retain a lien upon funds held or collected by such successor Bond Trustee to secure the amounts due it as compensation, reimbursement, expenses and indemnity afforded to it by the Bond Indenture.

No successor Bond Trustee shall accept appointment as provided in the Bond Indenture unless at the time of such acceptance such successor Bond Trustee shall be eligible under the provisions of the Bond Indenture.

Upon the acceptance of appointment by a successor Bond Trustee as provided in the Bond Indenture, the Authority (at the expense of PHC) shall give notice of the succession of such Bond Trustee to the trusts thereunder by first class mail to all Series 2016 Bond Owners. If the Authority fails to mail such notice within 10 days after acceptance of appointment by the successor Bond Trustee, the successor Bond Trustee shall cause such notice to be mailed at the expense of PHC.

Purposes for which Series 2016 Bond Owners’ Meetings may be Called

A meeting of Owners of Series 2016 Bonds may be called at any time and from time to time pursuant to the Bond Indenture for any of the following purposes: (i) to give any notice to the Authority, PHC or the Bond Trustee, or to give any directions to the Bond Trustee, or to consent to the waiving of any default under the Bond Indenture and its consequences, or to take any other action authorized to be taken by such Owners pursuant to the Bond Indenture; (ii) to remove the Bond Trustee pursuant to the terms of the Bond Indenture; (iii) to consent to the execution of a supplemental indenture pursuant to the Bond Indenture, or to consent to the execution of an amendment, change, modification or supplementation of the Agreement pursuant to the Bond Indenture; or (iv) to take any other action authorized to be taken by or on behalf of the Owners of any specified aggregate principal amount of the Series 2016 Bonds under any other provision of the Bond Indenture or under applicable law.

Call and Notice of Owners of Series 2016 Bonds’ Meetings

The Bond Trustee may at any time call a meeting of Owners of Series 2016 Bonds to be held at such time and at such place as the Bond Trustee shall determine. Notice of every meeting of Owners of Series 2016 Bonds, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given by first class mail not less than twenty (20) nor more than one hundred eighty (180) days prior to the date fixed for such meeting.

In case at any time the Owners of Series 2016 Bonds of at least 25% in aggregate principal amount of the Outstanding Series 2016 Bonds shall have requested the Bond Trustee to call a meeting of the Owners of Series 2016 Bonds by written request setting forth in reasonable detail the action proposed

D-30 to be taken at the meeting, and the Bond Trustee shall not have made the first giving of the notice of such meeting within twenty (20) days after receipt of such request, then such Owners may determine the time and the place for such meeting and may call such meeting to take any action authorized in the Bond Indenture hereof by giving notice thereof as provided in the preceding paragraph.

Determination of Voting Rights; Conduct and Adjournment of Meetings

Notwithstanding any other provisions of the Bond Indenture, the Bond Trustee may make such reasonable regulations as it may deem advisable for any meeting of Owners of Series 2016 Bonds in regard to proof of the ownership of Series 2016 Bonds and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the ownership of Series 2016 Bonds shall be proved in the manner specified in the Bond Indenture and the appointment of any proxy shall be proved in the manner specified therein or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company authorized by the Bond Indenture to certify to the ownership of Series 2016 Bonds. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in the Bond Indenture or other proof.

The Bond Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by Owners of Series 2016 Bonds as provided in the Bond Indenture, in which case the Owners of Series 2016 Bonds calling the meeting, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Owners of Series 2016 Bonds of a majority in aggregate principal amount of the Series 2016 Bonds represented at the meeting and entitled to vote.

At any meeting each Series 2016 Bond Owner or proxy shall be entitled to one vote for each $5,000 principal amount of Series 2016 Bonds Outstanding held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any bond challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Series 2016 Bond Owner or proxy.

At any meeting of Owners of Series 2016 Bonds, the presence of persons holding or representing Series 2016 Bonds in an aggregate principal amount sufficient under the appropriate provision of the Bond Indenture to take action upon the business for the transaction of which such meeting was called shall constitute a quorum. Any meeting of Owners of Series 2016 Bonds duly called pursuant to the Bond Indenture may be adjourned from time to time by vote of the Owners of a majority in aggregate principal amount of the Series 2016 Bonds represented at the meeting and entitled to vote, whether or not a quorum shall be present; and the meeting may be held as so adjourned without further notice.

Counting Votes and Recording Action of Meetings

The vote upon any resolution submitted to any meeting of Owners of Series 2016 Bonds shall be by written ballots on which shall be subscribed the signatures of such Owners or of their representatives by proxy and the number or numbers of the Series 2016 Bonds Outstanding held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in triplicate, of the proceedings of each meeting of Owners of Series 2016 Bonds shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of

D-31 votes on any vote by ballot taken and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published or mailed as provided in the Bond Indenture. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Authority, another to PHC and another to the Bond Trustee to be preserved by the Bond Trustee, which copy shall have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

Revocation by Series 2016 Bondholders

At any time prior to (but not after) the evidencing to the Bond Trustee, in the manner provided in the Bond Indenture, of the taking of any action by the Owners of Series 2016 Bonds of the percentage in aggregate principal amount of the Series 2016 Bonds specified in the Bond Indenture in connection with such action, any Owner of a Series 2016 Bond the number of which is included in the Series 2016 Bonds the Owners of which have consented to such action may, by filing written notice with the Bond Trustee at its Designated Office and upon proof of ownership as provided in the Bond Indenture, revoke such consent so far as concerns such Series 2016 Bond. Except as aforesaid, any such consent given by the Owner of any Series 2016 Bond shall be conclusive and binding upon such Owner and upon all future Owners of such bond and of any bond issued in exchange therefor or in lieu thereof, irrespective of whether or not any notation in regard thereto is made upon such bond. Any action permitted to be taken by the Owners under the Bond Indenture shall be conclusively binding upon the Authority, PHC, the Bond Trustee, the registered Owners of all the Series 2016 Bonds and anyone whatsoever when such action is taken by the Owners of the percentage in aggregate principal amount of Series 2016 Bonds specified in the Bond Indenture for such action.

Defeasance

When the principal of, redemption premium (if any) and interest to the maturity or redemption prior to maturity on, all Series 2016 Bonds have paid, or provision has been made for payment of the same, together with the compensation of the Bond Trustee and all other sums payable by the Authority, and upon the satisfaction of certain other conditions specified in the Bond Indenture, the right, title and interest of the Bond Trustee in the Agreement and 2016 Master Note and the moneys payable thereunder will thereupon cease and the Bond Trustee, on demand of the Authority, will release the Bond Indenture and will execute such documents to evidence such release as may be reasonably required by the Authority. Any remaining amounts will be turned over by the Bond Trustee to or upon the order of PHC.

Series 2016 Bonds for the payment or redemption of which sufficient moneys or sufficient Permitted Defeasance Investments (hereinafter defined) will have been deposited with the Bond Trustee will be deemed to be paid and no longer outstanding under the Bond Indenture, provided that there shall be delivered to the Bond Trustee (i) an opinion of Bond Counsel to the effect that the pledge of such Permitted Defeasance Investments to the payment of the Series 2016 Bonds will not, by itself, result in the interest on any Series 2016 Bonds becoming includable in gross income for federal income tax purposes under the Code and the Series 2016 Bonds are no longer outstanding under the Bond Indenture, (ii) a report of an independent firm of nationally recognized certified public accountants or similar entity verifying the sufficiency of the escrow established to pay the Series 2016 Bonds in full on the maturity or redemption date, and (iii) an escrow deposit agreement, all as described in the Bond Indenture; provided further that if such Series 2016 Bonds are to be redeemed prior to the maturity thereof, notice of such redemption will have been duly given or irrevocable arrangements satisfactory to the Bond Trustee will have been made for the giving thereof. Permitted Defeasance Investments” will be considered sufficient if such investments are noncallable Government Obligations which, with interest, mature and bear interest in such amounts and at such times as will assure sufficient cash to pay currently maturing interest and to

D-32 pay principal and redemption premiums (if any) when due on the Series 2016 Bonds (or such portion thereof with respect to which such deposit is made). For the purposes of this paragraph, “Permitted Defeasance Investments shall mean only (1) non-callable direct obligations of the United States of America (“Treasuries”), (2) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated or (3) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, or any combination thereof.

PHC may at any time surrender to the Bond Trustee for cancellation any Series 2016 Bonds previously authenticated and delivered which PHC may have acquired in any manner whatsoever, and such Series 2016 Bonds, upon such surrender and cancellation, will be deemed to be paid and retired.

Amendments and Supplements Without Bond Owners’ Consent

The Authority and the Bond Trustee from time to time and at any time, subject to the conditions and restrictions in the Bond Indenture and with the written consent of PHC, may enter into an indenture or indentures supplemental to the Bond Indenture, which indenture or indentures thereafter shall form a part hereof, for any one or more or all of the following purposes:

(a) to add additional covenants of the Authority or to surrender, restrict or limit any right or power conferred under the Bond Indenture upon the Authority;

(b) to cure any ambiguity or to cure, correct or supplement any defective provision of the Bond Indenture in such manner as will not adversely and materially affect the interest of the owners of the Series 2016 Bonds;

(d) to grant additional rights and powers to the Bond Trustee;

(e) to create additional accounts or subaccounts under the Bond Indenture as requested by PHC; or

(f) to provide for or modify existing provisions with respect to, a book-entry system of registration for the Series 2016 Bonds.

Amendments With Bond Owners’ Consent

With the consent of the owners of not less than a majority of the outstanding principal amount of the Series 2016 Bonds and the written consent of PHC, the Authority and the Bond Trustee may enter into an indenture or indentures supplemental to the Bond Indenture, provided, however, that no such supplemental indenture will (1) extend the fixed maturity of any Series 2016 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 Series 2016 Bond so affected, or (2) the aforesaid percentage of owners of Series 2016 Bonds required to approve any such supplemental indenture, or (3) deprive the owners of the

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Series 2016 Bonds (except as aforesaid) of the lien created by the Bond Indenture, without the consent of the owners of all the Series 2016 Bonds then outstanding.

Prior to the execution and delivery of any supplemental indenture, the Bond Trustee will mail to the Authority and the registered Owners of the Series 2016 Bonds, at least 30 days prior to the proposed effective date of such supplemental indenture a notice of such proposed supplemental indenture. Such notice (and the consents of the Owners of the Series 2016 Bonds) need not set forth such supplemental indenture in full and in lieu thereof may contain a summary of the provisions thereof. Such notice will set forth a time and procedure for consenting to such proposed supplemental indenture.

Supplemental Agreement

The Authority and PHC from time to time and at any time, subject to the conditions and restrictions in the Bond Indenture and with the written consent of the Bond Trustee, may enter into a supplemental loan agreement for any one or more or all of the following purposes:

(a) to add additional covenants of PHC or to surrender, restrict or limit any right or power conferred under thereunder upon PHC;

(b) to cure any ambiguity or to cure, correct or supplement any defective provision of the Agreement in such manner as will not adversely and materially affect the interest of the owners of the Series 2016 Bonds;

(c) to make any changes in the Agreement required in connection with a supplemental indenture or a supplement to the Master Indenture; or

(d) to grant additional rights and powers to the Bond Trustee or the Authority.

All other supplemental loan agreements are subject to the same notice and approval requirements required for supplemental indentures.

Supplements to the Master Indenture

The Bond Trustee, as registered owner of the 2016 Master Note, shall be authorized to consent to any supplement to the Master Indenture without any notice to or consent of the owners of the Series 2016 Bonds, for any one or more or all of the following purposes:

(a) to add additional covenants and agreements of the Obligated Issuers or to surrender, restrict or limit any right or power conferred under the Master Indenture upon the Obligated Issuers;

(b) to cure any ambiguity or to cure, correct or supplement any defective provision of the Master Indenture in such manner as will not adversely and materially affect the interest of the owners of the Series 2016 Bonds; or

The Bond Trustee shall be authorized to consent to any supplement to the Master Indenture other than as described above only upon the consent of the owners of not less than a majority of the outstanding principal amount of the Series 2016 Bonds.

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THE MASTER INDENTURE

The Master Indenture: General

The 2016 Master Note will be issued as a Master Indenture Obligation under the Master Indenture. Under the Master Indenture, the Obligated Group Members (as each may exist from time to time) jointly and severally covenant to promptly pay, or cause to be paid all Required Payments at the place, on or before the dates and in the manner provided therein or in any Related Supplement or Master Indenture Obligation (including, without limitation, all Existing Master Indenture Obligations). Each Obligated Group Member acknowledges that the time of such payment and performance is of the essence of the Master Indenture Obligations. Each Obligated Group Member further covenants to faithfully observe and perform all of the conditions, covenants and requirements of the Master Indenture, any Related Supplement and any Master Indenture Obligation.

The Master Indenture permits the Obligated Group Members to issue Master Indenture Obligations from time to time under certain circumstances and subject to the terms of the Master Indenture, which Master Indenture Obligations are equally and ratably secured under the Master Indenture with the 2016 Master Note. Any Master Indenture Obligation may be issued for the purpose of securing Indebtedness and any Financial Product Payments, but any obligation to pay Financial Product Extraordinary Payments shall be subordinate to the payment of other non-subordinated payments on Master Indenture Obligations. Each of the Existing Master Indenture Obligations will be treated, for all purposes of the Master Indenture, as if it were a Master Indenture Obligation issued after the effective date of the Master Indenture and will have the same rights under the Master Indenture in terms of voting, consents, or taking other actions as if it were issued under the Master Indenture for the same purpose for which it was originally issued.

To secure their obligation to make Required Payments under the Master Indenture and their other obligations, agreements and covenants to be performed and observed thereunder, each Obligated Group Member will grant to the Master Trustee security interests in the Gross Receivables to the extent the same may be pledged and a security interest granted therein under the UCC.

If an Event of Default exists, the Master Trustee may exercise all rights and remedies with respect to the Gross Receivables that are available to a secured party under the provisions of applicable law. The Master Trustee may give notice (a “Gross Receivables Notice”) to the Credit Group Representative that it will take possession of all cash and other proceeds from the Gross Receivables received or receivable by the Obligated Group after the date of such Gross Receivables Notice. After receipt of any Gross Receivables Notice, the Credit Group Representative will cause the Obligated Group Members immediately to remit to the Master Trustee any cash or other proceeds from the Gross Receivables that are received by the Obligated Group after the date of any Gross Receivables Notice until such time as notified by the Master Trustee in writing that such Gross Receivables Notice has been revoked. In addition, the Master Trustee shall be entitled, upon the order of any court of competent jurisdiction, to the appointment of a receiver for the Obligated Group and the Gross Receivables. The court appointing such receiver may grant to such receiver all powers and duties permitted by law, including without limitation the power to collect, use and apply all cash and other proceeds from the Gross Receivables.

Subject to certain conditions, the Master Indenture permits additional entities to become members of the Obligated Group, and permits the Credit Group Representative to designate Designated Affiliates. The Master Indenture also permits Obligated Group Members to withdraw from the Obligated Group and permits Designated Affiliates to cease to be a Designated Affiliate under specified conditions set forth in the Master Indenture.

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The 2016 Master Note, together with any Master Indenture Obligations presently outstanding or issued from time to time under the Master Indenture, are secured under the Master Indenture by a security interest in the Gross Receivables of each Obligated Group Member.

Membership and Withdrawal from the Obligated Group

Additional Obligated Group 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 Obligated Group Member which authorizes the execution and delivery of a Related Supplement and compliance with the terms of the Master Indenture; (b) a Related Supplement executed by the Credit Group Representative, the new Obligated Group Member and the Master Trustee pursuant to which the proposed new Obligated Group Member (i) agrees to become an Obligated Group Member, (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 Credit Group Representative as its agent and attorney-in-fact and grants to the Credit Group Representative the requisite power and authority to execute Related Supplements authorizing the issuance of Master Indenture Obligations or Series of Master Indenture Obligations and to execute and deliver Master Indenture Obligations; (c) an Opinion of Counsel to the effect that (i) the proposed new Obligated Group Member has taken all necessary action to become an Obligated Group Member, and upon execution of the Related Supplement, such proposed new Obligated Group Member will be bound by the terms of the Master Indenture, (ii) the addition of such Obligated Group Member would not adversely affect the validity of any Master Indenture Obligation then Outstanding and (iii) the addition of such Obligated Group Member will not cause the Master Indenture or any Master Indenture Obligations then Outstanding to be subject to registration under federal securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred); (d) an Officer’s Certificate to the effect that immediately after the addition of the proposed new Obligated Group Member, the Transaction Test would be satisfied; and (e) so long as any Related Bonds that are tax-exempt obligations are Outstanding, an Opinion of Bond Counsel to the effect that the addition of the proposed new Obligated Group Member 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.

Any Obligated Group Member may withdraw from the Obligated Group and be released from further liability or obligation under the provisions of the Master Indenture, or any Obligated Group Member may be redesignated as a Designated Affiliate, provided that prior to such withdrawal or redesignation the Master Trustee receives: (a) an Officer’s Certificate to the effect that the Credit Group Representative has approved the withdrawal of such Obligated Group Member (and, if applicable, redesignation of such Obligated Group Member as a Designated Affiliate); (b) an Officer’s Certificate to the effect that immediately following the withdrawal of such Obligated Group Member, the Transaction Test would be satisfied; (c) an Officer’s Certificate to the effect that immediately following such withdrawal, the remaining Obligated Group Members shall represent not less than 75% of the Total Revenues as shown on the Credit Group Financial Statements for the most recent Fiscal Year of the Obligated Group Members and Designated Affiliates immediately prior to such withdrawal; and (d) an Opinion of Counsel to the effect that (i) the withdrawal (or redesignation) of such Obligated Group Member would not adversely affect the validity of any Master Indenture Obligation then Outstanding and (ii) the withdrawal (or redesignation) of such Obligated Group Member will not cause the Master Indenture or any Master Indenture Obligations then Outstanding to be subject to registration under federal securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred).

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Designation of Designated Affiliates

The Credit Group Representative, by resolution of its governing body, may from time to time designate Persons as Designated Affiliates. In connection with such designation, the Credit Group Representative shall designate for each Designated Affiliate an Obligated Group Member to serve as the Controlling Member for such Designated Affiliate. The Credit Group Representative shall at all times maintain an accurate and complete list of all Persons designated as Designated Affiliates (and of the Controlling Members for such Designated Affiliates) and file such list with the Master Trustee and any Related Bond Issuer that shall request such list in writing annually on or before January 1 of each year.

Each Controlling Member shall cause each of its Designated Affiliates to provide to the Credit Group Representative a resolution of its governing body accepting such Person’s designation as a Designated Affiliate and acknowledging the provisions of the Master Indenture which apply to the Designated Affiliates. So long as such Person is designated as a Designated Affiliate, the Controlling Member of such Designated Affiliate shall either (i) maintain, directly or indirectly, control of such Designated Affiliate to the extent necessary to cause such Designated Affiliate to comply with the terms of this 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 Credit Group Representative and the Controlling Member, in the judgment of their respective Governing Bodies, deem sufficient for the Controlling Member to cause such Designated Affiliate to comply with the terms of this Master Indenture.

Each Controlling Member covenants and agrees in the Master Indenture that it will cause each of its Designated Affiliates to comply with any and all directives of the Controlling Member given pursuant to the provisions of the Master Indenture. Any Person designated by the Credit Group Representative as a Designated Affiliate shall become a Designated Affiliate upon receipt by the Master Trustee of the following: (a) a copy of a resolution of the governing body of Credit Group Representative designating such Person a Designated Affiliate; and (b) an Opinion of Counsel to the effect that the requirements described in the preceding paragraph have been satisfied with respect to such Person; and (c) an Officer’s Certificate to the effect that immediately after the addition of the proposed new Designated Affiliate, the Transaction Test would be satisfied.

Any Person may cease to be a Designated Affiliate (and thus not subject to the terms of the Master Indenture) provided that prior to such Person ceasing to be a Designated Affiliate the Master Trustee receives: (a) a resolution of the governing body of the Credit Group Representative declaring such Person no longer a Designated Affiliate; and (b) an Officer’s Certificate to the effect that immediately after such Person ceasing to be a Designated Affiliate, the Transaction Test would be satisfied.

Limitation on Encumbrances

Each Obligated Group Member agrees in the Master Indenture that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, create or suffer to be created or permit the existence of any Lien upon Property, other than Excluded Property, now owned or hereafter acquired by it other than Permitted Liens. Each Obligated Group Member, respectively, further covenants and agrees that if such a Lien (other than a Permitted Lien) is nonetheless created by someone other than an Obligated Group Member or Designated Affiliate and is assumed by any Obligated Group Member or Designated Affiliate, the Credit Group Representative will make or cause to be made effective a provision whereby all Master Indenture Obligations will be secured prior to any such Indebtedness or other obligation secured by such Lien. Each Obligated Group Member further

D-37 agrees that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, create or suffer to be created, or permit the existence of, any Lien upon Property now owned or hereafter acquired by it to secure the payment of any Master Indenture Obligation other than pursuant to certain exceptions in the Master Indenture.

Debt Service Coverage

Each Obligated Group Member agrees in the Master Indenture to manage its business such that the combined or consolidated Income Available for Debt Service of the Credit Group, calculated at the end of each Fiscal Year, commencing with the first full Fiscal Year following the execution of the Master Indenture, will not be less than 1.10 times Annual Debt Service. If for any Fiscal Year the Income Available for Debt Service is not sufficient to satisfy the requirement in the preceding sentence, the Credit Group Representative covenants to retain promptly an Independent Consultant to make recommendations to increase Income Available for Debt Service in the first Fiscal Year following the Fiscal Year in which such insufficiency occurred to the level required or, if in the opinion of the Independent Consultant the attainment of such level is impracticable, to the highest level attainable. The Credit Group Representative agrees to transmit a copy of such recommendations or opinion to the Master Trustee within 20 days of the receipt. Each Obligated Group Member shall, promptly upon its receipt of such recommendations, subject to applicable requirements or restrictions imposed by law and to a good faith determination by the governing body of the Obligated Group Representative that such recommendations are in the best interest of the Obligated Group, take such action as shall be in substantial conformity with such recommendations. If a report of an Independent Consultant is delivered to the Master Trustee and the Related Bond Issuers that states that Government Restrictions or Industry Restrictions have been imposed which make it impossible or impractical for the Income Available for Debt Service to satisfy the required Debt Service Coverage Ratio, then the required amount of Income Available for Debt Service shall be reduced to the maximum coverage permitted by, or reasonably attainable under, such Government Restrictions or Industry Restrictions.

Unless the Debt Service Coverage Ratio of the Credit Group is less than 1.0:1.0 for any two consecutive Fiscal Years, which is an Event of Default under the Master Indenture, if the Credit Group retains and substantially complies with the recommendations of the Independent Consultant, the Credit Group will be deemed to have complied with the covenants in the foregoing paragraph for such Fiscal Year, notwithstanding that the ratio of Income Available for Debt Service to the Annual Debt Service shall be less than 1.10:1.0.

Merger, Consolidation, Sale or Conveyance

Each Obligated Group Member covenants that it will not merge or consolidate with any other Person that is not an Obligated Group Member or sell or convey all or substantially all of its assets to any Person that is not an Obligated Group Member (a “Merger Transaction”) unless: (a) after giving effect to the Merger Transaction, (i) the successor or surviving entity (hereinafter, the “Surviving Entity”) is an Obligated Group Member, or (ii) the Surviving Entity shall (A) be a corporation or other entity organized and existing under the laws of the United States of America or any state thereof, and (B) become an Obligated Group Member pursuant to the Master Indenture and, pursuant to the Related Supplement required by the Master Indenture, shall expressly assume in writing the due and punctual payment of all Required Payments of the disappearing Obligated Group Member hereunder; (b) the Master Trustee receives an Officer’s Certificate to the effect that the Transaction Test is satisfied in connection with the Merger Transaction; (c) so long as any Related Bonds that are tax-exempt obligations are Outstanding, the Master Trustee receives an Opinion of Bond Counsel to the effect that, under the existing law, the consummation of the Merger Transaction, in and of itself, would not result in the inclusion of interest on such Related Bonds in gross income for federal income tax purposes; (d) the Master Trustee receives an

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Opinion of Counsel to the effect that (i) all conditions in the Master Indenture relating to the Merger Transaction have been complied with and the Master Trustee is authorized to join in the execution of any instrument required to be executed and delivered; (ii) the Surviving Entity meets the conditions set forth in Master Indenture and all Master Indenture Obligations then Outstanding; (iii) the Merger Transaction will not adversely affect the validity of any Master Indenture Obligations then Outstanding and such Master Indenture Obligations then Outstanding are enforceable against the Surviving Entity in accordance with their respective terms; and (iv) the Merger Transaction will not cause the Master Indenture or any Master Indenture Obligations then Outstanding to be subject to registration under federal securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred); and (e) the Surviving Entity shall 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 Entity 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, the Surviving Entity shall be treated as an Obligated Group Member and shall thereafter have the right to participate in transactions hereunder relating to Master Indenture Obligations to the same extent as the other Obligated Group Members. All Master Indenture Obligations issued under the Master Indenture on behalf of a Surviving Entity shall have the same legal rank and benefit under this Master Indenture as Master Indenture Obligations issued on behalf of any other Obligated Group Member.

Limitation on Disposition of Assets

Each Obligated Group Member covenants in the Master Indenture that it will not, and each Controlling Member agrees that it will not permit its Designated Affiliates to, make a Disposition of any part of its Property in any Fiscal Year (other than in the ordinary course of business, or as part of a Disposition with respect to all or substantially all of its assets as permitted by the Master Indenture), with a net Book Value in excess of 5% of the Value of the Property of the Credit Group, unless prior to such Disposition: (a) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that such Property is inadequate, obsolete, unsuitable, undesirable or unnecessary for the operation and functioning of the primary business of the Credit Group Members; (b) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that the Disposition is for Fair Market Value and such Disposition will not impair the structural soundness or operational utility of the remaining Property and is not expected to materially adversely affect the operations of the Credit Group; (c) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that such Property is being transferred to a Person who is not an Obligated Group Member if such Person shall become a Member coincidental to such transfer; (d) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that such Property is being transferred to a Governmental Issuer solely to accommodate a sale or lease transaction as described in the definition of “Related Bonds;” or (e) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that the Transaction Test would be, taking into consideration the effect of such Disposition, satisfied.

Notwithstanding the foregoing, nothing in the Master Indenture shall prohibit any Disposition among Credit Group Members and or prohibit the Credit Group Members from: (a) making loans, including, without limitation, employee relocation loans, physician recruitment loans or other credit or funding extensions, provided that such loans or other credit or funding extensions are in writing and the Master Trustee receives an Officer’s Certificate to the effect that such loans are in furtherance of the exempt purposes of the Credit Group Members or the Credit Group Members reasonably expect such loans to be repaid and such loans bear interest at a reasonable rate of interest and on commercially reasonable terms; (b) transferring gifts restricted to a purpose inconsistent with their use for the payment of debt service on Master Indenture Obligations or operating expenses to an Affiliate which has the

D-39 purpose to receive and disburse such restricted gifts; (c) making a Disposition in the ordinary course of business, including without limitation (x) the purchase or sale of goods and services in the ordinary course of business and (ii) passive investment activity in accordance with the established investment policy of the Credit Group Member making such Disposition; (d) making a Disposition for consideration in an amount not less than Fair Market Value, as determined in good faith by the Credit Group Member making such Disposition, including without limitation, a purchase or sale of assets that is not made in the ordinary course of business; provided, however, that an investment in an Affiliate may be permitted under the Master Indenture; (e) making a Disposition as a direct or indirect investment in, or a loan or advance to, another person whose results of operations are included, in whole or in part, in the income statement of the Obligated Group through consolidation of accounts, the equity method of accounting, or other generally accepted accounting principles, and such Disposition meets one of the following tests: (i) the Disposition is to another Obligated Group Member; (ii) the Disposition meets the requirements of the Master Indenture to the extent that Cash and Investments are included in the Disposition and (ii) to the extent that assets other than Cash and Investments are included in the Disposition; or (iii) after giving effect to the Disposition, (i) no Event of Default exists and (ii) the Debt Service Coverage Ratio for each of the two Fiscal Years immediately following the Fiscal Year in which such Disposition occurs is expected to be not less than 1.75:1.00 according to a forecast prepared by the Credit Group Representative. The forecast must be accompanied by an Officer’s Certificate stating that, to the best of such officer’s knowledge, the assumptions contained in the forecast are reasonable. If an Independent Consultant delivers a report stating in effect that the assumptions in the forecast are reasonable, the minimum Debt Service Coverage Ratio described in this paragraph shall be reduced to 1.50:1.00; (f) making a Disposition with respect to Cash or Investments and, on the date such Disposition is made, provided no Event of Default exists and, after giving effect to such Disposition, the Credit Group’s Days Cash on Hand as of the date such Disposition is made are not less than 100; or (g) making a Disposition with respect to assets other than Cash and Investments and, on the date such Disposition is made, (i) no Event of Default exists and (ii) the aggregate Book Value of the assets subject to such Disposition, together with the aggregate Book Value of all other assets subject to a Disposition in the same Fiscal Year, is not more than 5% of the Book Value of the Property, Plant and Equipment at the end of the Fiscal Year immediately prior to such Disposition.

Limitation on Indebtedness

Each Obligated Group Member covenants in the Master Indenture that it will not, and each Controlling Member covenants that it will not permit its Designated Affiliates to, incur any Indebtedness except that the Obligated Group Members and Designated Affiliates may incur the following Indebtedness:

Long-Term Indebtedness, if prior to the date of incurrence of the Long-Term Indebtedness there is delivered to the Master Trustee: an Officer’s Certificate to the effect that the Debt Service Coverage Ratio for the most recent Fiscal Year for which Credit Group Financial Statements are available with respect to all Long-Term Indebtedness then Outstanding at the time of such certification and the additional Long-Term Indebtedness to be incurred, but excluding any Long-Term Indebtedness to be refunded with the proceeds of such additional Long-Term Indebtedness to be incurred, was not less than 1.2:1.0; or (a) an Officer’s Certificate to the effect that the Debt Service Coverage Ratio for the most recent Fiscal Year (excluding the additional Long-Term Indebtedness to be incurred) was not less than 1.2:1.0 and (b) the report of an Independent Consultant (or, in lieu thereof, an Officer’s Certificate if the Debt Service Coverage Ratio is projected to be not less than 1.5:1.0 for each such Fiscal Year) to the effect that the Debt Service Coverage Ratio for each of the two Fiscal Years beginning with the Fiscal Year commencing after the estimated completion of the facilities to be financed by the Indebtedness to be incurred with respect to all Long-Term Indebtedness projected to be outstanding (including the additional Long-Term Indebtedness to be incurred but excluding any Long-Term Indebtedness to be refunded with

D-40 the proceeds of said additional Long-Term Indebtedness to be incurred), is projected to be not less than 1.2:1.0. Notwithstanding the foregoing, if the Master Trustee receives a report of an Independent Consultant to the effect that Government Restrictions or Industry Restrictions prevent the Credit Group Members from generating the required levels of Income Available for Debt Service sufficient to result in Debt Service Coverage Ratios at least equal to those described in this paragraph, the ratio requirements described in this paragraph shall be reduced to the highest ratios that, in the opinion of the Independent Consultant, are reasonably obtainable under such Government Restrictions or Industry Restrictions, but in no event less than a ratio of 1.0:1.0. In addition, Long-Term Indebtedness may be issued or incurred to refund Long-Term Indebtedness by providing the Master Trustee with an Officer’s Certificate to the effect that the issuance of such Long-Term Indebtedness would not increase Maximum Annual Debt Service by more than 10%.

Completion Indebtedness, without limitation, provided that an Officer’s Certificate is delivered to the Master Trustee stating that the Credit Group Representative reasonably expected the aggregate principal amount of Long-Term or Interim Indebtedness originally issued to finance the construction or equipping of the project for which such Completion Indebtedness is being incurred, together with other funds reasonably anticipated to be available for such purposes, to be fully sufficient to provide a completed and fully equipped facility of the type and scope contemplated at the time such Long-Term Indebtedness or Interim Indebtedness was originally incurred, and in accordance with the general plans and specifications for such facility as originally prepared and approved in connection with the related financing, modified or amended only in conformance with the provisions of the documents pursuant to which the related financing was undertaken.

Short-term Indebtedness provided that (a) the requirements for incurring Long-Term Indebtedness are satisfied calculated as if such Short-term Indebtedness was Long-Term Indebtedness, or (b) an Officer’s Certificate is delivered to the Master Trustee stating that: (i) the total amount of such Short-term Indebtedness, together with the aggregate principal amount of Indebtedness incurred pursuant to provisions under the heading “Any other Indebtedness” below, shall not exceed 20% of Total Revenues; and (ii) in every Fiscal Year, there shall be at least a consecutive 20 day period when the balances of such Short-term Indebtedness (excluding Short-Term Indebtedness consisting of commercial paper which is intended to be refinanced with additional commercial paper) is reduced to an amount which shall not exceed five percent of Total Revenues.

Nonrecourse Indebtedness, without limitation, provided that an Officer’s Certificate is delivered to the Master Trustee stating that the proceeds of Nonrecourse Indebtedness in the aggregate shall not be used to acquire or construct inpatient acute care hospital facilities.

Subordinated Indebtedness, without limitation.

Any other Indebtedness, provided that an Officer’s Certificate is delivered to the Master Trustee stating that the aggregate principal amount of such Indebtedness, together with the aggregate principal amount of Indebtedness incurred pursuant to the provisions described under “Short-term Indebtedness” above, does not, as of the date of incurrence, exceed 20% of Total Revenues.

Commitment Indebtedness, without limitation.

Events of Default

Each of the following events is an Event of Default under the Master Indenture:

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(a) failure on the part of the Obligated Group Members to make due and punctual payment of the principal of, redemption premium, if any, interest on or any other Required Payment on any Master Indenture Obligation after applicable grace, notice and/or cure periods, if any;

(b) the Debt Service Coverage Ratio of the Credit Group is less than 1.0:1.0 for any two consecutive Fiscal Years;

(c) any Obligated Group 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) and shall not have cured such failure within 60 days after the date on which written notice of such failure, requiring the failure to be remedied, shall have been given to the Credit Group Representative by the Master Trustee or to the Credit 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 60 day period, such failure shall not become an Event of Default for so long as the Credit Group Representative shall diligently proceed to remedy the failure);

(d) any Credit Group Member shall default in the payment of Indebtedness (other than (i) Subordinated Indebtedness, (ii) Nonrecourse Indebtedness, and (iii) Indebtedness secured by a Master Indenture Obligation, which will be governed by clause (a) of this paragraph) in an aggregate outstanding principal amount equal to the greater of 5% of the aggregate principal amount of Total Revenues of the Obligated Group, and any grace, notice and/or cure period for such payment shall have expired; provided, however, that such default shall not constitute an Event of Default if, within 60 days or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, any Credit Group Member in good faith commences proceedings to contest the existence or payment of such Indebtedness, and 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;

(e) a court having jurisdiction shall enter a decree or order for relief in respect of any Credit Group 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 Credit Group Member or for any substantial part of the Property of any Credit Group 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;

(f) any Credit Group 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 Credit Group 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; and

(g) An event of default shall exist under any Related Bond Indenture after applicable notice, grace and/or cure periods, if any.

The Credit Group Representative has agreed in the Master Indenture that, as soon as practicable, and in any event within ten days after such event, the Credit Group Representative will notify the Master Trustee of any event which is an Event of Default thereunder which has occurred and is continuing, which notice will state the nature of such event and the action which the Obligated Group Members propose to take with respect thereto.

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Acceleration; Annulment of Acceleration

Upon the occurrence and during the continuation of an Event of Default under the Master Indenture, the Master Trustee may, and upon the written request of the Holders of not less 25% in aggregate principal amount of Outstanding Master Indenture Obligations shall, by notice to the Credit Group Representative, declare all Outstanding Master Indenture Obligations immediately due and payable. Upon such declaration of acceleration, all Outstanding Master Indenture Obligations shall 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 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, and all other amounts due thereunder, shall be due and payable on the Master Indenture Obligations.

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: (a) the Obligated Group Members have 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); (b) the Obligated Group Members have 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; (c) the Obligated Group Members have 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 thereunder; and (d) 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 will extend to or affect any subsequent Event of Default or impair any right with respect to any subsequent Event of Default.

No provision described under the heading “Acceleration; Annulment of Acceleration” prohibits the Holder of any Master Indenture Obligation from declaring the acceleration of payments due on such Master Indenture Obligation following an Event of Default with respect to failure on the part of the Obligated Group Members to make due and punctual payment of the principal of, redemption premium, if any, interest on or any other Required Payment on any Master Indenture Obligation after applicable grace, notice and/or cure periods, if any, and no such declaration will be annulled without the express consent of such Holder.

Additional Remedies and Enforcement of Remedies

Upon the occurrence and continuance of any Event of Default under the Master Indenture, the Master Trustee may, and upon the written request of the Holders of not less than 25% in aggregate principal amount of the Outstanding Master Indenture Obligations (and upon indemnification of the Master Trustee to its satisfaction by the Credit Group for any such request), shall, proceed to protect and enforce its rights and the rights of the Holders thereunder by such proceedings as may be deemed expedient, including but not limited to: (a) enforcement of the right of the Holders to collect amounts due or becoming due under the Master Indenture Obligations; (b) civil action upon all or any part of the Master Indenture Obligations; (c) 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

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Obligations to account as if it were the trustee of an express trust for the Holders of Master Indenture Obligations; (d) civil action to enjoin any acts which may be unlawful or in violation of the rights of the Holders of Master Indenture Obligations; (e) civil action to obtain a writ of mandate against any Obligated Group Member or Controlling Member, or against any officer or member of the governing body of any Obligated Group Member or Controlling Member to compel performance of any act specifically required by the Master Indenture or any Master Indenture Obligation; and (f) enforcement of any other right or remedy of the Holders conferred by law or hereby.

Regardless of the occurrence of an Event of Default under the Master Indenture, if requested in writing by the Holders of not less than 25% 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 shall be necessary or expedient (1) to prevent any impairment of the security thereunder by any acts which may be unlawful or in violation hereof, or (2) 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 hereof or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interests of the Holders not making such request. Nothing herein shall be deemed to authorize the Master Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment, or composition affecting the Master Indenture Obligations or the rights of any Holder thereof, or to authorize the Master Trustee to vote in respect of the claim of any Holder in any such proceeding without the approval of the Holders so affected.

Application of Moneys After Default

During the continuance of an Event of Default under the Master Indenture, all moneys received by the Master Trustee pursuant to any right given or action taken under the provisions of Article IV of the Master Indenture (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 this Article):

First: To the payment of all Required Payments then due on the Master Indenture Obligations (including Financial Product Payments to the extent made pursuant to a Financial Product Agreement secured or evidenced by a Master Indenture Obligation and Parity Financial Product Extraordinary Payments), in the order of their due dates, and, if the amount available is not sufficient to pay in full all Required Payments due on the same date, then to the payment thereof ratably, according to the amount Required Payments due on such date, without any discrimination or preference;

Second: To the payment of all Financial Product Extraordinary Payments made pursuant to a Financial Product Agreement secured or evidenced by a Master Indenture Obligation (other than Parity Financial Product Extraordinary Payments), in the order of their due dates, and, if the amount available is not sufficient to pay in full all Financial Product Extraordinary Payments due on the same date, then to the payment thereof ratably, according to the amounts of Financial Product Extraordinary Payments due on such date, without any discrimination or preference.

(b) 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 Article of the Master Indenture):

First: To the payment of all Required Payments then due on the Master Indenture Obligations (including (i) Financial Product Payments to the extent made pursuant to a Financial

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Product Agreement secured or evidenced by a Master Indenture Obligation and (ii) Parity Financial Product Extraordinary Payments), 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, according to the amounts due respectively, without any discrimination or preference; and

Second: To the payment of all Financial Product Extraordinary Payments made pursuant to a Financial Product Agreement secured or evidenced by a Master Indenture Obligation (other than Parity Financial Product Extraordinary Payments), and, if the amount available is not sufficient to pay in full all such Financial Product Extraordinary Payments, then to the payment thereof ratably, 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 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 as described above and all fees and expenses of the Master Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive such balance. If no other Person is entitled thereto, then the balance shall be paid to the Members of the Obligated Group or such Person as a court of competent jurisdiction may direct.

Supplements Not Requiring Consent of Holders

The Credit Group Representative (acting for itself and as agent for each Obligated Group 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: (a) correct any ambiguity or formal defect or omission in the Master Indenture; (b) 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 thereunder and which does not materially and adversely affect the interests of the Holders; (c) 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 Obligated Group Members; (d) 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; (e) create and provide for the issuance of a Master Indenture Obligation or Series of Master Indenture Obligations as permitted thereunder; (f) obligate a successor to any Obligated Group Member in connection with a “Merger Transaction” as defined in the Master Indenture; (g) add a new Obligated Group Member or to reflect the withdrawal or redesignation of an Obligated Group Member; or (h) make any other change which does not materially and adversely affect the interests of the Holders.

Supplements Requiring Consent of Holders

Other than Related Supplements referred to under the heading “Supplements Not Requiring Consent of Holders” above and as described in this paragraph, 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 Credit Group Representative (acting for itself and as agent for each Obligated Group Member) and the Master Trustee of such Related Supplements as shall be

D-45 deemed necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding any of the terms contained herein; provided, however, that nothing described in this paragraph shall permit or be construed as permitting a Related Supplement which would: (a) 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 change the method of calculating interest payable on or reduce any other Required Payment on any Master Indenture Obligation without the consent of the Holder of such Master Indenture Obligation; (b) modify, alter, amend, add to or rescind any of the terms or provisions relating to the requirement that Obligated Group Members promptly pay all Required Payments or relating to the Events of Default and remedies thereto so as to affect the right of the Holders of any Master Indenture Obligations in default 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 (c) 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.

The Master Trustee may execute a Related Supplement (in substantially the form delivered to it as described below) without liability or responsibility to any Holder (whether or not such Holder has consented to the execution of such Related Supplement) if the Master Trustee receives: (a) a Request of the Credit Group Representative to enter into such Related Supplement; (b) a certified copy of the resolution of the governing body of the Credit Group Representative approving the execution of such Related Supplement; (c) the proposed Related Supplement; and (d) an instrument or instruments executed by the Holders of not less than the aggregate principal amount or number of Master Indenture Obligations specified in (a) above for the Related Supplement in question which instrument or instruments shall refer to the proposed Related Supplement and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof as on file with the Master Trustee.

Any such consent shall be binding upon the Holder of the Master Indenture Obligation giving such consent and upon any subsequent Holder of such Master Indenture Obligation and of any Master Indenture Obligation issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Master Indenture Obligation giving such consent or by a subsequent Holder thereof by filing with the Master Trustee, prior to the execution by the Master Trustee of such Related Supplement, such revocation and, if such Master Indenture Obligation or Master Indenture Obligations are transferable by delivery, proof that such Master Indenture Obligations are held by the signer of such revocation. At any time after the Holders of the required principal amount or number of Master Indenture Obligations shall have filed their consents to the Related Supplement, the Master Trustee shall file a written statement to that effect with the Credit Group Representative. Such written statement shall be conclusive evidence that such consents have been so filed. If the Holders of the required principal amount or number of the Outstanding Master Indenture Obligations have consented to the execution of such Related Supplement, no Holder shall have any right to object to the execution thereof, to object to any of the terms and provisions contained therein or the operation thereof, to question the propriety of the execution thereof or to enjoin or restrain the Master Trustee or the Credit Group Representative from executing such Related Supplement or from taking any action pursuant to the provisions thereof.

SUMMARY OF FIRST SUPPLEMENTAL MASTER TRUST INDENTURE AND COVENANTS

The First Supplemental Master Trust Indenture (the “First Supplemental Master Indenture”) contains covenants which are solely for the benefit of the holder of the outstanding obligations to which they relate. The following is a summary of the financial and reporting covenants contained in the First Supplemental Master Indenture.

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Summary of First Supplemental Master Trust Indenture

All terms used in the First Supplemental Master Indenture which are defined in the Master Indenture shall have the meanings assigned to them in the Master Indenture.

Debt Service Coverage Ratio; Option to Tender. The Members of the Obligated Group agree in the First Supplemental Master Indenture that the required combined or consolidated Income Available for Debt Service of the Credit Group in the Master Indenture shall be not less than 1.25 times Annual Debt Service rather than 1.10 times Annual Debt Service (as described under the heading “THE MASTER INDENTURE – Debt Service Coverage”), and that the reference to 1.10:1.0 in the Master Indenture (as described under the heading “THE MASTER INDENTURE – Debt Service Coverage”) shall be 1.25:1.0 rather than 1.10:1.0. Notwithstanding anything in the Master Indenture to the contrary, in the event that the required combined or consolidated Income Available for Debt Service of the Credit Group is less than 1.25 times Annual Debt Service as of any September 30, beginning on September 30, 2017, Specialized Lending, LLC (“Specialized Lending”) shall have the right in its sole option to tender the Development Authority of Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2009C (the “Series 2009C Bonds”), and BANA shall have the right in its sole option to tender the Amended and Restated 2012-1 Master Note, to PHC for purchase at a purchase price equal to the outstanding principal amount thereof, plus accrued interest, if any, which purchase shall occur on a Business Day designated by Specialized Lending and BANA, respectively, which is not less than 15 days after notice of the exercise of such tender right is delivered by Specialized Lending and/or BANA, respectively, to PHC. Failure to pay such tender price when due shall be deemed to constitute a failure to make due and punctual payment on a Master Indenture Obligation within the meaning of the Master Indenture.

Merger, Consolidation, Sale or Conveyance; Option to Tender. Notwithstanding the provisions of the Master Indenture relating to mergers, consolidations, sales or conveyances (as described under the heading “THE MASTER INDENTURE – Merger, Consolidation, Sale or Conveyance”), each Obligated Group Member covenants in the First Supplemental Master Indenture that unless waived in writing by BANA and Specialized Lending, it will not enter into any “Merger Transaction” as defined in the Master Indenture unless the Surviving Entity is an Obligated Group Member. In the event that there is a Merger Transaction and the Surviving Entity is not an Obligated Group Member, Specialized Lending shall have the right in its sole option to tender the Series 2009C Bonds, and BANA shall have the right in its sole option to tender the Amended and Restated 2012-1 Master Note, to PHC for purchase at a purchase price equal to the outstanding principal amount thereof, plus accrued interest, if any, which purchase shall occur on a Business Day designated by Specialized Lending and BANA, respectively, which is not less than 45 days after notice of the exercise of such tender right is delivered by Specialized Lending and/or BANA, respectively, to PHC. Failure to pay such tender price when due shall be deemed to constitute a failure to make due and punctual payment on a Master Indenture Obligation within the meaning of the Master Indenture.

Ratings; Option to Tender. The Obligated Group Members agree in the First Supplemental Master Indenture that the ratings assigned by Moody’s, S&P and Fitch, respectively, to long-term debt of PHC secured under the Master Indenture on a parity with the 2009-7 Master Note (the “2009-7 Note”), dated the date of issuance of the Fulton County Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2009C (the “Series 2009C Bonds”), and the amended and restated 2012-1 Master Note (the “Amended and Restated 2012-1 Master Note”) in the principal amount of $34,799,390.83, without regard to any credit or liquidity enhancement, shall be at least “Baa2,” “BBB” and “BBB,” respectively. In the event that any such rating is withdrawn or suspended for credit-related reasons, Specialized Lending shall have the right in its sole option to tender the Series 2009C Bonds, and BANA shall have the right in its sole option to tender and the Amended and Restated 2012-1 Master Note to PHC for purchase at a purchase price equal to the outstanding principal amount thereof, plus accrued interest, if any, which

D-47 purchase shall occur on a Business Day designated by Specialized Lending and BANA, respectively, which is not less than 15 days after notice of the exercise of such tender right is delivered by Specialized Lending or BANA, respectively, to PHC. Failure to pay such tender price when due shall be deemed to constitute a failure to make due and punctual payment on a Master Indenture Obligation within the meaning of the Master Indenture.

Reporting Requirements. PHC agrees in the First Supplemental Master Indenture to provide BANA and Specialized Lending (or make available to BANA and Specialized Lending through EMMA) copies of the following: (a) audited financial statements within 150 days after the end of each Fiscal Year for the Obligated Group, containing a consolidating balance sheet and income statements; and (b) notice of any events required to be provided to a nationally recognized municipal securities repository pursuant to any continuing disclosure agreement.

Withdrawal from Obligated Group. The First Supplemental Master Indenture amends Section 3.04(c) of the Master Indenture by deleting in its entirety the requirement that the Master Trustee receive the following prior to an Obligated Group Member’s withdrawal from the Obligated Group or redesignation as a Designated Affiliate:

“an Officer’s Certificate to the effect that immediately following such withdrawal, the remaining Obligated Group Members shall represent not less than 75% of the Total Revenues as shown on the Credit Group Financial Statements for the most recent Fiscal Year of the Obligated Group Members and Designated Affiliates immediately prior to such withdrawal.”

The First Supplemental Master Indenture replaces Section 3.04(c) with the following:

“an Officer’s Certificate to the effect that immediately following such withdrawal, the remaining Obligated Group Members shall represent not less than 75% of the Income Available for Debt Service of the Obligated Group Members and all consolidated affiliated entities of the Obligated Group Members (not Income Available for Debt Service of the Credit Group only) immediately prior to such withdrawal.”

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT

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CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement, dated November ___, 2016 (this “Disclosure Agreement”) is executed and delivered by Piedmont Healthcare, Inc. (“PHC”) on behalf of itself and the other Obligors (as hereinafter defined), and U.S. Bank National Association, as trustee (the “Trustee”) under (i) the Trust Indenture dated as of November 1, 2016, between the Development Authority of Fulton County (the “Fulton Authority”) and the Trustee pursuant to which $______aggregate principal amount of the Fulton Authority’s Revenue Bonds (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fulton Bonds”) are being issued, (ii) the Trust Indenture dated as of November 1, 2016, between The Hospital Authority of Clarke County, Georgia (the “Clarke Authority”) and the Trustee pursuant to which $______aggregate principal amount of the Clarke Authority’s Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A (the “Clarke Certificates”) are being issued, and (iii) the Trust Indenture dated as of November 1, 2016, between the Hospital Authority of Fayette County (the “Fayette Authority”) and the Trustee pursuant to which $______aggregate principal amount of the Fayette Authority’s Revenue Anticipation Certificates (Piedmont Healthcare, Inc. Project), Series 2016A (the “Fayette Certificates”) are being issued. The Fulton Bonds, the Clarke Certificates and the Fayette Certificates are collectively referred to herein as the “Series 2016A Bonds”. The Fulton Authority, the Clarke Authority and the Fayette Authority are referred to collectively herein as the “Authorities”. The separate trust indentures are referred to collectively herein as the “Indentures”.

The proceeds of the Series 2016A Bonds are being loaned to PHC pursuant to separate Loan Agreements, each dated as of November 1, 2016 (collectively, the “Agreements”), between the respective Authorities and PHC. PHC and the Trustee hereby covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by PHC and the Trustee for the benefit of the Beneficial Owners (as defined herein) of the Series 2016A Bonds and in order to assist the Participating Underwriter (as defined herein) in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth above and in the Indentures and the Agreements, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report provided by PHC pursuant to, and as described in, Sections 5 and 6 of this Disclosure Agreement.

“Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2016A Bonds (including persons holding Series 2016A Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2016A Bonds for federal income tax purposes.

“Dissemination Agent” means PHC or any successor Dissemination Agent designated in writing by PHC and which has filed with PHC a written acceptance of such designation.

“EMMA” shall mean the Electronic Municipal Market Access system as described in 1934 Act Release No. 59062 and maintained by the Municipal Securities Rulemaking Board for purposes of the Rule as further described in Section 6(b) hereof.

“Fiscal Quarter” means each quarter occurring during each Fiscal Year of PHC.

“Fiscal Year” means any period of 12 consecutive months adopted by PHC as PHC’s fiscal year for financial reporting purposes and initially shall mean the period beginning on July 1 of a calendar year and ending on June 30 of the following calendar year.

“Listed Events” shall mean any of the events Listed in Section 7(a) of this Disclosure Agreement.

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“Master Indenture” means the Amended and Restated Master Trust Indenture, dated November ___, 2016, amending and restating the Master Trust Indenture dated as of March 1, 1999, as supplemented and amended from time to time, between PHC and the other members of the Obligated Group, and U.S. Bank National Association, as successor trustee.

“MSRB” means the Municipal Securities Rulemaking Board.

“Obligors” means PHC and the members of the Obligated Group (as defined in the Master Indenture) under the Master Indenture.

“Official Statement” means the Official Statement dated October ____, 2016 with respect to the Series 2016A Bonds.

“Participating Underwriter” means, collectively, the original underwriters of the Series 2016A Bonds required to comply with the Rule in connection with the offering of the Series 2016A Bonds.

“Quarterly Report” means any Quarterly Report provided by PHC pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Quarterly Reports.

(a) PHC shall provide, or cause the Dissemination Agent (if other than PHC) to provide, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA), and accompanied by identifying information as prescribed by the MSRB, not later than 60 days after the end of each of the first three Fiscal Quarters of PHC, commencing with the report for the Fiscal Quarter ending December 31, 2016, a Quarterly Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Quarterly 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.

(b) The Dissemination Agent shall (if the Dissemination Agent is other than PHC), file a report with PHC certifying that the Quarterly Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided to the MSRB.

SECTION 4. Content of Quarterly Reports.

(a) The Quarterly Report shall contain or include by reference information for the preceding Fiscal Quarter regarding the financial information and operating data of PHC, substantially in the form included in APPENDIX A to the Official Statement under the following headings:

(1) Table 20. Selected Utilization Statistics (2) Table 21. Sources of Revenue by Payor Source (3) Table 22. Consolidated Statements of Operations (4) Table 23. Consolidated Balance Sheets

(b) PHC may omit or modify any part of the quarterly information required by this section if the operations to which it relates have been discontinued or materially changed. PHC will include an explanation to that effect as part of the quarterly information for the quarter in which such event first occurs (or, if such event occurs in the last quarter of the fiscal year, as part of the annual financial information provided by Section 5).

E-2 SECTION 5. Provision of Annual Reports.

(a) PHC shall provide, or cause the Dissemination Agent (if other than PHC) to provide, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA), and accompanied by identifying information as prescribed by the MSRB, not later than 150 days after the end of PHC’s Fiscal Year, commencing with the report for Fiscal Year 2016, an Annual Report which is consistent with the requirements of Section 6 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 6 of this Disclosure Agreement; provided that the audited financial statements of PHC may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. In such event, the audited financial statements will be submitted promptly upon their availability.

(b) The Dissemination Agent shall:

(i) (if the Dissemination Agent is other than PHC), file a report with PHC certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided to the MSRB; and

(ii) send a notice to the MSRB in substantially the form attached as Exhibit A if PHC is unable to verify that an Annual Report has been provided to the MSRB by the date required in paragraph (a) of this Section 5.

SECTION 6. Content of Annual Reports.

(a) The Annual Report for each Fiscal Year, which is to be provided within 150 days after the end of such Fiscal Year pursuant to Section 5(a), shall contain or include by reference:

(i) the audited financial statements of PHC for the preceding Fiscal Year, which shall be prepared in accordance with generally accepted accounting principles, as in effect from time to time, and which shall be accompanied by an opinion letter, if available at the time of submission of the Annual Report to the MSRB pursuant to Section 5(a) hereof, resulting from an audit conducted by an independent certified public accountant or firm of independent certified public accountants in conformity with generally accepted auditing standards;

(ii) to the extent not included in the audited financial statements (including the notes thereto) of PHC, if generally accepted accounting principles have changed since the last Annual Report submitted pursuant to Section 5(a) hereof and if such changes are material to PHC, a narrative explanation describing the impact of such changes on PHC; and

(iii) information for the preceding Fiscal Year regarding the financial information and operating data of PHC, substantially in the form included in APPENDIX A to the Official Statement under the following headings:

(1) Table 17. Pro Forma Debt of Obligated Group (2) Table 18. Interest Rate Swaps (3) Table 20. Selected Utilization Statistics (4) Table 21. Sources of Revenue by Payor Source (5) Table 22. Consolidated Statements of Operations (6) Table 23. Consolidated Balance Sheets (7) Table 24. Financial Ratios (excluding the pro forma portion relating to Piedmont Athens) (8) Table 25. Analysis of Indigent and Charity Care

E-3 (b) Any or all of the items listed in paragraph (a) of this Section 6 may be included by specific reference to other documents, including official statements of debt issues with respect to which PHC is an “obligated person” (as defined in the Rule), which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB or have been deposited with the MSRB. PHC shall clearly identify each such other document so included by reference.

(c) PHC may omit or modify any part of the annual information required by this section if the operations to which it relates have been discontinued or materially changed. PHC will include an explanation to that effect as part of the annual financial information provided by Section 5.

SECTION 7. Reporting of Significant Events.

PHC shall provide or cause to be provided through the Dissemination Agent, in a timely manner not in excess of 10 business days after the occurrence of the event, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) notice of the occurrence of any of the following events with respect to the Series 2016A 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 or events affecting the tax-exempt status of the Series 2016A Bonds,

7. Modifications to rights of holders of the Series 2016A Bonds, if material,

8. Bond calls, if material, and tender offers,

9. Defeasances,

10. Release, substitution, or sale of property securing repayment of the Series 2016A Bonds, if material,

11. Rating changes,

12. Bankruptcy, insolvency, receivership or similar events affecting an Obligor,

13. The consummation of a merger, consolidation, or acquisition involving an Obligor or the sale of all or substantially all of the assets of an Obligor, 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.

SECTION 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent PHC 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 or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If PHC chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, PHC shall have no obligation under this Disclosure

E-4 Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 9. Termination of Reporting Obligation. PHC reserves the right to terminate the obligations under this Disclosure Agreement with respect to itself or any other Obligor if and when such Obligor no longer remains an obligated person with respect to the Series 2016A Bonds within the meaning of the Rule. This Disclosure Agreement shall terminate with respect to all of the Obligors upon the occurrence of the legal defeasance, prior redemption, or payment in full of all of the Series 2016A Bonds in accordance with their respective Indentures. The Dissemination Agent will provide notice of any such termination to the MSRB through EMMA.

SECTION 10. Dissemination Agent. PHC, from time to time, may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. A Dissemination Agent other than PHC shall not be responsible in any manner for the content of any notice or report prepared by PHC pursuant to this Disclosure Agreement.

SECTION 11. Amendment. Notwithstanding any other provision of this Disclosure Agreement, PHC and the Trustee may amend this Disclosure Agreement (and the Trustee shall agree to any amendments requested by PHC), and any provision of this Disclosure Agreement may be waived, if:

(a) such amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligated person on the Series 2016A Bonds, or type of business conducted;

(b) such amendment is supported by an opinion of counsel expert in federal securities laws, to the effect that the undertakings contained herein, as amended, would have complied with the requirements of the Rule on the date hereof, after taking into account any amendments or official interpretations of the Rule, as well as any change in circumstances; and

(c) such amendment does not materially impair the interests of the Beneficial Owners, as determined either by an opinion of counsel expert in securities laws filed with PHC, or by the approving vote of the Beneficial Owners pursuant to the terms of the Indentures at the time of such amendment.

If any provision of this Disclosure Agreement is amended, the first release of the Annual Report containing any amended financial information or operating data shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being provided. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 7 and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 12. Default. If PHC fails to comply with any provision of this Disclosure Agreement, any Beneficial Owner’s right to enforce the provisions of this undertaking shall be limited to a right to obtain mandamus or specific performance by court order of PHC’s obligations pursuant to this Disclosure Agreement. Any failure by PHC to comply with the provisions of this Disclosure Agreement shall not be an event of default under the Indentures or the Agreements.

SECTION 13. Duties, Immunities, and Liabilities of Dissemination Agent and Trustee. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement. The Trustee is entering into this Disclosure Agreement in its capacity as Trustee under the Indentures, and as such shall be entitled to the protection of the provisions thereof, including specifically Article IX thereof.

E-5 SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of PHC, the Dissemination Agent (if other than PHC), the Participating Underwriter, the Trustee and Beneficial Owners, and shall create no rights in any other person or entity.

SECTION 15. Governing Law. This Disclosure Agreement shall be interpreted in accordance with the laws of the State of Georgia.

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PIEDMONT HEALTHCARE, INC.

By: Michael McAnder Chief Financial Officer

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U.S. BANK NATIONAL ASSOCIATION, as Trustee

By: Authorized Signatory

E-8 EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: [Full Name of Authority]

Name of Bond Issue: $______[Bond Title]

Name of Obligated Person: Piedmont Healthcare, Inc.

Date of Issuance: November __, 2016

NOTICE IS HEREBY GIVEN that Piedmont Healthcare, Inc. (“PHC”) has not provided an Annual Report with respect to the above-named Series 2016A Bonds as required by Section 5(a) of the Continuing Disclosure Agreement dated November ____, 2016, by PHC in favor of U.S. Bank National Association, as Trustee. PHC anticipates that the Annual Report will be filed by ______.

This notice is based on the best information available at the time of dissemination. Any questions regarding this notice should be directed to ______.

Dated: ______[Name of Dissemination Agent]

By:

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APPENDIX F

THE DTC BOOK ENTRY SYSTEM

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THE DTC BOOK ENTRY SYSTEM

Information concerning DTC and the book entry 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 by, the Authorities, the Underwriters, the Bond Trustees, or PHC.

The Bonds will be available only in book entry form in Authorized Denominations. The Depository Trust Company (“DTC”), New York, New York, will act as the initial securities depository for each series of the Bonds. Each series of the Bonds will be issued as fully registered securities 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 security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (the “Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others, such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the “Indirect Participants” and, together with the Direct Participants, the “Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for such Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (a “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participant’s 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 such Beneficial Owners entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry only system for the Bonds is discontinued.

To facilitate subsequent transfers, all Book-Entry 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 Book-Entry Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Book-Entry Bonds; DTC’s records reflect only the identity of the Direct Participants to whose account such Book-Entry 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.

Conveyances of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of

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significant events with respect to the Bonds, such as redemptions, tenders, defaults and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Registrar and request that copies of notices be provided directly to them.

Redemption notices will be sent to DTC. If less than all of the Book-Entry Bonds within a series are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed.

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

Principal and interest payments on the Book-Entry 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 related Bond Trustee, on a payment date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC or the Authorities, the Bond Trustees or PHC, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the related Bond Trustee; disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

NONE OF THE AUTHORITIES, PHC, OR THE BOND TRUSTEES WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS FOR (1) SENDING TRANSACTION STATEMENTS; (2) MAINTAINING, SUPERVISING OR REVIEWING, OR THE ACCURACY OF, ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (3) PAYMENT OR THE TIMELINESS OF PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON BOOK-ENTRY BONDS; (4) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OF ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND INDENTURE TO BE GIVEN HOLDERS OR OWNERS OF BOOK-ENTRY BONDS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF BOOK-ENTRY BONDS; OR (6) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF BOOK-ENTRY BONDS.

So long as Cede & Co. is the registered owner of the Bonds, as nominee for DTC, references in this Official Statement to the Bondholders, holders or registered owners of the Bonds (other than under the caption “TAX EXEMPTION” herein) will mean Cede & Co., as aforesaid, and will not mean the Beneficial Owners of the Bonds.

When reference is made to any action which is required or permitted to be taken by the Beneficial Owners, such reference will only relate to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they will be sent by PHC or the related Bond Trustee to DTC only.

As long as the book-entry system is used for the Bonds, PHC and the related Bond Trustee will give any notices required to be given to Holders of the Bonds only to DTC. Any failure of DTC to advise any Direct Participant, or of any Direct Participant to notify any Indirect Participant, or of any Direct Participant or Indirect Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the action premised on such notice. Conveyance of notices and other communications by DTC to Direct Participants, by Direct

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Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may desire to make arrangements with a Direct Participant or Indirect Participant so that all notices of redemption or other communications to DTC which affect such Beneficial Owners will be forwarded in writing by such Direct Participant or Indirect Participant.

NONE OF THE AUTHORITIES, PHC OR THE BOND TRUSTEES WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DIRECT PARTICIPANTS, OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES, WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS, OR THE BENEFICIAL OWNERS OF THE BONDS.

For every transfer and exchange of a beneficial ownership interest in the Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge, that may be imposed in relation thereto.

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

The Authorities or PHC may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor Securities Depository). In that event, Bond certificates will be printed and delivered to DTC.

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Piedmont Healthcare, Inc. Project • Revenue Bonds and Revenue Anticipation Certificates, Series 2016A