Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) (The “Bonds”)

SECOND SUPPLEMENT TO PRELIMINARY OFFICIAL STATEMENT

$967,835,000* ILLINOIS FINANCE AUTHORITY REVENUE BONDS, SERIES 2016C (PRESENCE HEALTH NETWORK) (THE “BONDS”)

The Preliminary Official Statement dated July 13, 2016 (the “Preliminary Official Statement”) relating to the above-referenced Bonds, as supplemented by the Supplement to Preliminary Official Statement dated July 15, 2016, is further supplemented and amended by this Second Supplement to Preliminary Official Statement dated July 26, 2016 (this “Supplement”), as follows:

1. As part of its Continuing Disclosure Agreement, the Corporation will host a call for the Beneficial Owners within seventy-five (75) days after the end of each fiscal quarter of the System through and including the fiscal quarter ending December 31, 2017.

2. The definition of “Cash and Liquid Investments” contained in Appendix D is hereby amended as follows (changed text shown in underline):

“Cash and Liquid Investments” means all unrestricted cash and liquid investment balances, including, without limitation, such amounts that are on deposit in a funded depreciation fund or account, whether classified as current or noncurrent assets, held by the System Affiliates for any of their corporate purposes, but excluding any trustee held funds, creditor held funds, self insurance and captive insurance funds, pension and retirement funds and the proceeds of any short-term borrowings, including without limitation, draws on lines of credit regardless of the maturity date of the line of credit, all as set forth in the most recent Financial Statements of the System delivered under the Master Indenture.

Capitalized terms in this Supplement have the meanings assigned thereto in the Preliminary Official Statement.

This Supplement has been approved by Presence Health Network.

This Supplement should be affixed to and is hereby made a part of the Preliminary Official Statement.

Supplement dated July 26, 2016.

* Preliminary, subject to change. SUPPLEMENT TO PRELIMINARY OFFICIAL STATEMENT

$967,835,000* ILLINOIS FINANCE AUTHORITY REVENUE BONDS, SERIES 2016C (PRESENCE HEALTH NETWORK) (THE “BONDS”)

The Preliminary Official Statement dated July 13, 2016 (the “Preliminary Official Statement”) relating to the above-referenced Bonds is supplemented and amended by this Supplement to Preliminary Official Statement dated July 15, 2016 (this “Supplement”), as follows:

1. The System has made its unaudited consolidated financial statements for the six months ended June 30, 2016 available at http://emma.msrb.org/EP941495-EP730452-EP1132184.pdf which financial statements are incorporated herein by reference.

2. The information appearing under the caption “ACUTE CARE MINISTRIES – Historical Utilization of Acute Care Ministries” on page A-15 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

Data regarding patient utilization for the Acute Care Ministries for the six months ended June 30, 2016 and 2015 and for the fiscal years ended December 31, 2015 and 2014 is depicted in the following table.

Six Months Ended June 30, Year Ended December 31, 2016 2015 2015 2014 Patient Days 273,656 285,528 569,784 581,975 Occupancy Percentage(1) 52.6% 55.2% 52.5% 55.7% Acute Care Admissions 44,058 46,158 90,986 92,232 Adjusted Admissions 98,566 101,732 204,139 199,755 Observation Cases 19,277 18,202 36,670 35,678 Average Length of Stay - Acute 4.23 4.16 4.14 4.27 Medicare ALOS – Acute 4.50 5.11 4.96 5.25 Medicare Acute Case Mix Index 1.59 1.60 1.59 1.60 ER Visits (Inpatients and Outpatients) 191,688 194,264 390,210 389,435 Deliveries 3,761 3,812 7,778 7,952 Inpatient Surgeries 9,811 9,842 19,950 20,656 Outpatient Surgeries 20,320 21,723 43,400 42,800 Open Heart Surgeries 448 488 953 925 GI Cases IP & OP 13,477 13,615 26,985 27,124 Total Surgery & GI Cases 44,056 45,668 91,288 91,505 ______(1) Occupancy percentage is based on available beds.

* Preliminary, subject to change.

3. The information appearing under the caption “FINANCIAL AND OPERATING INFORMATION – Sources of Gross Patient Service Revenue” on page A-26 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

The System derives its gross patient service revenue from the federal Medicare program, state Medicaid programs, managed care organizations, commercial insurers, self-paying patients and other sources. The following table presents the sources of gross patient service revenues for the System for the six months ended June 30, 2016, and for the fiscal years ended December 31, 2015 and 2014. For further information regarding the sources of revenue and the potential impacts of changes thereto, refer to the section in this Official Statement entitled “BONDHOLDERS’ RISKS.”

Sources of Gross Patient Service Revenues

Six Months Ended Year Ended June 30, December 31, 2016 2015 2014 Medicare 38.1% 38.1% 40.6% Medicare Managed Care 10.6 10.5 8.0 Medicaid 6.0 7.1 15.3 Medicaid Managed Care 14.8 13.1 4.7 Commercial 26.9 27.2 26.9 Self-Pay & Other 3.7 4.0 4.5 Total 100.0% 100.0% 100.0%

4. The information appearing under the caption “FINANCIAL AND OPERATING INFORMATION – Unrestricted Investments and Liquidity” on page A-28 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

The following table shows the System’s unrestricted cash and investments (excluding assets held by bond trustees) and days cash on hand as of June 30, 2016 and December 31, 2015 and 2014.

Liquidity Position (Dollars in Thousands)(1)

June 30, December 31, December 31, 2016 2015 2014 Cash and cash equivalents $161,545 $207,356 $192,404 Investments 740,925 744,433 918,455 Total unrestricted cash and investments $902,470 $951,789 $1,110,859 Days cash on hand(1) 126.7 130.6 165.0 ______(1) Days cash on hand is calculated in accordance with the Master Indenture for the audited periods and is based on actual days elapsed during the interim period ended June 30, 2016.

5. In the second paragraph under the caption “FINANCIAL AND OPERATING INFORMATION – Management’s Discussion of Financial Performance - Background” on page A-29 of the Preliminary Official Statement, the reference to “(approximately $33 million)” is hereby amended to read “(approximately $44 million).”

6. The information appearing under the caption “FINANCIAL AND OPERATING INFORMATION - Turnaround Plan: Projected Timing and Financial Outcomes of Initiatives – Turnaround Plan: Five Month 2016 Turnaround Plan Projections Compared to Unaudited Income Statement (excluding Alverno)” on page A-36 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

Turnaround Plan: Six Month 2016 Turnaround Plan Projections Compared to Unaudited Income Statement (excluding Alverno)

The 2016 Turnaround Plan projections were developed by management based on quarterly time periods. The Turnaround Plan projections on an aggregate basis for the 1st Quarter and 2nd Quarter 2016 are as indicated below.

January to June 2016 Projected Income Statement (Dollars in Thousands)

Projected Projected Projected 1st Quarter 2nd Quarter January – 2016 2016 June 2016

Total Revenue $633,000 $641,628 $1,274,628 Operating Expenses Salaries and benefits $334,000 $329,885 $663,885 Supplies 97,000 95,875 192,875 Purchased Services 93,000 91,852 184,852 Insurance 11,500 11,500 23,000 Depreciation and amortization 34,500 34,500 69,000 Interest 10,500 10,500 21,000 Assessments and taxes 29,500 29,500 59,000 Other 50,000 49,418 99,418 Total Expenses $660,000 $653,030 $1,313,030 Income (loss) from operations before ($27,000) ($11,402) ($38,402) turnaround expenses

Turnaround Expenses 5,955 8,838 14,793

Loss from operations ($32,955) ($20,240) ($53,195) ______Source: Management of the System Note: Certain items have been reclassified for presentation consistent with the annual audited financial statements for both actual operating results as well as Turnaround Plan projections and therefore will vary from previous presentations.

3 In order to compare the Turnaround Plan to the unaudited (actual) summary consolidated statements of operations for the six months ended June 30, 2016, which have been incorporated herein by reference, the below schedule excludes financial information for Alverno, which is separately listed.

Six Months Ended June 30, 2016 Unaudited (Dollars in Thousands) Consolidated Statement of Consolidated Operations Statement of Presence – Alverno (excluding Operations Alverno Eliminations Alverno) Total Revenue $1,324,487 $86,476 ($36,994) $1,275,005 Operating Expenses Salaries and benefits $697,636 $46,547 - $651,089 Supplies 209,404 20,462 - 188,942 Purchased services 159,008 5,236 (36,994) 190,766 Insurance 22,849 190 - 22,659 Depreciation and amortization 69,597 1,057 - 68,450 Interest 21,471 - - 21,471 Assessments and taxes 56,237 - - 56,237 Other 112,711 12,136 - 100,575 Total Expenses $1,348,913 $85,627 ($36,994) $1,300,279 Income (loss) from operations before turnaround expenses ($24,426) $848 - ($25,274) Turnaround Expenses 17,585 17,585 Income (loss) from operations ($42,011) $848 - ($42,859) ______Source: Management of the System

7. The information appearing under the caption “FINANCIAL AND OPERATING INFORMATION - Turnaround Plan: Comparison of Projections to Actual Performance” on page A-38 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

Turnaround Plan: Comparison of Projections to Actual Performance

The table below compares the Actual (Unaudited) Consolidated Statement of Operations (excluding Alverno) for January to June 2016 to Turnaround Plan projections for the six months ended June 30, 2016.

Consolidated Statement of Operations (excluding Alverno) for January – June 2016 Compared to Turnaround Plan Projections (Dollars in Thousands)

Six Months January February March April May June Ended Projected Actual Actual Actual Actual Actual Actual June 30, January – Ahead / 2016 June (Behind) Unaudited Actual 2016(1) Plan

Total Revenue $213,631 $207,742 $214,154 $209,196 $211,980 $218,302 $1,275,005 $1,274,628 $377 Operating Expenses Salaries and benefits $112,188 $105,971 $109,240 $105,228 $110,123 $108,339 $651,089 $663,885 $12,796 Supplies 32,390 30,623 32,581 30,033 29,912 33,403 188,942 192,875 3,933 Purchased services 31,082 31,826 33,253 32,190 31,689 30,726 190,766 184,852 (5,914) Insurance 3,766 3,685 3,775 3,744 3,810 3,879 22,659 23,000 341 Depreciation and 11,369 11,486 11,601 11,304 11,452 11,328 68,540 69,000 460 amortization Interest 3,573 3,201 3,697 3,584 3,678 3,738 21,471 21,000 (471) Assessments and taxes 9,626 9,819 9,760 9,768 8,768 8,496 56,237 59,000 2,763 Other General Expenses 18,616 15,947 17,028 16,695 15,005 17,284 100,575 99,418 ($1,157) Total Expenses $222,610 $212,558 $220,935 $212,546 $214,437 $217,193 $1,300,279 $1,313,030 $12,751 Income/ (loss) from operations before turnaround expenses ($8,978) ($4,815) ($6,782) ($3,350) ($2,457) $1,109 ($25,274) ($38,402) $13,128 Turnaround expenses 15 2,613 2,545 4,050 4,294 4,068 17,585 14,793 2,792

Loss from operations ($8,993) ($7,428) ($9,327) ($7,400) ($6,751) ($2,959) ($42,859) ($53,195) $10,336 ______Source: Management of the System (1) See January to June 2016 Projected Income Statement herein. Note: Certain items have been reclassified for presentation consistent with the annual audited financial statements for both actual operating results as well as Turnaround Plan projections and therefore will vary from previous presentations.

As noted above, the Income from Operations has improved from a loss of $9.0 million in January 2016 to a profit of $1.1 million in June 2016, an improvement in the monthly run rate of $10.1 million. Thus, the System is ahead of its projected breakeven in the 3rd Quarter 2016. Additionally, the System is ahead of the Turnaround Plan Income from Operations projections by $13.1 million for the six months ended June 30, 2016.

Labor

Reductions in Salaries and benefits was $12.8 million ahead of the Turnaround Plan projections as of June 30, 2016. These improvements are over and above one-time salary lump-sum payments of $1.1 million as well as $1.5 million in monthly increases to associates, which commenced in May. This savings is the result of a net reduction of

5 over 650 FTES which has been achieved through a combination of attrition and position elimination or restructuring. Although the System is ahead of plan for salary reductions, severance costs and salary increases to associates (which were instituted to promote retention) prevented the full effect of these reductions from being realized. These FTE reductions represent approximately 80% of the positions required to be eliminated to meet targeted savings. Management anticipates achieving the balance of FTE reductions primarily through attrition, with the full labor plan fully implemented by the 4th Quarter of 2016.

Revenue

Total Revenue is consistent with the Turnaround Plan projections as of June 30, 2016. Strategic/Market Based Pricing changes were implemented in March. The increased revenue expected from those changes, as well as the increased revenue that will result from a negotiated price increase under a health plan contract, are being recognized in the 2nd Quarter Turnaround Plan results. It is anticipated that additional improvements resulting from a delayed recognition of the increases resulting from Strategic/Market Based Pricing will be reflected in the 3rd Quarter reported financials. Lastly, improved cash collections, the number of accounts worked by the Centralized Insurance Verification team, and improvements in preauthorization and payer approval are continuing to enhance revenue. Management anticipates these increases in revenue to continue as processes and procedures improve.

Supply Chain and Purchased Services

Supplies are ahead of the Turnaround Plan projections by $3.9 million as of June 30, 2016.. While ahead of the Turnaround Plan projections, supply purchases during the month of June were higher due to increased costs related to cardiac and neurosurgical cases at one of the Acute Care Ministries, as well as timing differences which occurred between May and June in drug supplies. In addition, Purchased Services are behind Turnaround Plan projections by $5.9 million due to increases in physician fees, salaries, and subsidies as well as delays in achieving reductions in Temporary and Agency Labor. To address Temporary and Agency Labor, a new System Director for Recruitment started in June to spearhead recruitment strategies for hiring FTEs to replace higher cost agency staffing.

Other Expense

Other Expense is behind Turnaround Plan by $1.2 million due to delays in achieving other initiatives at PHFMC, PLC and PMG. The new Chief Operating Officer began May 1, 2016 and will be addressing performance in these areas.

8. The information appearing in the second paragraph under the caption “BONDHOLDERS’ RISKS – Patient Service Revenues – Illinois Hospital Assessment Program” on page 45 of the Preliminary Official Statement is hereby amended in its entirety to read as follows:

In June 2012, Illinois adopted legislation providing for an enhanced hospital assessment program from the beginning of fiscal year 2013 through the end of the 2014 calendar year, which was anticipated to generate a total assessment of approximately $290 million per year. Of this amount, $240 million was to be used to attract federal Medicaid matching funds, resulting in total new Medicaid payments to hospitals of about $480 million, and representing a net improvement of approximately $190 million. Payments were to be made according to formulae to preserve and improve access to perinatal services, complex emergent services, outpatient services, hospital emergency and psychiatric services, outpatient services at specialty hospitals, salaried physician services in high volume Medicaid hospitals, and to maintain access to hospitals that serve a high percentage of patients who are dually eligible for Medicare and Medicaid, hospitals that provide high volumes of inpatient services to Medicaid patients, and hospitals that have a disproportionate share of their outpatient volume within the emergency room setting. Assessments would not be due and any monies paid would be refunded if such hospital access improvement payments were not eligible for federal Medicaid matching funds. On June 30, 2016, Illinois enacted legislation to substantially increase ACA Access Payments to Illinois hospitals. Such payments are designed to ensure that the Medicaid rate for hospital services for adults covered by the ACA equals the rate paid on behalf of “traditional” Medicaid beneficiaries. Subject to

6 approval by CMS, these payments are federally-funded until 2017, at which time the Illinois hospital assessment will be increased to cover Illinois’ share of these Access Payments, which is 5% in 2017 and 6% in 2018. The amount of ACA Access Payments to be received by the System, and the timing of receipt thereof, have not yet been determined. However, based on the most recent analysis by the Illinois Health and Hospital Association (“IHA”), in the aggregate, the System is projected to receive an additional approximate $25 million in ACA supplemental payments in 2016, in excess of the approximately $37 million in ACA Access Payments provided for under the current program structure, as determined prior to the approved expansion. Payments of such supplemental amounts will be made by the State of Illinois retroactive to January 2016, and is expected to be made after CMS confirms the rates under the current program (which will include the expansion). No assurance can be given that CMS will confirm the applicable rates on which the estimated additional $25 million payments noted above are based, or if such rates when confirmed will be the same as those assumed by IHA in its estimates. The estimated additional payments have not been incorporated into the projections included in the Turnaround Plan. In addition, the use of provider assessments has been criticized in Congress and by various federal agencies and may be restricted or eliminated in the future. Capitalized terms in this Supplement have the meanings assigned thereto in the Preliminary Official Statement.

This Supplement has been approved by Presence Health Network.

This Supplement should be affixed to and is hereby made a part of the Preliminary Official Statement.

Supplement dated July 15, 2016.

7 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or filing under the securities laws of any such jurisdiction. delivery toDTConoraboutAugust __, 2016. Bondsinbook-entryformwillbeavailable for Underwriter byitscounsel,Orrick, Herrington&SutcliffeLLP.ItisexpectedthattheSeries 2016C Officer andGeneralCounselofthe Borrower,JeannieC.Frey,Esq.,andtheirspecialcounsel,Nixon PeabodyLLP,Chicago,Illinois,andforthe Authority byitsspecialcounsel,Schiff HardinLLP,Chicago,Illinois,fortheBorrowerandotherObligated GroupMembersbytheChiefLegal Series 2016CBondsandcertainlegal mattersbyChapmanandCutlerLLP,Chicago,Illinois,BondCounsel, theapprovalofcertainmattersfor Series 2016C Bonds. Investors should read the entire Official Statement to obtain informationessential to making an informed investmentdecision. and optionalpurchasepriortotheirstatedmaturityasdescribedherein. WHATSOEVER. ANY, ORINTERESTONTHESERIES2016CBONDS.AUTHORITY DOESNOTHAVETHEPOWERTOLEVYTAXESFORANYPURPOSES OF THEAUTHORITY,STATEILLINOISORANYPOLITICAL SUBDIVISIONTHEREOFTOPAYTHEPRINCIPALOF,PREMIUM,IF INCIDENTAL THERETO.NOOWNEROFANYSERIES2016CBOND SHALLHAVETHERIGHTTOCOMPELTAXINGPOWER,IFANY, PLEDGED TOTHEPAYMENTOFPRINCIPALOF,PREMIUM, IFANY,ANDINTERESTONTHESERIES2016CBONDSOROTHERCOSTS THE FULL FAITH AND CREDIT NOR THE TAXING POWERS OF THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF IS THE AUTHORITYPAYABLESOLELYOUTOFRECEIPTS,REVENUESANDINCOMESPECIFIEDINBONDINDENTURE. NEITHER PROVISION. THESERIES2016CBONDSANDINTERESTPREMIUM,IFANY,THEREONARESPECIAL,LIMITEDOBLIGATIONS OF ILLINOIS ORANYPOLITICALSUBDIVISIONTHEREOF,WITHINTHEPURVIEWOFCONSTITUTIONALSTATUTORYLIMITATION OR AN OBLIGATION,GENERALORMORAL,APLEDGEOFTHEFULLFAITHLOANCREDITAUTHORITY, STATEOF EXTENT, THESERIES2016CBONDSANDINTERESTPREMIUM,IFANY,THEREONDONOTCONSTITUTEANINDEBTEDNESS OR OTHER COSTSINCIDENTALTHERETOONLYFROMTHESOURCESSPECIFIEDINBONDINDENTURE,ANDEXCEPTTOSUCH LIMITED the Series2016CObligationinamountssufficienttopayprincipalof,premium,ifany,andinterestonSeries 2016CBonds. the MasterIndenture,asdescribedherein,whereunderObligatedGroupMembers,includingBorrower,areobligatedtomakepayments on on theSeries2016CBondswhendueisfurtherevidencedandsecuredbyObligation.TheObligationissued under and fromcertainfundsheldundertheBondIndenture. the BorrowerunderLoanAgreement,frompaymentsmadebyObligatedGroupMembersonSeries2016CObligation(described herein) Agreement, asdescribedherein,andprincipalof,premium,ifany,interestontheSeries2016CBondswillbepayablefrompayments madeby with interestpayableoneachFebruary15andAugust15,commencing2017. See “PLANOFFINANCE”herein. the BorrowerandUsers(3)paycertaincostsofissuanceSeries2016CBondsrefundingPrior(asdefined herein). certaincapitalexpendituresof previously issuedbytheAuthorityforbenefitofBorrowerandUsers(asdefinedherein),(2) reimburse only toCede &Co.See“THESERIES2016CBONDS–Book-Entry-OnlySystem”herein. beneficial ownersoftheSeries2016CBonds,asmorefullydescribedherein,and(ii) all notices,includinganynoticeofredemption,shallbemailed on theSeries2016CBondswillbepayabledirectlytoDTC,whichinturnremitsuchpaymentsitsparticipantsforsubsequentdisbursement to any integral multiple thereof. So long as Cede & Co. is the registered owner of the Series 2016C Bonds, (i) principal of, premium, if any, and interest maintained byDTC.PurchasesofbeneficialinterestsintheSeries2016CBondswillbemadebook-entryonlyformdenominations$5,000or registered inthenameofCede & Co.,asnomineeofTheDepositoryTrustCompany,NewYork,York (“DTC”),underthebook-entryonlysystem Wells FargoBank,NationalAssociation(the“BondTrustee”).TheSeries2016CBondswillbeissuedasfullyregisteredbondsandinitially Bonds”) asfixedratebondsunderthatcertainBondTrustIndenture,datedofAugust1,2016(the“BondIndenture”),betweentheAuthorityand * Date: ______,2016 Dated: DateofDelivery NEW ISSUE–BOOK‑ENTRYONLY 2016C BondsisnotexemptfrompresentIllinoisincometaxes.See“ not includedasanitemoftaxpreferenceincomputingthealternativeminimumforindividualsandcorporations.InterestonSeries present law,interestontheSeries2016CBondsisexcludablefromgrossincomeofownersthereofforfederaltaxpurposesand Preliminary, subjecttochange The Series2016CBondsareofferedwhen,asandifreceivedbytheUnderwriter, subjecttopriorsaleandtheapprovalofvalidity This coverpagecontainscertaininformationforgeneralreference only.Itisnotintendedtobeasummaryofthesecurityorterms The Series 2016C Bonds are subject to optional redemption, extraordinary optional redemption and mandatory bond sinking fund redemption THE AUTHORITYISOBLIGATEDTOPAYPRINCIPALOF,PREMIUM,IFANY,ANDINTERESTONSERIES2016CBONDS AND The obligationoftheBorrowertomakepaymentsBondTrusteeinanamountsufficientpayprincipalof,premium,ifany,andinterest The Series2016CBondsarespecial,limitedobligationsoftheAuthoritysecuredunderprovisionsBondIndentureand Loan The Series 2016C Bonds will accrue interest from their date of delivery, at the rates set forth on the maturity schedule on the inside cover page, The Series2016CBondsarebeingissuedforthebenefitofPresenceHealthNetwork(the“Borrower”)to(1)refundalloutstanding bonds The Illinois Finance Authority(the “Authority”) plans to issue itsRevenue Bonds, Series 2016C (PresenceHealth Network) (the “Series 2016C Subject tocompliancebytheAuthority,BorrowerandUserswithcertaincovenants,inopinionofBondCounsel,under

PRELIMINARY OFFICIAL STATEMENT DATED JULY 13, 2016

ILLINOIS FINANCE AUTHORITY (PRESENCE HEALTHNETWORK) REVENUE BONDS, SERIES 2016C $967,835,000 ______T ax M atters * ” hereinforamorecompletediscussion. Ratings (see“RATINGS”herein) Due: Asshownonthe Inside CoverPage Moody’s: Baa3 Fitch: BBB S&P: BBB -

MATURITY SCHEDULE*

$967,835,000

ILLINOIS FINANCE AUTHORITY REVENUE BONDS, SERIES 2016C (PRESENCE HEALTH NETWORK)

$______Serial Bonds

Maturity Date Principal Interest (February 15) Amount Rate Yield Price CUSIP† 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

$______% Term Bond due February 15, 2036; Yield: ____%; Price: ______CUSIP: ______†

$______% Term Bond due February 15, 2041; Yield: ____%; Price: ______CUSIP: ______†

* Preliminary, subject to change † Copyright 2016, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the Authority, the Underwriter or any Obligated Group Member and are included solely for the convenience of the owners of the Series 2016C Bonds. None of the Authority, the Underwriter or any Obligated Group Member is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Series 2016C Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2016C Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2016C Bonds. Presence Health - Sites of Care

Holy Family Medical Center

St Francis Hospital

St Joseph Resurrection Hospital - Medical Elgin Center

St Joseph Mercy Hospital - Medical Chicago Center Sts Mary & Elizabeth Medical Center

Saint Joseph Medical Center

Saint Mary Hospital

United Covenant Samaritans Medical Medical Center Center

The information set forth herein relating to the Authority under the headings “THE AUTHORITY” and “LITIGATION – The Authority” has been obtained from the Authority. All other information contained in this Official Statement has been furnished by the Borrower, the other Obligated Group Members, DTC and other sources that are believed to be reliable and is not to be construed as a representation of the Authority or J.P. Morgan Securities LLC (the “Underwriter”). The Authority has not reviewed or approved any information in this Official Statement except information relating to the Authority under the headings “THE AUTHORITY” and “LITIGATION – The Authority.” The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

No dealer, broker, salesperson or other person has been authorized by the Authority, the Borrower, the other Obligated Group Members or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such information or representation must not be relied upon as having been authorized by any of the foregoing. 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 Series 2016C Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall create under any circumstances any implication that there has been no change in the affairs of the Authority, the Borrower, the other Obligated Group Members or DTC since the date hereof. This Official Statement is submitted in connection with the issuance of securities referred to herein and may not be used, in whole or in part, for any other purpose.

IN CONNECTION WITH THE OFFERING OF THE SERIES 2016C BONDS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2016C BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

THE SERIES 2016C BONDS AND THE SERIES 2016C OBLIGATION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THE BOND INDENURE NOR THE MASTER INDENTURE HAS BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2016C BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAWS OF THE STATES IN WHICH THE SERIES 2016C BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2016C BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. ______

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute “forward- looking statements.” Such statements generally are identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. Such forward-looking statements include but are not limited to certain statements contained in the information under the captions “BONDHOLDERS’ RISKS,” and APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP,” including without limitation “STRATEGIC INITIATIVES” and “FINANCIAL AND OPERATING INFORMATION – Management’s Discussion of Financial Performance” and “- Turnaround Plan” in this Official Statement. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Obligated Group Members do not plan to issue any updates or revisions to those forward-looking statements if or when their expectations change, or events, conditions or circumstances on which such statements are based occur.

TABLE OF CONTENTS

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INTRODUCTORY STATEMENT ...... 1 Purpose of the Official Statement ...... 1 Interest Rates; Redemption ...... 1 Plan of Finance ...... 1 The Obligated Group and the Master Indenture ...... 2 Additional Indebtedness ...... 3 Security for the Series 2016C Bonds ...... 3 Additional Bonds ...... 4 Possible Substitution of Series 2016C Obligation ...... 4 Bondholders’ Risks ...... 4 THE AUTHORITY ...... 4 Description of the Authority ...... 4 Bonds of the Authority ...... 4 Authority Counsel ...... 5 THE SERIES 2016C BONDS ...... 5 General ...... 5 Redemption ...... 6 Retained Call Rights ...... 9 Additional Bonds ...... 9 Book-Entry-Only System ...... 9 Transfer and Exchange ...... 9 SECURITY FOR THE SERIES 2016C BONDS ...... 10 Limited Obligations ...... 10 General ...... 10 The Master Indenture ...... 11 Other Outstanding Indebtedness...... 15 Possible Substitution of Series 2016C Obligation ...... 15 Security and Enforceability ...... 15 State of Illinois Not Liable on the Series 2016C Bonds ...... 19 PLAN OF FINANCE ...... 19 General ...... 19 Refunding ...... 19 Project ...... 21 ESTIMATED SOURCES AND USES OF FUNDS ...... 22 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ...... 23 CONTINUING DISCLOSURE ...... 24 General ...... 24 Certain Non-Compliance ...... 24 BONDHOLDERS’ RISKS ...... 25 General ...... 25 Management’s Turnaround Plan ...... 26 Significant Risk Areas Summarized ...... 26 Federal Budget Cuts ...... 30 Health Care Reform ...... 31 Nonprofit Health Care Environment ...... 33 Patient Service Revenues ...... 37

i TABLE OF CONTENTS (continued) Page

Certain Risks Relating to Senior Care Facilities ...... 47 International Classification of Diseases, 10th Revision Coding System ...... 48 Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures ...... 48 Enforcement Affecting Clinical Research ...... 49 Regulatory Environment ...... 49 Business Relationships and Other Business Matters ...... 57 Information Technology ...... 62 Cybersecurity Risks ...... 63 Affiliations, Merger, Acquisition and Divestiture ...... 63 Tax-Exempt Status and Other Tax Matters ...... 64 Other Risk Factors ...... 67 TAX MATTERS ...... 70 APPROVAL OF LEGALITY ...... 72 INDEPENDENT AUDITORS ...... 72 FINANCIAL ADVISOR ...... 72 VERIFICATION ...... 72 LITIGATION ...... 72 The Borrower and Obligated Group ...... 72 The Authority ...... 73 RATINGS ...... 73 UNDERWRITING ...... 73 CERTAIN RELATIONSHIPS ...... 74 MISCELLANEOUS ...... 74

APPENDIX A – INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP ...... A-1 APPENDIX B – FINANCIAL STATEMENTS OF PRESENCE HEALTH NETWORK AND AFFILIATES ...... B-1 APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT ...... C-1 APPENDIX D – SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES ...... D-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL ...... E-1 APPENDIX F – FORM OF CONTINUING DISCLOSURE AGREEMENT ...... F-1 APPENDIX G – BOOK-ENTRY-ONLY SYSTEM ...... G-1

OFFICIAL STATEMENT

$967,835,000* ILLINOIS FINANCE AUTHORITY REVENUE BONDS, SERIES 2016C (PRESENCE HEALTH NETWORK)

INTRODUCTORY STATEMENT

The following introductory statement is subject in all respects to the more complete information set forth in this Official Statement. All descriptions and summaries of documents referred to herein do not purport to be comprehensive or definitive and are qualified in their entirety by reference to each such document. Terms used in this Official Statement, including the Appendices, and not otherwise defined have the same meanings as in the Bond Indenture (as defined below) or if not defined therein or as context may require as defined in the Master Indenture (as defined below). See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – Definitions of Certain Terms” and APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Definitions of Certain Terms.”

Purpose of the Official Statement

This Official Statement, including the cover page, the inside cover page and the appendices hereto, is provided to furnish information in connection with the sale, delivery and issuance of the $967,835,000* principal amount of Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) (the “Series 2016C Bonds”).

The Series 2016C Bonds will be issued in accordance with the laws of the State of Illinois, particularly the Illinois Finance Authority Act, as amended from time to time (the “Act”), and a resolution adopted by the Illinois Finance Authority (the “Authority”) on July 14, 2016, and under a Bond Trust Indenture, dated as of August 1, 2016 (the “Bond Indenture”), between the Authority and Wells Fargo Bank, National Association, as bond trustee (in such capacity, the “Bond Trustee”). The Series 2016C Bonds will be special, limited obligations of the Authority. Principal of, premium, if any, and interest on the Series 2016C Bonds will be payable from payments made by Presence Health Network (the “Borrower”) pursuant to a Loan Agreement, dated as of August 1, 2016 (the “Loan Agreement”), between the Borrower and the Authority, and from payments made by the Obligated Group Members (defined below) on the Series 2016C Obligation (defined below) and from certain funds held under the Bond Indenture.

Interest Rates; Redemption

The Series 2016C Bonds will bear interest at the rates set forth on the maturity schedule immediately following the cover page of this Official Statement with interest payable on each February 15 and August 15, commencing on February 15, 2017.

The Series 2016C Bonds are subject to optional redemption, extraordinary optional redemption and mandatory bond sinking fund redemption and optional purchase prior to their stated maturity, as described herein.

Plan of Finance

The Borrower expects to use a portion of the proceeds of the Series 2016C Bonds, together with other funds, to refund all outstanding bonds previously issued by the Authority for the benefit of the Borrower and the Users (as defined in the Bond Indenture) (as described further below, the “Prior Bonds”). A portion of the proceeds of the Series 2016C Bonds will also be used to reimburse certain capital expenditures of the Borrower and the Users and pay certain costs of issuance of the Series 2016C Bonds and the refunding of the Prior Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

______* Preliminary, subject to change

The Obligated Group and the Master Indenture

The Borrower is an Illinois not for profit corporation and, along with certain other entities as described herein, is obligated under the Master Trust Indenture, dated as of August 1, 2016 (as amended and supplemented, the “Master Indenture”), among the Borrower, the other Obligated Group Members and The Bank of New York Mellon Trust Company, N.A., as master trustee (in such capacity, the “Master Trustee”), and the Borrower’s Direct Note Obligation, Series 2016C (Illinois Finance Authority) (the “Series 2016C Obligation”) issued to the Bond Trustee. As of the date of issuance of the Series 2016C Bonds, the Obligated Group Members under the Master Indenture are:

o Presence Health Network;

o Presence Care Transformation Corporation;

o Presence Chicago Hospitals Network;

o Presence Central and Suburban Hospitals Network;

o Presence Life Connections;

o Presence Senior Services – Chicagoland; and

o Presence Healthcare Services.

Each of the Borrower and the other corporations listed above is referred to herein individually as an “Obligated Group Member” and, collectively, as the “Obligated Group Members” or the “Obligated Group.”

The Borrower controls, directly or indirectly, each Obligated Group Member. Each Obligated Group Member is an Illinois not for profit corporation. Current Obligated Group Members may withdraw from the Obligated Group and other entities may become Obligated Group Members, all in accordance with the provisions of the Master Indenture. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Entrance Into the Obligated Group” and “– Cessation of Status as an Obligated Group Member.”

Each Obligated Group Member is jointly and severally obligated to pay when due the principal of, premium, if any, and interest on each Direct Note Obligation issued under the Master Indenture (the “Obligations”), including the Series 2016C Obligation which will be dated the date of issuance of the Series 2016C Bonds, and will evidence and secure the payment of principal of and premium, if any, and interest on the Series 2016C Bonds.

The Borrower and its affiliates, including the other Obligated Group Members and certain other corporations that are not Obligated Group Members (all such corporations being collectively hereinafter referred to as “Presence Health” or the “System”) constitute the largest Catholic healthcare system in the State of Illinois and one of the largest Catholic systems in the Midwest, as measured by total operating revenue of $2.6 billion and total assets of $3.0 billion for the fiscal year ended December 31, 2015. The System’s hospitals and other providers collectively offer a comprehensive continuum of integrated health care services, including emergency, medical, surgical, behavioral, rehabilitative and other health services in inpatient and outpatient settings; senior care services; home health services; and primary and specialty physician services to the communities it serves. Although Presence Health had reported an approximately $40.2 million excess of revenue over expenses for the nine-month period ended September 30, 2015 (unaudited), significant fourth quarter 2015 accounting adjustments resulted in a total reported loss for the year of approximately $185.6 million. Such loss raised the possibility of covenant violations under the Obligated Group’s then-existing Master Indenture and bank agreements. The reported losses and possible covenant violations related to the Obligated Group’s debt resulted in rating downgrades on its outstanding bonds. The Obligated Group determined to seek the consent of a majority of the holders of obligations under the then- existing Master Indenture to amend the covenant in accordance with the terms of such Master Indenture to eliminate the debt service coverage requirement for the fiscal year ended December 31, 2015. The purchaser of the Series 2016A Bonds (as defined herein) and the Series 2016B Bonds (as defined herein) (J.P. Morgan Securities LLC, the Underwriter of the Series 2016C Bonds) consented to the amendment. In addition, all bank agreements were

terminated in connection with the issuance of the Series 2016A Bonds and Series 2016B Bonds. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP” for a description of the facilities and operations of the System and for a description of the System’s turnaround plan. APPENDIX B includes certain audited financial statements of the System.

The Master Indenture creates a “Credit Group” which consists of (1) the Obligated Group Members, (2) the Designated Affiliates, (3) the Limited Credit Group Participants, and (4) the Unlimited Credit Group Participants. Currently there are no Designated Affiliates, Limited Credit Group Participants or Unlimited Credit Group Participants. Although the Borrower and the other corporations referenced above will be the only Obligated Group Members and Credit Group Members under the Master Indenture on the date of issuance of the Series 2016C Bonds, the Borrower controls, directly or indirectly, a number of other entities whose assets, liabilities and results of operations are included in the audited financial statements attached as APPENDIX B. The information describing the financial condition of the System contained in this Official Statement includes information with respect to certain members of the System who are not Obligated Group Members or Credit Group Members. As of December 31, 2015, the Obligated Group Members constituted approximately 94.9% of the total assets of the System and 92.8% of the total revenues of the System. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information.” Also, see the discussion under the caption “Overview of Presence Health Network and Affiliates” in APPENDIX A hereto for a description of the Obligated Group Members and certain other entities controlled by the Borrower.

Under the Master Indenture, the audited financial statements for the System will be used for purposes of determining compliance with all financial covenants and ratios required under the Master Indenture so long as the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent at least 85% of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture –Financial Statements, Etc.” No other member of the System is obligated under the Master Indenture other than the Obligated Group Members.

Additional Indebtedness

The Series 2016C Obligation will be equally and ratably secured with an Obligation (the “Revolving Loan Obligation”) issued under the Master Indenture to secure a revolving credit facility in an amount not to exceed $75 million (the “Revolving Loan”) issued to the bank (the “Bank”) providing the Revolving Loan (which is an affiliate of the Underwriter of the Series 2016C Bonds). Additional Obligations issued in the future will be equally and ratably secured with each other Obligation issued under the Master Indenture, including the Series 2016C Obligation and the Revolving Loan Obligation. See “SECURITY FOR THE SERIES 2016C BONDS – The Master Indenture” herein. See also APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Permitted Additional Indebtedness.”

Security for the Series 2016C Bonds

The Series 2016C Bonds will be special, limited obligations of the Authority. Principal of, premium, if any, and interest on the Series 2016C Bonds will be payable from payments made by the Borrower pursuant to the Loan Agreement, and from payments made by the Obligated Group Members on the Series 2016C Obligation and from certain funds held under the Bond Indenture.

Pursuant to the Master Indenture, the Borrower and the Obligated Group Members and any future Obligated Group Members agree to make payments on the Series 2016C Obligation in amounts sufficient to pay, when due, the principal of, premium, if any, and interest on the Series 2016C Bonds. Each Obligated Group Member is jointly and severally obligated to make payments on all Obligations issued under the Master Indenture, including the Series 2016C Obligation and the Revolving Loan Obligation. Any Designated Affiliates, Unlimited Credit Group Participants and Limited Credit Group Participants will not be directly obligated to make any payments on any Obligations; however, they may be required to transfer funds to the Obligated Group Members in amounts necessary to make payments due on Obligations (as further set forth in the Master Indenture). The Obligated Group Members receive a credit on payments due on the Series 2016C Obligation to the extent of

payments made by the Borrower under the Loan Agreement. The Borrower receives credit on payments due under the Loan Agreement to the extent of payment made by the Obligated Group Members under the Series 2016C Obligation, if any. The Series 2016C Obligation will entitle the Bond Trustee, as the Holder thereof, to the benefit of the covenants, restrictions and other obligations imposed upon the Obligated Group under the Master Indenture.

All Obligations issued by the Obligated Group Members pursuant to the Master Indenture are equally and ratably secured by (i) the Mortgages (as defined herein) and (ii) a security interest in the Pledged Revenues of the current Obligated Group Members and any future Obligated Group Members, subject in each case to Permitted Encumbrances.

See “SECURITY FOR THE SERIES 2016C BONDS” herein.

Additional Bonds

The Authority may issue bonds under the Bond Indenture from time to time on a parity with the Series 2016C Bonds (“Additional Bonds”) for the purposes, upon the terms and subject to the conditions provided in the Bond Indenture. See the captions “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – The Bond Indenture - Additional Bonds” and “Definitions of Certain Terms - Additional Bonds” in APPENDIX C hereto.

Possible Substitution of Series 2016C Obligation

The Bond Indenture requires the Bond Trustee to surrender the Series 2016C Obligation to the Master Trustee in exchange for a replacement obligation issued under a new master indenture by a new obligated group of which the Borrower or any other then-current Obligated Group Member may or may not be a member under certain conditions as described in “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – The Bond Indenture - Release and Substitution of Obligations upon Delivery of Replacement Master Indenture” in APPENDIX C hereto.

Bondholders’ Risks

There are risks associated with the purchase of the Series 2016C Bonds. See “BONDHOLDERS’ RISKS” herein for a discussion of certain of these risks.

THE AUTHORITY

Description of the Authority

The Authority is a body politic and corporate of the State of Illinois. The Authority was created under the Act, which consolidated seven of the State of Illinois’ previously existing financing authorities (the “Predecessor Authorities”). All bonds, notes or other evidences of indebtedness of the Predecessor Authorities were assumed by the Authority effective January 1, 2004. Under the Act, the Authority may not have outstanding at any one time bonds for any of its corporate purposes in an aggregate principal amount exceeding $28,150,000,000 (subject to change, from time to time, by acts of the State of Illinois Legislature), excluding bonds issued to refund the bonds of the Authority or bonds of the Predecessor Authorities. Pursuant to the Act, the Authority is governed by a 15- member board appointed by the Governor of the State of Illinois with the advice and consent of the Illinois State Senate. Presently, fifteen members have been duly appointed and no vacancies exist. The members receive no compensation for the performance of their duties but are entitled to reimbursement for all necessary expenses incurred in connection with the performance of such duties.

Bonds of the Authority

The Authority may from time to time issue bonds as provided in the Act for the purposes set forth in the Act. The Series 2016C Bonds of the Authority as described herein are special, limited obligations of the Authority payable solely from the specific sources and revenues of the Authority specified in the resolution and Bond

Indenture authorizing the issuance of the Series 2016C Bonds. Any bonds, including the Series 2016C Bonds, issued by the Authority (and any premium thereon and the interest thereon) do not constitute indebtedness or an obligation, general or moral, or a pledge of the full faith or a loan of credit of the State of Illinois or any political subdivision thereof, within the purview of any constitutional or statutory limitation or provision. No Owner of any Series 2016C Bond shall have the right to compel any taxing power of the State of Illinois or any political subdivision thereof to pay the principal of, premium, if any, or interest on the Series 2016C Bonds. The Authority has no taxing power.

The Authority makes no warranty or representation, whether express or implied, with respect to the projects to be financed or refinanced with the Series 2016C Bonds or the use thereof. Further, the Authority has not prepared any material for inclusion in this Official Statement, except that material under the headings “THE AUTHORITY” and “LITIGATION - The Authority.” The distribution of this Official Statement has been duly approved and authorized by the Authority. Such approval and authorization does not, however, constitute a representation or approval by the Authority of the accuracy or sufficiency of any information contained herein except to the extent of the material under the headings referenced in this paragraph.

The offices of the Authority are located at 160 North LaSalle Street, Suite S-1000, Chicago, Illinois 60601, and its telephone number is (312) 651-1300.

Authority Counsel

Certain legal matters with respect to the Series 2016C Bonds will be passed upon for the Authority by its special counsel, Schiff Hardin LLP, Chicago, Illinois.

THE SERIES 2016C BONDS

The following is a summary of certain provisions of the Series 2016C Bonds. Reference is made to the Series 2016C Bonds for the complete text thereof and to the Bond Indenture for all of the provisions relating to the Series 2016C Bonds. The discussion herein is qualified by such reference. See also APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT” for a summary of certain additional provisions of the Bond Indenture and Loan Agreement.

General

The Series 2016C Bonds will be issued in the principal amount set forth on the cover of this Official Statement. Purchases of beneficial interests in the Series 2016C Bonds will be made in book-entry only form in denominations of $5,000 or any integral multiple thereof. The Series 2016C Bonds will be delivered in fully registered form without coupons.

The Series 2016C Bonds will be dated their date of delivery. The Series 2016C Bonds will be payable as to principal, subject to the redemption provisions described herein, on the dates and in the amounts set forth for the Series 2016C Bonds on the maturity schedule immediately following the cover page of this Official Statement.

The Series 2016C Bonds will be transferable and exchangeable as set forth in the Bond Indenture and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Series 2016C Bonds. See “THE SERIES 2016C BONDS – Book-Entry-Only System” herein.

The Series 2016C Bonds will accrue interest from their date of delivery at the rates for the Series 2016C Bonds set forth on the maturity schedule immediately following the cover page of this Official Statement with interest payable on each February 15 and August 15, commencing on February 15, 2017 (each an “Interest Payment Date”). Interest shall be calculated on a 360-day year of twelve 30-day months basis.

While the Series 2016C Bonds are held in the book-entry only system maintained by DTC (the “Book- Entry-Only System”), payments with respect to the beneficial interest therein shall be made to Cede & Co., as

nominee for DTC, pursuant to the Book-Entry-Only System, and beneficial interests therein will be issued solely in book-entry only form. Subject to the provisions described under the caption “THE SERIES 2016C BONDS - Book- Entry-Only-System,” interest payments on the Series 2016C Bonds will be made on each Interest Payment Date to the registered owner thereof appearing on the registration books of the Authority (the “Bond Register”) as the holder thereof as of the close of business of the Bond Trustee on each February 1 and August 1 (whether or not a Business Day, as hereinafter defined) next preceding the applicable Interest Payment Date (each a “Record Date”) by check or draft of the Bond Trustee mailed on the Interest Payment Date to such registered owner at the address of such owner as it appears on the Bond Register or at such other address furnished in writing by such registered owner to the Bond Trustee no later than the Record Date, or to any registered owner of $1,000,000 or more in aggregate principal amount of Series 2016C Bonds as of the close of business of the Bond Trustee on the Record Date for a particular Interest Payment Date by wire transfer sent to such owner on such Interest Payment Date upon written notice to the Bond Trustee from the registered owner containing the wire transfer address (which must be in the continental United States) to which the registered owner wishes to have such wire directed, which written notice is received not later than the Business Day next preceding the Record Date for such Interest Payment Date.

In the event that the Series 2016C Bonds are no longer held in the Book-Entry-Only System, the principal of and premium, if any, on the Series 2016C Bonds will be payable at the designated corporate trust office of the Bond Trustee or its successor Bond Trustee or at the office of any alternate Paying Agent named in the holder’s Series 2016C Bond. The term Business Day means a day other than a Saturday, a Sunday or a legal holiday on which banking institutions in the State of Illinois or the State of New York are authorized by law to close, or a day on which the New York Stock Exchange is closed or the payment system of the Federal Reserve System is not operational. Notwithstanding the foregoing, payment of Defaulted Interest on the Series 2016C Bonds shall cease to be payable to the holders of such Series 2016C Bonds on the relevant Record Date and shall be payable to the persons who shall be the registered owners thereof on the Special Record Date fixed by the Bond Trustee which shall be not more than 15 or less than 10 days prior to the date of the proposed payment and not less than 10 days after receipt by the Bond Trustee of the notice of the proposed payment.

Redemption

Optional Redemption. Outstanding Series 2016C Bonds are subject to redemption prior to maturity on or after February 15, _____, at the option of the Authority, upon direction of the Borrower, out of amounts prepaid on the Series 2016C Obligation, in whole or in part at any time, and if in part by maturities or portions thereof designated by the Borrower or, if not so designated in inverse order of maturity (and if less than all of a single maturity is being redeemed, randomly within a maturity in such manner as may be designated by the Bond Trustee), at the redemption price of 100% of the outstanding principal amount thereof, plus accrued interest thereon to the date of redemption.

No redemption (other than mandatory sinking fund redemptions) of less than all of the Series 2016C Bonds at the time outstanding shall be made pursuant to the foregoing provisions of the Bond Indenture unless the aggregate principal amount of such Series 2016C Bonds to be redeemed is equal to or greater than $100,000.

Extraordinary Optional Redemption. The Series 2016C Bonds are callable for redemption prior to maturity in the event of (i) damage to or destruction of the Property of any Obligated Group Member or any part thereof, or condemnation or sale consummated under threat of condemnation of the Property of the Obligated Group Members or any part thereof, if the amount of the net proceeds of insurance, condemnation or sale received in connection therewith and applied to make prepayments on the Series 2016C Obligation exceeds $10,000,000, (ii) the Borrower shall exercise its option to prepay the Series 2016C Obligation in an amount sufficient to redeem all or a portion of the Series 2016C Bonds then outstanding, or (iii) the Borrower has reason to believe that without such redemption it or any of its affiliates is or will be, by virtue of its participation in connection with the issuance of the Series 2016C Bonds, required or ordered by final legislative, judicial or administrative action (whether or not the Parent or any affiliate is or was a party to such action) of the United States of America, any state or agency, department or subdivision thereof to operate its Facilities or any part thereof in a manner which the Governing Body of the Borrower determines, in good faith, to be contrary to the Ethical and Religious Directives for Catholic Health Facilities or similar guidelines promulgated by the National Council of Catholic Bishops. If called for redemption in the events referred to in (i) above, Series 2016C Bonds shall be subject to redemption by the Authority, any time, in whole or in part at any time and if in part by maturities or portions thereof designated by the Obligated Group Agent

or, if not so designated, in inverse order of maturity (less than all of a maturity to be selected randomly using such method as may be designated by the Bond Trustee), at the principal amount thereof plus accrued interest to the redemption date and without premium; provided, however, that in no event shall the principal amount of Bonds so redeemed exceed the amount of such net proceeds. If called for redemption in the events referred to in (ii) above, such Series 2016C Bonds shall be subject to redemption, in whole or in part, at the times and in the manner and with the same premium set forth below as if such Bonds were being redeemed at the option of the Authority. If called for redemption in the events referred to in (iii) above, the Series 2016C Bonds shall be subject to redemption at the written direction of the Borrower at any time, in whole, at the principal amount thereof plus accrued interest to the redemption date and without premium.

Mandatory Sinking Fund Redemption. The Authority shall pay Series 2016C Bonds maturing February 15, 2036* at maturity or redeem Series 2016C Bonds by mandatory redemption through the Bond Sinking Fund (to the extent funds are available through the Bond Sinking Fund) from moneys on deposit in the Bond Sinking Fund on February 15 of each year, in the amounts and at the times, as follows:

Mandatory Sinking Fund Payment Dates Mandatory Sinking Fund (February 15) Payments $

____†

† Maturity.

The Authority shall pay Series 2016C Bonds maturing February 15, 2041* at maturity or redeem Series 2016C Bonds by mandatory redemption through the Bond Sinking Fund (to the extent funds are available through the Bond Sinking Fund) from moneys on deposit in the Bond Sinking Fund on February 15 of each year, in the amounts and at the times, as follows:

Mandatory Sinking Fund Payment Dates Mandatory Sinking Fund (February 15) Payments $

____†

† Maturity.

Notice of Redemption of the Series 2016C Bonds; Effect of Redemption. Notice of the call for any such redemption shall state the following: (i) the name of the bond issue, (ii) the CUSIP number and bond certificate number of the Series 2016C Bonds to be redeemed, (iii) the original dated date of the bond issue, (iv) the interest rate and maturity date of the Series 2016C Bonds to be redeemed, (v) the date of the redemption notice, and (vi) the redemption date and the place or places where the redemption price will be payable (including the name and address of the Bond Trustee and its telephone number). The redemption notice shall be given by mailing a copy of such notice of redemption by first class mail, postage prepaid not less than 30 or more than 60 days prior to the

* Preliminary, subject to change

redemption date to the registered owners of the Series 2016C Bonds to be redeemed to the address shown on the Bond Register; provided, however, that failure to give such notice by mailing or to provide such notice to any registered depository (as hereinafter provided) or a defect in the notice or the mailing as to any Series 2016C Bond will not affect the validity of any proceedings for redemption as to any other Bond with respect to which notice was properly given to the holder thereof. If any Series 2016C Bonds to be redeemed are held by a registered depository, redemption notices shall be delivered to such depository at least two Business Days prior to the general mailing of such notices.

The Bond Trustee will send a second notice of redemption by certified mail, return receipt requested, to any holder who has not submitted the Series 2016C Bonds called for redemption 30 days after the redemption date; provided, however, that the failure to give any second notice by mailing, or any defect in such notice, shall not affect the validity of the proceedings for the redemption of any Series 2016C Bonds. In addition, the Bond Trustee will not be liable for any failure by the Bond Trustee to send any second notice.

Except for a redemption pursuant to mandatory redemption through the Bond Sinking Fund, prior to the date that the redemption notice is first mailed as aforesaid, funds shall be placed with the Bond Trustee to pay the principal of such Series 2016C Bonds, the accrued interest thereon to the redemption date and the premium, if any, or such notice shall state that the redemption is conditional on such funds being deposited on or prior to the redemption date and that failure to make such a deposit will not constitute an event of default hereunder. Upon the happening of the above conditions, the Series 2016C Bonds, or portions thereof, thus called shall not bear interest after the applicable redemption date, and upon deposit of the necessary funds with the Bond Trustee to effect such redemption, shall no longer be protected by the Bond Indenture and shall not be deemed to be outstanding under the provisions of the Bond Indenture. The Bond Trustee shall redeem, in the manner provided in the Bond Indenture, such an aggregate principal amount of such Series 2016C Bonds at the principal amount thereof plus accrued interest to the redemption date and premium, if any, as will exhaust as nearly as practicable such funds. At the direction of the Obligated Group Agent such funds may be invested in United States Government Obligations until needed for redemption payout.

Open Market Purchase in Lieu of Redemption; Application of Purchase and Redemption to Bond Sinking Fund Payments. In lieu of optionally redeeming Series 2016C Bonds, the Bond Trustee may, at the request of the Borrower, use such funds otherwise available under the Bond Indenture for redemption of Series 2016C Bonds to purchase Series 2016C Bonds specifically designated by the Borrower in the open market at a price not exceeding the redemption price then applicable under the Bond Indenture. In the case of any optional or extraordinary optional redemption or any purchase and cancellation of the Series 2016C Bonds, the Authority shall receive credit against its required Bond Sinking Fund deposits with respect to such Series 2016C Bonds in such order as the Borrower elects prior to such optional or extraordinary optional redemption or purchase and cancellation or, if no election is made, in the inverse order thereof.

Purchase in Lieu of Optional Redemption. The Authority and, by their acceptance of the Series 2016C Bonds, the Bondholders, irrevocably grant to the Borrower or its assignee, the option to purchase, at any time and from time to time, any Series 2016C Bond which is redeemable pursuant to the optional or extraordinary optional redemption provisions of the Bond Indenture at a purchase price equal to the redemption price therefor. To exercise such option, the Borrower shall give the Bond Trustee a Written Request exercising such option within the time period specified in the Bond Indenture as though such Written Request were a written request of the Authority for redemption, and the Bond Trustee shall thereupon give the owners of the Series 2016C Bonds to be purchased notice of such purchase in the manner specified in the Bond Indenture as though such purchase were a redemption and the purchase of such Series 2016C Bonds shall be mandatory and enforceable against the Bondholders. On the date fixed for purchase pursuant to any exercise of such option, the Borrower or its assignee shall pay the purchase price of the Series 2016C Bonds then being purchased to the Bond Trustee in immediately available funds, and the Bond Trustee shall pay the same to the sellers of such Series 2016C Bonds against delivery thereof. Following such purchase, the Bond Trustee shall cause such Series 2016C Bonds to be registered in the name of the Borrower or its assignee and shall deliver them to the Borrower or its assignee. In the case of the purchase of less than all of the Series 2016C Bonds, the particular Series 2016C Bonds to be purchased shall be selected in accordance with the provisions of the Bond Indenture as though such purchase were a redemption. No purchase of Series 2016C Bonds pursuant to the Bond Indenture shall operate to extinguish the indebtedness of the Authority evidenced thereby. Notwithstanding the foregoing, no purchase shall be made pursuant to the Bond Indenture unless the Borrower shall

have delivered to the Bond Trustee and the Authority concurrently therewith an Opinion of Bond Counsel to the effect that such purchase will not adversely affect the exclusion of interest on the Series 2016C Bonds from gross income for federal income tax purposes.

Retained Call Rights

All or a portion of the Series 2016C Bonds may, in the future, be refunded or defeased to any redemption date or maturity date for the Series 2016C Bonds. In connection with issuance of the Series 2016C Bonds, the Authority, at the direction of the Borrower, has reserved all the call rights pertaining thereto, unless the Authority, at the direction of the Borrower, shall have irrevocably elected to waive any future right to call the Series 2016C Bonds or portions thereof for redemption prior to maturity. Therefore, subject to certain requirements contained in the Bond Indenture, subsequent to the date that cash and/or Government Obligations are deposited with the Bond Trustee to provide for the payment of all or any portion of the Series 2016C Bonds at the respective maturity dates therefor or any redemption date therefor, the Authority may, if directed by the Borrower, elect to pay such Series 2016C Bonds (or any portion thereof) prior to such maturity date or redemption date therefor. See “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT - Definitions of Certain Terms - Government Obligations” and the last paragraph of “The Bond Indenture - Defeasance” in APPENDIX C hereto.

Additional Bonds

Book-Entry-Only System

The Series 2016C Bonds, when issued, will be registered in the name of Cede & Co., DTC’s partnership nominee. When the Series 2016C Bonds are issued, ownership interests will be available to purchasers only through the Book-Entry-Only System. One fully-registered bond certificate will be issued for the principal amount of each maturity of the Series 2016C Bonds and will be deposited with DTC. See APPENDIX G – “BOOK-ENTRY- ONLY SYSTEM.”

Transfer and Exchange

Upon surrender for transfer of any Series 2016C Bond at the designated corporate trust office of the Bond Trustee, the Authority shall execute, and the Bond Trustee shall authenticate and deliver, in the name of the transferee or transferees, a new fully registered Series 2016C Bond or Series 2016C Bonds of the same maturity and of authorized denominations for the aggregate principal amount which the registered owner is entitled to receive. Series 2016C Bonds may be exchanged at said office of the Bond Trustee for a like aggregate principal amount of Series 2016C Bonds of the same maturity of other authorized denominations. The execution by the Authority of any such Series 2016C Bond will constitute full and due authorization of such Series 2016C Bond, and the Bond Trustee will thereby be authorized to authenticate, date and deliver such Series 2016C Bond. All Series 2016C Bonds presented for transfer or exchange are required to be accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the Bond Trustee, duly executed by the registered owner or by such owner’s duly authorized attorney.

No service charge shall be imposed upon the owner of any Series 2016C Bond requesting an exchange or transfer of such Series 2016C Bond, but the Authority and the Bond Trustee may require the payment by the Bondholder requesting an exchange or transfer of a sum sufficient to cover any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer, except in the case of the issuance of a Series 2016C Bond or Series 2016C Bonds for the unredeemed portion of a Bond surrendered for redemption.

The Authority and the Bond Trustee shall not be required to register the transfer or exchange of any Series 2016C Bond after notice calling such Series 2016C Bonds or portion thereof for redemption has been mailed or during the 15-day period next preceding the mailing of a notice of redemption of the Series 2016C Bonds of the same maturity.

As to any Series 2016C Bond, the person in whose name the same is registered will be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of and interest and any premium on any such Series 2016C Bond, shall be made only to or upon the written order of the registered owner thereof or such owner’s legal representative, but such registration may be changed only as described in the Bond Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2016C Bond to the extent of the sum or sums so paid.

So long as the Book-Entry-Only System remains in effect, the foregoing provisions apply only to Cede & Co. as the holder of the Series 2016C Bonds. Transfers of beneficial ownership interests in the Series 2016C Bonds may be made as described in APPENDIX G – “BOOK-ENTRY-ONLY SYSTEM” while the Book-Entry-Only System remains in effect.

SECURITY FOR THE SERIES 2016C BONDS Limited Obligations

The Series 2016C Bonds and any Additional Bonds are special, limited obligations of the Authority and are payable solely from (i) payments or prepayments to be made on the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture, (ii) payments or prepayments made under the Loan Agreement pledged under the Bond Indenture (excluding Unassigned Rights (as defined in the Bond Indenture), (iii) certain moneys and investments held by the Bond Trustee in the Funds held under, and to the extent provided in, the Bond Indenture and (iv) in certain circumstances, proceeds from certain insurance and condemnation awards or sale consummated under threat of condemnation. Certain investment earnings on moneys held by the Bond Trustee under the Bond Indenture may be transferred to the Rebate Fund established pursuant to the Tax Exemption Certificate and Agreement, to be entered into on the date of issuance of the Series 2016C Bonds, among the Borrower, the Users, the Authority and the Bond Trustee. Amounts held in the Rebate Fund for the Series 2016C Bonds are not part of the “trust estate” pledged to secure such Series 2016C Bonds and consequently will not be available to make payments on such Series 2016C Bonds.

General

In the Loan Agreement, the Borrower agrees to make payments to the Bond Trustee, which payments, in the aggregate, will be in amounts sufficient for the payment in full of all amounts payable with respect to the principal of, premium, if any, and interest on the Series 2016C Bonds to the date of maturity of the Series 2016C Bonds or earlier redemption, and certain other fees and expenses under the Loan Agreement, less any amounts available for such payment as provided in the Bond Indenture. The Series 2016C Bonds are also payable from payments made on the Series 2016C Obligation, prepayments, proceeds of the Series 2016C Bonds (to the extent available), investment earnings on proceeds of the Series 2016C Bonds, certain amounts on deposit under the Bond Indenture and proceeds of insurance or condemnation awards, each in the manner and to the extent set forth in the Bond Indenture.

To further secure payment of the principal of, premium, if any, and interest on the Series 2016C Bonds, the Borrower, concurrently with the issuance of the Series 2016C Bonds, will issue the Series 2016C Obligation to the Bond Trustee pursuant to which the current Obligated Group Members and any future Obligated Group Members agree to make payments to the Bond Trustee in amounts sufficient to pay, when due, the principal of and premium, if any, and interest on the Series 2016C Bonds. Each Obligated Group Member is jointly and severally liable for payment of all Obligations issued under the Master Indenture, including the Series 2016C Obligation.

The rights of the Authority in and to the Series 2016C Obligation, the amounts payable thereon and the amounts payable to the Authority under the Loan Agreement have been assigned to the Bond Trustee to provide for

and to secure the payment of principal of and premium, if any, and interest on the Series 2016C Bonds. Payments on the Series 2016C Obligation pledged under the Bond Indenture will be made directly to the Bond Trustee.

All Obligations issued by the Obligated Group Members pursuant to the Master Indenture are equally and ratably secured by (i) the Mortgages (as defined herein) and (ii) a security interest in the Pledged Revenues of the current Obligated Group Member and any future Obligated Group Members, subject in each case to Permitted Encumbrances.

No debt service reserve fund will be established in connection with the issuance of the Series 2016C Bonds. The Series 2016C Bonds are secured solely by the Bond Indenture and are payable solely from payments made pursuant to the Loan Agreement and the Series 2016C Obligation, and any amounts available therefor under the Bond Indenture.

The Master Indenture

Summary of Certain Covenants

Only Obligated Group Members are directly obligated under the Master Indenture. The Master Indenture creates a “Credit Group” which consists of (1) the Obligated Group Members, (2) the Designated Affiliates, (3) the Limited Credit Group Participants, and (4) the Unlimited Credit Group Participants. Currently there are no Designated Affiliates, Limited Credit Group Participants or Unlimited Credit Group Participants. Pursuant to the Master Indenture, the Borrower and the other Obligated Group Members and any future Obligated Group Members, agree to make payments on the Series 2016C Obligation in amounts sufficient to pay, when due, the principal of and premium, if any, and interest on the Series 2016C Bonds. Each Obligated Group Member is jointly and severally obligated to make payments on all Obligations issued under the Master Indenture, including the Series 2016C Obligation. Any Designated Affiliates, Unlimited Credit Group Participants and Limited Credit Group Participants will not be directly obligated to make any payments on any Obligations; however, they may be required to transfer funds to the Obligated Group Members in amounts necessary to make payments due on Obligations (as further set forth in the Master Indenture). The Master Indenture requires that each Obligated Group Member cause each Designated Affiliate it controls and each Limited Credit Group Participant and Unlimited Credit Group Participant it or any Designated Affiliate contracts with to conduct its business on a revenue producing basis so as to provide income from its property, together with other available funds, sufficient to enable the Obligated Group to pay amounts due on outstanding Obligations and to comply with the terms and provisions of the Master Indenture which are applicable to such entities.

The Master Indenture imposes certain covenants upon the Obligated Group Members for the benefit of the holders of Obligations (including the Series 2016C Obligation), including covenants, among others, relating to (i) an annual debt service coverage ratio and liquidity covenant (as described below), (ii) the incurrence of additional debt, (iii) the sale, lease or other disposition of Property, (iv) the admission of an Obligated Group Member into and the withdrawal of an Obligated Group Member from the Obligated Group, (v) limitations on mergers involving an Obligated Group Member, and (vi) limitations on the creation of Liens by an Obligated Group Member and any other Credit Group Member in order to secure their respective Indebtedness. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture.”

Any entity related to an Obligated Group Member or to any other Credit Group Member that is not designated as a Designated Affiliate or otherwise included within the Credit Group (as defined in APPENDIX D hereto) is not subject to the limitations set forth in the Master Indenture.

The Master Indenture requires the Obligated Group to calculate:

(1) the Annual Debt Service Coverage Ratio of the System for each Fiscal Year and subject to certain conditions, to the extent feasible, comply with and cause each Designated Affiliate and System Affiliate under its control to comply with recommendations relating to rates, fees and charges made by any Consultant which the Obligated Group Agent may be required to retain in the event that the

Annual Debt Service Coverage Ratio of the System for any Fiscal Year is less than 1.15 to 1.00 (See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Rates and Charges”); and

(2) the Days Cash on Hand of the System as of the last day of each Fiscal Year and subject to certain conditions, to the extent feasible, comply with and cause each Designated Affiliate and System Affiliate under its control to comply with, recommendations relating to rates, fees and charges made by any Consultant which the Obligated Group Agent may be required to retain in the event that Days Cash on Hand is less than 60 (See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Liquidity”).

Under the Master Indenture, if the Annual Debt Service Coverage Ratio of the System for any Fiscal Year or the Days Cash on Hand of the System as of the last day of any Fiscal Year as set forth in the Officer’s Certificate (as defined in the Master Indenture) delivered pursuant to the Master Indenture is less than 1.00 to 1.00 and 45 days, respectively, an event of default shall exist under the Master Indenture.

Under the Master Indenture, the audited financial statements for the System are used for purposes of determining compliance with all financial covenants and ratios required under the Master Indenture (including the covenants relating to the Annual Debt Service Coverage Ratio and Days Cash on Hand) so long as the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent at least 85% of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Financial Statements, Etc.” No other members of the System are obligated under the Master Indenture except the Obligated Group Members. If the total revenues and total assets of the Obligated Group and Designated Affiliates collectively represent less than 85% of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year, the financial statements required to be delivered for that Fiscal Year shall include a consolidating schedule from which the financial information relating solely to the Obligated Group Members and the Designated Affiliates may be derived.

Security Interest in Pledged Revenues

The Obligated Group Members have granted a security interest to the Master Trustee in their Pledged Revenues as security for all of the Obligations outstanding thereunder from time to time, including the Series 2016C Obligation and the Revolving Loan Obligation. Pledged Revenues are defined as all accounts (including, but not limited to, health care insurance receivables), accounts receivable and other contract rights in connection therewith and assignable general intangibles now owned or hereafter acquired by any Obligated Group Member regardless of how generated, and all proceeds therefrom, whether cash or noncash, all as defined in Article 9 of the Uniform Commercial Code (as amended) of the state of incorporation of such Obligated Group Member; excluding, however, gifts, grants, bequests, donations and contributions to any Obligated Group Member heretofore or hereafter made, and the income and gains derived therefrom, that are specifically restricted by the donor or grantor to a particular purpose that is inconsistent with its use for payments required under the Master Indenture or on the Obligations. Accounts receivable of the Obligated Group Members that constitute Pledged Revenues may be sold or pledged if such sale or pledge is made in accordance with the provisions of the Master Indenture. Under the Master Indenture, accounts receivable of the Obligated Group may be sold or pledged despite the security interest of the Master Indenture. The lien created under the Master Indenture on Pledged Revenues would terminate and be immediately released with respect to any accounts receivable that are so sold or pledged. See the discussion below under “Additional Liens.”

Mortgages

As additional security for all of the Obligations outstanding thereunder from time to time, including the Series 2016C Obligation, certain Obligated Group Members will deliver on the date of delivery of the Series 2016C Bonds to the Master Trustee, as mortgagee, mortgages (the “Mortgages”) on eight acute care hospitals owned by

certain Obligated Group Members, and certain related buildings, parking structures and parking lots and the real estate on which each is located (collectively, the “Mortgaged Properties”). The total revenues generated by the eight acute care hospitals subject to the Mortgages collectively represented approximately 66.4% of the total revenues of the System for the fiscal year ended December 31, 2015. For a description of certain provisions of the Mortgages, including, without limitation a description of the conditions to release of the Mortgaged Properties from the lien of the Mortgages, see APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Mortgages.”

The Mortgages do not include all properties of the Obligated Group. The total Book Value of the total net property, plant and equipment of the Mortgaged Properties constituted approximately 55.3% of the Book Value of the total net property, plant and equipment of the System as of December 31, 2015. There can be no assurance that the book value of the Mortgaged Properties would be realized upon its disposition or at foreclosure. No formal appraisal has been or is expected to be made of the Mortgaged Properties. The value of the Mortgaged Properties could be substantially less than the principal amount of Obligations outstanding. No mortgage title insurance policy will be obtained to insure the lien of the Mortgage with respect to the Mortgaged Properties.

Additional Liens

The Master Indenture contains a covenant of the Obligated Group Members, that such Obligated Group Members will not and will not permit any Designated Affiliate under its control or any Limited Credit Group Participant or Unlimited Credit Group Participant with which it or any Designated Affiliate under its control maintains a contract or agreement to create, or incur or permit to be created or incurred or to exist any mortgage, pledge or lease of, security interest in or lien, charge, restriction or encumbrance (each a “Lien”) on their Property to secure Indebtedness, except Permitted Encumbrances. One of the Permitted Encumbrances under the Master Indenture permits the Credit Group Members to create any Lien on Property if the total aggregate Book Value of Property that is subject to such Lien does not exceed 15% of the Book Value of all Property of the System. Another of the Permitted Encumbrances under the Master Indenture permits the Credit Group to create any Lien on Property that may be required from time to time to satisfy any collateralization requirements relating to any Interest Rate Swap Agreement. Liens on accounts receivable arising as a result of the sale, purported sale, pledge, mortgage or other transfer or financing of or involving accounts receivable are permitted under the Master Indenture, provided that the aggregate principal amount of Indebtedness secured by any such Lien does not at any time exceed 20% of the total amount of accounts receivable of the Credit Group and does not exceed the aggregate sales price of such accounts receivable received by the Credit Group Member selling the same by more than 25%. Liens on any Property of a Credit Group Member existing at the time any Person becomes a Credit Group Member also constitutes Permitted Encumbrances. For the definition of “Permitted Encumbrances” see APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Definitions of Certain Terms.”

Admissions to and Withdrawals from Obligated Group

Other entities may become Obligated Group Members, and Obligated Group Members may withdraw from the Obligated Group, in accordance with the provisions of the Master Indenture see APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Entrance Into the Obligated Group” and “– Cessation of Status as an Obligated Group Member.”

Designation of Designated Affiliates, Limited Credit Group Participants and Unlimited Credit Group Participants

The Master Indenture provides that the Obligated Group Agent may designate (i) any Person which meets the requirements of the definition of an “Unlimited Credit Group Participant” as an Unlimited Credit Group Participant, (ii) any Person which meets the requirements of the definition of a “Limited Credit Group Participant” as a Limited Credit Group Participant, and (iii) any Person which meets the requirements of the definition of a “Designated Affiliate” as a Designated Affiliate, in each case by filing a written notice with the Master Trustee. Such notice shall be filed prior to the date such identification is to become effective, with such Person to be deemed a Credit Group Member as of the date specified in such notice. Such Person shall thereafter be considered a Credit

Group Member until such time as the Obligated Group Agent shall file with the Master Trustee (i) a notice declaring that such Person is no longer a Credit Group Member effective as of the date of filing or, if later, as of the date specified in the notice, and (ii) a certificate of the Obligated Group Agent to the effect that immediately after the withdrawal of such Person from the Credit Group no event will have occurred which with the passage of time or the giving of notice, or both, would become an event of default under the Master Indenture. Accordingly, there can be no assurance that any future Limited Credit Group Participant or Unlimited Credit Group Participant, if any, will continue to be so designated.

See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Definitions of Certain Terms” for a definition of Designated Affiliate, Limited Credit Group Participant and Unlimited Credit Group Participant. There are currently no Designated Affiliates, Limited Credit Group Participants or Unlimited Credit Group Participants designated under the Master Indenture.

Certain Additional Covenants for the Benefit of the Bank for Revolving Loan

The Obligated Group also has in place an agreement with the Bank providing the Revolving Loan, and may have agreements with financial institutions in the future, which include representations, covenants and agreements in addition to those contained in the Master Indenture. The covenants in such agreements may be waived or modified at the sole discretion of the related financial institution without consent of or notice to any holders of Obligations, including the Series 2016C Obligation and are only applicable while such agreements are in place. An event of default under any such agreements could result in an event of default under the Master Indenture.

Financial Information with Respect to the System

The information describing the financial condition of the System contained in this Official Statement includes information with respect to certain members of the System who are not Obligated Group Members or Credit Group Members. As of December 31, 2015, the Obligated Group Members constituted approximately 94.9% of the total assets of the System and 92.8% of the total revenues of the System. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information.”

See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Financial Statements, Etc.” for a summary of the financial statement requirements under the Master Indenture.

Under the Master Indenture, the audited financial statements for the System will be used for purposes of determining compliance with all financial covenants and ratios required under the Master Indenture (including the covenants relating to the Annual Debt Service Coverage Ratio and Days Cash on Hand) so long as the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent at least 85% of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture –Financial Statements, Etc.” No other member of the System is obligated under the Master Indenture other than the Obligated Group Members. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES.”

Outstanding and Additional Obligations

Upon the issuance of the Series 2016C Bonds and the refunding of the Prior Bonds, the Series 2016C Obligation will be the only outstanding Obligation other than the Revolving Loan Obligation. Pursuant to the Master Indenture, Obligations may be issued from time to time in the future pursuant to the Master Indenture, and such Obligations will be secured on a parity under the Master Indenture with the Series 2016C Obligation and the other Obligations then outstanding.

Other Outstanding Indebtedness

The Obligated Group Members have outstanding indebtedness and other obligations that are not secured by Obligations. See Notes 10 and 11 to the financial statements included in this Official Statement as APPENDIX B with respect to certain information concerning outstanding indebtedness of the System as of December 31, 2015.

Possible Substitution of Series 2016C Obligation

The Bond Indenture requires the Bond Trustee to surrender the Series 2016C Obligation to the Master Trustee in exchange for replacement obligations issued under a new master indenture by a new obligated group of which the Borrower or any other then-current Obligated Group Member may or may not be a member under certain conditions as described in “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – The Bond Indenture - Release and Substitution of Obligations upon Delivery of Replacement Master Indenture” in APPENDIX C hereto.

If any substitution occurs, all references in the Loan Agreement and the Bond Indenture to the Series 2016C Obligation shall refer to the substitute obligation issued under the replacement master trust indenture and all related references to the Master Indenture shall refer to the replacement master trust indenture.

Security and Enforceability

Enforceability of the Master Indenture, the Loan Agreement and the Series 2016C Obligation. The state of the insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of guaranties or obligations issued by one corporation in favor of the creditors of another or the obligations of an Obligated Group Member to make debt service payments on behalf of another Obligated Group Member is unsettled, and the ability to enforce the Master Indenture and the Obligations against any Obligated Group Member that would be rendered insolvent thereby could be subject to challenge. In particular, such obligations may be voidable under the Federal Bankruptcy Code or applicable state fraudulent conveyance laws if the obligation is incurred without “fair” and/or “fairly equivalent” consideration to the obligor and if the incurrence of the obligation thereby renders the Obligated Group Member insolvent. The standards for determining the fairness of consideration and the manner of determining insolvency are not clear and may vary under the Federal Bankruptcy Code, state fraudulent conveyance statutes and applicable cases. Consequently, the Bond Trustee's and the Master Trustee’s ability to enforce the rights and remedies under the Bond Indenture, the Master Indenture and the Obligations against any Obligated Group Member that would be rendered insolvent therefore could be subject to challenge.

The joint and several obligation described herein of each Obligated Group Member to pay debt service on the Series 2016C Obligation may not be enforceable under any of the following circumstances:

(a) to the extent payments on the Series 2016C Obligation are requested to be made from any monies or assets of an Obligated Group Member which are donor-restricted or which are subject to a direct, express or charitable trust that does not permit the use of such monies or assets for such payments;

(b) if the purpose of the debt created and evidenced by the Series 2016C Obligation is not consistent with the charitable purposes of the Obligated Group Member from which such payment is requested or required, or if the debt was incurred or issued for the benefit of an entity other than a nonprofit corporation that is exempt from federal income taxation under sections 501(a) and 501(c)(3) of the Code and is not a “private foundation” as defined in section 509(a) of the Code;

(c) to the extent payments on the Series 2016C Obligation would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by such Obligated Group Member; or

(d) if and to the extent payments are requested to be made pursuant to any loan violating applicable usury laws.

These limitations on the enforceability of the joint and several obligations of the Obligated Group Members on the Series 2016C Obligation also apply to their obligations on all Obligations. If the obligation of a particular Obligated Group Member to make payment on an Obligation is not enforceable and payment is not made on such Obligation when due in full, then events of default will arise under the Master Indenture.

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

The legal right and practical ability of the Bond Trustee to enforce its rights and remedies against the Borrower under the Loan Agreement and related documents and of the Master Trustee to enforce its rights and remedies against Obligated Group Members under the Obligations, including the Series 2016C Obligation, may be limited by laws relating to bankruptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors’ rights. In addition, the Bond Trustee’s and the Master Trustee’s ability to enforce such terms will depend upon the exercise of various remedies specified by such documents which may in many instances require judicial actions that are often subject to discretion and delay or that otherwise may not be readily available or may be limited.

The various legal opinions delivered concurrently with the issuance of the Series 2016C Bonds are qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, rulings, policy and decisions affecting remedies and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors’ rights, including fraudulent conveyance considerations, or the enforceability of certain remedies or document provisions.

For a further description of the provisions of the Bond Indenture, the Loan Agreement and the Master Indenture, including covenants that secure the Series 2016C Bonds, events of default, acceleration and remedies under the Master Indenture, see APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT” and APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES.”

Security for Obligations. All Obligations issued and Outstanding under the Master Indenture are equally and ratably secured by the Master Indenture except to the extent specifically provided otherwise in the Master Indenture. Any one or more series of Obligations issued under the Master Indenture may, so long as any Liens created in connection therewith constitute Permitted Encumbrances, be secured by security not otherwise provided for under the Master Indenture (including, without limitation, letters or lines of credit, insurance, Liens on Property, including Facilities or Property of the Credit Group Members, or security interests in a depreciation reserve, debt service or interest reserve or debt service or similar funds). Such security need not extend to any other Indebtedness (including any other Obligations or series of Obligations). Consequently, the Supplemental Master Indenture pursuant to which any one or more series of Obligations is issued may provide for such supplements or amendments to the provisions of the Master Indenture as are necessary to provide for such security and to permit realization upon such security solely for the benefit of the Obligations entitled thereto.

Grant and Perfection of a Security Interest in Pledged Revenues. Each Obligated Group Member will, to the extent permitted by law, grant a security interest in the Pledged Revenues of the Obligated Group and has agreed to perfect such security interest to the extent, and only to the extent, that such security interest may be perfected under the Uniform Commercial Code of the jurisdiction in which each Obligated Group Member is organized. It may not be possible to perfect a security interest in any manner whatsoever in certain types of Pledged Revenues. The grant of a security interest in Pledged Revenues may be subordinated to the interest and claims of others in several instances. Some examples of cases of subordination of prior interests and claims are (1) statutory liens, (2) rights arising in favor of the United States of America or any agency thereof, (3) present or future prohibitions against assignment in any federal statutes or regulations, (4) constructive trusts, equitable liens or other rights impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction, (5) federal or

state bankruptcy laws that may affect the enforceability of the Master Indenture or the grant of a security interest in the Pledged Revenues, (6) provisions prohibiting the direct payment of amounts due to health care providers from Medicaid and Medicare programs to persons other than such providers, (7) the absence of an express provision permitting assignment of receivables due under the contracts between the Obligated Group Members and third-party payors, (8) certain judicial decisions which cast doubt upon the rights of the Master Trustee, in the event of bankruptcy of an Obligated Group Member, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs, (9) commingling of proceeds of Pledged Revenues with other moneys of the Obligated Group Members not so pledged under the Master Indenture, (10) federal or state laws governing fraudulent transfers, (11) rights of third parties in Pledged Revenues converted to cash and not in the possession of the Master Trustee and (12) claims that might arise if appropriate financing or continuation statements or amendments to financing statements are not filed in accordance with the Uniform Commercial Code of the applicable state, as from time to time in effect.

Certain Matters Relating to Security Granted by the Mortgages. Under the Master Indenture, the Obligated Group Members may encumber or permit encumbrance of the Mortgaged Properties by Permitted Encumbrances. Permitted Encumbrances on the Mortgaged Properties having priority over the lien created by the Mortgages may reduce the amount that can be realized by the Master Trustee in the event of a foreclosure of the Mortgages. No appraisal of the Mortgaged Properties was completed and no title insurance policy was obtained in connection with the Mortgages.

The Mortgaged Property is not comprised of general purpose buildings and would not generally be suitable for industrial or commercial use. Consequently, it would be difficult to find a buyer or lessee for the Mortgaged Properties if it were necessary to foreclose on the Mortgaged Properties. Thus, upon any default, it may not be possible to realize the outstanding interest on and principal of any Obligations, including the Series 2016C Obligation, from a sale or a lease of the Mortgaged Properties. In order to operate the Mortgaged Properties as health care facilities under present law, a purchaser of the Mortgaged Properties at foreclosure sale would have to obtain approval of the necessary state authorities, including the Illinois Health Facilities and Services Review Board, and licenses for the facilities. Therefore, the ability to operate Mortgaged Properties as health care facilities might be adversely affected.

Under applicable federal and state environmental statutes, in the event of prior or future releases of pollutants or contaminants on or near the Mortgaged Properties, a lien superior to the Mortgages could attach to the Mortgaged Properties affected to secure the costs of removing or otherwise treating pollutants or contaminants. Such a lien would adversely affect the Master Trustee’s ability to realize sufficient amounts to pay the Obligations, including the Series 2016C Obligation, in full. Furthermore, in determining whether to exercise any foreclosure rights with respect to the Mortgaged Properties, the Master Trustee may be required to take into account the potential liability of any owner of the Mortgaged Properties, including an owner by foreclosure, for clean-up costs with respect to such pollutants and contaminants. No environmental assessment of the Mortgaged Property has been made prior to the issuance of the Series 2016C Bonds.

Bankruptcy. In the event of bankruptcy of an Obligated Group Member, the rights and remedies of the Bondholders are subject to various provisions of the federal Bankruptcy Code. If an Obligated Group Member were to file a petition in bankruptcy, payments made by that Obligated Group Member during the 90-day (or, as applicable, one-year) period immediately preceding the filing of such petition may be avoidable as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of such Obligated Group Member’s liquidation. Security interests and other liens granted to the Bond Trustee or the Master Trustee and perfected during such preference period also may be avoided as preferential transfers to the extent such security interest or other lien secures obligations that arose prior to the date of such perfection. Such a bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Obligated Group 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 the Bond Trustee and the Master Trustee. If the bankruptcy court so ordered, the property of the Obligated Group Member, including accounts receivable and proceeds thereof, could be used for the financial rehabilitation of such Obligated Group Member despite any security interest of the Bond Trustee therein. The rights of the Bond Trustee and the Master Trustee to enforce their respective security interests and other liens could be delayed during the pendency of the bankruptcy proceeding.

Such Obligated Group Member could file a plan 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 are conditions 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 addition, the obligations of the Borrower under the Loan Agreement and the Obligated Group Members under the Series 2016C Obligation and the Master Indenture are not secured by a lien on or security interest in any assets or revenues of any Obligated Group Members, other than the lien on Pledged Revenues described under the caption “SECURITY FOR THE SERIES 2016C BONDS – The Master Indenture – Security Interest in Pledged Revenues” and the Mortgages. Except with respect to the lien on the Pledged Revenues and the Mortgages, in the event of a bankruptcy of any Obligated Group Member, Holders of the Series 2016C Bonds would be unsecured creditors.

In the event of bankruptcy of any Obligated Group Member, there is no assurance that certain covenants, including tax covenants, contained in the Loan Agreement and certain other documents would survive. Accordingly, a bankruptcy trustee could take action that would adversely affect the exclusion of interest on the Series 2016C Bonds from gross income of the Bondholders for federal income tax purposes.

The bankruptcy of a Designated Affiliate, an Unlimited Credit Group Participant or a Limited Credit Group Participant would not trigger an event of default under the Master Indenture, the Bond Indenture or the Loan Agreement, but the bankruptcy of a Designated Affiliate, an Unlimited Credit Group Participant or a Limited Credit Group Participant could have a material adverse effect on the Credit Group. If a Designated Affiliate were to file for bankruptcy and had no contractual obligation to make payments to the Obligated Group Agent, neither the Obligated Group Agent nor the Obligated Group Member that controls the Designated Affiliate would be able to file a claim in a bankruptcy proceeding involving the Designated Affiliate for the payment of any amounts due on the Obligations. The Master Trustee has no contractual rights against Designated Affiliates, Unlimited Credit Group Participants or Limited Credit Group Participants and would not be able to file such a claim whether or not a contract existed between the Obligated Group Member, the Designated Affiliate, the Unlimited Credit Group Participant or the Limited Credit Group Participant. In addition, in the event the Obligated Group Member that controls the Designated Affiliate were to become a debtor in a bankruptcy case, the Obligated Group Agent or such Obligated Group Member that controls the Designated Affiliate, as debtor-in-possession, or a trustee in bankruptcy, may not be able to cause the Designated Affiliate to transfer funds to the Obligated Group Agent or the Bond Trustee in bankruptcy.

Bond Trustee as Holder of the Series 2016C Obligation. Under the Master Indenture, the Bond Trustee is deemed to be the holder of the Series 2016C Obligation, and may exercise any and all of the rights granted to the respective holders of the Series 2016C Obligation thereunder, including the right to consent to amendments of the Master Indenture and the right, under certain circumstances, to direct the Master Trustee to exercise remedies and grant waivers upon the occurrence of an event of default thereunder.

Amendments to Bond Indenture, Loan Agreement and Master Indenture. Certain amendments may be made to the Bond Indenture and the Loan Agreement without obtaining the consent of any Holders of the Series 2016C Bonds and certain other amendments to the Bond Indenture and the Loan Agreement require, subject to the nature of the amendment(s), the consent of the Holders of not less than a majority in aggregate principal amount of the Series 2016C Bonds then Outstanding or the consent of all Holders of the Series 2016C Bonds. See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – The Bond Indenture – Modification or Amendment of the Bond Indenture” and “ – Amendment of Loan Agreement.” Certain amendments may be made to the Master Indenture without obtaining consent of any Holders of Obligations and certain other amendments to the Master Indenture require, subject to the nature of the amendment(s), the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Obligations, the consent of the Holder of the Obligation affected by such amendment(s) or the consent of all Holders of Obligations. Such amendments that are subject to consent of Holders may adversely affect the security for the Series 2016C Bonds. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – Summary of Certain Provisions of the Master Indenture – Supplemental Master Indentures and Amendments to Mortgages.” With respect to amendments to the Master Indenture, the Holders of the requisite percentage of Outstanding Obligations may be composed wholly or partially of the Holders of Obligations other than the Series 2016C Obligation. Such amendments may adversely affect the security of the Holder of the Series 2016C Bonds.

State of Illinois Not Liable on the Series 2016C Bonds

THE AUTHORITY IS OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2016C BONDS AND OTHER COSTS INCIDENTAL THERETO ONLY FROM THE SOURCES SPECIFIED IN THE BOND INDENTURE, AND EXCEPT TO SUCH LIMITED EXTENT, THE SERIES 2016C BONDS AND THE INTEREST AND PREMIUM, IF ANY, THEREON DO NOT CONSTITUTE AN INDEBTEDNESS OR AN OBLIGATION, GENERAL OR MORAL, OR A PLEDGE OF THE FULL FAITH OR A LOAN OF CREDIT OF THE AUTHORITY, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE PURVIEW OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR PROVISION. THE SERIES 2016C BONDS AND THE INTEREST AND PREMIUM, IF ANY, THEREON ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY OUT OF THE RECEIPTS, REVENUES AND INCOME SPECIFIED IN THE BOND INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWERS OF THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2016C BONDS OR OTHER COSTS INCIDENTAL THERETO. NO OWNER OF ANY SERIES 2016C BOND SHALL HAVE THE RIGHT TO COMPEL THE TAXING POWER, IF ANY, OF THE AUTHORITY, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2016C BONDS. THE AUTHORITY DOES NOT HAVE THE POWER TO LEVY TAXES FOR ANY PURPOSES WHATSOEVER.

PLAN OF FINANCE General

The issuance of the Series 2016C Bonds and the loan of the proceeds thereof to the Borrower will provide funds to (1) refund all of the Prior Bonds described below, (2) reimburse certain capital expenditures of the Borrower and the Users, and (3) pay certain costs of issuance of the Series 2016C Bonds and the refunding of the Prior Bonds. See also “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Refunding

The Borrower expects to use a portion of the proceeds of the Series 2016C Bonds, together with other available funds, to refund all of the following bond issues: 1. Illinois Finance Authority Revenue Bonds, Series 1999A (Resurrection Health Care) (the “Series 1999A Bonds”), currently outstanding in the aggregate principal amount of $75,975,000;

2. Illinois Finance Authority Revenue Bonds, Series 1999B (Resurrection Health Care) (the “Series 1999B Bonds”), currently outstanding in the aggregate principal amount of $75,975,000; 3. Illinois Finance Authority Revenue Refunding Bonds, Series 2009 (Resurrection Health Care Corporation) (the “Series 2009 Bonds”), currently outstanding in the aggregate principal amount of $51,915,000; 4. Illinois Finance Authority Revenue Bonds, Series 2009A (Provena Health) (the “Series 2009A Bonds”), currently outstanding in the aggregate principal amount of $200,000,000; 5. Illinois Finance Authority Revenue Bonds, Series 2010A (Provena Health) (the “Series 2010A Bonds”), currently outstanding in the aggregate principal amount of $86,835,000; and 6. Illinois Finance Authority Revenue Refunding Bonds, Series 2016A (Presence Health Network) (the “Series 2016A Bonds”), currently outstanding in the aggregate principal amount of $354,225,000. The Borrower also expects to use a portion of the proceeds of the Series 2016C Bonds to refund a portion of the Illinois Finance Authority Taxable Revenue Refunding Bonds, Series 2016B (Presence Health Network) (the “Refunded Series 2016B Bonds”), currently outstanding in the aggregate principal amount of $173,925,000. The Series 1999A Bonds, the Series 1999B Bonds, the Series 2009 Bonds, the Series 2009A Bonds, the Series 2010A Bonds, the Series 2016A Bonds and the Refunded Series 2016B Bonds are collectively referred to herein as the Prior Bonds. On the date of issuance of the Series 2016C Bonds, the Borrower expects that a portion of the proceeds of the Series 2016C Bonds will be deposited with the bond trustee for the Series 1999A Bonds and the Series 1999B Bonds in an escrow fund established under an escrow agreement in an amount sufficient to pay the principal of and interest on all of the Series 1999A Bonds and the Series 1999B Bonds currently outstanding to the redemption date of May 15, 2018 (the “Series 1999A/B Bonds Redemption Date”), and to redeem the Series 1999A Bonds and the Series 1999B Bonds in whole on the Series 1999A/B Bonds Redemption Date, at a redemption price equal to the principal amount thereof, plus accrued interest to the Series 1999A/B Bonds Redemption Date. The funds held in the escrow fund will be held as cash and invested in permitted investments as specified in the bond trust indentures relating to the Series 1999A Bonds and the Series 1999B Bonds and pledged to secure the payment of the principal of and interest on the Series 1999A Bonds and the Series 1999B Bonds.

On the date of issuance of the Series 2016C Bonds, the Borrower expects that a portion of the proceeds of the Series 2016C Bonds will be deposited with the bond trustee for the Series 2009 Bonds in an escrow fund established under an escrow agreement in an amount sufficient to pay the principal of and interest on all of the Series 2009 Bonds currently outstanding to the redemption date of May 15, 2019 (the “Series 2009 Bonds Redemption Date”), and to redeem the Series 2009 Bonds in whole on the Series 2009 Bonds Redemption Date, at a redemption price equal to the principal amount thereof, plus accrued interest to the Series 2009 Bonds Redemption Date. The funds held in the escrow fund will be held as cash and invested in permitted investments as specified in the bond trust indenture relating to the Series 2009 Bonds and pledged to secure the payment of the principal of and interest on the Series 2009 Bonds.

On the date of issuance of the Series 2016C Bonds, the Borrower expects that a portion of the proceeds of the Series 2016C Bonds will be deposited with the bond trustee for the Series 2009A Bonds in an escrow fund established under an escrow agreement in an amount sufficient to pay the principal of and interest on all of the Series 2009A Bonds currently outstanding to the redemption date of August 15, 2019 (the “Series 2009A Bonds Redemption Date”), and to redeem the Series 2009A Bonds in whole on the Series 2009A Bonds Redemption Date, at a redemption price equal to the principal amount thereof, plus accrued interest to the Series 2009A Bonds Redemption Date. The funds held in the escrow fund will be held as cash and invested in permitted investments as specified in the bond trust indenture relating to the Series 2009A Bonds and pledged to secure the payment of the principal of and interest on the Series 2009A Bonds. On the date of issuance of the Series 2016C Bonds, the Borrower expects that a portion of the proceeds of the Series 2016C Bonds will be deposited with the bond trustee for the Series 2010A Bonds in an escrow fund established under an escrow agreement in an amount sufficient to pay the principal of and interest on all of the

Series 2010A Bonds currently outstanding to the redemption date of May 1, 2020 (the “Series 2010A Bonds Redemption Date”), and to redeem the Series 2010A Bonds in whole on the Series 2010A Bonds Redemption Date, at a redemption price equal to the principal amount thereof, plus accrued interest to the Series 2010A Bonds Redemption Date. The funds held in the escrow fund will be held as cash and invested in permitted investments as specified in the bond trust indenture relating to the Series 2010A Bonds and pledged to secure the payment of the principal of and interest on the Series 2010A Bonds. The Series 2016A Bonds and the Refunded Series 2016B Bonds will be redeemed on the date of issuance of the Series 2016C Bonds. Project

The Borrower expects to use a portion of the proceeds of the Series 2016C Bonds to reimburse certain prior capital expenditures at certain of the facilities of the Borrower and the Users.

ESTIMATED SOURCES AND USES OF FUNDS

Series 2016C Bonds Sources of Funds

Par Amount $ Original Issue [Premium/Discount] Funds on Hand with Prior Trustees

Total Sources: $

Uses of Funds

Refunding of Prior Bonds Reimbursement of Prior Capital Expenditures Costs of issuance(1)

Total Uses: $

______(1) Includes underwriter’s discount, fees of the Authority, counsel fees, rating agency fees, and other miscellaneous costs of issuance. Note: Totals in table may not add due to rounding.

ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS

The table on the following page sets forth the total annual debt service for the Series 2016C Bonds. The table does not include any debt service relating to capital leases or other indebtedness that is not secured by the Master Indenture. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Indebtedness and Certain Liabilities.”

Series 2016C Bonds

Year Ending Principal (December 31) Payments Interest Total 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 TOTAL:

Note: Totals in table may not add due to rounding.

CONTINUING DISCLOSURE

General

The Borrower, acting as Obligated Group Agent, has undertaken all responsibilities for any continuing disclosure to Holders of the Series 2016C Bonds as described below, and the Authority shall have no liability to the Holders or any other person with respect to such disclosures. The Obligated Group Agent has covenanted for the benefit of Holders and beneficial owners of the Series 2016C Bonds to provide certain financial information and operating data relating to the System by not later than one hundred fifty (150) days after the end of the System’s fiscal year (which fiscal year currently ends on December 31), commencing with the report for the fiscal year ending December 31, 2016 (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed on behalf of the Borrower by Digital Assurance Certification, L.L.C., as dissemination agent (the “Dissemination Agent”), under the Continuing Disclosure Agreement, with the Municipal Securities Rulemaking Board (the “MSRB”) through the Electronic Municipal Market Access (“EMMA”) website of the MSRB. All notices of enumerated events will be filed on behalf of the Borrower by the Dissemination Agent, with the MSRB. The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is described in APPENDIX F – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12.

In addition, the Borrower has undertaken to provide to the MSRB quarterly unaudited financial information for the System not later than sixty (60) days after the end of each fiscal quarter (commencing with the fiscal quarter ending September 30, 2016). The unaudited financial information for each fiscal quarter will include a consolidated statement of financial position and consolidated statements of operations and changes in unrestricted net assets and a consolidated statement of cash flows statement (or comparably named statements), presented on a basis substantially consistent with the audited financial statements of the System (with the exception of the inclusion of the required footnotes).

Failure by the Borrower to comply with the Continuing Disclosure Agreement will not constitute an event of default under the Master Indenture or the Bond Indenture or the Loan Agreement for the Series 2016C Bonds, and the Holders and beneficial owners of the Series 2016C Bonds are limited to the remedies described in the Continuing Disclosure Agreement. Failure by the Borrower to comply with the Continuing Disclosure Agreement must be reported in accordance with Rule 15c2-12 and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2016C Bonds in the secondary market. Consequently, any such failure may adversely affect the transferability and liquidity of the Series 2016C Bonds and their market price.

Certain Non-Compliance

In connection with the issuance of certain prior series of bonds, the Borrower and other Obligated Group Members entered into respective continuing disclosure agreements pursuant to which the Borrower and such other Obligated Group Members agreed to provide notices, annual financial information, quarterly financial information and operating data to EMMA. In connection with the consolidation of the master trust indentures of the health systems which combined to form Presence Health, the Borrower, as Obligated Group Agent, entered into a master continuing disclosure agreement to amend and restate all such prior continuing disclosure agreements and to address the alignment of the prior health systems’ different fiscal years (the “2013 Master Continuing Disclosure Agreement” and, together with the prior continuing disclosure agreements, the “Prior Disclosure Agreements”). The Borrower did not file a copy of 2013 Master Continuing Disclosure Agreement to EMMA due to administrative oversight.

Over the past five years, the Borrower and other Obligated Group Members filed all required annual financial information to EMMA on a timely basis, but in one instance such information was filed 3 days after the required due date under a Prior Disclosure Agreement and in certain instances such information was not linked to each of the Borrower’s outstanding bond issues. During that same time period, the Borrower and other Obligated Group Members filed all required quarterly financial information to EMMA, but in certain instances such information was filed after the applicable filing deadline under the Prior Disclosure Agreements. The late filings

were delinquent by one to 16 days. In addition, in certain instances, the required quarterly statement of cash flows was filed after the applicable filing deadline under the Prior Disclosure Agreements, was not filed at all, was not linked to each of the Borrower’s outstanding bond issues, and/or did not contain a comparison to the corresponding period in the preceding year. In addition, certain operating data required to be filed annually to EMMA pursuant to the Prior Disclosure Agreements was not filed and notice of failure to file such information also was not filed. In certain instances, the operating data provided did not include certain of the following information in the detail and format as required by the Prior Disclosure Agreements: historical hospital and senior care facility utilization data, payor mix information by hospital facility and market share in primary service area data. The missing operating data was due to administrative oversight and the availability of information in the required format following numerous corporate consolidations and the alignment of the prior health systems’ different fiscal years. As a result of these findings, the Borrower has implemented internal policies and procedures to comply with its obligations under all continuing disclosure obligations.

BONDHOLDERS’ RISKS

The purchase of the Series 2016C Bonds involves investment risks that are discussed throughout this Official Statement. Prospective purchasers of the Series 2016C Bonds should evaluate all of the information presented in this Official Statement. This section on Bondholders’ Risks focuses primarily on the general risks associated with hospital or health system operations, whereas APPENDIX A describes the System and the Obligated Group specifically. These should be read together.

General

Except as noted under “SECURITY FOR THE SERIES 2016C BONDS,” the Series 2016C Bonds are payable from payments made by the Borrower pursuant to the Loan Agreement, and from payments made by the Obligated Group Members on the Series 2016C Obligation and from certain funds held under the Bond Indenture. No representation or assurance can be made that revenues will be realized by the Borrower or other Obligated Group Members in amounts sufficient to make the payments under the Loan Agreement or the Series 2016C Obligation and, thus, to pay principal of, premium, if any, and interest on the Series 2016C Bonds.

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 is subject to actions by, among others, the National Labor Relations Board, The Joint Commission, the Centers for Medicare & Medicaid Services (“CMS”) of the U.S. Department of Health and Human Services (“DHHS”), the Internal Revenue Service (“IRS”), state Attorneys General, 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, timing and amount of payments to the Obligated Group Members 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 audits, 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 (e.g., accountable care organizations, value based purchasing, bundled payments and other health care reform payment mechanisms, including a “single-payor” system), future changes in the economy, demographic changes, availability of physicians, nurses and other health care professionals, malpractice claims and other litigation. These factors and others may adversely affect payment by the Borrower and the Obligated Group under the Loan Agreement and the Series 2016C Obligation and, consequently, on the Series 2016C Bonds. In addition, the tax-exempt status of the Borrower or other Obligated Group Members could be adversely affected by, among other things, an adverse determination by a governmental entity, and noncompliance with governmental regulations or legislative changes, including changes resulting from current health care reform legislation or initiatives. Loss of tax-exempt status by the Borrower or other Obligated Group Members could adversely affect the tax-exempt treatment of interest on the Series 2016C Bonds.

The following discussion of risk factors is not, and is not intended to be, exhaustive.

Management’s Turnaround Plan

The System experienced operating losses for the fiscal year ended December 31, 2015 and is in the process of implementing a turnaround initiative prepared by management of the System. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Turnaround Plan” for a description of management’s turnaround plan and management’s projections for the fiscal years ending December 31, 2016 and 2017. These projected financial opportunities and the projected timing for implementation of same are forward-looking statements and not guarantees of future performance. The projections reflect the current views of the System with respect to the projected financial opportunities. The projections involve certain risks, uncertainties, estimates and assumptions and may be dependent on actions taken or not taken by third parties not controlled by the System, including the governments of the United States and the State of Illinois. While management believes that the assumptions that underlie the projected financial opportunities are reasonable, there will usually be differences between projections and actual results, because events and circumstances may not occur as expected, and these differences may be significant and may be material. No assurance can be given that the targeted savings will be achieved, or achieved on the expected implementation schedule. The System undertakes no obligation to publicly update or revise any of the projected financial opportunities as a result of new information, future events, or other information.

Significant Risk Areas Summarized

Certain of the primary risks associated with the operations of large hospital or health systems similar to those operated by 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 condition and results of operations of one or more Obligated Group Members and, in turn, the ability of the Borrower to make payments under the Loan Agreement, and of the Obligated Group to make payments under the Series 2016C Obligation.

Federal Health Care Reform and Deficit Reduction. The Patient Protection and Affordable Care Act (“ACA”) was enacted in March 2010. The constitutionality of the ACA has been challenged in courts around the country. In June 2012, the U.S. Supreme Court upheld most provisions of the ACA, including an “individual mandate” (which began in 2014, generally requiring individuals to have a certain amount of health insurance coverage or pay a penalty), while limiting the power of the federal government to penalize states for refusing to expand Medicaid. In June 2015, the U.S. Supreme Court, in its decision in King v. Burwell, upheld Treasury Regulation 26 C.F.R. § 1.36B-2(a)(1), issued under the ACA, stating that health insurance exchange purchasers can receive tax-credit subsidies, regardless of whether the purchase is made through a federal or state-operated exchange. The ACA addresses almost all aspects of hospital and provider operations and health care delivery, and has changed and is changing how health care services are covered, delivered, and reimbursed. These changes will result in new payment models with the risk of lower health care provider reimbursement from Medicare, utilization changes, increased government enforcement and the necessity for health care providers to assess, and potentially alter, their business strategy and practices, among other consequences. While many providers will receive reduced payments for care, millions of previously uninsured Americans may have coverage. “Health insurance exchanges” could fundamentally alter the health insurance market and negatively impact health care providers, enabling insurers to aggressively negotiate rates. Federal deficit reduction efforts will likely curb federal Medicare and Medicaid spending further to the detriment of hospitals, physicians and other health care providers.

General Economic Conditions; Bad Debt, Indigent Care and Investment Performance. Health care providers are economically influenced by the environment in which they operate. Any national economic difficulties may constrain corporate and personal spending, limit the availability of credit and increase the national debt and any federal and state government deficits. To the extent that employers reduce their workforces, unemployment rates are high, employers reduce their budgets for employee health care coverage or private and public insurers seek to reduce payments to health care providers or curb utilization of health care services, health care providers may experience decreases in insured patient volume and reductions in payments for services. In addition, to the extent that state, county or city governments are unable to provide a safety net of medical services, pressure is applied to local health care providers to increase free care. Furthermore, economic downturns and lower funding of federal Medicare and state Medicaid and other state health care programs may increase the number of patients who are unable to pay for their medical and hospital services. These conditions may give rise to increases

in health care providers’ uncollectible accounts, or “bad debts,” uninsured discounts and charity care and, consequently, to reductions in operating income.

Declines in investment portfolio values may reduce or eliminate non-operating revenues. Investment losses (even if unrealized) may trigger debt covenant violations and may jeopardize the economic security of hospitals and health systems. Losses in pension and other postretirement benefit funds may result in increased funding requirements. Potential failure of lenders, insurers or vendors may negatively impact the results of operations and the overall financial condition of health care providers. Philanthropic support may also decrease or be delayed due to general economic downturns that adversely affect the net worth of individual and corporate donors.

Debt Limit Increase. The federal government has through legislation created a debt “ceiling” or limit on the amount of debt that may be issued by the United States Treasury. In the past several years, political disputes have arisen within the federal government during negotiations to authorize an increase in the federal debt ceiling. Any failure by Congress to increase the federal debt limit may impact the federal government’s ability to incur additional debt, pay its existing debt instruments and satisfy its obligations relating to the Medicare and Medicaid programs.

Management of the Obligated Group is unable to determine at this time what impact any future failure to increase the federal debt limit may have on the operations and financial condition of the Obligated Group, although such impact may be material. Additionally, the market price or marketability of the Series 2016C Bonds in the secondary market may be materially adversely impacted by any failure to increase the federal debt limit.

Nonprofit Health Care Environment. The significant tax benefits received by nonprofit, tax-exempt hospitals have increasingly caused the business practices of such hospitals to be subject to scrutiny by public officials and the press, and to political and legal challenges of the ongoing qualification of such organizations for tax-exempt status. Multiple governmental authorities, including state Attorneys General, the IRS, Congress and state legislatures have held hearings and carried out audits regarding the conduct of tax-exempt organizations, including tax-exempt hospitals. Citizen organizations, such as labor unions and patient advocates, have also focused public attention on the activities of tax-exempt hospitals and health systems and raised questions about their practices. The IRS imposes certain reporting requirements for hospitals and health systems, including through Schedule H, Schedule J and Schedule K of the Form 990.

Proposals to increase the regulatory requirements for nonprofit hospitals’ retention of tax-exempt status, such as by establishing a minimum level of charity care, have also been introduced repeatedly in Congress and in state legislatures. These challenges and examinations, and any resulting legislation, regulations, judgments or penalties, could materially change the operating environment for nonprofit providers and have a material adverse effect on the Obligated Group, taken as a whole. Significant changes in the obligations of nonprofit, tax-exempt hospitals and challenges to or loss of the tax-exempt status of nonprofit hospitals generally, or the Obligated Group Members in particular, could have a material adverse effect on the Obligated Group.

Capital Needs vs. Capital Capacity. Hospital and other health care operations are capital intensive and replacement or renovation of aging facilities may be required. Regulation, technology and physician/patient expectations require constant and often significant capital investment. Total capital needs may exceed capital capacity.

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 developments could result in higher hospital costs, reductions in patient populations and/or new sources of competition for hospitals.

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 for which hospitals realize their highest margins, thus negatively affecting programs that are economically important to hospitals. Specialty hospitals may attract specialists as investors and may seek to treat only profitable classifications of patients, leaving full-service hospitals

with higher acuity and/or lower paying patient populations. Competitor hospitals also may employ critical specialists and other physicians vital to the provision of health care services in the community. These 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 competing facilities.

Increasing Consumer Choice. Hospitals and other health care providers face increased pressure to operate transparently and make available information about cost and quality of services. Detailed information on a variety of quality measures and other matters for hospital and other health care providers is increasingly available on the Internet from governmental and non-governmental sources. Consumers and payors accessing cost and quality information accumulated on various data bases may shift business among providers or make different health care choices based on such information.

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

Reliance on Medicare. Inpatient hospitals rely to a high degree on payment from the federal Medicare program and future payment restraints are predicted. Recent, as well as future, changes in the underlying laws and regulations, as well as in payment policy and timing, create uncertainty and could have a material adverse impact on hospitals’ payment streams from Medicare. Congress and CMS are expected to take action in the future to further decrease or restrain Medicare outlays for hospitals and other providers. In addition, disputes with non-contracted payors may result in an inability to collect billed charges from these payors. A substantial portion of the gross revenues received by the Obligated Group and its affiliates are from Medicare, with gross revenues from traditional Medicare and managed Medicare combined comprising approximately 48.6% of gross patient service revenues of the System in 2015.

Costs and Restrictions from Governmental Regulation. Nearly every aspect of hospital operations and health care delivery is regulated, in some cases by multiple agencies of government. The level and complexity of regulation and compliance audits appear to be increasing, imposing greater operational limitations, enforcement and liability risks, and significant and sometimes unanticipated costs.

Government “Fraud” Enforcement. “Fraud” in government funded health care programs is a significant concern of federal and state government and regulatory agencies overseeing health care programs, 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 in which 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 do not have the traditional elements of fraud, and enforcement actions may extend to conduct that occurred in the past. Violations carry significant sanctions. The government periodically conducts widespread investigations covering various categories of services, or certain accounting or billing practices. In addition, the System conducts or arranges for compliance audits to assess compliance levels in specific areas by members of the Obligated Group and

their affiliates. Issues identified in such audits may result in repayments or self-reporting to governmental or other payors, and may trigger penalties in addition to repayment obligations.

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, monetary and other penalties, including suspending essential hospital and other health care provider payments from the Medicare or Medicaid programs, or exclusion from those programs. Aggressive investigation tactics, negative publicity and threatened penalties can be, and often are, used to force health care providers to enter into monetary settlements in exchange for releases of liability for past conduct, as well as agreements imposing prospective restrictions and/or mandated compliance requirements on health care providers. Such negotiated settlement terms may have a materially adverse impact on hospital and other health care provider operations, financial condition, results of operations and reputation. Multi-million dollar fines and settlements for alleged intentional misconduct, fraud or false claims are not uncommon in the health care industry. These risks are generally uninsured. Government enforcement and private whistleblower suits may increase in the hospital and health care sector. Many large hospital and other health care provider systems are likely to be adversely impacted.

Illinois Medicaid Programs. Illinois Medicaid and other state health care programs are an important payor source to many hospitals and may become a proportionately larger source of revenue as federal health care reform is implemented, expanding Medicaid coverage, in those states that choose to expand Medicaid, to significant numbers of uninsured Americans. These programs often pay hospitals and physicians at levels that may be below the actual cost of the care provided. As Medicaid and other state health care programs are partially funded by states, the often precarious financial condition of states may result in lower funding levels and/or payment delays in the future. See “- Patient Service Revenues – Illinois Budget” for the significant budget challenges in the State of Illinois which may result in payment delays for hospitals including the System. These could have a material adverse impact on hospitals, skilled nursing facilities and other health care providers. A significant portion of the gross revenues received by the Obligated Group and its affiliates are from Medicaid, with gross revenues from traditional Medicaid and managed Medicaid combined comprising approximately 20% of gross patient service revenues of the System in 2015.

Professional Staffing. From time to time, shortages of certain physician specialties, nurses and medical technicians may exist which may have a primary impact on hospitals and health systems. Hospital operations, patient and physician satisfaction, financial condition, results of operations and future growth could be negatively affected by these shortages, resulting in a material adverse impact to hospitals.

Labor Costs and Disruption. The delivery of health care services is labor intensive. Labor costs, including salary, benefits and other liabilities associated with the workforce, have significant impact on hospital and health care provider operations and financial condition. Hospital and health care employees may be or become organized in collective bargaining units, and may be involved in work actions of various kinds, including work stoppages and strikes. Overall costs of the hospital workforce are high, and turnover is high. Pressure to recruit, train and retain qualified employees is expected to accelerate. These factors may materially increase hospital costs of operation. At the same time, health care organizations will be under increasing pressure to reduce the cost of delivering care to patients, including the cost of salary and benefits, in order to compete in a transparent price market. Workforce disruption may negatively impact hospital revenues and reputation.

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 or insurance costs, may increase in the future. Health systems may be affected by negative financial and liability impacts on physicians. Costs of insurance, including self-insurance, may increase dramatically. Efforts to establish tort reform in Illinois have been unsuccessful, so that there are no legal limits on non-economic damages that may be imposed in medical professional liability cases. Approximately half of the System’s hospitals, skilled nursing homes and other health care providers are located in Cook County, which consistently ranks as one of the most hostile judicial environments for health care provider defendants, with a record of high jury verdicts and settlements.

Other Class Actions. Hospitals and health care providers 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 care providers. These class action suits have most recently focused on hospital billing and collections practices and breaches of privacy, 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 care providers in the future.

Facility Damage. Hospitals and health systems are highly dependent on the condition and functionality of their physical facilities. Damage from earthquake, floods, fire, other natural causes, deliberate acts of destruction, or various facilities system failures may have a material adverse impact on operations, financial conditions and results of operations.

Reserved Powers. The sponsors of religiously based non-profit health care systems often have reserved powers that may restrict an Obligated Group Member’s ability to take significant actions to achieve its business objectives. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Overview of Presence Health Network and Affiliates – Sponsorship” and “- Governance and Management of the Corporation – Sponsorship” for a description of the reserved powers currently held by the canonical Sponsor of the Borrower.

Federal Budget Cuts

The Budget Control Act of 2011 (the “BCA”) mandated significant reductions and spending caps on the federal budget for fiscal years 2013-2021. The BCA also created a Joint Select Committee on Deficit Reduction (the “Super Committee”) to develop a plan to further reduce the federal deficit by $1.5 trillion on or before November 23, 2011. Because the Super Committee failed to act, the BCA mandated that a capped 2% reduction in Medicare spending, among other reductions, also known as the sequestration cuts, would be triggered to take effect on January 2, 2013.

The American Taxpayer Relief Act of 2012 (“ATRA”) postponed this scheduled reduction until March 1, 2013. On March 1, 2013, the Office of Management and Budget issued a report to Congress detailing the effects of this reduction to be a 2% Medicare spending reduction. CMS confirmed that the 2.0% reduction to Medicare providers and insurers was for services provided after April 1, 2013. ATRA significantly affects hospital Medicare reimbursement in that it requires the Medicare program to recoup funds from hospitals based on changes in documentation and coding that have increased Medicare inpatient prospective payment system (“IPPS”) payments but that do not represent real increases in the intensity of services provided to patients. In the final IPPS regulations for federal fiscal year 2014, CMS stated that it intended to phase in this recoupment over time, starting with a 0.8% reduction in the Medicare standardized amount for 2014. The fiscal year 2015 IPPS final rule reduced standardized amounts by a second 0.8% installment, for a cumulative reduction of 1.6% for fiscal year 2015. The fiscal year 2016 IPPS final rule reduced standardized amounts by an additional 0.8% for a cumulative reduction of 2.4%. Additional recoupment adjustments are planned for federal fiscal year 2017.

In December 2013, the Bipartisan Budget Act of 2013 (“BBA 2013”) was enacted, which among other actions included restructuring planned deductions of Medicaid disproportionate share payments (“DSH payments”) by delaying the fiscal year 2014 DSH payment cuts until fiscal year 2016, but increasing the overall level of reductions and extending cuts through fiscal year 2023. The Medicare Access and CHIP Reauthorization Act of 2015 further delays the DSH payment cuts until fiscal year 2018, while extending cuts through fiscal year 2025.

The BBA 2013 extended the 2% reduction to Medicare providers and insurers at least through March 31, 2024, subject to additional Congressional action. Certain commercial Medicare Advantage plans are passing this reduction on to health care providers. On November 2, 2015, the President signed into law the Bipartisan Budget Act of 2015 (the “BBA 2015”), increasing the discretionary spending caps imposed by the BCA for fiscal years 2016 and 2017 and authorizing $80 billion in increased spending over the two years. The BBA 2015 also extended the 2% reduction to Medicare providers and insurers for another year, to at least March 31, 2025, and suspended the limit on the federal government’s debt until March 2017.

Absent further Congressional action, these automatic spending cuts will become permanent. Because Congress may make changes to the budget in the future, it is impossible to predict the impact any spending cuts 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. If and to the extent Medicare and/or Medicaid spending is reduced under either scenario, this may have a material adverse effect on the financial condition of the Obligated Group. Ultimately, these reductions or alternatives could have a disproportionate impact on hospital providers and could have an adverse effect on the financial condition of the Obligated Group, which could be material.

Health Care Reform

As a result of the ACA, substantial changes have occurred and are anticipated to occur in the United States health care system. The ACA is impacting the delivery of health care services, the financing of health care costs, reimbursement of health care providers and the legal obligations of health insurers, providers, employers and consumers. Some of the provisions of the ACA took effect immediately or within a few months of final approval, while others were or will be phased in over time, ranging from one year to ten years. Because of the complexity of the ACA generally, additional legislation may be considered and enacted over time. The ACA has also required, and will continue to require, the promulgation of substantial regulations with significant effects on the health care industry. Thus, the health care industry is the subject of significant new statutory and regulatory requirements and consequently to structural and operational changes and challenges for a substantial period of time. The full ramifications of the ACA may also become apparent only over time and through later regulatory and judicial interpretations. Portions of the ACA have already been limited and nullified as a result of legislative amendments and judicial interpretations and future actions may further change its impact. The uncertainties regarding the implementation of the ACA create unpredictability for the strategic and business planning efforts of health care providers, which in itself constitutes a risk.

The changes in the health care industry brought about by the ACA may have both positive and negative effects, directly and indirectly, on the nation’s hospitals and other health care providers, including the Obligated Group Members. For example, the projected increase in the numbers of individuals with health care insurance occurring as a consequence of Medicaid expansion, creation of health insurance exchanges, subsidies for insurance purchase and the penalty on certain individuals who do not purchase insurance could result in lower levels of bad debt and increased utilization or profitable shifts in utilization patterns for hospitals. However, the extent to which Medicaid expansion, which is now optional on a state-by-state basis, is either not pursued or results in a shifting of significant numbers of commercially-insured individuals to Medicaid, or health insurance options on exchanges are limited or unaffordable, as well as the cost containment measures and pilot programs that the ACA requires, may offset these benefits. A negative impact to the hospital industry overall will likely result from scheduled cumulative reductions in Medicare payments; such reductions are substantial.

The ACA’s cost-cutting provisions to the Medicare program include reduction in Medicare market basket updates to hospital reimbursement rates under the IPPS, additional reductions to or elimination of Medicare reimbursement for certain patient readmissions and hospital-acquired conditions, as well as anticipated reductions in rates paid to Medicare managed care plans that may ultimately be passed on to providers. Industry experts also expect that government cost reduction actions may be followed by private insurers and payors. Because a large percentage of the revenues of the Obligated Group Members are from Medicare spending, the reductions may have a material impact, and could offset any positive effects of the ACA. See also “—Patient Service Revenues—The Medicare Program” below. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Sources of Gross Patient Service Revenue” for information regarding percentage of Medicare revenues for the System.

Health care providers could be further subjected to decreased reimbursement as a result of implementation of recommendations of the Independent Payment Advisory Board (“IPAB”) established by the ACA. Beginning January 15, 2019, if the Medicare growth rate exceeds the target, IPAB is directed to make recommendations for cost reduction for implementation by DHHS, and those recommended reductions will be automatically implemented unless Congress adopts alternative legislation that meets equivalent savings targets. While hospitals are largely exempted from recommendations from the IPAB, industry experts also expect that government cost reduction actions may be followed by private insurers and payors. The IPAB was to begin submitting its annual

recommendations no later than January 15, 2014. However, President Obama has yet to appoint the members of the IPAB. Additionally, the Chief Actuary of CMS has concluded that the projected Medicare per capita growth rate has not yet exceeded the target growth rate and there will be no need for IPAB activity at least through federal fiscal year 2016. In June 2015, the House of Representatives voted to repeal the IPAB, although the Senate has not yet approved the legislation. On the other hand, the fiscal year 2017 federal budget aims to strengthen the IPAB.

Beginning in 2014, the ACA authorized the creation of state “health insurance exchanges” in which health insurance can be purchased by certain groups and segments of the population, expanded the availability of subsidies and tax credits for premium payments by some consumers and employers, and required that certain terms and conditions be included by commercial insurers in contracts with providers. In addition, the ACA imposed many new obligations on states related to health insurance. It is unclear how the increased federal oversight of state health care may affect future state oversight or affect the Obligated Group Members. The health insurance exchanges may have positive impact for hospitals by increasing the availability of health insurance to individuals who were previously uninsured. Conversely, employers or individuals may shift their purchase of health insurance to new plans offered through the exchanges, which may or may not reimburse providers at rates equivalent to rates the providers currently receive. The exchanges could alter the health insurance markets in ways that cannot be predicted, and exchanges might, directly or indirectly, take on a rate-setting function that could negatively impact providers. Because the exchanges are still so new, the effects of these changes upon the financial condition of any third party payor that offers health insurance, rates paid by third-party payors to providers and, thus, the revenues of the Obligated Group Members, and upon the operations, results of operations and financial condition of the Obligated Group, taken as a whole, cannot be predicted.

High-deductible insurance plans have become more common in recent years, and the ACA is expected to encourage the increase in high deductible insurance plans as the health care exchanges include a variety of plans, several of which offer lower monthly premiums in return for higher deductibles. Many plans offered on the exchanges have high deductibles. High-deductible plans may contribute to lower inpatient volumes as patients may forgo or choose less expensive medical treatment to avoid having to pay the costs of the high deductibles. There is also a potential concern that some patients with high deductible plans will not be able to pay their medical bills as they may not be able to cover their high deductible.

The ACA will likely affect some health care organizations differently from others, depending, in part, on how each organization adapts to the legislation’s emphasis on directing more federal health care dollars to integrated provider organizations and providers with demonstrable achievements in quality care. Commencing October 1, 2012, the ACA established a value-based purchasing system for hospitals under the Medicare program, which was designed to provide incentive payments to hospitals contingent on satisfaction of specified performance measures related to common and high-cost medical conditions, such as cardiac, surgical and pneumonia care. The ACA also funds various demonstration programs and pilot projects and other voluntary programs to evaluate and encourage new provider delivery models and payment structures, including “accountable care organizations” (“ACOs”) and bundled provider payments. On January 26, 2015, DHHS announced a timetable for transitioning Medicare payments from the traditional fee-for-service model to a value-based payment system. This schedule calls for tying 30% of traditional Medicare fee-for-service payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements, by the end of 2016, increasing to 50% by 2018. In addition, DHHS set a goal of tying 85% of all traditional Medicare fee-for-service payments to quality or value by 2016, increasing to 90% by 2018. By the end of 2014, approximately 20% of Medicare’s payments were made through alternative payment models, up from almost none in 2011. The outcomes of these projects and programs, including the likelihood of their being made permanent or expanded or their effect on health care organizations’ revenues or financial performance, cannot be predicted.

The ACA contains amendments to existing criminal, civil and administrative anti-fraud statutes and increases in funding for enforcement and efforts to recoup prior federal health care payments to providers. Under the ACA, a broad range of providers, suppliers and physicians are required to adopt a compliance and ethics program. While the government has already increased its enforcement efforts, failure to implement certain core compliance program features provide new opportunities for regulatory and enforcement scrutiny, as well as potential liability if an organization fails to prevent or identify improper federal health care program claims and payments. See also “—Regulatory Environment” below.

The ACA is projected to expand access to Medicaid and the scope of services covered thereunder. With respect to access, Medicaid is expected to cover all individuals with incomes of less than 133% of the federal poverty level. The new law currently gives states the option to expand Medicaid eligibility to non-elderly, non- pregnant individuals who are not otherwise eligible for Medicare, if they have incomes of less than 133% of the federal poverty level. To assist states with the cost of covering such newly eligible individuals, the federal government agreed to pay 100% of the new cost for a limited number of years. Thereafter, the cost share is expected to decrease to 90% by 2020, which decrease will occur in phases. If a state chooses not to participate in the expanded Medicaid program, the net effect of the reforms in the ACA could be significantly reduced. Additionally, Medicaid reimbursement rates differ by state and the effect of expanded Medicaid enrollment must be determined on a state-by-state basis. Illinois has chosen to expand Medicaid. See “Illinois Medicaid Program” below.

Additionally, the Obama Administration delayed the effective date of certain aspects of the ACA, such as the requirement that businesses with more than 50 employees provide health insurance to their workers or pay a penalty, with such deadline postponed to 2015 for employers with 100 or more full-time employees and 2016 for employers with 50 to 99 full-time employees. In response to difficulties faced by individuals who received cancellation notices regarding plans that that did not meet the coverage requirements for the ACA, DHHS granted those individuals an exception from the ACA’s individual mandate, which requires individuals to have health insurance or face a penalty commencing tax year 2014. Those individuals may now obtain catastrophic coverage, which is basic coverage generally available to those under 30 or who meet a hardship exemption; DHHS announced that it is granting a “hardship exemption” to individuals whose plans were cancelled and might be having difficulty paying for standing coverage.

With respect to charity care, the ACA contains many features from previous tax-exempt reform proposals, including a set of sweeping changes applicable to charitable hospitals exempt under Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). The ACA: (i) imposes new eligibility requirements for 501(c)(3) hospitals, coupled with an excise tax for failures to meet certain of those requirements; (ii) requires mandatory IRS review of the hospitals’ entitlement to exemption; (iii) sets forth new reporting requirements, including information related to community health needs assessments and audited financial statements; (iv) requires hospitals to adopt and publicize a financial assistance policy, limit charges to patients who qualify for financial assistance to the lowest amount charged to insured patients, and control the billing and collection processes; and (v) imposes further reporting requirements on the Secretary of the Treasury regarding charity care levels. Failure to satisfy these conditions may result in the imposition of fines and the loss of tax-exempt status.

Efforts to repeal or substantially modify provisions of the ACA are from time to time pending in Congress. 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 in June 2015, the Supreme Court issued a decision in King v. Burwell, ruling that health insurance subsidies under the ACA would be available in all states, including those with a federally-facilitated health insurance exchange. In November 2015, the BBA 2015 repealed a provision of the ACA which would require employers that offer one or more health benefits plans and have more than 200 full-time employees to automatically enroll new full-time employees in a health plan. The ultimate outcome of any legislative efforts to repeal, amend, eliminate or reduce funding for the ACA or any future judicial interpretations of the ACA is unknown. Results of recent Congressional elections and of the upcoming 2016 Presidential election could affect the outcome of those efforts.

Nonprofit Health Care Environment

The tax-exempt status of hospitals and health care organizations is the subject of continuing regulatory and legislative threats. As nonprofit tax-exempt organizations, the Obligated Group Members are subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including their operation for charitable purposes. At the same time, the Obligated Group Members conduct large-scale complex business transactions and are often the major employers in their 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. Hospitals or other health care providers may be forced to forego otherwise favorable opportunities for certain joint ventures, recruitment and other arrangements in order to maintain their tax-exempt status.

The operations and practices of nonprofit, tax-exempt hospitals are routinely challenged or criticized for inconsistency or inadequate compliance with the regulatory requirements for, and societal expectations of, nonprofit tax-exempt organizations. These challenges, in some cases, 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. A common theme is that nonprofit hospitals may not confer community benefits that exceed or equal the benefit received from their tax-exempt status. 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, exemption from sales and use taxes, private use of facilities financed with tax-exempt bonds and others. These challenges and criticisms have come from a variety of sources, including state Attorneys General, the IRS, labor unions, advocacy groups, Congress, state legislatures and patients, and in a variety of forums, including hearings, audits and litigation. The challenges and examinations, and any resulting legislation, regulations, judgments or penalties, could have a material adverse effect on the Obligated Group.

Congressional Action. Senate and House committees have conducted several nationwide investigations of hospital billing and collection practices and prices charged to uninsured patients and have considered reforms to the nonprofit sector, including proposed reform in the area of tax-exempt health care organizations, as part of health care reform generally.

Bond Examinations. IRS officials have indicated that more resources will be invested in audits of tax- exempt bonds in the charitable organization sector with specific review of private use. A schedule to the Form 990 return (Schedule K), effective for the 2009 tax year and thereafter, is intended to address what the IRS believes is significant noncompliance with recordkeeping and record retention requirements. Schedule K also requires tax- exempt organizations to report on the investment and use of bond proceeds to address IRS concerns regarding compliance with arbitrage rebate requirements and the private use of bond-financed facilities.

Internal Revenue Service Examination of Compensation Practices and Community Benefit. In February 2009, the IRS issued its Hospital Compliance Project Final Report (the “IRS Final Report”) that examined tax-exempt organizations’ practices and procedures with regard to compensation and benefits paid to their officers and other defined “insiders.” The IRS Final Report indicated that the IRS (1) will continue to heavily scrutinize executive compensation arrangements, practices and procedures of tax-exempt hospitals and other tax-exempt organizations, and (2) in certain circumstances, may conduct further investigations or impose fines on tax-exempt organizations. The IRS has also undertaken a community benefit initiative directed at hospitals. A 2007 IRS report on this initiative determined that a lack of uniformity in definitions of community benefit used by reporting hospitals, including those regarding uncompensated care and various types of community benefit, made it difficult for the IRS to assess whether any particular hospital is in compliance with current law. The revised Form 990 adopted in 2008 includes a new schedule, Schedule H, which hospitals and health systems must use to report their community benefit activities, including the cost of providing charity care and other tax-exemption related information. Proposals have also been made within Congressional committees to codify the requirements for hospitals’ tax-exempt status, including requirements to provide minimum levels of charity care. Additionally, the ACA contains new requirements for non-profit hospitals in order to maintain their tax-exempt status. See “Tax- Exempt Status and Other Tax Matters – Maintenance of the Tax-Exempt Status of Obligated Group Members” below.

Litigation Relating to Billing and Collection Practices. During the past 10 – 15 years, a notable number of lawsuits have been filed in both federal and state courts alleging, among other things, that hospitals have failed to fulfill their obligations to provide charity care to uninsured patients and have overcharged uninsured patients. Some of these cases were dismissed by the courts and others were settled by hospitals and health systems, in some cases for significant amounts. Claims regarding billing and collection practices of hospitals with respect to uninsured and under-insured patients are a continued risk area, given the complexity of hospital and affiliated professional billing, and the increase in high-deductible insurance plans.

State Oversight. Nonprofit corporations, including the Borrower and several of the other Obligated Group Members, are subject to oversight and examination by the Illinois Attorney General to ensure their charitable purposes are being carried out, that their fundraising and investment activities comply with state law and that the terms of charitable gifts are followed.

Challenges to Real Property Tax Exemptions. The real property tax exemptions afforded to certain nonprofit health care providers, including certain Obligated Group Members, by state and local taxing authorities have been challenged on the grounds that the health care providers were not engaged in sufficient charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins and operations that closely resemble for-profit businesses. See “Tax Exempt Status and Other Tax Matters – State and Local Property, Sales and Other Tax Exemptions.”

In Illinois, specifically, the status of real property and sales tax exemptions for not-for-profit health care providers has been under scrutiny for a number of years. As a result, in June 2012, the State of Illinois enacted legislation (the “Illinois Property and Sales Tax Act”) creating standards for real property and sales tax exemptions for health care providers operating in the State.

The Illinois Property and Sales Tax Act provides that a hospital owner or hospital affiliate satisfies the conditions for an exemption from real property taxation if the value of “qualified services or activities” for the hospital year equals or exceeds the relevant hospital entity's estimated property tax liability for the calendar year in which exemption or renewal of exemption is sought. Not-for-profit hospital entities and affiliates (under the Illinois Property and Sales Tax Act, non-hospital facilities are also covered) that satisfy this test will also be exempt from the State’s sales and use tax. The Illinois Property and Sales Tax Act includes a list of the items that are included within the definition of “qualified services and activities,” including charity care (free or discounted services pursuant to the hospital’s or system’s financial assistance policy, measured at cost); health services to low-income or underserved individuals (including financial or in-kind support relating to the care and treatment of low-income or underserved individuals); subsidies provided to State or local governments for programs related to health care for low-income or underserved individuals; support for State health care programs for low-income individuals; and the portion of unreimbursed costs attributed to providing, paying for, or subsidizing goods, activities or services that relieve the burden of government relating to health care for low income individuals, including the provision of medical education and training of health care professionals as well as the provision of emergency, trauma, burn, neonatal, psychiatric, rehabilitation or other special services.

Two lawsuits challenging the constitutionality of the Illinois Property and Sales Tax Act are pending in the Illinois courts. The Illinois Supreme Court has agreed to hear one of these cases, involving Carle Foundation Hospital in Urbana, after the 4th District Appellate Court in January 2016 struck down as unconstitutional the portion of the Illinois Property and Sales Tax Act addressing property tax exemption for not-for-profit hospitals. Obligated Group management cannot predict the ultimate success of these lawsuits. Obligated Group management cannot predict whether there would be a material adverse impact on the results of operations and financial condition of the entities within the Obligated Group in regards to maintenance of existing tax-exemption determinations and any future property or sales tax exemption applications if one or more adverse rulings are received regarding the constitutionality of the Illinois Property and Sales Tax Act. If the Supreme Court upholds the finding that the Illinois Property and Sales Tax Act is unconstitutional, the property tax exemption of one of the Obligated Group’s hospitals, Presence Covenant Medical Center in Urbana, as well as the facilities of other Obligated Group members, could be in jeopardy. See “TAX EXEMPT STATUS AND OTHER MATTERS – State and Local Property, Sales and Other Tax Exemptions.”

Action by Purchasers of Hospital Services and Consumers. Major purchasers of hospital services, including governmental payors, employers and commercial insurers, continually seek to reduce hospital and other health care costs. Such efforts may include actions through contracts or regulation to restrain hospital charges or charge increases. 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.

State of Illinois Attorney General and Legislative Action Focused on Hospital Charity Care, Billing and Collections. In addition to the increased scrutiny that tax-exempt hospitals have faced in the past 10 - 15 years through federal and state charity care litigation, congressional hearings and IRS examinations, the office of the Illinois Attorney General (the “Attorney General”) has also directed its attention toward state legislative and

regulatory initiatives relating to tax-exempt hospitals. Under current Illinois law, tax-exempt hospitals that are not operated by a unit of government are required to develop an organizational mission statement and community benefit plan that identifies the hospital's commitment to serving the health care needs of the community and the operational plan for serving the community, including the goals and objectives for providing charity care and government sponsored indigent health care. All nonprofit hospitals are required to annually submit audited financial statements and a detailed community benefits reports to the Attorney General.

In part as a result of the Attorney General’s focus on hospital billing and collections practices, particularly for the uninsured, the Illinois Legislature passed two laws, The Fair Patient Billing Act of 2007 and the Hospital Uninsured Patient Discount Act, which was passed in 2008. The Fair Patient Billing Act imposes specific procedures on Illinois hospitals relating to billing and collection procedures. The Hospital Uninsured Patient Discount Act requires all hospitals to provide discounts to uninsured patients meeting certain eligibility requirements and establish a maximum collectible amount of 25 percent of annual family income for eligible individuals.

In 2012, the Illinois Legislature passed the Uninsured Charity Care Act. The Uninsured Charity Care Act amends the Fair Patient Billing Act and the Hospital Uninsured Patient Discount Act to require, among other things, (i) the Attorney General to develop standard provisions in applications for financial assistance, together with rules for determining presumptive eligibility, and (ii) hospitals, other than rural hospitals or critical access hospitals, to provide a charitable discount of 100% of its charges for all medically necessary health care services exceeding $300 to uninsured individuals who apply for such a discount and who have a family income of not more than 200% of the federal poverty guidelines and rural hospitals or critical access hospitals to provide medically necessary free care to individuals with family income of up to 125% of the federal poverty guidelines. In August 2013, the Attorney General adopted new rules that require hospitals to provide hospital financial assistance applications to patients on forms that are to be submitted annually along with the Community Benefits Report as required by the Community Benefits Act. The rules contain specific requirements pertaining to what hospitals’ financial assistance forms must contain and provide for with respect to notifying patients of the availability of financial assistance. The rules also address presumptive eligibility criteria and require hospitals to adopt a Presumptive Eligibility Policy identifying each of the criteria used by the hospital to determine whether a patient is presumptively eligible for hospital financial assistance. Hospitals are required to report their financial assistance statistics annually.

Future Nonprofit Legislation. Legislative proposals which could have an adverse effect on the Obligated Group include: (i) any changes in the taxation of nonprofit corporations or in the scope of their exemption from income, property or sales and use taxes; (ii) limitations on the amount or availability of tax-exempt financing for corporations recognized under the Code; (iii) regulatory limitations affecting the Obligated Group’s ability to undertake capital projects or develop new services; (iv) a requirement that nonprofit health care institutions pay real estate property tax and sales and use taxes on the same basis as for-profit entities; (v) mandating certain levels of free or substantially reduced care that must be provided to low income uninsured and underinsured populations; and (vi) placing ceilings on executive compensation of nonprofit corporations.

Legislative bodies have considered proposed legislation on the charity care standards that nonprofit, charitable hospitals must meet to maintain their federal income tax-exempt status under the Code and legislation mandating nonprofit, charitable hospitals to have an open-door policy toward Medicare and Medicaid patients as well as to offer, in a non-discriminatory manner, qualified charity care and community benefits. Excise tax penalties on nonprofit, charitable hospitals that violate these charity care and community benefit requirements could be imposed or their tax-exempt status under the Code could be revoked. The scope and effect of legislation, if any, which may be adopted at the federal or state levels with respect to charity care of nonprofit hospitals cannot be predicted. The effect on the nonprofit health care sector or the Obligated Group of any such legislation, if enacted, has not yet been determined.

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

Obligated Group Members, and, in turn, their ability to make payments under the Loan Agreement and the Series 2016C Obligation.

Patient Service Revenues

The Medicare Program. Medicare is the federal health insurance system under which hospitals and other providers are paid for services provided to eligible elderly and disabled persons. Medicare is administered by CMS, which delegates to the states the process for certifying hospitals to which CMS will make payment. In order to achieve and maintain Medicare certification, hospitals must meet CMS’s “Conditions of Participation” on an ongoing basis, as determined by each state in which they operate and/or The Joint Commission or other officially sanctioned 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, operations, personnel, billing, policies and services. Failure to comply with certification and accreditation requirements could result in a loss of eligibility to participate in the Medicare program. A loss of participation in the Medicare program could have a material negative effect on the financial condition and results of operations of one or more of the Obligated Group Members.

As the U.S. 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, including the ability of the federal government to continue to fund the Medicare program. The ACA institutes multiple mechanisms for reducing the costs of the Medicare program, including the following:

Market Basket Reductions. Generally, Medicare payment rates to hospitals for inpatient hospital services are adjusted annually based on a “market basket” of estimated cost increases. The ACA required automatic 0.25% reductions in the “market basket” for federal fiscal years 2010 and 2011, and calls for reductions in the annual “market basket” update amount ranging from 0.10% to 0.75 % each year through federal fiscal year 2019.

Market Productivity Adjustments. Beginning in federal fiscal year 2012 and thereafter, the ACA provides for “market basket” adjustments based on overall national economic productivity statistics calculated by the Bureau of Labor Statistics. This adjustment is anticipated to result in an approximately 1% additional annual reduction to the “market basket” update. The reduction in market basket updates and the productivity adjustments have had (and will continue to have) a disproportionately negative impact upon those providers that are relatively more dependent upon Medicare than other providers.

Value-Based Purchasing. Medicare inpatient payments to hospitals are now determined, in part, based on a program under which value-based incentive payments are made in a fiscal year to hospitals that meet certain performance standards during that fiscal year. The program is funded through a pool of money collected from all hospital providers, as a result of the reduction of hospital inpatient care payment by 1% in federal fiscal year 2013, progressing to 2% by federal fiscal year 2017. The reduction is set at 1.75% for federal fiscal year 2016. This reduction may be offset by incentive payments that commenced in federal fiscal year 2013 for hospitals that meet or exceed quality standards. In each federal fiscal year, the total amount collected from these reductions will be pooled and used to fund payments to reward hospitals that meet certain quality performance standards established by DHHS.

Hospital Acquired Conditions Penalty. Beginning in federal fiscal year 2015, Medicare inpatient payments to hospitals that are in the top quartile nationally for frequency of certain “hospital-acquired conditions” identified by CMS will be reduced by 1% of what would otherwise be payable to each hospital for the applicable federal fiscal year.

Readmission Rate Penalty. Medicare inpatient payments to those hospitals with excess readmissions compared to the national average for three patient conditions (acute myocardial infarction, pneumonia and heart failure) are being reduced based on the dollar value of that hospital’s percentage of excess preventable Medicare readmissions within 30 days of discharge, for certain medical conditions. The maximum penalty was 1% in fiscal year 2013, increasing to 3% in fiscal year 2015 and fiscal year 2016. In the fiscal year 2016, Hospital IPPS final rule, CMS expanded the pneumonia readmission measure to include hospitalized patients who have the following

diagnoses upon discharge: (i) aspiration pneumonia, and (ii) sepsis (excluding severe sepsis), and who have a secondary diagnosis of pneumonia.

Medicare and Medicaid Disproportionate Share Payments. The ACA provided that, beginning in federal fiscal year 2014, hospitals receiving supplemental Disproportionate Share (“DSH”) payments from Medicare (i.e., those hospitals that care for a disproportionate share of low-income Medicare beneficiaries) were slated to have their DSH payments reduced significantly. The loss of revenue caused by such reduction was expected by policy makers to be offset at least in part by new, additional payments based on the volume of uninsured and uncompensated care provided by affected hospitals, and by a higher proportion of covered patients as a result of the ACA.

On September 13, 2013, CMS issued a final rule confirming its Medicaid DSH reductions methodology, which accounted for statewide reductions in uninsured and uncompensated care, and reduced Medicaid DSH allotments to each state. Under this final rule, the federal share of Medicaid DSH payments was reduced by $500 million in fiscal year 2014 and $600 million in fiscal year 2015 (and additional amounts through 2020). However, BBA 2013 delayed the fiscal year 2014 Medicaid DSH cuts until fiscal year 2016, but increased the overall level of reductions and extended cuts through fiscal year 2023. The Protecting Access to Medicare Act of 2014 further delayed the Medicaid DSH payment reductions until federal fiscal year 2017, but increased the level of such reductions and extended them through federal fiscal year 2024. The Medicare Access and CHIP Reauthorization Act of 2015 further delays the DSH payment cuts until fiscal year 2018, while extending cuts through fiscal year 2025. There can be no assurance that either Medicare or Medicaid DSH funding will not be further decreased beyond projected reductions or eliminated entirely. See also “Disproportionate Share Payments” below.

Medicare Advantage. Hospitals also receive payments from health plans under the Medicare Advantage program. The ACA includes significant changes to federal payments to Medicare Advantage plans resulting in a transition to benchmark payments tied to the level of fee-for-service spending in the applicable county. Decreased federal payments to the Medicare Advantage plans, which have been delayed to date, could in turn affect the scope of coverage of these plans or cause plan sponsors to negotiate lower payments to providers.

Components of the 2008 federal stimulus package, the American Recovery and Reinvestment Act (“ARRA”), provide for Medicare incentive payments that began in 2011 to hospital providers meeting designated deadlines for the installation and use of electronic health information systems. For those hospital providers failing to meet a 2016 deadline, Medicare payments will be significantly reduced. For information concerning the Borrower’s electronic health records systems, see APPENDIX A –“MISCELLANEOUS – Information Systems”.

In addition to components of the ACA described above, ATRA also negatively affected hospital Medicare reimbursement. Specifically, ATRA reduced Medicare reimbursement for hospitals by $10.5 billion, in the form of a coding and documentation adjustment to inpatient reimbursement payment rates, to help offset the $30 billion cost of deferring a 27% reduction in Medicare physician payments that would otherwise have gone into effect as well as the cost of extending for one year several CMS payment policies that would otherwise have expired.

For the fiscal years ended December 31, 2015 and 2014, the System received approximately 48.6% and 48.6%, respectively, of its gross patient service revenue from services covered by Medicare and Medicare managed care programs. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Sources of Gross Patient Service Revenue.”

Hospital Inpatient Reimbursement. Hospitals are generally paid for inpatient services provided to Medicare beneficiaries based on established categories of treatments or conditions known as diagnosis related groups (“DRGs”). The actual cost of care, including capital costs, may be more or less than the DRG rate. DRG rates are subject to adjustment by CMS, including reductions mandated by the ACA and the BCA, and are subject to federal budget considerations. There is no guarantee that DRG rates, as they change from time to time, will cover actual costs of providing services to Medicare patients. For information regarding the impact of the ACA on payments to hospitals for inpatient services, see “The Medicare Program” above.

Effective October 1, 2013, CMS adopted a policy known as the Inpatient Hospital Prepayment Review “Probe & Educate” review process or the “Two-Midnight” rule. The “Two-Midnight” policy specified that hospital

stays spanning two or more midnights after the beneficiary is properly and formally admitted as an inpatient will be presumed to be “reasonable and necessary” for purposes of inpatient reimbursement. CMS adopted the policy due to growing concern with the overuse of the “observation” status at hospitals; CMS found that Medicare beneficiaries were spending extended periods of time in observation units without being admitted as inpatients. With some exceptions, stays not expected to extend past two midnights should not be admitted and instead be billed as outpatient. In April 2015, CMS announced it would delay enforcement of the “Two-Midnight” rule until September 30, 2015 and in August 2015, CMS announced it would again delay enforcement of the “Two-Midnight” rule until the end of 2015. Effective October 1, 2015, responsibility for enforcement of the “Two-Midnight” rule shifted from Medicare administrative contractors to quality improvement organizations (“QIO”), and recovery audit contractors will only conduct reviews for providers that have been referred by the related QIO. The Outpatient PPS Final Rule, issued in November 2015 and effective January 1, 2016, revised the Two-Midnight Rule to allow an exception for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not satisfy the two-midnight benchmark if documentation in the medical records supports that the patient required inpatient care. The “Two- Midnight” rule has had an adverse financial impact for hospitals. CMS has announced that it will not continue to impose an inpatient payment cut to hospitals under the “Two-Midnight” rule starting in 2017 following ongoing industry criticism and a legal challenge. In the 2017 IPPS proposed rule, CMS stated its intent to make a onetime payment increase to hospitals to offset cuts in reimbursement associated with the Two-Midnight Rule in fiscal years 2014, 2015 and 2016. If the rule is implemented as proposed, hospitals would see a temporary increase of 0.6% in fiscal 2017.

Hospital Outpatient Reimbursement. Hospitals are generally paid for outpatient services provided to Medicare beneficiaries under “Outpatient PPS,” which is based on established categories of treatments or conditions known as ambulatory payment classifications (“APC”). The actual cost of care, including capital costs, may be more or less than the reimbursements. The ACA provides for a reduction to the market basket used to determine annual Outpatient PPS increases by an adjustment factor for 2010 through 2019 and by a productivity adjustment for 2012 and subsequent years. Application of the productivity adjustment can result in a market basket increase of less than zero, such that payments in a current year may be less than the prior year. There is no guarantee that APC rates, as they change from time to time, will cover actual costs of providing services to Medicare patients.

Provider-Based Off-Campus Hospital Outpatient Departments. Section 603 of the BBA 2015 reduces Medicare payments to newly enrolled provider-based, off-campus hospital outpatient departments (“HOPDs”) by excluding such facilities from payment under the OPPS beginning January 1, 2017. While this change does not affect already existing and enrolled provider-based, off-campus HOPDs that were billing for services prior to November 2, 2015, newly enrolled provider-based, off-campus HOPDs will receive lower payments than in previous years for providing the same services.

Skilled Nursing Care. Health care providers, including the Obligated Group Members, may participate in the Medicare program subject to certain conditions of participation and acceptance of a provider agreement from the Secretary of the DHHS. Only covered services, upon the satisfaction of certain criteria, are eligible for Medicare reimbursement. Medicare Part A reimburses for certain post-hospital inpatient skilled nursing and rehabilitation care for up to 100 days during the same spell of illness. For skilled nursing facilities (“SNFs”), the federal government has implemented a Prospective Payment System (“PPS”) for Medicare reimbursement, which utilizes prospective, case-mix adjusted per diem rates applicable to all covered SNF services. Reimbursement under PPS also incorporates adjustments to account for resident specific case-mix using the Resource Utilization Groups (“RUGs”) system. SNF PPS payment rates are adjusted annually based on the skilled nursing facility “market basket” index, or the cost of providing SNF services. Future actions by the federal government relative to limiting or reducing the total amount of funds available under Medicare, or otherwise restructuring Medicare, may decrease or eliminate the amount of reimbursement available to the Obligated Group. No assurance can be given as to the timing, nature or extent of any further changes.

Other Medicare Service Payments. Medicare payment for skilled nursing services, psychiatric services, inpatient rehabilitation services, general outpatient services and home health services are based on regulatory formulas or predetermined rates. There is no guarantee that these rates, as they may change from time to time, will be adequate to cover the actual cost of providing these services to Medicare patients.

Reimbursement of Hospital Capital Costs. Hospital capital costs (including depreciation and interest) apportioned to Medicare patient use are paid by Medicare on the basis of a standard federal rate (based upon average national costs of capital), subject to limited adjustments specific to the hospital. There can be no assurance that future capital-related payments will be sufficient to cover the actual capital-related costs of the Obligated Group Members’ facilities applicable to Medicare patient stays or will provide flexibility for hospitals to meet changing capital needs.

Medical Education Payments. Medicare currently pays for a portion of the costs of medical education at hospitals that have teaching programs. These payments are vulnerable to reduction or elimination. The direct and indirect medical education reimbursement programs have repeatedly emerged as targets in the legislative efforts to reduce the federal budget deficit. Legislation has capped the number of residents recognized by Medicare for reimbursement purposes and has limited reimbursement for both direct and indirect medical education costs.

Medicare Payments for Physician Services. The sustainable growth rate (“SGR”) formula, a limit on the growth of Medicare payments for physician services, was enacted in 1997 and linked to changes in the U.S. Gross Domestic Product over a ten-year period. Each year since 2003, Congress provided temporary relief from scheduled “negative” updates that would have reduced physician payments. In April of 2015, Congress passed and the President signed the so-called “doc fix” in the form of the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). This law replaces the SGR formula with statutorily prescribed physician payment updates and provisions. As a result, payments under the Medicare Physician Fee Schedule for services furnished on or after April 1, 2015 were not cut by 21%. Instead, current payment rates will increase annually by 0.5% through 2019. Thereafter, payment rates will be frozen at 2019 levels through 2025.

On April 27, 2016, CMS released a Notice of Proposed Rulemaking to implement portions of MACRA. This proposed rule structures Medicare physician payment incentives based on compliance with two types of programs: the Merit-Based Incentive Payment System (“MIPS”) and the Advanced Alternative Payment Models (“APMs”). CMS proposes to begin measuring data under these programs in January 2017 prior to anticipated payment disbursement in 2019. Following a data analysis, physicians and other clinicians may receive positive, negative or neutral adjustment factors under the MIPS program, which will include potential increases of 4% in 2019, rising to 9% in 2022. Under the APM structure, qualifying physicians and clinicians may receive a 5% bonus on Medicare payments. While the immediate payment cuts associated with the SGR formula have been eliminated, it is possible that future legislative action will be taken, or modifications made to the MACRA proposed rule, that would once again trigger physician payment reductions.

Medicare Bad Debt Reimbursement. Under Medicare, the costs attributable to the deductible and coinsurance amounts that remain unpaid by a Medicare beneficiary can be added to the Medicare share of allowable costs as cost reports are filed. Hospitals generally receive interim pass-through payments during the cost report year that are determined by the Medicare Administrative Contractor (“MAC”) from the prior cost report filing. Bad debts must meet the following criteria to be allowable:

• the debt must be related to covered services and derived from deductible and coinsurance amounts; • the provider must be able to establish that reasonable collection efforts were made; • the debt was actually uncollectible when claimed as worthless; and • sound business judgment established that there was no likelihood of recovery at any time in the future.

The amounts uncollectible from specific beneficiaries are to be charged off as bad debts in the accounting period in which the accounts are deemed to be uncollectible. In some cases, an amount previously written off as a bad debt and allocated to the program may be recovered in a subsequent accounting period. In these cases, the recoveries must be used to reduce the cost of beneficiary services for the period in which the collection is made. In determining reasonable costs for hospitals, the amount of bad debts otherwise treated as allowable costs is reduced by 35%. Amounts incurred by a hospital as reimbursement for bad debts are subject to audit and recoupment by the MAC. Bad debt reimbursement has been a focus of MAC audit/recoupment efforts in the past.

Recovery Audit Contractor Program. CMS has implemented a Recovery Audit Contractor (“RAC”) program on a nationwide basis pursuant to which CMS contracts with private contractors to conduct pre- and post- payment reviews to detect and correct improper payments in the fee-for-service Medicare program. The ACA expands the RAC program’s scope to include managed Medicare plans and Medicaid claims. CMS also employs Medicaid Integrity Contractors (“MICs”) to perform post-payment audits of Medicaid claims and identify improper payments. These programs tend to result in retroactively reduced payment and higher administration costs to hospitals.

Medicaid Program. Medicaid is a program of medical assistance, funded jointly by the federal government and the states, for certain low income individuals and their dependents. Under Medicaid, the federal government provides limited funding to states that have medical assistance programs that meet federal standards. Attempts to balance or reduce federal and state budgets will likely negatively impact Medicaid and other state health care program spending. Federal and state budget proposals may contemplate significant cuts in Medicaid spending that would negatively impact provider reimbursement.

The ACA makes changes to Medicaid funding and substantially increases the potential number of Medicaid beneficiaries. To fund this expansion, the ACA provides that the federal government will fund 100% of the costs of this expansion from 2014 – 2016, decreasing to 90% of the costs of this expansion in 2020 and thereafter. In June 2012, the U.S. Supreme Court held that the federal government cannot withhold existing federal funds for states that refuse to expand Medicaid as required by the ACA. While management of the Borrower cannot predict the effect of these changes to the Medicaid program on the operations, results from operations or financial condition of the Obligated Group, historically Medicaid has reimbursed at rates below the cost of care. Therefore, increases in the overall proportion of Medicaid patients poses a financial risk to the Obligated Group. It is uncertain to what extent this risk may be mitigated if the increased Medicaid utilization replaces previously uncompensated patients. Certain outcomes, such as a state refusing to expand Medicaid coverage, which brings more patients to most hospital providers, while Medicaid payment cuts are implemented, could put providers at greater financial risk. Illinois has chosen to expand Medicaid. See “Illinois Medicaid Program” below.

For the fiscal years ended December 31, 2015 and 2014, the System received approximately 20.2% and 20.0%, respectively, of its gross patient service revenues from services covered by state Medicaid and Medicaid managed care programs. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Sources of Gross Patient Service Revenue.”

Illinois Medicaid Program. In Illinois, Medicaid is administered by the Illinois Department of Healthcare and Family Services (“IDHFS”). The State of Illinois continues to be adversely affected by fiscal considerations that affect the budget for programs such as Medicaid. Historically, federal payments and the amount appropriated by the Illinois General Assembly for payment of Medicaid claims have not been sufficient to reimburse hospitals for their actual costs in providing services to Medicaid patients. Also, the state has routinely failed to pay Medicaid claims on a timely basis. In June 2012, Illinois adopted the Save Medicaid Access and Resources Together (“SMART”) Act that includes approximately $1.6 billion in cuts to the state’s Medicaid funding, representing approximately $1.36 billion in program reductions and $240 million in reimbursement rate cuts. At the same time, Illinois enacted Public Act 97-0691, which provides that the maximum amounts of unpaid Medicaid Assistance bills received and recorded by IDHFS on or before June 30 of a particular fiscal year that may be paid by IDHFS from future fiscal year Medicaid Assistance appropriations is $700 million for fiscal year 2013 and $100 million for fiscal year 2014 and each fiscal year thereafter.

The reduction in Medicaid services and programs, as well as any failure by the State of Illinois to pay Medicaid claims on a timely basis, may have an adverse effect on the cash flow and financial condition of the Obligated Group. Illinois is one of the states that has opted to receive additional federal funding for expansion of its Medicaid program to provide coverage to individuals who may not now be eligible. The expanded coverage will result in some additional revenue to hospitals in Illinois, but it is not anticipated that this revenue will be so significant as to significantly reduce the burden of providing care to Medicaid recipients in Illinois.

In July 2013, Illinois enacted the Expanded Medicaid Act, expanding Medicaid health coverage to adults under the age of 65 with incomes under 138% of the federal poverty level. Approximately 350,000 adults are

expected to obtain health coverage under the Medicaid expansion. The federal government will pay 100% of the cost of the newly eligible Medicaid recipients in 2014, 2015 and 2016, with the matching level phasing down (beginning in 2017, by about 2% per year) to 90% by 2020 and subsequent years.

Also in July of 2013, the Illinois Medicaid program provided additional payments to what are determined to be “Safety Net Hospitals.” These hospitals are located in areas that have a high number of residents that live at or below the poverty level and/or that provide care to a high percentage of Medicaid recipients. The Safety Net Hospitals’ payment program has been in place for some time, and its continuance in future years may be vulnerable in light of the State of Illinois' fiscal problems.

In May 2014, Illinois enacted the Omnibus Medicaid Bill. Among its provisions, this law authorized a new hospital payment system, extended both the existing Medicaid assessment system and enhanced Medicaid assessment system to July 1, 2018 (both of these assessment systems were scheduled to expire on December 31, 2014), and provided that IDHFS request federal funding under the Affordable Care Act for newly eligible Medicaid patients. The new hospital payment system became effective July 1, 2014. The goal of the new payment system is to better align the payment for services rendered to Medicaid patients with the hospitals providing the services. Under the new hospital payment system, rates paid will be based on more current utilization data with a greater emphasis on accurate coding of claims. Quarterly fixed payments are being replaced with increased payments on a per claim basis. Outpatient rates are also being increased. IDHFS requested, and on January 9, 2015 CMS approved, federal funding for hospitals serving newly eligible Medicaid recipients under the Affordable Care Act, retroactive to March 1, 2014. IDHFS estimates that this will provide approximately $400 million of new annual federal funding to be distributed to hospitals across Illinois. The distribution of this new funding is designed to mirror the two current hospital assessment systems’ distributions.

Skilled nursing home services for Illinois Medicaid beneficiaries are reimbursed by IDHFS based on a prospective payment system that sets rates for each facility for future periods with no retroactive reconciliation of reimbursement amounts paid to actual expenditures during the rate period. Components of a facility’s rate include: (a) support service costs — laundry, food, housekeeping, utility, maintenance, insurance, dietary, general office services, and administrative expenses — limited to actual allowable costs, of that facility, up to specified ceilings and allowing a profit for facilities that operate below the ceilings; (b) nursing and direct care costs — a case mix reimbursement system is used to reimburse nursing and program costs based on the use of minimum data set assessments on each resident; (c) capital costs — depreciation, rent, interest and property taxes —per diem rates are determined through a blending of the uniform building value and the building specific historical cost per bed, subject to certain limitations. Property taxes are reimbursed as part of the capital costs but are determined separately and are not included in the uniform building value.

Illinois imposes a franchise permit fee and a license fee (“Illinois Bed Taxes”) on skilled nursing facility beds. Under Section 5B-2 of the Illinois Public Aid Code, 305 ILCS 5/5B-2, every skilled nursing facility must pay a monthly assessment of $6.07 for each occupied nursing bed day. In addition, under Section 5E-10 of the Public Aid Code, every nursing facility must pay a quarterly license fee of $1.50 for each licensed nursing bed day. The revenue generated from the Illinois Bed Taxes is utilized to draw down Medicaid federal matching funds for nursing home services. Accordingly, the Illinois Bed Taxes result in a shift of funds from nursing homes with a relatively lower amount of Medicaid reimbursement to others with a higher amount.

Medicare and Medicaid Audits. Hospitals that participate in the Medicare and Medicaid programs are subject from time to time to audits and other investigations relating to various aspects of their operations and billing practices, as well as to retroactive audit adjustments with respect to reimbursements claimed under these programs. Medicare and Medicaid regulations also provide for withholding reimbursement payments in certain circumstances. New billing rules and reporting requirements for which there is no clear guidance from CMS or state Medicaid agencies could result in claims submissions being considered inaccurate. The penalties for violations may include an obligation to refund money to the Medicare or Medicaid program, payment of criminal or civil fines and, for serious or repeated violations, exclusion from participation in federal health programs.

Authorized by the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), the Medicare Integrity Program (“MIP”) was established to deter fraud and abuse in the Medicare program. Funded separately from the general administrative contractor program, the MIP allows CMS to enter into contracts with

outside entities and insure the “integrity” of the Medicare program. These entities, include but are not limited to, Medicare zone program integrity contractors (“ZPICs”), formerly known as program safeguard contractors, are contracted by CMS to review claims and medical charts, both on a prepayment and post-payment basis, conduct cost report audits and identify cases of suspected fraud. ZPICs have the authority to deny and recover payments as well as to refer cases to the Office of Inspector General (“OIG”). ZPICs have the ability to compile claims data from multiple sources in order to analyze the complete claims histories of beneficiaries for inconsistencies.

The federal Medicaid Integrity Program was created by the Deficit Reduction Act in 2005. The Medicaid Integrity Program was the first federal program established to combat fraud and abuse in state Medicaid programs. Congress determined a federal program was necessary due to the substantial variations in state Medicaid enforcement efforts. The Medicaid Integrity Program’s enforcement efforts support existing state Medicaid Fraud Control Units. Federal Medicaid Integrity Contractors (“MICs”) are classified into Review MICs, Audit MICs and Educational MICs. Review MICs perform review audits generally to determine trends and patterns of aberrant Medicaid billing practices through data mining. Audit MICs perform post-payment reviews of individual providers through desk or field audits. The Educational MICs are responsible for developing and carrying out a variety of education activities to increase and improve Medicaid enforcement efforts by state government. Once a Medicaid overpayment is identified, the state has either 60 days, or one year if there is fraud, to repay the state’s share of federal financial participation to CMS. The state is then required to collect from the provider. If the provider wins on an appeal of the identified overpayment, the state is not permitted to reclaim its federal portion, so there is very little incentive for the states to settle such cases with the provider.

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 of the FCA. It also added provisions respecting the timing of the obligation to identify, report and reimburse overpayments.

In February 2016, CMS issued a final rule addressing the requirement to report and return overpayments, with an emphasis for providers on developing robust compliance programs. In the final rule, CMS imposes a new “reasonable diligence” standard for identifying overpayments that must be reported and returned within 60 days, CMS clarifies that the 60-day timeframe for report and return begins when either reasonable diligence is completed (including determination of the overpayment amount) or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment. In the final rule, CMS instructed that 6 years is the appropriate lookback period for identifying historical overpayments. The final rule also imposes an alternative duty to proactively determine whether overpayments have been made. The effect of these changes on existing programs and systems of the Obligated Group Members cannot be predicted.

Disproportionate Share Payments. The federal Medicare and the Illinois Medicaid programs each provides additional payment for hospitals that serve a disproportionate share of certain low income patients. Certain hospitals in the Obligated Group Members qualify as disproportionate share hospitals and are expected to qualify from time to time in future years, but there can be no assurance that such Obligated Group Members will qualify for disproportionate share status in the future. The ACA substantially reduces Medicare and Medicaid payments to disproportionate share hospitals and disproportionate share payments are frequently the object of proposed Medicare and Medicaid payment reductions. There can be no assurance that payments to disproportionate share hospitals will not be further decreased or eliminated in the future or that any of the Obligated Group’s facilities will continue to qualify for disproportionate share status. See “The Medicare Program” above.

State Children’s Health Insurance Program. The State Children’s Health Insurance Program (“SCHIP”) is a federally funded insurance program for children whose families are financially ineligible for Medicaid, but cannot afford commercial health insurance. CMS administers SCHIP, but each state creates its own program based upon minimum federal guidelines. While generally considered to be beneficial for both patients and providers by reducing the number of uninsured children, it is difficult to assess the fiscal impact of SCHIP on the payments to the Obligated Group. SCHIP insurance is provided through private health plans contracting with the state. Each state must periodically submit its SCHIP plan to CMS for review to determine if it meets the federal requirements. If it

does not meet the federal requirements, a state can lose its federal funding for the program. Any such loss of funding or federal or state budget cuts to the program could have an adverse effect on provider revenues.

The ACA temporarily increased reimbursement for primary care visits for Medicaid enrolled individuals, funded 100% by the federal government in 2013 and 2014. The federal funding for the increase expired at the end of 2014. Under the Medicare Access and CHIP Reauthorization Act of 2015, federal funding for SCHIP was extended through September 30, 2017. When such funding expires there can be no assurances that funding for an increase will be reestablished at either a state or federal level, or that professional and /or facility reimbursement rates will not subsequently be reduced in efforts to manage costs.

Illinois Budget. The State of Illinois continues to be adversely affected by fiscal considerations that affect its budget for programs such as Medicaid. In part to address a $1.6 billion deficit in its 2015 fiscal year budget (July 1, 2014 through June 30, 2015), Illinois legislative leaders and the governor reached a deal in March 2015 to address the fiscal year 2015 deficit. The agreed legislation provided for $1.3 billion in fund sweeps and across the board funding cuts of 2.25% to address the $1.6 billion budget shortfall, and projected savings of $160 million from Medicaid.

On February 18, 2015 Governor Rauner presented his State of Illinois fiscal year 2016 budget proposal; however, the Legislature and the Governor were unable to come to terms on a budget for the 2016 fiscal year. Based on legal challenges, on July 23, 2015, the United States District Court for the Northern District of Illinois ordered the State of Illinois to make Medical Assistance payments for claims related to Cook County Medicaid recipients incurred on and after July 1, 2015. On August 5, 2015, the Illinois Attorney General’s Office advised the court that the State of Illinois had decided to pay all Medicaid providers statewide during the budget impasse for services provided to all Medicaid beneficiaries, including children and adults.

Under the Governor’s fiscal 2016 budget proposal, the Medicaid portion of the budget would have been reduced by approximately $1.5 billion. The proposed budget also called for a reduction in the worker’s compensation fee schedule. In response to the Governor’s proposed budget, the Illinois House and Senate passed a fiscal year 2016 budget bill that in terms of Medicaid funding would have increased the provider assessment tax to Illinois hospitals, the same approach used to address the fiscal 2015 budget shortfall, but would have avoided significant Medicaid program reductions including rate cuts, reductions to the hospital assessment program, and no reductions in the Medicaid transition supplemental payment pool as included in the Governor’s budget proposal. The Governor vetoed the budget bills except for provisions related to school funding, and the State remained without a budget through the end of the 2016 fiscal year on June 30, 2016.

On June 30, 2016, the Illinois Legislature passed and the Governor signed a 6-month stopgap budget for fiscal year 2017. The failure to agree to a final budget for fiscal year 2017 may have an adverse impact on the Obligated Group. The budget challenges in the State of Illinois may result in payment delays for hospitals and could have a material adverse impact on hospitals, skilled nursing facilities and other health care providers including the Obligated Group Members.

Financial challenges facing states, from time to time, may negatively affect health care organizations in a number of ways. States, including Illinois, may enact legislation designed to reduce their Medicaid expenditures through eligibility restrictions, (causing a greater number of indigent, uninsured or underinsured patients) and reductions in Medicaid payment rates. The ACA provides for significant expansions to the Medicaid program. While federal funding is available to facilitate Medicaid program expansion, this funding is expected to be temporary. The Medicaid program expansion and the expected longer-term loss of federal financial support to offset longer-term expansion-related costs may require the states to reduce provider reimbursement rates further. The BCA may shift further funding responsibility from the federal government to state governments, exacerbating any states’ financial challenges. See “BONDHOLDERS’ RISKS – Significant Risk Areas Summarized – General Economic Conditions, Bad Debt, Indigent Care and Investment Performance” and “– Business Relationships and Other Business Matters–Indigent Care” herein. Illinois Hospital Assessment Program. In 2008, Illinois enacted a law providing for a hospital assessment program (the “Hospital Assessment Program”) intended to qualify for federal matching funds under the Illinois Medicaid program, with a sunset provision effective January 1, 2015, as described below. Under the Hospital Assessment Program, which was approved by CMS, each hospital is assessed an amount based on that

hospital's adjusted gross hospital revenue. Such assessments are to be used to provide additional reimbursement from the federal government for Medicaid inpatient and outpatient services. In June 2014, Illinois enacted a law extending the sunset provision of the 2008 Hospital Assessment Program to July 1, 2018. There can be no assurance that the State of Illinois will extend or that CMS will approve an extension of the 2008 Hospital Assessment Program past its current sunset date. In June 2012, Illinois adopted legislation providing for an enhanced hospital assessment program from the beginning of fiscal year 2013 through the end of the 2014 calendar year, which was anticipated to generate a total assessment of approximately $290 million per year. Of this amount, $240 million was to be used to attract federal Medicaid matching funds, resulting in total new Medicaid payments to hospitals of about $480 million, and representing a net improvement of approximately $190 million. Payments were to be made according to formulae to preserve and improve access to perinatal services, complex emergent services, outpatient services, hospital emergency and psychiatric services, outpatient services at specialty hospitals, salaried physician services in high volume Medicaid hospitals, and to maintain access to hospitals that serve a high percentage of patients who are dually eligible for Medicare and Medicaid, hospitals that provide high volumes of inpatient services to Medicaid patients, and hospitals that have a disproportionate share of their outpatient volume within the emergency room setting. Assessments would not be due and any monies paid would be refunded if such hospital access improvement payments were not eligible for federal Medicaid matching funds. On June 30, 2016, Illinois enacted legislation to substantially increase ACA Access Payments to Illinois hospitals. Such payments are designed to ensure that the Medicaid rate for hospital services for adults covered by the ACA equals the rate paid on behalf of “traditional” Medicaid beneficiaries. Subject to approval by CMS, these payments are federally-funded until 2017, at which time the Illinois hospital assessment will be increased to cover Illinois’ share of these Access Payments, which is 5% in 2017 and 6% in 2018. The amount of ACA Access Payments to be received by the System and the timing of receipt thereof, have not yet been determined. The use of provider assessments has been criticized in Congress and by various federal agencies and may be restricted or eliminated in the future. Health Plans, Managed Care and Other Commercial Insurance Arrangements. 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 health care using managed care options. Payments to health care organizations from managed care plans typically are lower than those received from traditional indemnity or commercial insurers. Today hospitals and health systems receive a significant portion of their non-governmental payor revenue from managed care plans. Health care organizations 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 health care organizations 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, or a fixed rate per hospital stay, which, in each case, usually is discounted from the usual and customary charges for the care provided. As a result, the discounts offered to HMOs and PPOs could, in some cases, result in payment to a provider that is less than its actual cost. Additionally, the volume of patients directed to a provider may vary significantly from projections, and changes in the utilization may be dramatic and unexpected, thus jeopardizing the provider’s ability to manage this component of revenue and cost. Some HMOs employ a “capitation” payment method under which health care organizations are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” or otherwise directed to receive care from a particular health care organization. The health care organization may assume financial risk for the cost and scope of institutional care given. If payment is insufficient to meet the health care organization’s actual costs of care, or if utilization by such enrollees materially exceeds projections, the financial condition of the health care organization could erode rapidly and significantly. In addition to this standard managed care risk sharing approach, private health insurance companies are increasingly adopting various additional risk sharing/cost containing measures, sometimes similar to those introduced by government payors. Providers may expect health care cost containment and its associated risk sharing to continue to increase in the coming years amongst all payors.

Often, managed care contracts are enforceable for a stated term, regardless of health care organizations losses, and may require health care organizations to care for enrollees for a certain time period, regardless of whether the payor is able to pay the health care organization. Health care organizations from time to time have disputes with HMOs, PPOs and other managed care payors concerning payment and contract interpretation issues. Such disputes may result in mediation, arbitration or litigation.

There is no assurance that the Obligated Group Members will maintain particular insurance contracts, existing rates or obtain contracts from other third party payors in the future. Failure to maintain contracts could have the effect of reducing a health care organization’s market share and net patient services revenues. Conversely, participation may result in lower net income if participating health care organizations are unable to adequately contain their costs. In part to reduce costs, health plans are increasingly implementing, and offering to purchasing employers, tiered provider networks, which involve classification of a plan’s network providers into different tiers based on care quality and cost. With tiered benefit designs, plan enrollees are generally encouraged, through incentives or reductions in copayments or deductibles, to seek care from providers in the top tier. Classification of a hospital in a non-preferred or lower tier by a significant payor may result in a material loss of volume. The new demands of dominant health plans and other shifts in the managed care industry may also reduce patient volume and revenue. Thus, managed care poses one of the most significant business risks (and opportunities) that health care organizations face.

Newer Payment Models. As the healthcare industry continues to undergo structural changes, health systems are facing newer payment and reimbursement models, which are gradually shifting away from fee for service reimbursement in favor of value-based care. With this trend, health systems are taking on greater financial risk associated with payment for quality of care rather than volume. Thus, risk arrangements are becoming more prevalent in today’s market, with new risk-sharing and value-based payment models that correspond with the ACA’s various reform mandates, including through commercial ACOs and “narrow network” plans.

Commercial Accountable Care Organizations. The past few years have shown an influx in ACOs, both commercial and governmental, where providers and suppliers work together and are responsible for improving the health of a specific patient population while reducing the rate of health care spending. Commercial ACOs are intended to create incentives for health care providers to work together to treat an individual patient population. As these payment models are relatively new, it is still too early to tell to what extent providers participating in the ACOs will recover the costs involved in creating such programs, much less achieve shared savings and reward. For a further discussion of ACOs, see “BONDHOLDERS’ RISKS – Significant Risk Areas Summarized – Accountable Care Organizations,” below.

Narrow Networks. One of the major components of the ACA was to create insurance marketplaces (“Exchanges”), or alternative distribution channels for individuals and small businesses to obtain insurance coverage. Exchanges present an opportunity for previously uninsured individuals to obtain coverage at lower price points. Partly in response to new marketplace opportunities, many health insurance plans, including those offered in the ACA’s Exchanges, are narrowing their provider networks in an effort to contain overall costs. To address consumer concerns regarding growing premiums costs, many payors have begun offering “narrow network” insurance plans which provide consumers with lower premium payments in exchange for access to a more restricted network of hospitals and physicians. Narrow networks tightly maintain costs, and incentivize enrollees to receive care only from in-network providers, with significantly higher deductibles and copays applied to out-of-network providers. As more consumers enter into narrow network plans, health systems face the challenge of being included in the right networks, sometimes even at a lower cost, so as to continue providing needed care to key patient populations.

Payor Consolidation and Other Market Variables. In addition, the current trend of consolidation in the health insurance industry is likely to increase the leverage of commercial insurers when negotiating rates with health care providers. Large health insurers that assume dominant positions in local markets threaten to increase health insurer concentration, reduce competition and decrease choice. If any of the Obligated Group Members were to terminate its agreement with any of the major managed care payors or not agree to terms proposed by such payors, it could have a significant material adverse impact on the financial condition of the Obligated Group. In Illinois, Blue Cross maintains a dominant share of the commercial insurance market and thus has significant market power. United HealthCare also has a large presence in Illinois. The inability of Obligated Group Members to obtain and

maintain competitive agreements with such major commercial payors could have a material adverse effect on the revenues of the Obligated Group.

After implementation of the ACA, there is a continuing concern that substantial numbers of employers may elect to discontinue employer-funded medical care for employees eligible for federal assistance in securing private insurance, and the employees could then choose health insurance under the health insurance exchanges. Individuals choosing their own coverage may become highly price sensitive, which could increase the number of enrollees in HMO plans and increase the use of capitation, making price negotiations with HMO and other insurance plans more difficult.

Similarly, PPIC, described in more detail below, sells insurance contracts under which it pays for the healthcare services of its enrollees. PPIC assumes a financial risk for the cost and scope of care given to its enrollees. If PPIC’s payments to providers consistently and significantly exceed its premium revenue, the financial condition of PPIC could erode rapidly and significantly. The ACA could limit PPIC’s ability to adjust premiums fast enough to respond to rising healthcare costs causing PPIC’s margins to erode.

For information concerning the managed care payments received by the Obligated Group, see APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Financial and Operating Information – Sources of Gross Patient Service Revenue.”

Certain Risks Relating to Senior Care Facilities

Certain of the Obligated Group’s facilities are long-term care and senior residential facilities and home health agencies. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Presence Senior Care Ministries” for a description of such facilities. The following is a summary of certain risks relating to these senior care facilities.

Present and Prospective Federal and State Regulation for Skilled Nursing, Assisted Living and Long- Term Care Facilities. The System includes skilled nursing, assisted living and long-term care facilities, all of which are subject to a variety of state and federal licensing and other regulations and requirements.

Skilled nursing care facilities are subject to numerous licensing, certification, accreditation and other governmental requirements. These include, but are not limited to, requirements relating to Medicare and Medicaid participation and payment, requirements relating to state licensing agencies, private payors and accreditation organizations and certificate of need approval by state agencies of certain capital expenditures. Sheltered care facilities, assisted living facilities, lifecare facilities and home health agencies are also subject to licensing requirements. Renewal and continuance of certain of these licenses, certifications, approvals and accreditations are based upon inspections, surveys, audits, investigations or other review, some of which may require or include affirmative action or response by the Obligated Group Members. An adverse determination could result in a loss, fine or reduction in the scope of licensure, certification or accreditation, could affect the ability to undertake certain expenditures or could reduce the payment received or require the repayment of the amounts previously remitted.

The Illinois Department of Public Health (“IDPH”) licenses, regulates and inspects all “assisted living establishments” within the State. The Assisted Living and Shared Housing Act establishes a licensing and regulatory framework for “assisted living establishments” in Illinois. Illinois assisted living facilities tend to provide residential living accommodations, communal meals and concierge services. In addition, assisted living facilities usually offer or arrange for some personal care assistance, including bathing, dressing and ambulating.

IDPH licenses, regulates and inspects at least annually all long-term care facilities within the State. IDPH also assists CMS with certifying these facilities for participation in federal payment reimbursement programs. IDPH’s Bureau of Long-term Care is responsible for ensuring that nursing homes comply with the provisions of the Illinois Nursing Home Care Act. In addition, under a cooperative agreement with CMS, IDPH conducts certification surveys to ensure facilities receiving Medicaid or Medicare money for resident payment abide by applicable federal regulations. Nursing homes in Illinois are licensed, regulated, inspected and certified by a number of public and private agencies at the state and federal levels, including IDPH and CMS. Failure to obtain and maintain licensure

with IDPH would have a material adverse effect upon the Obligated Group’s ability to operate its Illinois long-term care facilities.

Failure to Achieve and Maintain Occupancy. The economic sustainability of the senior and nursing care facilities operated by the Obligated Group depends in large part upon the ability of the Obligated Group Members to maintain substantial occupancy and turnover of residents of its senior care facilities throughout the term of the Series 2016C Bonds. This depends to some extent on factors outside management’s control, such as the residents’ financial conditions and investment environments. The inability to maintain high census level could adversely affect the financial results of such facilities.

Utilization Demand. Several factors could, if implemented, affect demand for services of the senior and nursing care facilities of the Obligated Group, including: (i) efforts by insurers and governmental agencies to reduce utilization of assisted living facilities or other long-term care facilities by such means as preventive medicine and home health care programs; (ii) advances in scientific and medical technology; (iii) a decline in the population, a change in the age composition of the population or a decline in the economic conditions of the service areas of the senior and nursing care facilities; and (iv) increased or more effective competition from independent living apartments, life care facilities, assisted living facilities and other long-term care facilities located in the service areas of the Obligated Group’s senior care facilities.

Competition. The Obligated Group Members provide services in areas where other competitive senior and nursing care facilities exist and may face additional competition in the future as a result of the construction or renovation of competing facilities in the primary or secondary market area of the Obligated Group Members. There may also arise in the future competition from other senior living and long-term care facilities, some of which may offer similar facilities, but not necessarily similar services, at lower prices.

Medicare “36-Month Rule” for Home Health Agencies. Effective January 1, 2011, CMS imposed a “36-month rule” governing ownership changes of home health agencies. If a Medicare-certified home health agency experiences a change in its majority ownership due to a sale within 36 months of either (i) initial Medicare enrollment, or (ii) its most recent change of a majority of its ownership, the home health agency’s Medicare provider agreement does not transfer to the new owner. Under such circumstances, the new owner must enroll and obtain a state survey or accreditation. If the Obligated Group desired to sell one of its home health agencies, this “36-month rule” could impact the intended transaction.

International Classification of Diseases, 10th Revision Coding System

On October 1, 2015, the International Classification of Diseases, 10th Revision coding system (“ICD-10”) diagnostic code set went into effect. At this time, it is too early to predict whether health care organizations will experience negative effects due to ICD-10 implementation. ICD-10 provides a common approach to the classification of diseases and other health problems, allowing the United States to align with other nations to better share medical information, diagnosis, and treatment codes. ICD-10 is not without risk as physicians and other staff had to be retrained, processes redesigned, and computer applications modified as the current available codes and digit size dramatically increased. Additionally, there is a potential for temporary coding and payment backlog, as well as potential increases in claims errors. There is a potential for revenue stream disruption for health care organizations and the magnitude of the transition within the industry may add pressure to health care organizations cash flows. Health care organizations continue to rely on outside software vendors, clearinghouses and third-party billing services to assist with the implementation of, and billing under, ICD-10. For the first 12 months after the ICD-10 implementation, Medicare review contractors have not been denying claims billed where the issue solely is related to the specificity of the ICD-10 diagnosis code. This limited “grace period” is set to expire on October 1, 2016. After this date, ICD-10 coding errors may cause claims denials and impact the cash flow and revenue of the Obligated Group Members.

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 that may 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 Members. 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.

Enforcement Affecting Clinical 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 OIG, as recently as its 2015 “Work Plan,” has addressed its intent to monitor clinical trials, including through several enforcement initiatives related to reimbursement for experimental drugs and devices (including kickback concerns). The OIG also has issued compliance program guidance directed at recipients of extramural research awards from the National Institutes of Health and other agencies of the U.S. Public Health Service. Over the past several years, there have been a number of 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 Program for care provided to patients enrolled in clinical trials that is not eligible for Medicare reimbursement can subject the Obligated Group Members to sanctions as well as repayment obligations.

Regulatory Environment

“Fraud” and “False Claims.” 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 others 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 submitting inaccurate billing information, billing for services deemed to be medically unnecessary, or billings accompanied by an illegal inducement to use or refrain from using 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 from participation in the Medicare/Medicaid programs, civil monetary penalties, executing corrective action plans, and suspension of Medicare/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 a health care organization and to nearly all individuals and entities with which a health care organization does business. Fraud investigations, settlements, prosecutions and related publicity can have a material adverse effect on health care organizations. See “Enforcement Activity” below. Major elements of these often highly technical laws and regulations are generally summarized below.

The ACA authorizes the Secretary of DHHS to suspend payments to a provider pending an investigation or prosecution of a credible allegation of Medicare or Medicaid fraud against the provider. Providers found to have engaged in Medicare or Medicaid fraud may be excluded from participation in the Medicare and Medicaid programs thereafter.

False Claims Act. The federal False Claims Act (“FCA”) makes it illegal to knowingly 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. 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. The ACA amends the FCA by expanding the number of activities that are subject to civil monetary penalties to include, among other things, failure to report and return known overpayments within statutory time limits. FCA investigations and cases have become common in the health care field and may cover a range of activity from submission of inflated billings, to highly technical billing infractions, to allegations of inadequate care. Penalties under the FCA are severe and can include damages equal to three times the amount of the alleged false claims, as well as substantial civil monetary penalties.

Violation or alleged violation of the FCA frequently result in settlements that require multi-million dollar payments and costly corporate integrity 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 federal government or recover independently if the federal government does not participate. Because qui tam lawsuits are kept under seal while the federal government evaluates whether the United States will join the lawsuit, it is impossible to determine at this time whether any such actions are pending against any of the Obligated Group Members and no assurances can be made that such actions will not be filed in the future. The FCA has become one of the federal government’s primary tools against health care fraud and suspected 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 and other health care providers.

Under the ACA, the FCA has been expanded to include overpayments that are discovered by a health care provider and are not promptly refunded to the applicable federal health care program, even if the claims relating to the overpayment were initially submitted without any knowledge that they were false. The ACA requires that providers return identified overpayments within 60 days of identification or the overpayment becomes an “obligation” under the FCA. This expansion of the FCA exposes hospitals and other health care providers to liability under the FCA for a considerably broader range of claims than in the past. See also “PATIENT SERVICES REVENUES – Medicare and Medicaid Audits” above.

On June 30, 2016, the U.S. Department of Justice (“DOJ”) issued an interim final rule that proposes to more than double civil monetary penalties under the FCA. While the DOJ has the authority to enact a smaller increase, it indicated that it does not intend to invoke that authority. These increases take effect on August 1, 2016 and apply to FCA violations after November 2, 2015.

Anti-Kickback Law. The federal “Anti-Kickback Law” prohibits anyone from soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral of a patient for, or the ordering or recommending of the purchase (or lease) of any item or service that is paid by a federal or state health care program. The Anti-Kickback Law potentially implicates many common health care transactions between persons and entities with which a hospital does business, including hospital-physician joint ventures, medical director agreements, physician recruitment agreements, physician office leases and other transactions. The ACA amended the Anti-Kickback Law to provide that a claim that includes items or services resulting from a violation of the Anti-Kickback Law now constitutes a false or fraudulent claim for purposes of the FCA. Another amendment provides that an Anti-Kickback Law violation may be established without showing that an individual knew of the statute’s proscriptions or acted with specific intent to violate the Anti-Kickback Law, but only that the conduct was generally unlawful. The new standards could significantly expand criminal and civil fraud exposure for transactions and arrangements where there is no intent to violate the Anti-Kickback Law.

Violations or alleged violations of the Anti-Kickback Law most often results in settlements that require multi-million dollar payments and costly corporate integrity agreements. The Anti-Kickback Law can be prosecuted either criminally or civilly. Violation is a felony, subject to potentially substantial fines, imprisonment and/or exclusion from the Medicare and Medicaid programs, any of which would have a significant detrimental effect on the financial stability of most hospitals. In addition, significant civil monetary penalties may be imposed. Increasingly, the federal government and qui tam relators are prosecuting violations of the Anti-Kickback Law under the FCA, based on the argument that claims resulting from an illegal kickback arrangement are also false claims for FCA purposes. See the discussion under the subheading “False Claims Act” above. The IRS has taken

the position that hospitals are found to have violated the Anti-Kickback Law may also be subject to revocation of their tax-exempt status.

Stark Referral Law. The federal “Stark” statute prohibits the referral by a physician of Medicare and Medicaid patients for certain designated health services (including inpatient and outpatient hospital services, clinical laboratory services, and radiation, and other imaging services) to entities with which the referring physician has a financial relationship, unless the relationship fits within a stated exception. It also prohibits a hospital from billing Medicare, or any other payor or individual, for designated health 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 violation. If certain technical requirements are not satisfied, many ordinary business practices and economically desirable arrangements between hospitals and physicians may constitute improper “financial relationships” within the meaning of the Stark statute, thus triggering the prohibition on referrals and billing. Most providers of designated health services with physician relationships have some exposure to liability under the Stark statute. Changes to the regulations issued under the Stark statute 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 referral prohibited under the Stark law and regulations and a hospital that has billed for prohibited services may be obligated to 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 Stark, the hospital could be obligated to repay CMS for the payments received from Medicare for all of the designated health services referred to the hospital by all of the physicians in the group for the period of time the lease does not comply with an applicable Stark exception, which could potentially be a significant amount. As a result, even relatively minor, technical violations of the law may trigger substantial refund obligations. In the Physician Fee Schedule final rule for calendar year 2016, CMS eased some of the technical burdens associated with Stark Law compliance (e.g. CMS explains in the final rule that a single contract is not necessary and instead a collection of documents will suffice to demonstrate Stark law compliance), but the practical outcome remains unclear. The government may also seek substantial civil monetary penalties. Hospitals and other entities may also be excluded from the Medicare and Medicaid programs. Potential repayments to CMS, settlements, fines or exclusion for a Stark violation or alleged violation could have a material adverse impact on a hospital and other health care providers. Increasingly, the federal government is prosecuting violations of the Stark statute 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 Federal government is also increasingly attempting to recover the Federal portion of Medicaid claims referred to hospitals by physicians with whom they have a prohibited financial relationship.

CMS has established a voluntary self-disclosure program under which hospitals and other entities may report Stark violations and seek a reduction in potential refund obligations. The Obligated Group Members may make self-disclosures under this program as appropriate from time to time. Any submission pursuant to the self- disclosure program does not waive or limit the ability of the OIG or the DOJ to seek or prosecute violations of the Anti-Kickback Statute or impose civil monetary penalties. The level of repayments, penalties and other actions resulting from such self-disclosures will depend on the particular facts and circumstances, including then-current regulatory approach regarding the issues subject to such disclosure.

Review of Outlier Payments. CMS is reviewing health care providers that are receiving large proportions of their Medicare revenues from outlier payments. Health care providers found to have obtained inappropriately high outlier payments will be subject to further investigation by the CMS Program Integrity Unit and potentially the OIG.

HIPAA. HIPAA focuses on preserving the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted by the HIPAA statute or regulations or authorized by the patient. HIPAA’s confidentiality provisions extend not only to patient medical records, but also to a wide variety of individually identifiable health care clinical and financial information. These patient privacy requirements also impose communication, operational, and accounting obligations that add costs and create potentially unanticipated sources of liability. HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information.

HIPAA also provides for criminal sanctions for health care fraud and applies to all health care benefit programs, whether public or private. HIPAA 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 subject to mandatory exclusion from Medicare. See “ – Exclusions from Medicare or Medicaid Participation” below.

The HITECH Act. Provisions in the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), enacted as part of ARRA, increased the minimum and maximum civil monetary penalties for violations of HIPAA and granted enforcement authority of HIPAA to state attorneys general. The HITECH Act also (i) extended the reach of HIPAA beyond “covered entities,” (ii) imposed a breach notification requirement on HIPAA covered entities, (iii) limited certain uses and disclosures of individually identifiable health information, and (iv) restricted covered entities’ marketing communications.

The breach notification obligation, in particular, may expose covered entities such as hospitals to heightened liability. Under HITECH, in the event of a data privacy breach, covered entities are required to notify affected individuals and the federal government. If more than 500 individuals in any state are affected by the breach, (1) the covered entity must also notify the media and (2) the federal government posts a description of the breach on its website. Although HIPAA does not provide for a private right of action, these reporting obligations increase the risk of government enforcement as well as class action lawsuits filed under state privacy or consumer protection laws, especially if large numbers of individuals are affected by a breach.

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. The CMS rule to implement MACRA proposes to replace the meaningful use program with the “advancing care information” portion of the MIPS requirements. While these proposed MACRA requirements apply to physicians and other clinicians, CMS indicated that it intends to replace the meaningful use program for hospitals as well. It is not clear how this proposal will impact hospitals and other health care facilities.

On January 25, 2013, DHHS issued comprehensive modifications to the existing HIPAA regulations to implement the requirements of the HITECH Act, commonly known as the “HIPAA Omnibus Rule.” The HIPAA Omnibus Rule became effective on March 26, 2013, and covered entities were required to be in compliance by September 23, 2013 (though certain requirements have a longer timeframe). Key aspects of the HIPAA Omnibus Rule include, but are not limited to: (i) a new standard for what constitutes a breach of protected health information, (ii) establishing four levels of culpability with respect to civil monetary penalties assessed for HIPAA violations, (iii) direct liability of business associates for certain violations of HIPAA, (iv) modifications to the rules governing research, (v) stricter requirements regarding non-exempt marketing practices, (vi) modification and re-distribution of notices of privacy practices, and (vii) stricter requirements regarding the protection of genetic information. The stricter requirements and penalties provided by the HIPAA Omnibus Rule increase the potential adverse effect on health care providers found to have experienced a HIPAA breach event or to have violated other HIPAA provisions.

The HITECH Act revises the civil monetary penalties associated with violations of HIPAA as well as provides state attorneys general with authority to enforce the HIPAA privacy and security regulations in some cases through a damages assessment of $100 per violation or an injunction against the violator. The revised civil monetary penalty provisions establish a tiered system, ranging from a minimum of $100 per violation for an unknowing violation to $1,000 per violation for a violation due to reasonable cause, but not willful neglect. For a violation due to willful neglect, the penalty is a minimum of $10,000 or $50,000 per violation, depending on whether the violation was corrected within 30 days of the date the violator knew or should have known of the violation. Maximum penalties may reach $1,500,000 for identical violations.

Pursuant to the HITECH Act, criminal penalties will be enforced against persons who obtain or disclose personal health information without authorization. DHHS performs periodic audits of health care providers and group health plans to ensure that required policies under the HITECH Act are in place. Individuals harmed by violations will be able to recover a percentage of monetary penalties or a monetary settlement based upon methods to be established by DHHS for such private recovery. DHHS chose not to address these penalty distribution guidelines in the 2013 Omnibus HIPAA Rule, but stated that they will be a subject of future rulemaking.

The Office for Civil Rights (“OCR”) is the administrative office that is tasked with enforcing HIPAA. OCR has stated that it has now moved from education to enforcement in its implementation of the law. Recent settlements of HIPAA violations for breaches involving lost data have reached the millions of dollars and often require comprehensive corrective action plans. Any breach of HIPAA, regardless of intent or scope, may result in penalties or settlement amounts that are material to a covered health care provider or health plan.

Business Associates. Under existing HIPAA regulations, covered entities must include certain required provisions in their contractual relationships with organizations that perform functions on their behalf which involve use or disclosure of protected health information. These organizations are called business associates, and have been indirectly regulated by HIPAA through those contractual obligations. The HITECH Act and the HIPAA Omnibus Rule provide that all of the HIPAA security administrative, physical, and technical safeguards, as well as security policies, procedures, and documentation requirements now apply directly to all business associates. In addition, the HITECH Act makes certain privacy provisions directly applicable to business associates. These changes are significant because business associates will now be directly regulated by DHHS for those requirements, and as a result, will be subject to penalties imposed by DHHS and/or state attorneys general. Likewise, to the extent a business associate is deemed to be an agent of the covered entity under the Federal common law, the covered entity will be liable for the breaches of the business associate. Covered entities have had to review and amend their business associate agreements in recent years in order to comply with these changing rules, which can be costly and administratively burdensome.

Security Breaches and Unauthorized Releases of Personal Information. 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, as discussed with respect to the HITECH Act above, 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 and negative media attention. 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.

Exclusions from Medicare or Medicaid Participation. The government may exclude a health care provider 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, including, but not limited to, 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 health care provider would be decertified as a participant in such programs and would be ineligible to treat or be reimbursed for services to program beneficiaries. Any health care provider exclusion could be a materially adverse event, even within a large hospital system. In addition, exclusion of health care organization’s employees or independent contractors or their employees under Medicare or Medicaid may be another source of potential liability for hospitals and health systems based on services provided by those excluded individuals or entities.

Administrative Enforcement. 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. For two such examples of potential areas of administrative enforcement, see “BONDHOLDERS’ RISKS – Significant Risk Areas Summarized – Civil Monetary Penalties Law” and “– Compliance with Conditions of Participation,” below.

Civil Monetary Penalties Law. The federal Civil Monetary Penalties Law (“CMPL”) provides for administrative sanctions against health care providers for a broad range of billing and other abuses. A health care provider is liable under the CMPL if it knowingly presents, or causes to be presented, improper claims for reimbursement under Medicare, Medicaid and other federal health care programs. A hospital that participates in arrangements known as “gainsharing” by paying a physician to limit or reduce services to Medicare fee-for-service beneficiaries also could be subject to CMPL penalties. A health care provider that provides benefits to Medicare or Medicaid beneficiaries that such provider knows or should know are likely to induce the beneficiaries to choose the provider for their care also could be subject to CMPL penalties. The CMPL authorizes imposition of a civil money penalty and treble damages. The ACA also amended the CMPL laws to establish various new grounds for exclusion and civil monetary penalties, as well as increased penalty thresholds for existing civil monetary penalties.

Health care providers may be found liable under the CMPL even when they did not have actual knowledge of the impropriety of their action. Knowingly undertaking the action is sufficient. Ignorance of the Medicare regulations is no defense. The imposition of civil money penalties on a health care provider could have a material adverse impact on the provider’s financial condition.

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, such as suspension or executing potentially burdensome corrective actions plans, potentially could be imposed.

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.

Enforcement actions may pertain to not only deliberate violations, but also frequently relate to violations resulting from actions of which management is unaware, from mistakes or from circumstances where the individual participants do not know that their conduct is in violation of law. Enforcement actions may extend to conduct that occurred in the past. The government may seek a wide array of penalties, including withholding essential payments under the Medicare or Medicaid programs or exclusion from those programs.

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 or to recover higher damages, assessments or penalties and/or by instituting criminal action. In addition, the cost of defending such an action, the time and management attention consumed, and the facts of a case may dictate settlement. 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 health care organization, 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 or other facilities in a health system, as the government often extends enforcement actions regarding health care fraud to other hospitals or health care entities in the same organization. Therefore, Medicare fraud related risks identified as being materially adverse as to a health care organization could have materially adverse consequences to a health system taken as a whole.

Liability Under State “Fraud” and “False Claims” Laws. Hospital providers in Illinois are also are subject to a variety of state laws related to false claims (similar to the FCA or that are generally applicable false claims laws), anti-kickback (similar to the federal Anti-Kickback Law or that are generally applicable anti-kickback or fraud laws), and physician referral (similar to Stark). A violation of these laws could have a material adverse impact on a hospital for the same reasons as the federal statutes. See discussion under the subheadings “False Claims Act,” “Anti-Kickback Law” and “Stark Referral Law” above.

Privacy Requirements. HIPAA, along with new privacy rules arising from federal and state statutes, 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. Such 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. Regulations promulgated under HIPAA also provide a heightened level of privacy of records associated with the provision of substance abuse counseling and treatment by covered alcohol and substance abuse treatment programs. These rules are significantly more restrictive than the privacy provisions set forth in HIPAA. States may adopt privacy laws that are more restrictive than HIPAA but not less restrictive. Illinois also has specific laws relating to privacy of records pertaining to mental health and developmental disability treatment records, HIV testing and treatment records and genetic testing. These laws are either more detailed and/or more restrictive than HIPAA with respect to these particular types of treatment records.

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, the hospital may be liable for any claim by an individual who has suffered harm as a result of a violation.

Licensing, Surveys, Investigations and Accreditations. 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 accreditation organizations 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 or to bill various third party payors.

Environmental Laws and Regulations. Health facilities 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 health facilities; and requirements for training employees in the proper handling and management of hazardous materials and wastes.

Health facilities 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; may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and may not be covered by insurance.

Illinois Health Facilities Planning Act and Health Facilities and Services Review Board Administrative Rules. The Obligated Group is subject to the Illinois Health Facilities Planning Act, as amended (the “Planning Act”) and the Health Facilities and Services Review Board Administrative Rules (the “Planning Act Rules”). The Planning Act has among its purposes the establishment of a procedure that (1) requires a person

establishing, constructing or modifying a health care facility to have the qualifications, background, character and financial resources to adequately provide a proper service for the community, (2) promotes the orderly and economic development of health care facilities in the State of Illinois that avoids unnecessary duplication of such facilities, and (3) promotes planning for and development of health care facilities needed for comprehensive health care, especially in areas where the health planning process has identified unmet needs. IDPH, with the Illinois Health Facilities and Services Review Board’s (“the Review Board”) prior approval, promulgates the Planning Act Rules. In general, the Planning Act Rules govern the application for and issuance of permits and exemptions.

Pursuant to the Planning Act and the Planning Act Rules, a permit or exemption must be obtained from the Review Board, before acquiring “major medical equipment” or constructing or modifying a “health care facility” (which, as defined in the Planning Act, includes hospitals, SNFs, and certain other health care facilities) that (a) requires a total capital expenditure in excess of the “capital expenditure minimum,” (b) substantially changes the scope or the functional operation of the health care facility, or (c) changes the bed capacity of a health care facility (by increasing the total number of beds, by distributing beds among various categories of service, or by relocating beds from one physical facility or site to another) by more than 20 beds or more than 10% of total bed capacity, whichever is less, over a 2 year period. Construction or modification includes (a) the establishment, erection, building, alteration, reconstruction, modernization, improvement, extension, discontinuation or change of ownership, of or by a health care facility, (b) the purchase or acquisition by or through a health care facility of equipment or service for diagnostic or therapeutic purposes or facility administration or operation, or (c) any capital expenditure made by or on behalf of a health care facility which exceeds the “capital expenditure minimum.” Health care facilities generally apply for a certificate of exemption for discontinuation or change of ownership. However, the discontinuation or change of ownership of a SNF and certain mental health and developmental disability health care facilities is not subject to the Planning Act.

In addition, the Planning Act authorizes the Review Board to require each health care facility to submit an annual report of all capital expenditures in excess of $200,000 (adjusted annually for inflation) and such reasonable reports that it needs to carry out the purposes and provisions of the Planning Act. The Planning Act also requires certain health care facilities, including hospitals and SNFs, to submit annual questionnaires to the Review Board. Generally, the questionnaires request that a health care facility list the types of services it offers, the number of beds it has in each category of service, the patient utilization of its services and beds and patient revenue by payor type and cost.

In 2009, the Illinois General Assembly significantly amended the Planning Act and established new capital expenditure minimums for hospitals, long-term care facilities (SNFs) and all other applicants, which the Review Board adjusts annually for inflation. Effective July 1, 2016, the capital expenditure minimums are $12,950,881, $7,320,061, and $3,378,491, respectively. The 2009 legislation also extended the Certificate of Need program until December 31, 2019. In 2012, the Illinois General Assembly amended the Planning Act in relation to application and approval procedures, and separate standards for facilities licensed under the Specialized Mental Health Act. In 2015, the Illinois General Assembly amended the Planning Act to simplify the certificate of exemption application process.

Illinois Insurance Claims Fraud Prevention Act. The Illinois Insurance Claims Fraud Prevention Act prohibits remuneration (in cash or kind) for patient referrals where ultimately an insurance company will pay claims. Penalties for violations of this Act include a civil penalty of $5,000 to $10,000 per violation, plus an assessment of not more than three times the amount of each claim for compensation under a contract of insurance.

Illinois Hospital Report Card Act. The Illinois Hospital Report Card Act, which mandates public access to certain information regarding hospital staffing and patient outcomes, requires the provision of certain hospital data reports to the Illinois Department of Public Health (the “IDPH”), mandates initial and continuing nursing training and provides whistleblower protection for hospital employees who make good faith disclosures under the act. In addition, hospitals must share with consumers, upon request, nurse staff schedules, nurse assignment rosters, methods to determine and adjust nurse staff schedules, and staff training information. The act requires submission of quarterly and annual reports to the IDPH for subsequent public release following review by the department's advisory committee. These reports must disclose information on topics including patient care levels and infection- related measures.

Business Relationships and Other Business Matters

Integrated Delivery Systems. Health facilities and health systems often own, control or have affiliations with relatively large physician groups and independent practice associations. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Physician Platform and Other Clinical Initiatives.” Generally, the sponsoring health facility or health system will be the primary capital and funding source for such alliances and may have an ongoing financial commitment to provide growth capital and support operating deficits. As separate operating units, integrated physician practices and medical foundations sometimes operate at a loss and require subsidy or other support from the related hospital or health system. 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, particularly in today’s environment of increasing provider consolidation. 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.

Affiliations with physicians and physician groups 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. However, these goals may not be achieved, and an unsuccessful affiliation may be costly and counterproductive to all of the above- stated goals. Due to the increasing demands for healthcare providers to be accountable for the coordination of care and health outcomes of patients and populations served, physician affiliations are likely to become increasingly important to the success of hospitals and health care systems. In addition, 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, affiliations of health systems with providers across the continuum of care will also be important.

The ACA authorizes several alternative payment programs for Medicare that promote, reward or necessitate integration among hospitals, physicians and other providers, in order to reduce costs and improve the quality of care and patient experience. 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 1980’s 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, monitor and control patient outcomes and assume risk based on achieving designated outcome levels. 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 in “BONDHOLDERS’ RISKS – Regulatory Environment” herein, 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. The ability of hospitals or health 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 the hospital or health system’s investment at risk, and potentially reducing its managed care leverage and/or overall utilization.

In October 2011, CMS, the Federal Trade Commission and the DOJ jointly issued guidance regarding waivers and safe harbors to enable providers to participate in the Medicare Shared Savings Program (see “– Accountable Care Organizations,” below). Although CMS issued the Shared Savings Program final rule in June 2015, there can be no assurance that such waivers or other regulations or guidance issued will sufficiently clarify the scope of permissible activity in all cases. State law prohibitions, such as the bar on the corporate practice of

medicine, 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 and health systems also face the risk in affiliating with for-profit entities that the IRS will determine that compensation practices or business arrangements result in private benefit or private use or generate unrelated business income for the hospitals and health systems. Increasingly, hospitals and health care systems that operate hospitals may, directly or in partnership, take on actual insurance risk, market various health coverage products and access patients by way of new and presently unknown channels. Such new endeavors could adversely affect the financial and operating condition or reputation of a health care organization.

Physician Financial Relationships. In addition to the physician integration relationships referred to above, hospitals and health systems frequently have various additional business and financial relationships with physicians and physician groups. These are in addition to hospital physician contracts for individual services performed by physicians in hospitals or other health care facilities. Such arrangements may include: joint ventures to provide a variety of outpatient services; recruiting arrangements with individual physicians and/or physician groups; loans to physicians; medical office leases; equipment leases from or to physicians; and various forms of physician practice support or assistance. These and other financial relationships with physicians (including hospital physician contracts for individual services) may involve financial and legal compliance risks for the hospitals and health systems involved. From a compliance standpoint, these types of financial relationships may raise federal and state “anti-kickback” and federal “Stark” issues (see “BONDHOLDERS’ RISKS – Regulatory Environment,” above), tax exemption issues (see “BONDHOLDERS’ RISKS – Tax-Exempt Status and Other Tax Matters,” below), as well as other legal and regulatory risks, and these could have a material adverse impact on hospitals.

Health care providers, responding to health care reform and other industry pressures, are increasingly moving toward integrated delivery systems, managing the health of defined populations, patient-centered medical homes, bundled payments, and capitated insurance plans. These trends will require new infrastructures, including the appropriate mix of physician specialties, new administrative skills, close relationships between physicians and hospitals, insurance risk management, and new relationships between patients and providers. Health care provider organizations may be unsuccessful in assembling successful integrated networks, may not achieve savings sufficient to offset the substantial costs of creating and maintaining the necessary infrastructures to support such arrangements, could incur losses from assuming increased risk and could incur damage to their reputation.

Bundled Payment Programs. The ACA established a Medicare bundled payment pilot program, under which Medicare will make a single payment for an episode of care, such as heart bypass surgery, covering some combination of hospital, physician and post-hospital care for the episode. Private insurers are also developing bundled payment programs. While bundled payments offer opportunities to provide better coordinated care and to save costs, they also entail financial risk if the episode is not well managed.

Accountable Care Organizations. The ACA establishes the Medicare Shared Savings Program (“MSSP”) that seeks to promote accountability and coordination of care through the creation of Accountable Care Organizations (“ACOs”). The program allows hospitals, physicians and others to form ACOs and work together to invest in infrastructure and redesign integrated delivery processes to achieve high quality and efficient delivery of services. ACOs that achieve quality performance standards are eligible to share in a portion of the amounts saved by the Medicare program. DHHS has significant discretion to determine key elements of the program, including what steps providers must take to be considered an ACO, how to decide if Medicare program savings have occurred, and what portion of such savings will be paid to ACOs. CMS published the final rules regarding ACOs in late November 2011, and in June 2015, issued a final rule to update and improve policies governing the MSSP. The regulations are complex and health systems have found that achieving the standards necessary to achieve payouts under the MSSP payments is difficult. Establishing and successfully operating ACOs require investments in technology and other resources as well as development of detailed processes and procedures. It may take several years, if ever, for a health system to recoup the cost of investment needed to establish or participate effectively in a particular ACO or similar arrangement. In addition, although the regulation provides for waivers of certain federal laws, there may remain regulatory risks for participating hospitals and other health care providers, as well as financial and operational risks. The applicable regulating bodies have published guidance for ACOs to follow in order to comply with various other areas of law, but the published guidance is complex. In addition, since the

federal ACO regulation would not preempt state law, Illinois providers participating as a federal ACO must be organized and operated in compliance with Illinois’ existing statutes and regulations.

Numerous organizations, including the System, have formed ACOs and been selected by CMS to participate in the MSSP. In addition, organizations are forming ACOs that do not participate in the MSSP, or that participate in the MSSP but also contract with private insurers. The potential impacts of these initiatives and the regulation of ACOs are unknown, but introduce greater risk and complexity to health care finance and operations. For example, on January 15, 2016, the IRS issued a private letter ruling to an ACO that does not participate in the MSSP, determining that, while the ACO’s activities generally promote health, they are not all in furtherance of charitable purposes. The private letter ruling states that negotiating payor agreements with commercial insurers on behalf of health care providers that are not, or are not employed by, exempt hospitals, is not a charitable activity. The IRS determined that the ACO entity did not qualify for federal income tax exemption. Although it is anticipated that the IRS will issue further guidance on the charitable nature of the activities of ACOs, clinically integrated entities and other hospital-clinician organizations, this private letter ruling and the IRS guidance in this area may have an adverse impact on the Obligated Group Members, including to the extent that income from ACOs are required to be treated as taxable unrelated business income. For a discussion of the ACOs of the Obligated Group Members, see APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP - Physician Platform and Other Clinical Initiatives.”

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. See “SIGNIFICANT RISK AREAS SUMMARIZED – Rate Pressures from Insurers and Major Purchasers” and “NONPROFIT HEALTH CARE ENVIRONMENT – Action by Purchasers of Hospital Services and Consumers.”

Indigent Care. Tax-exempt health care providers often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, inner-city hospitals and other health care providers may treat significant numbers of indigents. These hospitals and health care providers may be susceptible to economic and political changes that could increase the number of indigents or their responsibility for caring for this population. 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, county, 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. See “NONPROFIT HEALTH CARE ENVIRONMENT – Charity Care and Financial Assistance; State of Illinois Legislative Initiatives” and “- Future Nonprofit Legislation.”

Hospital 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 obtain medical staff membership and clinical privileges and 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 may 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 a hospital’s governing body to adequately oversee the conduct of its medical staff may result in hospital liability to third parties or violation of Medicare Conditions of Participation or accreditation requirements.

Physician Supply. Sufficient community-based physician supply is important to hospitals and health systems. CMS annually reviews overall physician reimbursement formulas for Medicare and Medicaid. Changes to physician compensation formulas by CMS could lead to physicians ceasing to accept Medicare and/or Medicaid patients. See “PATIENT SERVICE REVENUES – Payments for Physician Services.” 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 for recruiting and retaining physicians, or may be required to increase the percentage of employed physicians or be compelled to affiliate with and provide support to

physicians in order to continue serving the growing population base and maintain market share. The physician-to-population ratio in certain parts of Illinois is below the national average, and the shortage of physicians could become a significant issue for hospitals and health care systems there.

Section 340B Drug Pricing Program. Hospitals that participate (as “covered entities”) in the prescription drug discount program established under Section 340B of the federal Public Health Service Act (the “340B Program”) are able to purchase certain outpatient prescription drugs for their patients at a reduced cost. On August 28, 2015 the Health Resources and Services Administration published proposed 340B Drug Pricing Program Omnibus Guidance in the Federal Register, 80 Fed. Reg. 52300 (“Proposed Guidance”). If adopted in its current form, the Proposed Guidance could restrict the ability of hospitals to purchase drugs under the 340B Program. Certain of the Obligated Group Members participate in the 340B Program and such restrictions could potentially have an adverse effect on these Obligated Group Members.

Competition Among Health Care Providers. Competition from a wide variety of sources, including specialty hospitals, other hospitals and health care systems, inpatient and outpatient health care facilities, HMOs, long-term care and skilled nursing services facilities, clinics, ambulatory surgical centers, independent diagnostic facilities, physicians and others, may adversely affect the utilization and/or revenues of specific hospitals or hospitals in general. Existing and potential competitors may not be subject to various restrictions applicable to hospitals, and competition, in the future, may arise from new sources not currently anticipated or prevalent.

Freestanding ambulatory surgery centers, where permitted by law, may attract significant commercial outpatient services traditionally performed at hospitals. 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. Full-service hospitals rely upon the revenues generated from commercial outpatient services to fund other less profitable services, and the decline of such business may result in reduced income. Competing ambulatory surgery centers, more likely a for-profit business, may not accept indigent patients or low paying programs and would leave these populations to receive services in the full-service hospital setting. Consequently, hospitals are vulnerable to competition from ambulatory surgery centers.

Impact of New Technology. Additionally, scientific and technological advances, new procedures, drugs and appliances, preventive medicine and outpatient health care delivery may reduce utilization and revenues of hospitals 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.

Antitrust. Antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, payor contracting, physician relations, joint ventures, merger, affiliation and acquisition activities, certain pricing or salary setting activities, as well as other areas of activity. Consolidation transactions among health care providers is an area in which investigation and enforcement activity by federal and state antitrust agencies is particularly frequent and vigorous. The application of the federal and state antitrust laws to health care is evolving (especially as the ACA is implemented), and therefore not always clear. Currently, the most common areas of potential liability are joint action among providers with respect to payor contracting, medical staff credentialing disputes, and hospital mergers and acquisitions.

Violation of the antitrust laws could result in criminal and/or civil enforcement proceedings by federal and state agencies, as well as actions by private litigants. In certain actions, private litigants may be entitled to treble damages, and in others, governmental entities may be able to assess substantial monetary fines. Investigations and proceedings arising from the application of federal and state antitrust laws can require the dedication of substantial resources by affected providers and can delay or impede proposed transactions even if ultimately it is determined that no violation of applicable law would occur as a result of the proposed transaction.

Employer Status. Hospitals are major employers with mixed technical and nontechnical workforces. Labor costs, including salaries, benefits and other liabilities associated with a workforce, have significant impacts on hospital operations and financial condition. Developments affecting hospitals as major employers include: (1) imposing higher minimum or living wages; (2) enhancing occupational health and safety standards; and (3) penalizing employers of undocumented immigrants. The minimum wage for workers 18 years of age or older is

$8.25 per hour in Illinois, higher than the federal minimum wage of $7.25 per hour. The facilities within the Obligated Group that operate within the City of Chicago are subject to an even higher minimum wage of $10.50 per hour, which is scheduled to rise to $13.00 per hour in 2019. Legislation or regulation on any of the above or related topics could have a material adverse impact on one or more Obligated Group Members and, in turn, their ability to make payments with respect to the Series 2016C Bonds.

Labor Relations and Collective Bargaining. Hospitals are large employers with a wide diversity of employees. Increasingly, employees of hospitals are becoming unionized, and many hospitals have collective bargaining agreements with one or more labor organizations. Employees subject to collective bargaining agreements may include essential nursing and technical personnel, as well as food service, maintenance and other trade personnel. Renegotiation of such agreements upon expiration may result in significant cost increases to hospitals. Employee strikes or other adverse labor actions may have an adverse impact on operations, revenue and hospital reputation.

Certain Obligated Group Member employees are covered by collective bargaining agreements. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Miscellaneous – Associates.”

Class Actions and Litigation. Hospitals and health systems 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. Such class action suits have included ones 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.

Federal law and many states, including Illinois, impose standards related to worker classification, eligibility and payment for overtime, liability for providing rest periods and similar requirements. Large employers with complex workforces, such as hospitals, are susceptible to actual and alleged violations of these standards. In recent years there has been a proliferation of lawsuits over these “wage and hour” issues, often in the form of large, sometimes multi-state, class actions. For large employers such as hospitals and health systems, such class actions can involve multi-million dollar claims, judgments and/or settlements. A major class action decided or settled adversely to the Borrower or the Obligated Group could have a material adverse impact on their financial conditions and results of operations.

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 generally 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 individuals currently considered as independent contractors of hospitals or other health care entities as employees, back taxes and penalties could be material.

Staffing. From time to time, the health care industry suffers from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. In addition, aging medical staffs and difficulties in recruiting individuals to the medical profession are predicted to result in physician shortages. Medical schools, nursing schools and other health professional educational programs are not equipped to meet the demand for persons entering such professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital-specific shortages. In addition, state budget cuts to university programs may impact the training available for nursing personnel and other health care professionals. Competition for physicians and other health care professionals, coupled with increased recruiting and retention costs, will increase hospital and health system operating costs, possibly significantly, and growth may be constrained. This trend could have a material adverse impact on the financial conditions and results of operations of hospitals and other health care facilities. Such scarcity could further be intensified if utilization of health care services increases as a consequence of the ACA’s expansion of the number of insured consumers. As reimbursement amounts are reduced

to health care facilities and organizations that employ or contract with physicians, nurses and other health care professionals, pressure to control and possibly reduce wage and benefit costs may further strain the supply of those professionals.

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 not only compensatory but also non-economic and punitive damages are often filed against health care providers. Insurance does not provide coverage for judgments for punitive damages. Illinois has not successfully adopted tort reform; therefore health care providers may be subjected to extremely large jury verdicts for non-economic and punitive damages. In addition, many of the Obligated Group’s hospitals are located in Cook County, which is consistently ranked as one of the worst venues for defendants, in terms of the potential for very high jury verdicts and settlements. See “SIGNIFICANT RISK AREAS SUMMARIZED – Medical Liability Litigation and Insurance.”

Beginning in 2008, CMS refused to reimburse hospitals for medical costs arising from certain “never events,” which include specific preventable medical errors. Certain private insurers and HMOs followed suit. The occurrence of “never events” is more likely to be publicized and may negatively impact a hospital’s reputation, thereby reducing future utilization and potentially increasing the possibility of liability claims.

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 an Obligated Group Member 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.

Information Technology

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. Information systems require an ongoing commitment of significant resources to maintain, protect and enhance existing 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 “Regulatory Environment–HIPAA” above and “Cybersecurity Risks” below. 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 health care providers.

The System currently uses Meditech in six hospitals (former Provena facilities) and EPIC in six hospitals (former Resurrection facilities). The System expects to migrate to EPIC for all System hospitals by the end of 2018. The System does not yet have an estimate of the costs involved to migrate to EPIC, but the costs could be

substantial. No assurances can be given that the System will in fact convert to EPIC or that additional debt will not be required to fund such costs. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Miscellaneous – Information Systems.”

Future government regulation and adherence to technological advances could result in an increased need of the Obligated Group Members to implement new technology. Such implementation could be costly and is subject to cost overruns and delays in application, which could negatively affect the financial condition of the Obligated Group.

Cybersecurity Risks

Health care providers are highly dependent upon integrated electronic medical record and other information technology systems to deliver high quality, coordinated and cost-effective health care. These systems necessarily hold large quantities of highly sensitive protected health information that is highly valued on the black market for such information. As a result, the electronic systems and networks of health care providers are considered likely targets for cyberattacks and other potential breaches of their systems. In addition to regulatory fines and penalties, the health care entities subject to data and patient information breaches may be liable for the costs of remediating the breaches, damages to individuals (or classes) whose information has been breached, reputational damage and business loss, and damage to the information technology infrastructure. Cybersecurity concerns now extend beyond data breaches involving protected health information and identify theft, as health care organizations have become increasingly targeted by malware that can adversely affect operations of administrative and clinical systems and technology, including ransomware that seizes control of health system technology and systems and is used by cyber criminals who demand payment to restore control back to the organization. Health systems will continue to incur significant costs to assure that effective monitoring, response to cyberattacks and breaches, data back-up and recovery systems are in place to combat ever-evolving cyber threats.

The Obligated Group has taken, and continues to take measures to protect its information technology system against such cyberattacks, but there can be no assurance that the Obligated Group will not experience a significant breach. If such a breach occurs, the financial consequences of such a breach could have a material adverse impact on the Obligated Group.

Affiliations, Merger, Acquisition and Divestiture

The Obligated Group Members evaluate and pursue potential acquisition, merger and affiliation candidates as part of the overall strategic planning and development process. As part of its ongoing planning and property management functions, the Obligated Group reviews the use, compatibility and business viability of many of the operations of the Obligated Group Members, and from time to time the Obligated Group Members may pursue changes in the use of, or disposition of, their facilities. Likewise, Obligated Group Members occasionally receive offers from, or conduct discussions with, third parties about the potential acquisition of operations and properties which may become subsidiaries or affiliates of Obligated Group Members in the future, or about the potential sale of some of the operations or property which are currently conducted or owned by the Obligated Group Members. Discussion with respect to affiliation, merger, acquisition, disposition or change of use of facilities, including those which may affect the Obligated Group Members, are held from time to time with other parties. As a result, it is possible that the current organization and assets of the Obligated Group Members may change from time to time.

In addition to relationships with other hospitals and physicians, the Obligated Group Members may consider investments, ventures, affiliations, development arrangements, mergers, acquisitions or other transactions with other health care-related entities. Such transactions may involve entities engaged in providing home health care, long-term care, infusion, dialysis, pharmaceuticals, health care technology or administrative services. In addition, the Obligated Group Members may pursue transactions with health insurers, HMOs, preferred provider organizations, third-party administrators and other health insurance-related businesses. Because of the integration occurring throughout the health care field, management will consider these arrangements if there is a perceived strategic or operational benefit for the Obligated Group. Any initiative may involve significant capital commitments and/or capital or operating risk (including, potentially, insurance risk) in a business in which the Obligated Group Members may have less expertise than in hospital operations. There can be no assurance that these projects, if pursued, will not lead to material adverse consequences to the Obligated Group.

Tax-Exempt Status and Other Tax Matters

Maintenance of the Tax-Exempt Status of Obligated Group Members. The tax-exempt status of the Series 2016C Bonds depends upon maintenance by each Obligated Group Member that receives or benefits from the proceeds of the Series 2016C Bonds (a “Benefiting Member”) of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of such status is dependent on compliance by such Benefiting Member with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable and other permissible purposes and their avoidance of transactions that may cause their earnings or assets to inure to the benefit of private individuals. As these general principles were developed primarily for public charities that do not conduct large-scale technical operations and business activities, they often do not adequately address the myriad of operations and transactions entered into by a modern health care organization. Although the exempt (or non-exempt) status of many activities traditionally engaged in by health care providers has been the subject of interpretations by the IRS in the form of private letter rulings or other guidance, as health care operations change to reflect the new industry environment created by health care reform, many newer activities and circumstances have not been fully addressed in any official opinion, interpretation or policy of the IRS.

The IRS has taken the position that hospitals which are in violation of the Anti-Kickback Law may also be subject to revocation of their tax-exempt status. See “Regulatory Environment - Anti-Kickback Law” above. As a result, tax-exempt hospitals, such as those of the Obligated Group, which have, and will continue to have, extensive transactions with physicians are subject to an increased degree of scrutiny and perhaps enforcement by the IRS.

The ACA also contains new requirements for tax-exempt hospitals. Under the ACA, each tax-exempt hospital facility is required to (i) conduct a community health needs assessment at least once every three years and adopt an implementation strategy to meet the identified community needs, (ii) adopt, implement and widely publicize a written financial assistance policy that contains the statutory and regulatory required minimums and a policy to provide emergency medical treatment without discrimination, (iii) limit charges to individuals who qualify for financial assistance under such tax-exempt hospital’s financial assistance policy to no more than the amounts generally billed to individuals who have insurance covering such care and refrain from using “gross charges” when billing such individuals, and (iv) refrain from taking extraordinary collection actions without first making reasonable efforts to determine whether the individual is eligible for assistance under such tax-exempt hospital’s financial assistance policy.

The Treasury Department is required to review information about each tax-exempt hospital’s community benefit activities at least once every three years, as well as to submit an annual report to Congress with information regarding the levels of charity care, bad debt expenses, unreimbursed costs of government programs, and costs incurred by tax-exempt hospitals for community benefit activities. The periodic reviews and reports to Congress regarding the community benefits provided by 501(c)(3) hospitals may increase the likelihood that Congress will require such hospitals to provide a minimum level of charity care in order to retain tax-exempt status and may increase IRS scrutiny of particular 501(c)(3) hospital organizations. See “NONPROFIT HEALTH CARE ENVIRONMENT – Future Nonprofit Legislation.”

On December 29, 2014, the Secretary of the Treasury issued final regulations under Section 501(r) of the Code that provide detailed and comprehensive guidance relating to requirements for community health needs assessments, financial assistance policies, emergency medical care policies, limitations on charges and billing and collection practices, and also provide guidance on consequences of failure to satisfy Section 501(r) requirements. These final regulations are complex and may be administratively burdensome to implement. Generally, the regulations apply to tax years beginning after December 29, 2015, and provide that a hospital organization may rely on a reasonable, good faith interpretation of the Section 501(r) requirements for tax years beginning on or before December 29, 2015, which may include compliance with certain prior proposed regulations under Section 501(r).

The Obligated Group Members participate in a variety of joint ventures and transactions with physicians and other organizations, either directly or indirectly. Management believes that the joint ventures and transactions to which the Obligated Group Members are a party are consistent with the requirements of the Code as to tax- exempt status, but there is no guarantee that the IRS will not change its interpretation of tax-exempt requirements or that future guidance will not have an adverse effect on Obligated Group members in connection with one or more such ventures.

The IRS has periodically conducted audit and other enforcement activity regarding tax-exempt health care organizations. Certain audits are conducted by teams of revenue agents, often take years to complete and require the expenditure of significant staff time by both the IRS and the audited organization. These audits examine a wide range of possible issues, including tax-exempt bond financing, partnerships and joint ventures, retirement plans, employee benefits, employment taxes, political contributions and other matters.

If the IRS were to find that an Obligated Group Member has participated in activities in violation of certain regulations or rulings, the tax-exempt status of such entity could be jeopardized. Although the IRS has not often revoked the 501(c)(3) tax-exempt status of nonprofit health care corporations, it could do so in the future. Loss of tax-exempt status by even one Benefiting Member potentially could result in loss of tax exemption of the Series 2016C Bonds and of other tax-exempt debt of the Obligated Group Members and defaults in covenants regarding the Series 2016C Bonds and other related tax-exempt debt and obligations likely would be triggered. Loss of tax- exempt status also could result in substantial tax liabilities on income of the Obligated Group Members. For these reasons, loss of tax-exempt status of any Benefiting Member could have a material adverse effect on the financial condition and results of operations of the Obligated Group, taken as a whole.

In some cases, the IRS has imposed substantial monetary penalties on tax-exempt hospitals in lieu of revoking their tax-exempt status. In those cases, the IRS and exempt hospitals have entered into settlement agreements requiring the hospital to make substantial payments to the IRS. Given the size of the Obligated Group, the wide range of complex transactions entered into by the Obligated Group Members, and potential exemption risks, Obligated Group Members could be at risk for incurring monetary and other liabilities or penalties imposed by the IRS if the IRS determines that an activity of an Obligated Group Member is inconsistent with or unrelated to its tax-exempt purposes.

If the IRS determines that an organization exempt from taxation under Section 501(c)(3) of the Code has engaged in an “excess benefit transactions” with an officer, director or other “disqualified persons,” the IRS may impose a penalty in the form of excise taxes on certain “excess benefit transactions” involving 501(c)(3) organizations and “disqualified persons.” An excess benefit transaction is one in which a disqualified person or entity receives more than fair market value from the exempt organization or pays the exempt organization less than fair market value for property or services, or shares the net revenues of the tax-exempt entity. A disqualified person is a person (or an entity) who is in a position to exercise substantial influence over the affairs of the exempt organization during the five years preceding an excess benefit transaction. The statute imposes excise taxes on the disqualified person and any “organization manager” who knowingly participates in an excess benefit transaction. These rules do not penalize the exempt organization itself, so there would be no direct impact on an Obligated Group Member or the tax status of the Series 2016C Bonds if an excess benefit transaction were subject to IRS enforcement, pursuant to these “intermediate sanctions” rules.

State and Local Property, Sales and Other Tax Exemptions. The status of real property and sales tax exemptions for nonprofit health care providers has been under scrutiny in the State of Illinois for a number of years. A 2010 Illinois Supreme Court opinion stemming from a 2004 Illinois Department of Revenue (“IDOR”) ruling denying property tax exemption for certain real property owned by one of the Obligated Group Member’s facilities, now known as Presence Covenant Medical Center, a nonprofit hospital located in Urbana, Illinois, created uncertainty about what standards should be applied by the tax assessors for real property tax exemptions in the State of Illinois. In response to this concern, in June 2012, the State of Illinois enacted the Illinois Property and Sales Tax Act that creates new standards for real property and sales tax exemptions for health care providers operating in the State of Illinois. Presence Covenant Medical Center applied for and was determined eligible for property tax exemption under the Illinois Property and Sales Tax Act. See Note 14(d) to the financial statements included in this Official Statement as APPENDIX B.

The Illinois Property and Sales Tax Act provides that a hospital owner or hospital affiliate satisfies the conditions for an exemption from real property taxation if the value of “qualified services or activities” for the hospital year equals or exceeds the relevant hospital entity's estimated property tax liability for the calendar year in which exemption or renewal of exemption is sought. Nonprofit hospitals that satisfy this test will also be exempt from the State of Illinois’ sales and use tax. The Illinois Property and Sales Tax Act includes a list of the items that are included within the “qualified services and activities,” including charity care (free or discounted services pursuant to the hospital’s financial assistance policy, measured at cost); health services to low-income or underserved individuals (including, without limitation, financial or in-kind support relating to the care and treatment of low-income or underserved individuals); subsidies provided to State of Illinois or local governments for programs related to health care for low-income or underserved individuals; support for State of Illinois health care programs for low-income individuals; and the portion of unreimbursed costs attributed to providing, paying for, or subsidizing goods, activities or services that relieve the burden of government relating to health care for low income individuals, including, without limitation, the provision of medical education and training of health care professionals as well as the provision of emergency, trauma, burn, neonatal, psychiatric, rehabilitation or other special services. As discussed herein, two lawsuits challenging the constitutionality of the Illinois Property and Sales Tax Act are pending, and the Supreme Court has accepted review of one of the cases. See “NONPROFIT HEALTH CARE ENVIRONMENT – Challenges to Real Property Tax Exemption.” If the law is found unconstitutional, resulting in significant amounts of the real property of healthcare organizations being subject to taxation, this could adversely affect the financial results of affected health care organizations such as members of the Obligated Group.

It is likely that the loss by an Obligated Group Member of federal income tax exemption would also trigger a challenge to its state income tax exemption and render such entity ineligible for other state exemptions. Depending on the circumstances, such event could be material and adverse to that Obligated Group Member and the Obligated Group as a whole.

It is not possible to predict the scope or effect of future state and local legislative or regulatory actions with respect to taxation of nonprofit corporations. There can be no assurance that future changes in the laws and regulations of state or local governments will not materially adversely affect the financial condition of the Obligated Group, taken as a whole, by requiring payment of income, local property or other taxes.

Maintenance of Tax-Exempt Status of Interest on the Series 2016C Bonds. The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Series 2016C Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and the bond-financed property, 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 each Authority file an information report with the IRS. The Borrower has covenanted in the Loan Agreement that it will comply with such requirements. Future failure by the Borrower or any Benefiting Member to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series 2016C Bonds as taxable, retroactively to the date of issuance. The Authority has covenanted in the Bond Indenture that it will not take any action or refrain from taking any action that would cause interest on the Series 2016C Bonds to be included in gross income for federal income tax purposes.

IRS officials have indicated that more resources will be invested in audits of tax-exempt bonds, including the use of bond proceeds, in the charitable organization sector, with specific reviews of private use. The IRS sent post-issuance compliance questionnaires to several hundred nonprofit corporations that had borrowed on a tax- exempt basis. After analyzing responses, IRS representatives indicated that it had commenced a number of examinations of hospital tax-exempt bond issuances with wide-ranging areas of inquiry. In the final report, issued July 1, 2011, summarizing the findings and conclusions of the questionnaires, the IRS stressed the importance of formal post-issuance compliance and record-keeping procedures which, once implemented, the borrower should continuously review. The IRS suggested that it may issue future questionnaires as part of its goal to promote post- issuance compliance.

Effective with the 2008 tax year, tax-exempt organizations must also complete Schedules H, K and J to IRS Form 990-Return of Organizations Exempt From Income Tax, which create additional reporting responsibilities. On Schedule H, hospitals and health systems must report how they provide community benefit and specify certain

billing and collection practices. Schedule K requires detailed information related to certain 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. See “Nonprofit Health Care Environment – Bond Examinations” and “—Internal Revenue Service Examination of Compensation Practices and Community Benefit.”

There can be no assurance that responses by Obligated Group Members to an IRS examination or questionnaire, or in their Form 990s, will not lead to an IRS review that could adversely affect the tax-exempt status or the market value of the Series 2016C Bonds or of other outstanding tax-exempt indebtedness of the Obligated Group. Additionally, the Series 2016C Bonds, or other tax-exempt obligations issued for the benefit of the Obligated Group may be, from time to time, subject to examination by the IRS.

In reliance on certain matters identified in the opinion, including representations by the Borrower, Bond Counsel will render an opinion with respect to the tax-exempt status of each Series of the Series 2016C Bonds, as described under the caption “TAX MATTERS.” No private letter ruling has been sought from the IRS with respect to the tax-exempt status of the Series 2016C Bonds, and the opinion of Bond Counsel is not binding on the IRS or the courts. There can be no assurance that an examination of the Series 2016C Bonds will not adversely affect the market value of the Series 2016C Bonds, or that future legislative action might limit or remove the tax-exempt status of interest on the Series 2016C Bonds.

Proposed Legislation Regarding Limitations or Elimination of Tax-Exempt Status of Interest on the Series 2016C Bonds. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2016C Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest on the Series 2016C Bonds to some extent for high-income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2016C Bonds. Prospective purchasers of the Series 2016C Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code. 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 the 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 one or more Obligated Group Member’s tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Obligated Group, taken as a whole, and might lead to loss of tax exemption of interest on the Series 2016C Bonds and other tax-exempt debt of the Obligated Group.

Cost of Capital. From time to time, Congress has considered and is considering revisions to the Internal Revenue Code that may prevent or limit access to the tax-exempt debt market to borrowers or issuers such as the Obligated Group Members. Such legislation, if enacted into law, may have the effect of increasing the capital costs of the Obligated Group Members.

Other Risk Factors

Risks Related to Outstanding Variable Rate Obligations. The Obligated Group Members will not have any variable rate indebtedness secured by Obligations (other than the Revolving Loan Obligation) outstanding on the date of issuance of the Series 2016C Bonds. The Obligated Group Members may in the future may have such variable rate obligations, the interest rates on which could rise. Such interest rates vary on a periodic basis and may be converted to a fixed interest rate. This protection against rising interest rates is limited, however, because the Obligated Group Members would be required to continue to pay interest at the variable rate until they are permitted to convert the obligations to a fixed rate pursuant to the terms of the applicable transaction documents. If in the

future certain variable rate bonds with put features are issued by or on behalf of the Obligated Group Members and such bonds cannot be remarketed when holders demand payment, the Obligated Group Members could be forced to draw under a line of credit, liquidate investments, or apply cash to purchase such variable rate bonds, thus reducing its liquid assets available to pay the Series 2016C Bonds and continue their revenue producing operations. Variable rate demand bonds may be supported by letters of credit issued by commercial banks that, unless extended or replaced, will expire. Should any of these banks not extend a letter of credit at the expiration of its term and should the Obligated Group Members not be able to obtain an alternate letter of credit, provide self-liquidity, or refinance or convert such bonds to an interest rate mode not requiring liquidity, the Obligated Group Members could be required to amortize such bonds in full immediately or over several years, which could deplete or exceed the Obligated Group’s available cash and investments.

Risks Related to Interest Rate Swaps. None of the Obligated Group Members are a party to interest rate swap or other hedging agreements (“Swaps”). One or more Obligated Group Members may in the future enter into Swaps. The Swaps will be subject to periodic “mark-to-market” valuations and at any time may have a negative value to such Obligated Group Member, which may for certain Swaps trigger a requirement that the Obligated Group Member post collateral for the benefit of Swap counterparties. The Swap counterparties may terminate the Swaps upon the occurrence of certain “termination events” or “events of default.” The Obligated Group Member may terminate the Swaps at any time. If either the counterparty to the Swaps or the Obligated Group Member terminates any of the Swaps during a negative value situation, the Obligated Group Member may be required to make a termination payment to such Swap counterparty, and such payment could be material. Certain of the Swaps may require an Obligated Group Member to secure its obligations with collateral in certain circumstances, which circumstances could include, without limitation, a downgrade of the ratings assigned to the long-term debt issued on behalf of the Obligated Group. If the Obligated Group Member is unable to secure its obligations under a Swap with sufficient collateral, the Swap counterparty may have the right to terminate such Swap and the Obligated Group Member may be required to make a termination payment to the Swap counterparty, and such payment could be material. The counterparty may be obligated to make payments to the Obligated Group Member based on a floating rate index and the applicable notional amount, which payments may be more or less than the variable rates the Obligated Group Member is required to pay with respect to a comparable principal amount of the related bonds, as the case may be.

Investments. The Obligated Group has significant holdings in a broad range of investments. Market fluctuations may affect the value of those investments and those fluctuations may be material.

Pension and Benefit Funding. As large employers, health systems may incur significant expenses to fund pension and benefit plans for employees and former employees, and to fund required workers’ compensation benefits. Plans are often underfunded, or may become underfunded and funding obligations in some cases may be erratic or unanticipated and may require significant commitments of available cash needed for other purposes. See APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Miscellaneous – Retirement Plans” for information relating to pension and benefit plans for the Obligated Group.” See also Note 14(d) to the audited financial statements included in this Official Statement as APPENDIX B regarding certain litigation relating to certain of the System’s pension plans that have been previously found to be exempt from ERISA requirements as “church plans.”

Construction Risks. Construction projects are subject to a variety of risks, including but not limited to delays in issuance of required building permits or other necessary approvals or permits, including environmental approvals, strikes, shortages of qualified contractors or materials and labor, and adverse weather conditions. Such events could delay occupancy of major construction projects. Cost overruns may occur due to change orders, delays in construction schedules, scarcity of building materials and labor and other factors. Cost overruns could cause project costs to exceed estimates and require more funds than originally allocated or require the Obligated Group to borrow additional funds to complete projects.

Bond Ratings. There is no assurance that the ratings assigned to the Series 2016C Bonds will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for and marketability of the Series 2016C Bonds. See also “RATINGS” herein.

Suitability of Investment. An investment in the Series 2016C Bonds involves a material degree of risk and should be considered only by investors who have adequate experience to evaluate the merits and the risks of the Series 2016C Bonds and who are able to bear the risk of loss of all or a portion of their investment in the Series 2016C Bonds. Prospective investors should carefully examine this Official Statement, including the Appendices hereto, and their own financial condition, as well as consult their own independent legal and financial advisors, in order to make a judgment as to their ability to bear the economic risk of such an investment, and to determine whether or not the Series 2016C Bonds are an appropriate investment for them.

Security and Enforceability. For certain risks relating to the security and enforceability of the Series 2016C Bonds, the Series 2016C Obligation and the Master Indenture, see “SECURITY FOR THE SERIES 2016C BONDS – Security and Enforceability.”

Covenants. The agreement relating to the Revolving Loan contains, and certain agreements that could be entered into by an Obligated Group Member in the future may contain, covenants that may be waived or enforced by parties to such agreements and may be more restrictive than the Master Indenture covenants described herein. Such covenants could impede the ability of the Obligated Group to realize cash flows sufficient to pay the Series 2016C Obligation or maintain the ratings assigned to the Series 2016C Bonds and their value. Such agreements may require Obligated Group Members to satisfy and maintain specified financial ratios. The ability of the Obligated Group to meet such financial ratios can be affected by events beyond its control, and there can be no assurance it will continue to meet those ratios. A breach of any of these covenants could result in a default under the Master Indenture and such other agreements. Upon an event of default under any of these agreements, creditors of the Obligated Group could elect to declare all outstanding advances immediately due and payable and terminate all commitments to extend further credit. Any such action could deplete cash available to pay the Series 2016C Obligation, or could result in an acceleration of the due date of the Series 2016C Bonds without the consent of their owners. In addition, the Master Indenture may be amended without the consent of the owners of the Series 2016C Bonds in ways that could permit the Obligated Group Members to take future action that is currently prohibited or conditioned, which, if taken, could adversely affect the owners of the Series 2016C Bonds. See also “SECURITY FOR THE SERIES 2016C BONDS – Security and Enforceability – Amendments to Bond Indenture, Loan Agreement and Master Indenture” herein.

Other Future Risks. In the future, the following factors, among others, may adversely affect the operations of health care providers, including the Obligated Group Members, or the market value of health care revenue bonds, including the Series 2016C Bonds, to an extent that cannot be determined at this time:

(a) Adoption of legislation or implementation of regulations that would modify national or State health programs or that would establish national, statewide, local or otherwise regulated rates applicable to hospitals and other health care providers.

(b) Reduced demand for the services of health facilities that might result from decreases or shifts in population or loss of market share to competitors.

(d) Efforts by insurers, employers and governmental agencies to limit the cost of health care services, to reduce the number of hospital beds or other ancillary services and to reduce the utilization of health facilities by such means as prescribed protocols, preventive medicine, improved occupational health and safety and outpatient care or comparable attempts by third-party payors to control or restrict the operations of certain health care facilities.

(e) The occurrence of a natural or man-made disaster, a pandemic or an epidemic that could damage a health care provider’s facilities, interrupt utility service or access to the facilities, result in an abnormally high demand for health care services or otherwise impair a health care provider’s operations or the generation of revenues from the facilities.

(f) Cost and availability of any insurance, such as professional liability, fire, automobile and general comprehensive liability coverages, which health care facilities of a similar size and type generally carry.

TAX MATTERS

Federal tax law contains a number of requirements and restrictions which apply to the Series 2016C Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The Authority, the Borrower and the Users have covenanted to comply with all requirements that must be satisfied in order for the interest on the Series 2016C Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Series 2016C Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2016C Bonds.

Subject to compliance by the Authority, the Borrower and the Users with the above referenced covenants, under present law, in the opinion of Bond Counsel, interest on the Series 2016C Bonds is excludable from the gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations but Bond Counsel expresses no opinion as to whether interest on the Series 2016C Bonds is taken into account in computing adjusted current earnings, which is used in determining the federal alternative minimum tax for certain corporations.

In rendering its opinion, Bond Counsel will rely upon certifications of the Authority, the Borrower and the Users with respect to certain material facts within the Authority’s, the Borrower’s and the Users’ knowledge, will rely on an opinion of the Obligated Group’s general counsel that the Borrower and the Users are each a 501(c)(3) organization and certain other matters, and will rely upon the computations of the yield on the Series 2016C Bonds and the yield on certain investments by Causey Demgen & Moore P.C., certified public accountants. Bond Counsel’s opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result.

Ownership of the Series 2016C Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain 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 tax exempt obligations. Prospective purchasers of the Series 2016C Bonds should consult their tax advisors as to applicability of any such collateral consequences.

The issue price (the “Issue Price”) for each maturity of the Series 2016C Bonds is the price at which a substantial amount of such maturity of the Series 2016C Bonds is first sold to the public. The Issue Price of a maturity of the Series 2016C Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside front cover page hereof.

If the Issue Price of a maturity of the Series 2016C Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity of the Series 2016C Bonds (the “OID Bonds”) and the principal amount payable at maturity is original issue discount.

For an investor who purchases an OID Bond in the initial public offering at the Issue Price for such maturity and who holds such OID Bond to its stated maturity, subject to the condition that the Authority and the Borrower comply with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but owners of OID Bonds should consult their own tax advisors as to whether such original issue discount is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code; and (d) the accretion of original issue discount in each year may result in an alternative minimum tax liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Based upon the stated position of the Illinois Department of Revenue, under Illinois income tax law, accreted original issue discount on such OID Bonds is subject to taxation as it accretes, even

though there may not be a corresponding cash payment until a later year. Owners of OID Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID Bonds.

Owners of Series 2016C Bonds who dispose of Series 2016C Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Series 2016C Bonds in the public offering, but at a price different from the Issue Price or purchase Series 2016C Bonds subsequent to the initial public offering should consult their own tax advisors.

If a Series 2016C Bond is purchased at any time for a price that is less than the Series 2016C Bond’s stated redemption price at maturity or, in the case of an OID Bond, its Issue Price plus accreted original issue discount (the “Revised Issue Price”), the purchaser will be treated as having purchased a Series 2016C Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Series 2016C Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser’s election, as it accrues. Such treatment would apply to any purchaser who purchases an OID Bond for a price that is less than its Revised Issue Price. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such Series 2016C Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Series 2016C Bonds.

An investor may purchase a Series 2016C Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as “bond premium” and must be amortized by an investor on a constant yield basis over the remaining term of the Series 2016C Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax exempt bond. The amortized bond premium is treated as a reduction in the tax exempt interest received. As bond premium is amortized, it reduces the investor’s basis in the Series 2016C Bond. Investors who purchase a Series 2016C Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Series 2016C Bond’s basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Series 2016C Bond.

There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the Series 2016C Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Series 2016C Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax exempt obligations to determine whether, in the view of the Service, interest on such tax exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Series 2016C Bonds. If an audit is commenced, under current procedures the Service may treat the Authority as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Series 2016C Bonds until the audit is concluded, regardless of the ultimate outcome.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt obligations, including the Series 2016C Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Series 2016C Bond owner who fails to provide an accurate Form W 9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Series 2016C Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes.

Interest on the Series 2016C Bonds is not exempt from present Illinois income taxes. Ownership of the Series 2016C Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Series 2016C Bonds.

Prospective purchasers of the Series 2016C Bonds should consult their tax advisors regarding the applicability of any such state and local taxes.

APPROVAL OF LEGALITY

The validity of the Series 2016C Bonds is subject to the delivery on the date of issuance of an approving opinion of Chapman and Cutler LLP, as Bond Counsel. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain other legal matters will be passed upon for the Authority by its special counsel, Schiff Hardin LLP, for the Borrower and the other Obligated Group Members by the Chief Legal Officer and General Counsel of the Borrower, Jeannie C. Frey, Esq., and their special counsel, Nixon Peabody LLP, and for the Underwriter by its counsel, Orrick, Herrington & Sutcliffe LLP, which also undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

INDEPENDENT AUDITORS

The consolidated financial statements of Presence Health Network and Affiliates as of December 31, 2015 and 2014, and for the years then ended, included in APPENDIX B to this Official Statement, have been audited by KPMG LLP, independent auditors, as stated in their report appearing therein.

FINANCIAL ADVISOR

The Borrower has retained Kaufman, Hall & Associates, LLC, Skokie, Illinois, as financial advisor in connection with the issuance of the Series 2016C 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.

VERIFICATION

The arithmetical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the Borrower relating to (a) computation of forecasted receipts of principal and interest on the escrow securities for the Series 1999A Bonds, the Series 1999B Bonds, the Series 2009 Bonds, the Series 2009A Bonds, the Series 2010 Bonds and the forecasted payments of principal and interest to redeem the Series 1999A Bonds, the Series 1999B Bonds, the Series 2009 Bonds, the Series 2009A Bonds, the Series 2010 Bonds and (b) computation of the yield on the Series 2016C Bonds and the escrow securities, will be verified by Causey Demgen & Moore P.C. (“Causey Demgen”). Such computations were based solely upon assumptions and information supplied by the Underwriter on behalf of the Borrower. Causey Demgen has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome.

LITIGATION The Borrower and Obligated Group

There is no controversy or litigation of any nature now pending against any Obligated Group Member or, to the knowledge of the officers of the Borrower, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the Series 2016C Bonds, or in any way contesting or affecting the validity of the Series 2016C Bonds, any proceedings of the Borrower taken concerning the issuance or sale thereof, or the pledge or application of any moneys or security provided for the payment of the Series 2016C Bonds.

As with most health care providers, each Obligated Group Member is subject to certain legal actions that, in whole or in part, are not or may not be covered by insurance (or reinsurance as to certain self-insured risks) because of the type of action or amount or types of damages requested (e.g., punitive damages), because of a reservation of rights by an insurance carrier, or because the action has not proceeded to a stage that permits full evaluation. Management of the Borrower does not anticipate that any such actions will ultimately result in punitive

damage awards or judgments in excess of applicable insurance limits, or if such awards or judgments were to be entered, that they would have a material adverse impact on the financial condition of the Obligated Group, taken as a whole.

Except as described Notes 14(a) and (d) to the audited financial statements included in APPENDIX B and in APPENDIX A – “INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP – Miscellaneous – Retirement Plans – Church Plan Litigation,” no litigation, proceedings or investigations are pending or, to the Borrower’s knowledge, threatened against any Obligated Group Member, except (i) litigation, proceedings or investigations for which the probable ultimate recoveries and the estimated costs and expenses of defense will be entirely within the Obligated Group Members’ applicable insurance policy limits (subject to applicable deductibles) or are not in excess of the total reserves held under applicable self-insurance programs or funds otherwise available, or (ii) litigation, proceedings or investigations for which the Borrower believes there is no reasonable likelihood that an adverse determination will result or which, if adverse, would not have a materially adverse effect on the financial condition or results of operations of the Obligated Group, taken as a whole. There can be no assurance, however, that future litigation will not have a material adverse effect on any Obligated Group Member or the Obligated Group as a whole.

The Authority

There is not now pending (as to which the Authority has received service of process) or, to the actual knowledge of the Authority, threatened, any litigation against the Authority restraining or enjoining the issuance or delivery of the Series 2016C Bonds or questioning or affecting the validity of the Series 2016C Bonds or the proceedings or authority under which the Series 2016C Bonds are to be issued. Neither the creation, organization or existence of the Authority nor the title of any of the present members or other officers of the Authority to their respective offices is being contested. There is no litigation against the Authority pending (as to which the Authority has received service of process) or, to the actual knowledge of the Authority, threatened, which in any manner questions the right of the Authority to enter into the Bond Indenture, the Loan Agreement or the bond purchase contract for the Series 2016C Bonds or to secure the Series 2016C Bonds in the manner provided in the Bond Indenture, the applicable resolution

RATINGS

Moody’s Investors Service, Inc., Standard & Poor’s and Fitch Ratings, Inc. have assigned municipal bond ratings of “Baa3” (negative outlook), “BBB-” (negative outlook) and “BBB” (negative outlook), respectively, to the Series 2016C Bonds. Any explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. Certain information and material not included in this Official Statement were furnished to the rating agencies concerning the Series 2016C Bonds. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions made by the rating agencies themselves. There is no assurance that the ratings mentioned above will remain in effect for any given period of time or that a rating might not be revised downward, suspended, or withdrawn entirely by the applicable rating agency, if in its judgment circumstances so warrant. Neither the Authority nor the Underwriter has any responsibility to bring to the attention of the owners of the Series 2016C Bonds any proposed revision, suspension or withdrawal of the rating on the Series 2016C Bonds. Any such downward revision, suspension or withdrawal of such rating may have an adverse effect on the market price or marketability of the Series 2016C Bonds. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.

UNDERWRITING

The Series 2016C Bonds are being purchased by J.P. Morgan Securities LLC (the “Underwriter”), pursuant to a bond purchase contract for the Series 2016C Bonds. The Underwriter has agreed to purchase the Series 2016C Bonds at a purchase price of $______(consisting of the aggregate principal amount of the Series 2016C Bonds of $______, [plus/less] an original [net] issue [premium/discount] of $______, less an underwriter’s discount of $______). The bond purchase contract for the Series 2016C Bonds provides that the Underwriter will purchase all of the Series 2016C Bonds, if any are purchased, and contains the agreement of the Borrower to indemnify the Underwriter and the Authority against certain liabilities.

CERTAIN RELATIONSHIPS

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

J.P. Morgan Securities LLC is the beneficial owner of the Series 2016A Bonds and the Refunded Series 2016B Bonds. J.P. Morgan Securities LLC will receive proceeds from the Series 2016C Bonds to refund the Series 2016A Bonds and the Refunded Series 2016B Bonds and cash from the Obligated Group to redeem the remaining Series 2016B Bonds. J.P.Morgan Chase Bank, N.A. is also providing the Revolving Loan.

MISCELLANEOUS

The foregoing and subsequent summaries or descriptions of provisions of the Series 2016C Bonds, the Bond Indenture, the Loan Agreement, the Master Indenture, the Series 2016C Obligation and the Mortgages and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices attached hereto are a part of this Official Statement. Copies, in reasonable quantity, of the Bond Indenture, the Loan Agreement, the Master Indenture, the Series 2016C Obligation and the Mortgages may be obtained during the offering period upon request directed to the Underwriter and, thereafter, upon request directed to the corporate trust office of the Bond Trustee.

The information contained in this Official Statement has been compiled or prepared from information obtained from the Borrower and official and other sources deemed to be reliable and, while not guaranteed as to completeness or accuracy, is believed to be correct as of the date of this Official Statement. The Authority furnished only the information relating to itself contained under the headings “THE AUTHORITY” and “LITIGATION – The Authority” and, except for such information, relating to such Authority, makes no representation as to the adequacy, completeness or accuracy of this Official Statement or the information contained herein. Any statements involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact.

The Bond Trustee has not participated in the preparation of this Official Statement. This Official Statement is not to be construed as a contract or agreement among any of the Authority, the Borrower or any other Obligated Group Member and the purchasers or Holders of the Series 2016C Bonds.

PRESENCE HEALTH NETWORK, for itself and as Obligated Group Agent on behalf of the other Obligated Group Members

75 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A

INFORMATION CONCERNING PRESENCE HEALTH NETWORK OBLIGATED GROUP

The information contained herein as Appendix A to this Official Statement has been obtained from Presence Health Network and its Affiliates

Capitalized terms used, but not defined, in this Appendix A are defined in the forepart of this Official Statement and in Appendix C and Appendix D to this Official Statement [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

Page OVERVIEW OF PRESENCE HEALTH NETWORK AND AFFILIATES ...... A-1 Introduction and History...... A-1 Mission, Vision and Values ...... A-3 Sponsorship ...... A-3 Corporate Organization and Operational Structure ...... A-4 Obligated Group Members and Affiliated Entities...... A-5

GOVERNANCE AND MANAGEMENT OF THE CORPORATION ...... A-8 Sponsorship ...... A-8 Board of Directors ...... A-8 Conflicts of Interest ...... A-9 Standing Committees ...... A-9 Management ...... A-10

ACUTE CARE MINISTRIES ...... A-14 Overview and Services of the Acute Care Ministries ...... A-14 Historical Utilization of Acute Care Ministries ...... A-15 Medical Staff ...... A-16 Market Share ...... A-17

PHYSICIAN PLATFORM AND OTHER CLINICAL INITIATIVES ...... A-18 Presence Medical Group...... A-18 Presence Health Partners ...... A-19

PRESENCE SENIOR CARE MINISTRIES ...... A-20 Overview ...... A-20 Historical Utilization of Senior Care Facilities ...... A-20

STRATEGIC INITIATIVES ...... A-20 Governance and Advisory Body Oversight of Quality and Population Health ...... A-20 Population Health; Value-Based Provider ...... A-21 Care Coordination and the Medicare Market ...... A-21 Use of Technology ...... A-22 Clinical and Operational Excellence ...... A-22

FINANCIAL AND OPERATING INFORMATION ...... A-22 Presentation of Financial Information ...... A-22 Historical Financial Information ...... A-22 Sources of Gross Patient Service Revenue ...... A-26 Indebtedness and Certain Liabilities ...... A-26 Historical and Pro Forma Capitalization ...... A-26 Historical and Pro Forma Coverage of Debt Service ...... A-27 Credit Facility ...... A-27 Unrestricted Investments and Liquidity ...... A-27 Management’s Discussion of Financial Performance ...... A-28 Turnaround Plan: Initiatives ...... A-31 Turnaround Plan: Projected Timing and Financial Outcomes of Initiatives ...... A-33 Turnaround Plan: Comparison of Projections to Performance ...... A-38 Summary of Management Discussion of Financial Performance ...... A-39

i Table of Contents (continued)

Page Integrated Financial Management Process ...... A-39 Community Benefits ...... A-40

MISCELLANEOUS ...... A-42 Information Systems ...... A-42 Licensure, Accreditation, Memberships and Awards ...... A-42 Malpractice and Other Insurance ...... A-43 Associates ...... A-43 Retirement Plans ...... A-43 Educational Programs and Affiliations ...... A-44

ii OVERVIEW OF PRESENCE HEALTH NETWORK AND AFFILIATES

Introduction and History

Presence Health is a Catholic-sponsored health care delivery system (“Presence Health” or the “System”), which includes an ultimate parent corporation, Presence Health Network (referred to throughout as the “Corporation”), and its affiliated entities (the “Affiliates”). The Corporation and its Affiliates operate in accordance with and in furtherance of the Presence Health Mission and Values developed by the System’s Founding Congregations (see “Sponsorship” below) and approved by the Corporation’s Board.

Presence Health was formed through the affiliation of two Illinois-based Catholic healthcare systems, Provena Health and Resurrection Health Care, effective as of November 1, 2011. The name “Presence Health” and its logo (four interconnected circles joined together by a cross at the center) were chosen by the sponsors to reflect the essence of Catholic health care. As a Catholic health system, Presence Health seeks to witness to God’s presence through the interactions of its associates with its patients, communities and each other. Sponsorship of the Presence Health system was transferred from the five Founding Congregations in late 2015, to Presence Health Ministries, a public juridic person recognized by the Holy See as the canonical Sponsor of the System.

History of Provena Health and Resurrection Health Care Systems

Provena Health was formed as of December 1, 1997, through the merger of three health systems sponsored by different orders of Catholic religious women: the Sisters of Mercy of the Americas (West Midwest Region), the Franciscan Sisters of the Sacred Heart, and the Servants of the Holy Heart of Mary. As a result of the merger, Provena Health operated six hospitals and numerous skilled nursing facilities and other senior residential and post-acute facilities, as well as primary care practices, ambulatory care centers and home health and hospice operations.

Resurrection Health Care was founded by the Sisters of the Resurrection, who built Resurrection Medical Center in Northwest Chicago in 1953 on Congregation-owned property, to serve the Polish immigrants in that community. By 2001, Resurrection Health Care grew to four hospitals and ten skilled nursing and other senior care and post-acute facilities. In March of 2001, the Sisters of the Resurrection entered into a co-Sponsorship arrangement with the Sisters of the Holy Family of Nazareth, resulting in the addition of two acute care hospitals, Holy Family Medical Center in Des Plaines, Illinois and Saint Mary of Nazareth Hospital in Chicago, to the Resurrection system. The Resurrection system acquired Oak Park-based West Suburban Medical Center, together with the West Suburban College of Nursing (now Resurrection University) in 2004. Resurrection Health Care sold West Suburban Medical Center and Westlake Community Hospital (acquired in 1998 and located in Melrose Park, Illinois) in August 2010.

Overview of Presence Health

Presence Health is the second largest health system in the State of Illinois, the largest Catholic healthcare system in the State and one of the largest Catholic systems in the Midwest, as measured by total revenue of $2.6 billion and total assets of $3.0 billion for the fiscal year ended December 31, 2015. The System’s hospitals and other providers collectively offer a comprehensive continuum of integrated health care services, including emergency, medical, surgical, behavioral, rehabilitative and other health services in inpatient and outpatient settings; senior care services; home health services; and primary and specialty physician services to the communities it serves. The System has 12 acute care hospitals, located in the Chicago and Central Illinois areas, with combined approximately 2,768 available beds as of

A-1 December 31, 2015. The System has four hospitals located in the City of Chicago, and six others in the greater Chicagoland communities of Evanston, Des Plaines, Elgin, Aurora, Kankakee and Joliet. Its two Central Illinois hospitals provide services in the Danville and Champaign/Urbana areas. Presence Holy Family Medical Center, one of these 12 facilities, is a long-term acute care hospital. The Presence Health hospitals are sometimes referred to herein as the “Acute Care Ministries.”

The System’s Acute Care Ministries operate in three distinct geographic areas: City of Chicago, Chicago Suburbs, and Central Illinois. The geographies and the Acute Care Ministries located in each are as follows:

Area Acute Care Ministries City of Chicago Presence Resurrection Medical Center Presence Saint Joseph Hospital – Chicago Presence Saints Mary and Elizabeth Medical Center(1)

Chicago Suburbs Presence Holy Family Medical Center – Des Plaines Presence Mercy Medical Center – Aurora Presence Saint Francis Hospital – Evanston Presence Saint Joseph Hospital – Elgin Presence Saint Joseph Medical Center – Joliet Presence St. Mary’s Hospital – Kankakee

Central Illinois Presence Covenant Medical Center – Urbana Presence United Samaritans Medical Center – Danville

(1) Presence Saint Mary of Nazareth Hospital and Presence Saint Elizabeth Hospital are separately licensed. They are geographically proximate and managed under a common management team as Presence Saints Mary and Elizabeth Medical Center. The two hospitals have a single, combined medical staff.

The System’s senior and other post-acute care facilities and programs (the “Senior Care Ministries”) are comprised of a wide spectrum of services delivered on 21 campuses, including long-term care and senior residential facilities together with a number of other post-acute care programs. Through Presence Medical Group (“PMG”), the System currently employs approximately 270 physician providers and 43 mid-level practitioners throughout Illinois. On an annual basis, the System has over 1.7 million outpatient visits and over 90,000 acute care inpatient admissions across the communities it serves.

See the page following the inside front cover of the Official Statement to which this APPENDIX A is attached for a map detailing the locations of the Acute Care Ministries, certain of the Senior Care Ministries (described below), and a number of the System’s practice sites and other facilities of the System. Multiple practices are housed in single locations, some of which are in medical office buildings located on campuses of the Acute Care Ministries and a number of the ambulatory care sites within the System.

Recent Financial Issues

The System is in the process of implementing a turnaround initiative. Although Presence Health had reported an approximately $40.2 million excess of revenue over expenses for the nine-month period ended September 30, 2015 (unaudited), significant 4th Quarter 2015 accounting adjustments resulted in a total reported loss for the year of approximately $185.6 million. Such loss raised the possibility of covenant violations under the Obligated Group’s then-existing Master Indenture and bank agreements. The reported losses and possible covenant violations related to the Obligated Group’s debt

A-2 resulted in rating downgrades on its outstanding bonds. The Obligated Group determined to seek the consent of a majority of the holders of obligations under the then-existing Master Indenture to amend the covenant within the terms of such Master Indenture to eliminate the debt service coverage requirement for the fiscal year ended December 31, 2015. The purchaser of the Series 2016A Bonds and the Series 2016B Bonds (as defined herein) (J.P. Morgan Securities LLC, the Underwriter of the Series 2016C Bonds) consented to the amendment. In addition, all bank agreements were terminated in connection with the issuance of the Series 2016A Bonds and Series 2016B Bonds. To address the financial issues reflected in the 2015 financial statements, Presence Health management has initiated an aggressive, multi- pronged turnaround initiative (see “FINANCIAL AND OPERATING INFORMATION – Turnaround Plan: Initiatives” herein).

Mission, Vision and Values

The System operates under the following overarching Mission, Vision and Values.

Mission: Inspired by the healing ministry of Jesus Christ, we Presence Health, a Catholic health system, provide compassionate, holistic care with a spirit of healing and hope in the communities we serve.

Vision: We will be a leader in transforming health care by delivering clinical excellence, outstanding value and exceptional experience to achieve better health for our communities.

Values: Our Values guide the work we do and are at the core of who we are.

Honesty

The Value of Honesty instills in us the courage to always speak the truth, to act in ways consistent with our Mission and Values, and to choose to do the right thing.

Oneness

The Value of Oneness inspires us to recognize that we are interdependent, interrelated and interconnected with each other and all those we are called to serve.

People

The Value of People encourages us to honor the diversity and dignity of each individual as a person created and loved by God, bestowed with unique and personal gifts and blessings, and an inherently sacred and valuable member of the community.

Excellence

The Value of Excellence empowers us to always strive for exceptional performance as we work individually and collectively to best serve those in need.

Sponsorship

Presence Health is sponsored by Presence Health Ministries, a Catholic canonical entity recognized by the Holy See as a public juridic person that serves as the successor to the five founding

A-3 Congregations who were the original sponsors of Presence Health (collectively, the “Founding Congregations”):

- Franciscan Sisters of the Sacred Heart - Servants of the Holy Heart of Mary - Sisters of the Holy Family of Nazareth - Sisters of Mercy of the Americas - Sisters of the Resurrection

See “GOVERNANCE AND MANAGEMENT OF THE CORPORATION – Sponsorship” herein.

None of the Founding Congregations is a member of the Obligated Group or of the Credit Group and none of the sponsoring orders is liable, directly or indirectly, for payments with respect to the Master Indenture, the Series 2016 Obligation, the Loan Agreement or the Series 2016C Bonds. The sponsoring orders are not included in the financial statements included as APPENDIX B to this Official Statement. The revenues and assets of such entities are not available to the Corporation for purposes of making, nor do such entities have any independent obligation to make, debt service payments under the Loan Agreement or the Master Indenture, including payments on the Series 2016 Obligation or on the Series 2016C Bonds.

Corporate Organization and Operational Structure

The Corporation is an Illinois not for profit corporation exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the “Code”), as an organization described in Section 501(c)(3) of the Code and is not a private foundation as defined in Section 509(a) of the Code. As part of a Catholic health care system, the Corporation and its Affiliates act in accordance with Roman Catholic teachings and abide by the Ethical and Religious Directives for Catholic Health Care Services, as promulgated from time to time by the local Ordinary (the Bishop).

The Corporation, together with its Affiliates, implemented a corporate structure reorganization that was fully effective on January 1, 2016 (the “Reorganization”). The Reorganization was designed to simplify the Presence Health corporate structure and mirror the streamlined governance structure approved by the Board effective January 1, 2016. Under the new organizational structure, Presence Health Network remains the ultimate system parent corporation and is the sole corporate member of four tier-two corporations representing the System’s major functional areas: Presence Care Transformation Corporation, Presence Health Partners Services, Presence Health Foundation Board of Trustees and Resurrection University. Presence Care Transformation Corporation is the sole or indirect member of System corporations that own and operate healthcare providers, including hospitals, nursing homes and physician groups. Presence Health Partners Services serves as the member of the System’s accountable care/population health entities. Presence Health Foundation Board of Trustees coordinates all of the System charitable giving and fundraising activities. Resurrection University serves as the educational arm of Presence Health.

The Reorganization also modified the System’s governance structure in a manner intended to help the System better meet the challenges of population health. See “STRATEGIC INITIATIVES – Governance and Advisory Body oversight of Quality and Population Health” herein.

A-4 Obligated Group Members and Affiliated Entities

The members of the Obligated Group are listed below and include Presence Health Network (which continues as the Obligated Group Agent) and affiliated entities that own and operate 12 acute care hospitals, the owned physician practices and substantially all of the senior care facilities. For the fiscal year ended December 31, 2015, the Obligated Group accounted for approximately 92.8% of the total revenue, and 94.9% of the total assets of the System. The following chart depicts the corporate and affiliated entity organizational structure of Presence Health and the Obligated Group members.

Obligated Group Members

All members of the Obligated Group are tax-exempt Illinois not for profit corporations. As shown in the Organization Chart, all of the members listed below are directly or indirectly controlled by the Corporation.

Presence Health Network is the ultimate parent corporation of Presence Health and is tax-exempt under Section 501(c)(3) of the Internal Revenue Code as a supporting organization. It provides or arranges for administrative and management support for all of the healthcare facilities within Presence Health, which includes 12 acute care hospitals, 21 long-term care and senior residential campuses and other post-acute programs, approximately 270 employed physicians and 43 employed mid-level providers and approximately 88 physician practice sites. Through the exercise of reserved powers, the Presence

A-5 Health Network Board of Directors approves budgets of the System, major transactions, strategies and strategic initiatives, and monitors the performance of the System in the areas of quality, finance, regulatory compliance, mission and conformance with Catholic identity and tax-exempt status. Certain reserved powers regarding significant matters and issues affecting the Catholic identity of the System as a whole or individual Affiliates are also held by Presence Health Ministries as the Sponsor of Presence Health.

Presence Care Transformation Corporation (f/k/a Presence PRV Health) is the direct or second-tier member of the corporations that own and operate the System’s clinical operations and services, including hospitals, physicians, ambulatory care, long-term care, home health, hospice and behavioral health. It is charged with overseeing the quality and integration of care across all of the System’s service lines.

Presence Central and Suburban Hospitals Network (f/k/a Presence Hospitals PRV) owns and operates the following six acute care hospitals: Presence Covenant Medical Center, Presence Mercy Medical Center, Presence Saint Joseph Hospital–Elgin, Presence Saint Joseph Medical Center, Presence St. Mary’s Hospital, and Presence United Samaritans Medical Center. See “ACUTE CARE MINISTRIES” herein.

Presence Chicago Hospitals Network (f/k/a Presence RHC Corporation) owns and operates the following six acute care hospitals: Presence Holy Family Medical Center, Presence Resurrection Medical Center, Presence Saint Francis Hospital, Presence Saint Joseph Hospital–Chicago, and Presence Saints Mary and Elizabeth Medical Center, comprising Presence Saint Mary of Nazareth Hospital and Presence Saint Elizabeth Hospital. Presence Saint Mary of Nazareth Hospital and Presence Saint Elizabeth Hospital are separately licensed, but are geographically proximate and managed under a common management team. See “ACUTE CARE MINISTRIES” herein.

Presence Healthcare Services encompasses the following operating divisions: (i) Presence Medical Group, which currently employs approximately 270 physicians and 43 mid-level providers with approximately 88 practice locations across the Presence Health service area, and (ii) Presence Properties, which owns certain medical office buildings and other real estate. See “PHYSICIAN PLATFORM AND OTHER CLINICAL INITIATIVES” herein.

Presence Life Connections owns and operates skilled nursing facilities, independent living facilities, assisted living facilities and other post-acute care facilities and programs in northern and central Illinois and northwest Indiana. See “PRESENCE SENIOR CARE MINISTRIES” herein.

Presence Senior Services – Chicagoland (f/k/a Presence RHC Senior Services) owns and operates skilled nursing facilities, independent living facilities and assisted living facilities as well as other post-acute care facilities and programs in Chicago and the suburbs. See “PRESENCE SENIOR CARE MINISTRIES” herein.

Affiliated Entities / Not Obligated Group Members

The following corporations (all either directly or indirectly controlled by the Corporation) are part of the System but are not members of the Obligated Group. Except as noted, all are tax-exempt, Illinois not for profit corporations.

Arthur Merkle–Clara Knipprath Nursing Home owns and operates a skilled nursing facility in Clifton, Illinois.

A-6 L. Gilbraith Insurance SPC Ltd. is a Cayman Island registered insurance company that provides excess insurance coverage for the System and is 100% reinsured.

LaVerna Terrace Housing Corporation owns and operates a senior housing facility in Indiana financed under Section 202 of the National Housing Act of 1959, as amended.

Medicare Value Partners operates as a Medicare Shared Savings Program accountable care organization.

Presence Ambulatory Services is organized to develop, own and operate ambulatory healthcare facilities.

Presence Behavioral Health provides mental health and related health care services and programs, and operates in multiple facilities across the System’s service area.

Presence Care @ Home provides private duty home health and related health care services.

Presence Health Foundation Board of Trustees (“Presence Foundation”) serves to foster, solicit and receive gifts and contributions for and on behalf of the charitable programs and activities of the System.

Presence Health Partners, LLC is an Illinois limited liability company that serves as the systemwide clinically-integrated/population health contracting organization for the System.

Presence Health Partners Services serves as the member of the System’s accountable care/clinical integration/population health organizations.

Presence Home Care provides home health and related health care services and programs.

Presence Properties, Inc. is an Illinois for profit corporation organized to hold real property.

Presence Service Corporation is a taxable Illinois not for profit corporation that holds Presence Health’s membership interest in the Presence Physicians Immediate Care (PIC) joint venture. See “STRATEGIC INITIATIVES – Population Health; Value-Based Provider” herein.

Presence Ventures, Inc. is an Illinois for profit corporation, which is the sole shareholder of Presence Properties, Inc.

Rainbow Hospice and Palliative Care operates hospice and palliative care programs.

Resurrection University is an accredited, degree-granting institution that offers Bachelor’s and Master’s Degree programs in Nursing, Pre and Post-Licensure Bachelor’s Degree programs in Radiography, and Bachelor’s and Certificate programs in Health Informatics and Information Management. See “MISCELLANEOUS - Educational Programs and Affiliations” herein.

Vermilion County Surgery Center, LLC is an Illinois limited liability company that owns and operates an ambulatory surgery center in Danville, Illinois purchased in 2012.

A-7 GOVERNANCE AND MANAGEMENT OF THE CORPORATION

Sponsorship

The Corporation has no members. Presence Health Ministries, a public juridic person of the Roman Catholic Church, serves as the canonical Sponsor of Presence Health and has reserved to itself certain governance-related approval and other powers with respect to the Corporation and its affiliates. Such powers are generally exercised based on the recommendation or approval of the Board of Directors. The reserved and approval powers currently held by Presence Health Ministries include the power to approve the transfer or encumbrance of assets in excess of stable patrimony limits, to approve the merger or dissolution of the Corporation, to appoint or remove the Directors of the Corporation, or to approve the incurrence of additional System debt above a level determined from time to time by Presence Health Ministries.

Board of Directors

Subject to the powers reserved to or shared with the Sponsor, Presence Health Ministries, as described above, the management and operation of the Corporation are governed by a Board of Directors (the “Board” or the “Directors”), which consists of least fourteen (14) and no more than nineteen (19) Directors, including: (i) the President and Chief Executive Officer of the Corporation, who serves ex- officio with vote; and (ii) up to five Directors directly appointed by Presence Health Ministries. All other Directors are appointed by Presence Health Ministries from among those nominated by the Corporation’s Board of Directors upon the recommendation of its Governance Committee. Pursuant to the Corporation’s current Bylaws, Directors may serve up to three consecutive terms of three years, except that ex-officio Directors serve co-terminously with the office to which they are appointed or elected and Presence Health Ministries appointees may serve for an indefinite number of terms.

Currently, the Board consists of sixteen (16) members, including the President and Chief Executive Officer of the Corporation, three Presence Health Ministries appointees and twelve (12) additional Directors. The current members of the Board are as follows:

Name Occupation/Affiliation Current Term Expiration Victor Orler Vice Chairman 12/31/2018 Board Chair VitaHEAT Medical

Haven Cockerham President & CEO 12/31/2018 Board Vice Chair Cockerham & Associates LLC (Human Resources Consulting)

Michael Englehart President & CEO Ex-Officio Presence Health

James Gravell Director and Senior CFO Consultant 12/31/2018 Warbird CFO Consulting Network

Bruce Hamory, MD, FACP Partner & CMO - Oliver Wyman 12/31/2018 Health and Life Sciences

A-8 Name Occupation/Affiliation Current Term Expiration Mark Hanson, Esq. Partner 12/31/2017 Fabrizio, Hanson, Peyla & Kawinski, PC

Thomas Huberty, MD Retired Orthopaedic Surgeon 12/31/2017

Sister Patricia Koschalke, Member of Presence Health Ministries No term limit CSFN

Marsha Ladenburger Retired Healthcare System Executive 12/31/2016

Laurie Lafontaine Retired VP of Finance/Treasury, CPA, 12/31/2018 MBA

Sister Terry Maltby, RSM Governance/Sponsorship Consultant No term limit Member of Presence Health Ministries

Susan McDonough Retired VP, Strategy & 12/31/2017 System Development, Covenant Health, Inc.

Thomas Settles Retired CEO 12/31/2016

Sister Mary Shinnick, OSF Treasurer No term limit Franciscan Sisters of the Sacred Heart Member of Presence Health Ministries

Guy Wiebking Retired Healthcare Executive 12/31/2018

James Winikates Retired CPA 12/31/2016

Conflicts of Interest

From time to time, the Corporation and its Affiliates conducts business transactions with organizations or corporations with which one or more members of the Board or management may be affiliated. The Corporation has a conflicts of interest policy which states that any Directors found to have a conflict of interest may not vote on any matters relating to the conflict, and may not be present at any portion of a meeting discussing matters involving the conflict. On an annual basis, the Corporation conducts a disclosure process whereby all Board members and senior management complete a survey inquiring about possible conflicts and provides an opportunity to disclose any possible conflicts to ensure that such conflicts, or the appearance of such, are managed or addressed appropriately.

Standing Committees

The Board has six standing committees: the Audit and Compliance Committee, Executive Committee, Finance Committee, Governance Committee, Human Resources Committee and Investment Committee. At least a majority of the members of each standing committee are Board members. Other than the Executive Committee, each standing committee meets at least four times per year. The Executive Committee meets from time to time as needed. The roles, responsibilities and membership

A-9 requirements of the standing committees are specified in committee charters adopted and amended from time to time by the Board of Directors. The Board may delegate additional responsibilities to standing committees by Board resolution, to the extent permitted under the Illinois Not for Profit Corporation Act.

Management

The management of Presence Health is vested in the President and CEO, who is appointed by the Board of Directors. Members of senior management are hired by and report to the CEO.

As described above, the majority of clinical activity taking place in facilities owned by Presence Health occurs through corporations, the sole corporate member of which is Presence Care Transformation Corporation. Hospitals, also referred to herein as “Acute Care Ministries,” are managed under the oversight of the System Chief Operations and Academic Officer. Each Acute Care Ministry has a CEO or other senior executive officer, with some leaders serving in executive roles for two Acute Care Ministries that are geographically proximate. Biographical information for Presence Health’s senior management is set forth below.

Michael Englehart, System President and Chief Executive Officer. Mr. Englehart was appointed as System President and CEO as of October 1, 2015. He has nearly 20 years of health care experience, including more than a decade with Advocate Health Care. Prior to joining Presence Health Mr. Englehart served as President of Advocate Physician Partners, leading their clinically integrated network of 4,900 physicians and 13 hospitals. He also served as President of Advocate South Suburban Hospital, and as Regional Vice President at Advocate Christ Medical Center. Mr. Englehart earned his Bachelor of Arts at Northern Illinois University, in DeKalb, Illinois, a Master of Business Administration at Lake Forest Graduate School of Management in Lake Forest, Illinois, and Master of Arts at Lewis University in Romeoville, Illinois.

Sam Bagchi, System Chief Medical and Quality Officer. As Chief Quality and Medical Officer, Dr. Bagchi provides leadership and direction to the System Quality/Risk, Information Services, Telehealth Services, Hospitalists, Emergency Medicine and Clinical Analytics functions. A board certified internal medicine physician, Dr. Bagchi previously served as Senior Vice President, Chief Medical Officer for Methodist Health System, a seven hospital health system in Texas. Dr. Bagchi earned his medical degree from Indiana University and completed the Internal Medicine residency program at Beth Israel Deaconess Medical Center. He joined Presence Health in July, 2015.

Bryan Eklund, Executive Vice President, Operational Improvement. Mr. Eklund is co-leader of a comprehensive and multi-faceted turnaround process for Presence Health. Since 2000, Mr. Eklund has served as part of E2, a healthcare executive consulting team serving hospitals, healthcare systems, and physician practices. He has helped lead financial turnarounds, acquisitions and integrations of hospitals into healthcare systems as well as consolidations and hospital closings. Through E2, Mr. Eklund has worked with Advocate Healthcare, Franciscan Alliance, and the University of Chicago and its many hospitals. Mr. Eklund received both a Master’s degree and Bachelor’s degree from Wheaton College. He joined Presence Health in October, 2015.

Ann Errichetti, M.D., System Chief Operations and Academic Officer. Dr. Errichetti joined Presence Health in May 2016. She is the senior management leader responsible for the operations of the System’s acute and post-acute care ministries, helping each achieve its clinical, financial and quality of care goals. She also has management responsibility for oversight of Resurrection University and the System’s extensive Graduate Medical Education (GME). Dr. Errichetti is a board-certified cardiologist, with nearly 30 years of senior leadership experience in hospital and medical administration. Most recently, she was the CEO at St. Peter’s Hospital and Albany Memorial Hospital as well as Vice

A-10 President, Acute Care Albany, in Albany, New York. Prior to serving in her New York hospital positions, Dr. Errichetti was President of Advocate Condell Medical Center in Libertyville, Illinois and was the Chief Academic Officer of Advocate Health Care. Dr. Errichetti graduated from Fordham University in Bronx, New York, and received her medical degree from Harvard Medical School in Boston. She also received an MBA from Clark University in Worcester, Massachusetts. She completed her Internal Medicine residency and Clinical Fellowship in Cardiology at the University of Massachusetts Medical Center in Worcester, and a Clinical Research Fellowship in Cardiovascular Medicine at Massachusetts General Hospital in Boston.

Dennis Erwin, Executive Vice President, Operational Improvement and Transactions. Mr. Erwin is co-leader of a comprehensive and multi-faceted turnaround process for Presence Health. Since 2000, Dennis has served as part of E2, a healthcare executive consulting team serving hospitals, healthcare systems, and physician practices. He has helped lead financial turnarounds, acquisitions and integrations of hospitals into healthcare systems as well as consolidations and hospital closings. Through E2, Mr. Erwin has worked with Advocate Healthcare, Franciscan Alliance, and the University of Chicago and its many hospitals. Mr. Erwin received his doctorate specializing in Leadership and Change Management from Rush University, Master’s degrees from each of Loyola University Chicago and DePaul University, as well as a Bachelor’s degree from Arizona State University. He joined Presence Health in October, 2015.

Jeannie C. Frey, Chief Legal Officer and General Counsel. Ms. Frey is responsible for management of all legal functions in Presence Health, including transactions and operational, regulatory and litigation matters. She oversees the System Compliance, Insurance and Claims Management functions, and serves as the chief governance executive and corporate Secretary for System entities. Ms. Frey joined legacy Resurrection Health Care in 2004 as Senior Vice President of Legal Affairs and its first General Counsel. In November 2011 she was selected to serve as Chief Legal Officer of Presence Health. Previously, she was a health law partner with the law firm McDermott, Will & Emery in Chicago, Illinois. Earlier in her career, she was a corporate and securities attorney in private practice in Denver, Colorado and Washington, D.C., and served as a staff attorney with the Securities and Exchange Commission. She is a former Chair of the Nonprofit Organizations Committee of the Business Law Section of the American Bar Association. She holds a Juris Doctorate degree from Yale Law School, and a Bachelor of Arts from the University of Colorado, Boulder.

Dana L. Gilbert, Chief Strategy and Population Health Officer, and CEO of Presence Health Partners. Mr. Gilbert leads the strategic business development and growth activities for Presence Health and the System ministries, including in the population health arena. He is the senior executive responsible for directing the Marketing/Communications, Strategy/Growth and Managed Care Contracting teams. Mr. Gilbert joined Presence Health in November, 2015 from Advocate Physician Partners, where he worked for 15 years, most recently serving as Chief Operating Officer, with responsibility for key components of Advocate’s clinical integration and accountable care activities. He previously served as Advocate’s Vice President for Clinical Innovation and Growth. Prior to joining Advocate, Mr. Gilbert worked for 14 years with Illinois Masonic Medical Center, where he was responsible for all areas of managed care from contract negotiation to health plan management and operations. He holds a Bachelor of Science from Massachusetts Institute of Technology and a Master of Science in Management from the Massachusetts Institute of Technology Sloan School of Management.

Dougal Hewitt, Chief Mission Officer. Mr. Hewitt oversees mission, ministry formation, ethics and external affairs for Presence Health. He joined Presence Health in 2013 from Bon Secours Richmond Health System, where he had served as Senior Vice President of Mission. Mr. Hewitt has more than 22 years of experience in health administration, community outreach and leadership and formation. He is currently a Ph.D. candidate in community health and architecture at University of Miami, and has a

A-11 Master of Arts in public administration from University of Pennsylvania and a Master of Arts in modern history and international relations from University of Saint Andrews in Scotland. He also has a certification in ethics from Georgetown University and a certification in integral leadership from University of Notre Dame.

James Kelley, System Chief Financial Officer. Mr. Kelley joined Presence Health in May, 2016. Prior to joining Presence Health he served as the Vice President of Finance at Advocate Lutheran General Hospital and Advocate Children’s Hospital, Advocate’s flagship hospitals. Mr. Kelley has extensive experience in managed care contracting, investment portfolio management and business conduct. Mr. Kelley holds a Bachelor of Arts from Vanderbilt University, a Master of Business Administration at the University of Texas at Austin and a Certified Public Accounting certificate.

Thomas Koelbl, System Vice President, Human Resources. Mr. Koelbl is responsible for strategic leadership in the areas of Talent Acquisition and Management, Organizational Effectiveness, H.R. Operations, Learning & Development, Labor and Employee Relations, Total Rewards and Employee Health. Immediately prior to joining Presence Health in 2014, he served as Regional Vice President of Human Resources for Banner Health in Arizona, where he led human resources operations and was a recognized leader in talent management for human resources staff. He also served as Vice President of Human Resources for 11 years at Swedish American Health System in Rockford, Illinois, and 13 years at Riverside Health System in Kankakee, Illinois. Mr. Koelbl holds a Bachelor’s degree from University of Illinois at Champaign-Urbana and an MBA in Human Resources from DePaul University in Chicago, Illinois. He is a Fellow in the American College of Healthcare Executives and certified as a Senior Professional in Human Resources.

Dave Lundal, System Vice President, Chief Information Officer. Mr. Lundal joined Presence Health in July 2014. Prior to joining Presence Health he served as Vice President and Regional Chief Information Officer for SSM Integrated Health Technologies in Wisconsin, serving eight hospitals, a physician multi-specialty clinic, a health plan and an ACO. Previously he held a variety of positions at Saint Joseph’s Regional Medical Center in South Bend, Indiana, including Director of Internet, Home Care and Physician Services. Mr. Lundal holds a Bachelor of Arts from Indiana University in Bloomington and a Master of Business Administration from Bethel College in Mishawaka, Indiana.

Reynick (Rey) Martinez, Chief Marketing and Communications Officer. Mr. Martinez joined Presence Health in May 2015. He is responsible for all marketing and communications functions, including branding, digital marketing, consumer engagement, media relations and internal communications. Before joining Presence Health, Mr. Martinez served for nearly four years as Brand Management and Strategy Director for CVS Health. Prior to CVS, he worked in marketing and communications roles with Walmart and Kraft Foods, with responsibilities for branding, consumer- focused marketing and communications. Mr. Martinez holds a Bachelor’s degree in Neuroscience from the University of Miami and a Business Administration degree from the University of Florida Hough Graduate School of Business.

Sharon Rudnick, President of Presence Health Partners. Ms. Rudnick leads the strategic direction of operations related to Presence Health’s clinically-integrated provider networks. Ms. Rudnick joined Presence Health in March 2016. Prior to joining Presence Health she served as Vice President, Outpatient Enterprise Care Management with Advocate Health Care, with responsibility for medical management of Advocate Medical Group’s and Advocate Physician Partners’ value-based contracts. Prior to that position, she was Advocate’s Vice President of Utilization Management/Quality Improvement. Ms. Rudnick holds a Bachelor of Arts, a Bachelor of Science and a Master degree, all from St. Louis University.

A-12 Ian Stewart, System Vice President, Revenue Cycle. Mr. Stewart joined Presence Health in May 2016. Prior to joining Presence Health he served for 14 years as Vice President of Business Systems, Finance and Operations with Advocate Medical Group. Mr. Stewart holds a Bachelor of Arts degree in Accounting and a Master of Business Administration degree, both from Southern Illinois University.

A-13 ACUTE CARE MINISTRIES

Overview and Services of the Acute Care Ministries

Presence Health owns and operates 12 Acute Care Ministries within the System including Presence Holy Family Medical Center (PHFMC), a long-term acute care hospital. The statistics noted in this section include data from PHFMC. As of December 31, 2015, the Acute Care Ministries had an aggregate licensed bed capacity of 3,114 beds. The Acute Care Ministries offer a wide range of inpatient services, as shown by the distribution of available beds across the regions served by the System.

Bed Category as of December 31, 2015(1) Intensive Medical and Total Total and Coronary Behavioral Available Licensed Surgical Care Obstetrics Pediatric(2) Health Rehab Other Beds Beds City of Chicago Presence Holy Family 23 - - - - - 105 128 178 Medical Center(3) Presence Resurrection 185 41 17 17 - 65 - 325 337 Medical Center Presence Saint Joseph 166 19 20 22 34 20 25 306 361 Hospital - Chicago Presence Saints Mary 214 29 20 14 160 15 26 478 492 and Elizabeth Medical Center(4) Chicago Suburbs Presence Mercy Medical 122 16 16 16 72 - - 242 292 Center – Aurora Presence Saint Francis 160 25 14 - - - - 199 215 Hospital – Evanston Presence Saint Joseph 99 15 - - 30 40 - 184 184 Hospital – Elgin Presence Saint Joseph 282 52 33 13 31 41 - 452 489 Medical Center - Joliet Presence St. Mary’s 83 25 13 14 21 - - 156 182 Hospital - Kankakee Central Illinois Presence Covenant 95 14 22 4 25 21 - 181 210 Medical Center - Urbana Presence United Samaritans Medical Center - Danville 82 12 15 8 - - - 117 174 Total 1,511 248 170 108 373 202 156 2,768 3,114 ______(1) Excludes nursery. (2) Pediatric category includes Neonatal Intensive Care Unit (NICU) beds. (3) Presence Holy Family Medical Center bed count in “Other” category represents long term care beds. (4) Presence Saint Mary of Nazareth Hospital and Presence Saint Elizabeth Hospital are separately licensed. They are geographically proximate and managed under a common management team as Presence Saints Mary and Elizabeth Medical Center. The two hospitals have a single, combined medical staff.

A-14 Historical Utilization of Acute Care Ministries

Data regarding patient utilization for the Acute Care Ministries for the five months ended May 31, 2016 and 2015 and for the fiscal years ended December 31, 2015 and 2014 is depicted in the following table.

Five Months Ended May 31, Year Ended December 31, 2016 2015 2015 2014 Patient Days 230,262 240,225 569,784 581,975 Occupancy Percentage(1) 54.7% 55.6% 52.5% 55.7% Acute Care Admissions 36,993 38,618 90,986 92,232 Adjusted Admissions 82,260 84,556 204,139 199,755 Observation Cases 16,013 15,126 36,670 35,678 Average Length of Stay - Acute 4.25 4.19 4.14 4.27 Medicare ALOS – Acute 4.52 5.14 4.96 5.25 Medicare Acute Case Mix Index 1.59 1.60 1.59 1.60 ER Visits (Inpatients and Outpatients) 159,865 161,448 390,210 389,435 Deliveries 3,103 3,164 7,778 7,952 Inpatient Surgeries 8,138 8,154 19,950 20,656 Outpatient Surgeries 16,664 17,870 43,400 42,800 Open Heart Surgeries 366 399 953 925 GI Cases IP & OP 11,128 11,391 26,985 27,124 Total Surgery & GI Cases 36,296 37,814 91,288 91,505 ______(1) Occupancy percentage is based on available beds.

A-15 Medical Staff

Each Acute Care Ministry has a separate medical staff appointed pursuant to policies approved by the designated governing body. The following table sets forth the medical staff complement and average age of physicians at each Acute Care Ministry.

Medical Staff Complement as of December 31, 2015

Average Active Associate Other Total Age City of Chicago

Presence Holy Family Medical Center 82 143 53 278 50

Presence Resurrection Medical Center 217 285 71 573 51

Presence Saint Joseph Hospital - Chicago 440 122 52 614 52

Presence Saints Mary and Elizabeth 285 56 176 517 53 Medical Center(1)

Chicago Suburbs

Presence Mercy Medical Center – Aurora 218 5 166 389 48

Presence Saint Francis Hospital – 240 161 60 461 52 Evanston

Presence Saint Joseph Hospital – Elgin 168 77 163 408 51

Presence Saint Joseph Medical Center – 445 0 149 594 50 Joliet

Presence St. Mary’s Hospital – Kankakee 182 43 67 292 51

Central Illinois

Presence Covenant Medical Center – 129 34 126 289 51 Urbana

Presence United Samaritans Medical 44 13 84 141 51 Center – Danville

Total 2,450 939 1,167 4,556 51 ______(1) Presence Saint Mary of Nazareth Hospital and Presence Saint Elizabeth Hospital are separately licensed. They are geographically proximate and managed under a common management team and have a single, combined medical staff.

Included in the total medical staff are approximately 270 physician employees of Presence Medical Group. In addition, there are 786 Advanced Independent Practitioners/Allied Health Professionals credentialed across the Acute Care Ministries.

A-16 Market Share

Chicago Metropolitan Market

Presence Health owns and operates ten hospitals in the Chicago, Illinois metropolitan area, which includes the counties of Cook, Kane, DuPage, Will, Kankakee and Kendall. Including Presence Health, there are ten health systems in this market that have an inpatient market share of 3% or higher for the year ended December 31, 2015. These ten systems represent 68% of the total market.

Year Ended December 31, Chicago Metro Health Systems 2015 2014 2013

Advocate Health System(1) 15.1% 14.9% 15.3% Presence Health 10.7 10.8 10.8 Northwestern Medicine 8.7 9.0 9.3 AMITA Health System 8.1 7.9 7.8 Rush Health System 5.3 5.4 5.3 Edward-Elmhurst Health System 5.0 4.7 4.5 Trinity Health System 4.7 4.4 4.7 Tenet Health System 4.1 4.2 4.1 NorthShore University HealthSystem(1) 3.3 3.3 3.4 Sinai Health System 3.0 3.0 3.0 ______(1) These systems have announced plans to merge, subject to final resolution of Federal Trade Commission antitrust challenge, currently on appeal to the Seventh Circuit Court of Appeals. Source: Illinois Hospital Association’s COMPdata database; inpatient cases

Central Illinois Market

Presence Health owns and operates two hospitals in the Central Illinois market, which includes Vermilion, Champaign and Iroquois counties. Presence Health also has a management agreement with Iroquois Memorial Hospital in this region. As shown in the table below, Presence Health and The Carle Foundation represent the majority of this market.

Year Ended December 31, Central Illinois Health Systems 2015 2014 2013 The Carle Foundation 50.3% 50.9% 47.2% Presence Health 36.0 35.1 38.5 Riverside Medical Center 3.5 3.6 3.3 The Pavilion 2.3 2.2 2.1 Iroquois Memorial Hospital 1.9 2.1 2.5 ______Source: Illinois Hospital Association’s COMPdata database; inpatient cases

A-17 PHYSICIAN PLATFORM AND OTHER CLINICAL INITIATIVES

Presence Medical Group

Presence Healthcare Services is a tax-exempt, Illinois not for profit corporation that owns and operates the System’s multispecialty medical group, known as Presence Medical Group (“PMG”). Historically, the System’s medical group providers were housed in two separate corporations, generally reflecting the legacy Resurrection and Provena system services areas. In December 31, 2015, the two separate medical groups were combined into one of those corporations. As of May 31, 2016, PMG employed a total of 270 physician providers, which includes 157 ambulatory care physicians (of which 101 are primary care and 56 are specialists) as well as 113 hospital-based physicians (hospitalist and emergency room). The ambulatory care physicians provide care at approximately 88 practice locations throughout the System’s service areas. PMG also employs 43 advanced practice clinicians primarily in primary care. The chart below shows the composition of PMG physicians and mid-level practitioners by specialty as of May 31, 2016 and December 31, 2015 and 2014. The decrease in the total group size in 2016 is due primarily to the consolidation of physician practices, the transfer of a number of practices following an earlier disposition of a hospital facility and the transfer of certain practices in connection with the Physicians Immediate Care joint venture. See “STRATEGIC INITIATIVES – Population Health; Value-Based Provider” herein.

May 31, December 31, Specialty Category 2016 2015 2014 Cardiology Electrophysiology 3 2 2 Cardiology: Invasive-Interventional 8 8 9 Cardiology: Noninvasive 3 5 5 Community Based Mid-Level Practitioner-PCP 13 16 14 Community Based Mid-Level Practitioner-Psych 1 4 3 Community Based Mid-Level Practitioner-Specialist 10 3 3 Hospital Based Mid-Level Practitioner 19 23 19 Emergency Room 60 87 88 Hospitalist 53 57 54 Endocrinology 2 4 3 Family Practice 42 54 64 General Surgery 2 2 2 Geriatric Medicine 3 3 3 Urogynecology 1 1 1 Hematology And Oncology 8 7 7 Internal Medicine 51 55 58 Neurology 3 5 11 Obstetrics And Gynecology 10 14 17 Orthopaedic Surgery 3 3 3 Otorhinolaryngology 3 4 4 Pain Management-Non Anesthesia 2 2 2 Palliative Care - - 1 Pediatrics 4 7 9 Physiatry 4 4 3 Psychiatry 5 9 10 Pulmonary Medicine 1 1 1 Rheumatology 1 2 2 Total 315 382 398

A-18 PMG has one fully functional Patient Centered Medical Home (PCMH) practice with eight other practices on track for implementation as a PCMH model. PMG intends that all of these practices will seek National Committee for Quality Assurance (NCQA) accreditation. All PMG employed physicians are required contractually to be Board certified or Board eligible. All PMG providers participate in Presence Health Partners, the System’s clinical integration organization/ACO (described below), and PMG serves as a cornerstone of Presence Health’s clinical integrated network strategy. Physicians are financially rewarded for achieving specific quality metrics and patient satisfaction scores.

PMG is working to develop the ‘model clinic’ in order to reduce variations in individual practice operations. In 2016, this work is expected to lead to a standardized front desk approach in all practices, same-day appointments for all patients who need one and the establishment of specialty panels and a referral management center to manage outbound referrals from the PMG offices.

Presence Health Partners

Presence Health Partners (“PHP”) is the System’s clinically integrated multispecialty provider network consisting of employed and independent practitioners. The network includes 500 primary care physicians (“PCP”) and 1,100 specialty physicians, with the largest group being Presence Medical Group.

PHP has seven value-based contracts with health plans for risk and shared savings incentives covering over 240,000 members. These contracts cover members within the commercial, Medicare Advantage and Medicaid lines of business. PHP also participates with CMS for the Medicare ACO program (Track 1 with shared savings and no downside risk), branded Medicare Value Partners (MVP). The value-based risk contracts cover professional and some outpatient services. The shared savings contracts allow PHP network providers to receive additional compensation when certain quality and expense metrics are achieved. PHP also receives care coordination payments from some managed care payors. Health plans have delegated to PHP specific administration responsibilities which include claims processing, provider credentialing, member services, care coordination, case management, and referral and utilization management.

The PHP network covers five counties in northern Illinois and one county in central Illinois. A majority of the network providers are on staff at one of the System’s general acute care hospitals. PHP has formed Provider Organized Delivery Systems (“PODS”) at the hospitals in order to locally manage the risk and shared savings contracts. PODS are led by Local Leadership Councils (“LLC”) and engage local physicians in the processes necessary to perform in value-based arrangements. The LLCs focus on areas such as: patient access to PCPs and specialists, enrolling patients in case management and achieving quality indicators.

As part of the ongoing management of contracts, PHP’s Quality Management department participates in Healthcare Effectiveness Data and Information Set (HEDIS) data collection and Quality Improvement studies. In total there are 37 HEDIS measures and sub-measures that are tracked and reported in whole or in part to contracted health plans along with several health plan specific quality improvement studies.

PHP has negotiated clinically integrated, value-based agreements with health care purchasers. PHP network members earned incentive distributions based on the network’s 2015 performance under its value-based contracts. The incentives were earned based on performance related to measures of quality, utilization and experience.

A-19 PRESENCE SENIOR CARE MINISTRIES

Overview

The System’s Senior Care Ministries are owned and operated by two of its affiliates, Presence Senior Services – Chicagoland (“PSSC”) and Presence Life Connections (“PLC”). PSSC and PLC own, operate and manage a wide spectrum of post-acute and senior services, in communities throughout the Chicago area, central Illinois and northwest Indiana, many of which provide multiple services. The Senior Care Ministries include 21 campuses that provide a variety of services from skilled nursing to assisted and independent living services. Management of PSSC and PLC is also responsible for operating other post-acute programs, including day centers, community and supportive living facilities, home health, hospice, palliative care and long-term care pharmacies. These entities also manage a number of senior care facilities on behalf of their respective owners. For the fiscal year ended December 31, 2015, the Senior Care Ministries accounted for approximately 10.8% and 7.4%, respectively, of the total revenue and total assets of the System.

Historical Utilization of Senior Care Facilities

The following chart provides information regarding utilization of the skilled nursing facilities, assisted living and independent living facilities owned and operated (including leased facilities) by PSSC and PLC for the five months ended May 31, 2016 and 2015, and for each fiscal year ended December 31, 2015 and 2014.

Five Months Ended Year Ended May 31, December 31, 2016 2015 2015 2014 Bed Complement 3,443 3,592 3,592 3,592 Resident Days 431,329 450,940 1,085,179 1,078,603 Occupancy (%) 82.4% 83.1% 82.8% 82.3%

STRATEGIC INITIATIVES

The Presence Health Vision is to be a leader in transforming health care by delivering clinical excellence, outstanding value and exceptional experience to achieve better health for its communities. In order to build its brand, Presence Health developed a new, consumer insights-driven marketing strategy. This new strategy intends to bring to the market a differentiated brand position communicated through a fully-integrated marketing plan being rolled out in the 3rd Quarter of 2016. Presence Health intends to position itself in the Chicagoland market as a value-based health care provider whose network includes a broad array of physician office, ambulatory, inpatient and post-acute services. These services are incorporated into the System’s clinically integrated network, Presence Health Partners, which includes both employed and independent physicians.

A summary of the System’s strategic initiatives, and the corporate restructuring recently implemented to facilitate and direct these strategies, follows.

Governance and Advisory Body Oversight of Quality and Population Health

On January 1, 2016, Presence Health modified its governance structure to better meet the challenges of population health, and the triple aim of continual improvement of patient quality and experience, reduction in the per-capita cost of care, and enhancing the health of the communities it serves. The governance restructuring changes included re-purposing and re-populating local hospital boards to

A-20 become active advisory organizations known as “Community Leadership Boards.” The Community Leadership Boards are comprised of representatives from the geographic communities served by each of the Acute Care Ministries and certain affiliated skilled nursing and post-acute facilities, and assist management in overseeing the Internal Revenue Service mandated triennial Community Health Needs Assessment process, and the development and operations of community benefits programs and partnerships and initiatives designed to meet community health-related needs.

Presence Care Transformation Corporation was established at this time with an independent board with expertise in a wide range of areas including health care, IT, quality and transformational change, to oversee the quality and integration of care across all service lines and support Presence Health’s ability to address the healthcare and related needs of distinct populations within its service areas. As the result of the merger into one corporation of several Chicago-area hospital corporations, the System now has two hospital corporations that each own and operate six hospitals. The hospital Boards each meet monthly to review current quality and related data and make credentialing, privileging and other decisions related to hospital Medical Staffs.

Issues relating to quality of care and best practices identified by the hospital boards, the Presence Care Transformation Corporation board, or the System’s senior clinical leaders may be referred to the Clinical Leadership Council (“CLC”), an advisory council comprised of physicians and nurses across the System. The CLC works to develop standardized clinical protocols and policies in a variety of areas, including through engaging clinical subcommittees on specific areas, and makes recommendations for new System clinical policies and procedures to be considered and approved by the Presence Care Transformation Corporation board. The CLC’s focus areas include Quality/Safety Initiatives, Clinical Services, Patient Care Processes, Clinical Information Technology, and Provider Credentialing/ Privileging. A key component of the CLC is its alignment with the PMG and PHP Quality Committees, the Clinical Leadership Team, and Clinical IT Reporting/Governance.

Population Health; Value-Based Provider

By providing care at locations through the Chicago area and the central state region, Presence Health and its clinically integrated physicians provide consumers with access to care throughout its service areas. As consumers, employers and health insurers seek lower-cost insurance coverage, both on and off the public insurance exchange, Presence Health is positioning itself to be at the center of value- based, narrow network products. A key premise of the strategy is a focus on consumers, including those with high-deductible health plan coverage, that will seek access to convenient and cost-effective care as deductibles increase and as they become more engaged in managing their own health care. In support of this strategy, Presence Health entered into an ambulatory care joint venture with Physicians Immediate Care (PIC) that currently operates 11 ambulatory care centers and is taking other steps to increase its primary care network. As payment structures transition to value-based models, the System is structuring its cost position to allow it to succeed through fee-for-value approaches while it takes a measured approach to risk-based capitation.

Care Coordination and the Medicare Market

Presence Health also is positioning for success in the growing Medicare and Medicare Advantage market through coordination of care across the continuum. The System’s network spans from physician offices to ambulatory facilities, and from inpatient care to a robust post-acute care network, which includes a long term acute care hospital, skilled nursing facilities, assisted living and independent living communities, home care, hospice and palliative care operations. In order to more fully realize the benefits of coordinated care, the System is creating a unified care management structure across the care continuum.

A-21 Use of Technology

Core technology, which supports Presence Health’s population health strategy and encourages patient engagement, includes the System’s use of Epic in the Chicago area hospitals and in all Presence Medical Group locations. Epic’s MyChart patient portal allows patients convenient electronic access to test results and supports patient scheduling. Presence is also using its telehealth platform to develop cost effective programs which enhance the consumer experience. These telehealth programs are grounded in the System’s 12-year experience in operating its teleICU throughout the Presence Health hospitals. For a further description of the technology initiative, see “MISCELLANEOUS – Information Systems” herein.

Clinical and Operational Excellence

Presence Health is laying the foundation to become a top-quartile-performing health system through standardization efforts throughout the organization. A new balanced scorecard focuses on core measures of success in the areas of: the Presence Health experience, Stewardship, Quality and Safety, and Growth. Management goals through the System are aligned to these core areas, which are intended to drive year-over-year improvement. Presence Health also expects continued investment in its core technology platforms in order to further standardize clinical quality and operations throughout the System. Presence Health intends to continue to invest in its patient care network with the goal of increasing access and affordability, including growth in its outpatient network and through PMG with a focus on growing primary care capacity to meet market needs.

FINANCIAL AND OPERATING INFORMATION

Presentation of Financial Information

The consolidated financial information contained in this APPENDIX A and the audited consolidated financial statements contained in APPENDIX B include the accounts and activities of the System. For the fiscal year ended December 31, 2015, the Obligated Group accounted for approximately 92.8% of the total revenue of the System, and 94.9% of the total assets of the System.

The audited consolidated financial statements contained in APPENDIX B include accounts and activities of certain entities that are not wholly owned (directly or indirectly) by the Corporation but are required pursuant to Generally Accepted Accounting Principles (“GAAP”) to be consolidated into the Corporation’s financial statements. The most significant of these entities are Alverno Provena Hospital Laboratories, Inc., which provides laboratory services, and Alverno Clinical Laboratories, LLC, which is a venture created to expand the availability of lab services to patients in the communities served by the System (collectively, “Alverno”). The System owns a 66.7% controlling interest in Alverno. Alverno is not an Obligated Group Member.

Historical Financial Information

The following summary consolidated statements of operations of the System for the fiscal years ended December 31, 2015 and 2014 and the summary consolidated balance sheets as of December 31, 2015 and 2014 have been derived by management of the System from the audited consolidated financial statements of the System included in APPENDIX B. Also included are the unaudited summary consolidated statements of operations for the five months ended May 31, 2016 and 2015, and the unaudited summary consolidated balance sheets as of May 31, 2016 and 2015, both of which are based upon unaudited consolidated financial statements of the System prepared by management, and reflect, in the opinion of management, all adjustments (including normal recurring adjustments) necessary to present such information in conformity with GAAP. The information should be read in conjunction with the

A-22 consolidated financial statements, related notes, and other financial information included herein. Results of operations for the five months ended May 31, 2015 include an allocation of accounting adjustments recognized during the 4th Quarter of 2015. In management’s view, the methodology used for the allocation is reasonable. See “FINANCIAL AND OPERATING INFORMATION – Management’s Discussion of Financial Performance – Background” herein. Results of operations for the five months ended May 31, 2016, are not necessarily indicative of the results that may be achieved for the fiscal year ending December 31, 2016.

A-23 Presence Health Network and Affiliates Summary Consolidated Statements of Operations (Dollars in Thousands)

Five Months Ended May 31, Year Ended Unaudited December 31, 2016 2015(1) 2015(1) 2014 Net patient and resident service revenue $995,818 $1,044,972 $2,377,213 $2,352,050 Other operating revenue 102,120 101,348 238,795 226,833 Total revenue $1,097,938 $1,146,320 $2,616,008 $2,578,883

Expenses: Salaries and benefits 581,539 567,022 1,385,122 1,322,616 Supplies 172,592 170,630 418,684 406,485 Purchased services 133,575 132,018 345,598 302,750 Insurance 18,938 27,976 102,740 44,156 Depreciation and amortization 58,093 60,407 140,788 134,831 Interest 17,733 17,122 40,889 41,831 Assessments and taxes 47,741 48,656 116,971 109,810 Other 93,404 102,152 250,772 229,148 Total expenses $1,123,615 $1,125,983 $2,801,564 $2,591,627

Income (loss) from operations before turnaround expenses (25,677) 20,337 (185,556) (12,744) Turnaround expenses (13,517) - - - Income (loss) from operations ($39,194) $20,337 ($185,556) ($12,744)

Nonoperating gains and losses: Investment income 2,115 18,536 19,578 130,189 Change in net unrealized gains and losses on on trading securities 5,419 10,417 (20,108) (75,322) Other, net 132 2,358 2,689 3,769 Net nonoperating gains $7,666 $31,311 $2,159 $58,636

Revenues and gains (deficient) in excess of losses and expenses before discontinued operations (31,528) 51,648 (183,397) 45,892

Net gains (losses) from discontinued operations 1,111 (2,543) (13,913) (47,898)

Revenues and gains (deficient) in excess of losses and expenses ($30,417) $49,105 ($197,310) ($2,006) ______(1) Total revenue includes $34.3 million Affordable Care Act payments related to 2014 activity.

A-24 Presence Health Network and Affiliates Summary Consolidated Balance Sheet (Dollars in Thousands)

May 31, Unaudited December 31, 2016 2015 2015 2014 Assets Current assets: Cash and cash equivalents $189,382 $150,736 $207,356 $192,404 Patient and resident accounts receivables, net 372,800 470,096 365,544 467,648 Other current assets 144,622 128,613 156,324 114,708 Total current assets $706,804 $749,445 $729,224 $774,760

Investments 708,642 884,157 744,433 918,455 Investments with limited uses 73,098 71,519 76,236 77,102 Land, buildings, and equipment, net 1,391,456 1,391,711 1,417,995 1,397,543 Other assets 78,803 68,107 78,341 72,533

Total assets $2,958,803 $3,164,939 $3,046,229 $3,240,393

Liabilities and Net Assets Current liabilities: Current portion of long-term debt and obligations under capital leases 18,549 28,250 17,797 51,472 Accounts payable and accrued expenses 347,963 300,302 383,722 352,880 Deferred revenue and refundable deposits 30,989 33,566 34,611 33,894 Current portion of estimated self-insurance liabilities 51,167 53,646 51,167 53,646 Estimated third-party payor settlements 222,788 176,438 219,671 201,359 Total current liabilities $671,456 $592,202 $706,968 $693,251

Long-term debt and obligations under capital leases, net of current portion 1,019,039 1,031,162 1,031,275 1,048,494

Pension benefit liability 253,781 275,402 263,780 287,901 Estimated self-insurance liabilities 251,824 246,608 249,463 242,163 Other liabilities 37,520 20,054 41,593 22,355 Total liabilities $2,233,620 $2,165,428 $2,293,079 $2,294,164

Net assets: Unrestricted 672,999 950,808 703,255 898,335 Noncontrolling interests in consolidated affiliates 4,648 4,438 4,408 4,385 Total unrestricted net assets $677,647 $955,246 $707,663 $902,720 Temporarily restricted 30,253 28,039 28,228 26,493 Permanently restricted 17,283 16,226 17,259 17,016 Total net assets $725,183 $999,511 $753,150 $946,229

Total liabilities and net assets $2,958,803 $3,164,939 $3,046,229 $3,240,393

A-25 Sources of Gross Patient Service Revenue

The System derives its gross patient service revenue from the federal Medicare program, state Medicaid programs, managed care organizations, commercial insurers, self-paying patients and other sources. The following table presents the sources of gross patient service revenues for the System for the five months ended May 31, 2016 and 2015, and for the fiscal years ended December 31, 2015 and 2014. For further information regarding the sources of revenue and the potential impacts of changes thereto, refer to the section in this Official Statement entitled “BONDHOLDERS’ RISKS.”

Sources of Gross Patient Service Revenues

Five Months Ended Year Ended May 31, December 31, 2016 2015 2015 2014 Medicare 38.0% 38.2% 38.1% 40.6% Medicare Managed Care 10.6 10.7 10.5 8.0 Medicaid 6.0 8.3 7.1 15.3 Medicaid Managed Care 14.8 12.0 13.1 4.7 Commercial 26.9 27.0 27.2 26.9 Self-Pay & Other 3.6 3.7 4.0 4.5 Total 100.0% 100.0% 100.0% 100.0%

Indebtedness and Certain Liabilities

As of May 31, 2016, the System’s aggregate principal amount of long-term debt, including the current portion, is approximately $1,037.6 million, which is comprised of $1,019.1 million of tax-exempt and taxable indebtedness under the Master Indenture, approximately $3.7 million in capital leases and approximately $14.8 million of indebtedness that is not secured under the Master Indenture.

Historical and Pro Forma Capitalization

The following table sets forth the System’s historical and pro forma capitalization ratios as of December 31, 2015. Capitalization Ratios (Dollars in Thousands) Pro forma December 31, 2015 December 31, 2015(2) Long Term Debt (Including Current Portion)(1) 1,049,072 Unrestricted Net Assets 703,255 Total Capitalization 1,752,327 Long Term Debt to Capitalization Ratio 59.9% ______(1) Tax-exempt and taxable long term indebtedness secured under the Master Indenture, capital leases and other indebtedness not secured under the Master Indenture. (2) Incorporates issuance of Series 2016C Bonds in a principal amount of $______and the refunding of the Prior Bonds (as such term is defined in the forepart of this Official Statement).

A-26 Historical and Pro Forma Coverage of Debt Service

The following table sets forth for the fiscal years ended December 31, 2015 and 2014, the Income Available for Debt Service in the years shown and the extent to which such Income Available for Debt Service covered the actual and maximum annual Debt Service requirements on the outstanding indebtedness of the System during such years. The following table also sets forth the Income Available for Debt Service for the five months ended May 31, 2015, and the extent to which such Income Available for Debt Service would have covered an allocable portion of the maximum annual Debt Service requirements on the outstanding indebtedness of the System for the fiscal year ended December 31, 2015.

Debt Service Coverage (Dollars in Thousands)

Pro Forma Five Months Years Ended Ended May 31, 2016 December 31, (Unaudited) 2015 2014 Income Available for Debt Service(1) $38,879 $18,388 $297,876 Historical Annual Debt Service(3) -- 90,736 75,532 Coverage of Historical Annual Debt Service -- 0.20(2) 3.94 Historical Maximum Annual Debt Service (MADS)(3) 38,223 91,735 102,053 Coverage of Historical Maximum Annual Debt Service 1.02 0.20(2) 2.92 ______(1) Calculated in accordance with the Master Indenture. (2) Covenant relating to debt service coverage was amended to remove any potential covenant violation. See “FINANCIAL AND OPERATING INFORMATION – Management’s Discussion of Financial Performance – Background” herein. (3) Excludes debt service relating to capital leases and certain other indebtedness that is not secured by the Master Indenture. The amount shown for the five months ended May 31, 2016 represents five-twelfths of the Historical Maximum Annual Debt Service for the fiscal year ended December 31, 2015.

Credit Facility

Presence Health intends to enter into a Revolving Line of Credit with JPMorgan Chase Bank, N.A. simultaneous with the issuance of the Series 2016C Bonds. Under this credit facility, the System may draw up to $75 million to support operating liquidity needs. The Revolving Line of Credit is expected to have a term of twelve months. The Revolving Line of Credit Agreement will be secured by an Obligation issued under the Master Indenture and will contain covenants requiring quarterly financial reporting and semi-annual maintenance of certain financial ratios. As of the date of issuance of the Series 2016C Bonds, the System will have no outstanding indebtedness other than the Series 2016C Bonds, the Revolving Line of Credit Agreement, and approximately $3.7 million in capital leases and approximately $14.8 million of indebtedness that is not secured under the Master Indenture.

Unrestricted Investments and Liquidity

The System maintains a centralized cash management and investment program (the “General Fund” or the “Fund”). Unrestricted investments represent investments set aside by the System primarily for future purposes including capital expenditures, acquisitions, improvements, and amounts held for mission programs. The Board of Directors, through the Investment Committee, retains control of the General Fund and may, at its discretion and in certain circumstances, use the Fund for other

A-27 purposes. Substantially all of the System’s unrestricted investments and other investments are invested and managed by professional managers in accordance with agreed-upon investment and socially responsible investing guidelines and are held in custody with a financial institution.

The System’s investment policy and administrative procedures provide a structure to maintain a diversified investment portfolio, with appropriate liquidity and growth potential, designed to avoid assumption of undue risk by the System. The investment policy is recommended by management and its investment advisor and approved by the Board of Directors, through the Investment Committee.

The investment portfolio is invested in a diversified portfolio of unrestricted investments and other investments which are measured at fair value, classified as trading securities, and consist of: cash and cash equivalents; U.S. government, state, municipal, and agency obligations; other fixed income securities; equity securities; asset backed securities; index funds, mutual funds and unregistered mutual funds. Board designated and other investments also include alternative investments, consisting of investments in hedge funds and real assets, which are generally measured based on their net asset value as a practical expedient for fair value. The General Fund has an asset allocation goal of 35% equities (split between domestic/international/emerging), 40% fixed income, 20% alternative investments and 5% real assets.

The following table shows the System’s unrestricted cash and investments (excluding assets held by bond trustees) and days cash on hand as of May 31, 2016 and December 31, 2015 and 2014.

Liquidity Position (Dollars in Thousands)(1)

May 31, December 31, December 31, 2016 2015 2014 Cash and cash equivalents $189,382 $207,356 $192,404 Investments 708,642 744,433 918,455 Total unrestricted cash and investments $898,024 $951,789 $1,110,859 Days cash on hand(1) 126.5 130.6 165.0 ______(1) Days cash on hand is calculated in accordance with the Master Indenture for the audited periods and is based on actual days elapsed during the interim period ended May 31, 2016.

Management’s Discussion of Financial Performance

Background

On October 1, 2015, Michael Englehart became President and CEO of Presence Health. Shortly thereafter, he engaged key executives including Chief Strategy Officer Dana Gilbert, EVP for Operational Improvement Bryan Eklund, and EVP for Operational Improvement and Transactions Dennis Erwin. This team initiated a review of the System’s operations, both clinical and financial. Based upon a preliminary finding of this review, an investor call was conducted on December 4, 2015 discussing concerns with the System’s accounts receivable and other financial and accounting controls.

In order to conduct a comprehensive review of financial information and to ensure the accuracy of the December 31, 2015 financial statements, Presence Health’s new management did not timely file its required quarterly disclosure for the unaudited period ended 4th Quarter, 2015, which was due on February 29, 2016. On March 16, 2016, Presence Health management published the December disclosure

A-28 and conducted a conference call during which the 2015 financial results were discussed. Although Presence Health had reported an approximately $40.2 million excess of revenue over expenses for the nine-month period ended September 30, 2015 (unaudited), significant 4th Quarter 2015 accounting adjustments resulted in a total reported loss for the year of approximately $185.6 million. The primary causes of the adjustments were revisions to accounts receivable and contractual allowance reserves (approximately $96 million), the medical malpractice reserve (approximately $33 million), and other balance sheet adjustments (approximately $26 million). The Board of Directors took prompt action to approve a new accounts receivable reserve policy (November 2015), a revised policy for authorization of adjustment transactions (March 2016), a new medical malpractice reserve policy (January 2016) and new contracting standards and business guidelines (January 2016).

Such loss raised the possibility of covenant violations under the Obligated Group’s then-existing Master Indenture and bank agreements. In addition, the reported losses and possible covenant violations related to the Obligated Group’s outstanding bonds resulted in rating agency downgrades, as follows:

- Standard & Poor’s downgraded from BBB+ to BBB- (Negative outlook); - Moody’s placed Presence Health on review for downgrade, which was ultimately downgraded from Baa2 to Baa3, Outlook Negative; and - Fitch Ratings downgraded from BBB+ to BBB (Negative outlook).

The Obligated Group determined to seek the consent of a majority of the holders of obligations under the then-existing Master Indenture to amend such Master Indenture to eliminate the debt service coverage requirement for the fiscal year ended December 31, 2015. Management initiated various discussions with banks and bondholders on this topic. Ultimately, these discussions resulted in a private placement transaction on May 26, 2016 with JPMorgan Securities LLC (“JPMS”) as purchaser. This transaction involved the issuance of the Series 2016A and 2016B Bonds (as defined herein); simultaneous with this transaction, JPMS consented to the amendment to the Master Indenture. All bank agreements were terminated in connection with this transaction. After the refinancing, Presence Health received an unqualified audit opinion on its Consolidated Financial Statements for the year ended December 31, 2015.

The management team identified the need for new leadership and management, improved accounting and financial controls and a general turnaround of the financial and operating performance of the System. The management team has aggressively pursued building a new executive team, while engaging numerous external implementation resources to remedy the accounting and financial control issues and to support the Turnaround Initiatives (discussed below). Management has also established an internal performance consulting group to coordinate the external resources engaged and to support management in implementing these improvement initiatives. In addition, as noted in “STRATEGIC INITIATIVES” herein, the new management team is working to bring operational discipline and transparency to the organization while it reinvigorates and refocuses its vision and growth strategies.

Board of Directors

The Board of Directors has been actively engaged in the process of understanding the sources of the System’s financial issues and approving and overseeing the implementation of initiatives to address same. It has provided management with its full support to act upon the turnaround plan, and has authorized a turnaround budget based on the improvement initiatives, an incentive-based compensation program for management and the refinancing activities.

A-29 Leadership Team

New executive team members recruited by the new President and CEO since October 2015 include the following:

- Bryan Eklund, Executive Vice President, Operational Improvement; - Dr. Ann Errichetti, System Chief Operations and Academic Officer; - Dennis Erwin, Executive Vice President, Operational Improvement and Transactions; - Dana Gilbert, Chief Strategy & Population Health Officer; - James Kelley, System Chief Financial Officer; - Sharon Rudnick, President, Presence Health Partners; and - Ian Stewart, System Vice President, Revenue Cycle.

These new executives complement the existing members of senior management as follows:

- Dr. Sam Bagchi, System Chief Medical and Quality Officer (July, 2015); - Jeannie Frey, Chief Legal Officer and General Counsel (2004); - Dougal Hewitt, Chief Mission Officer (January, 2013); - Thomas Koelbl, System Vice President, Human Resources (September, 2014) - David Lundal, System Vice President, Chief Information Officer (July, 2014); and - Reynick (Rey) Martinez, Chief Marketing and Communications Officer (May, 2015).

Biographical information is provided for these individuals in “GOVERNANCE AND MANAGEMENT OF THE CORPORATION – Management” herein.

Accounting and Financial Controls and Reporting

Management engaged Crowe Horwath to review the System’s financial operations, assess accounting and financial controls, recommend organizational changes, and assist in the monthly financial close. In addition, Crowe Horwath is implementing Revenue Cycle Analytics (RCA), a tool for maintaining contractual allowances and reserves for accounts receivable.

External Resources

In addition to Crowe Horwath, management has engaged the following external resources:

- Huron Healthcare to support improvements in Revenue Cycle, Supply Chain, and Clinical Documentation Integrity; - The Buonopane Group to support Strategic Pricing and Contract Modeling; - Xtend Healthcare to support Central Business Office Transition Management and Cash Acceleration; and - CareTech to conduct an Information Technology assessment.

New Presence Performance Consulting Group

Management has consolidated former project managers and lean initiative facilitators into an 18 member internal consulting team, the Presence Performance Consulting Group (PPCG). This team currently operates as an extension of the CEO’s office and assists in the coordination of both internal and external turnaround resources in addition to tracking and monitoring results. In addition, the PPCG supports prioritization of System resources on key strategic initiatives.

A-30 Turnaround Plan: Initiatives

Management has identified five major areas of focus for its turnaround plan (the “Turnaround Initiatives”). Those areas are listed below along with management’s projected annual improvement targets or projected financial opportunities and timing for full implementation. In addition, the comparison of financial performance to these projections are described in the section “Turnaround Plan: Five Month 2016 Turnaround Plan Projections Compared to Unaudited Income Statement (excluding Alverno).”

Projected Annual Timing to Full Area of Focus Improvement Target Implementation Labor $ 55.4M 4Q 2016 Revenue and Contracting $ 31.0M 2Q 2016 Revenue Cycle $ 61.0M 1Q 2017 Supply Chain $ 29.1M 1Q 2017 Other Initiatives $ 8.1M 1Q 2017 $184.5M Source: Management of the System

These projected financial opportunities, as further discussed below, and the projected timing for implementation of same, are forward-looking statements and not guarantees of future performance. The projections reflect the current views of the System with respect to the projected financial opportunities. The projections involve certain risks, uncertainties, estimates and assumptions and may be dependent on actions taken or not taken by third parties not controlled by the System, including the governments of the United States and the State of Illinois. While management believes that the assumptions that underlie the projected financial opportunities are reasonable, there will usually be differences between projections and actual results, because events and circumstances may not occur as expected, and these differences may be significant and may be material. No assurance can be given that the targeted savings will be achieved, or achieved on the expected implementation schedule. The System undertakes no obligation to publicly update or revise any of the projected financial opportunities as a result of new information, future events, or other information.

A summary of the Turnaround Initiatives follows. A discussion of the progress under each initiative is included in “FINANCIAL AND OPERATING INFORMATION – Turnaround Plan: Comparison of Projections to Actual Performance” herein.

Labor

Management has identified opportunities to reduce labor costs through two initiatives: acute care hospital productivity and full time equivalent (“FTE”) reductions. To support these initiatives, management has implemented a labor productivity management tool along with position control across the System.

Revenue and Contracting

Management engaged The Buonopane Group to assess strategic, market-based pricing opportunities and to assist management in the development of new pricing models. The goal of these models is to obtain the best net revenue return on gross charges based upon each individual hospital’s managed care payer, patient and service mix.

A-31 Revenue Cycle

Management has identified revenue cycle issues related to accounts receivable, payment denials, and patient registration and scheduling. Management has hired a new System Vice President of Revenue Cycle, and Huron Healthcare and Xtend Healthcare have been engaged to support management in addressing these issues. Areas being addressed include: pre-access and central scheduling, patient registration, coding for documentation integrity, and the management of billing and collections in the central business office. Actions taken to date include working toward standardization of processes and policies relating to administrative write-offs (i.e., issues associated with physician order issues and insurance verification) and point of service collections, in addition to improving service to physicians and patients by extending hours of operation. Management has also engaged Huron Healthcare to assist management in standardizing processes relating to patient registration after identifying issues relating to registration accuracy, financial counseling and insurance identification and assignment. Huron Healthcare has also been engaged to provide assistance in efforts relating to coding for documentation integrity (“CDI”), and revitalizing that activity. Management has also identified financial opportunities in the System’s central business office relating to cash collection performance, with special focus on collection of aged accounts receivable and accounts with significant contractual adjustments. Xtend Healthcare has been engaged to stabilize cash collections utilizing both System staff and remote Xtend Healthcare employees.

Supply Chain Management

Management has identified financial opportunities in the area of Supply Chain Management including the pricing and procurement of supplies, purchasing operations, and purchased services. For supplies, management has implemented a new purchase benchmarking system and engaged Huron Healthcare to identify and support supply chain in achieving targeted savings. Areas of focus include:

- supply purchasing; - supply utilization; - physician preference items; - 340B enhancements; and - commodity purchased services.

Management has also instituted policies regarding new product requests, value analysis committees, clinical leadership steering committees, and an executive approval process. For purchased services, management is implementing new controls, a Request for Proposal process, bidding, and the renegotiation of purchased service arrangements.

Management has identified significant agency and temporary labor expense currently reflected as Purchased Services that can be reduced through converting to full-time employees in various areas across the System. The projected savings use a 35% wage differential in determining the savings of converting to full-time employees. A task force is working to establish standardized approaches to the usage of agency and temporary labor, minimize the use of expensive agency and temporary labor and recruit lower cost FTEs.

Other Initiatives

Management has identified other operational initiatives involving PLC, Presence Holy Family Medical Center, and PMG. The PLC initiatives involve improving pricing and cost standardization, including the development of specific plans for the System’s skilled nursing facilities designed to standardize pricing, improve occupancy and reduce operating expense. The Presence Holy Family

A-32 Medical Center initiatives include improving ventilator patient admissions. The PMG initiatives involve improving revenue cycle billing and collections as well as reducing losses from various clinical service lines.

Turnaround Plan: Projected Timing and Financial Outcomes of Initiatives

Management has projected the financial outcomes of these Turnaround Initiatives over 2016 and 2017 as shown in the following chart.

2016 Projected Financial Outcomes of Initiatives

Projected 1st Projected 2nd Projected 3rd Projected 4th Projected Area of Focus Quarter Quarter Quarter Quarter Total 2016 2016 2016 2016 2016

Labor $ - $ 4,569,469 $ 9,138,938 $ 13,846,875 $ 27,555,281

Revenue and Contracting Improvement $ 3,000,000 $ 7,750,000 $ 7,750,000 $ 7,750,000 $ 26,250,000

Revenue Cycle $ - $ 3,877,500 $ 8,910,000 $ 14,060,000 $ 26,847,500

Supply Chain Management $ - $ 1,818,750 $ 3,637,500 $ 5,456,250 $ 10,912,500

Other Operational Initiatives $ - $ 581,625 $ 1,163,250 $ 1,887,500 $ 3,632,375

Total $ 3,000,000 $ 18,597,344 $ 30,599,688 $ 43,000,625 $ 95,197,656 ______Source: Management of the System

A-33 2017 Projected Financial Outcomes of Initiatives

Projected 1st Projected Projected Projected 4th Projected Area of Focus Quarter 2nd Quarter 3rd Quarter Quarter Total 2017 2017 2017 2017 2017

Labor $ 13,846,875 $ 13,846,875 $ 13,846,875 $ 13,846,875 $ 55,387,500

Revenue and Contracting Improvement $ 7,750,000 $ 7,750,000 $ 7,750,000 $ 7,750,000 $ 31,000,000

Revenue Cycle $ 15,250,000 $ 15,250,000 $ 15,250,000 $ 15,250,000 $ 61,000,000

Supply Chain Management $ 7,275,000 $ 7,275,000 $ 7,275,000 $ 7,275,000 $ 29,100,000

Other Operational Initiatives $ 2,012,500 $ 2,012,500 $ 2,012,500 $ 2,012,500 $ 8,050,000

Total $ 46,134,375 $ 46,134,375 $ 46,134,375 $ 46,134,375 $184,537,500 ______Source: Management of the System

Turnaround Plan: Projected 2016 and 2017 Profit/Loss from Operations

Management has used the projected financial outcomes of these Turnaround Initiatives to project profit and loss from operations over 2016 and 2017. The financial projections do not include Alverno. The initial projected loss from operations before projected Turnaround Initiatives and Turnaround Costs (as shown in the charts below) is $30 million per quarter, or a loss of $10 million per month. The $10 million loss per month is based upon the January 2016 operating loss from operations. In the chart below, this $30 million loss is adjusted by the projected Turnaround Initiative improvements listed above and projected Turnaround Costs.

A-34 2016 Projected Profit/Loss from Core Operations (excluding Alverno)

Projected 1st Projected 2nd Projected 3rd Projected 4th Projected Quarter Quarter Quarter Quarter Total 2016 2016 2016 2016 2016

Projected Loss from Operations before Turnaround Initiatives and Turnaround Costs(1) $ (30,000,000) $ (30,000,000) $ (30,000,000) $ (30,000,000) $ (120,000,000) Turnaround Initiatives(2) $ 3,000,000 $ 18,597,344 $ 30,599,688 $ 43,000,625 $ 95,197,656

Projected Profit/Loss from Operations before Turnaround Costs $ (27,000,000) $ (11,402,656) $ 599,688 $ 13,000,625 $ (24,802,344)

Turnaround Costs(3) $ (5,955,500) $ (8,838,000) $ (8,688,000) $ (7,313,875) $ (30,795,375)

Projected Profit/Loss After Turnaround Initiatives and Turnaround Costs $ (32,955,500) $ (20,240,656) $ (8,088,313) $ 5,686,750 $ (55,597,719) ______Source: Management of the System

2017 Projected Profit/Loss from Operations (excluding Alverno)

Projected 1st Projected 2nd Projected 3rd Projected 4th Projected Quarter Quarter Quarter Quarter Total 2017 2017 2017 2017 2017

Projected Loss from Operations before Turnaround Initiatives and Turnaround Costs(1) $ (30,000,000) $ (30,000,000) $ (30,000,000) $ (30,000,000) $ (120,000,000) Turnaround Initiatives(2) $ 46,134,375 $ 46,134,375 $ 46,134,375 $ 46,134,375 $ 184,537,500

Projected Profit/Loss from Operations before Turnaround Costs $ 16,134,375 $ 16,134,375 $ 16,134,375 $ 16,134,375 $ 64,537,500

Turnaround Costs(3) $ (5,260,625) $ (1,700,000) $ (450,000) $ (450,000) $ (7,860,625)

Projected Profit/Loss After Turnaround Initiatives and Turnaround Costs $ 10,873,750 $ 14,434,375 $ 15,684,375 $ 15,684,375 $ 56,676,875 ______Source: Management of the System (1) Projected Loss from Core Operations before Turnaround Initiatives and Turnaround Costs carries forward the loss shown in the January 2016 unaudited financial statements. (2) See “FINANCIAL AND OPERATING INFORMATION – Turnaround Plan: Projected Timing and Financial Outcomes of Initiatives” herein. (3) Turnaround Costs include: Huron Healthcare (Revenue Cycle, Central Business Office, Supply Chain, and Coding for Documentation Integrity), Xtend Healthcare (Billing and Cash Collections), Crowe Horwath (Revenue Monitoring/Accounting), Kaufman Hall, Legal, CareTech (IT Services), etc.

A-35 Turnaround Plan: Five Month 2016 Turnaround Plan Projections Compared to Unaudited Income Statement (excluding Alverno)

The 2016 Turnaround Plan projections were developed by management based on quarterly time periods. The Turnaround Plan projections have been adjusted to make them comparable to the five months ended May 31, 2016. This has been achieved by combining the Turnaround Plan projections for 1st Quarter 2016 and two-thirds of the 2nd Quarter 2016 as indicated below.

January to May 2016 Projected Income Statement (Dollars in Thousands)

Projected Projected (Projected 2nd Projected 1st Quarter 2nd Quarter Quarter January – (1) 2016 2016 2016)(x)(2/3) May 2016

Total Revenue $633,000 $641,628 $427,752 $1,060,752

Operating Expenses Salaries and benefits $334,000 $329,885 $219,923 $553,923 Supplies 97,000 95,875 63,917 160,917 Purchased Services 93,000 91,852 61,235 154,235 Insurance 11,500 11,500 7,667 19,167 Depreciation and amortization 34,500 34,500 23,000 57,500 Interest 10,500 10,500 7,000 17,500 Assessments and taxes 29,500 29,500 19,667 49,167 Other 50,000 49,418 32,945 82,945 Total Expenses $660,000 $653,030 $435,353 $1,095,353

Income (loss) from operations before ($27,000) ($11,402) ($7,601) ($34,601) turnaround expenses

Turnaround Expenses 5,955 8,838 5,892 11,847

Loss from operations ($32,955) ($20,240) ($13,493) ($46,448) ______Source: Management of the System (1) Projected 1st Quarter 2016 plus 2/3 Projected 2nd Quarter 2016. Note: Certain items have been reclassified for presentation consistent with the annual audited financial statements for both actual operating results as well as Turnaround Plan projections and therefore will vary from previous presentations.

A-36 In order to compare the Turnaround Plan to the unaudited (actual) summary consolidated statements of operations for the five months ended May 31, 2016, which are presented under “Historical Financial Information” above, the below schedule excludes financial information for Alverno.

Five Months Ended May 31, 2016 Unaudited (Dollars in Thousands) Consolidated Statement of Consolidated Operations Statement of Presence – Alverno (excluding Operations Alverno Eliminations Alverno) Total Revenue $1,097,938 $72,063 ($30,828) $1,056,703 Operating Expenses Salaries and benefits $581,539 $38,789 - $542,750 Supplies 172,592 17,053 - 155,539 Purchased services 133,575 4,363 (30,828) 160,040 Insurance 18,938 158 - 18,780 Depreciation and amortization 58,093 881 - 57,212 Interest 17,733 - - 17,733 Assessments and taxes 47,741 - - 47,741 Other 93,404 10,113 - 83,291 Total Expenses $1,123,615 $71,357 ($30,828) $1,083,086 Income (loss) from operations before turnaround expenses ($25,677) $706 $0 ($26,383) Turnaround Expenses 13,517 - - 13,517 Income (loss) from operations ($39,194) $706 $0 ($39,900) ______Source: Management of the System

A-37 Turnaround Plan: Comparison of Projections to Actual Performance

The table below compares the Actual (Unaudited) Consolidated Statement of Operations (excluding Alverno) for January to May 2016 to Turnaround Plan projections for the five months ended May 31, 2016.

Consolidated Statement of Operations (excluding Alverno) for January – May 2016 Compared to Turnaround Plan Projections (Dollars in Thousands) Five Months January February March April May Ended Projected Actual Actual Actual Actual Actual May 31, January – Ahead / Unaudited 2016 May (Behind) Actual 2016(1) Plan

Total Revenue $213,631 $207,742 $214,154 $209,196 $211,980 $1,056,703 $1,060,752 ($4,049) Operating Expenses Salaries and benefits $112,188 $105,971 $109,240 $105,228 $110,123 $542,750 $553,923 $11,173 Supplies and drugs 32,390 30,623 32,581 30,033 29,912 155,539 160,917 5,378 Purchased services 31,082 31,826 33,253 32,190 31,689 160,040 154,235 (5,805) Insurance 3,766 3,685 3,775 3,744 3,810 18,780 19,167 387 Depreciation and 11,369 11,486 11,601 11,304 11,452 57,212 57,500 288 amortization Interest 3,573 3,201 3,697 3,584 3,678 17,733 17,500 (233) Assessments and taxes 9,626 9,819 9,760 9,768 8,768 47,741 49,167 1,426 Other General Expenses 18,616 15,947 17,028 16,695 15,005 83,291 82,945 (346) Total Expenses $222,610 $212,558 $220,935 $212,546 $214,437 $1,083,086 $1,095,353 $12,267 Income/ (loss) from operations before turnaround expenses ($8,978) ($4,815) ($6,782) ($3,350) ($2,457) ($26,383) ($34,601) $8,218 Turnaround expenses 15 2,613 2,545 4,050 4,294 13,517 11,847 (1,670)

Loss from operations ($8,993) ($7,428) ($9,327) ($7,400) ($6,751) ($39,900) ($46,448) $6,548 ______Source: Management of the System (1) See January to May 2016 Projected Income Statement herein. Note: Certain items have been reclassified for presentation consistent with the annual audited financial statements for both actual operating results as well as Turnaround Plan projections and therefore will vary from previous presentations.

As depicted above, the Loss from Operations has declined from $9.0 million in January 2016 to $2.5 million in May 2016, an improvement in the monthly run rate of $6.5 million. Thus, the System is trending towards its projected breakeven in 3rd Quarter 2016. Additionally, the System is ahead of the Turnaround Plan Income from Operations projections by $8.2 million for the five months ended May 31, 2016.

Labor

Reductions in Salaries and Benefits was $11.2 million ahead of the Turnaround Plan projections as of May 31, 2016. These improvements are over and above one-time salary lump-sum payments of $1.1 million as well as $1.5 million in monthly increases to associates, which commenced in May. This savings is the result of a net reduction of over 650 FTEs which has been achieved through a combination

A-38 of attrition and position elimination or restructuring. Although the System is ahead of plan for salary reductions, severance costs and salary increases to associates (which were instituted to promote retention) prevented the full effect of these reductions from being realized. These FTE reductions represent approximately 80% of the positions required to be eliminated to meet targeted savings. Management anticipates achieving the balance of FTE reductions primarily through attrition, with the full labor plan fully implemented by the 4th Quarter of 2016.

Revenue

Total Revenue is reported as behind the Turnaround Plan projections by $4.0 million for the period ended May 31, 2016. Strategic/Market Based Pricing changes were implemented in March. The increased revenue expected from those changes, as well as the increased revenue that will result from a negotiated price increase under a health plan contract, are not reflected in the 2nd Quarter Turnaround Plan results due to a delayed recognition of the increases. It is anticipated that these improvements will be reflected in the 3rd Quarter reported financials. On the other hand, Total Revenue per Adjusted Patient Day improved from $2,514 ($213,631,000 revenue / 84,961 adjusted patient days) in January to $2,580 ($211,980,000 revenue / 82,150 adjusted patient days) in May or 2.6% due to improved cash collections, the number of accounts worked by the Centralized Insurance Verification team, and improvements in preauthorization and payer approval. Management anticipates these increases in revenue to continue as processes and procedures improve.

Supply Chain

Supplies and Drugs are ahead of the Turnaround Plan projections by $5.4 million. Purchased Services are behind Turnaround Plan projections by $5.8 million due to increases in physician fees, salaries, and subsidies as well as delays in achieving reductions in Temporary and Agency Labor. To address Temporary and Agency Labor, a new System Director for Recruitment started in June to spearhead recruitment strategies.

Summary of Management Discussion of Financial Performance

The System’s new management team began in October, 2015 with the expectation of completing the 2015 fiscal year with an operating profit. Despite significant unexpected findings in the 4th Quarter of 2015, the management team has acted expeditiously and decisively. As discussed above, management has recruited a new leadership team and identified and is addressing financial and accounting control issues. The team has developed a detailed turnaround plan and enlisted both internal and external resources to implement that plan. In addition to improving the operational performance of the System, the management team is working to reinvigorate and refocus the strategic direction of Presence Health. Management also took action to position the System for long-term financial stability by creating a more cost-effective and sustainable debt structure by refinancing its long-term debt (including through the issuance of the Series 2016C Bonds as described herein).

Integrated Financial Management Process

The financial strength of the System depends upon the ability to create sufficient capital resources to allow investment in strategic and operating initiatives that will support and grow the mission leading to a sustainable competitive environment. On a quarterly basis, the System updates its current year operating projections in order to evaluate its capital capacity. Capital capacity is derived from a combination of projected cash flow and projected new borrowings balanced by the maintenance of targeted balance sheet liquidity and leverage ratios as specified by existing debt covenant requirements.

A-39 The System has a formalized capital allocation process that requires all capital projects above a certain threshold to be reviewed and approved by the Finance Committee of the System Board. All non- threshold capital is reviewed and approved at a System level based on a tiered weighting system that prioritizes capital spend based on strategic use, asset replacement and operational safety needs. All non- emergent capital needs are reviewed monthly and require a detailed financial analysis, executive summary, multiple vendor quotes and evaluation of alternatives.

For the five months ended May 31, 2016 and for the years ended December 31, 2015 and 2014, the System incurred capital expenditures for property, plant and equipment of $31,312,000, $161,641,000, and $197,385,000 respectively. The System contemplates an approximate $150 million capital spend in its 2016 and 2017 fiscal years. In addition, it is assessing the costs of its expected 2018 conversion to the EPIC EMR system. See “MISCELLANEOUS – Information Systems” herein.

Community Benefits

Presence Health strives to make a positive impact in its communities. For the fiscal year ended December 31, 2015, Presence Health provided approximately $288.6 million of community benefits including charity care to the communities it feels privileged to serve. The System provides medical and other supplies, healthcare services, health screenings, support groups, educational opportunities and presentations, monetary donations, sponsorships, and other services.

Presence Health’s commitment to this mission is evidenced by the amount of care to the poor and the level of community benefits provided, which for fiscal year ended December 31, 2015 was as follows.

A-40 Quantifiable Community Benefits(1) Unaudited (Dollars in Thousands)

Year Ended December 31, 2015 Estimated Benefits for the Poor: Cost of charity care provided $45,654 Unpaid cost of Medicaid and other indigent care programs $84,923 Other Benefits for the Poor: Subsidized Health Services $2,420 Community Health Improvement Services $1,082 Financial and In-Kind Contributions $551 Other Community Benefits $1,568 Total Benefits for the Poor $136,198 Benefits for the Broader Community: Health Professions Education $63,418 Subsidized Health Services $2,731 Community Health Improvement Services $1,487 Community Building Activities $146 Financial and In-Kind Contributions $556 Research $602 Community Benefit Operations $1,239 Total Benefits for the Broader Community $70,155 Total Quantifiable Community Benefits $206,377 Unpaid costs of Medicare $82,193 Total quantifiable community benefits including unpaid costs of Medicare $288,570

______(1) Quantifiable community benefits are presented net of any offsetting revenues, donations, or other funds used to defray costs.

In addition to $288.6 million of quantifiable community benefits for the fiscal year ended December 31, 2015, the System also provided a significant amount of uncompensated care to patients, which approximated $138.6 million.

A-41 MISCELLANEOUS

Information Systems

Presence Health utilizes and relies upon a corporate department offering information technology services referred to as Presence Health Information Services (“IS”). IS manages the System’s information technology software and hardware assets for all computers, networks, voice and video solutions, and the vendors that supply them. IS assists in the selection, implementation, operation, and enhancement of information technology services across the System.

IS focuses on providing a strategic foundation where data and information flows securely between the System and its facilities, providers, payors, and patients. The System’s Enterprise Resource Planning (“ERP”) application area recently moved to a single platform. The ERP migration was an enterprise-wide accomplishment which brought all of the System facilities and associated partners onto a single PeopleSoft platform for Accounts Payable, General Ledger, Materials Management, Human Resources, and Payroll. A Kronos solution also standardized scheduling and time and attendance across the System.

After the migration to and optimization efforts with the unified ERP platform, the System is focused on unifying its Health Information Technology (HIT) platform into one Electronic Medical Record (EMR) vendor. Currently, the System uses Meditech in six hospitals (former Provena facilities) and EPIC in six hospitals (former Resurrection facilities). Presence Health is exploring a plan to migrate to EPIC by the end of 2018. Presence Health has been able to achieve all Meaningful Use targets. However, significant additional benefits are anticipated with a migration to a single advanced platform.

Presence Health IS is currently focused on:

- Preparing the System to move to a unified EMR solution; - Assisting Revenue Cycle with system improvements and new capabilities; - Enabling a value-based organization by focusing on costs; - Standardizing Home Health to a single platform; and - Optimizing current applications (removing duplication in an effort to create efficiencies) while balancing the demand for system customization versus the need for system standardization.

Licensure, Accreditation, Memberships and Awards

Each Acute Care Ministry currently is licensed by the Illinois Department of Public Health and is fully accredited by The Joint Commission. In addition, these facilities hold various other licenses and accreditations relating to the specific specialties and services offered at such facilities. These include but are not limited to Primary Stoke Certification, Chest Pain Center Certification and Hip/Knee Certification. Rehab units are CARF (Commission on Accreditation of Rehabilitation Facilities) accredited and all mammography sites are IEMA (Institute for Environmental Management Association) certified. All laboratory sites participate in the CAP (College of American Pathologists) Laboratory Accreditation Program and have CLIA (Clinical Laboratory Improvement Amendments) certification. Each Acute Care Ministry is also a member of various hospital associations, including the American Hospital Association, the Catholic Health Association, and the Illinois Health and Hospital Association.

Each of the nursing homes and long-term care facilities owned or operated by Presence Senior Services – Chicagoland and Presence Life Connections currently is licensed by the Illinois Department of Public Health or the Indiana State Department of Health, as applicable. Presence Senior Services licensed

A-42 facilities are also fully accredited by the Joint Commission. Presence Senior Services belongs to the Leading Age Association, which is the national and state association for post-acute providers as well as home and community based services.

Presence Health has won several awards for clinical services and performance. Based on the Truven Health Analytics 15 Top Health Systems Study, 2016 (8th Edition), the System was in the top quintile of large health systems for 2014 Performance, on both risk-adjusted mortality index and mean 30- day mortality rate.

Malpractice and Other Insurance

Presence Health maintains a self-insured program for comprehensive general liability and healthcare professional liability risks for all of its facilities and providers in amounts that management of the Corporation has determined to be adequate and customary for similarly situated entities. Insurance is written through the System’s captive insurance company with commercial umbrella and excess reinsurance above a self-insured retention. In addition, the System maintains insurance policies to cover fire and supplemental perils, business interruption, managed care errors and omissions, workers’ compensation, directors and officers/employment practices/fiduciary liability, automobile liability, cyber/privacy liability, pollution liability and crime, all in amounts that management of the Corporation has determined to be adequate and customary for similar entities in the health care industry.

Associates

As of May 31, 2016, the System employed approximately 15,387 full time equivalent (FTE) associates. This includes 1,797 FTEs in centralized administrative services roles, 10,082 FTEs in Acute Care Ministries, 2,284 in the Senior Care Ministries, 841 in PMG, and the remaining 383 in the following organizations: Resurrection University, Presence Behavioral Health, Presence Properties, PHP, Presence Ambulatory Services and Presence Foundation.

Currently there are four unions representing 1,024 associates at six different locations. The largest is the Illinois Nurses Association which represents 847 registered nurses at Presence Saint Joseph Medical Center – Joliet. The next largest is the AFSCME which represents 85 associates in various roles within the Presence Home Care unit.

The remaining associates throughout the System are not unionized. Presence Health places a strong emphasis on associate engagement. Retention rates for associates are generally in line with industry benchmarks and are tracked monthly.

Retirement Plans

The System has various retirement programs with both frozen and active statuses. These plans include defined contribution, defined benefit and non-qualified retirement plans. The primary retirement plan available to eligible associates is the Presence Health 403(b) Plan. This plan is a defined contribution plan which has an associate non-elective deferral company contribution and an employer matching contribution.

Presence Health also has noncontributory defined benefit pension plans covering eligible employees of the System. Two of these pensions have church plan status, the Provena Health Employees’ Pension Plan and the Resurrection Health Care Retirement Plan (collectively, the “Plans”). Therefore, funding in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), is not required for these Plans. The West Suburban Health Care Retirement Income Plan does not have church

A-43 plan status, and is therefore administered in accordance with all ERISA guidelines. The Plans and the West Suburban Health Care Retirement Income Plan are frozen defined benefit plans and no new entrants are eligible to participate in these plans. In each of 2015 and 2014, Presence Health contributed $30 million in the aggregate to the Plans. Future contributions to the Plans are expected to be allocated ratably based on each plan’s overall funded status. The West Suburban Health Care Retirement Income Plan is funded consistent with ERISA requirements. The System’s total pension benefit liability as of December 31, 2015 was approximately $264 million. There is no assurance that the System’s pension costs will not materially increase in the future and that the various assumptions used to calculate the contributions will vary materially.

There are also non-qualified retirement plans available to certain highly compensated associates. These plans include the Presence Health Supplemental Retirement Plan (457(f)) and the Presence Health Deferred Compensation Plan (457(b)). The 457(f) plan is funded solely by the organization in accordance with the plan document. Contributions to the 457(b) plan are made exclusively by the associate.

Church Plan Litigation

On April 2, 2015, a lawsuit was filed in the U.S. District Court for the Northern District of Illinois against Presence Health and certain affiliates, on behalf of the participants of the Plans. The lawsuit challenges the eligibility of the Plans to be treated as “Church Plans” exempt from the Employee Retirement Income Security Act of 1974. Presence Health intends to vigorously defend the Plans’ status as eligible Church Plans, consistent with long-standing positions of the U.S. Department of the Treasury, including IRS and the U.S. Department of Labor. In March 2016, the Seventh Circuit Court of Appeals (which is the applicable Federal Appellate Court for Presence Health litigation) ruled in a similar case that the Advocate Health Care pension plan did not satisfy the Church Plan exemption; one other Federal Appellate Court has reached a similar conclusion although district court rulings to date have been mixed. An appeal to the U.S. Supreme Court in one or more of these cases is possible. Although the Advocate Health Care case created adverse precedent for the Presence Health litigation on certain issues, Presence Health believes its facts are distinguishable. However, if the litigation is ultimately resolved in favor of the participants, the System could be liable to fund any deficiencies in the Plans (approximately $74 million currently). See Footnote 14(a) to the Audited Consolidated Financial Statements contained in APPENDIX B hereto.

Educational Programs and Affiliations

Presence Health has a history of commitment to both undergraduate and graduate medical education, as well as nursing and the health professions through Resurrection University. Presence Health’s four major teaching hospitals – Presence Resurrection Medical Center, Presence St. Francis Hospital, Presence St. Joseph Hospital – Chicago, and Presence Saints Mary and Elizabeth Medical Center – train approximately 360 Residents/Fellows per year in Presence Health-sponsored sponsored programs. Residency programs are predominantly concentrated in primary care - Family Medicine, Internal Medicine, and Obstetrics and Gynecology. There are also specialized training programs in Emergency Medicine and General Surgery. In addition, Presence Health’s teaching hospitals and community sites provide over 2,000 medical student rotations annually.

To further its educational mission, Presence Health has developed academic affiliations with all major universities in the Chicago metropolitan area for the clinical education and training of medical students, including Loyola University, Midwestern University, Rosalind Franklin University, Rush University, University of Chicago, and the University of Illinois at Chicago.

A-44 Resurrection University (the “University”), formerly known as West Suburban College of Nursing, an affiliate of the System, was founded in 1914. In 2011, the University became a separately incorporated, non-profit organization with an independent governing Board of Directors. The University is accredited to grant undergraduate and graduate degrees, not only in nursing but in other allied health fields. The University currently enrolls 600 students in the undergraduate and graduate programs, and continues to grow in enrollment and academic programs. Undergraduate degrees are offered in nursing (BSN), image technology (BSIT), and health informatics and information management (BS HIIM). The graduate program currently includes a Master’s in Nursing Science (MSN), with concentrations of Nurse Educator, Health Systems Leadership, and Nurse Practitioner. The University also offers a post- baccalaureate certificate in the HIIM program. The University is regionally accredited by the Higher Learning Commission (HLC) and holds specialty accreditation from the Commission on Collegiate Nursing Education (CCNE), the Commission on Accreditation for Health Informatics and Information Management (CAHIIM), and the Joint Review Committee on Education in Radiologic Technology (JRCERT). Presence Health ministries also offer clinical training of nurses and allied health professionals for students from various colleges and universities within the local communities served.

A-45 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B

FINANCIAL STATEMENTS OF PRESENCE HEALTH NETWORK AND AFFILIATES

[THIS PAGE INTENTIONALLY LEFT BLANK] PRESENCE HEALTH NETWORK AND AFFILIATES

Consolidated Financial Statements and Supplementary Infonmation

December 31 , 2015 and 2014

(With Independent Auditors' Report Thereon) PRESENCE HEALTH NETWORK AND AFFILIATES

Table of Contents

Page

Independent Auditors' Report

Consolidated Statements of Financial Position 3

Consolidated Statements of Operations and Change in Unrestricted Net Assets 4

Consolidated Statements of Changes in Net Assets 5

Consolidated Statements of Cash Flows 6

Notes to Consolidated Financial Statements 7 KPM G llP Aon Cen ter Suite 5500 200 East Randolph Drive Chicago, Il 60601-6436

Independent Auditors' Report

The Board of Directors Presence Health Network:

Report on the Financial Statements We have audited the accompanying consolidated finan cial statements of Presence Health Network and its affi liates (Presence Health), which comprise the consolidated statements of financial position as of December 3 1, 20 15 and 20 14, and the related consolidated statements of operations and change in unrestricted net assets, changes in net assets, and cash flows for the years then ended, and the related notes to the consoli dated finan cial statements.

Mallagemellt's Respo" sibility for the Fillallcial Statemellts Management is responsible for the preparation and fair presentation of these conso lidated financial statements in accordance with U.S . generally accepted accounting principles; this incl udes 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 finan cial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of Ameri ca. Those standards require that we plan and perfonn the audits to obtain reasonable assurance about whether the consoli dated fin ancial statements are free from material misstatement.

An audit in volves perfonning procedures to obtain audit evidence about the amounts and di sclosures in the consolidated financial statement's. The procedures selected depend on the auditors' judgment, including the assessment of the ri sks of materi al 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 fa ir presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not fo rthe purpose of expressing an opinion on the effecti veness 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 signifi cant accounting estimates made by management, as well as evaluating the overa ll presentati on of the consolidated financ ial statements.

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

KPM G LLP ;s • Dolowat& ....t ed IiatHty paltMf$l>ip, tM u.s. ~ fom of KPMG I nt~na t ional Coop&r.""" I"KPMG Int"""'t"""·I.' Swis. ""';t, Opinion In our opinion, the consolidated financial statements referred to above present fa irly, in all material respects, the fi nancial position of Presence Health Network and its affi liates as of December 31, 20 15 and 20 14, and the results of their operations and their cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

Chicago, Ill inois May 26, 2016

2 PRESENC E HEALTH NETWORK AND AFFILIATES Consolidated Statements of Financial Position December 31,2015 and 2014 (In thousands)

Assets 201 5 2014 Current assets: Cash and cash equivalents $ 207,356 192,404 Investments - required for current liabilities 32,297 53,830 Patient and resident accounts receivable, less allowance for uncollectible accounts of $267,512 and $188,248 365,544 467,648 Inventories 53,845 50,136 Prepaid expenses and other current assets 102,479 60,072 Assets held for sale 4,500 Total current assets 761,521 828,590 Investments 712,136 864,625 Investments with limited uses 76,236 77,102 Land, buildings, and equipment, net 1,417,995 1,397,543 Other assets 78,341 72,533 Total assets 3,046,229 3,240,393 $ -,;;:;;.;,=- Liabilities and Net Assets Current liabilities: Current installments oflong-term debt $ 16,703 49,847 Current portion of obligations under capital leases 1,094 1,625 Current portion of estimated self-insurance liabilities 51,167 53,646 Accounts payable and accrued expenses 383,722 352,880 Estimated payablcs under third-party reimbursement programs 219,671 201,359 Deferred revenue and refundable deposits 34,611 33,894 Total current liabilities 706,968 693,251 Long-term debt, excluding current installments and unamortized bond premiums and discounts 1,028,069 1,044,833 Obligations under capital leases, net of current portion 3,206 3,661 Pension benefit liability 263,780 287,901 Estimated self-insurance liabilities, excluding current portion 249,463 242,163 Other long-term liabilities 41 ,593 22,355 Total liabilities 2,293,079 2,294,164 Net assets: Unrestricted: Unrestricted net assets of Presence Health 703,255 898,335 Noncontrolling interest in subsidiaries 4,408 4,385 Total unrestricted net assets 707,663 902,720 Temporarily restricted 28,228 26,493 Permanently restricted 17,259 17,016 Total net assets 753,150 946,229 Total1iabilities and net assets $ 3,046,229 3,240,393

See accompanying notes to consolidated financial statements.

3 PRESENCE HEALTH NETWORK AND AFFILIATES Consolidated Statements of Operations and Change in Unrestricted Net Assets Years ended December 31, 2015 and 2014 (In thousands)

20 15 2014 Net patient and resident service revenue: Net patient and resident service revenue before bad debt $ 2,5 15,850 2,431 ,805 Provision for uncol lectible accounts receivable 138,637 79,755 Net patient and resident service revenue 2,377,213 2,352,050 Other revenue: Other 238,795 226,833 Total revenue 2,616,008 2,578,883 Expenses: Salaries and benefits 1,385,122 1,322,6 16 Supplies 418,684 406,485 Purchased services 345,598 302,750 Insurance 102,740 44, 156 Depreciation and amortization 140,788 134,831 lmereSl 40,889 41 ,83 1 Assessments and taxes 11 6,971 109,8 10 Other 250,772 229, 148 Total expenses 2,80 1,564 2,591,627 Loss from operations (185,556) (12,744) Nonoperating - investment return and other, net 2,159 58,636 Revenue and gains (deficient) in excess of expenses and losses before discontinued operations (183,397) 45,892 Net losses from discontinued opcrations (including loss on sale of$35,369 in 2014) (13,913) (47,898) Revenue and gains deficient of expenses and losses (197,310) (2,006) Other changes in unrestricted net assets: Net assets released from restrictions for purchase of land, buildings, and equipment 3,911 11 ,734 Recognition of change in pension funded status (1,658) (109,745) Change in unrestricted net assets $ =..:,,;( 1,;;;95;,;;, 0~5;,d,7)= (100,017)

See accompanying notes lO consolidated financial statements.

4 PRESENCE HEALTH NETWORK AND AFFILIATES Consolidated Statements of Changes in Net Assets Years ended December 3 1, 2015 and 2014 (In thousands)

201 5 20 14 Unrestricted net assets: Revenue and gains deficient of expenses and losses $ ( 197,3 10) (2,006) Net assets released from restrictions fo r purchase of land, bui ldings, and equipment 3,911 11,734 Recognition of change in pension funded status (1,658) (109,745) Change in unrestricted net assets (195,057) ( 100,017) Temporari ly restricted net assets: Pledges and contributions 8,807 8,697 Investment return 23 2 10 Net assets released from restrictions fo r purchase afland, buildings, and equipment (3,911) ( 11,734) Net assets released from restrictions fo r operations - other revenue (3,184) (3,508) Change in temporarily restricted net assets 1,735 (6,335) Pennanently restricted net assets: Contributions 243 1,308 Change in pennanently restricted net assets 243 1,308 Change in net assets ( 193,079) (105,044) Net assets at beginning of year 946,229 1,05 1,273 Net assets at end of year $ 753, 150 946,229

See accompanying notes to consolidated fi nancial statements.

5 PRESENCE HEALTH NETWORK AND AFFILIATES Consolidated Statements of Cash Flows Years CIlded December 31, 2015 and 2014 (In thousands)

201 5 2014 Cash flows from operating activities: Change in net assets , (193,079) (105.044) Adjustments to reconcile change in net assets to net cash provided by operating acti vities: Losses from discontinued operations 13,913 47.898 Ik:preciation and amortization 140,788 134.831 Amorti7.3tion of bond premiwn and diseount, net (61) (61) Amorti7.3tion of deferred occupancy and care revenue (1,316) (294) Provision for uncollectible accounts receivable 138,637 79.755 Gain on disposal of land. buildings. and equipment 1,360 (591) Change in pension funded status 1,658 109.745 Equity gain in joint ventures (2,796) (1,120) Change in net unrealized gains on investment SC{;urities 20, 108 75.322 Net realized losses (gains) on sale of investmCllts 3,575 (117.699) Net assets released from restrictions for operations - other revenue 3,184 3,508 Restricted contributions and investment return (9,073) (10.215) Changes in assets and liabilities: PatiCllt and residcnt accounts receivable (36,533) (111,548) Estimated selliements under third-party reimbursemCllt programs, net 18,312 20.915 Inventories (3 ,709) (2.914) Prepaid expenses and other assets (42,407) 6.281 Accounts payable and accrued expenses 30,842 9,057 Estimated self-insurance liabilities 4.821 1,906 Pension benefit liability (25.779) (32,590) Other long-term liabilities 19,238 (4,900) Net cash med in discontinued operating activities (8.843) (2.663) Net cash provided by operating activities 72.840 99.579 Cash flows from investing activities: Acquisition of land, buildings, and equipment. net (161.641) (197.385) Net proceeds from sale ofland. buildings, and equipment 16,811 Purchases of investment securities (207,408) (717.390) Sales of investment securities 358,613 828,473 Acquisition ofintcrest in joint venture (3,975) (3.000) Change in other long-term assC\s 1,143 5,748 Net cash med in discontinued investing activities ( 180) (6,199) Net cash used in investing activities (13,448) (72.942) Cash flows from financing activities: Repayment of obligations under capital leases (1.945) (3,036) Scheduled ""p3ymcntS oflong_tenn debt (36,852) (33,701) Redemptions and defeasance of long-tenn debt (13,565) Net receipt (refunds) of entrance fees and mcmbership deposits 2.033 (2,652) Cash acquired in acquisition of joint venture 5,777 Net assets relcased from restrictions for operations - other revenue (3 ,1 84) (3,508) Restricted contributions and investment return 9,073 10,215

Net cash. used in financing acti\~ties (44,440) (26,905l Net change in cash and cash equivalents 14,952 (268) Cash and cash equivalCllts at beginning ofycar 192,404 192,672 Cash and cash equivalents at end ofycar $ 207,356 192,404 SupplemClltal disclosure of cash flow infonnation: Cash paid for in terest, net of amounts capitalized $ 40,959 41 ,272 SupplcmClltal di, ath Conversion of equity investment to consolidated inl'estmCllt , (4,557) Assets acquired under capital leases 959 1,876

Sec accompanying notes to consolidated financial statements,

6 PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

(I) Presence Health Network and Affiliates Presence Hea lth Network and its affili ates (referred to as Presence Health, herein) is the largest Catholic healthcare network in the state of Illinois, spanning 12 licensed hospitals, 27 long-tenn care and senior residential facilities, more than 50 primary and specialty care clinics. and 6 home health agencies. The combined health system has hospital operations throughout Chicago, as wel l as in Des Plaines, Evanston, Aurora, El gin, Joli et, Kankakee, Urbana, and Danville.

The accompanying consolidated financial statements include the accounts of Presence Health Network and the foll owing affili ates :

• Presence Hospitals PRY (Presence Hospitals), an Illinois not-for-profit corporation that owns and operates six acute care hospitals and medi cal centers and more than 30 health centers. The six acute care hospitals owned and operated by Presence Hospitals are Presence Mercy Medical Center, Presence United Samaritans Medical Center, Presence Saint Joseph Hospital-Elgin, Presence Saint Joseph Medical Center, Presence St. Mary's Hospita l, and Presence Covenant Medical Center. Presence Hospitals' wholly owned subsidiary, Presence Service Corporation (d/b/a Presence Medical Group - PRy) (PSC). is a taxable []]inois not-for-profit corporati on fonned to manage Presence Hospitals' physician practices; • Presence Resurrection Medi cal Center (PRMC), a not-for-profit corporation that owns an acute care hospital providing various inpatient and outpatient services and programs; • Presence Our Lady of the-Resurrection Medi cal Center (POLR), a nOI-for-profit corporation that owns an acute care hospital providing various inpatient and outpatient services and programs. Effecti ve December 31, 201 4, Presence Health sold substantially all of the assets and certain liabilities of and associated with POLR (note 8). Effective January 30, 201 5, the name of the corporation was changed to POLR Legacy Corporation; • Presence Holy Famil y Medical Center (PHFMC), a not-for-profi t corporation that owns a long-tenn acute care hospital providing various services and programs to patients incl uding outpatient services and addiction services; • Presence Saint Francis Hospital (PSFH), a not-for-profit corporation that owns an acute care hospital providing various inpati ent and outpatient services and programs; • Presence Saint Joseph Hospital - Chicago (PSJH), a not-for-profit corporation that owns an acute care hospital providing various inpatient and outpatient services and programs; • Presence Saints Mary and Elizabeth Medi cal Center (pSMEMC), a not-for-profit corporation that owns two acute care hospitals providing vari ous inpatient and outpatient services and programs; • Presence Healthcare Services (Services), a not-for-profit corporation that encompasses the following operating divisions: Presence Properties, Presence Phannacies (retail , Presence Medical Group - RHC) and Presence Home Medical Equipment - RHC. Effecti ve March 31,201 5, Presence Healthcare Services sold substantially all of the assets and liabilities of Presence Home Medical Equipment - RHC. Services al so oversees the operations of Presence Ambulatory Services.

7 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

• Presence Ambul atory Services, an Illinois nOl-for-pro fit corporati on that owns and operates certain ambulatory hcalthcare fac ilities. • Presence Service Corporation (d/b/a Presence Medical Group - PRY) (PSC), a wholly owned subsidiary of Presence Hospitals, is a taxable Illinois not-for-profit corporation fonned to manage Presence Hospitals' physician practi ces; • Presence Life Connections, an Illinois not-for-pro fit corporation that owns and operates II nursing homes, four independent li ving facilities, four assisted living faciliti es, two adult daycarc centers, two community servi ce facilities, one child care center, and one outpatient pharmacy in northern and central Illinois and Indiana;

Presence PRY Health is the sole member of LaVerna Terrace Housing Corporation, an Lllinois not-for-profit corpomtion doing business as Provena LaVerna Terrace;

Presence Life Connections is the sole member of Presence Home Care, a not-for-profit corpomtion that owns and opemtes five home health agencies and two hospi ce agencies in northern and centml Illinois. Presence Care @ Home is an Illinois not-for-profit corporation formerl y known as Will County Community Transitions Program, Inc.

• Presence RHC Senior Services (Senior Services), a not-for-profit corporation that manages and owns various independent li ving and nursing services and programs including the foll owing: Presence Resurrection Nursing and Rehabilitation Center, Presence Resurrection Retirement Community, Presence Resurrection Life Center, Presence Bethlehem Woods Retirement Community, Presence Casa San Carlo Retirement Community, Presence Saint Benedict Nursing and Rehabilitation Center, Presence Villa Scalabrini Nursing and Rehabilitation Center, Presence Maryhaven Nursing and Rehabilitation Center, Presence Saint Andrew Life Center (PSALC), Presence Nazarethville, and Presence Ballard Nursing Center (PBNC). Effe cti ve December 8, 2014, Presence Health sold substantially a ll of the assets and certain liabili ties associated with PSALC and PBNC (note 8); • Presence Home Care Services (Home Care), a not-for-profit corpomtion established to provide home care services. Prior to August I, 201 4, Home Care held the Presence Health System' s membership interest in Rainbow Hospice and Palli ati ve Care (Rainbow Hospice), not-for-profit corporation that is a 50/50 joint venture with Advocate Health and Hospitals Corporation. Effective as of August 1, 2014, Presence Home Care Servi ces became the sole corporate member of Rainbow Hospi ce; • Resurrection Ministries of New York, a not-for-pro fit tax-exempt subsidiary of Presence RHC Corporation, which owns two nursing home facilities, the assets of whi ch are presented as assets held for sale in the accompanying 201 4 consolidated statement of financial position. T he two nursing homes were in receivership pending fin al approval from the New York Department of Health under its Certificate of Need program and from the New York Attorney General 's Charities Bureau. This receivership arrangement was established to allow the prospective purchaser to commence work to stabilize the operations and financial results to achieve the necessary levels of quality and viability needed to obtain the pending approvals. Effecti ve October 1, 201 5, Presence Health sold substantially all of the assets and liabilities of the two nursing home facilities, Resurrection Nursing Home and Mount Loretto Nursing Home.

8 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

• Presence PRY Health and Presence RHC Corporation (collectively, the Presence Health Corporate), not-for-profit tax-exempt corporations, incorporated for charitable, educational, and scientific purposes to support health and human services by providing management assistance; • Presence Health Care Preferred (PHCP), a taxable not-for-profit corporation that serves as a managed care contracting organization for physicians associated with certain Presence Health hospitals in Chicago, and holds capitated risk and "messenger model" contracts for which such physicians and Presence Health hospitals and other facilities act as participating providers; • Presence Behavioral Health, ilk/a Proviso Family Services (PBH), a not-for-profit corporation established 10 provide behavioral health services; • Resurrection Development Foundation Board of Trustees (Foundation), a not-for-profit corporation establi shed to coordinate fund-raising activities that support the benevolent care and other programs at Presence Health; • Presence Ventures, Inc. (Ventures), an Illinois (for-profit) corporation, which is the sole shareholder of Presence Properties, Inc. as of December 31,2015 and 20 14, an Illinois business corporation that owns four parcels of land held for future use by Presence Health; • Resurrection University, a not-for-profit corporation establi shed to prepare students for professional careers in a healthcare environment; • L. Gilbraith Insurance SPC Ltd. - Resurrection Segregated Portfolio (L. Gilbrailh), an msurance company incorporated in the Cayman Islands on February 25, 1986, operates subject to the provisions of the Companies Law of the Cayman Islands. L. Gilbraith is wholly owned by Presence RHC Corporation and is consolidated with Presence RHC Corporation. The principal business of L. Gilbraith is to provide excess insurance coverage to Presence Health. L. Gilbraith is 100% reinsured; • Provena Health Assurance SPC was an insurance company incorporated in the Cayman Islands as of May 29, 2003, and beginning June 1, 2003, operated subject to the provisions oflhe Companies Law of the Cayman Islands. Provena Health Assurance SPC was a wholl y owned subsidiary of Presence PRV Health. The principal business of Provena Health Assurance SPC was to provide excess insurance coverage to Presence Health. Provena Health Assurance SPC was 100% reinsured; Effective July I, 2014, subject to a Novation, Assignment, and Assumption Agreement, and subject to the consent of all reinsurers, the coverage obligations oflhe Company were transferred to L. Gilbrailh. • Alvemo Provena Hospital Laboratories, Inc. (APHL), a corporation operated as a cooperative hospital service organization providing laboratory services, and Alvemo Clinical Laboratories, LLC (ACL), a venture created to expand the availability of lab services to patients in the serviced communities, encourage further improvement in the quality of lab services, and support APHL (collectively herein, Alvemo). Presence Health and its affiliates collectively own a 66.7% controlling interest in Alvemo. Accordingly, the accompanying consolidated financial statements include the statements of financial position and results of operations of Alvemo as of and for the years ended December 31, 20 15 and 2014.

9 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following represents a reconciliation of beginning and ending balances of Presence Health 's intcrest and the noncontrolling interests for each class of net assets for which a noncontrolling interest exists during the years ended December 3 1, 20 I 5 and 2014:

Unrestricted net assets Controlling Noncontromng Total interest interest

Balance al December 31, 20 13 $ 1,002,737 998,402 4,335 Revenue and gains in excess of (deficient) of expenses and losses (2,006) (2,056) 50 Net assets released from restrictions used for the purchase of land, buildings, and equipment 11 ,734 11 ,734 Recognition of change in pension funded status (109,745) (109,745) Balance at December 31, 20 14 902,720 898,335 4,385 Revenue and gains in excess (deficient) of expenses and losses (197,3 10) (197,333) 23 Net assets released from restrictions used for the purchase of land, buildings, and equipment 3,9 11 3,91 1 Recognition of change in pension funded status (1,658) (1,658) Balance al December 3 1, 20 15 $ ===~707,663 703,255 4,408

The accompanying consolidated financial statement's also include certain settlement transactions re lating to Westlake Hospital and West Suburban Medical Center (WSMC}-two entities disposed of by sale in August 20 I O-that arc presented as di scontinued operations. In addition, Presence Health disposed ofPOLR, PBNC, and PSALC during 20 14, and these entities are also presented as discontinued operations (note 8).

(2) Summary of Significant Accounting Policies A summary of significant accounting policies is as follows:

• The preparation of financial statements in confonnity with U.S. general ly accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 estimates include allowance for contractual adjustments, bad debt, and charity; third-party payor settlements; valuation of investments; recoverability of land, buildings, and equipment; self-insurance liabilities; and accrued pension benefit liabilities.

10 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

• Transactions deemed by management to be ongoing, major, or central to the provision of health and long-tenn care services are reported as operating revenue and ex penses. Peripheral or incidental transactions are reported as nonoperating gains and losses. • The consolidated statements of operations and change in unrestri cted net assets include revenue and gains defi cient of expenses and losses. Changes in unrestri cted net assets, which are excluded from revenue and gains defi cient of expenses and losses, consistent with industry prac tice, include recognition of change in pension fund ed status and contributions of and for long-li ved assets (including assets acquired using contributions, which by donor restri ction were to be used for the purposes of acquiring such assets). • Cash and cash equi va lents consist primarily of demand deposits with banks, cash on hand, overnight secured repurchase agreements, and securiti es with an ori ginal tenn of90 days or less when purchased, excluding amounts classified as investments. At December 31, 201 5 and 201 4, Presence Health maintained funds with financial institutions at amounts in excess of federally insured limits. • Presence Health applies the provisions of Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement, for fair value measurements of financial assets and li abilities and for fa ir value measurements of nonfinancial items that are recognized or di sclosed at fair value in the consolidated fin ancial statements on a recurring basis. Fair value is defined as the price that would be received to se lJ an asset or paid to transfer a li ability in an orderl y transacti on between market participants at the measurement date. ASC Topic 820 establishes a framework for measuring fair value and expands di sclosures about fair value measurements (note 7). • Inventories are stated at the lower of cost or market. Cost is detennined using the weighted average cost. • Land, buildings, Dnd equipment arc stated at cost, or if donated, at fair value Dt the dale of donation, net ofalJ owances fo r depreciation and impainnents. Depreci ati on is provided over the estimated useful life of each class of depreciable asset and is primarily computed using the straight-line method. Leasehold improve ments are amortized over the shorter of the tenns of the leases or the estimated useful li ves of the improvements. Equipment under capital leases is recorded at the present value of minimum lease payments. Amortization of equipment under capi tal leases is over the shorter of the lease term or useful life of the equipment. Interest cost incurred on borrowed funds during the peri od of construction of capital assets is capitalized as a component cost of acquiring those assets. Presence Health capitalized interest cost of$2,360 and $2,269 for the years ended December 31, 201 5 and 2014, respectively. • Presence Heahh applies the provisions of ASC Subtopics 958-805, No/-for-Projit £ l1fi/ies - Business COII/ billa/iolls, and 954-805, Heal/II Care £II/ities - Business Combinations. ASC SUb topics 958-805 and 954-805 provide guidance on a transaction or other event in which a not-for-profit entity that is a reporting entity combines with one or more other not-far-profit, businesses, or nonprofit acti vities in a transaction that meets the definition of a merger of not-far-profit emities or an acquisition by a not-far-profit entity.

II (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

• Presence Health evaluates long-lived assets for impairment on an annual basis. Long-Lived assets are considered to be impaired whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset. When such assets are considered to be impaired, the impainnent loss recognized is measured by the amount by which the carrying va lue of the asset exceeds the fair value of the asset. No such impairments were required for the year ended December 3 1,2015 or 2014. • 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 contributions. Absent explicit donor stipulations about how long those long·lived assets must be maintained, expiration of donor restrictions is reported when the donated or acquired long·lived assets are placed in service. • Investments include assets set aside by the board of directors for future capital improvements and for se lf·insured liabilities. The board of directors retains control and may at its discretion subsequently use these investments for other purposes. Investments with li mited uses include assets held by trustees under indenture agreements and donor·restricted investments. Investments are class ified as current assets to the extent that they are required to satisfy obligations classified as current liabilities in the accompanying consolidated statements of financial position. • Deferred fmance charges, bond discount, and bond premium are amortized on a stmight·li ne basis over the periods the related obligations are outstanding. • Deferred revenue and refundable deposits represent various types of entrance and membership fees received from residents of senior living facilities. Resident membership deposits are fully refundable, net of applicable processing fees, to the resident upon tennination of the lease agreement between Senior Services and the resident, with any interest earned on such deposits accruing to Senior Services. Senior Services offers a variety of partially refundable entrance fees. The nonrefundable portion of entrance fees is amortized to revenue using the straight·1ine method over the estimated remaining life expectancies of the residents. Total entrance payments subject to refund at December 31, 2015 and 20 14 approximated $23,987 and $30,086, respectively, and are included in deferred revenue and refundable deposits in the accompanying consolidated statements of financial position. • The provisions for estimated self·insured medical malpractice claims, workers' compensation claims, and employee health claims include estimates of the ultimate costs for both reponed claims and claims incurred but not reported. • Unconditional promises to give cash or other assets are reported at fair value at the date the promise is received. All contributions are considered to be available for unrestricted use unless speci.fically restri cted by donors. Contributions arc reported as direct additions to temporarily restricted net assets if they are received with donor sti pulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations and change in unrestricted net assets as net assets re leased from restrictions. Donor·restricted contributions whose restrictions are met within the same year as

12 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

received are recorded as unrestricted contributions. Gifts of cash or other assets that must be used to acquire long-li ved assets arc reported as restricted support . Ex pirations of donor restrictions are reported when the donated or acquired long-li ved assets are placed in service. • Temporarily restri cted net assets are those whose use has been limited by donors to a specific time period or purpose. Temporarily restri cted net assets are restricted for various programs related to the provision of health and pastoral care and the acquisiti on a fland, buildings, and equipment. • Pennanently restri cted net assets represent donor-restricted contributions, the principal amount of which may not be expended. Amounts repon ed as permanently restTicted net assets represent the cumulative amount of contributions received for permanent endowment. In vestment return currently earned on permanently restricted investments is reported as either nonoperating in vestment income or a direct addition to temporarily restricted net assets based on donor intentions.

Endowment fun ds are commingled in a pooled investment ponfolio administered by Presence Health. Presence Health reli es on a total return strategy in which investment returns are achieved through both capital appreciation (reali zed and unrealized) and current yield (interest and dividends). Presence Health targets a di versifi ed asset allocation that places a greater emphasis on fi xed-income investments to achi eve its long-term return objecti ves within prudent risk constraints. Investment return is allocated to endowment fund assets on a basis proponional to its percentage of the investment portfolio. Endowment fund assets are maintained at a level equiva lent to the balance of permanently restricted net assets.

• Net patient and resident service revenue is reported at the estimated net realizabl e amounts from patients, residents, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroacti ve adjustments are accrued on on estimated basis in the period the reloted services ore rendered ond adjusted in future periods as final settlements are determined. • Presence Health provides care to patients who meet certain criteria under its chari ty care policy without charge or at amounts less than its established rales. Because Presence Health does not pursue collection of amounts detennined to qualify as charity care, they are not reported as revenue. Presence Health appli es the provisions of ASC Subtopi c 954-605, Health Care Entities - Rellenue Recognition, the disclosure section of whi ch requires that cost be used as the measurement basis for charity care di sclosures purposes and that cost can be identified as direct and indirect costs of providing charity care. • Presence Health accounts for di scontinued operations under ASC guidance related to accounting for the impairment or disposal of long-lived assets. Effecti ve for Presence Health in 20 IS, Accounting Standard Update (ASU) 201 4-08, Reporting Discol1fill Zl ed Operations and Disclosures of Disposals o/Components of an Entity, improves the definition of what is defin ed as di scontinued operations by limiting the circumstances under which is can be used. The adoption of ASU 2014-08 does not impact di sposal s previously reported as di scontinued operations. Presence Health continues to account for previous di sposals as di scontinued operations in the accompanying consolidated statements of operations and change in unrestricted net assets.

13 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

• Investment income or loss (including realized gains and losses on investments, changes in unrealized gains and losses on trading securiti es, interest, and di vidends) is included in unrestri cted revenue and gains defi cient of ex penses and losses in the accompanying consolidated statements of operati ons and change in unrestricted nel assets unless the income or loss is restricted by donors, in which case the investment income is recorded directl y to temporaril y or pennancntly restricted net assets. lnvestment returns of temporarily restricted investments are recorded directl y to temporarily restri cted net assets in accordance with donor intent. • Presence Health recognizes liabilities when a legal obligation exists to perfonn an asset retirement obligation (ARO) in which the timing or method of sett lement are conditional on a future event that mayor may not be under the contTol of the enti ty. An ARO li ability is recorded at its net present value with recogniti on of a related long-li ved asset in a corresponding amount. The ARO liability is accreted through periodic charges to interest expense. Presence Health is legally li abl e to remove asbestos from existing bui ldings prior to future remodeling or demolishing of the existing buildings . The estimated asbestos removal cost at December 3 1, 20 15 and 201 4 was $12,624 and $13,560, respectively, and is included as other long-tenn liabilities in the accompanying consolidated statements of fi nancial position. • Ventures is an Illinois business (for-profit) corporation that recognizes deferred income taxes under the asset-and-liability method. Deferred tax assets and liabilities are recogni zed for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respecti ve tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expec ted to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recogni zed in income in the period that includes the enactment date.

Ventures tax effects of temporary differences that give ri se to significant portions of the deferred tax assets at December 31, 201 5 and 20 14 are primarily the result of net operating loss carryforwards of $6,441 and $6,656 at December 31, 201 5 and 201 4, respecti vely, which expire at various future dates through 2030.

PSC is an Illinois not-for-profit taxable corporation that also recogni zes deferred income taxes under the asset-and-liability method. PSC tax effects of temporary di ffe rences that give rise to significant portions of the deferred tax assets at December 31, 201 5 and 2014 are primarily the result of net operating loss carryforwards of $ 184,01 3 and $168,667 at December 3 1, 201 5 and 201 4, respectively, whi ch expire at various future dates through 2035.

In assessing the realizabili ty of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets wi ll not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary di fferences become deductible. Management considers projected fulure taxable income and tax planning strategies in making thi s assessment. Based upon the level of histori cal taxable losses and projections for future taxable losses over the periods for which the deferred tax assets are deductible, management believes it is more likely than not that Ventures and PSC will not

14 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

realize the majority of the benefits of these deductible differences. The defe rred tax assets attributable to the net operating loss carryforwards not reali zed as of December 3 1, 201 5 and 201 4 have been full y reserved in the accompanying consolidated financial sl'atements due to the uncertainty of realization.

Presence Health recognizes the tax benefit from an uncertain tax position only i[i! is more likely than not that the tax positi on will be sustained on examination by the tax ing authorities, based on the technical merits of the positi on. As of December 31, 201 5 and 2014, Presence Health does not have any liabilities for unrecognized tax benefits.

• Presence Health primarily incurs expenses for the provision of health and residential care services and related general and administrati ve acti vities. • The Medical Electronic Health Record (EHR) Incentive Program (the Program) provides incentive payments to eligible hospitals and professionals as they adopt, implement, upgrade, or demonstrate meaningful use of certified EHR technology. For the years ended December 31, 201 5 and 201 4, Presence Health recognized $8,47 1 and $16,352, respecti vely, as other revenue related to Medi care and Medicaid EHR incentives, which have been received or are expected to be received based on certifications prepared by management under th e· appro priate guidelines for attestation. • Certain 201 4 amounts have been reclassified to confonn to the 201 5 consolidated fin ancial statement presentation.

(3) Net Patient and Resident Service Revenue Presence Health has agreements with third-party payors that provide for reimbursement at amounts di ffere nt from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, capitation, and per diem payments. A summary of the basis of reimbursement with major third-party payors is as fo llows:

Medicare - Inpatient ac ute care services, outpatient services, physician services, home health, and long-term care services rendered to Medicare program benefi ciaries are paid at prospectively detennined rates per case. These rates vary according to patient and resident classification systems that are based on clinical, diagnostic, and other factors. The prospectively detennined rates are not subject to adjustment. Payment classification of pati ents and residents under the prospective payment systems, and the appropriateness of the services, are subject to validation reviews. Certain services related to Medi care benefi ciaries are reimbursed based upon cost-reimbursement methodologies. Presence Health is reimbursed for cost-reimbursable items at tentative rates with final settlement determined after submi ssion of annual reimbursement reports by Presence Health and audits thereof by the Medicare fi scal intermediary. As of December 31, 201 5, annual Medicare reimbursement reports generally have been final settled through 201 2 with some final settled through 2014.

Medicaid - Inpatient and outpatient services rendered to Medicaid program beneficiaries arc reimbursed under prospective ly detemlined rates per discharge and fee schedules, respectively. Presence Health also receives incremental Medicaid reimbursement for specific programs and services at the di scretion of tbe State of Illinois Medicaid Program. Medi caid reimbursement may be subj ect to periodic adjustment, as well as to changes in existing payment methodologies and rates, based on the amount of funding avail abl e to the State of Illinois Medicaid Program.

15 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

The State of Illinois (the State) has an assessment program to assist in the fi nancing of its Medica id program, which was extended by the State through July 1, 201 8. Pursuant to this program, hospitals within the State are required to remit payment to the Slate Medi caid program under an assessment fannula approved by the Centers for Medicare and Medicaid Services (eM S). Presence Health has included $8 1,328 and $79,207 as provider tax assessment expense for the years ended December 3 1, 201 5 and 2014, respecti vely, in the accompanying consolidated statements of operations and change in unrestricted net assets.

The assessment program also provides hospitals within the State with additional Medicaid reimbursement based on funding fonnulas approved by CMS. Presence Health has included its additional related reimbursement of $126,08 1 and $125,339 for the years ended December 31, 201 5 and 2014, respecti ve ly, within net patient and resident service revenue in the accompanying consolidated statements of operati ons and change in unrestricted net assets.

As of and for the years ended December 31, 2015 and 2014, Presence Health has included its related assessment of $25,527 and $24,894, respecti vely, under the Enhanced Hospital Assessment Program, within assessments and taxes in the accompanying consolidated statements of operations and change in unrestricted net assets. The Enhanced Hospital Assessment Program provides hospitals within the State with additional Medicaid reimbursement, based on funding formulas also approved by CMS. Presence Health has included its additional related reimbursements for the years ended December 3 1, 201 5 and 2014 of $34,609, within net patient and resident service revenue in the accompanying consolidated statements of operations and change in unrestricted net assets.

On January 9, 201 5, CMS approved a new Ulinois Medicaid supplemental hospital payment program for services provided to indi viduals who qualify as a Medicaid beneficiary under the Affordable Care Act. The program is retroactive to March 1, 2014 and ex pires June 30, 201 8. Presence Health has included its additional reimbursement of $72,483. which includes $34.274 related to 2014. in net patient and resident service revenue in the accompanying 201 5 consolidated statement of operations and change in unrestricted net assets.

The State's Medi caid program entered its fi scal years beginning Jul y 1,2011 and 20 12 with structural budget de fi cits. The defi cits include the continued practice of deferring Medicaid bills to future periods, and have led to the State' s slowdown in claims processing and payments. As of December3l, 201 5 and 201 4, Medicaid nct receivabl es were approximately $ 103,000 and $139,000, respectively, and represented approximately eight and eleven months, respectively, of outstanding claims. Management continues to value these patient receivables using hi storical collect·ion percentages.

BIll e Cross - Presence Health participates as a provider of healthcare services under reimbursement agreements with Blue Cross. The provisions of the indemni ty plan agreements stipul ate that services will be reimbursed at a tentative reimbursement rate and that fin al reimbursement for these services is detennined after the submission of annual cost reports and reviews by Blue Cross. As of December 3 1, 2015, the Blue Cross cost settlements for 201 5 are subject to audit and retroactive adjustment.

16 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

Managed Care - Presence Health participates as a provider of health care servi ces under various agreements with health maintenance organi zati ons (HMOs) and preferred provider organizations (PPOs). The terms of each contract vary, but typically include a negotiated discount offered by Presence Health for services provided to contracted HMO and PPO pati ents.

Capitation Revel/lie - PHCP receives capitation payments based on the demographic characteristics of covered members in exchange for providing all primary care physician services, as well as certain outpatient diagnostic and specialist physician services. Additionally. PH CP is eligible for incentive payments based on favorable utilization experi ence. Capitati on revenue related to risk-based contracts totaled $60,599 and $50,178 for the years ended December 31, 20 15 and 2014, respecti ve ly, and is included within other revenue in the accompanying consolidated statements of operations and change in unrestricted net assets. Pursuant to ri sk-based contracts, PHCP estimates its liability for covered medical claims, including claims incurred but not reported as of the consolidated statements of financial position dates, based upon historical costs incurred and payment processing experience. This liability approximated $5 ,11 5 and $4,859 at December 3 1, 2015 and 201 4, respecti vely, and is incl uded wi thin accounts payable and accrued expenses in the accompanying consolidated statements of financial position.

Net patient and resident service revenue for the years ended Dccember 31, 201 5 and 201 4 includes $10,986 and $6,6 11 , respectively, of net favorable retroactively detennined reimbursement settlements from prior years with third-party payors. In addition, net patient and resident service revenue for the year ended December 3 1, 201 5 incl udes approximately $7,920 due to a settlement from Medicare for fi scal years 2007- 2011 related to the Rural Floor Budget Neutrality Adjustment Appeal.

Pati ents' accounts receivabl e are reduced by an allowance for uncollecti ble accounts. In evaluating the collectibility of patients' accounts receivabl e, Presence Health analyzes its past hi story and identiti es trends for each of its major payor sources of revenue to estimate the appropri ate allowance for uncollectible accounts and provision for uncollectible accounts receivabl e. Management regularl y reviews data about these major payor sources of revenue in evaluating the sufficiency of the allowance for uncollectible accounts. For receivables associated with servi ces provided to pati ents who have third-party coverage, Presence Health analyzes contractually due amounts and provides an allowance for uncoll ectible accounts and a provision fo r uncoll ecti ble accounts receivable, if necessary. For receivables associated with patient responsibility (which includes both patients without insurance and patients with deductible and copayment balances due for which third-pan y coverage exists for part of the bill), the patients are screened against the Presence Health charity care policy and uninsured di scount policy. For any remaining pati ent responsibility balance, Presence Health rccords a provision for uncollectible accounts receivable in the period of service on the basis of its past experience, which indicates that many patients are unable or unwilling to pay the portion of their bill for which they are financially responsibl e. The diffe rence between the standard rates (or the di scounted rates if negoti ated) and the amounts actually collected after all reasonable collection efforts have been exhausted is charged off against the allowance for uncoll ecti ble accounts.

17 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

Presence Health's allowance for uncollectible accounts for self-pay patients increased from 28.7% of accounts receivable at December 31,2014 to 42.3% of accounts receivable at December 31, 2015 due to an increase in the number afpalieots with higher coinsurance and deductible plans and an increase in the aging of accounts receivable. In addition, Presence Health's self-pay wri te-offs decreased from $94,984 for the year ended December 31, 2014 to $59,403 forthe year ended December 31 , 2015. Presence Health does not maintain a material allowance for uncollectible accounts from third-party payors, nor did it have significant write-offs from third-party payors.

Patient service revenue, net of contractual allowances and discounts (but before the provision for uncollectible accounts receivable), recognized in the period from these major payor sources is as follows:

2015 2014 Medicare $ 943,239 954,524 Medicaid 538,566 488,900 Managed care!contract payors 827,424 838,766 Other 206,62 1 149,615 Net patient and resident service revenue before bad debt $ =~=~2,5 15,850 2,43 1,805

(4) Concentrations of Credit Risk Presence Health grants credit without collateral to its patients and residents, most of whom are local residents in Presence Health's markets. The mix of net receivables from patients, residents, and third-party payors at December 31, 20 15 and 20 14 is as follows:

2015 2014 Medicare 33% 33% Medicaid 25 29 Managed carelcontract payors 24 23 Other 18 15 100% 100%

(5) Charity Care During the years ended December 31, 2015 and 2014, the estimated costs of charity care provided were $45,654 and $6 1,695, respectively. Cost is estimated using an overall cost to charge ratio.

18 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

(6) Investments A summary oflhe composition of Presence Health's investment portfolio al December 31 , 2015 and 2014 is as follows:

2015 2014 Cash and cash equivalents $ 48,111 58,042 Domestic common stocks 142,507 200,632 Foreign common stocks 1,025 Domestic equity mutual funds 8,922 51 ,693 Domestic fixed-income mutual funds 43,899 1,988 Foreign equity mutual funds 32,089 79,476 Foreign fixed-income mutual funds 162,379 178,870 U.S. government and agency obligations 53,993 54,906 Corporate debt securities 72 ,154 77,566 Mortgage-backed securities 42,799 55,729 Commercial mortgage-backed securities 8,5 17 12,755 Asset-backed securities 18,838 15 ,499 Foreign debt securities 4,825 6,276 Other 27 Alternative investment - Lighthouse Global Long/Short Fund 93 ,438 101 , 102 Alternati ve investment - Aurora Offshore Fund Ltd 11 88,171 99,998 $ 820,669 995,557

Presence Health has invested in alternative investments - hedge fund of funds lhal employ a long/short strategy. The funds are primarily invested in global equity markets and private investment funds. There are no additional funding commitments as of December 31 , 2015 and 2014.

Investments are classified in the accompanying consolidated statements of financial position as follows:

2015 2014 Investments, required for current liabi lities $ 32,297 53,830 Investments limited as to use 76,236 77, 102 Investments 712, 136 864,625 $ ==,;;82;;;0;,;,6;;;6,;,9= 995,557

19 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

Certain investments are held for the following limited uses as of December 31:

2015 2014 Held by trustee under bond indenture agreements $ 35,619 36,505 Restricted by donors 40,6 17 40,597 $ ==.;,76;;;, 2;;;;3~6= 77, 102

The composition of investment return for the years ended December 3 1, 20 15 and 2014 is as follows:

2015 2014 Interest and dividend income, net offees and expenses $ 23, 153 12,490 Change in net unrealized gains on securities (20,108) (75,322) Net realized (losses) gains on sale of investments (3,575) 117,699 Total investment return $ ==~(5;;;3;;!0)~ 54,867

Investment returns are included in the accompanying consolidated statements of operations and change in unrestricted net assets for the years ended December 31,2015 and 2014 as follows:

2015 2014 Nonoperating: Investment return $ (553) 54,657 Temporarily restricted net assets: Investment retum 23 210 Total investment return $ ==~(5;;;3;;!0)~ 54,867

(7) Fair Value Measurements (a) Fair Value of FiltaltciallltSlrumenls The fol1owing methods and assumptions were used in estimating the fair value of its financial instruments:

• The canying amount reported in the consolidated statements of financial position for the following approximates fair value because ofthe short maturities ofthese instruments: cash and cash equivalents, patient and resident accounts receivable, accounts payable and accrued expenses, and estimated payables under third-party reimbursement programs. • Investments: Common stocks are measured using quoted market prices at the reporting dale multiplied by the quantity held. U.S. government obligations, U.S. agency obligations, corporate debt securities, mortgage-backed securities, commercial mortgage-backed securities,

20 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

asset-backed securities, and foreign debt securities are measured using other observable inputs. The carrying va lue equals fair value. • Presence Health applies the concepts of Ase Subtopic 820- 10 to its mutual funds and alternative investments using NAY as a practical expedient in estimating fair value; however, it is possible that the redemption rights of certain alternative investments may be restricted by the funds in the future in accordance with the underlying fund agreements. Changes in market conditions and the economic environment may impact the NAY of the funds and consequently the fair value of Presence Health 's interest in the funds. As of December 31, 2015 and 2014, Presence Health had no plans or intentions to sell investments at amounts different from NAV. • Long-term debt: The fair va lue affixed rate long-tenn debt is estimated based on quoted market prices for the same or similar issues or on the current rates offered to Presence Health for debt of the same remaining maturities. For variable rate debt, carrying amounts approximate fair value. The estimated fa ir value of long-tenn debt instruments at December 31 , 2015 and 2014 is approximately $ 1,122,000 and $1,189,000, respectively.

(b) Fair Value Hierarchy ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair va lue. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabi lities (Level I measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fa ir value hierarchy are as follows:

• Level I inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Presence has the ability to access at the measurement date. • Level 2 are observable inputs other than Levell prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inpuls that are observable or can be corroborated by observabl e market data for substantially the full tenn of the assets or liabi lities. • Level 3 inputs are unobservable inputs for the asset or liabi lity.

The level in the fair value hierarchy within which a fa ir value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.

21 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following table presents assets and liabil ities that are measured at fair value on a recurring basis at December 31, 2015:

Fair va lu e mcuuremcnls Total at Deeember 31,201S usinB Redemption Da )'s fair >"a lu e Level I Len'12 Level 3 frequency notice

Assets: Investments. excluding cash and cash equivalents tOlaling S48.111: Domestic common stocks S 142,507 142,507 Daily Domestic equity """ mutual funds 8,922 8.922 Daily Domestic fixed-income """ mutual funds 4),899 43,899 Daily Foreign equ ity """ mutual funds 32,089 32.089 Daily 0", Forei gn fixed-income mutual funds 162,379 162,379 Daily 0", U.s. government and agency obligations 53,993 46,044 7.949 Daily COlJlOrate debt """ securities 72,154 72,154 Daily 0", Mortgage-backed securities 42,799 42,799 Daily 0", Commercial mortgage-backed securities 8,517 8,517 Daily 0", Asset-backed securities 18,838 18,838 Daily "", Foreign debt secunti"s 4,825 4,825 Daily 0", Other 27 27 Daily Alternative """ investment - Lighthouse Global Long! Monthly! Short Fund 93,438 93,438 Quarterly 90160 Alternative investment - Aurora Offsh.ore Fund Ltd II 88,171 88,171 Quarterly 95

Total S 772,558 435,840 336,718

22 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following table presents assets and liabilities that are measured at fair value on a recurring basis at December 31,2014:

Fair u lue measurements Total al l)cccmbcr 31 , 20 14 usin!.! Redemption Oays rair \'alue LHel1 Len'12 Le\'cl 3 rrequency notice

Assets: Investments. excluding cash and cash equivalents totaling $58,042: Domestic common stocks $ 200.632 200.632 Daily 0" Foreign common stocks 1,025 1,025 Daily 0" Domestic equity mutual funds 51 .693 51,693 Daily 0" Domestic fixed-income mutual funds 1,988 1,988 Daily 0" Foreign equity mutual funds 79,476 79,476 Daily 0" Foreign fixed-income mutual funds 178,870 178,870 Daily 0" U.S. government and agency obligations 54,906 47,782 7,124 Daily 0" Corporate debt securities 77,566 77,566 Daily 0" Mortgage-backed securities 55,729 55.729 Daily 0" Commercial mortgage·backed securities 12.755 12,755 Daily 0" Asset-backed securities 15.499 15.499 Daily 0" Foreign debt securities 6,276 6.276 Daily 0" Alternative investment - Lighthouse Global Long! Monthly! Short Fund 101.102 101,102 Quarterly 90160 Alternati ve investment - Aurora Offshore Fund Ltd II 99,998 99.998 Quarterly 95

Total $ 937,515 561.466 376,049

Presence Hea lth recognizes transfers between levels of the fair value hierarchy in the year of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level I, Level 2, or Level 3 for the years ended December 31, 2015 and 2014.

23 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

(8) Discontinued Operations Effecti ve December 31, 2014, Presence Health di vested certain assets and liabilities associated with POLR, certain properti es, physician practices, and a retail phannacy associated with Services (collecti vely referred to herein as the Entities). Presence Health recognized a loss on sale of $35,437 in 2014.

Effecti ve December 8, 201 4, Senior Services sold certain assets and liabilities associated with PBNe and PSALC. In 2014, Senior Services recognized a loss on the sale of PBNe of $822 and a gain on the sale of PSALC of $890.

The operations, including the loss on the sale transactions, of the Entities, PBNe, and PSALC have been presented in the accompanying consolidated statements of operation as di scontinued operations. All net cash flo ws related to tbe operating, investing, and fin ancing acti vities of the Entiti es, PBNC, and PSALC are reported separately as di scontinued operations in the accompanying consolidated statements of cash flo ws.

(9) Land, Buildings, and Equipment A summary ofland, buildings, and equipment at December 3 1, 201 5 and 2014 is as fo llows:

2015 2014 Land $ 67,202 69,502 Land improvements 75,350 78,448 Buildings and leasehold improvements 1,767,2 14 1,752,015 Equipment and furni shings 1,458,432 1,352,526 3,368,198 3,252,491 Less accumulated depreciation and amortization for capital leases 1,98 1,1 96 1,933,674 1,387,002 1,3 18,817 Construction in progress 30,993 78,726 Land, buildings, and equipment, net $ =~==1,4 17,995 1,397,543

AI December 31, 201 5 and 2014, construction in progress related primari ly to various infrastructure and facility improvement projects. Presence Health has outstanding contractual commitments of approximately $3 0,830 as of December 3 1, 20 15 relating 10 these proj ects, which will be funded through operations and with ex isting funds.

24 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

(10) Capital Leases Presence Health leases certain equipment under capital leases. Included with equipment and furnishings is $10,640 and $ \0,921 of assets held under capital leases and $7 ,295 and $6,661 of related accumulated amortization al December3 1, 20 15 and 2014, respecti vely. Capital leases are secured by the underlying equipment. A summary of future minimum lease payments and the present value of future minimum lease payments related to capital leases as of December 3 1, 2015 and 2014 is as fol lows:

20 16 $ 1,368 201 7 1,264 20 18 1,253 2019 450 2020 302 Thereafter 75 Total future minimum lease payments 4,7 12 Less amount representing interest al rates from 3. 16% to 10.25% 4 12 Present value of future minimum lease payments 4,300 Less current portion of obligations under capital leases 1,094 Obligations under capital leases, excluding current portion $ 3,206

(11) Long-Term Debt Presence Health and certain of its affiliates are party to an Amended and Restated Master Trust Indenture (Presence Health MTr). Secnrity unrler the Presence Hea lth MTI incltlrles the pl erl gerl revenue of all Obligated Group members plus mortgages on nine acute care hospitals and a medical office building. The Presence Health MTI includes the fo llowing Obligated Group Members: Presence Health (Obljgated Group Agent), Presence PRY Health, Presence Hospitals, Presence Life Connections, Presence RH C Corporation, PRMC, POLR, PSFH , PSJH, PSMEMC, and PHFMC. The fo llowing entiti es are Un limited Credit Group Participants under the Presence Health MTI: Presence Behavioral Health, Presence Ambulatory Services, Resurrection Development Foundation Board of Trustees, Presence Home Care Services, Presence RH C Seni or Services, and Presence Healtheare Services. As a result of a corporate reorgani zation effecti ve January 1, 20 16, all Unlimited Credit Group Participants became Obligated Group Members. The Presence Health Obligated Group represents approximately 94% of consolidated operating revenue for the year ended December 31, 2015 and approximately 98% of consolidated assets as of December 31, 201 5.

Amounts of long-tenn debt outstanding under the Presence Health MTI totaled $ 1,029,706 and $ 1,079,473 as of December 3 1,201 5 and 2014, respectively.

Bond issue premiums and costs are amortized over the term of the related bonds. Bond issuance costs, net of amortization, are reported as other assets in the accompanying consolidated statements of financial position.

25 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

A summary of long-term debt issued through the flIinois Finance Authority (lFA) and financial institutions at December 31, 2015 and 2014 is as fol lows:

2015 2014 Provena Series: [fA Revenue Bonds (Series 2009A) - payable annually beginning in 2026 through August 2034. Interest payable semiannually is fixed at 7.75%. $ 200,000 200,000 lFA Revenue Bonds (Series 201 OA) - payable annually through May 2028. Intcrest payable semiannually is fixed at 5.00% to 6.25%. 91,555 96,110 RHC Series: [FA Reven ue Bonds (Series I 999A) - payable annually through June 2029. Interest is fixed at 4.00% to 5.50%. 79,575 87,400 IF A Revenue Bonds (Series I 999B) - payable annually through June 2029. Interest is fixed at 4.00% to 5.25%. 79,575 87,400 I.FA Revenue Refunding Bonds (Series 2009) - payable annuall y through 2025. Interest is payable semi annually at fixed rates ranging from 5.00% to 6.125%. 51,915 62,825 Presence Health Series: Variable Rate Direct Purchase Bonds (Series 20 13A) - payable annually commencing in 20 15 with final maturity in 2035. Interest rate of 1.3 75% at December 31,2015 and 2014. 58,605 60,000 Variable Rate Direct Purchase Bonds (Series 20 13B) - payable annually commencing in 2035 with final maturity of 1.36% and 1.21% at December 31, 2015 and 2014, respectively. 48,835 50,000 Variable Rate Direct Purchase Bonds (Series 20 13C) - payable annuall y commencing in 20 15 with final maturity in 2045. Interest rale of 1.43 % and 1.32% at December 31, 2015 and 2014, respectively. 54,550 55,850 Variable Rate Direct Purchase Bonds (Series 20130) - payable annually commencing in 20 14 with final maturity in 2045. Interest rale of 1.2 1% and 1.1 1% at December 3 1, 2015 and 2014, respecti vely. 39,055 40,040

26 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

2015 2014 Variable Rate Direct Purchase Bonds (Series 20 13E) • payable annuall y commencing in 20 15 with fi nal maturity in 2035. Interest rate of 1.1 7% and 1.07% at December 3 1, 20 15and 20 14 respectively. $ 116,390 119,140 Variable RUle Direct Purchase Bonds (Series 20 13F) • payable annually commencing in 2035 with fi nal maturity in 2044. Interest rate of 1. 17% and 1.07% at December 3 1, 2015 and 2014, respectively. 39,940 40,875 Bank of America Tenn Loan - payable annuall y ranging from $] ,259 to $2,925 over tcn years. Variable interest rates of 1. 79% and 1.62% at December 31, 2015 and 2014, respectively. 92,171 93,793 PNC Term Loan - payable annually through 2023, bearing a fixed interest rate of 3.19%. 77,540 86,040 Other obligations: U.S. Department of Housing and Urban Development Mortgage Loan - payable monthly through November 2022. 8 14 894 Business Loan Agreements - payable annually starting in 2023 through 2041, bearing interest at 0.94%. 14,000 14,000 Totallong-tenn debt 1,044,520 1,094,367 Less current installments of long-term debt 16,703 49,847 Less unamortized bond premium (4,3 68) (4,657) Less unamortized bond discount 4,1 16 4,344 Total long-tenn debt, net of current installments and unamortized bond premium/discount $ 1,028,069 1,044,833

In September of20 13 , Presence Health redeemed existing bonds and reissued new tax-exempt Variable Rate Direct Purchase Bond (presence Series 2013A through 2013F (Series 2013 Bonds» , via a private placement offering having a bank as the bondholder. The initial purchase period of these six bond series ranges from five years to eight years, with new purchase dates extending from September 3, 2018 to September 1,2021. Each of these series is in an Index Floating Rate Period. In connection with the Series 2013 Bonds, Presence Health entered into six separate, but substantially similar, Continuing Covenant Agreements (CCAs) with five banks. Under these CCAs, principal payments are made either in accordance with the underlying bonds or on a more accelerated basis under the CCAs. Interest is computed as a percent of one-month LffiOR plus a credit spread. Under the bond documents, in the event of a default, the bonds can be put back to Presence Health in advance of the Initial Index Floating Rate Purchase Date. Absent a default, on or before the date 180 days prior to the Initial Index Floating Rate Purchase Date, Presence Health may submit, in writing, a request that the bank repurchase the bonds for an additional period. The bank may respond within 60 days. If the bank does not provide a written response to this request wi thin 60 days, the bank is deemed to have 27 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

refused the request. Effecti ve May 26,201 6 with the Series 201 6 fin ancing described below, the CCAs were tenninated.

During 2014, Presence Health sold certain assets at POLR, PBNe, and PSALC (note 8) to for-profit corporati ons. Certain assets located at these facilities had been financed with the proceeds of tax-exempt debt. As a result, during the first quarter ar 201S, Presence Health remediatcd $ 18,265 of the debt associated with those assets, comprising $4,700 in scheduled debt service and $ 13,565 in excess of previously scheduled debt service. This remediation resuhed in increasing the current portion of long-tenn debt by $ 13,565 as of December 31, 2014. As a result of the redemptions and defeasances in 201 5, a loss on refinancing of $570 was reported in the accompanying 201 5 consolidated statement of operations and change in unrestricted net assets in net losses from discontinued operati ons.

Presence Health 's effecti ve interest rates for variable rate debt for the years ended December 3 1, 2015 and 2014 are as follows:

2015 2014 Presence Health Series: 201 3 A 1.38% 1.38% 2013 B 1.32 1.26 201 3 C 1.39 1.32 201 3 D 1.1 8 1.11 2013 E 1.13 1. 07 201 3 F 1.1 3 1.07 Bank of America T enn Loan 1.74 1.66

In connection with the Presence Health MTl, Presence Health is required to maintain certain fi nancial and non-financial covenants. Among these covenants is a hi storical debt service coverage rati o (HDSe rati o). On May 26, 2016, the MTl was amended to remove the HDSC ratio covenant for the year ended December 31, 201 5. On May 26, 201 6, the lllinois Finance Authority issued its Seri es 2016A Bonds and its Series 201 6B Bonds (Seri es 201 6 Bonds) and loaned the proceeds thereof to Presence Health. Presence Health applied the proceeds of the Series 201 6 Bonds to prepay the Series 201 3 Bonds, the Bank of America Tenn Loan and the PNC Tenn Loan. The Series 2016 Bonds were purchased in a private pl acement transaction wi th a bank bondholder. The Series 201 6 Bonds bear interest at a percent of one-month LillOR plus a credit spread, with no scheduled principal repayments until February 15, 201 7. The Series 201 6 Bonds are subject to mandatory tender for purchase on December 1, 201 7. As a result of the issuance of the Series 201 6 Bonds, Presence Health recorded a loss on refin ancing in 20 16 of $3,900.

28 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

Scheduled principal repayments on long-tenn debt based on the outstanding bonds and the Series 20 16 Bonds are as follows:

Year ending December 3 I : 20 16 $ 16,703 2017 537,758 2018 16,27 1 20 19 2 1,586 2020 21 ,3 07 Thereaft er 430,895 $ 1,044,520

Under Section 148(t) of the Code, an issuer oftax-cxempt bonds is required to rebate to the lnternal Revenue Service the excess of investment income earned on all nonpurpose investments made with the gross proceeds of tax-exempt bond issues over the amount, which would have been earned if such nonpurpose investments had been invested at a rate equal to the interest yield on the related bond issue. There was no estimated rebate liability at December 3 1, 201 5 and 2014.

(12) Employees' Retirement Plans Pri or to September I, 2013, the Presence Health Retirement Program consisted of the defin ed-contribution money purchase plan (the Defined Contribution Plan), the Provena Employees' 403(b) Retirement Savings Plan (the Savings Plan), the Provena Ventures, Inc. 401 (k) Retirement Savings Plan (the 401 (k) Plan), the Resurrection Health Care Retirement Plan (Retirement Plan), the West Suburban Health Care Retirement Income Plan (Income Plan), and the Provena Employees' Pension Plan (the Plan). Effective September I, 201 3, Presence Health repl aced the Defin ed Conrribution Plan and the Savings Plan with the Presence Health Retirement Savings Plan (PH Plan), a defined-contribution 403(b) plan. The account balances, investment electi ons, and cOnlribution elections of participants of the legacy plans were automatically transferred to the PH Plan.

In conjunction with the fonnation of the PH Plan, Presence Health also amended the Retirement Plan to freeze benefit accruals for all nongrandfathered participants whose benefit accruals are specifically provided for in the supplements to the Retirement Plan, effective August 3 1, 20 13.

Matching employer and base contributions under the cash balance plans (the Savings Pl an, the 40 l(k) Plan, and the newly fonned PH Plan) are funded currently and amounted to $39,42 1 and $39,952 fo r the years ended December 3 1, 201 5 and 2014, respecti vely, and are included in salaries and benefit s expense in the accompanying consolidated statements of operations and change in unrestricted net assets.

Resurrection Health Care Retirement Plan Presence Health records pension cost at an amounl calculated by an independent consulting actuary. Presence Health recognizes the cost related to employee service using the projected unit credit cost method. Gains and losses, calculated as the difference between estimated and actual amounts of plan assets and the projected benefit obligation, and prior service cost are amortized over the expected future service period. 29 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following tables set forth the consolidated funded status, assumptions, and amounts recogni zed in the accompanying consolidated fin ancial statements as of and fo r the years ended December 31,2015 and 2014 for the Retirement Plan:

2015 2014 Change in benefit obligation: Projected benefit obligation at beginning of period $ (365,265) (354,300) Service cost (29) (14) Interest cost ( 11 ,941) (14,247) Actuarial (loss) gain 10,230 (29,647) Benefits paid 35,747 32,943 Projected benefit obligation at end of period (331,258) (365,265) Change in pl an assets: Fair value of plan assets at beginning of period 233,767 224,76 1 Actual return on plan assets 726 11 ,949 Employer contributions 30,000 30,000 Benefits paid (35,747) (32,943) Fair value of plan assets at end of period 228,746 233,767 Funded status (102,512) (13 1,498) Amounts recognized in the accompanying consolidated statements of financial position: Pension benefit liability $ (102,5 12) ( 131,498) Accumulated charge to unrestricted net assets 77,605 80,291 Net amount recognized $ _""""(""24",,9,,,0,,,7),- (5 1,207) Accumulated benefit obligation $ (331,201) (365, 123) Estimate of amounts that will be amortized from unrestricted net assets to net pension cost in 20 16: Net actuarial loss $ 1,300 Components of net periodic benefit cost: Service cost $ 29 14 Expense load 700 700 Interest cost 11 ,941 14,247 Expected return on plan assets (16,307) ( 16,800) Amortization of unrecognized net loss 1,158 428 Settlement charge 6,179 6,3 18 Net periodic benefit cost $======3,700 4,907

30 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

2015 2014 Other changes in plan assets and benefit obli gation recognized in unrestricted net assets: Net actuarial (loss) gain $ (1,528) 27,480 Reversal of amortization items: Net actuarial10ss (1,158) (428) Total recognized in unrestricted net assets $ (2,686) 27,052 Estimated future benefit payments: Calendar year 20 16 $ 31,933 Calendar year 20 17 29,175 Calendar year 2018 27,196 Calendar year 20 19 25,987 Calendar year 2020 25,186 Calendar years 202 1-2025 103,008 Expected contribution during calendar year 2016 30,000 2015 2014 Weighted average assumptions used to dctcnnine benefit obligations at period*cnd: Settlement (discount) rate 3.76% 3.46% Weighted average rate of increase in future compensation levels 2.00 2.00 Weighted average assumptions used to detennine net periodic benefit cost: Discount rate 3.46% 4.26% Expected return on plan assets 7.00 7.00 Rate of compensation increase 2.00 2.00

Presence Health contributed $30,000 to the Retirement Plan during 2015, of which $3,700 is the expense of the Retirement Plan. During 2015 and 2014, benefit payments exceeded the sum of service cost and interest cost. As a result, Presence Health recognized a settlement charge of $6, 179 and $6,318, which represents accelerated recognition of a portion of the previously unrecognized loss, for the years ended December 31, 2015 and 20 14, respectively.

As of December 31, 2014, Presence Health adopted the new RP-2014 Mortality Table with generational improvements using projection scale MP-2014. As a result of the adoption, the projected benefit obligation increased by $3,900. As of December 31, 2015, Presence Hea lth adopted the new MP-2015 projection scale, the adoption of which did not have a significant impact on the projected benefit obligation.

Presence Health 's overall expected long-tenn rate ofretum on assets is 7%. The expected long-tenn rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments.

31 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

Presence Health has developed a plan investment policy for the Retirement Plan, which has been reviewed and approved by the Presence Health Finance Committee and its board of directors. The policy established goals and objectives of the fund, asset al locations, asset classifications, and manager guidelines. The policy dictates a specific asset allocation between equity and fixed-income securities. Investments are managed by independent advisers who are monitored by management and tbe Finance Committee. Presence Health monitors the asset allocation and executes required recalibrations of the portfolio allocation on a regular basis in response to fluctuations in market conditions and the overall portfolio composition.

The tabl e below shows the target allocation and acceptable ranges and actual asset allocations as of December 3 1, 20 15 and 20 14:

Actual Actual a llocation allocation Target Acceptable December 31, December 31, Asset allocation range 2015 2014

Common stocks and mutual funds 60% 500/..-70% 56.2% 62.0% Fixed-income securities 40 30-50 40.5 34.4 Cash and cash equivalents 0-5 3.3 3.6

(a) Fair Value of Filtanciallnslrumenls Valuation methodologies used to measure fair value of plan assets for the Retirement Plan are consistenl with those used by Presence Health for its general investments as previously disclosed (note 7).

(b) Fair Value Hierarchy The Ret irement Pl an applies the provisions of ASC Topic 715, Compensation - Retirement Benefits, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. ASC Topic 7 15 establi shes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

32 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The fo ll owing table presents the Retirement Plan's fair value hi erarchy for those assets measured at fair value on a recurring basis as of December 31,2015:

Redemption [lays Total LC\'ell Lc\'cI 2 LC"cl 3 frequency notice

Investments, excluding cash and cash equivalents of $7,590: Domestic common stocks , 102,352 102,352 Daily 0", Forei gn equity mutual fund 13,082 13,082 Daily 0"' Foreign fixed-income mutual fund 13.164 13,164 Daily 0"' U.S. government and agency obligations 21,068 20,362 706 Daily 0", Corporate debt securities 40.461 40,461 Daily 0", Mortgage-backed securities 22.081 22,081 Daily 0", Commercial mOl1gage-backed securities 6,341 6,341 Daily 0 "' Asset-backed securities 2,607 2,607 Daily 0 ",

Total asscts at fair value $ 221.156 148,960 72,196

33 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The fo ll owing table presents the Retirement Plan's fair value hi erarchy for those assets measured at fair value on a recurring basis as of December 31,2014:

Redemption Days Total Levell Ln'el2 Lenl 3 (requellcy notice

Investments, excluding cash and cash equivalents of $8.303: Domestic common stocks , 115,129 115,129 Daily 0" Foreign common stocks Daily ,,", Foreign equily mutual fund 29,831 29,831 Daily 0" U.S. government and agency obligations 17,608 17,205 403 Daily 0" Corpordte debt securities 32,389 32,389 Daily 0" Mortgage-backed securities 21,162 21,162 Daily 0" Commercial mortgage-backed securities 8,363 8,363 Daily Asset-backed securities 981 981 Daily """0"

Total assets at fair value S 225,464 162,166 63,298

Thc Rctircment Plan rccognizcs transfcrs bctwccn levels ofthc fair valuc hicrarchy in thc ycar ofthc event or change in circumstances that caused the transfer. There were no transfers into or out of Level I, Level 2, or Level 3 for the years ended December 31, 20 I 5 and 2014.

We~·t Suburban Health Care Retirement Income Plan The Income Plan is a noncontributory defined-benefit pension plan, for which the board of directors of WSM C authorized the curtailment of the income Plan effecti ve January I, 2002. As a result of the curtailment, no new benefit s will accrue to participants subsequent to that date. Gains and losses, calculated as the difference between estimated and actual amounts of plan assets and the proj ected benefit obligation, are amortized over the expected future service period. Presence Health has maintained responsibility for the Income Plan subsequent to the asset divestitures.

34 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

A summary of the changes in the projected benefit obligation and plan assets and the resulting funded status of the Income Plan is as follows at December 31 , 2015 and 2014 (measurement date):

2015 2014 Change in benefit obligation: Projected benefit obligation at beginning of period $ (100,576) (83 ,961) Service cost Interest cost (3,813) (3 ,92 1) Actuarial gain (loss) 6,607 (16, 151) Benefits paid 3,704 3,457 Projected benefit obligation at end of period (94,078) (100,576) Change in plan assets: Fair value of plan assets at beginning of period 78,895 77,399 Actual return on plan assets (558) 4, 136 Employer contributions 817 Benefits paid (3 ,704) (3 ,457) Fair va lue of plan assets at end of period 74,633 78,895 Funded status $ =~=i::(19,445) (21 ,681) Amount recognized in the accompanying consolidated statements of financial position: Pension benefit liability $ (19,445) (21 ,681) Accumulated charge to unrestricted net assets 41,543 43 ,462 Net amount recognized 22,098 21 ,78 1 $ =...;;;=;.,. Accumulated benefit obligation Estimate of amounts that will be amortized from unrestricted net assets to net pension cost in 20 16: Net actuarial loss $ 1,200

35 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

2015 2014 Components of nel periodic benefit cost: Interest cost $ 3,813 3,921 Expected return on plan assets (5,373) (5 ,3 19) Amortization of unrecogni zed net loss 1,243 720 Net periodic benefit $ ====";;';';.b(317) (678) Other changes in plan assets and benefit obligation recognized in unrestricted net assets: Net actuarial (loss) gain $ (676) 17,334 Reversal of amortization item: Net actuarial loss (1,243) (720)

Total recognized in unrestricted net assets $ ===g;~Ob(1 ,919) 16,614 Estimated future benefit payments: Calendar year 2016 $ 4,148 Calendar year 20 17 4,369 Calendar year 20 18 4,573 Calendar year 20 19 4,767 Calendar year 2020 4,959 Calendar years 2021-2025 27,315 Expected contributions during calendar year 2016: Minimum required contribution $ Weighted average assumptions used to determine benefit obligations: Settlement (discount) rate 4.20% 3.84% Weighled average assumptions used to determine net periodic benefit cost: Discount rate 3.84% 4.75% Expected return on plan assets 7.00 7.00

As of December 3 1, 2014, Presence Health adopted the new RP-2014 Mortality Table with generational improvements using projection scale MP-20 14. As a result of the adoption, the projected benefit obligation increased by $4,400. As of December 31,2015, Presence Health adopted the new MP-20 15 projection scale, the adoption of which did not have a significant impact on the projected benefit obligation.

The Income Plan's overall expected long-term rate of return on assets is 7.0%. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adj ustments.

Presence Health has developed a plan investment policy for the Income Plan, which has been reviewed and approved by the Presence Health Finance Committee and its board of directors. The policy established goals

36 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

and objectives of the fund, asset allocations, asset classifications, and manager guidelines. The policy dictates a specific asset allocation between equity and fi xed-income securities. Investments are managed by independent advisers who are monitored by management and the Finance Committee. Presence Health monitors the asset allocation and executes required recalibrations of the portfolio allocation on a regular basis in response to fluctuations in market conditions and tbe overall portfolio composition.

The table below shows the target allocation and acceptable ranges and actual asset allocations as of December 3 1,20 15 and 20 14:

Actual Actual allocation allocation Target Acceptable December 31, December 31, Asset allocation range 2015 2014

Common stocks and mutual funds 60% 50%- 70% 58.7% 64.0% Fixed-income securities 40 30-50 38.3 34.3 Cash and cash equivalents 0-5 3.0 1.7

(a) Fair Value of Filtanciallnstruments Valuation methodologies used to measure fair value of plan assets for the Income Plan are consistent with those used by Presence Health for its general investments as previously disclosed (note 7).

37 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

(b) Fair Value Hierarchy The Income Plan applies the provisions of ASC Topic 715. The following table presents the Income Plan's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 20 15:

Redemption Days Total Lew ll Lenl 2 Lewl 3 freq uen cy notice

InvcstmcllIS, excluding cash and cash equivalents of $2,250: Domestic common stocks $ 34,556 34556 Daily 000 Foreign equity mutual funds 4,591 4,591 Daily 0 " Foreign fixed-income mumal funds 4,620 4,620 Daily 000 U.S. government and agency obligations 6,658 6,475 183 Daily 0 " Corporate debt securities 11.431 11.431 Daily 0 " Mortgage-backed securities 6,407 6,407 Daily 000 Commercial mortage-backed securities 2,446 2,446 Daily 000 Asset-backed securities 1,674 1,674 Daily 000

$ 72.383 50,242 22.141

38 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following table presents the Income Plan's fair value hierarchy for those assets and liabilities measured at fair val ue on a recurring basis as of December 31,2014:

Redemption Days Total Level I Le\'el 2 uvel 3 rre!l u ellc~ notice

Investments, excluding cash and cash equivalents of $1.332: Domestic common stocks , 40,109 40,109 Daily 0 " Foreign common stocks Daily 0 " Foreign equity mutual funds 10,419 10,419 Daily 0 " U.S. government and agency obligations 5,540 4,887 653 Daily 0 " Corporate debt securities 10.601 10,601 Daily 0 " Mortgage-backed securities 6,939 6,9J9 Daily 0 " Commercial mortgage-backed securities 3,126 3,1 26 Daily 0 " Asset-backed securities 828 828 Daily 0 "

, 77,563 55,4 16 22,147

The Income Plan recognizes transfers between levels of the fair value hierarchy in the year of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level I, Level 2, or Level 3 for the years ended December 31, 2015 and 2014.

Provena Health Employees' Pension Plan The Plan was frozen effecti ve December 31 , 2003 and only specified grandfathered employees remained as active parti cipants in the Plan. Presence Health recognizes the cost related to the Plan using the Projected Unit Credit cost method. Gains and losses, calculated as the difference between estimates and actual amounts of plan assets and the projected benefit obligation, were amortized over the expected future service period through 2004. Effective January I, 2005, the amortization period was changed to the average remaining li fe expectancy of inactive participants.

Presence Health accounts for the Plan in accordance with ASC Topic 715.

39 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The following tabl e sets forth the Plan's funded status, amounts recognized in the accompanying consolidated financial statements, and assumptions at the Plan's measurement date, December 3 1:

2015 2014 Change in benefit obligation: Projected benefit obligation at beginning of period $ (544,372) (489,569) Service cost (1,266) (1,301 ) Interest cost (19,148) (2 1, 137) Actuarial gain (loss) 17,11 1 (58, 11 2) Benefits paid 25,455 25,747 Projected benefit obligation at end of period (522,220) (544,372) Change in plan assets: Fair value of plan assets at beginning of period 409,650 414,924 Actual return on plan assets (3,057) 21,648 Expenses paid (741) (1,175) Benefits paid (25,455) (25,747) Fair value of plan assets at end of period 380,397 409,650 Funded status $ =~~(141 ,823) (134,722) AmounlS recognized in the accompanying consolidated statements of financial position: Pension benefit liability $ (141,823) (134,722) Accumulated charge to unrestricted net assets: 283,943 277,680 Net amount recognized $ =...;,;;;;~142,120 142,958 Accumulated benefit obligation Estimate of amounts that will be amortized from unrestricted net assets to net pension cost in 2016: Net actuarial loss $ 8,200 Components of net periodic benefit cost (benefit): Service cost $ 1,266 1,301 Interest cost 19,148 2 1,137 Expected return on plan assets (27,566) (34,224) Amortization of unrecognized net actuarial loss 7,990 5,785

Net periodic benefit cost (benefit) $ ===83;;:,8= (6,001) Other changes in plan assets and benefit obligation recognized in unrestricted net assets: Net actuarial gain $ 14,253 71,864 Reversal of amortization items: Net actuarial loss (7,990) (5,785)

Total recognized in unrestricted net assets $ ==,;;;6,~26;;;3= 66,079

40 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notes to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

2015 2014 Estimated future benefIt payments: Calendar year 2016 $ 31, 142 Calendar year 2017 31,665 Calendar year 2018 32,2 19 Calendar year 20 19 33, 10 1 Calendar years 2020--2024 33,470 Calendar years 2021 - 2025 166,454 Weighted average assumptions used to determine benefl! obli gations: Discount rate - benefit obligations 3.90% 3.60% Rate of compensation increase 2.00 2.00 Weighted average assumptions used to determine net periodic benefit cost: Discount rate 3.60 4.50 Expected return on plan assets 7.00 8.50 Rate of compensation increase 2.00 2.00

Presence Health's overall expected long-tenn rate ofretum on assets is 7%. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments. Presence Health does not expect to make any contributions to the Plan during 2016.

As of December 3 1, 2014, Presence Health adopted the new RP-2014 Mortality Table with generational improvements using projection scale MP-2014. As a result of the adoption, the projected benefit obligation increased by $ 14,900. As of December 31 , 2015, Presence Health adopted the new MP-20 15 projection scale, the adoption of which did not have a significant impact on the projected benefit obligation.

Presence Health has developed a plan investment policy for the Plan, whi ch has been reviewed and approved by the Presence Health Finance Committee and its boards of directors. The policy established goals and objectives of the fund, asset allocations, asset classifications, and manager guidelines. The policy dictates a specific asset allocation between equity and fixed-income securities. Investments are managed by independent advisers who are monitored by management and the Finance Committee. Presence Health monitors the asset allocation and executes required recalibrations of the portfolio allocation on a regular basis in response to fluctuations in market conditi ons and the overall portfolio composition.

41 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

The table below shows the target allocation and acceptable ranges and actual asset allocations as of December 3 1, 2015:

Actual Actual allocation allocation Target Acceptable December 31, December 31 , Asset allocation ran&e 2015 2014

Common stocks and mutual funds 60% 55%--65% 60.0% 63.0% Fixed-income securities and cash equivalents 40 35-45 40.0 37.0

Presence Health monitors the asset allocation and executes required recalibrations of the portfolio allocation on a regular basis in response to fluctuations in market conditions and the overall portfolio composition.

(a) Fair Value of Financial Instruments Valuation melhodologies used to measure fair value of plan assets for the Plan are consistent with those used by Presence Health for its general investments as previously disclosed (note 7).

42 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

(b) Fair Value Hierarchy The following table presents the Plan's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31,2015:

Redemption Days Total Len-II Lenl2 Level 3 frequency notice

Investments, ellcluding cash and cash equivalents of523,661: Domestic equity common stocks $ 178,090 178,090 Daily 000 Foreign fixed-income mutual funds 25.036 25,036 Daily 0" Foreign equity mutual funds 24,882 24,882 Daily 000 U.S. government and agency obligations 45,840 41,318 4,522 Daily 0" Corporate debt securities 27.880 27,880 Daily 0" Foreign debt securities 152 152 Daily 0" Mongagc-backcd securities 25,329 25,329 Daily One Commercial mongagc-backcd securities 19,838 19,838 Daily 000 Asset-backed securities 9,689 9,689 Daily 0"

Total $ 356.736 269.326 87.410

43 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 2014 (Dollars in thousands)

The foll owing table presents the Plan's fa ir value hi erarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31,2014:

Redemption Days Total Level I Len'12 Lnel3 fr~u c n c r notice

Investments, excluding cash and cash equivalents of5 17,750: Domestic equity common stocks S 201.526 201.526 Daily 0" Foreign common stocks Daily 0" Foreign equity mutual funds 56.363 56.363 Daily 0" U.S. governmelll and agency obligations 43,490 38,063 5.427 Daily 0", Corporate debt securities 27,196 27.196 Daily 0", Foreign debt securities 846 846 Daily 0" Mortgage-backed securities 49,004 49,004 Daily 0" Commercial mortgage-backed securities 5,637 5.637 Daily 0", Asset-backed securities 7,837 7.837 Daily 0",

Total S 391.900 295,953 95.947

The Plan recognizes transfers between levels of the fair va lue hierarchy in the year of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level I, Level 2, or Level 3 for the years ended December 31,201 5 and 2014,

(13) Self-Insurance (a) Pro!essimlQ! alld Gelleral Liability Presence Health is self-insured for professional and general liability claims up to specified limi ts arising from incidents occurring aft er dates of entry into the program, which vary by corporation. Excess insurance coverage was occurrence based through various dates, whi ch over time has been changed to claims-made-based coverage. There are no assurances that Presence Health will be abl e to renew existing excess policies or procure coverage on similar lenus in the fu ture.

Presence Health is in vol ved in liti gation arising in the ordinary course of business. Claims alleging ma lpractice have been asserted and are currently in various stages of liti gation. Provisions for profe ssional and general liability claims include the ultimate cost of known claims and cl aims incurred but not reported as oflhe respecti ve consolidated statements of financial position dates. It is the opinion of management that the estimated malpractice liabilities accrued al December 31, 201 5 and 20 14 are adequate to provide for the ultimate cost of potential losses resulting from pending or threatened litigation; however, such estimates may be more or less than the amounts ul timately paid when claims are resolved. Accruals for professional and general liabilities are recorded on an undiscounted basis.

44 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

Profess ional and general liability expense amounted to $98,030 and $35,28 1 for the years ended December 3 1, 2015 and 2014, respecti vely, and is included in insurance expense in the accompanying consolidated statements of operations and change in unrestricted nel assets.

The accrued liability estimated for self-insured professional and general liability claims is $268,602 and $262,901 at December 31 , 2015 and 2014, respecti vely. The accrued liabi lity estimated for self-insured professional and general liability claims are classified in the accompanying consolidated statements of financial position as follows:

2015 2014 Curren! portion of estimated self-insurance liabilities $ 38,353 40,164 Estimated self-insurance liabilities, excluding current portion 230,249 222,737 $ =~2;;;68:;;;, 6:;;:0:;,2 = 262,901

ASC Subtopic 954-450, Health Care Entities - Contingencies, clarifies thaI healthcare entities should not net insurance recoveries against the related claim liabi lity and that the claim liability amount should be detennined without consideration of insurance recoveries. As such, Presence Health reported a receivable of$15,648 and $ 18,902 at December 3 1,2015 and 2014, respectively, in other assets in the accompanying consolidated statements of financial position.

(b) Worker... • CompellSation Presence Health administers self-insurance programs for workers' compensation coverage that covers all entities except for two long-tenn care and residential facilities in Indiana, which are commercially insured. These programs limit the self-insured retention to specific amounts on a per occurrence basis. Coverage from commercial insurance carriers is maintained for claims in excess of the self-insured retention. Accrued workers' compensation claims amounted to $26,480 and $27, 129 at December 31 , 2015 and 20 14, respectively. Management believes tbe estimated self-insured workers' compensation claims liability at December 31,20 15 and 2014 is adequate to cover the ultimate liability; however, such estimate may be more or less than the amounts ultimately paid when claims are resolved. The accrued liability estimated for workers' compensation claims are classified in the accompanying consolidated statements of financial position as follows:

2015 2014 Curren! portion of estimated self-insurance liabilities $ 7,266 7,703 Estimated self-insurance liabilities, excluding current portion 19,214 19,426 $ 26,480 27,129

45 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

Workers' compensati on self-insurance expense amounted to $12,633 and $ 12,070 for the years ended December 3 1, 201 5 and 201 4, respecti vely, and is included in salari es and benefi ts expense in the accompanying consolidated statements of operations and change in unrestricted net assets.

(c) Healthcare Presence Health maintains a program of self-insurance for employee health coverage. Slop-loss reinsurance coverage is maintained for claims in excess of stop-loss limits. Accrued self-insured employee healthcare claims amounted to $5 ,548 and $5,779 at December 3 1, 201 5 and 201 4, respectively, and are included within the current ponion of estimated self-insurance li abilities in the accompanying consolidated statements of financial position based on the short-tenn payment cycle related to health claims. It is the opinion of management thatlhe estimated healthcare costs accrued at December 3 1, 201 5 and 2014 are adequate to provide for the ultimate liability; however, fin al payouts as claims are paid may vary signifi cantly from estimated claim li abilities.

(14) Commitments and Contingencies (a) Litigatioll Presence Health is invo lved in litigation and regulatory investigati ons ari sing in the nornlal course of business. In consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on the consolidated financial position or results fro m operations.

As disclosed in note 12, Employees' Retirement Pl ans, Presence Health sponsors various types of empl oyee benefit plans. On April 2, 201 5, a lawsuit was fil ed in the U.S. Di strict Court for the Northern District of [J\inois against Presence Health Network and certain affiliates, on behalf of the participants of the Resurrection Health Care Retirement Plan and the Provena Employees' Pension Plan (collectively, the Plans). The lawsuit challenges the eligibility of the Plans to be treated as "Church Plans" exempt from the Empl oyee Retirement Income Security Act of 1974. Presence Health intends to vigorously defend the Plans' status as eligi ble Church Pl ans, consistent with long-standing positions of the U.S. Department of the Treasury, including IRS and the U.S . Department of Labor. in March 2016, the Seventh Circuit Court of Appeals (which is the applicabl e Federal Appell ate Court for Presence Health litigation) rul ed in a similar case that the Advocate Health Care pension plan did not satisfy the Church Plan exemption; one other Federal Appellate Court has reached a similar conclusion although district court rulings to date have been mixed. An appeal to the U.S. Supreme Court in one or more of these cases is possibl e. Although the Advocate Health Care case created adverse precedent for the Presence Health liti gation on certain issues, Presence Health believes its facts are di stinguishable. lfin the future, a final , nonappealable ruling was made in this case that was adverse to Presence Health 's position, such ruling could, under certain circumstances, have a material adverse effect on the fin ancial condition or operations of Presence Health, when taken as a whole, as a result of requirements to comply with ERISA funding obligations and to pay annual premiums to the Pension Benefit Guaranty Corporation.

46 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 2015 and 20 14 (Dollars in thousands)

(b) Regulatory Investigatiolls alld Overpaymellts The U.S. Department of Justice and other federal agencies routinely conduct regulatory investigations and compliance audits of heahhcare providers. Presence Health is subject to these regulatory efforts. Additi onall y, the laws and regulations governing the Medicare, Medicaid, and other government healthcare programs are extremely complex and subject to interpretation, makJng compli ance an ongoing chall enge for Presence Health and other healthcarc organizations. Recently the federal government has increased its enforcement activity, including audit s and investigations related to billing practices, clinical documentation, and related matters. Presence Health maintains a systemwide compliance program and conducts audits and other activities to identify potential compliance issues, including overpayments to governmental payors.

(c) Operatillg Leases Presence Health leases various equipment and facilities under operating leases expiring at various dates through 2023. Total lease expense for the years ended December3l , 2015 and 2014 for all operating leases was approximately $20,383 and $20,575, respectively.

The following is a schedule by year of future minimum lease payments for the next five years and thereafter under operating leases as of December 31, 2015 that have initial or remaining lease tenns in excess of one year:

2016 $ 12,039 2017 9,558 2018 8,934 2019 8,473 2020 8,7 18 ·J·hereafter 27,441)

$ ===7;,;5;,;, 1;,;7,;,,1=

(d) Property alld Sales Tax Exemptioll Legislatioll On June 14, 20 12, the Governor of Illinois signed into law Public Act 97·068 (2012 Hospital Exemption Law), which creates new standards for property and sales tax exemptions for hospitals and hospital affiliates in Illinois. The law establi shes new eligibility standards for the issuance of such exemptions, including requirements for a nonprofit hospital to certify annually that in the prior year it provided an amount of qualified services and activiti es to low·income and underserved indi viduals having a value at least equal to tbe hospital's estimated property tax liability. In early 2016, tbe 1.llinois 4th District Appellate Court ruled that the 20 12 Hospital Exemption Law is unconstitutional. This decision has been appealed to the Illinois Supreme Court with a ruling ex pected in mid·2017. It is anticipated that all Presence Health hospitals and related properties will retain exemptions until then, but if the Supreme Court rules that the 2012 Hospital Exemption Law is unconstitutional, such ruling could threaten the exempt status of all Presence Health hospitals and other related properties. In particular, PCMC would likely lose its property tax exemption as a direct result of such adverse ruling,

47 (Continued) PRESENCE HEALTH NETWORK AND AFFILIATES Notcs to Consolidated Financial Statements December 31, 201 5 and 201 4 (Dollars in thousands)

since its current exemption is solely grounded on the 201 2 Hospital Exemption Law. Presence Health has not recorded a liability for related property taxes based upon management's current detenninati on that such hospital entities will remain eligible for property and sales tax exemption based on the amount of qualified services provided.

Presence Health entities are exempt from sales tax and property tax based on their not-for-profit charitable status. Under the 201 2 Hospital Exemption Law, the lest for hOlh sales tax exemption for hospital corporations and certain affiliated corporations will be the same, as described above.

Management believes that its hospitals and hospital affiliated corporati ons qualify for both property and sales tax exemption under the new law.

(e) Im'estment Risks and Uncertainties Presence Health invests in various investment securities. Investment securities arc exposed to various ri sks such as interest rate, credit, and overall market volatili ty risks. Due to the level of risk associated with certain investment securities and current market conditions, it is at least reasonabl y possible that changes in the values of in vestment securities will occur in the near tenn and such changes could materially affect the amounts reported in the accompanying consolidated statements of fin ancial position.

(15) Subsequenl Events In connection with the preparation of the consolidated fin ancial statements and in accordance with ASC Topic 855, Subsequent Events, Presence Health evaluated subsequent events after the consolidated statement of financial position date of December 3 1, 201 5 through May 26, 201 6, which was the date the consolidated financial statements were issued.

See note 11 for subsequent event related to long-ternl debt.

48 APPENDIX C

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT

TABLE OF CONTENTS

PAGE

DEFINITIONS OF CERTAIN TERMS ...... C-1

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE ...... C-11 Funds; Disposition of Revenues ...... C-11 Project Fund - Payouts ...... C-13 Investment of Funds ...... C-16 Arbitrage ...... C-17 Supplemental Bond Indentures ...... C-17 Events of Default; Acceleration ...... C-19 Remedies ...... C-22 Direction of Proceedings by Bondholders ...... C-22 Waiver of Events of Default ...... C-22 Application of Moneys ...... C-23 Removal of the Bond Trustee ...... C-25 Bond Trustee as Holder of Series 2016C Obligation ...... C-25 Defeasance ...... C-25 Additional Bonds ...... C-28 Release and Substitution of Obligations upon Delivery of Replacement Master Indenture ...... C-28

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT ...... C-30 Loan of Series 2016C Bond Proceeds ...... C-30 Representations ...... C-30 Payments in Respect of Series 2016C Obligation and under the Loan Agreement ...... C-31 Assignment and Pledge of Authority’s Rights; Obligations of Borrower Unconditional ...... C-31 Indemnification of the Authority ...... C-31 Maintenance of Corporate Existence and Status ...... C-34 Accreditation and Licensure ...... C-35 Financial Statements ...... C-35 Discharge of Orders ...... C-36 Continuing Disclosure ...... C-36 Use of the Facilities ...... C-36 Rates and Charges ...... C-37 Transfer of Bond Financed Property ...... C-37 Investment of Funds; Arbitrage; Tax Exemption Agreement ...... C-37 Amendments to the Loan Agreement ...... C-38 Defaults and Remedies ...... C-40 Exchange of Bonds ...... C-42

APPENDIX C

SUMMARY OF THE CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT

This Appendix C contains the definitions of certain terms used in, and summarizes the provisions of, the Bond Indenture and the Loan Agreement, executed and delivered in connection with the Series 2016C Bonds described in the forepart of this Official Statement. Certain other definitions and summaries of certain other provisions of the Bond Indenture and the Loan Agreement have been provided elsewhere in this Official Statement. Reference is hereby made to the Bond Indenture for the definition of any capitalized term used herein and not otherwise defined herein.

DEFINITIONS OF CERTAIN TERMS

The following are definitions of certain terms used in the Bond Indenture, the Loan Agreement and this Official Statement.

“Act” means the Illinois Finance Authority Act of the State of Illinois, as from time to time amended, until such time as it may be repealed, and from and after any such repeal, any successor act thereto.

“Additional Bonds” means the parity bonds authorized to be issued by the Authority pursuant to the terms and conditions of the Bond Indenture in addition to the Series 2016C Bonds.

“Additional Obligations” means any evidence of Indebtedness issued after the issuance of the Series 2016C Obligation authorized to be issued by the Borrower pursuant to the Master Indenture to secure Additional Bonds which Additional Obligations have been authenticated by the Master Trustee.

“Authority” means the Illinois Finance Authority, a body politic and corporate created and existing under and by virtue of the Act, and its successors and assigns.

“Bondholder,” “holder” or “owner of the Bonds” means the registered owner of any Bond.

“Bond Counsel” means any nationally recognized municipal bond counsel not objected to by either of the Authority or the Bond Trustee.

“Bond Financed Property” means any and all property of the Borrower financed, refinanced or reimbursing with the proceeds of the Series 2016C Bonds.

“Bond Indenture” means the Bond Trust Indenture dated as of August 1, 2016 between the Authority and the Bond Trustee, as it may from time to time be amended or supplemented, providing for the issuance of the Series 2016C Bonds.

C-1 “Bond Register” means the registration books of the Authority kept by the Bond Trustee to evidence the registration and transfer of Bonds.

“Bond Trustee” means Wells Fargo Bank, National Association, or any successor trustee under the Bond Indenture.

“Bond Year” means any 12-month period beginning February 15 of a calendar year and ending February 14 of the next succeeding calendar year. For the purpose of calculating debt service on the Bonds payable in any Bond Year, principal and interest payable on the Bonds on February 15 of any Bond Year shall be deemed to be payable during the preceding Bond Year.

“Bonds” means the Series 2016C Bonds and any Additional Bonds.

“Borrower” means Presence Health Network, an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday on which banking institutions in the State of Illinois or the State of New York are authorized by law to close or (b) a day on which the New York Stock Exchange is closed or the payment system of the Federal Reserve System is not operational.

“Closing Date” means the date of the initial issuance and delivery of the Series 2016C Bonds.

“Code” means the Internal Revenue Code of 1986, as amended from time to time. Each reference to a section of the Code herein shall be deemed to include the United States Treasury Regulations, including temporary and proposed regulations, relating to such section which are applicable to a series of Bonds or the use of the proceeds thereof.

“Counsel” means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent or in-house legal counsel for any Obligated Group Member, the Master Trustee or a Related Bond Trustee (as defined in Appendix C to this Official Statement).

“Defaulted Interest” means interest on any Bond which is payable but not duly paid on the date due.

“Disclosure Agreement” means that certain Continuing Disclosure Agreement dated August 1, 2016, and executed by the Obligated Group Agent on behalf of all Members of the Obligated Group and Digital Assurance Certification, L.L.C.

“DTC” means The Depository Trust Company.

“Fitch” means Fitch Ratings Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any

C-2 other nationally recognized securities rating agency designated by the Obligated Group Agent with written notice to the Bond Trustee, the Authority and the Borrower.

“Governing Body” means the board of directors, the board of trustees or similar group in which the right to exercise the powers of corporate directors or trustees is vested.

“Government Obligations” means (a) noncallable United States Government Obligations or (b) evidences of a direct ownership in future interest or principal payments on noncallable United States Government Obligations, which United States Government Obligations are held in a custodial account on behalf of the Bond Trustee pursuant to the terms of a custody agreement; provided, however, that if such Government Obligations consist of obligations for which the principal and interest payments have been “stripped” into separate securities, such custodian shall be a Federal Reserve Bank.

“Immediate Notice” means notice by telephone, telex, telecopier or electronic mail to such telephone number, telex number, telecopier number or electronic mail address as the addressee shall have directed in writing, promptly followed by written notice by overnight courier service or by first class mail, postage prepaid, to such address as the addressee shall have directed in writing; provided, however, that if any Person required to give an Immediate Notice shall not have been provided with the necessary information as to the telephone, telex number, telecopier number or electronic mail address of an addressee, Immediate Notice shall mean written notice by overnight courier service or by first class mail, postage prepaid.

“Independent Architect” means an architect, engineer or firm of architects or engineers selected by the Borrower, not objected to the Authority and licensed by, or permitted to practice in, the State, which architect, engineer or firm of architects or engineers shall have no interest, direct or indirect, in any Obligated Group Member and, in the case of an individual, shall not be a partner, member, director, officer, controlling shareholder or employee of any Obligated Group Member and, in the case of a firm, shall not have a partner, member, director, officer or employee who is a partner, member, director, officer, controlling shareholder or employee of any Obligated Group Member; it being understood that an arm’s length contract with a Obligated Group Member for the performance of architectural or engineering services shall not in and of itself be regarded as creating an interest in or an employee relationship with such entity and that the term Independent Architect may include an architect or engineer or a firm of architects or engineers who otherwise meet the requirements of this definition and who also are under contract to construct the facility which they have designed.

“Independent Counsel” means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent legal counsel for the Borrower, any other Member of the Obligated Group, the Authority or the Bond Trustee.

“Interest Payment Date” means February 15 and August 15 of each Bond Year, commencing February 15, 2017.

“Loan Agreement” means the Loan Agreement dated as of August 1, 2016 between the Borrower and the Authority, as it may from time to time be amended, initially providing for the loan to the Borrower of the proceeds of the Series 2016C Bonds.

C-3 “Master Indenture” means the Master Trust Indenture dated as of August 1, 2016, from the Members of the Obligated Group to the Master Trustee, and as it may from time to time be further amended or supplemented in accordance with the terms thereof.

“Master Trustee” means The Bank of New York Mellon Trust Company, N.A., or any successor trustee under the Master Indenture.

“Members” or “Members of the Obligated Group” or “Obligated Group Members” means the Persons which have executed the Master Indenture or any supplements thereto and thereby have become contractually obligated to comply with the provisions of the Master Indenture and have not withdrawn from the Obligated Group Member pursuant to the provisions of the Master Indenture as set forth in the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – CESSATION OF STATUS AS AN OBLIGATED GROUP MEMBER” in Appendix D to this Official Statement.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Borrower by written notice to the Bond Trustee and the Authority.

“Obligated Group Agent” means the Borrower or such other Member as may be designated from time to time pursuant to written notice to the Master Trustee and the Authority executed by the President or Chairperson of the Governing Body of the Borrower or, if the Borrower is no longer a Member of the Obligated Group, of each Member of the Obligated Group.

“Obligations” means the Series 2016C Obligation and Additional Obligations.

“Officer’s Certificate” means a certificate signed, in the case of a certificate delivered by a corporation, by the President, any Vice President or any other officer authorized to sign by resolution of the Governing Body of such corporation or, in the case of a certificate delivered by any other Person, the chief executive or chief financial officer of such other Person, in either case whose authority to execute such Certificate shall be evidenced to the satisfaction of the Bond Trustee.

“Official Statement” means this Official Statement prepared in connection with the offering and sale of the Series 2016C Bonds.

“Opinion of Bond Counsel” means a written opinion of Bond Counsel, which opinion may be based upon a ruling or rulings of the Internal Revenue Service and which opinion, including the scope, form, substance and other aspects thereof, are acceptable to the Authority and the Bond Trustee.

C-4 “Outstanding Series 2016C Bonds” or “Series 2016C Bonds outstanding” means all Series 2016C Bonds which have been duly authenticated and delivered by the Bond Trustee under the Bond Indenture, except:

(a) Series 2016C Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity;

(b) Series 2016C Bonds for the payment or redemption of which cash or Government Obligations shall have been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity or redemption date of any such Series 2016C Bonds) in accordance with the provisions of the Bond Indenture; provided that if such Series 2016C Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Bond Trustee shall have been filed with the Bond Trustee; and

For certain purposes more fully described in the Bond Indenture relating to proof of ownership of the Series 2016C Bonds, Series 2016C Bonds which are owned or held by a Member shall be disregarded and deemed not to be Outstanding under the Bond Indenture.

“Paying Agent” means the bank or banks, if any, designated pursuant to the Bond Indenture to receive and disburse the principal of and interest on the Series 2016C Bonds or designated pursuant to the Master Indenture to receive and disburse the principal of and interest on the Obligations.

“Person” means any natural person, firm, joint venture, association, partnership, limited liability company, business trust, corporation, public body, agency or political subdivision thereof or any other similar entity.

“Proceeds” means the current outstanding principal amount of any Bonds (excluding accrued interest).

“Project” means all Property of the Borrower originally financed with the proceeds of the Series 2016C Bonds.

“Property” means any and all rights, titles and interests in and to any and all property, whether real or personal, tangible (including cash) or intangible, wherever situated and whether now owned or hereafter acquired.

“Project Certificate” means the Certificate Regarding the Project and the Expenditure of Funds dated the Closing Date delivered by the Borrower and the Users in connection with the issuance of the Series 2016C Bonds.

“Project Certificate Exhibit” means the listing set forth in Exhibit A to the Project Certificate, which Exhibit sets forth the Bond Financed Property and their related useful lives.

C-5 “Project Fund” means the Fund by that name created pursuant to the Bond Indenture.

“Purchase Contract” means the contract for purchase of the Series 2016C Bonds between the Authority and the purchaser named therein and approved by the Obligated Group Agent.

“Qualified Investments” means investments in any of the following:

(a) Government Obligations;

(b) Direct obligations of any agency or instrumentality of the United States of America and obligations on which the timely payment of principal and interest is fully guaranteed by any such agency or instrumentality;

(c) Certificates of deposit, time deposits or other direct, unsecured debt obligations of any bank (including without limitation the Master Trustee or the Bond Trustee and their affiliates), trust company or savings and loan association if all of the direct, unsecured debt obligations of such institution at the time of purchase of such certificates of deposit, time deposits or obligations, which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest rating categories assigned by such Rating Agency (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), or which certificates of deposit, time deposits or obligations are fully secured by a security interest in obligations described in clauses (a) or (b) of this definition; provided, however, that if such certificates of deposit, time deposits or obligations are so secured (1) the Bond Trustee shall have a perfected first security interest in the obligations securing such certificates of deposit, time deposits or other obligations, (2) the Bond Trustee shall hold or shall have the option to appoint an intermediary bank, trust company or savings and loan association as its agent to hold the obligations securing such certificates of deposit, time deposits or other obligations, and (3) the Bond Trustee or its appointed agent shall hold such obligations free and clear of the liens or claims of third parties;

(d) Certificates of deposit or time deposits of any bank (including the Bond Trustee and the Master Trustee and their affiliates), trust company or savings and loan association which certificates of deposit or time deposits are fully insured by a federally sponsored deposit insurance program;

(e) Securities of the type described in clauses (a) or (b) above purchased under agreements to resell such securities to any registered broker-dealer subject to the Securities Investors Protection Corporation jurisdiction or any commercial bank, if such broker-dealer’s or bank’s uninsured, unsecured and unguaranteed obligations which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest rating categories assigned by such Rating Agency (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), provided: (i) a master repurchase agreement or specific written repurchase agreement governs the transaction; (ii) the repurchase agreement has a term of 30 days or less, or the Bond Trustee or a third party custodian as described below is required thereunder to value the collateral securities no less frequently than monthly and to liquidate or cause the custodian to liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two Business Days of such valuation; (iii) the fair market value of the securities in

C-6 relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 100%; and either (iv)(A) the securities are held by the Bond Trustee free and clear of any lien or claims of a third party, or (iv)(B)(w) the securities are held by an independent third party acting solely as agent for the Bond Trustee free and clear of any lien or claims of a third party (other than as agent hereinafter described), (x) such agent is a Federal Reserve Bank, or a bank which is a member of the Federal Deposit Insurance Corporation and which bank has combined capital, surplus and undivided profits of not less than $50,000,000, (y) the Bond Trustee shall have received written confirmation from such agent that it holds such securities, free and clear of any lien or claim, as agent for the Bond Trustee and (z) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 CFR 306.0 et seq., 31 CFR 357.0 et seq. or any other regulations analogous to the preceding regulations governing any other automated book entry system operated by the United States federal reserve banks in which securities issued by government sponsored enterprises are issued, recorded, transferred and maintained in book entry form (including without limitation the regulations set forth in 24 CFR Part 81, Subpart H) in such securities is created for the benefit of the Bond Trustee;

(f) Investment agreements with banks which meet the rating criteria set forth in (c) above or investment agreements with non-bank financial institutions (i) all of the unsecured, direct long-term debt of such non-bank financial institution which is rated by a Rating Agency is rated by such Rating Agency in one of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by such Rating Agency for obligations of that nature, (ii) if such non-bank financial institutions have no such outstanding long-term debt which is rated, all of the short-term debt of which is rated by a Rating Agency is rated by such Rating Agency in the highest rating category (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned to short-term indebtedness by such Rating Agency, or (iii) the obligations of such non-bank financial institutions are guaranteed by an entity whose claims paying ability is rated by a Rating Agency in one of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), all of which agreements referred to this subsection (f) provide that if such banks’ or non-bank financial institutions’ debt no longer satisfies such rating criteria such bank or institution will secure such agreements as soon as reasonably practicable to the extent and in the manner provided in subsection (c) above;

(g) Shares of a fund registered under the Investment Company Act of 1940, as amended, whose shares are registered under the Securities Act of 1933, as amended, (including those funds for which the Bond Trustee or an affiliate performs services for a fee, whether as a custodian, transfer agent, investment advisor or otherwise) having assets of at least $100,000,000, whose investment assets are obligations which constitute Qualified Investments;

(h) Commercial paper which, at the time of purchase, is rated by a Rating Agency in one of the two highest rating categories (incorporating refinements or gradation of rating category by numerical modifier or otherwise) assigned by such Rating Agency for obligations of that nature;

(i) Obligations of, or obligations fully guaranteed by, any state of the United States of America or any political subdivision thereof which obligations, at the time of purchase, are

C-7 rated by a Rating Agency in one of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by such Rating Agency to obligations of that nature;

(j) Senior debt obligations of any corporation or trust organized under the laws of any state of the United States of America which securities, at the time of purchase, are rated by a Rating Agency in one of the three highest rating categories (without regard to any refinements or gradation of rating category by numerical modifier or otherwise) assigned by such Rating Agency for obligations of that nature;

(k) Obligations which are rated in the highest rating category by a Rating Agency and are issued or incurred by any state, commonwealth or territory of the United States of America or any political subdivision, public instrumentality or public authority of any state, commonwealth or territory of the United States of America, which obligations are fully secured by and payable solely from an escrow fund consisting of cash or direct obligations of, or obligations the timely payment of principal and interest on which are fully guaranteed by, the United States of America, which fund is held by a corporate fiduciary pursuant to an escrow agreement; and

(l) Bankers acceptances of any bank, including the Bond Trustee and the Master Trustee and their affiliates, if all of the direct, unsecured debt obligations of such institution at the time of purchase of such acceptances which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) by such Rating Agency.

Ratings of Qualified Investments referred to in the Bond Indenture shall be determined at the time of purchase of such Qualified Investments and without regard to ratings subcategories. The Bond Trustee shall have no responsibility to monitor the ratings of Qualified Investments after the initial purchase of such Qualified Investments.

“Rating Agencies” means Fitch, Moody’s or S&P, and their respective successors and assigns.

“Rebate Fund” means the Rebate Fund created by the Tax Exemption Agreement.

“Record Date” means each February 1 or August 1 (whether or not a Business Day) next preceding an Interest Payment Date.

“Series 1999A Bond Indenture” means the Amended and Restated Bond Trust Indenture dated as of June 1, 2008 between The Bank of New York Mellon Trust Company, N.A., as bond trustee, and the Authority.

“Series 1999A Bonds” means the $125,000,000 in aggregate original principal amount of Illinois Finance Authority Revenue Bonds, Series 1999A (Resurrection Health Care) authorized to be issued pursuant to the terms and conditions of the Series 1999A Bond Indenture.

C-8 “Series 1999B Bond Indenture” means the Amended and Restated Bond Trust Indenture dated as of June 1, 2008 between The Bank of New York Mellon Trust Company, N.A., as bond trustee, and the Authority.

“Series 1999B Bonds” means the $125,000,000 in aggregate original principal amount of Illinois Finance Authority Revenue Bonds, Series 1999B (Resurrection Health Care) authorized to be issued pursuant to the terms and conditions of the Series 1999B Bond Indenture.

“Series 2009 Bond Indenture” means the Bond Trust Indenture dated as of December 1, 2009 between Wells Fargo Bank, N.A., as bond trustee, and the Authority.

“Series 2009 Bonds” means the $103,805,000 in aggregate original principal amount of Illinois Finance Authority Revenue Refunding Bonds, Series 2009 (Resurrection Health Care Corporation) authorized to be issued pursuant to the terms and conditions of the Series 2009 Bond Indenture.

“Series 2009A Bond Indenture” means the Bond Trust Indenture dated as of June 1, 2009 between The Bank of New York Mellon Trust Company, N.A., as bond trustee, and the Authority.

“Series 2009A Bonds” means the $200,000,000 in aggregate original principal amount of Illinois Finance Authority Revenue Bonds, Series 2009A (Provena Health) authorized to be issued pursuant to the terms and conditions of the Series 2009A Bond Indenture.

“Series 2010A Bond Indenture” means the Bond Trust Indenture dated as of February 1, 2010 between The Bank of New York Mellon Trust Company, N.A., as bond trustee, and the Authority.

“Series 2010A Bonds” means the $115,980,000 in aggregate original principal amount of Illinois Finance Authority Revenue Bonds, Series 2010A (Provena Health) authorized to be issued pursuant to the terms and conditions of the Series 2010A Bond Indenture.

“Series 2016A Bond Indenture” means the Bond Trust Indenture dated as of May 1, 2016 between Wells Fargo Bank, N.A., as bond trustee, and the Authority related to the Series 2016A Bonds.

“Series 2016A Bonds” means the $354,225,000 in aggregate original principal amount of Illinois Finance Authority Revenue Refunding Bonds, Series 2016A (Presence Health Network) authorized to be issued pursuant to the terms and conditions of the Series 2016A Bond Indenture.

“Series 2016B Bond Indenture” means the Bond Trust Indenture dated as of May 1, 2016 between Wells Fargo Bank, N.A., as bond trustee, and the Authority, related to the Series 2016B Bonds.

“Series 2016B Bonds” means the $173,925,000 in aggregate original principal amount of Illinois Finance Authority Taxable Revenue Refunding Bonds, Series 2016B (Presence Health Network) authorized to be issued pursuant to the terms and conditions of the Series 2016B Bond Indenture.

“Series 2016C Bonds” means the Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) authorized to be issued pursuant to the terms and conditions of the Bond Indenture.

C-9 “Series 2016C Obligation” means the Borrower’s Direct Note Obligation, Series 2016C (Illinois Finance Authority), being issued to the Authority to secure the Borrower’s obligations under the Loan Agreement.

“Special Record Date” means the date fixed by the Bond Trustee pursuant to the Bond Indenture for the payment of Defaulted Interest.

“S&P” means S&P Global Ratings, a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Standard & Poor’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Borrower by written notice to the Bond Trustee and the Authority.

“State” means the State of Illinois.

“Tax-Exempt Organization” means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxation under Section 501(a) of the Code, and which is not a “private foundation” within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Tax Exemption Agreement” means the Tax Exemption Certificate and Agreement dated the Closing Date, among the Borrower, the Users, the Authority and the Bond Trustee.

“Unassigned Rights” means the Authority’s right to receive payment of its fees and expenses, the Authority’s rights to indemnification under the Loan Agreement, the Authority’s right to execute and deliver supplements and amendments to the Loan Agreement and the Authority’s right to receive notices and showings.

“United States Government Obligations” means noncallable direct obligations of, or obligations the timely payment of the principal of and interest on which is fully guaranteed by, the United States of America.

“Unrelated Trade or Business” means an activity which constitutes an “unrelated trade or business” within the meaning of Section 513(a) of the Code without regard to whether such activity results in unrelated trade or business income subject to taxation under Section 512(a) of the Code.

“Use Agreement” means the Use Agreement dated as of August 1, 2016 between the Borrower and the Users related to the Bond Financed Property.

“Users” means Presence Care Transformation Corporation, Presence Chicago Hospitals Network, Presence Central and Suburban Hospitals Network, Presence Senior Services – Chicagoland and Resurrection University.

“Written Request” means with reference to the Authority, a request in writing signed by the Chairperson, Vice Chairperson, Executive Director, Secretary or Treasurer of the Authority and, with

C-10 reference to any Member of the Obligated Group, means a request in writing signed by the President or a Vice President of such Member or the Obligated Group Agent, or any other officers designated by the Authority or such Member or the Obligated Group Agent, as the case may be.

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE

The Bond Indenture contains various covenants, security provisions, terms and conditions, certain of which are summarized below. Reference is made to the Bond Indenture for a full and complete statement of the Bond Indenture’s provisions.

FUNDS; DISPOSITION OF REVENUES

(1) Revenue Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the “Revenue Fund – Presence Health Network Series 2016C” (the “Revenue Fund”). All payments upon the Series 2016C Obligation pledged under the Bond Indenture and all payments under the Loan Agreement (other than payments made in connection with the Unassigned Rights), as and when received by the Bond Trustee, shall be deposited in the Revenue Fund and shall be held therein until disbursed as provided in the Bond Indenture. Pursuant to the assignment and pledge of payments upon the Series 2016C Obligation set forth in the granting clauses contained in the Bond Indenture, the Authority will direct the Borrower to make payments upon the Series 2016C Obligation directly to the Bond Trustee when and as the same become due and payable by the Borrower under the terms of the Series 2016C Obligation and the Loan Agreement.

If on the date any payment upon the Obligation pledged under the Bond Indenture is due the Bond Trustee does not receive such payment, the Bond Trustee shall request the Master Trustee to give immediate telephonic notice promptly confirmed in writing to each Member of the nonpayment.

(2) Interest Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the “Interest Fund –Presence Health Network – Series 2016C” (the “Interest Fund”).

On or before the Business Day prior to each Interest Payment Date, commencing February 15, 2017, the Bond Trustee shall deposit in the Interest Fund from moneys in the Revenue Fund an amount which is not less than the interest to become due on the next succeeding semi-annual Interest Payment Date of the Series 2016C Bonds. No such deposit pursuant to the provisions of the Bond Indenture summarized in this paragraph need be made, however, to the extent that there is a sufficient amount already on deposit and available for such purpose in the Interest Fund to be applied to such next interest payment. Moneys on deposit in the Interest Fund, other than income thereon which is to be transferred to other funds created under the Bond Indenture, must be used to pay interest on the Series 2016C Bonds as it becomes due.

C-11 the first Interest Payment Date occurring on or after the date of such redemption or defeasance to pay the principal of and interest on the Series 2016C Bonds to be redeemed or defeased.

(3) Bond Sinking Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the “Bond Sinking Fund – Presence Health Network – Series 2016C” (the “Bond Sinking Fund”). On or before the Business Day prior to each February 15, commencing February 15, [_____], after making the deposits required by the provisions of the Bond Indenture summarized under the immediately preceding subcaption, the Bond Trustee shall deposit in the Bond Sinking Fund from moneys in the Revenue Fund an amount which is not less than the principal of the Series 2016C Bonds next to become due by maturity or mandatory Bond Sinking Fund redemption. No such deposit need be made, however, to the extent that there is a sufficient amount already on deposit and available for such purpose in the Bond Sinking Fund to be applied to such next maturity or mandatory Bond Sinking Fund redemption payment.

Moneys on deposit in the Bond Sinking Fund, other than income earned thereon which is to be transferred to other funds created under the Bond Indenture or to the Rebate Fund, shall be applied by the Bond Trustee to pay principal of the Series 2016C Bonds as it becomes due and to redeem the Series 2016C Bonds in accordance with the mandatory Bond Sinking Fund redemption schedule provided in the Bond Indenture. In lieu of such mandatory Bond Sinking Fund redemption, the Bond Trustee may, at the request of the Borrower, purchase for cancellation an equal principal amount of Series 2016C Bonds of the maturity to be redeemed in the open market at prices not exceeding the principal amount of the Series 2016C Bonds being purchased plus accrued interest, with such interest portion of the purchase price to be paid from the Interest Fund and the principal portion of such purchase price to be paid from the Bond Sinking Fund. In addition, the amount of Series 2016C Bonds to be redeemed on any date pursuant to the mandatory Bond Sinking Fund redemption schedule shall be reduced by the principal amount of Series 2016C Bonds of the maturity required to be redeemed which are acquired by the Borrower and delivered to the Bond Trustee for cancellation.

In connection with any partial redemption or defeasance prior to maturity of the Series 2016C Bonds, the Bond Trustee may, at the request of the Borrower, use any amounts on deposit in the Bond Sinking Fund in excess of the amount needed to pay principal on the Series 2016C Bonds remaining outstanding on the first principal or mandatory sinking fund payment date occurring on or after the date of such redemption or defeasance to pay the principal of and interest on the Series 2016C Bonds to be redeemed or defeased.

(4) Optional Redemption Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the “Optional Redemption Fund – Presence Health Network – Series 2016C” (the “Optional Redemption Fund”). In the event of (i) prepayment by or on behalf of the Borrower or any other Member of amounts payable on the Series 2016C Obligation or Additional Obligations pledged under the Bond Indenture, including prepayment with condemnation or insurance proceeds or proceeds of a sale consummated under threat of condemnation, or (ii) deposit with the Bond Trustee by the Borrower, any other Member or the Authority of moneys from any other source for redeeming Bonds or purchasing Bonds for cancellation, such moneys shall, except as otherwise provided in the Bond Indenture, be deposited in the Optional Redemption Fund. Moneys on deposit in the Optional Redemption Fund shall be used, first, to make up

C-12 any deficiencies existing in the Interest Fund and the Bond Sinking Fund (in the order listed) and, second, for the redemption or purchase of Bonds in accordance with the provisions of the Bond Indenture.

(5) Expense Fund. The Authority shall establish with the Bond Trustee a separate account to be known as the “Expense Fund – Presence Health Network – Series 2016C” (the “Expense Fund”). An initial deposit to the credit of the Expense Fund is to be made in accordance with the provisions of the Bond Indenture. Amounts on deposit in the Expense Fund shall be disbursed upon the Written Request of the Borrower or the Authority for the payment of expenses for any recording, trustee’s and depository’s fees and expenses, accounting and legal fees, financing costs (including costs of acquiring investments for the funds and escrows), and other fees and expenses incurred or to be incurred by or on behalf of the Authority or the Borrower in connection with or incident to the issuance and sale of the Series 2016C Bonds. At such time as the Bond Trustee is furnished with a Written Request of the Borrower stating that all such fees and expenses have been paid, and in no event later than August 1, 2017, the Bond Trustee shall transfer any moneys remaining in the Expense Fund to the Project Fund.

(6) Disbursement Fund. The Authority shall establish with the Bond Trustee a separate account to be known as the “Disbursement Fund – Presence Health Network – Series 2016C (the “Disbursement Fund”). An initial deposit to the credit of the Disbursement Fund shall be made in accordance with the Bond Indenture.

PROJECT FUND - PAYOUTS

The Authority shall establish with the Bond Trustee a separate account to be known as the “Project Fund — Presence Health Network — Series 2016C” (the “Project Fund”). An initial deposit to the credit of the Project Fund shall be made in accordance with the provisions of the Bond Indenture. Any moneys received by the Bond Trustee from any other source for the Project shall be deposited in the Project Fund unless otherwise specifically excepted under the Bond Indenture or unless contrary provision is made in the Loan Agreement. The moneys in the Project Fund shall be held in trust by the Bond Trustee, shall be applied to the payment of the costs of the Project and, pending such application, shall be held as trust funds under the Bond Indenture in favor of the holders of the outstanding Bonds and for the further security of such holders until paid out or transferred as provided under this caption.

Moneys deposited in the Project Fund shall be paid out from time to time by the Bond Trustee (subject to the right of the Authority to stop payment at any time prior to payment) in order to pay, or to reimburse the Borrower for payment made for, the costs of the Project and such other costs related thereto as are permitted under the Act, in each case within three Business Days after receipt by the Bond Trustee and the Authority of a Written Request of the Borrower described below together with bills of sale or invoices showing that such costs are due and owing or have been incurred and previously paid by the Borrower.

Each Written Request of the Borrower shall certify: (i) the item number of such Written Request, the name of the person, firm or corporation to whom each such payment is due, each amount to be paid or reimbursed, the general classification of the costs for which each obligation to be paid was incurred, and that such costs were incurred for or in connection with the Project; (ii) that such costs have been incurred by the Borrower and are presently due and payable or have been paid by the Borrower and are reimbursable under the Bond Indenture and each item thereof is a proper charge against the Project Fund

C-13 and has not been previously paid or reimbursed from the proceeds of the Series 2016C Bonds; (iii) that such costs are valid “costs” of a “project” under the Act and no part thereof was included in any other Written Requests previously filed with the Bond Trustee under the provisions of the Bond Indenture; (iv) that there has not been filed with or served upon the Borrower any notice of any lien, right to a lien or attachment upon or claim affecting the right of any Person, firm or corporation to receive payment of the respective amount stated in such Written Request; (v) that the amount of moneys which will remain on deposit in the Project Fund after the withdrawal in question is made, together with its reasonable estimate of investment income to be earned thereon and on other funds created under the Bond Indenture and held by the Bond Trustee which income is required to be deposited in the Project Fund, and the amount of moneys, if any, committed by and available to the Borrower for payment of the costs of the Project will, after payment of the amounts then requested, be sufficient to pay the cost of completing the Project; (vi) that the necessary permits and approvals, if any, required for that portion of the Project for which such withdrawal is to be made have been issued and are in full force and effect; (vii) (a) the item on the Project Certificate Exhibit for which payment or reimbursement is requested or (b) if any item for which payment or reimbursement is sought was not included in the Project Certificate Exhibit, the expenditure, if any, on such Exhibit for which such item is being substituted, the reasonably expected economic life to the Borrower of such substituted item determined as of the later of the Closing Date or the date on which such item was, or is expected to be, placed in service and evidence that a corresponding amendment was made to the Project Certificate Exhibit as well as the Plans and Specifications and/or the Schedule (as defined in the Loan Agreement) in accordance with the Loan Agreement; (viii) that no items for which payment or reimbursement is sought are located at any location which was not described in the notice of public hearing published in connection with the issuance of the Series 2016C Bonds; and (ix) that the withdrawal and use of the Project Fund moneys for the purpose intended will not cause any of the representations or certifications contained in the Project Certificate to be untrue.

Upon receipt of each Written Request of the Borrower, the Bond Trustee shall pay the obligation set forth in such Written Request out of moneys in the Project Fund. In making such payments the Bond Trustee may rely upon such Written Request and accompanying certificates. If for any reason the Authority or the Borrower should decide prior to the payment of any item in said Written Request not to pay such item, it shall give written notice of such decision to the Bond Trustee and, upon receipt thereof, the Bond Trustee shall not make such payment. The Bond Trustee shall not be liable to the Authority or the Borrower for any payment made pursuant to a Written Request prior to the Bond Trustee’s receipt of such written notice.

The Authority shall require the Borrower pursuant to the Loan Agreement to submit to the Bond Trustee and the Authority within 90 days after the completion of the Project, a certificate of the Borrower certifying: (i) that the Project has been completed in accordance with the Plans and Specifications, the Schedule and the Project Certificate Exhibit and all permits necessary for the occupancy and use of the Project have been obtained and are in full force and effect; (ii) (1) that no item was added, deleted or substituted on the Project Certificate Exhibit or (2) if any item was added, deleted or substituted from the Project as described in the Project Certificate Exhibit, the average reasonably expected economic life of the Project recalculated as follows:

(A) any item which was not originally listed on the Project Certificate Exhibit but for which a draw was made from the Project Fund shall be included in the Project Certificate Exhibit and the Borrower shall specify the reasonably expected

C-14 economic life to the Borrower of the additional item, the date on which such additional item was placed in service, and the original cost thereof;

(B) any item which was originally listed on the Project Certificate Exhibit but for which the Borrower subsequently arranged to lease or otherwise finance or which the Borrower subsequently deleted from the Project pursuant to an amendment to the Project Documents shall be deleted from the Project Certificate Exhibit;

(C) all other items shall be assumed to have the economic life and the cost originally assigned to them on the Closing Date as reflected on the Project Certificate Exhibit;

(D) that all fixtures required for the operation of the Project have been installed and are free and clear of all liens and security interests other than Permitted Encumbrances;

(E) that the Project (to the extent of said Project Certificate Exhibit) has been fully paid for and no claim or claims exist against the Authority, the Borrower or against the Project out of which a lien based on furnishing labor or material exists or might, with the passage of time or the giving of notice, or both, ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might, with the passage of time or the giving of notice, or both, ripen in the event that the Borrower intends to contest such claim or claims in accordance with the Master Indenture, in which event such claim or claims shall be described; provided that funds are on deposit in the Project Fund which are sufficient, together with other funds which are committed by and available to the Borrower for the Project, to make payment of the full amount which might in any event be payable in order to satisfy such claim or claims; and

(F) no Event of Default has occurred and is continuing under the Bond Indenture or under the Loan Agreement.

If after payment by the Bond Trustee of all orders theretofore tendered to the Bond Trustee under the provisions under this caption above and after receipt by the Bond Trustee of the certificates and other documents mentioned under this caption there shall remain any moneys in the Project Fund, the Borrower may elect (i) to retain all or a portion of such moneys in the Project Fund until August 1, 2019 and withdraw such moneys in accordance with the provisions under this caption to pay or reimburse the Borrower for payment of the “cost” of an additional “project” or “projects” (as such terms are defined in the Act) if the Borrower complies with the provisions of the Loan Agreement relating to changes in or amendments to the Project Documents, or (ii) to instruct the Bond Trustee to deposit such moneys in the Interest Fund to the extent necessary to make the next interest payment therefrom, then in the Bond Sinking Fund to the extent necessary to make the next payment therefrom so long as the next principal payment is required to be made within 13 months from the date of deposit therein and then to the Optional Redemption Fund. If the Borrower makes no such election and in any event on August 1, 2019, the Bond Trustee shall transfer such moneys to the Interest Fund to the extent necessary to make the next interest payment therefrom, then to the Bond Sinking Fund to the extent necessary to make the next principal payment therefrom, if such principal payment is required to be made within 13 months from the

C-15 date of deposit therein and then to the Optional Redemption Fund; provided, however, that if the Borrower and the Bond Trustee receive an Opinion of Bond Counsel to the effect that such moneys may be retained in the Project Fund or deposited in a manner not in accordance with the foregoing provisions, such moneys may be retained in the Project Fund or, if such Opinion is received by the Bond Trustee in sufficient time to permit the Bond Trustee to follow any directions contained therein, deposited as set forth in such Opinion. The foregoing notwithstanding, amounts remaining in the Project Fund after completion of the Project as described above which are attributable to investment earnings may be transferred to the Rebate Fund (as defined in the Tax Exemption Agreement) upon the written request of the Borrower.

As soon as practicable after the Borrower has made an election pursuant to the first two subparagraphs under this caption, the Borrower shall recalculate the average reasonably expected economic life of the Project, as reflected on the Project Certificate Exhibit, to (i) make any adjustments required by this caption, (ii) include in the Project Certificate Exhibit the average reasonably expected economic life of any additional projects undertaken with moneys remaining on deposit in the Project Fund at the completion of the Project, and (iii) include in the Project Certificate Exhibit the amount of moneys so transferred from the Project Fund as an asset with an economic life of zero.

Subject to the provisions of the Bond Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – INVESTMENT OF FUNDS” below, moneys at any time on deposit in the Project Fund shall, by telephonic instructions promptly followed by a Written Request of the Borrower, be invested or reinvested by the Bond Trustee in Qualified Investments maturing at such time or times so that the Bond Trustee will be able to pay the costs of the Project from time to time upon the Written Request of the Borrower as provided in the Bond Indenture. The Bond Trustee, the Borrower and the Authority shall be entitled to rely upon a schedule of anticipated payments of construction and equipment costs approved by the Borrower in scheduling such investments. Any earnings on such investments shall be credited to and any losses on such investments shall be charged against the Project Fund. The Bond Trustee shall not be obligated to invest any moneys held by it under the Bond Indenture except as directed by the Borrower and except as provided otherwise in the Bond Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – INVESTMENT OF FUNDS” below, but shall promptly inform the Authority and the Borrower of any amounts that remain uninvested but are eligible for investment in Qualified Investments. The Bond Trustee may sell or present for redemption any Qualified Investments so purchased whenever it shall be necessary in order to provide moneys to meet any payment under this caption and the Bond Trustee shall not be liable or responsible for any loss resulting from such investments. Notwithstanding any other provisions of the Bond Indenture, all investment earnings shall be subject to the provisions of the Tax Exemption Agreement.

INVESTMENT OF FUNDS

Upon telephonic instructions immediately followed by a Written Request of the Obligated Group Agent filed with the Bond Trustee, moneys in the Revenue Fund, Interest Fund, Bond Sinking Fund, Project Fund, Expense Fund, and Optional Redemption Fund shall remain invested, to the extent possible, at all times until the moneys therein are required to be used and shall be invested in Qualified Investments. If the Obligated Group Agent fails to file such a Written Request with the Bond Trustee, moneys in such funds shall be invested in the Wells Fargo Government Money Market Fund or any

C-16 successor money market fund. Such investments shall be made so as to mature on or prior to the date or dates that moneys therefrom are anticipated to be required. The Bond Trustee, when authorized by the Obligated Group Agent, may trade with itself in the purchase and sale of securities for such investment, and may charge its ordinary and customary fees for such trades, including cash sweep account fees; provided, however, that in no case shall investments be otherwise than in accordance with the investment limitations contained in the Bond Indenture and in the Tax Exemption Agreement. The Bond Trustee shall not be liable or responsible for any loss resulting from any such investments. Although the Authority and the Borrower each recognizes that it may obtain a broker confirmation or written statement containing comparable information at no additional cost, the Authority and the Borrower agree that confirmations of permitted investments are not required to be issued by the Bond Trustee for each month in which a monthly statement is rendered. No statement need be rendered for any fund or account if no activity occurred in such fund or account during such month.

During the period that the Project is in progress and until the Project is substantially completed, investment income from the funds specified in the paragraph above in excess of the requirements of such funds shall be deposited into the Project Fund. Thereafter, all income in excess of the requirements of the funds summarized above under the heading “FUNDS; DISPOSITION OF REVENUES” derived from the investment of moneys on deposit in any such funds shall be deposited in the following funds, in the order listed: the Bond Sinking Fund and the Interest Fund (in that order), to the extent, with respect to the Bond Sinking Fund, of the amount required to be deposited in the Bond Sinking Fund to make the next required principal payment on the Bonds if such payment is scheduled to occur within 13 months of such transfer and to the extent, with respect to the Interest Fund, of the amounts required to be deposited in the Interest Fund necessary to make any interest payments on the Bonds occurring within 13 months of such transfer; and the balance, if any, in the Optional Redemption Fund

ARBITRAGE

The Authority covenants and agrees in the Bond Indenture that it will not take any action or fail to take any action with respect to the investment of the proceeds of any Bonds issued under the Bond Indenture or with respect to the payments derived from the Series 2016C Obligation pledged under the Bond Indenture and under the Loan Agreement or any other moneys regardless of source or where held which may, notwithstanding compliance with the other provisions of the Bond Indenture, the Loan Agreement and the Tax Exemption Agreement, result in constituting the Series 2016C Bonds or any Additional Bonds “arbitrage bonds” within the meaning of such term as used in Section 148 of the Code. The Authority further covenants and agrees in the Bond Indenture that it will comply with and take all actions required by the Tax Exemption Agreement.

SUPPLEMENTAL BOND INDENTURES

The Authority and the Bond Trustee may, without the consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to the Bond Indenture, as shall not be inconsistent with the terms and provisions of the Bond Indenture, for any one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in the Bond Indenture; (ii) to grant to or confer upon the Bond Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders and the Bond Trustee, or either of them; (iii) to assign and pledge under the Bond Indenture additional revenues, properties or

C-17 collateral; (iv) to evidence the appointment of a separate trustee or the succession of a new trustee under the Bond Indenture; (v) to permit the qualification of the Bond Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute in effect or to permit the qualification of the Bonds for sale under the securities laws of any state of the United States; (vi) to permit the issuance of coupon bonds under the Bond Indenture and to permit the exchange of Bonds from registered form to coupon form and vice versa; (vii) to provide for the refunding or advance refunding of any Bonds; (viii) to provide for Additional Bonds to the extent permitted by the Bond Indenture; (ix) to permit continued compliance with the Tax Exemption Agreement or any similar agreement entered into in connection with the issuance of any series of Additional Bonds; and (x) to make any other change that, in the judgment of the Bond Trustee, does not materially adversely affect the rights of any Bondholders.

The Authority and the Bond Trustee may not enter into an indenture supplemental to the Bond Indenture pursuant to paragraph (vi) above unless the Authority and the Bond Trustee shall have received an Opinion of Bond Counsel to the effect that the issuance of coupon Bonds will not adversely affect the validity of such Bonds or any exemption from federal income tax of the interest paid on any Bonds to which such Bond would otherwise be entitled.

In addition to supplemental indentures permitted by the provisions summarized in the first paragraph under this caption and subject to the terms and provisions of the Bond Indenture hereinafter summarized, and not otherwise, the holders of not less than a majority in aggregate principal amount of the Bonds which are outstanding under the Bond Indenture at the time of the execution of such indenture or supplemental indenture shall have the right, from time to time, anything contained in the Bond Indenture to the contrary notwithstanding, to consent to and approve the execution by the Authority and the Bond Trustee of such other indenture or indentures supplemental to the Bond Indenture as shall be deemed necessary and desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Bond Indenture or in any supplemental indenture; provided, however, that nothing contained in the provisions of the Bond Indenture summarized under this caption shall permit, or be construed as permitting, a supplemental indenture to effect: (a) an extension of the stated maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the holders of such Bonds; (b) a reduction in the amount or extension of the time of any payment required to be made to or from the Interest Fund or the Bond Sinking Fund or any interest or sinking fund applicable to any Additional Bonds; (c) the creation of any Lien prior to or on a parity with the lien of the Bond Indenture, without the consent of the holders of all the Bonds at the time outstanding; (d) a reduction in the aforesaid aggregate principal amount of Bonds the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all the Bonds at the time outstanding which would be affected by the action to be taken; or (e) a modification of the rights, duties or immunities of the Bond Trustee, without the written consent of the Bond Trustee.

If at any time the Authority shall request the Bond Trustee to enter into any such supplemental indenture for any of the purposes summarized in the preceding paragraph, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed to each holder of Bonds as shown on the Bond Register. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the designated corporate trust office of the Bond Trustee for inspection by all Bondholders.

C-18 The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided in the provisions of the Bond Indenture summarized under this caption. If the holders of the requisite principal amount of Bonds which are outstanding under the Bond Indenture at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as provided in the Bond Indenture, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as in accordance with the provisions summarized under this caption, the Bond Indenture shall be and be deemed to be modified and amended in accordance therewith.

Anything in the Bond Indenture to the contrary notwithstanding, so long as the Members of the Obligated Group are not in default under the Master Indenture and the Borrower is not in default under the Loan Agreement, a supplemental indenture shall not become effective unless and until the Obligated Group Agent shall have consented in writing to the execution and delivery of such supplemental indenture. In this regard, the Bond Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture to which the Obligated Group Agent has not already consented, together with a copy of the proposed supplemental indenture and a written consent form to be signed by the Obligated Group Agent, to be mailed by certified or registered mail to the Obligated Group Agent at least thirty days prior to the proposed date of execution and delivery of any such supplemental indenture.

EVENTS OF DEFAULT; ACCELERATION

Each of the following events is an “event of default” under the Bond Indenture:

(a) payment of any installment of interest payable on any of the Bonds shall not be made when the same shall become due and payable; or

(b) payment of the principal of or the premium, if any, payable on any of the Bonds shall not be made when the same shall become due and payable, either at maturity, by proceedings for redemption, upon acceleration, through failure to make any payment to any fund under the Bond Indenture or otherwise; or

(d) an order or decree shall be entered, appointing a receiver, receivers, custodian or custodians for any of the revenues of the Authority, or approving a petition filed against the Authority seeking reorganization of the Authority under the federal bankruptcy laws or any other similar law or statute of the United States of America or any state thereof, or if any such order or decree, having been entered without the consent or acquiescence of the Authority, shall not be vacated or discharged or stayed on appeal within 60 days after the entry thereof; or

(e) any proceeding shall be instituted, with the consent or acquiescence of the Authority, or any plan shall be entered into by the Authority, for the purpose of effecting a

C-19 composition between the Authority and its creditors or for the purpose of adjusting the claims of such creditors pursuant to any federal or state statute now or hereafter enacted, if the claims of such creditors are under any circumstances payable from any part or all of the trust estate, including the revenues and other moneys derived by the Authority under the Series 2016C Obligation pledged under the Bond Indenture or the Loan Agreement; or

(f) the Authority (1) files a petition in bankruptcy or under Title 11 of the United States Code, as amended, (2) makes an assignment for the benefit of its creditors, (3) consents to the appointment of a receiver, custodian or trustee for itself or for the whole or any part of the trust estate, including the revenues and other moneys derived by the Authority under the Series 2016C Obligation pledged under the Bond Indenture or the Loan Agreement, or (4) is generally not paying its debts as such debts become due; or

(g) (1) the Authority is adjudged insolvent by a court of competent jurisdiction, (2) on a petition in bankruptcy filed against the Authority it is adjudged as bankrupt, or (3) an order, judgment or decree is entered by any court of competent jurisdiction appointing, without the consent of the Authority, a receiver, custodian or trustee of the Authority or of the whole or any part of its property and any of the aforesaid adjudications, orders, judgments or decrees shall not be vacated or set aside or stayed within 60 days from the date of entry thereof; or

(h) the Authority shall file a petition or answer seeking reorganization or any arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof; or

(i) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property, and such custody or control shall not be terminated within thirty days from the date of assumption of such custody or control; or

(j) any event of default as defined in the Loan Agreement or in the Master Indenture shall occur and be continuing from and after the date the Authority is entitled under the Loan Agreement to request that the Master Trustee declare the Series 2016C Obligation pledged under the Bond Indenture to be immediately due and payable, or such event of default shall be continuing from and after the date on which the Master Trustee is entitled under the Master Indenture to declare the Series 2016C Obligation immediately due and payable, or the Master Trustee shall declare the Series 2016C Obligation immediately due and payable; or

(k) the Authority shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Bond Indenture or any agreement supplemental to the Bond Indenture to be performed on the part of the Authority, and such default shall continue for the period of 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the Authority, the Borrower and the Obligated Group Agent by the Bond Trustee which notice the Bond Trustee may give in its discretion and must give at the written request of the owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding under the Bond Indenture exclusive of Bonds then owned by the Authority or any Member;

C-20 provided that, if such default cannot with due diligence and dispatch be wholly cured within 30 days but can be wholly cured, the failure of the Authority to remedy such default within such 30-day period shall not constitute a default under the Bond Indenture if the Authority shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or

(l) the Authority, the Borrower or the Bond Trustee shall default in the performance of any covenant, condition, agreement or provision of the Tax Exemption Agreement (or any similar agreement executed in connection with the issuance of a series of Additional Bonds), and such default shall continue for the period of 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the party in default and the Borrower by the other party; provided that if such default cannot with due diligence and dispatch be wholly cured within 30 days but can be wholly cured, the failure of the Authority, the Borrower or the Bond Trustee to remedy such default within such 30-day period shall not constitute a default under the Bond Indenture if any of the foregoing shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch.

If on the date payment of principal of or interest on any Bond is due, sufficient moneys are not available to make such payment, the Bond Trustee shall give telephonic notice, confirmed in writing, of such insufficiency to the Obligated Group Agent.

The Bond Trustee shall give the Obligated Group Agent Immediate Notice of any failure of the Borrower to pay any installment of interest, principal or premium on the Series 2016C Obligation or any Additional Obligations pledged under the Bond Indenture or any other payment required by the Loan Agreement when the same shall become due and payable, whether upon a scheduled Interest Payment Date, at stated maturity, upon any date fixed for prepayment, by acceleration or otherwise.

Upon the happening of any event of default specified in paragraphs (c) through (l) above and the continuance of the same for the period, if any, specified in said paragraphs, the Bond Trustee may, but without any action on the part of the Bondholders, or upon the happening and continuance of any event of default specified in paragraphs (c) through (l) above and the written request of the owners of not less than 25% in aggregate principal amount of the Bonds then outstanding under the Bond Indenture exclusive of Bonds then owned by the Authority or any Member, and upon being indemnified to its satisfaction, the Bond Trustee shall, or upon the happening of any event of default specified in paragraph (a) or (b) above, the Bond Trustee shall, by notice in writing delivered to the Authority, declare the entire principal amount of the Bonds then outstanding under the Bond Indenture and the interest accrued thereon, immediately due and payable, and the entire principal and interest shall thereupon become and be immediately due and payable, subject, however, to the provisions of the Bond Indenture summarized below under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – WAIVER OF EVENTS OF DEFAULT.”

C-21 REMEDIES

Upon the occurrence of any event of default the Bond Trustee may pursue any available remedy, including a suit at law or in equity to enforce the provisions in the Bond Indenture and of the Loan Agreement and the payment of the principal of, premium, if any, and interest on the Bonds outstanding under the Bond Indenture.

If an event of default shall have occurred, and if the Bond Trustee shall have been requested to do so by the owners of not less than 25% in aggregate principal amount of Bonds then outstanding and the Bond Trustee shall have been indemnified as provided in the Bond Indenture, the Bond Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the provisions of the Bond Indenture summarized under this caption as the Bond Trustee shall deem most expedient in the interests of the owners of Bonds; provided, however, that the Bond Trustee shall have the right to decline to comply with any such request or direction if the Bond Trustee shall be advised by counsel (who may be its own counsel) that the action so requested may not lawfully be taken or the Bond Trustee in good faith shall determine that such action would be unjustly prejudicial to the holders of Bonds not parties to such request.

No remedy by the terms of the Bond Indenture conferred upon or reserved to the Bond Trustee (or to the holders of Bonds) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Bond Trustee or to the holders of Bonds under the Bond Indenture now or thereafter existing at law or in equity or by statute.

No delay or omission to exercise any right or power accruing upon any default or event of default shall impair any such right or power or shall be construed to be a waiver of any such default or event of default, or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient.

No waiver of any default or event of default under the Bond Indenture, whether by the Bond Trustee or by the holders of Bonds, shall extend to or shall affect any subsequent default or event of default or shall impair any rights or remedies consequent thereon.

DIRECTION OF PROCEEDINGS BY BONDHOLDERS

The owners of not less than a majority in aggregate principal amount of Outstanding Bonds shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Bond Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Bond Indenture, including the enforcement of the rights of the Authority under the Loan Agreement or the appointment of a receiver or any other proceedings under the Bond Indenture; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of the Bond Indenture.

WAIVER OF EVENTS OF DEFAULT

The Bond Trustee may in its discretion waive any event of default under the Bond Indenture and its consequences and rescind any declaration of maturity of principal, and shall do so, upon being

C-22 indemnified to its satisfaction and upon receipt of the written request of the holders of (1) at least a majority in aggregate principal amount of all the Bonds outstanding in respect of which default in the payment of principal and/or interest exists, or (2) at least a majority in aggregate principal amount of all the Bonds outstanding in the case of any other event of default; provided, however, that there shall not be waived (a) any event of default in the payment of the principal of any outstanding Bonds when due at the dates of maturity specified therein other than principal due upon an acceleration of the Bonds or (b) any default in the payment when due of the interest on any such Bonds, other than accrued interest due solely as a result of an acceleration of the Bonds, unless prior to such waiver or rescission all arrears of interest, with interest thereon (to the extent permitted by law) at the rate, borne by the Bonds in respect of which such default shall have occurred on overdue installments of interest and all arrears of payments of principal when due, as the case may be, and all fees and expenses of the Bond Trustee and any Paying Agent in connection with such default shall have been paid or provided for, including, but not limited to, the reasonable fees of their counsel, and in case of any such waiver or rescission or in case any proceeding taken by the Bond Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Authority, the Bond Trustee and the Bondholders shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Bond Indenture respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon.

APPLICATION OF MONEYS

Subject to the provisions of the Tax Exemption Agreement, all moneys received by the Bond Trustee pursuant to any right given or action taken under the provisions of the Bond Indenture summarized under this caption shall, after payment of the cost and expenses of the proceedings resulting in the collection of such moneys and of the outstanding fees of, and the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Bond Trustee and the creation of a reasonable reserve for anticipated fees, costs and expenses, be deposited in the Revenue Fund and all moneys in the Funds maintained by the Bond Trustee under the Bond Indenture shall be applied as follows:

(a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied:

FIRST: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement;

SECOND: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto without any discrimination or privilege;

THIRD: To the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than 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, and, if the amount available shall not be

C-23 sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal due on such date, to the Persons entitled thereto without any discrimination or privilege; and

FOURTH: To the payment to the Persons entitled thereto of unpaid principal and interest due and owing on any Bonds, the payment of principal and interest of which has been extended in the manner described in the Bond Indenture.

(b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied:

FIRST: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement;

SECOND: To the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal or interest over the other, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege; and

THIRD: To the payment of the principal and interest when due and unpaid upon Bonds with respect to which the payment of principal and interest has been extended as described in the Bond Indenture.

(c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of the Bond Indenture, then, subject to the provisions of the Bond Indenture summarized in paragraph (b) above in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of the Bond Indenture summarized in paragraph (a) above.

Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions of the Bond Indenture summarized under this caption, such moneys shall be applied by it at such times, and from time to time, as the Bond Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable, or, with respect to payments of Defaulted Interest, shall be such date as is required by the Bond Indenture) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date and of the Special Record Date by mailing a copy of such notice by first class mail to the registered owners of the Bonds, at least 10 days prior to the Special Record Date. The Bond Trustee shall not be required to make payment to the holder of any Bond until such Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid.

C-24 Whenever all Bonds and interest thereon have been paid under the provisions of the Bond Indenture summarized under this caption and all expenses and charges of the Bond Trustee have been paid, any balance remaining shall be paid to the Persons entitled to receive the same; and if no other Person shall be entitled thereto, then the balance shall be paid to the Borrower.

REMOVAL OF THE BOND TRUSTEE

The Bond Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Bond Trustee, the Obligated Group Agent and the Authority and signed by the owners of a majority in aggregate principal amount of Bonds then outstanding. So long as no event of default has occurred and is continuing under the Bond Indenture or the Loan Agreement, the Bond Trustee may be removed for any reason at any time by the Obligated Group Agent or by the Authority by an instrument or concurrent instruments in writing delivered to the Bond Trustee. If any event of default has occurred or is continuing under the Bond Indenture or the Loan Agreement, the Bond Trustee may be removed for cause (including but not limited to maintaining non-competitive fees) at any time by the Obligated Group Agent or the Authority by an instrument or concurrent instruments in writing and delivered to the Bond Trustee. The foregoing notwithstanding, the Bond Trustee may not be removed by the Obligated Group Agent unless written notice of the delivery of such instrument or instruments signed by the Authority is mailed to the owners of all Bonds outstanding under the Bond Indenture, which notice indicates the Bond Trustee will be removed and replaced by the successor trustee named in such notice, such removal and replacement to become effective on the 30th day next succeeding the date of such notice, unless the owners of not less than ten percent (10%) in aggregate principal amount of Bonds then outstanding under the Bond Indenture shall object in writing to such removal and replacement. Such notice shall be mailed by first class mail postage prepaid to the owners of all such Bonds then outstanding at the address of such owners then shown on the Bond Register.

BOND TRUSTEE AS HOLDER OF SERIES 2016C OBLIGATION

The Bond Trustee, unless it elects to the contrary by a notice in writing delivered to the Master Trustee, will be considered the holder of the Series 2016C Obligation for the purpose of giving certain consents and approvals under the Master Indenture.

DEFEASANCE

If the Authority shall pay or provide for the payment of the entire indebtedness on all Bonds (including for the purposes of the provisions of the Bond Indenture summarized under this caption, Bonds held by any Member of the Credit Group) outstanding in any one or more of the following ways: (a) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on all Bonds outstanding, as and when the same become due and payable; (b) by depositing with the Bond Trustee, in trust, at or before maturity, moneys in an amount sufficient to pay or redeem (when redeemable) all Bonds outstanding (including the payment of premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Obligations, which are not prepayable or callable prior to the date the moneys therefrom are anticipated to be required, in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all

C-25 Bonds outstanding at or before their respective maturity dates; it being understood that the investment income on such Government Obligations may be used for any other purpose under the Act; (c) by delivering to the Bond Trustee, for cancellation by it, all Bonds outstanding; or (d) by depositing with the Bond Trustee, in trust, Government Obligations, which are not prepayable or callable prior to the date the moneys therefrom are anticipated to be required, in such amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, and any uninvested cash, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all Bonds outstanding at or before their respective maturity dates; provided that the Bond Trustee shall be permitted to rely upon an accountant’s verification report as conclusive evidence of the sufficiency of the amount of such deposit; and if the Authority shall pay or cause to be paid all other sums payable under the Bond Indenture and if any of the Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given in accordance with the Bond Indenture or provisions satisfactory to the Bond Trustee shall have been made for the giving of such notice, the Bond Indenture and the estate and rights granted under the Bond Indenture shall cease, determine, and become null and void, and thereupon the Bond Trustee shall, upon Written Request of the Authority, and upon receipt by the Bond Trustee of an Officer’s Certificate of the Obligated Group Agent and an opinion of Independent Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Bond Indenture have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging the Bond Indenture and the lien thereof. The satisfaction and discharge of the Bond Indenture shall be without prejudice to the rights of the Bond Trustee to charge and be reimbursed by the Authority and the Borrower for any expenditures which it may thereafter incur in connection therewith.

Any moneys, funds, securities, or other property remaining on deposit in the Expense Fund, Revenue Fund, Interest Fund, Bond Sinking Fund, Project Fund, Optional Redemption Fund or any other fund or investment under the Bond Indenture (other than said Government Obligations or other moneys deposited in trust as above provided) shall, upon the full satisfaction of the Bond Indenture, forthwith be transferred, paid over and distributed to the Authority and the Borrower immediately preceding such satisfaction, as their respective interests may appear.

The Authority or the Borrower may at any time surrender to the Bond Trustee for cancellation by it any Bonds previously authenticated and delivered, which the Authority or the Members of the Obligated Group may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

If the Authority shall pay or provide for the payment of the entire indebtedness on any portion of the Bonds, in one or more of the following ways: (a) by paying or causing to be paid the principal of (including premium, if any) and interest on such portion of the Bonds, as and when the same shall become due and payable; (b) by depositing with the Bond Trustee, in trust, at or before maturity, moneys in an amount sufficient to pay or redeem (when redeemable) such portion of the Bonds (including the payment of premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Obligations, which are not prepayable or callable prior to the date the moneys therefrom are anticipated to be required, in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such portion of the Bonds at or before their respective maturity dates; it being understood that the investment income on such Government Obligations may be used for any other purpose under the Act; (c) by delivering to the Bond Trustee, for cancellation by it,

C-26 such portion of the Bonds; or (d) by depositing with the Bond Trustee, in trust, Government Obligations, which are not prepayable or callable prior to the date the moneys therefrom are anticipated to be required, in such amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, and any uninvested cash, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such portion of the Bonds at or before their respective maturity dates; provided that the Bond Trustee shall be permitted to rely upon an accountant’s verification report as conclusive evidence of the sufficiency of the amount of such deposit; and if the Authority shall also pay or cause to be paid all other sums payable under the Bond Indenture with respect to such portion of the Bonds, and, if such portion of the Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given in accordance with the Bond Indenture or provisions satisfactory to the Bond Trustee shall have been made for the giving of such notice, such Bonds shall cease to be entitled to any lien, benefit or security under the Bond Indenture. The liability of the Authority in respect of such Bonds, if any, shall continue but the holders thereof shall thereafter he entitled to payment (to the exclusion of all other Bondholders) only out of the moneys or Government Obligations deposited with the Bond Trustee as aforesaid.

Provision for payment of the Bonds may not be made as aforesaid nor may the Bond Indenture be discharged if under any circumstances such provision for payment would result in the loss of any exemption for purposes of federal income taxation to which interest on the Bonds would otherwise be entitled. As a condition precedent to the provision for payment of any Bonds, the Bond Trustee shall receive an Opinion of Bond Counsel, which opinion may be based upon a ruling or rulings of the Internal Revenue Service, to the effect that such provision for payment will not result in the loss of any exemption for purposes of federal income taxation to which the interest on the Bonds would otherwise be entitled.

Notwithstanding anything to the contrary in the Bond Indenture, upon the provision for payment of the Bonds or a portion thereof as specified in clauses (b) or (d) of the first and fourth paragraphs above, the optional redemption provisions of the Bond Indenture allowing such Bonds to be called prior to maturity upon proper notice (notwithstanding provision for the payment of such Bonds having been made through a date after the first optional redemption date provided for in the Bond Indenture) shall remain available to the Authority, upon direction of the Borrower, unless, in connection with making the deposits referred to in the Bond Indenture, the Authority, at the direction of the Borrower, shall have irrevocably elected to waive any future right to call the Bonds or portions thereof for redemption prior to maturity. Notwithstanding anything to the contrary in the Bond Indenture, upon the provision for payment of the Bonds or a portion thereof prior to the maturity thereof as specified in clauses (b) or (d) of the first and fourth paragraphs above, the Authority, upon direction of the Borrower, may elect to pay such Bonds on the respective maturity dates therefor unless, in connection with making the deposits referred to therein, the Authority, at the direction of the Borrower, shall have irrevocably elected to waive such right to provide for the payment thereof on the maturity date. No such redemption or restructuring shall occur, however, unless the Borrower shall deliver on behalf of the Authority to the Bond Trustee (a) Government Obligations and/or cash sufficient to discharge such Bonds (or portion thereof) on the redemption or maturity date or dates selected, (b) a report of an independent certified public accountant verifying that such Government Obligations, together with the expected earnings thereon, and/or cash will be sufficient to provide for the payment of such Bonds to the redemption or maturity dates, and (c) an Opinion of Bond Counsel to the effect that such earlier redemption or restructuring, will not result in the loss of any exemption for purposes of federal income taxation to which interest on the Bonds would

C-27 otherwise be entitled. The Bond Trustee shall give written notice of any such redemption or restructuring to the owners of the Bonds affected thereby.

ADDITIONAL BONDS

Additional Bonds (in addition to the Series 2016C Bonds) may be issued by the Authority on a parity with the Series 2016C Bonds for the following purposes: (a) to refund or advance refund any series of outstanding Bonds or portion thereof; (b) to obtain funds to loan to the Borrower in order to complete any “project” (as defined in the Act) financed or refinanced, in whole or in part, with the proceeds of any Bonds issued under the Bond Indenture, provided that such completion Additional Bonds may only be issued upon receipt by the Bond Trustee of (i) a statement of an Independent Architect or other expert acceptable to the Authority setting forth the amount estimated to be needed to complete such project and (ii) an Officer’s Certificate of the Borrower involved stating that the proceeds of such completion Additional Bonds, together with a reasonable estimate of investment income to be earned on the proceeds of such Additional Bonds and available for construction, and the amount of moneys, if any, committed to the project through enumerated bank loans (including letters of credit) or through federal or state grants, or other funds available to the Borrower, will be in an amount not less than the amount set forth in the statement of the Independent Architect; and (c) to obtain funds for any other purpose permitted under the Act.

The principal amount of such Additional Bonds may include an amount sufficient to pay the costs and expenses of issuance and the funding of a debt service reserve fund for the benefit of such Additional Bonds as well as such additional amounts as are permitted by the Act. Such Additional Bonds shall be issued on a parity with the Series 2016C Bonds (except that any series of Series 2016C Bonds or portion thereof may be advance refunded through the deposit in escrow for the benefit of such Series 2016C Bonds of cash and/or Government Obligations) notwithstanding the fact that no additional security (except for the required pledge of Additional Obligations issued under the Master Indenture) is made subject to the lien of the Bond Indenture; provided, however, that the Bond Trustee and the Authority are authorized to accept additional security upon the issuance of any Additional Bonds.

RELEASE AND SUBSTITUTION OF OBLIGATIONS UPON DELIVERY OF REPLACEMENT MASTER INDENTURE

The Bond Trustee will surrender the Series 2016C Obligation upon presentation to the Bond Trustee prior to such surrender of the following:

(A) a copy of an original executed counterpart of a master indenture (the “Replacement Master Indenture”) executed by or on behalf of a different credit group (collectively, the “New Group”) and an independent corporate trustee (the “Replacement Trustee”);

(B) an original replacement note or similar obligation issued by or on behalf of the New Group (the “Substitute Note”) under and pursuant to and secured by the Replacement Master Indenture, which Substitute Note has been duly authenticated by the Replacement Trustee;

C-28 (C) an opinion of Counsel addressed to the Bond Trustee to the effect that: (1) the Replacement Master Indenture has been duly authorized, executed and delivered by or on behalf of the New Group, the Substitute Note has been duly authorized, executed and delivered by or on behalf of the New Group and the Replacement Master Indenture and the Substitute Note are each a legal, valid and binding obligation of the New Group, subject in each case to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity and to customary qualifications with respect to the joint and several obligations of the members of the New Group to make payments of debt service on the Substitute Note; (2) all requirements and conditions to the issuance of the Substitute Note set forth in the Replacement Master Indenture have been complied with and satisfied; and (3) registration of the Substitute Note under the Securities Act of 1933, as amended, is not required or, if registration is required, the Substitute Notes have been so registered;

(D) an Opinion of Bond Counsel that the surrender of the existing Series 2016C Obligation and the delivery of the Substitute Note will not adversely affect the validity of any Series 2016C Bonds or any exemption for the purposes of federal income taxation to which interest on any Series 2016C Bonds would otherwise be entitled; and

(E) an Officer’s Certificate stating either:

(i) that, upon delivery of the Substitute Note, (a) each Rating Agency then maintaining a rating on any Series 2016C Bonds provides written confirmation to the effect that the long-term ratings assigned to the Series 2016C Bonds by each such Rating Agency will be no less than “A-” or its equivalent or will be a higher rating category or rating modifier than the then-current rating immediately prior to the delivery of the Substitute Note after giving effect to the delivery of the Substitute Note; (b) no “Event of Default” then exists; and (c) if such transaction had occurred as of the first day of the first full Fiscal Year preceding the delivery of the Substitute Note for which Financial Statements of the System are available, the Transaction Test would be satisfied as of the date of such transaction; or

(ii) that, upon delivery of the Substitute Note, (a) each Rating Agency then maintaining a rating on any Series 2016C Bonds provides written confirmation to the effect that the long-term ratings assigned to the Series 2016C Bonds after giving effect to the delivery of the Substitute Note will be no less than the then- current rating on the Series 2016C Bonds immediately prior to the delivery of the Substitute Note or the then-current rating will not be decreased or withdrawn; (b) if such transaction had occurred as of the first day of the first full Fiscal Year preceding the delivery of the Substitute Note for which Financial Statements of the System are available, the Transaction Test would be satisfied as of the date of such transaction; (c) the Replacement Master Indenture contains a pledge of gross revenues substantially similar to the pledge of Pledged Revenues established under the Master Indenture; and (iv) the Mortgages, or similar mortgages, are granted to the master trustee under the Replacement Master

C-29 Indenture to secure all obligations issued under the Replacement Master Indenture on a parity basis.

In connection with the delivery of a Replacement Master Indenture and the substitution of the outstanding Series 2016C Obligation with the Substitute Note, the provisions summarized under this caption will not permit, or be construed as permitting, (i) a change in the times, amounts or currency of payment of the principal of, premium, if any, and interest on any obligation or the Series 2016C Bonds, (ii) a reduction in the principal amount of any obligation or the Series 2016C Bonds (iii) a change in the redemption premiums or rates of interest on any obligation or the Series 2016C Bonds, or (iv) a preference or priority of any Obligation over any other Obligation, unless the Bond Trustee receives the prior written consent of the Holders of each Series 2016C Bond so affected.

In connection with the delivery of a Replacement Master Indenture and the substitution of the outstanding Series 2016C Obligation with the Substitute Note under the provisions summarized under (E)(i) above, the Bond Trustee, as the holder of the Series 2016C Obligation, shall execute a release of the Mortgages and the pledge of the Gross Revenues of the Obligated Group (each as defined in Appendix D to this Official Statement).

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT

The Loan Agreement contains various terms and conditions, certain of which are summarized below. Reference is made to the Loan Agreement for a full and complete statement of the Loan Agreement’s provisions.

LOAN OF SERIES 2016C BOND PROCEEDS

The Borrower will enter into the Loan Agreement with the Authority, pursuant to which the Authority will loan the proceeds from the sale of the Series 2016C Bonds to the Borrower. The Series 2016C Obligation will be delivered to the Authority to evidence such loan and the obligation of the Borrower to repay the same. The Series 2016C Obligation will be issued in a principal amount equal to the aggregate principal amount of the Series 2016C Bonds, and will provide for payment of principal, premium, if any, and interest thereon sufficient to permit the Authority to make payments of principal, premium, if any, and interest on the Series 2016C Bonds.

REPRESENTATIONS

The Borrower represents in the Loan Agreement that it is a not for profit corporation duly incorporated and validly existing under the laws of the State, is in good standing and duly authorized to conduct its business in the State, and is duly authorized and has full power under the laws of the State and all other applicable laws and its articles of incorporation and by-laws to create, issue, enter into, execute and deliver the Master Indenture, the Series 2016C Obligation, the Tax Exemption Agreement, the Use Agreement, the Purchase Contract, the Disclosure Agreement and this Loan Agreement (collectively, the “Borrower Agreements”) and to execute the Official Statement and all action on its part necessary for the valid creation and issuance of the Series 2016C Obligation and the valid execution and delivery of the other Borrower Agreements have been duly and effectively taken; and the Series 2016C Obligation in the

C-30 hands of the holder thereof will be the legal and valid obligation of the Borrower and each other Member of the Obligated Group, as applicable.

PAYMENTS IN RESPECT OF SERIES 2016C OBLIGATION AND UNDER THE LOAN AGREEMENT

Under the terms of the Loan Agreement, the Borrower covenants and agrees to pay the Bond Trustee such amounts at such times as shall provide for payment of interest, premium, if any, and principal, whether upon a regularly scheduled interest payment date, maturity, mandatory redemption or acceleration, on the Bonds outstanding under the Bond Indenture. The Loan Agreement also requires that the Borrower pay certain other charges which may be incurred for such items as the Bond Trustee’s fees, the Authority’s fees and expenses, and other reasonable fees and expenses incurred in connection with the issuance of the Series 2016C Bonds. All payments due on the Series 2016C Obligation and any other Additional Obligations pledged under the Bond Indenture and under the Loan Agreement, except for certain enumerated payments described in the Loan Agreement, shall be paid directly to the Bond Trustee and applied in the manner provided in the Bond Indenture.

ASSIGNMENT AND PLEDGE OF AUTHORITY’S RIGHTS; OBLIGATIONS OF BORROWER UNCONDITIONAL

As security for the payment of the Bonds, the Authority will assign and pledge to the Bond Trustee all right, title and interest of the Authority in and to the Loan Agreement, the Series 2016C Obligation and any Additional Obligations issued in connection with the issuance of Additional Bonds, including the right to receive payments under the Loan Agreement, the Series 2016C Obligation and any Additional Obligations (except its Unassigned Rights, including, without limitation, the right to receive payment of expenses, fees, indemnification and the rights to make determinations and receive notices as provided in the Loan Agreement), and directs the Borrower to make said payments directly to the Bond Trustee. The Borrower assents to such assignment and pledge and will make payments directly to the Bond Trustee without defense or set-off by reason of any dispute between the Borrower and the Authority or Bond Trustee, and agrees that its obligation to make payments under the Loan Agreement and to perform its other agreements contained in the Loan Agreement are absolute and unconditional. Until the principal of and interest on the Bonds shall have been fully paid or provision for the payment of the Bonds made in accordance with the Bond Indenture, the Borrower (a) will not suspend or discontinue any payments provided for in the Loan Agreement, (b) will perform all its other duties and responsibilities called for by the Loan Agreement, and (c) will not terminate the Loan Agreement for any cause including any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Bond Financed Property, commercial frustration of purpose, any change in the laws of the United States or of the State or any political subdivision of either or any failure of the Authority to perform any of its agreements, whether express or implied, or any duty, liability or obligation arising from or connected with the Loan Agreement.

INDEMNIFICATION OF THE AUTHORITY

The Borrower will pay, and will protect, indemnify and save the Authority and the Bond Trustee and their respective past, present and future members, officers, directors, employees, agents, successors, assigns and any other person, if any, who “controls” the Authority or the Bond Trustee, as the case may be, as that term is defined in Section 15 of the Securities Act of 1933, as amended (the Authority, the

C-31 Bond Trustee and the other listed persons, collectively referred to as the “Indemnified Persons”) harmless from and against any and all liabilities, losses, damages, taxes, penalties, costs and expenses (including attorneys’ fees and expenses of the Authority and the Bond Trustee), causes of action, suits, proceedings, claims, demands, tax reviews, investigations and judgments of whatsoever kind and nature (including, but not limited to, those arising or resulting from any injury to or death of any person or damage to property) arising from or in any manner directly or indirectly growing out of or connected with the following:

(i) the use, financing, non-use, condition or occupancy of the Bond Financed Property, any repairs, construction, alterations, renovation, relocation, remodeling and equipping thereof or thereto or the condition of any such Bond Financed Property including adjoining sidewalks, streets or alleys and any equipment or facilities at any time located on or connected with such Bond Financed Property or used in connection therewith but which are not the result of the gross negligence of the Authority or the Bond Trustee;

(ii) a violation of any agreement, warranty, covenant or condition of the Loan Agreement or any other agreement executed in connection with the Loan Agreement;

(iii) a violation of any contract, agreement or restriction by the Borrower relating to its Bond Financed Property;

(iv) a violation of any law, ordinance, rule, regulation or court order affecting the Bond Financed Property or the ownership, occupancy or use thereof or the Series 2016C Bonds or use of the proceeds thereof;

(v) a violation of any law, ordinance, rule, regulation or court order relating to the sale of the Series 2016C Bonds or the use of any official statement (or other disclosure document) related thereto;

(vi) any statement or information concerning the Borrower, or any Member of the Obligated Group, any of their officers and members, their operations and financial condition generally or the Bond Financed Property, contained in any official statement or supplement or amendment thereto furnished to the Authority or the purchaser of any Bonds, that is untrue or incorrect in any material respect, and any omission from such official statement or any statement of information which should be contained therein for the purpose for which the same is to be used or which is necessary to make the statements therein concerning the Borrower, or any Member of the Obligated Group, any of their officers and members, its operations and financial condition generally and the Bond Financed Property not misleading in any material respect, provided that such official statement or supplement or amendment has been approved by the Borrower and the Indemnified Persons; and

(viii) the acceptance or administration of the Bond Indenture, including without limitation the enforcement of any remedies under the Bond Indenture and related documents, provided that the Bond Trustee will not be entitled to any indemnity related to liabilities described in under this paragraph caused solely by the negligence or willful misconduct of the Bond Trustee.

C-32 In case any claim shall be made or any action shall be brought against one or more of the Indemnified Persons in respect of which indemnity can be sought against the Borrower pursuant to any of the preceding paragraphs under this caption, the Indemnified Party seeking indemnity shall promptly notify the Borrower, in writing, and the Borrower shall promptly assume the defense thereof, including the employment of counsel chosen by the Borrower and approved by the Authority or Bond Trustee or both (provided, that such approval by the Authority or Bond Trustee shall not be unreasonably withheld), the payment of all expenses and the right to negotiate and consent to settlement. If any Indemnified Person is advised in a written opinion of counsel that there may be legal defenses available to such Indemnified Person which are adverse to or in conflict with those available to the Borrower or that the defense of such Indemnified Person should be handled by separate counsel, the Borrower shall not have the right to assume the defense of such Indemnified Person, but the Borrower shall be responsible for the reasonable fees and expenses of counsel retained by such Indemnified Person in assuming its own defense, and provided also that, if the Borrower shall have failed to assume the defense of such action or to retain counsel reasonably satisfactory to the Authority or Bond Trustee within a reasonable time after notice of the commencement of such action, the reasonable fees and expenses of counsel retained by the Indemnified Person shall be paid by the Borrower. Notwithstanding the foregoing, any one or more of the Indemnified Persons shall have the right to employ separate counsel with respect to any such claim or in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Person unless the employment of such counsel has been specifically authorized by the Borrower or unless the provisions of the immediately preceding sentence are applicable. The Borrower shall not be liable for any settlement of any such action affected without the consent of the Borrower, but if settled with the consent of the Borrower or if there be a final judgment for the plaintiff in any such action with or without consent, the Borrower agrees to indemnify and hold harmless the Indemnified Person from and against any loss, liability or expense by reason of such settlement or judgment.

The Borrower shall also indemnify the Authority, Bond Trustee and such Indemnified Persons for all reasonable costs and expenses, including reasonable counsel fees, incurred in: (i) enforcing any obligation of the Borrower under the Loan Agreement or any related agreement, (ii) taking any action requested by the Borrower, (iii) taking any action required by the Loan Agreement or any related agreement, or (iv) taking any action considered necessary by the Authority and which is authorized by the Loan Agreement or any related agreement. If the Authority is to take any action under the Loan Agreement or any other instrument executed in connection with the Loan Agreement for the benefit of the Borrower, it will do so if and only if (i) the Authority is a necessary party to any such action or proceeding, and (ii) the Authority has received specific written direction from the Borrower, as required under the Loan Agreement or under any other instrument executed in connection therewith, as to the action to be taken by the Authority.

All amounts payable to the Authority under the provisions of the Loan Agreement summarized under this caption shall be deemed to be fees and expenses payable to the Authority for the purposes of the provisions of the Loan Agreement and of the Bond Indenture dealing with assignment of the Authority’s rights under the Loan Agreement. The Authority and its members, officers, agents, employees and their successors and assigns shall not be liable to the Borrower for any reason.

Any provision of the Loan Agreement or any other instrument or document executed and delivered in connection therewith to the contrary notwithstanding, the Authority retains the right to

C-33 (i) enforce any applicable Federal or State law or regulation or resolution of the Authority, and (ii) enforce any rights accorded to the Authority by Federal or State law or regulation of the Authority, and nothing in the Loan Agreement shall be construed as an express or implied waiver thereof.

The indemnifications set forth in the Loan Agreement shall survive the termination of the Bond Indenture and/or the resignation or removal of the Bond Trustee.

MAINTENANCE OF CORPORATE EXISTENCE AND STATUS

Unless the Borrower complies with the following provisions of the Loan Agreement summarized under this caption, the Borrower agrees that as long as any Bonds are outstanding it will maintain its existence, will not dissolve, liquidate or otherwise dispose of all or substantially all of its assets, and will not consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it. Any dissolution, liquidation, disposition, consolidation or merger shall be subject to the following conditions:

(a) no event of default exists under the Loan Agreement or under the Bond Indenture, and that no event of default will be caused by the dissolution, liquidation, disposition, consolidation or merger;

(b) the entity surviving the dissolution, liquidation, disposition, consolidation or merger assumes (or if the surviving entity is the Borrower, affirms) in writing and without condition or qualification the obligations of the Borrower under the Borrower Agreements;

(c) neither the validity nor enforceability of the Bonds, the Bond Indenture or any Borrower Agreements is adversely affected by the dissolution, liquidation, disposition, consolidation or merger;

(d) the dissolution, liquidation, disposition, consolidation or merger will not adversely affect any exemption from federal income taxation to which interest on the Series 2016C Bonds and any Additional Bonds would otherwise be entitled, and the provisions of the Act, Bond Indenture and Borrower Agreements are complied with concerning the dissolution, liquidation, disposition, consolidation or merger;

(e) the Bond Financed Property continues to be as described in the Loan Agreement;

(f) any successor to the Borrower shall be qualified to do business in the State and shall continue to be qualified to do business in the State throughout the term of the Loan Agreement; and

(g) the Authority has executed a certificate acknowledging receipt of all documents, information and materials required by the provisions of the Loan Agreement summarized under this caption.

As of the effective date of the dissolution, liquidation, disposition, consolidation or merger, the Borrower (at its cost) shall furnish to the Authority and the Bond Trustee (i) an opinion of Bond Counsel,

C-34 in form and substance satisfactory to such parties, as to item (d) above, (ii) an opinion of Independent Counsel (of high reputation and expertise as determined by the Authority), in form and substance satisfactory to such parties, as to the legal, valid and binding nature of the instrument of dissolution, liquidation, disposition, consolidation or merger, (iii) a certificate of the Borrower, in form and substance satisfactory to the Authority as to items (a), (c), (e) and (f) above, and (iv) a true and complete copy of the instrument of dissolution, liquidation, disposition, consolidation or merger.

The Borrower further agrees that it will not act or fail to act in any other manner which would adversely affect any exemption from federal income taxation of the interest earned by the owners of the Bonds to which such Bonds would otherwise be entitled.

ACCREDITATION AND LICENSURE

The Borrower warrants that its and the Users’ acute care hospitals (if applicable) are each now accredited by The Joint Commission, and the Borrower warrants that its and the Users’ health care Facilities have all material state and local licenses required for the operation thereof. The Borrower will obtain and maintain, or cause to be obtained and maintained, all such material licenses required for its and the Users’ operations and the operation of their health care Facilities. The Borrower will use its best efforts to cause the Users to establish and maintain their Facilities’ status as a provider of health care services, eligible for reimbursement under Medicare and equivalent insurance programs, and Medicaid and other similar contractual programs, including future federal and state programs, so long as it is in the best interest of the Obligated Group and the Users, as determined by the Board of Directors of the Borrower.

FINANCIAL STATEMENTS

The Borrower will and will cause each Obligated Group Member to keep proper books of records and accounts in which full, true and correct entries will be made of all dealings or transactions of, or in relation to, its business and affairs in accordance with principles of accounting generally accepted in the United States of America consistently applied (except to the extent otherwise permitted pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – FINANCIAL STATEMENTS, ETC.” in Appendix D to this Official Statement); provided, however, that the method of recording entries in the books of records and accounts may be changed to reflect any changes in accounting principles generally accepted in the United States of America so long as any such change is reflected in the notes accompanying its financial statements for the year in which such change is made, and will furnish the materials and notices required to be delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES – SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – FINANCIAL STATEMENTS, ETC.” in Appendix D to this Official Statement to the Authority and the Bond Trustee. The Bond Trustee shall have no duty to review or analyze such financial statements and shall hold such financial statements solely as a repository for the benefit of the Bondholders. The Bond Trustee shall not be deemed to have notice of any information contained therein or event of default which may be disclosed therein in any manner.

C-35 DISCHARGE OF ORDERS

The Borrower covenants to cause any order, writ or warrant of attachment, garnishment, execution, replevin or similar process filed against any part of the funds or accounts held by the Bond Trustee under the Bond Indenture to be discharged, vacated, bonded or stayed within 90 days after such filing (which 90-day period shall be extended for so long as the Borrower is contesting such process in good faith), but, notwithstanding the foregoing, in any event not later than five days prior to any proposed execution or enforcement with respect to such filing or any transfer of moneys or investments pursuant to such filing.

CONTINUING DISCLOSURE

So long as the Series 2016C Bonds are Outstanding, the Borrower covenants and agrees that it will comply with and carry out on a timely basis all of the obligations set forth in the Continuing Disclosure Agreement (as the same may be amended from time to time in accordance with its terms). Failure by the Borrower to comply with its obligations as described in the preceding sentence shall not be considered an event of default hereunder; however any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Borrower to comply with its obligations described in the Loan Agreement.

USE OF THE FACILITIES

The Borrower will use, and cause each of the Users to use, its health care facilities primarily as and for health care facilities and related activities and only in furtherance of the lawful corporate purposes of the Borrower and the Users; will use, and cause all of the Users to use, the facilities and the Bond Financed Property as “health facilities” within the meaning of the Act; and agrees to operate, and cause each of the Users to operate, all its Property on a nondiscriminatory basis.

The Borrower agrees that it will not permit, and will cause each of the Users to not permit, any of the Bond Financed Property to be used (i) by any Person in an “unrelated trade or business” (as defined in Section 513(a) of the Code) of the Borrower or the Users (without regard to whether such activity results in unrelated trade or business income subject to taxation under Section 512(a) of the Code), or (ii) by any Person who is not a Tax-Exempt Organization, in either case in such manner or to such extent as would result in the loss of tax exemption of interest on the Series 2016C Bonds or any other such tax-exempt Additional Bonds otherwise afforded under Section 103(a) of the Code.

The Borrower further agrees that it will not use or permit, and will cause each of the Users to not use or permit, to be used any of the Bond Financed Property: (i) primarily for sectarian instruction or study or as a place of devotional activities or religious worship or as a facility used primarily in connection with any part of the program of a school or department of divinity for any religious denomination or the training of ministers, priests, nuns, rabbis or other similar persons in the field of religion, or (ii) in a manner which is prohibited by the Establishment of Religion Clause of the First Amendment to the Constitution of the United States of America and the decisions of the United States Supreme Court interpreting the same or by any comparable provisions of the Constitution of the State and decisions of the Supreme Court of the State interpreting the same.

C-36 The Borrower agrees that the Authority, the Bond Trustee, and their duly authorized agents shall have the right, but shall be under no duty or obligation to exercise this right, during regular business hours, with reasonable notice, to enter upon the premises and examine and inspect the Bond Financed Property to determine compliance with the two preceding paragraphs, subject to such limitations, restrictions and requirements as the Borrower may reasonably prescribe. The provisions of this paragraph and the immediately preceding paragraph shall remain in full force and effect notwithstanding the payment of the Bonds and all amounts due and owing under the Loan Agreement and under the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture and the termination of the Bond Indenture and the Loan Agreement.

The covenants and agreements summarized under this caption need not be observed or may be changed if the Bond Trustee and the Borrower receive an Opinion of Bond Counsel to the effect that such nonobservance or change will not adversely affect the exclusion from gross income of interest on the Series 2016C Bonds or any Additional Bonds for federal income tax purposes or the validity of the Series 2016C Bonds or any Additional Bonds.

RATES AND CHARGES

The Borrower covenants and agrees to charge such fees and rates for its facilities and services and to exercise such skill and diligence and to cause the other Obligated Group Members, if any, to transfer such funds to the Borrower, so as to provide income from its Property together with other available funds sufficient to pay promptly all expenses of operation, maintenance and repair of its Property, all amounts owing on the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture and all other payments required to be made by the Borrower under the Loan Agreement. The Borrower further covenants and agrees that it will, from time to time as often as necessary, to the extent permitted by law, revise its rates, fees and charges and cause the other Obligated Group Members to operate their facilities and to revise their rates, fees and charges in such manner or take such other action as may be necessary or proper to comply with the provisions summarized under this caption. This caption shall not be construed to prohibit the Borrower or the other Obligated Group Members from serving indigent patients to the extent required for the Borrower or any such Obligated Group Member to continue its qualification as a Tax-Exempt Organization or from serving indigent patients or any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the Borrower from satisfying the other requirements of this caption.

TRANSFER OF BOND FINANCED PROPERTY

The Borrower covenants and agrees that it will not sell, lease or otherwise dispose of, and will cause each of the Users to not sell, lease or otherwise dispose of, directly or indirectly, in whole or in part, any of the Bond Financed Property unless the conditions set forth in the Tax Exemption Agreement are satisfied.

INVESTMENT OF FUNDS; ARBITRAGE; TAX EXEMPTION AGREEMENT

The Borrower covenants and agrees that moneys on deposit in any Fund under the Bond Indenture shall at all times be invested by the Bond Trustee upon oral direction promptly followed by a

C-37 Written Request of the Borrower in Qualified Investments in accordance with the provisions of the Bond Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – INVESTMENT OF FUNDS” above, and that the Borrower will take all actions necessary, including without limitation providing the Bond Trustee with all necessary directions, to assure that such moneys are continuously invested in accordance with the provisions of the Bond Indenture, the Tax Exemption Agreement and the Use Agreement. The Borrower acknowledges in the Loan Agreement that if it fails to give the Bond Trustee such oral direction or fails to file such Written Request with the Bond Trustee, the Bond Trustee will invest moneys in such Funds in the Wells Fargo Government Money Market Fund or any successor money market fund. The Borrower covenants and agrees that if, at any time, any investment in any Fund under the Bond Indenture is downgraded below the rating level required at the time of the purchase thereof to be considered a Qualified Investment under the terms of the Bond Indenture, the Borrower will replace such investment with another Qualified Investment within 30 days of knowledge or notice of such downgrade. The Borrower further covenants and agrees that it will not take or permit to be taken any action or fail to take any action, including without limitation any action with respect to the investment of the proceeds of any Series 2016C Bonds or Additional Bonds (whether or not held under the Bond Indenture), with respect to any other moneys or securities deposited with the Bond Trustee pursuant to the Bond Indenture, with respect to the payments derived from the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture or from the Master Indenture or the Loan Agreement, with respect to the purchase of other Authority obligations, with respect to any actions or payments required under the Tax Exemption Agreement, or with respect to any other moneys or properties, regardless of the source or where held, which may, notwithstanding compliance with the other provisions of the Bond Indenture, the Loan Agreement, the Tax Exemption Agreement and the Use Agreement, result in constituting any of the Series 2016C Bonds or any Additional Bonds as “arbitrage bonds” within the meaning of such term as used in Section 148 of the Code. The Borrower covenants that neither it nor any related person, as defined in Sections 144(a)(3) and 147(a) of the Code, shall, pursuant to an arrangement, formal or informal, purchase obligations of the Authority in an amount related to the amount of the Series 2016C Obligation or any Additional Obligations pledged under the Bond Indenture or delivered in connection with the transaction contemplated thereby.

AMENDMENTS TO THE LOAN AGREEMENT

The Authority and the Borrower may, with the prior written consent of the Bond Trustee, amend or modify the Loan Agreement, or any provision thereof, or may consent to the amendment or modification thereof, in any manner not inconsistent with the terms and provisions of the Bond Indenture, for any one or more of the following purposes: (a) to cure any ambiguity or formal defect in the Loan Agreement; (b) to grant to or confer upon the Authority or Bond Trustee, for the benefit of the Bondholders, any additional rights, remedies, powers or authorities that lawfully may be granted to or conferred upon the Authority or the Bond Trustee; (c) to amend or modify the Loan Agreement, or any part thereof, in any manner specifically required or permitted by the terms thereof, including, without limitation, as may be necessary to maintain the exclusion from gross income for purposes of federal income taxation of the interest on any of the Bonds; (d) to provide that the Bonds may be secured by a credit facility or other additional security not otherwise provided for in the Bond Indenture or the Loan Agreement; (e) to modify, amend or supplement the Loan Agreement, or any part thereof, or any supplement thereof, in such manner as the Bond Trustee and the Borrower deem necessary in order to comply with any statute, regulation, judicial decision or other law relating to secondary market disclosure

C-38 requirements with respect to tax-exempt obligations of the type that includes the Bonds; (f) to provide for the appointment of a successor securities depository; (g) to provide for the availability of certificated Bonds; (h) to provide for changes in the components of the Project, to the extent permitted by the Bond Indenture and the Loan Agreement; and (i) to make any other change which does not, in the opinion of the Bond Trustee, have a material adverse effect upon the interests of the Bondholders. In addition, subject to the terms and provisions summarized in the third paragraph under this caption, the Bond Trustee may grant such waivers of compliance by the Borrower with the provisions of the Loan Agreement as to which the Bond Trustee may deem necessary or desirable to effectuate the purposes of the intent of the Loan Agreement and which, in the opinion of the Bond Trustee, do not have a material adverse effect upon the interests of the Bondholders, provided that the Bond Trustee shall file with the Authority any and all such waivers granted by the Bond Trustee within three (3) Business Days thereof.

Except for the amendments, changes or modifications summarized in the preceding paragraph, neither the Authority, the Borrower nor the Bond Trustee shall consent to any other amendment, change or modification of the Loan Agreement without the written approval or consent, given and procured as summarized in this paragraph, of the holders of not less than a majority in aggregate principal amount of the Bonds which are outstanding under the Bond Indenture at the time of execution of any such amendment, change or modification; provided that if such amendment, change or modification will, by its terms, not take effect so long as any Bonds remain outstanding, the consent of the holders of such Bonds shall not be required; provided, however, that nothing in this paragraph shall permit, or be construed as permitting, any amendment, change or modification of the Loan Agreement that may result in any amendment, change or modification described in the lettered clauses of the third paragraph under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – SUPPLEMENTAL BOND INDENTURES” without the consent of each Bondholder affected. If at any time the Authority and the Borrower shall request the consent of the Bond Trustee to any such proposed amendment, change or modification of the Loan Agreement, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided by the provisions of the Bond Indenture summarized in the third paragraph under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – SUPPLEMENTAL BOND INDENTURES” with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the designated corporate trust office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to give such notice, and any such failure shall not affect the validity of such amendment, change or modification when consented to and approved as provided in the provisions of the Bond Indenture summarized under this caption. If the holders of the requisite principal amount of Bonds which are outstanding under the Bond Indenture at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as provided in the Bond Indenture, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof.

Under no circumstances shall any amendment to the Loan Agreement alter any Obligation pledged under the Bond Indenture or the payments of principal, premium, if any, and interest thereon, in a

C-39 manner materially adverse to the holder of any Bond without the consent of the holders of all the Bonds outstanding.

DEFAULTS AND REMEDIES

The occurrence and continuance of any of the following events shall constitute an “event of default” under the Loan Agreement:

(a) failure of the Borrower to pay when due any installment of interest, principal or any premium on the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture as described in the Loan Agreement; or failure by the Borrower to make any other payment required by the Loan Agreement for the payment of the Series 2016C Bonds when the same shall become due and payable, whether upon a scheduled Interest Payment Date, at maturity, upon any date fixed for prepayment, by acceleration or otherwise; or

(b) failure of the Borrower to comply with or perform any of the covenants, conditions, or provisions of the Loan Agreement (other than those specifically identified in clauses (a), (h) or (i) under this caption) or of the Tax Exemption Agreement and to remedy such default within 60 days after written notice thereof from the Authority or the Bond Trustee to the Borrower; provided that, if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Borrower to remedy such default within such 60-day period shall not constitute a default under the Loan Agreement if the Borrower shall as soon as reasonably practicable upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or

(c) if any representation or warranty made by the Borrower in the Loan Agreement or in any statement or certificate furnished to the Authority or the Bond Trustee or the purchaser of any Bonds in connection with the sale of the Bonds or furnished by the Borrower pursuant to the Loan Agreement proves untrue in any material respect as of the date of the making thereof and shall not be made good within 60 days after written notice thereof by the Authority to the Borrower; provided that, if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Borrower to remedy such default within such 60-day period shall not constitute a default under the Loan Agreement if the Borrower shall as soon as reasonably practicable upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or

(d) any event of default shall occur under the Master Indenture which would permit the acceleration of any Obligation; or

(e) if the Borrower admits in writing its insolvency or bankruptcy or its inability to pay its debts as they mature, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the Borrower, or for the whole, or a substantial part, of its Property; or

C-40 (f) if a trustee, custodian or receiver is appointed for the Borrower or for the whole, or a substantial part, of its Property and is not discharged within 60 days after such appointment; or

(g) if bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors are instituted by or against the Borrower (other than bankruptcy proceedings instituted by the Borrower against third parties), and if instituted against the Borrower are allowed against the Borrower or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or

(h) failure by the Borrower to comply with or perform its covenant summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT – DISCHARGE OF ORDERS” above; or

(i) if payment of any installment of interest or principal, or any premium, on any Bond shall not be made when the same shall become due and payable under the provisions of the Bond Indenture.

The Borrower will give Immediate Notice to the Authority and the Bond Trustee of any Event of Default summarized in (d)-(i) above.

Upon the occurrence and during the continuance of any Event of Default under the Loan Agreement, the Authority shall have the following rights and remedies, in addition to any other remedies in the Loan Agreement or by law provided:

I. Acceleration of Maturity; Waiver of Event of Default and Rescission of Acceleration. The Authority or the Bond Trustee may, by written notice to the Master Trustee, request that it declare the principal of the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture (if not then due and payable) to be due and payable immediately, subject to the provisions of the Master Indenture regarding waiver of events of default, anything in the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture or in the Loan Agreement contained to the contrary notwithstanding.

II. Right to Bring Suit, Etc. The Authority or the Bond Trustee, with or without entry, personally or by attorney, may in its discretion, proceed to protect and enforce its rights by pursuing any available remedy including a suit or suits in equity or at law, whether for damages or for the specific performance of any obligation, covenant or agreement contained in the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture, the Master Indenture or in the Loan Agreement or in aid of the execution of any power granted in the Loan Agreement, or for the enforcement of any other appropriate legal or equitable remedy, as the Authority or the Bond Trustee shall deem most effectual to collect the payments then due and thereafter to become due on the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture, to enforce performance and observance of any obligation, agreement or covenant of the Borrower under the Loan Agreement or under the Series 2016C Obligation and

C-41 any Additional Obligations pledged under the Bond Indenture or the Master Indenture or to protect and enforce any of the Authority’s rights or duties under the Loan Agreement.

EXCHANGE OF BONDS

In the event the Act or the Authority created thereunder is determined to be unconstitutional under the laws of the State or under the laws of the United States of America, and as a result thereof, the Bonds issued by the Authority are declared to be invalid and unenforceable, and if as a result thereof the obligation of the Borrower to make payments on the Series 2016C Obligation and any Additional Obligations pledged under the Bond Indenture is determined to be unenforceable, then the Borrower agrees that it will issue its own bonds (the interest on which may not be exempt from federal income tax) in exchange for an amount of Bonds equal to the then outstanding Bonds, principal amount for principal amount, having the same rates of interest, maturities, redemption provisions and prepayment provisions as are then applicable to the Bonds being exchanged. The bonds to be issued by the Borrower will be issued under an indenture having substantially the same terms and provisions as the Bond Indenture, the Loan Agreement and the Master Indenture and such bonds of the Borrower will be issued thereunder in exchange for an amount of Bonds equal to the Bonds surrendered by the registered owners thereof. Notice of any such exchange shall be given as provided for redemption of the Bonds under the Bond Indenture and the expenses of such exchange, including the printing of the bonds and other reasonable expenses in connection therewith, shall be borne by the Borrower.

C-42 APPENDIX D

SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE AND THE MORTGAGES

Brief descriptions of the Master Indenture and the Mortgages are included hereafter in this Appendix D to the Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Master Indenture and the Mortgages are qualified in their entirety by reference to each such document, copies of which are available for review prior to the issuance and delivery of the Series 2016C Bonds at the office of the Authority and thereafter at the office of the Bond Trustee.

DEFINITIONS OF CERTAIN TERMS

The following are definitions of certain terms used in the Master Indenture and the Mortgages.

“Additional Indebtedness” means Indebtedness incurred by any Obligated Group Member other than the Series 2016 Obligations.

“Affiliate” means a corporation, partnership, joint venture, association, business trust or similar entity organized under the laws of the United States of America or a state thereof, directly controlled by or under common control with an Obligated Group Member or any other System Affiliate. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of at least a majority of its voting securities, or the right to designate or elect at least a majority of the members of its board of directors by contract or otherwise.

“Annual Debt Service Coverage Ratio” means, for any Fiscal Year, the ratio determined by dividing Income Available for Debt Service for that period by the Debt Service Requirement for such Fiscal Year.

“Balloon Indebtedness” means Long-Term Indebtedness, 20% or more of the original principal of which (calculated as of the date of issuance) matures during any consecutive twelve-month period, if such maturing principal amount is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such twelve-month period. Balloon Indebtedness does not include Indebtedness which otherwise would be classified under the Master Indenture as Put Indebtedness.

“Book Value,” when used with respect to Property, means the value of such Property, net of accumulated depreciation and amortization, as reflected in the most recent Financial Statements of the System, provided that such aggregate shall be calculated in such a manner that no portion of the value of any Property of any System Affiliate is included more than once.

“Capitalized Lease” means any lease of real or personal property which, in accordance with GAAP, is required to be capitalized on the balance sheet of the lessee.

D-1 funds and pension and retirement funds, all as set forth in the most recent Financial Statements of the System delivered under the Master Indenture.

“Code” means the Internal Revenue Code of 1986, as amended from time to time. Each reference to a section of the Code in the Master Indenture shall be deemed to include the United States Treasury Regulations, including temporary and proposed regulations, relating to such section which are applicable to a series of Related Bonds or the use of the proceeds thereof.

“Commitment” means a binding commitment, which may include without limitation a letter or line of credit, purchase agreement or insurance commitment which is subject only to commercially reasonable contingencies, by a financial institution generally regarded as responsible, which commitment and institution are not objected to by the Master Trustee, to provide financing sufficient to pay or provide for Balloon Indebtedness or Short-Term Indebtedness at its maturity or upon tender thereof.

“Commitment Indebtedness” means the obligation of any Credit Group Member to repay amounts disbursed pursuant to a commitment from a financial institution, insurer, surety or similar entity to pay, refinance or purchase when due, when tendered or when required to be purchased or tendered, or to advance funds for any such purpose (a) other Indebtedness or other obligation of such Credit Group Member, or (b) Indebtedness or other obligation of a Person who is not a Credit Group Member, which Indebtedness is guaranteed by a Guaranty of such Credit Group Member or secured by or payable from amounts paid on Indebtedness of such Credit Group Member, in either case which Indebtedness or Guaranty of such Credit Group Member was incurred in accordance with the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – PERMITTED ADDITIONAL INDEBTEDNESS,” and the obligation of any Credit Group Member to pay interest payable on amounts disbursed for such purposes, plus any fees, costs or expenses payable to such financial institution, insurer, surety or similar entity for, under or in connection with such commitment, in the event of disbursement pursuant to such commitment or in connection with enforcement thereof, including without limitation any penalties payable in the event of such enforcement and any indemnification or contribution obligation related thereto.

“Completion Long-Term Indebtedness” means any Long-Term Indebtedness for borrowed money: (a) incurred for the purpose of financing the completion of the acquisition, construction, remodeling, renovation or equipping of Facilities with respect to which Long-Term Indebtedness for borrowed money has been incurred in accordance with the provisions of the Master Indenture; and (b) with a principal amount not in excess of the amount required to provide completed and equipped Facilities of substantially the same type and scope contemplated at the time such prior Long-Term Indebtedness was originally incurred, to provide for funded interest during the period of construction, to provide any reserve fund relating to such Completion Long-Term Indebtedness and to pay the costs and expenses of issuing such Completion Long-Term Indebtedness.

“Consultant” means a professional consulting, financial advisory, accounting, investment banking or commercial banking firm selected by the Obligated Group Agent and not unacceptable to the Master Trustee, having the skill and experience necessary to render the particular report required and having a favorable reputation for such skill and experience, which firm does not control any Credit Group Member, is not controlled by or under common control with any Credit Group Member and has no interest, direct or indirect, in any Credit Group Member.

D-2 “Corporation” means Presence Health Network (doing business as Presence Health), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Counsel” means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent or in-house legal counsel for any Credit Group Member, the Master Trustee or a Related Bond Trustee.

“Credit Group” means, collectively, all the Credit Group Members.

“Credit Group Member” means (a) each Obligated Group Member, (b) each Designated Affiliate, (c) each Unlimited Credit Group Participant, or (d) each Limited Credit Group Participant.

“Days Cash on Hand” means the amount determined by dividing (1) Cash and Liquid Investments of the System Affiliates as of a particular date (the “Measurement Date”) by (2) the quotient obtained by dividing (a) operating expenses less depreciation and amortization of the System Affiliates for the most recent Fiscal Year for which Financial Statements of the System have been delivered under the Master Indenture by (b) the number of days in such Fiscal Year.

“Debt Service Requirement” means, with respect to the period of time for which calculated, the aggregate of the payments required to be made during such period in respect of principal (whether at maturity, as a result of mandatory sinking fund redemption, mandatory prepayment or otherwise) and interest on outstanding Long-Term Indebtedness of the System Affiliates with respect to which calculated; provided that: (a) interest shall be excluded from the determination of the Debt Service Requirement to the extent that an Irrevocable Deposit is applied or available to pay such interest; (b) principal of Long-Term Indebtedness shall be excluded from the determination of Debt Service Requirement to the extent that an Irrevocable Deposit is applied or available to pay such principal; and (c) when calculating the Debt Service Requirement under a Guaranty, a guarantor shall be considered liable only for 20% of the annual debt service requirement on the Long-Term Indebtedness guaranteed; provided, however, if the guarantor has been required by reason of its guaranty to make a payment in respect of such Long-Term Indebtedness within the immediately preceding 24 months, the guarantor shall be considered liable for 100% of the annual debt service requirement on the debt guaranteed.

“Designated Affiliate” means a Person designated by the Obligated Group Agent as such in accordance with the Master Indenture, and over which any Obligated Group Member maintains control, directly or indirectly, including the power to direct or approve the management, policies, disposition of assets and actions of such Designated Affiliate to the extent required to cause such Designated Affiliate to comply with the terms and conditions of the Master Indenture applicable to the Designated Affiliate, whether through the ownership of such Person’s voting securities, partnership interests, membership, reserved powers, the power to appoint, directly or through other controlled Persons, such Person’s members, trustees or directors or otherwise. As of the effective date of the Master Indenture, there are no Designated Affiliates.

“Environmental Law” means any and all local, state, federal, international, governmental, public or private laws, statutes, ordinances, regulations, orders, consent decrees, settlement agreements, injunctions, judgments, permits, licenses, codes, covenants, deed restrictions, common laws, treaties, and reported state or federal court decisions thereunder, related to environmental protection, health and safety

D-3 of persons, natural resource damages, conservation, wildlife, waste management, the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport or any other activity related to a Hazardous Material, or any other environmental matter, including but not limited to any of the following statutes: (a) Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, and Solid Hazardous Waste Amendments of 1984, 42 U.S.C. Sections 6901-9661K; (b) Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601-9675; (c) Clean Air Act of 1966, as amended, 42 U.S.C. Sections 7401-7642; (d) Hazardous Materials Transportation Control Act of 1970, as amended, 49 U.S.C. Sections 1801-1812; (e) Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251-1387; (f) Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Section 136-136y; (g) Toxic Substances Control Act, as amended, 15 U.S.C. Sections 2601-2671; (h) Safe Drinking Water Act, 42 U.S.C. Sections 300f-300j 26; (i) Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. 651; (j) Emergency Planning & Community Right To Know Act of 1986, 42 U.S.C. §§11001-11050; (k) National Environmental Policy Act of 1978, 42 U.S.C. Section 300(f) et seq.; (1) any similar or implementing state or local laws, statutes, ordinances; and (m) all amendments, rules, regulations, guidance documents and publications promulgated under any and all of the above.

“Escrow Obligations” means, (i) with respect to any Obligation which secures a series of Related Bonds, the obligations permitted to be used to defease such series of Related Bonds under the Related Bond Indenture, or (ii) with respect to any other Obligation, those securities identified as such in the Supplemental Master Indenture pursuant to which such Obligation was issued.

“Facilities” means all land, leasehold interests and buildings and all fixtures and equipment (as defined in the Uniform Commercial Code or equivalent statute in effect in the state where such fixtures or equipment are located) of a Person.

“Financial Statements of the System” means the audited financial statements of the Corporation and all System Affiliates most recently delivered pursuant to the requirements of the Master Indenture and, to the extent specifically referenced, the most recently available unaudited financial statements of the Corporation and all System Affiliates.

“Fiscal Year” means any twelve-month period beginning on January 1 of any calendar year and ending on December 31 of the same calendar year or such other consecutive 12-month period selected by the Obligated Group Agent as the fiscal year for the System.

“GAAP” means accounting principles generally accepted in the United States of America, consistently applied.

“Governing Body” means the board of directors, board of trustees or similar group in which the right to exercise the powers of corporate directors or trustees is vested or an executive committee of such board or any duly authorized committee of that board to which the relevant powers of that board have been lawfully delegated.

“Government Obligations” means: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America or any agency thereof; (2) obligations,

D-4 debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Bank System, Export-Import Bank of the United States, Federal Financing Bank, Federal Land Banks, Government National Mortgage Association, Farmers Home Administration, Small Business Administration, Federal Home Loan Mortgage Corporation or Federal Housing Administration or any other comparable federal agency hereafter created; (3) certificates which evidence ownership of the right to the payment of the principal of and/or interest on obligations described in clauses (1) and (2), provided that such obligations are held in the custody of a bank or trust company in a special account separate from the general assets of such custodian; and (4) obligations the interest on which is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, and the timely payment of the principal of and interest on which is fully provided for by the deposit in trust or escrow of cash or obligations described in clauses (1), (2) or (3).

“Guaranty” means all obligations of an Obligated Group Member guaranteeing in any manner whatever, whether directly or indirectly, any obligation of any other Person (other than another Obligated Group Member), which obligation of such other Person would constitute Indebtedness if such obligation were the obligation of the Obligated Group Member.

“Hazardous Materials” means any hazardous or toxic chemical, element, material, waste, byproduct, pollutant, contaminant, compound, product or substance or other similar term including any material that is regulated by any Environmental Law or that hereafter becomes regulated by any Environmental Law, including, without limitation, asbestos, urea formaldehyde foam insulation, petroleum and its derivatives, by products and other hydrocarbons, radioactive materials, radon gas and polychlorinated byphenyls (PCBs).

“Historical Pro Forma Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Income Available for Debt Service for that period by the Maximum Annual Debt Service Requirement for the Long-Term Indebtedness then outstanding (other than any Long-Term Indebtedness being refunded with the Long-Term Indebtedness then proposed to be issued) and the Long- Term Indebtedness then proposed to be issued.

“Income Available for Debt Service” means, unless the context provides otherwise, with respect to the System Affiliates as to any period of time, their combined excess of revenues over expenses (excluding all income from Irrevocable Deposits), before depreciation, amortization, and interest expense on Long-Term Indebtedness, as determined in accordance with GAAP; provided, that no determination thereof shall take into account:

(a) any gain or loss resulting from either the early extinguishment or refinancing of Indebtedness or the sale, exchange or other disposition of capital assets not made in the ordinary course of business;

(b) gifts, grants, bequests, donations or contributions, and income therefrom, to the extent specifically permanently restricted by the donor or by law 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;

D-5 (c) any gain or loss resulting from pension terminations, settlements, curtailments or minimum pension liabilities or changes in pension and post-retirement benefits other than net periodic pension costs included in accrued pension liabilities;

(d) any unusual charges for employee severance;

(e) the net proceeds of casualty insurance (other than business interruption insurance) and condemnation awards;

(f) any gain or loss resulting from any discontinued operations;

(g) asset impairment charges;

(h) adjustments to the value of assets or liabilities resulting from changes in GAAP;

(i) extraordinary non-cash items;

(j) unrealized gains or losses resulting from changes in valuation of any Interest Rate Agreement;

(k) unrealized gains or losses that do not result in the receipt or expenditure of cash; and

(l) other nonrecurring items which do not involve the receipt, expenditure or transfer of assets.

“Indebtedness” means all obligations (a) for repayment of borrowed money, (b) under installment sales agreements and Capitalized Leases incurred or assumed by a Credit Group Member (other than Indebtedness of one Credit Group Member to another Credit Group Member, any Guaranty by any Credit Group Member of Indebtedness of any other Credit Group Member or the joint and several liability of any Obligated Group Member on Indebtedness issued by another Obligated Group Member), including Guaranties, Long-Term Indebtedness, Short-Term Indebtedness or any other obligation for payments of principal and interest with respect to money borrowed, 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. Interest Rate Agreements, trade payables, operating lease obligations, accrued expenses in the normal course of business, physician income guaranties, any obligation to repay moneys deposited by patients or others with a Credit Group Member as security for or as prepayment of the cost of patient care or any rights of residents of life care, elderly housing or similar facilities to endowment or similar funds deposited by or on behalf of such residents, and contingent liabilities not reflected on financial statements in accordance with GAAP, shall not constitute Indebtedness.

“Independent Architect” means an architect, engineer or firm of architects or engineers selected by the Obligated Group Agent , not reasonably objected to by the Master Trustee and licensed by, or permitted to practice in, the state where the construction involved is located, which architect, engineer or firm of architects or engineers is independent and shall have no interest, direct or indirect, in any Credit

D-6 Group Member; it being understood that an arm’s-length contract with any Credit Group Member for the performance of architectural or engineering services shall not in and of itself be regarded as creating an interest in or an employee relationship with such entity and that the term Independent Architect may include an architect or engineer or a firm of architects or engineers who otherwise meet the requirements of this definition and who also are under contract to construct the facility which they have designed.

“Insurance Consultant” means an independent person or firm, appointed by the Obligated Group Agent and not reasonably objected to by the Master Trustee, qualified to survey risks and to recommend insurance coverage for hospital or health care facilities and services of the type involved, and having a reputation for skill and experience in such surveys and such recommendations, and which may include a broker or agent with whom any Credit Group Member transacts business.

“Interest Rate Agreement” means an interest rate exchange, hedge or similar agreement, which agreement may include, without limitation, an interest rate swap, a forward or futures contract or an option (e.g., a call, put, cap, floor or collar) and which agreement does not constitute an obligation to repay money borrowed, credit extended or the equivalent thereof.

“Irrevocable Deposit” means, the irrevocable deposit in trust of cash, Government Obligations or other securities permitted for such purpose pursuant to the terms of the documents governing the payment or discharge of Indebtedness, the principal of and interest on which will be in an amount, and under terms sufficient to pay all or a portion of the principal of, premium, if any, and interest on, as the same shall become due, any Indebtedness which would otherwise be considered Outstanding. The trustee of such deposit may be the Master Trustee or any other trustee or escrow agent authorized to act in such capacity.

“Lien” means any mortgage, pledge or lease of security interest in or lien, charge, restriction or encumbrance on any Property of the Person involved in favor of, or which secures any Indebtedness to, any Person other than a Credit Group Member.

“Limited Credit Group Participant” means a Person designated by the Obligated Group Agent to the Master Trustee with whom an Obligated Group Member or a Designated Affiliate has entered into a contract or other agreement, under which such Person is obligated to make such portion of the payments required by the provisions of the Master Indenture (i) in the amount specified in such contract or other agreement or (ii) subject to such limitations as described therein, perform all of the other obligations of a Credit Group Member under the Master Indenture, and do all things necessary to permit the Obligated Group to perform its obligations and covenants under the Master Indenture, provided that together with such identification there shall be delivered to the Master Trustee (a) a fully executed copy of such contract or other agreement and (b) an opinion of Counsel acceptable to the Master Trustee to the effect that such contract or other agreement is a valid and binding obligation of such Person enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity and to the exceptions set forth in Exhibit A to the Master Indenture.

“Long-Term Indebtedness” means Indebtedness other than Short-Term Indebtedness.

“Master Indenture” means the Master Trust Indenture dated as of August 1, 2016, as it may from time to time be amended or supplemented in accordance with the terms of the Master Indenture.

D-7 “Master Trustee” means The Bank of New York Mellon Trust Company, N.A., or any successor trustee under the Master Indenture.

“Material Credit Group Member” means any Credit Group Member which for any of the three Fiscal Years preceding the occurrence of any event described in subsection (d), (e) or (f) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –DEFAULTS AND REMEDIES,” shall have had (i) total revenues greater than or equal to ten percent (10%) of the total revenues of the System for such Fiscal Year, (ii) Income Available for Debt Service greater than or equal to ten percent (10%) of Income Available for Debt Service of the System for such Fiscal Year, or (iii) Property having a book value greater or equal to ten percent (10%) of the Book Value of the Property of the System for such Fiscal Year.

“Maximum Annual Debt Service Requirement” means the largest total Debt Service Requirement (as adjusted in accordance with the assumptions set forth in the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – CALCULATION OF DEBT SERVICE AND DEBT SERVICE COVERAGE”) for the current or any succeeding Fiscal Year; provided that in calculating Maximum Annual Debt Service Requirement for the purposes of applying such provisions, the principal amount of any Indebtedness included in such calculation which is paid during the year with respect to which debt service coverage is being calculated shall be excluded to the extent such principal amount is paid from the proceeds of other Indebtedness incurred in compliance with the provisions of the Master Indenture.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligated Group Agent by notice to the Master Trustee.

“Mortgages” means, collectively, the Presence Saint Joseph Medical Center (Joliet, IL) Mortgage, the Presence Mercy Medical Center (Aurora, IL) Mortgage, the Presence Saint Joseph Hospital (Elgin, IL) Mortgage, the Presence St. Mary’s Hospital (Kankakee, IL) Mortgage, the Presence Resurrection Medical Center (Chicago, IL) Mortgage, the Presence Saint Joseph Hospital (Chicago, IL) Mortgage, the Presence Saints Mary and Elizabeth Medical Center (Chicago, IL) Mortgage, the Presence St. Francis Hospital (Evanston, IL) Mortgage, and any other mortgage(s) given by any of the Obligated Group Members, from time to time, in favor of the Master Trustee securing all of the Obligations issued under the Master Indenture, each as amended and supplemented from time to time.

“Net Proceeds” means, when used with respect to any insurance or condemnation award or sale consummated under threat of condemnation, the gross proceeds from the insurance or condemnation award or sale with respect to which that term is used less all expenses (including attorney’s fees, adjuster’s fees and any expenses of the Master Trustee) incurred in the collection of such gross proceeds.

“Non-Recourse Indebtedness” means any Indebtedness the liability for which is effectively limited to property, plant and equipment (as classified under GAAP) and the income therefrom, the cost of which property, plant and equipment shall have been financed with the proceeds of such Indebtedness with no recourse, directly or indirectly, to any other Property of any Credit Group Member.

D-8 “Obligated Group” means, collectively, the Obligated Group Members.

“Obligated Group Agent” means the Corporation or such other Obligated Group Member as may be designated from time to time pursuant to written notice to the Master Trustee executed by an authorized officer of the Corporation or, if the Corporation is no longer an Obligated Group Member, of each Obligated Group Member.

“Obligated Group Member” means any Person who is listed on Exhibit B to the Master Indenture as a result of having fulfilled the requirements for entry into the Obligated Group in accordance with the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – ENTRANCE INTO THE OBLIGATED GROUP” and which has not, in either case, ceased such status in accordance with the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – CESSATION OF STATUS AS AN OBLIGATED GROUP MEMBER.” The initial Obligated Group Members are Presence Health Network, Presence CTC, Presence Chicago Network, Presence Central and Suburban Network, Presence Life Connections, Presence Senior Services – Chicagoland and Presence Healthcare Services.

“Obligation” means the Series 2016 Obligations and any other obligation of an Obligated Group Member pursuant to the Master Indenture which has been authenticated by the Master Trustee pursuant to the Master Indenture.

“Obligation holder” means the registered owner of any fully registered or book entry Obligation unless alternative provision is made in the Supplemental Master Indenture pursuant to which such Obligation is issued for establishing ownership of such Obligation, in which case such alternative provision shall control, subject to the terms of the Master Indenture.

“Officer’s Certificate” means a certificate signed, in the case of a certificate delivered by a corporation, by the president, any vice president or any other officer authorized to sign by resolution of the Governing Body of such corporation or, in the case of a certificate delivered by any other Person, the chief executive or chief financial officer of such other Person, in either case whose authority to execute such Certificate shall be evidenced to the satisfaction of the Master Trustee. Each “Officer’s Certificate” shall (i) state that the terms thereof are in compliance with the requirements of the section or subsection pursuant to which such Officer’s Certificate is delivered, or shall state in reasonable detail the nature of any non-compliance and the steps being taken to remedy such non-compliance; (ii) state it is being delivered together with any opinions, schedules, statements or other documents required in connection therewith; and (iii) be in scope, form, substance and other aspects thereof, not objected to by the Master Trustee.

“Opinion of Bond Counsel” means a written opinion of nationally recognized municipal bond counsel, which counsel and opinion, including without limitation the scope, form, substance and other aspects thereof, are not unacceptable to the Master Trustee.

“Outstanding Obligations” or “Obligations outstanding” means all Obligations which have been duly authenticated and delivered by the Master Trustee under the Master Indenture, except:

(a) Obligations canceled after purchase in the open market or because of payment at or prepayment or redemption prior to maturity;

D-9 (b) (i) Obligations for the payment, prepayment or redemption of which cash or Escrow Obligations shall have been theretofore deposited with the Master Trustee (whether upon or prior to the maturity, prepayment or redemption date of any such Obligations); provided that if such Obligations are to be prepaid or redeemed prior to the maturity thereof, notice of such prepayment or redemption shall have been given or irrevocable arrangements satisfactory to the Master Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Master Trustee shall have been filed with the Master Trustee and (ii) Obligations securing Related Bonds for the payment, prepayment or redemption of which cash or Escrow Obligations shall have been theretofore deposited with the Related Bond Trustee (whether upon or prior to the maturity, prepayment or redemption date of any such Obligations); provided that if such Related Bonds are to be prepaid or redeemed prior to the maturity thereof, notice of such prepayment or redemption shall have been given or arrangements satisfactory to the Related Bond Trustee shall have been made therefor, or waiver of notice satisfactory in form to the Related Bond Trustee shall have been filed with the Related Bond Trustee;

(d) For the purpose of all consents, approvals, waivers and notices required to be obtained or given under the Master Indenture, Obligations held or owned by any Credit Group Member.

Notwithstanding the foregoing, any Obligation securing Related Bonds shall be deemed outstanding if such Related Bonds are Outstanding.

“Paying Agent” means the bank or banks, if any, designated pursuant to a Related Bond Indenture to receive and disburse the principal of and interest on any Related Bonds or designated pursuant to the Master Indenture to receive and disburse the principal of and interest on any Obligations.

“Permitted Encumbrances” means Liens, if any, created by the Master Indenture, any Related Loan Document and, as of any particular time:

(a) any Lien described in Exhibit E to the Master Indenture which is existing as of the effective date of the Master Indenture, or as such Exhibit E shall be supplemented upon addition of an Obligated Group Member, provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of any Obligated Group Member not subject to such Lien as of the effective date of the Master Indenture, unless (1) such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Encumbrance or (2) the maturity date of the Indebtedness secured by such Lien is not extended and either the total principal and interest requirements or the maximum annual principal and interest requirements (calculated in a manner consistent with the calculation of Debt Service Requirement) on such Indebtedness is not increased as a result of the refinancing of such Indebtedness;

(b) Liens arising by reason of good faith deposits by a Credit Group Member in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Credit Group Member to secure public or statutory

D-10 obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Credit Group Member to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen’s compensation, unemployment insurance, pensions or profit sharing plans or other social security plans or programs, or to share in the privileges or benefits required for corporations participating in such arrangements;

(c) any Lien on Property, other than all property subject to the Mortgages, acquired subject to an existing Lien, if at the time of such acquisition, the aggregate amount remaining unpaid on the Indebtedness secured thereby (whether or not assumed by the Credit Group Member) does not exceed the fair market value or (if such Property has been purchased) the lesser of the acquisition price or the fair market value of the Property subject to such Lien;

(d) any Lien on any Property of any Credit Group Member granted in favor of or securing Indebtedness to any other Credit Group Member;

(e) any Lien on Property, including without limitation the Mortgages, if such Lien equally and ratably secures all of the Obligations and only the Obligations;

(f) the lease or license of the use of all or a part of any portion of the Property in connection with the proper and economical use of such Property in accordance with customary and prudent business practice;

(g) Liens for taxes and special assessments which are not then delinquent, or if then delinquent are being contested in accordance with the provisions of the Master Indenture;

(h) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s Lien or right in respect of the Master Indenture if payment is not yet due under the contract in question or if such Lien is being contested in accordance with the provisions of the Master Indenture;

(i) statutory rights under Section 291, Title 42 of the United States Code, as a result of what are commonly known as Hill-Burton grants, and similar rights under other federal statutes or statutes of the state in which the Property involved is located;

(j) Liens on or in Property given, granted, bequeathed or devised by the owner thereof existing at the time of such gift, grant, bequest or devise, provided that (i) such Liens consist solely of restrictions on the use thereof or the income therefrom, or (ii) secure Indebtedness which is not assumed by any Credit Group Member and such Liens attach solely to the Property (including the income therefrom) which is the subject of such gift, grant, bequest or devise;

(k) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which any Credit Group

D-11 Member shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall be in existence;

(l) Liens on moneys deposited by patients or others with a Credit Group Member as security for or as prepayment of the cost of patient care or any rights of residents of life care, elderly housing or similar facilities to endowment or similar funds deposited by or on behalf of such residents;

(m) Liens on Property due to rights of third-party payors for recoupment of excess reimbursement paid;

(n) any security interest in a project fund, rebate fund, any depreciation reserve, debt service or interest reserve, debt service fund or any similar fund established pursuant to the terms of any Supplemental Master Indenture, Related Bond Indenture or Related Loan Document in favor of the Master Trustee, a Related Bond Trustee or the holder of the Indebtedness issued pursuant to such Supplemental Master Indenture, Related Bond Indenture or Related Loan Document or the provider of any liquidity or credit support for such Related Bond or Indebtedness;

(o) any Lien on any Related Bond or any evidence of Indebtedness of any Credit Group Member acquired by or on behalf of any Credit Group Member by the provider of liquidity or credit support for such Related Bond or Indebtedness;

(p) Liens on accounts receivable arising as a result of the sale, purported sale, pledge, mortgage or other transfer or financing of or involving accounts receivable with or without recourse on commercially reasonable terms; provided, that the aggregate principal amount of Indebtedness secured by any such Lien does not at any time exceed 20% of the total amount of accounts receivable of the Credit Group as reflected in the Financial Statements of the System; and provided further that the principal amount of Indebtedness secured by any such Lien does not exceed the aggregate sales price of such accounts receivable received by the Credit Group Member selling the same by more than 25%;

(q) Liens on Property of a Person existing at the time such Person is merged into or consolidated with a Credit Group Member, or at the time of a sale, lease or other disposition of the properties of a Person as an entirety or substantially as an entirety to a Credit Group Member which becomes part of a Property that secures Indebtedness that is assumed by a Credit Group Member as a result of any such merger, consolidation or acquisition; provided, that no such Lien may be increased, extended, renewed or modified after such date to apply to any Property of a Credit Group Member not subject to such Lien on such date unless such Lien as so increased, extended, renewed or modified is otherwise permitted under the Master Indenture;

(r) Liens which secure Non-Recourse Indebtedness;

(s) Liens arising out of Capitalized Leases;

D-12 (t) Liens in favor of banking or other depository institutions arising as a matter of law encumbering the deposits of any Member held in the ordinary course of business by such banking institution (including any right of setoff or statutory bankers’ liens) so long as such deposit account is not established or maintained for the purpose of providing such Lien, right of setoff or bankers’ lien;

(u) any Lien on Property that may be required from time to time to satisfy any collateralization requirements relating to any Interest Rate Agreement;

(v) Uniform Commercial Code financing statements filed with the Secretary of State of the State of Illinois (or such other office maintaining such records) in connection with an operating lease entered into by any Credit Group Member in the ordinary course of business;

(w) rights of tenants under leases or rental agreements pertaining to Property owned by any Credit Group Member so long as the lease arrangement is in the ordinary course of business of the Credit Group Member;

(x) deposits of Property by any Credit Group Member to meet regulatory requirements for a governmental workers' compensation, unemployment insurance or social security program, other than any Lien imposed by ERISA;

(y) Liens on any Property of a Credit Group Member to secure any Indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the Property subject to such Liens; provided, that such Liens shall not apply to any Property theretofore owned by a Credit Group Member, other than any theretofore unimproved real property on which the Property so constructed or improved is located; and

(z) Liens on Property of a Credit Group Member, in addition to those Liens permitted as defined above in this definition of Permitted Encumbrances, if the total aggregate Book Value of the Property subject to a Lien of the type described in this subsection (z) does not exceed 15% of the Book Value of all Property of the System.

“Person” means any natural person, firm, joint venture, association, partnership, business trust, corporation, limited liability company, public body, agency or political subdivision thereof or any other similar entity.

“Pledged Revenues” means all accounts (including, but not limited to, health care insurance receivables), accounts receivable and other contract rights in connection therewith and assignable general intangibles now owned or hereafter acquired by any Obligated Group Member regardless of how generated, and all proceeds therefrom, whether cash or noncash, all as defined in Article 9 of the Uniform Commercial Code, as amended, of the state of incorporation of such Obligated Group Member; excluding, however, gifts, grants, bequests, donations and contributions to any Obligated Group Member made heretofore or after the effective date of the Master Indenture, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payments required under the Master Indenture or on the Obligations.

D-13 “Presence CTC” means Presence Care Transformation Corporation (formerly, Presence PRV Health), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Presence Central and Suburban Network” means Presence Central and Suburban Hospitals Network (formerly, Presence Hospitals PRV), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Presence Chicago Network” means Presence Chicago Hospitals Network (formerly, Presence RHC Corporation), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Presence Healthcare Services” means Presence Healthcare Services, an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Presence Life Connections” means Presence Life Connections, an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Presence Mercy Medical Center (Aurora, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Network in favor of the Master Trustee relating to Presence Mercy Medical Center located in Aurora, IL.

“Presence Resurrection Medical Center (Chicago, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Network in favor of the Master Trustee, relating to Presence Resurrection Medical Center located in Chicago, IL.

“Presence St. Francis Hospital (Evanston, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Network in favor of the Master Trustee, relating to Presence St. Francis Hospital located in Evanston, IL.

“Presence Saint Joseph Hospital (Chicago, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Network in favor of the Master Trustee, relating to Presence Saint Joseph Hospital located in Chicago, IL.

“Presence Saint Joseph Hospital (Elgin, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Network in favor of the Master Trustee, relating to Presence Saint Joseph Hospital located in Elgin, IL.

“Presence Saint Joseph Medical Center (Joliet, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Network in favor of the Master Trustee, relating to Presence Saint Joseph Medical Center located in Joliet, IL.

D-14 “Presence Saints Mary and Elizabeth Medical Center (Chicago, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Network in favor of the Master Trustee, relating to Presence Saints Mary and Elizabeth Medical Center located in Chicago, IL.

“Presence St. Mary’s Hospital (Kankakee, IL) Mortgage” means that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Network in favor of the Master Trustee, relating to Presence St. Mary’s Hospital located in Kankakee, IL.

“Presence Senior Services – Chicagoland” means Presence Senior Services – Chicagoland (formerly, Presence RHC Senior Services), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation.

“Primary Obligor” means the Person who is primarily obligated on an obligation which is guaranteed by another Person.

“Projected Debt Service Coverage Ratio” means, for any future period, the ratio determined by dividing the projected Income Available for Debt Service for that period by the Maximum Annual Debt Service Requirement for the Long-Term Indebtedness expected to be outstanding during such period.

“Projected Rate” means, at the option of the Obligated Group Agent, (i) the interest rate which equals the most recently available Revenue Bond Index as published in The Bond Buyer (or such comparable index approved by the Obligated Group Agent if the Revenue Bond Index is no longer published) or (ii) the projected yield at par of an obligation as set forth in the report of a Consultant (Consultant and report, including without limitation the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee). Such report shall state that in determining the Projected Rate such Consultant reviewed the yield evaluations at par of not less than three obligations selected by such Consultant, the interest on which is entitled to the exemption from federal income tax afforded by Section 103(a) of the Code or any successor thereto (or, if it is not expected that it will be reasonably possible to issue such tax-exempt obligations or if the interest on the Indebtedness for which the Projected Rate is being calculated is not entitled to such exemption, then obligations the interest on which is subject to federal income taxation) which obligations such Consultant states in its report are reasonable comparators for utilizing in developing such Projected Rate and which obligations: (a) were outstanding on a date selected by the Consultant which date so selected occurred during the 45-day period preceding the date of the calculation utilizing the Projected Rate in question, (b)(i) if the obligation with respect to which such Projected Rate is being determined bears interest at a fixed rate, bear interest at a fixed rate, or (ii) if the obligation with respect to which such Projected Rate is being determined bears interest at a variable rate, bear interest at a variable rate, (c)(i) if an Obligated Group Member has no commitment for credit enhancement for the obligation with respect to which such Projected Rate is being determined, are obligations of persons engaged in operations similar to those of the Obligated Group, have a credit rating similar to that of the Obligated Group and are not entitled to the benefits of any credit enhancement, or (ii) if an Obligated Group Member has a commitment for credit enhancement for the obligation with respect to which such Projected Rate is being determined, including without limitation any letter of credit or insurance policy, are entitled to the benefits of comparable credit enhancement; provided that the annual fees payable for such credit enhancement shall be taken into account when determining such

D-15 Projected Rate, and (d) to the extent practicable, have a remaining term and amortization schedule substantially the same as the obligation with respect to which such Projected Rate is being determined.

“Put Date” means (i) any date on which an owner of Put Indebtedness may elect to have such Put Indebtedness paid, purchased or redeemed by or on behalf of the underlying obligor prior to its stated maturity date or (ii) any date on which Put Indebtedness is required to be paid, purchased or redeemed from the owner by or on behalf of the underlying obligor (other than at the option of the owner) prior to its stated maturity date, other than pursuant to any mandatory sinking fund or other similar fund or other than by reason of acceleration upon the occurrence of an event of default.

“Put Indebtedness” means Indebtedness which is (i) payable or required to be purchased or redeemed by or on behalf of the underlying obligor, at the option of the owner thereof, prior to its stated maturity date or (ii) payable or required to be purchased or redeemed from the owner by or on behalf of the underlying obligor (other than at the option of the owner) prior to its stated maturity date, other than pursuant to any mandatory sinking fund or other similar fund or other than by reason of acceleration upon the occurrence of an event of default.

“Related Bond Indenture” means the Series 2016C Bond Indenture and any bond indenture, bond resolution or similar instrument pursuant to which a series of Related Bonds is issued.

“Related Bond Trustee” means the trustee appointed under any Related Bond Indenture and any successor trustee thereunder or, if no trustee is appointed under a Related Bond Indenture, the Related Issuer.

“Related Bonds” means the Series 2016C Bonds, and any other revenue bonds or similar obligations, the proceeds of which are loaned or otherwise made available to any Credit Group Member in consideration, whether in whole or in part, of the execution, authentication and delivery of an Obligation or Obligations.

“Related Issuer” means the Authority and any other issuer of a series of Related Bonds.

“Related Loan Document” means the Series 2016C Loan Agreement and any document or documents (including without limitation any lease, sublease or installment sales contract) pursuant to which any proceeds of any Related Bonds are advanced to any Credit Group Member (or any Property financed or refinanced with such proceeds is leased, sublet or sold to a Credit Group Member).

“Required Payment” means any payment, whether at maturity, by acceleration, upon proceeding for redemption or otherwise, including without limitation, payments on Interest Rate Agreements 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 Obligation.

D-16 “Revolving Credit Agreement” means the Revolving Credit Agreement dated August __, 2016 between the Corporation, on its own behalf and as Obligated Group Agent on behalf of the other Obligated Group Members, and the bank named therein, as such agreement may be supplemented, amended, modified or extended from time to time.

“Series 2016C Bonds” means the $______Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network).

“Series 2016C Bond Indenture” means the Bond Trust Indenture dated as of August 1, 2016 between the Authority and the bond trustee identified therein, pursuant to which the Series 2016C Bonds were issued, as it may be amended or supplemented from time to time.

“Series 2016C Bond Trustee” means Wells Fargo Bank, National Association, as bond trustee, under the Series 2016C Bond Indenture, and its successors and assigns.

“Series 2016C Loan Agreement” means the Loan Agreement dated as of August 1, 2016 between the Corporation and the Authority providing for the loan of the proceeds of the Series 2016C Bonds to the Corporation.

“Series 2016C Obligation” means the $______original principal amount Presence Health Network Direct Note Obligation, Series 2016C (Illinois Finance Authority) issued under the Master Indenture in substantially the form attached to the Master Indenture.

“Series 2016D Obligation” means the $______original principal amount Presence Health Network Direct Note Obligation, Series 2016D (JPMorgan Chase Bank, N.A. - Revolving Credit Agreement) issued under the Master Indenture in substantially the form attached to the Master Indenture.

“Series 2016 Obligations” means the Series 2016C Obligation and the Series 2016D Obligation.

“Short-Term,” when used in connection with Indebtedness, means Indebtedness of a Person for money borrowed or credit extended having an original maturity less than or equal to one year and not renewable at the option of the debtor for, or subject to any binding commitment to refinance or otherwise provide for such Indebtedness having, a term greater than one year beyond the date of original issuance.

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligated Group Agent by notice to the Master Trustee.

“Subordinated Indebtedness” means Indebtedness specifically subordinated as to payment and security to the payment of all Required Payments of the Obligated Group Members under the Master Indenture.

“Supplemental Master Indenture” means an indenture amending or supplementing the Master Indenture entered into pursuant to the Master Indenture on or after the effective date of the Master Indenture.

“System” means the affiliated group of Persons comprised of all the System Affiliates.

D-17 “System Affiliates” means each Obligated Group Member, each Affiliate of the Corporation or any other Obligated Group Member, each Designated Affiliate and each other Person with whom an Obligated Group Member or Designated Affiliate has in place a contract or other agreement whereby such Person is obligated to make payments in respect of Obligations.

“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 Financial Statements of the System are available, the Obligated Group would be able to satisfy the conditions for the issuance of $1.00 of additional Long- Term Indebtedness set forth in subsection (A) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE -PERMITTED ADDITIONAL INDEBTEDNESS” as of the date of such transaction.

“Unlimited Credit Group Participant” means a Person designated by the Obligated Group Agent to the Master Trustee with whom an Obligated Group Member or a Designated Affiliate has entered into a contract or other agreement, under which such Person is obligated to make all of the transfers required by the Master Indenture, perform all of the other obligations of a Credit Group Member under the Master Indenture, and do all things necessary to permit the Obligated Group to perform its obligations and covenants under the Master Indenture, provided that together with such identification there be delivered to the Master Trustee (a) a fully executed copy of such contract or other agreement and (b) an opinion of Counsel acceptable to the Master Trustee to the effect that such contract or other agreement is a valid and binding obligation of such Person enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity and to the exceptions set forth in Exhibit A to the Master Indenture.

“Written Request” means a request in writing signed by the President or any Vice President of a Credit Group Member, or any other officers designated by such Credit Group Member.

Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, words importing the singular number shall include the plural and vice versa. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with accounting principles generally accepted in the United States. Headings of articles and sections herein are solely for the convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. All accounting terms not otherwise defined herein shall be interpreted, all accounting determinations under the Master Indenture shall be made, and all financial statements required to be delivered under the Master Indenture will be prepared, in accordance with GAAP. If, after the date of the Master Indenture, there shall occur any changes in GAAP from those used in the preparation of the financial statements referred to in the Master Indenture and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in the Master Indenture including, without limitation, a

D-18 recharacterization of operating leases to the effect that certain operating leases are to be treated as capital leases, the Obligated Group Agent shall negotiate in good faith to amend such covenants, standards, and terms so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the System, shall be the same as if such change had not been made. Until any such covenant, standard, or term is amended in accordance with this paragraph, financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles at the option of the Obligated Group Agent.

SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE

The Master Indenture contains various covenants, security provisions, terms and conditions, certain of which are summarized below. Reference is made to the Master Indenture, as amended and supplemented, for a full and complete statement of its provisions.

THE OBLIGATIONS;PAYMENT OF THE OBLIGATIONS

The total principal amount of Obligations, the number of Obligations and the series of Obligations that may be created under the Master Indenture are not limited except as is set forth in the Master Indenture.

All Obligations, including the Series 2016C Obligation, are intended to be the absolute and unconditional joint and several obligation of each Obligated Group Member (see “SECURITY FOR THE SERIES 2016C BONDS – SECURITY AND ENFORCEABILITY” in the forepart of this Official Statement) issued and outstanding under this Master Indenture and will be secured by the Mortgages (see “SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES”) and a security in the Pledged Revenues of each Obligated Group Member. Any Obligated Group Member may incur Additional Indebtedness (which may include additional Obligations). Such Additional Indebtedness may be secured by security in addition to any security provided for the Series 2016C Obligation or any other Indebtedness (including without limitation letters or lines of credit, insurance or Liens on Property, including Facilities or Property of the Credit Group Members, or security interests in a depreciation reserve, debt service or interest reserve or debt service or similar funds). Such security need not extend to any other Indebtedness (including the Series 2016C Obligation or any other Obligations or series of Obligations). See “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –LIENS ON PROPERTY” and “DEFINITIONS OF CERTAIN TERMS – Permitted Encumbrances.” The Master Indenture provides that Supplemental Master Indentures pursuant to which one or more series of Obligations entitled to additional security is issued may provide for such supplements or amendments to the provisions of the Master Indenture, including the provisions thereof relating to the exercise of remedies upon the occurrence of an event of default, as are necessary to provide such security and to permit realization upon such security solely for the benefit of the Obligations entitled thereto.

Each Obligated Group Member unconditionally and irrevocably (subject to the right of such Member to cease its status as an Obligated Group Member pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – CESSATION OF STATUS AS AN OBLIGATED GROUP MEMBER”), jointly and severally agrees that it will promptly pay the Required Payments on every Obligation issued under this Master Indenture at the place, on the dates and in the manner provided herein and in said Obligations according to the true

D-19 intent and meaning thereof, notwithstanding any specific schedule of payment included in such Obligation.

ENTRANCE INTO THE OBLIGATED GROUP

Any Person may become an Obligated Group Member if:

(a) Such Person shall execute and deliver to the Master Trustee a Supplemental Master Indenture acceptable to the Master Trustee which shall also be executed by the Master Trustee and the Obligated Group Agent on behalf of each then-current Obligated Group Member, containing (i) the agreement of such Person to become an Obligated Group Member and thereby to become subject to compliance with all provisions of the Master Indenture, and unconditionally and irrevocably (subject to the right of such Person to cease its status as an Obligated Group Member pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – CESSATION OF STATUS AS AN OBLIGATED GROUP MEMBER”) to jointly and severally make payments upon each Obligation at the times and in the amounts provided in each such Obligation, (ii) representations and warranties by such Person substantially similar to those set forth in the Master Indenture other than, if such Person is not a Tax-Exempt Organization, and except that any representation regarding incorporation and good standing shall refer to the actual type and state of organization of such Person (but with such deviations as are not unacceptable to the Master Trustee), and (iii) the irrevocable appointment of the Obligated Group Agent as its agent and attorney-in-fact and grants to the Obligated Group Representative full power to execute Supplemental Master Indentures authorizing the issuance of Obligations and to execute and deliver Obligations;

(b) The Obligated Group Agent shall, by appropriate action of its Governing Body, have approved the admission of such Person to the Obligated Group and each of the other Obligated Group Members shall have taken such action, if any, required by their own by-laws or organizational documents to approve the admission of such Person to the Obligated Group;

(c) The Master Trustee shall have received (i) a certificate of the Obligated Group Agent which demonstrates that, immediately upon such Person becoming an Obligated Group Member the Obligated Group Members would not, as a result of such transaction, be in default in the performance or observance of any covenant or condition to be performed or observed by them under the Master Indenture, (ii) an opinion of Counsel to the effect that (A) the instrument described in paragraph (a) above has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement of such Person, enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting enforcement of creditors’ rights and application of general principles of equity and to the exceptions set forth in Exhibit A to the Master Indenture and summarized in the forepart of this Official Statement under the caption “SECURITY FOR THE SERIES 2016C BONDS – SECURITY AND ENFORCEABILITY,” (B) the addition of such Person to the Obligated Group will not adversely affect the status as a Tax-Exempt Organization of any Obligated Group Member which otherwise has such status, (C) the Person which is to become an Obligated Group Member is liable on all Obligations outstanding under the Master Indenture, as if such Obligations were originally issued by such Person, subject only to the applicable exceptions set forth in Exhibit A to the Master Indenture and summarized in the forepart of this Official Statement under the caption “SECURITY

D-20 FOR THE SERIES 2016C BONDS – SECURITY AND ENFORCEABILITY,” and (D) under then existing law such Person becoming an Obligated Group Member will not subject any Obligation to the registration provisions of the Securities Act of 1933, as amended (or that such Obligations have been so registered if registration is required), and (iii) if all amounts due or to become due on all Related Bonds have not been paid to the holders thereof or provision for such payment has not been made in such manner as to have resulted in the defeasance of all Related Bond Indentures, an Opinion of Bond Counsel to the effect that under then existing law the addition of such Person as an Obligated Group Member would not adversely affect the validity of any Related Bond or any exemption from federal or state income taxation of interest payable on such Related Bond otherwise entitled to such exemption;

(d) a certificate of the Obligated Group Agent which demonstrates that, immediately upon such Person becoming an Obligated Group Member, giving effect to the inclusion of such Person as an Obligated Group Member as of the beginning of the most recently completed Fiscal Year for which Financial Statements of the System are available, the Transaction Test would be satisfied; and

(e) the Supplemental Indenture referenced in (a) shall include: (i) an amendment to Exhibit B to the Master Indenture to add such Person as an Obligated Group Member and (ii) an amendment to Exhibit E to the Master Indenture to include Permitted Encumbrances on the Property of such Person. See “DEFINITIONS OF CERTAIN TERMS – Permitted Encumbrances.”

CESSATION OF STATUS AS AN OBLIGATED GROUP MEMBER

Each Obligated Group Member covenants that it will not take any action, corporate or otherwise, which would cause it or any successor thereto into which it is merged or consolidated under the terms of the Master Indenture to cease to be an Obligated Group Member unless:

(a) if the Obligated Group Member proposing to withdraw from the Obligated Group is a party to any Related Loan Documents with respect to Related Bonds which remain outstanding, another Obligated Group Member shall issue an Obligation under the Master Indenture evidencing or assuming the obligation of the withdrawing Obligated Group Member in respect of such Related Bonds;

(b) prior to cessation of such status, there is delivered to the Master Trustee an Opinion of Bond Counsel to the effect that, under then existing law, the cessation by the Obligated Group Member of its status as an Obligated Group Member will not adversely affect the validity of any Related Bond or any exemption from federal or state income taxation of interest payable thereon to which such Related Bond would otherwise be entitled;

(c) the Master Trustee shall have received a certificate of the Obligated Group Agent to the effect that prior to and immediately after such cessation, no event of default exists under the Master Indenture and no event shall have occurred which with the passage of time or the giving of notice, or both, would become such an event of default;

(d) the Master Trustee shall have received a certificate of the Obligated Group Agent which demonstrates that, immediately upon such Person withdrawing from the Obligated Group,

D-21 giving effect to the withdrawal of such Person as an Obligated Group Member as of the beginning of the most recently completed Fiscal Year for which Financial Statements of the System are available, the Transaction Test would be satisfied;

(e) prior to such cessation that is delivered to the Master Trustee an opinion of Counsel to the effect that the cessation by such Obligated Group Member of its status as an Obligated Group Member will not adversely affect the status as a Tax-Exempt Organization of any Obligated Group Member which otherwise has such status; and

(f) prior to cessation of such status, the Obligated Group Agent consents in writing to the withdrawal by such Obligated Group Member.

Upon such cessation in accordance with the foregoing provisions, Exhibit B to the Master Indenture shall be amended to delete therefrom the name of such Person.

LIENS ON PROPERTY

Each Obligated Group Member covenants not to create, and not to permit any Designated Affiliate under its control or any Limited Credit Group Participant or Unlimited Credit Group Participant with which it or any Designated Affiliate under its control maintains a contract or agreement to, create or incur or permit to be created or incurred or to exist any Lien on any Property of any Credit Group Member to secure Indebtedness, except Permitted Encumbrances. See “DEFINITIONS OF CERTAIN TERMS – Permitted Encumbrances.”

PERMITTED ADDITIONAL INDEBTEDNESS

So long as any Obligations are outstanding, the Credit Group will not incur any Additional Indebtedness (whether or not incurred through the issuance of additional Obligations) other than:

(A) Long-Term Indebtedness, if prior to incurrence thereof or, if such Long-Term Indebtedness was incurred in accordance with another subsection summarized under this caption and the Obligated Group Agent wishes to have such Long-Term Indebtedness classified as having been issued under the Master Indenture, prior to such classification, there is delivered to the Master Trustee:

(i) An Officer’s Certificate from the Obligated Group Agent stating that the Historical Pro Forma Debt Service Coverage Ratio of the System derived from the most recently available Financial Statements of the System was not less than 1.15 to 1 for the immediately preceding Fiscal Year; or

(ii) (A) An Officer’s Certificate from the Obligated Group Agent stating that the Annual Debt Service Coverage Ratio of the System derived from the most recently available audited Financial Statements of the System was not less than 1.35 to 1; and (B) an Officer’s Certificate from the Obligated Group Agent to the effect that the Projected Debt Service Coverage Ratio of the System for each of the next two succeeding Fiscal Years is not less than 1.35 to 1; provided that the requirements of the foregoing shall be deemed satisfied if (X) there is delivered to the Master Trustee a Consultant’s

D-22 report which contains an opinion of such Consultant that applicable laws or regulations have prevented or will prevent the Credit Group from generating the amount of Income Available for Debt Service required to be generated by this clause (ii) as a prerequisite to the issuance of such Additional Indebtedness, and, if requested by the Master Trustee, such report is accompanied by a concurring opinion of Counsel as to any conclusions of law supporting the opinion of such Consultant, (Y) the Consultant’s report indicates that the rates charged or to be charged by the System are or will be such that, in the opinion of such Consultant, the System has generated or will generate the maximum amount of revenues reasonably practicable given such laws or regulations, and (Z) the Annual Debt Service Coverage Ratio of the System and the Projected Debt Service Coverage Ratio of the System referred to in the applicable subsection are at least 1.00 to 1.

(B) Completion Long-Term Indebtedness if there is delivered to the Master Trustee: (i) an Officer’s Certificate of the Obligated Group Agent stating that at the time the original Long-Term Indebtedness for the Facilities to be completed was incurred, the Obligated Group Agent had reason to believe that the proceeds of such Long-Term Indebtedness together with other moneys then expected to be available would provide sufficient moneys for the completion of such Facilities, (ii) a statement of an Independent Architect or other expert not objected to by the Master Trustee setting forth the amount estimated to be needed to complete the Facilities, and (iii) an Officer’s Certificate of the Obligated Group Agent stating that the proceeds of such Completion Long-Term Indebtedness to be applied to the completion of the Facilities, together with a reasonable estimate of investment income to be earned on such proceeds and available to pay such costs, the amount of moneys, if any, committed to such completion from available cash or marketable securities and reasonably estimated earnings thereon, enumerated bank loans (including letters or lines of credit) and federal or state grants reasonably expected to be available, will be in an amount not less than the amount set forth in the statement of an Independent Architect or other expert, as the case may be, referred to in (ii).

(C) Long-Term Indebtedness for the purpose of refunding (whether in advance or otherwise) any outstanding Long-Term Indebtedness if prior to the incurrence thereof an Officer’s Certificate of the Obligated Group Agent is delivered to the Master Trustee stating that, taking into account the issuance of the proposed Long-Term Indebtedness and the application of the proceeds thereof and any other funds available to be applied to such refunding, the Maximum Annual Debt Service Requirement of the Credit Group will not be increased by more than 10%.

(D) Non-Recourse Indebtedness without limit.

(E) Balloon Indebtedness if the conditions set forth in subsection (A) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS” are met when it is assumed that the Balloon Indebtedness is Long-Term Indebtedness, the principal amount of which is payable over a term of 30 years from the date of calculation, or the actual remaining term to maturity, whichever is greater, bearing interest at the Projected Rate and payable in equal annual installments of principal and interest.

(F) Put Indebtedness if the conditions set forth in subsection (A) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE

D-23 MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS” are met when it is assumed that the Put Indebtedness is Long-Term Indebtedness, the principal amount of which is payable over a term of 30 years from the date of calculation, bearing interest at the Projected Rate and payable in equal installments of principal and interest.

(G) Guaranties provided that the conditions set forth in the Master Indenture are satisfied if it is assumed that the Indebtedness guaranteed is Long-Term Indebtedness of a Credit Group Member. In making the calculation required by the Master Indenture the System’s Income Available for Debt Service shall not be deemed to include any revenues of the Primary Obligor and the debt service payable with respect to the Indebtedness guaranteed shall be calculated in accordance with the assumptions contained in the Master Indenture.

(H) Commitment Indebtedness without limit.

(I) Subordinated Indebtedness without limitation.

(J) Any other Additional Indebtedness which (i) constitutes Short-Term Indebtedness and (ii) at the time of incurrence of such Short-Term Indebtedness, the aggregate principal amount of all such Indebtedness incurred pursuant to this clause (J) does not exceed 5% of total revenues of the System as reflected in the most recently available Financial Statements of the System; provided that the outstanding principal amount of any such Short-Term Indebtedness shall not exceed 5% of total revenues as reflected in the Financial Statements of the System for period of thirty (30) consecutive days during each Fiscal Year plus such additional amount as the Obligated Group Agent certifies in an Officer’s Certificate is (a) attributable to Short-Term Indebtedness incurred to offset a temporary delay in the receipt of funds due from third-party payors and (b) in the minimum amount reasonably practicable taking into account such delay.

(K) Short-Term Indebtedness which constitutes commercial paper if there is in effect with respect to such Short-Term Indebtedness a Commitment, if the conditions described in the Master Indenture are met with respect to such Short-Term Indebtedness when it is assumed that such Short-Term Indebtedness is Long-Term Indebtedness maturing over 30 years from the date of issuance of the Short-Term Indebtedness, bears interest on the unpaid principal balance at the Projected Rate and is payable on a level annual debt service basis over a 30-year period.

(L) Indebtedness the principal amount of which at the time incurred, together with the aggregate principal amount of all other Indebtedness then outstanding which was issued pursuant to the provisions of the Master Indenture and which has not been subsequently reclassified as having been issued under subsection (A), (E), (F), (J) or (K) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS”, does not exceed 10% of the total revenues of the System derived from the most recently available Financial Statements of the System.

(M) Liabilities for contributions to self-insurance or shared or pooled risk insurance programs.

D-24 (N) Indebtedness consisting of accounts payable incurred in the ordinary course of business or other Indebtedness not incurred or assumed primarily to assure the repayment of money borrowed or credit extended, which Indebtedness is incurred in the ordinary course of business.

It is agreed and understood by the parties to the Master Indenture that various types of Indebtedness may be incurred under any of the above-referenced subsections with respect to which the tests set forth in such subsection are met and need not be incurred under only a subsection specifically referring to such type of Indebtedness (e.g., Balloon Indebtedness and Put Indebtedness may be incurred under subsection (A) above if the tests therein are satisfied).

Each Obligated Group Member covenants that prior to, or as soon as reasonably practicable after, the incurrence of Additional Indebtedness by any Credit Group Member, it will deliver to the Master Trustee an Officer’s Certificate which identifies the Indebtedness incurred, identifies the subsection summarized under this caption pursuant to which such Indebtedness was incurred and demonstrates compliance with the provisions of such subsection.

Each Obligated Group Member covenants that Indebtedness of the type permitted to be incurred under subsection (N) above will not be allowed to become overdue for a period in excess of that which is ordinary for similar institutions without being contested in good faith and by appropriate proceedings.

CALCULATION OF DEBT SERVICE

The various calculations of the amount of Indebtedness of a Person, the amortization schedule of such Indebtedness and the Debt Service Requirement with respect to such Indebtedness required under certain provisions of the Master Indenture shall be made in a manner consistent with that adopted pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS.” In the case of Balloon, Short-Term or Put Indebtedness issued pursuant to subsection (B), (E), (F) or (L) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” unless such Indebtedness is reclassified pursuant to the provisions summarized under this caption as having been issued pursuant to another subsection of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” the amortization schedule of such Indebtedness and the debt service payable with respect to such Indebtedness for future periods shall be calculated on the assumption that such Indebtedness is being issued simultaneously with such calculation. With respect to Put Indebtedness, if the option of the holder to require that such Indebtedness be paid, purchased or redeemed prior to its stated maturity date, or if the requirement that such Indebtedness be paid, purchased or redeemed prior to its stated maturity date (other than at the option of such holder and other than pursuant to any mandatory sinking fund or any similar fund), has expired or lapsed as of the date of calculation, such Put Indebtedness shall be deemed payable in accordance with its terms.

In determining the amount of debt service payable on Indebtedness in the course of the various calculations required under certain provisions of the Master Indenture, if the terms of the Indebtedness being considered are such that interest thereon for any future period of time is expressed to be calculated at a varying rate per annum, a formula rate or a fixed rate per annum based on a varying index, then for

D-25 the purpose of making such determination of debt service, interest on such Indebtedness for such period (the “Determination Period”) shall be computed by assuming that the rate of interest applicable to the Determination Period is equal to the average of the rate of interest (calculated in the manner in which the rate of interest for the Determination Period is expressed to be calculated) that was or would have been in effect for the 12-month period immediately preceding the date on which such calculation is made; provided, however, that if such average annual rate of interest cannot be calculated for such entire 12-month period but can be calculated for a shorter period, then the assumed interest rate for the Determination Period shall be the average annual rate of interest that was or would have been in effect for such shorter period; and provided further, that if such average annual rate of interest cannot be calculated for any preceding period of time, then the assumed interest rate for the Determination Period shall be the initial annual rate of interest which is actually applicable to such Indebtedness upon the incurrence thereof. The provisions of this paragraph shall not apply to Put Indebtedness, Balloon Indebtedness or Short-Term Indebtedness incurred pursuant to (E), (F) or (L) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS” (which debt service shall be calculated as set forth in (E), (F) or (L) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” respectively) unless such Put Indebtedness, Balloon Indebtedness or Short-Term Indebtedness is incurred pursuant to the provisions of subsection (A) of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS” or is thereafter reclassified as issued pursuant to such subsection.

No debt service shall be deemed payable with respect to Commitment Indebtedness until such time as funding occurs under the commitment which gave rise to such Commitment Indebtedness. From and after such funding, the amount of such debt service shall be calculated in accordance with the actual amount required to be repaid on such Commitment Indebtedness and the actual interest rate and amortization schedule applicable thereto. No Additional Indebtedness shall be deemed to arise when any funding occurs under any such commitment or any such commitment is renewed upon terms which provide for substantially the same terms of repayment of amounts disbursed pursuant to such commitment as obtained prior to such renewal.

The outstanding principal amount of any Put Indebtedness, Balloon Indebtedness or Short-Term Indebtedness shall be reduced by the amount of any Commitment Indebtedness to the extent payments are required to be made by the Credit Group under such Commitment Indebtedness.

None of (i) conversion of variable rate Indebtedness to bear interest at a fixed rate in accordance with its terms, (ii) a shift in the method of computing interest or the terms of which Put Indebtedness may be tendered which shift is made in accordance with the terms of such Indebtedness or (iii) the extension of the maturity of any Indebtedness without any increase in the principal amount thereof or change in the interest rate applicable thereto shall be deemed to constitute the issuance of such Indebtedness for the purposes of applying the various tests under the Master Indenture.

Balloon Indebtedness incurred as provided under subsection (B) or (L) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” unless reclassified, shall be deemed to be payable in accordance with the assumptions set forth in subsection (E) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER

D-26 INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS.” Put Indebtedness incurred as provided under subsection (B), (F) or (L) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” unless reclassified pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” shall be deemed to be payable in accordance with the assumptions set forth in subsection (F) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS.” Short-Term Indebtedness incurred as provided under subsection (J) or (K) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” unless reclassified pursuant to pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” shall be deemed to be payable in accordance with the assumptions set forth in subsection (K) pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS.”

Except for the purpose of determining whether any Guaranty may be incurred, in which case it shall be assumed that 100% of the Indebtedness guaranteed is Long-Term Indebtedness of the guarantor, when calculating the Debt Service Requirement under a Guaranty, a guarantor shall be considered liable only for 20% of the annual debt service requirement on the Indebtedness guaranteed; provided, however, if the guarantor has been required by reason of its guaranty to make a payment in respect of such Indebtedness within the immediately preceding 24 months, the guarantor shall be considered liable for 100% of the annual debt service requirement on the debt guaranteed.

Each Credit Group Member may elect to have Indebtedness issued pursuant to one provision of pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” including without limitation subsection (L), reclassified as having been incurred under another provision of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS,” by demonstrating compliance with such other provision on the assumption that such Indebtedness is being reissued on the date of delivery of the materials required to be delivered under such other provision including the report of a Consultant with respect to any applicable Projected Rate. From and after such demonstration, such Indebtedness shall be deemed to have been incurred under the provision with respect to which such compliance has been demonstrated until any subsequent reclassification of such Indebtedness.

Anything in the Master Indenture to the contrary notwithstanding, any portion of any Indebtedness of any Credit Group Member for which an Interest Rate Agreement has been obtained by such Credit Group Member shall be deemed to bear interest for the period of time that such Interest Rate Agreement is in effect at a net rate which takes into account the interest payments made by such Credit Group Member on such Indebtedness and the payments made or received by such Credit Group Member on such Interest Rate Agreement provided that the long-term credit rating of the provider of such Interest Rate Agreement (or any guarantor thereof) is in one of the three highest rating categories of any Rating Agency (without regard to any refinements of gradation of rating category by numerical modifier or otherwise) or the provider of such Interest Rate Agreement secures its obligations under the Interest Rate

D-27 Agreement with a cash or securities collateral agreement, otherwise the rate used shall be the higher of the rate on such Indebtedness or the amount due under the Interest Rate Agreement. In addition, so long as any Indebtedness is deemed to bear interest at a rate taking into account an Interest Rate Agreement, any payments made by a Credit Group Member on such Interest Rate Agreement shall be excluded from expenses and any payments received by a Credit Group Member on such Interest Rate Agreement shall be excluded from revenues, in each case, for all purposes of the Master Indenture.

RATES AND CHARGES AND CALCULATION OF DEBT SERVICE COVERAGE

Each Obligated Group Member covenants and agrees to, and each Obligated Group Member covenants to cause each Designated Affiliate under its control and each Unlimited Credit Group Participant or Limited Credit Group Participant with which it or any Designated Affiliate under its control maintains a contract or agreement to, conduct its business on a revenue-producing basis and to exercise such skill and diligence as to provide income from its Property, together with other available funds sufficient to pay promptly all Required Payments on the Obligations, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it under the Master Indenture, to the extent permitted by law.

If in any such Fiscal Year the Annual Debt Service Coverage Ratio of the System as set forth in the Officer’s Certificate delivered pursuant to the provisions of the Master Indenture summarized in subsection (b) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – FINANCIAL STATEMENTS,ETC.” is less than 1.15 to 1, the Master Trustee shall require the Obligated Group Agent at its expense to retain a Consultant to make recommendations with respect to the rates, fees and charges of the System Affiliates and the System Affiliates’ methods of operation and other factors affecting its financial condition in order to increase the Annual Debt Service Coverage Ratio of the System for the succeeding Fiscal Year to at least 1.15 to 1.

A copy of the Consultant’s report and recommendations, if any, shall be filed with the Obligated Group Agent and the Master Trustee. Each Obligated Group Member shall follow, and each Obligated Group Member shall cause each Designated Affiliate and System Affiliate under its control, to follow the recommendations of the Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Obligated Group Member) and permitted by law, subject in the case of a Limited Credit Group Participant to the terms of its contract or agreement. This covenant shall not be construed to prohibit any System Affiliate from serving indigent patients to the extent required for such System Affiliate to continue its qualification as a Tax-Exempt Organization or from saving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the System from satisfying the other requirements of the Master Indenture summarized under this caption.

The foregoing provisions notwithstanding, if in any Fiscal Year the Annual Debt Service Coverage Ratio of the System as set forth in the Officer’s Certificate delivered pursuant to the provisions of the Master Indenture summarized in subsection (b) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –FINANCIAL STATEMENTS,ETC.” is less than 1.15 to 1, the Master Trustee shall not be obligated to require the Obligated Group Agent to retain a Consultant to make such recommendations if: (a) there is filed with the Master Trustee a written report addressed to them of a Consultant which contains an opinion of such Consultant that applicable laws or regulations have prevented the System from generating Income Available for Debt Service during such Fiscal Year in an

D-28 amount sufficient to produce an Annual Debt Service Coverage Ratio of the System of 1.15 to 1 or higher, and, if requested by the Master Trustee, such report is accompanied by a concurring opinion of Counsel as to any conclusions of law supporting the report of such Consultant; (b) the report of such Consultant indicates that the fees and rates charged by the System Affiliates are such that, in the opinion of the Consultant, the System has generated the maximum amount of revenues reasonably practicable given such laws or regulations; and (c) the Annual Debt Service Coverage Ratio of the System was at least 1.00 to 1 for such Fiscal Year. The Obligated Group Agent shall not be required to cause the Consultant’s report referred to in the preceding sentence to be prepared more frequently than once every two Fiscal Years if at the end of the first of such two Fiscal Years the Obligated Group Agent provides to the Master Trustee an opinion of Counsel to the effect that the applicable laws and regulations underlying the Consultant’s report delivered in respect of the previous Fiscal Year have not changed in any material way.

Any provision summarized under this caption notwithstanding, if the Annual Debt Service Coverage Ratio of the System as set forth in the Officer’s Certificate delivered pursuant to subsection (b) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –FINANCIAL STATEMENTS,ETC.” is less than 1.00 to 1 as of the last day of any Fiscal Year, an event of default shall exist under the Master Indenture.

LIQUIDITY

In the event Days Cash on Hand of the System Affiliates as set forth in the Officer’s Certificate delivered pursuant to the provisions of the Master Indenture summarized in subsection (b) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –FINANCIAL STATEMENTS, ETC.” is less than 60 as of the last day of any such Fiscal Year, the Master Trustee shall require the Obligated Group Agent at its expense to retain a Consultant to make recommendations with respect to the rates, fees and charges of the System Affiliates and the System Affiliates’ methods of operation and other factors affecting their financial condition in order to increase the Days Cash on Hand to at least 60.

A copy of the Consultant’s report and recommendations, if any, shall be filed with the Obligated Group Agent and the Master Trustee. Each Obligated Group Member shall follow, and each Obligated Group Member shall cause each Designated Affiliate and System Affiliate under its control, to follow the recommendations of the Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Obligated Group Member) and permitted by law, subject in the case of a Limited Credit Group Participant to the terms of its contract or agreement. This covenant shall not be construed to prohibit any Person from serving indigent patients to the extent required for such Person to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the System from satisfying the other requirements of the Master Indenture summarized under this caption.

The Obligated Group Agent shall not be required to cause the Consultant’s report referred to in the preceding paragraph to be prepared more frequently than once every two Fiscal Years if at the end of the first of such two Fiscal Years the Obligated Group Agent provides to the Master Trustee an opinion of Counsel to the effect that the applicable laws and regulations underlying the Consultant’s report delivered in respect of the previous Fiscal Year have not changed in any material way.

D-29 Any provision summarized under this caption notwithstanding, if Days Cash on Hand of the System Affiliates as set forth in the Officer’s Certificate delivered pursuant to the provisions of the Master Indenture summarized in subsection (b) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –FINANCIAL STATEMENTS,ETC.” is less than 45 as of the last day of any Fiscal Year, an event of default shall exist under the Master Indenture.

INSURANCE

Each Obligated Group Member covenants and agrees to, and each Obligated Group Member covenants to cause each Designated Affiliate under its control and each Limited Credit Group Participant or Unlimited Credit Group Participant with which it or any Designated Affiliate under its control maintains a contract or agreement to, maintain or cause to be maintained at its sole cost and expense, insurance (which may be self-insurance) with respect to its Property, the operation thereof and its business against such casualties, contingencies and risks (including but not limited to public liability and employee dishonesty) and in amounts not less than is customary in the case of corporations engaged in the same or similar activities and similarly situated and as is adequate to protect its Property and operations. The Obligated Group Agent shall at least once every two Fiscal Years cause a certificate of an Insurance Consultant or Insurance Consultants to be delivered to the Master Trustee which indicates that the insurance then being maintained by the Credit Group Members is customary in the case of corporations engaged in the same or similar activities and similarly situated and is adequate to protect the Credit Group’s Property and operations. The Obligated Group Agent shall cause a copy of the certificate of the Insurance Consultant or Insurance Consultants to be delivered promptly to the Master Trustee, and upon request, to each Related Bond Trustee and to each Related Issuer.

SALE,LEASE OR OTHER DISPOSITION OF PROPERTY

Each Credit Group Member agrees that it will not, in any consecutive 12-month period, sell, lease, contribute, loan or otherwise dispose (including without limitation any involuntary disposition) of Property which, together with all other Property transferred by Credit Group Members in transactions other than those described in subsections (A) through (G) under this caption, totals for such 12-month period in excess of 10% of the total value of the Property of the System (calculated on the basis of the Book Value of the assets shown on the Financial Statements of the System or, if the Obligated Group Agent so elects, on the basis of Current Value), except for transfers or other dispositions of Property:

(A) In the ordinary course of business;

(B) In return for other Property (including cash) of equal or greater value and usefulness;

(C) To any Person, if prior to such sale, lease, contribution or other disposition there is delivered to the Master Trustee an Officer’s Certificate of a Credit Group Member stating that, in the judgment of the signer, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property;

D-30 (D) To another Credit Group Member (other than to a Limited Credit Group Participant);

(E) Upon fair and reasonable terms no less favorable to the Credit Group Member than the Credit Group Member would obtain in a comparable arm’s-length transaction, if following such transfer the proceeds received by the transferor are retained thereby, applied to acquire Property or to repay the principal of Long-Term Indebtedness of any Credit Group Member;

(F) To any Person, if such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on the Obligations; or

(G) To any Person upon delivery to the Master Trustee of an Officer’s Certificate of the Obligated Group Agent to the effect that, immediately after such disposition, the Transaction Test would be satisfied.

The foregoing provisions summarized under this caption notwithstanding, each Credit Group Member agrees that it will not sell, lease or otherwise dispose of any Property subject to the Mortgages without satisfying the requirements summarized under this caption and the requirements of the Mortgages summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES –CONDITIONS FOR RELEASE” herein.

MERGER,CONSOLIDATION,SALE OR CONVEYANCE

(a) Each Obligated Group Member agrees that it will not merge into, or consolidate with, one or more corporations which are not Obligated Group Members, or allow one or more of such corporations to merge into it, or sell or convey all or substantially all of its Property to any Person who is not an Obligated Group Member, unless:

(i) Any successor corporation to such Obligated Group Member (including without limitation any purchaser of all or substantially all the Property of such Obligated Group Member) is a corporation organized and existing under the laws of the United States of America or a state thereof and shall execute and deliver to the Master Trustee an appropriate instrument, satisfactory to the Master Trustee, containing the agreement of such successor corporation to assume, jointly and severally, the due and punctual payment of the Required Payments on all Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of the Master Indenture to be kept and performed by such Obligated Group Member;

(ii) Immediately after such merger or consolidation, or such sale or conveyance, no Obligated Group Member would be in default in the performance or observance of any covenant or condition of any Related Loan Document or the Master Indenture and the Master Trustee shall receive an Officer’s Certificate of the Obligated Group Agent to such effect;

(iii) The Master Trustee receives an opinion of Counsel to the effect that (a) such consolidation, merger, conveyance or transfer and any such assumption and Supplemental Master

D-31 Indenture delivered in connection therewith comply with the requirements described in the Master Indenture; (b) all conditions precedent to such transaction have been complied with; (c) the Person which is the surviving entity meets the conditions contained in the Master Indenture and is liable on all Obligations Outstanding under the Master Indenture, as if such Obligations were originally issued by such Person; and (d) under then existing law such merger, consolidation, sale or conveyance will not subject any Obligations to the registration provisions of the Securities Act of 1933, as amended (or that such Obligations have been so registered if registration is required);

(iv) If all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance would not adversely affect the validity of such Related Bonds or the exemption otherwise available from federal or state income taxation of interest payable on such Related Bonds;

(v) The Master Trustee receives an Officer’s Certificate of the Obligated Group Agent to the effect that, immediately after such consolidation, merger, conveyance or transaction, the Transaction Test would be satisfied.

(b) In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named in the Master Indenture as such Obligated Group Member and the Obligated Group Member which is a party to such transaction, if it is not the survivor, shall thereupon be relieved of any further obligation or liabilities under the Master Indenture or upon the Obligations and such Obligated Group Member as the predecessor or non-surviving corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated. Any successor corporation to such Obligated Group Member thereupon may cause to be signed and may issue in its own name Obligations under the Master Indenture. All Obligations so issued by such successor corporation under the Master Indenture shall in all respects have the same legal rank and benefit under the Master Indenture as Obligations theretofore or thereafter issued in accordance with the terms of the Master Indenture as though all of such Obligations had been issued under the Master Indenture by such prior Obligated Group Member without any such consolidation, merger, sale or conveyance having occurred.

(c) In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate.

(d) Except as may be expressly provided in any Supplemental Master Indenture, the ability of any Designated Affiliate, Unlimited Credit Group Participant or Limited Group Participant to merge into, or consolidate with, one or more corporations, or allow one or more corporations to merge into it, or sell or convey all or substantively all of its Property to any Person is not limited by the provisions of the Master Indenture.

D-32 DAMAGE OR DESTRUCTION

Each Member agrees to notify the Master Trustee immediately in the case of the destruction of its Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, the Net Proceeds of which are estimated to exceed $10,000,000.

In the event the Net Proceeds exceed the amount described above, the Member suffering the casualty or loss shall deposit such Net Proceeds with the Master Trustee and within 12 months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, unless objected to by the Master Trustee:

(a) Option A – Repair and Restoration. Such Member may elect to replace, repair, reconstruct, restore or improve any of the Facilities of the Obligated Group or acquire additional Facilities for the Obligated Group or repay Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds. In such event such Member shall proceed forthwith to replace, repair, reconstruct, restore or improve Facilities of the Obligated Group or to acquire additional Facilities. So long as the Obligated Group Member(s) are not in default under the Master Indenture, any Net Proceeds of insurance relating to such damage or destruction received by the Master Trustee shall be released from time to time by the Master Trustee to such Member upon the receipt by the Master Trustee of (i) an Officer’s Certificate of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such repair, reconstruction, restoration, improvement or acquisition and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction, restoration, improvement or acquisition and (ii) if such expenditures were or are to be made or such Indebtedness was incurred for the construction or renovation of Facilities, the written approval of such Officer’s Certificate by an Independent Architect.

It is further understood and agreed that in the event such Member shall elect this Option A, such Member shall complete the replacement, repair, reconstruction, restoration, improvement and acquisition of the Facilities, whether or not the Net Proceeds of insurance received for such purposes are sufficient to pay for the same.

(b) Option B – Prepayment of Obligations. Such Member may elect to have all or a portion of the Net Proceeds payable as a result of such damage or destruction applied to the prepayment of the Obligations designated by the Obligated Group Agent. In such event such Member shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds, when and as received, to the prepayment of the Obligations provided that if in any such case less than all of the Obligations are redeemed the Obligated Group shall have first provided the Master Trustee with a certificate of an Independent Architect or Consultant or other expert approved by the Master Trustee stating (i) that the property that was damaged is not essential to the Obligated Group’s use or occupancy of its Facilities and the damage will not operate to materially reduce the revenues of the Obligated Group or (ii) that the damaged facility has been restored to a condition substantially equivalent to its condition prior to the damage or condemnation. Notwithstanding the foregoing, if the Obligations designated by the Obligated Group Agent for prepayment secure an issue of Related Bonds the Obligated Group further

D-33 agrees to comply with the provisions of the Related Bond Indenture for the prepayment of the Related Bonds and the Obligations designated for prepayment by the Obligated Group Agent pursuant to the provisions summarized under this caption are not deemed prepaid pursuant to the provisions summarized under this caption unless their prepayment results in a corresponding prepayment of the Related Bonds.

(c) Option C – Partial Restoration and Partial Prepayment of Obligations. Such Member may elect to have a portion of such Net Proceeds applied to the replacement, repair, reconstruction, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds with the remainder of such Net Proceeds to be applied to prepay Obligations, in which event the Net Proceeds to be used for replacement, repair, reconstruction, restoration, improvement and acquisition shall be applied as set forth in subsection (a) summarized under this caption and the Net Proceeds to be used for prepayment of the Obligations shall be applied as set forth in subsection (b) summarized under this caption.

The foregoing notwithstanding, no Member will be required to comply with the provisions summarized under this caption to the extent that the Facilities damaged or destroyed were pledged as security for Non-Recourse Indebtedness incurred in accordance with the provisions of the Master Indenture summarized in paragraph (D) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –PERMITTED ADDITIONAL INDEBTEDNESS” or Indebtedness secured by Liens imposed in accordance with paragraphs (b) or (t) of the definition of Permitted Encumbrances summarized under the caption “DEFINITIONS OF CERTAIN TERMS – Permitted Encumbrances” and the documents pursuant to which such Indebtedness was incurred require Net Proceeds to be applied in a manner inconsistent with the provisions summarized under this caption.

CONDEMNATION

The Master Trustee shall cooperate fully with the Obligated Group Member(s) in the handling and conduct of any prospective or pending condemnation proceedings with respect to their Facilities or any part thereof. Each Member hereby irrevocably assigns to the Master Trustee, as its interests may appear, all right, title and interest of such Member in and to any Net Proceeds of any award, compensation or damages payable in connection with any such condemnation or taking, or payment received in a sale transaction consummated under threat of condemnation (any such award, compensation, damages or payment being hereinafter referred to as an “award”), which exceeds $10,000,000. Such Net Proceeds shall be initially paid to the Master Trustee for disbursement or use as hereinafter provided. In the event such Net Proceeds exceed the amount described above, the Member in question shall within 12 months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, unless objected to by the Master Trustee:

(a) Option A – Repairs and Improvements. The Member may elect to use the Net Proceeds of the award for restoration or replacement of or repairs and improvements to the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of

D-34 such Net Proceeds. In such event, so long as the Obligated Group is not in default under the Master Indenture, such Member shall have the right to receive such Net Proceeds from the Master Trustee from time to time upon the receipt by the Master Trustee of (i) the Officer’s Certificate of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such restoration, replacement, repairs, improvements and acquisitions and stating that such Net Proceeds, together with any of the moneys legally available for such purposes, will be sufficient to complete such restoration, replacement, repairs, improvements and acquisition and (ii) if such expenditures were or are to be made or such Indebtedness was incurred for the construction or renovation of Facilities, the written approval of such Officer’s Certificate by an Independent Architect.

(b) Option B – Prepayment of Obligation. Such Member may elect to have such Net Proceeds of the award applied to the prepayment of the Obligation. In such event such Member shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds when and as received, to the prepayment of the Obligation designated by the Obligated Group Agent; provided that if in any such case less than all of the Obligation is prepaid the Obligated Group shall have first provided the Master Trustee with a certificate of an Independent Architect or Consultant or other expert approved by the Master Trustee stating (i) that the property that was condemned is not essential to the Obligated Group’s use or occupancy of its Facilities and the condemnation will not operate to materially reduce the revenues of the Obligated Group or (ii) that the condemned facility has been restored to a condition substantially equivalent to its condition prior to the damage or condemnation. Notwithstanding the foregoing, if the Obligation designated by the Obligated Group Agent for prepayment secures an issue of Related Bonds the Obligated Group further agrees to comply with the provisions of the Related Bond Indenture for the prepayment of the Related Bonds and the Obligation designated for prepayment by the Obligated Group Agent pursuant to pursuant to the provisions summarized under this caption is not deemed prepaid pursuant to the provisions summarized under this caption unless its prepayment results in a corresponding prepayment of the Related Bonds.

(c) Option C – Partial Restoration and Partial Prepayment of Obligation. Such Member may elect to have a portion of such Net Proceeds of the award applied to the repair, replacement, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds, with the remainder of such Net Proceeds to be applied to the prepayment of Obligation, in which event such Net Proceeds to be used for repair, replacement, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) summarized under this caption and such Net Proceeds to be used for prepayment of the Obligation shall be applied as set forth in subparagraph (b) summarized under this caption.

The foregoing notwithstanding, no Member will be required to comply with the provisions summarized under this caption to the extent that the Facilities condemned were pledged as security for Non-Recourse Indebtedness incurred in accordance with paragraph (D) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – PERMITTED ADDITIONAL INDEBTEDNESS” or Indebtedness secured by Liens imposed in accordance with paragraphs (b) or (t) of the definition of Permitted Encumbrances summarized

D-35 under the caption “DEFINITIONS OF CERTAIN TERMS – Permitted Encumbrances” and the documents pursuant to which such Indebtedness was issued require Net Proceeds to be applied in a manner inconsistent with the provisions summarized under this caption.

FINANCIAL STATEMENTS,ETC.

Each Obligated Group Member covenants that it will, and will cause each System Affiliate to, keep adequate records and books of account in which complete and correct entries will be made; and

(a) Deliver to the Master Trustee within 150 days after the last day of each Fiscal Year one or more financial statements that in the aggregate include all System Affiliates. Such financial statements shall:

(i) consist of consolidated or combined financial results including the Obligated Group Members and each System Affiliate and one or more other Persons required to be consolidated or combined with such entity(ies) under GAAP;

(ii) be audited by a firm of national recognized independent certified public accountants as having been prepared in accordance with GAAP; and

(iii) include a consolidated or combined balance sheet, statement of operations and changes in net assets.

If the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent less than eighty-five (85%) of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year, the financial statements required to be delivered for that Fiscal Year shall include a consolidating schedule from which the financial information relating solely to the Obligated Group Members and the Designated Affiliates may be derived.

(b) Deliver to the Master Trustee within 150 days after the last day of each Fiscal Year an Officer’s Certificate (i) setting forth calculations based upon the Financial Statements of the System for such Fiscal Year of (A) the Annual Debt Service Coverage Ratio of the System for the reported Fiscal Year, and (B) Days Cash on Hand of the System Affiliates as of the last day of the reported Fiscal Year, and (ii) stating that, to the best of the signer’s knowledge, no event which constitutes an Event of Default has occurred and is continuing as of the end of such Fiscal Year, or specifying the nature of such event and the actions taken and proposed to be taken by the Members to cure such Event of Default.

(c) The Financial Statements of the System shall be used for purposes of determining compliance with all financial covenants and ratios pursuant to and under the Master Indenture so long as the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent at least eighty-five (85%) of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year. Notwithstanding the foregoing, if the total revenues and the total assets of the Obligated Group Members and Designated Affiliates collectively represent less than eighty-five (85%) of the consolidated total revenues and the consolidated total assets, respectively, of the System for any Fiscal Year, all financial covenants and ratios required to be calculated for such Fiscal Year shall be calculated for the Credit Group, and any and all references to the terms

D-36 “System” and “System Affiliates” in such covenants and all related defined terms shall be replaced with the term “Credit Group” and “Credit Group Members,” respectively.

OTHER COVENANTS OF THE OBLIGATED GROUP MEMBERS

Each Obligated Group Member hereby covenants to, and each Obligated Group Member covenants to cause each Designated Affiliate under its control and each Limited Credit Group Participant or Unlimited Credit Group Participant with which it or any Designated Affiliate under its control maintains a contract or agreement to:

(a) Except as otherwise expressly provided in the Master Indenture (i) preserve its corporate or other separate legal existence, (ii) preserve all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and (iii) be qualified to do business and conduct its affairs in each jurisdiction where its ownership of Property or the conduct of its business or affairs requires such qualification; provided, however, that nothing contained in the Master Indenture shall be construed to obligated such Member or Designated Affiliate to retain, preserve or keep in effect the rights, licenses or qualifications no longer used, or in the judgment of its Governing Body, useful or desirable in the conduct of its business.

(b) Promptly pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable which if not so paid, satisfied or discharged would constitute a default or an event of default under subsection (c) under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –DEFAULTS AND REMEDIES.”

(c) Unless such Lien is being contested in accordance with the provisions of the Master Indenture, at all times comply with all terms, covenants and provisions of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness.

(d) In the case of any Person which is a Tax-Exempt Organization at the time it becomes a Credit Group Member, so long as all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or provision for such payment has not been made, to take no action or suffer any action to be taken by others, including any action which would result in the alteration or loss of its status as a Tax-Exempt Organization, which could result in any such Related Bond being declared invalid or result in the interest on any Related Bond, which is otherwise exempt from federal or state income taxation, becoming subject to such taxation.

(e) Operate all of its Facilities so as not to discriminate on a legally impermissible basis.

(f) At its sole cost and expense, promptly comply with all present and future laws, ordinances, orders, decrees, decisions, rules, regulations and requirements of every duly constituted governmental authority, commission and court and the officers thereof which may be applicable to it or any of its affairs, business, operations and Property, any part thereof, any of the streets, alleys, passageways, sidewalks, curbs, gutters, vaults and vault spaces adjoining any of its Property or any part thereof or to the use or manner of use, occupancy or condition of any of its Property or any part thereof.

(g) Procure and maintain all necessary licenses and permits and use its best efforts to maintain the status of its health care Facilities (other than those not currently having such status or not

D-37 having such status on the date a Person becomes a Credit Group Member under the Master Indenture) as providers of health care services eligible for payment under those third-party payment programs which its Governing Body determines are appropriate.

(h) At all times use its Facilities only in furtherance of its lawful corporate purposes and cause its business to be carried on and conducted and its Property and each part thereof to be maintained, preserved and kept in good repair, working order and condition and in as safe condition as its operations will permit and make all necessary and proper repairs (interior and exterior, structural and non-structural, ordinary as well as extraordinary and foreseen as well as unforeseen), renewals and replacements thereof so that its operations and business shall at all times be conducted in an efficient, proper and advantageous manner; provided, however, that nothing in the Master Indenture contained shall be construed (i) to prevent it from ceasing to operate any portion of its Property that, in the reasonable judgment of the Obligated Group Agent, is not material to the overall operations or financial condition of the Credit Group, (ii) to prevent it from ceasing to operate any material portion of its Property, if in its reasonable judgment (evidenced, in the case of such a cessation other than in the ordinary course of business, by a determination by its Governing Body) it is advisable not to operate the same, or if it intends to sell or otherwise dispose of the same and within a reasonable time endeavors to effect such sale or other disposition, or (iii) to obligate it to retain, preserve, repair, renew or replace any Property, leases, rights, privileges or licenses no longer used or, in the judgment of its Governing Body, useful in the conduct of its business.

(i) Pay or cause to be paid: (i) all taxes, levies, assessments and charges on account of the use, occupancy or operation of its Property, including but not limited to all sales, use, occupation, real and personal property taxes, all permit and inspection fees, occupation and license fees and all water, gas, electric, light, power or other utility charges assessed or charged on or against its Property or on account of its use or occupancy thereof or the activities conducted thereon or therein; and (ii) all taxes, assessments and impositions, general and special, ordinary and extraordinary, of every name and kind, which shall be taxed, levied, imposed or assessed during the term of the Master Indenture upon all or any part of its Property, or its interest or the interest of any Related Issuer or either of them in and to its Property, or upon its interest or the interest of any Related Issuer or the interest of either of them in the Master Indenture or the amounts payable under the Master Indenture or under the Obligations, unless payment is being contested in good faith and monies to make the contested payment have been set aside and escrowed for that purpose. If under applicable law any such tax, levy, charge, fee, rate, imposition or assessment may at the option of the taxpayer be paid in installments, any Credit Group Member may exercise such option.

The foregoing notwithstanding, any Credit Group Member may (i) cease to be a nonprofit corporation or (ii) take actions which could result in the alteration or loss of its status as a Tax-Exempt Organization if prior thereto there is delivered to the Master Trustee (1) an Opinion of Bond Counsel to the effect that such actions would not adversely affect the validity of any Related Bond or the exemption from federal or state income taxation of interest payable on any Related Bond otherwise entitled to such exemption or adversely affect the enforceability in accordance with its terms of the Master Indenture against any Person, and (2) an opinion of Counsel to the effect that under then-existing law such action will not subject any Obligations to the registration provisions of the Securities Act of 1933, as amended (or that such Obligations have been so registered if registration is required).

D-38 DEFAULTS AND REMEDIES

Each of the following is an “event of default” under the Master Indenture:

(a) failure of the Obligated Group to pay any installment of interest or principal, or any premium, or tender price of any Obligation when the same shall become due and payable, whether at maturity, upon any date fixed for prepayment or by acceleration or otherwise and the continuance of the failure for such applicable grace period set forth in the Supplemental Master Indenture pursuant to which such Obligation is issued or in a Related Loan Document with respect thereto; or

(b) failure of any Obligated Group Member to comply with, observe or perform any of the covenants, conditions, agreements or provisions of the Master Indenture (other than those described in (a)) and to remedy such default within 60 days after written notice thereof to such Obligated Group Member and the Obligated Group Agent from the Master Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Obligations; provided, that if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Obligated Group Member to remedy such default within such 60-day period shall not constitute a default under the Master Indenture if the Obligated Group Member shall commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or

(c) default in the payment of the principal of, premium, if any, or interest on or purchase price of any Long-Term Indebtedness (other than Non-Recourse Indebtedness or any Long-Term Indebtedness evidenced by an Obligation) of any Obligated Group Member in an amount in excess of 2% of the total revenues of the System, including without limitation any Long-Term Indebtedness created by any Related Loan Document, as and when the same shall become due, or an event of default as defined in any mortgage, indenture, loan agreement or other instrument under or pursuant to which there was issued or incurred, or by which there is secured, any such Long-Term Indebtedness (including any Obligation) of any Obligated Group Member, and which default in payment or event of default entitles the holder thereof (or a credit enhancer exercising the rights of such holder) to declare or, in the case of any Obligation, to request that the Master Trustee declare, such Long-Term Indebtedness due and payable prior to the date on which it would otherwise become due and payable; provided, however, that such default shall not constitute an event of default under the Master Indenture if within 30 days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Long-Term Indebtedness is commenced (i) the Obligated Group Members in good faith commence proceedings to contest the existence or payment of such Long-Term Indebtedness, and (ii) sufficient moneys are escrowed with a bank or trust company for the payment of such Long-Term Indebtedness; or

(d) any Obligated Group Member or any Material Credit Group Member admits insolvency, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for such Member, or for a substantial portion of its Property; or

(e) a trustee, custodian or receiver is appointed for any Obligated Group Member or any Material Credit Group Member or for a substantial portion of its Property and is not discharged within 60 days after such appointment; or

D-39 (f) bankruptcy, dissolution, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors are instituted by or against any Obligated Group Member or any Material Credit Group Member (other than bankruptcy proceedings instituted by any Material Credit Group Member against third parties), and if instituted against any Obligated Group Member or any Material Credit Group Member are allowed against such Obligated Group Member or Material Credit Group Member or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or

(g) any representation or warranty made by any Obligated Group Member in the Master Indenture or in any statement or certificate furnished to the Master Trustee or the purchaser of any Obligation in connection with the sale of any Obligation or furnished by any Member pursuant to the Master Indenture proves untrue in any material respect as of the date of the issuance or making thereof and shall not be corrected or brought into compliance within 30 days after written notice thereof to the Obligated Group Agent by the Master Trustee or the holders of at least 25% in aggregate principal amount of the Outstanding Obligations; provided, however, that if such representation or warranty cannot be corrected or brought into compliance within 30 days of the receipt of such notice, no event of default shall occur under the Master Indenture so long as the Obligated Group is diligently working to correct such untrue representation or warranty; or

(h) the occurrence of an event of default under any Mortgage; or

(i) any event of default as defined in any agreement or contract pursuant to which a Person becomes a Limited Credit Group Participant or an Unlimited Credit Group Participant which is assigned as security under the Master Indenture shall occur and such event shall be continuing from and after the expiration of any grace period permitted with respect thereto; or

(j) payment of any installment of interest or principal, or any premium, on or purchase price of any Related Bond shall not be made when the same shall become due and payable under the provisions of any Related Bond Indenture; or

(k) the occurrence of an event of default as described in the last paragraph of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – RATES AND CHARGES” or the last paragraph of the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – LIQUIDITY.”

If an event of default has occurred and is continuing, the Master Trustee may, and if requested by the holders of not less than 25% in aggregate principal amount of Outstanding Obligations shall, by notice in writing delivered to the Obligated Group Agent, declare the entire principal amount of all Obligations then outstanding under the Master Indenture and the interest accrued thereon immediately due and payable, and the entire principal and such interest shall thereupon become immediately due and payable, subject, however, to the provisions of the Master Indenture with respect to waivers of events of default.

Upon the occurrence of any event of default under the Master Indenture and subject to the provisions of the Master Indenture, the Master Trustee may pursue any available remedy including a suit, action or proceeding at law or in equity to enforce the payment of the Required Payments on the

D-40 Obligations outstanding under the Master Indenture and any other sums due under the Master Indenture and may collect such sums in the manner provided by law out of the Property of any Obligated Group Member wherever situated.

DIRECTION OF PROCEEDINGS BY HOLDERS

The holders of a majority in aggregate principal amount of the Obligations then outstanding which have become due and payable in accordance with their terms or have been declared due and payable pursuant to the provisions of the Master Indenture summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –DEFAULTS AND REMEDIES” and have not been paid in full in the case of remedies exercised to enforce such payment, or the holders of a majority in aggregate principal amount of the Obligations then outstanding in the case of any other remedy, shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Master Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Master Indenture or for the appointment of a receiver or any other proceedings under the Master Indenture, provided, that such direction shall not be otherwise than in accordance with the provisions of law and of the Master Indenture and that the Master Trustee shall have the right to decline to comply with any such request in accordance with the provisions of the Master Indenture if the Master Trustee shall be advised by counsel (who may be its own counsel) that the action so directed may not lawfully be taken or the Master Trustee in good faith shall determine that such action would be unjustly prejudicial to the holders of the Obligations not parties to such direction.

The foregoing notwithstanding, the holders of a majority in aggregate principal amount of the Obligations then outstanding which are entitled to the exclusive benefit of certain security in addition to that intended to secure all or other Obligations shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Master Trustee subject to the provisions of the Master Indenture, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Master Indenture, the Supplemental Master Indenture or Indentures pursuant to which such Obligations were issued or so secured or any separate security document in order to realize on such security; provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and of the Master Indenture.

WAIVER OF EVENTS OF DEFAULT

If, at any time after the principal of all Obligations shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered and before the acceleration of any Related Bond, any Obligated Group Member shall pay or shall deposit with the Master Trustee a sum sufficient to pay all matured installments of interest upon all such Obligations and the principal and premium, if any, of all such Obligations that shall have become due otherwise than by acceleration (with interest on overdue installments of interest and on such principal and premium, if any, at the rate borne by such Obligations to the date of such payment or deposit, to the extent permitted by law) and the reasonable expenses of the Master Trustee, and any and all events of default under the Master Indenture, other than the nonpayment of principal of and accrued interest on such Obligations that shall have become due by acceleration, shall have been remedied, then and in every such case the holders of 25% or more in aggregate principal amount of all Obligations then outstanding, by written notice to the Obligated Group Agent and to the Master Trustee, may waive all events of default

D-41 and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or affect any subsequent event of default, or shall impair any right consequent thereon.

APPLICATION OF MONEYS

All moneys received by the Master Trustee pursuant to any right given or action taken under the provisions of Article V of the Master Indenture (except moneys held for the payment of Obligations called for prepayment or redemption which have become due and payable other than pursuant to the provisions summarized under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –DEFAULTS AND REMEDIES”) shall, after payment of the cost and expenses of the proceedings resulting in the collection of such moneys and of the fees of, expenses, liabilities and advances incurred or made by the Master Trustee, any Related Issuers and any Related Bond Trustees, be applied to Required Payments on the Obligations,

(a) unless all Outstanding Obligations have become or have been declared due and payable, to the payment of all Required Payments then due on the Obligations, 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; and

(b) if all Outstanding Obligations have become or have been declared due and payable, to the payment of all Required Payments then due on the Obligations, and, if the amount available is not sufficient to pay in full the whole amount then due and unpaid, then to the payment thereof ratably, without preference or priority, according to the amounts due respectively, without any discrimination or preference.

Whenever moneys are to be applied by the Master Trustee pursuant to the provisions summarized under this caption, such moneys shall be applied by it at such times, and from time to time, as the Master Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Master Trustee shall apply such moneys, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Master Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the holder of any unpaid Obligation until such Obligation shall be presented to the Master Trustee for appropriate endorsement or for cancellation if fully paid.

Whenever all Obligations and interest thereon have been paid under the provisions summarized under this caption and all expenses and charges of the Master Trustee have been paid, any balance remaining shall be paid to the person entitled to receive the same; if no other person shall be entitled thereto, then the balance shall promptly be paid to the Obligated Group Agent on behalf of the Obligated Group Members.

D-42 SUPPLEMENTAL MASTER INDENTURES AND AMENDMENTS TO THE MORTGAGES

Subject to the limitations set forth in the second paragraph under this caption, the Obligated Group Members and the Master Trustee may, without the consent of, or notice to, any of the Obligation holders, amend or supplement the Master Indenture or any Mortgage, for any one or more of the following purposes:

(a) To cure any ambiguity or defective provision in or omission from the Master Indenture in such manner as is not inconsistent with and does not impair the security of the Master Indenture or the Mortgages or adversely affect the holder of any Obligation;

(b) To grant to or confer upon the Master Trustee for the benefit of the Obligation holders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Obligation holders and the Master Trustee, or either of them, to add to the covenants of the Obligated Group Members for the benefit of the Obligation holders or to surrender any right or power conferred under the Master Indenture or under the Mortgages upon any Obligated Group Member;

(d) To evidence the succession of another corporation to the agreements of an Obligated Group Member or the Master Trustee, or the successor of any thereof under the Master Indenture or under the Mortgages;

(e) To permit the qualification of the Master Indenture under the Trust Indenture Act of 1939, as then amended, or under any similar federal statute hereafter in effect or to permit the qualification of any Obligations for sale under the securities laws of the United States or any state of the United States;

(f) To provide for the refunding or advance refunding of any Obligation;

(g) To provide for the issuance of Obligations;

(h) To reflect the addition to or withdrawal of an Obligated Group Member from the Obligated Group, including the necessary changes to Exhibit B to the Master Indenture;

(i) To provide for the issuance of Obligations with original issue discount, provided such issuance would not materially adversely affect the holders of Outstanding Obligations;

(j) To permit an Obligation to be secured by security which is not extended to all Obligation holders, provided such security consists of a Lien which constitutes a Permitted Encumbrance;

(k) Provide for the release in accordance with the provisions of any Mortgage of any Property subject to the lien of such Mortgage; and

(l) To make any other change which, in the opinion of the Master Trustee, does not materially adversely affect the holders of any of the Obligations, including without limitation any modification, amendment or supplement to the Master Indenture or any indenture supplemental to the

D-43 Master Indenture or the Mortgages in such a manner as to establish or maintain exemption of interest on any Related Bonds under a Related Bond Indenture from federal income taxation under applicable provisions of the Code.

The holders of a majority in aggregate principal amount of the Obligations which are outstanding under the Master Indenture at the time of the execution of such Supplemental Master Indenture or amendment to a Mortgage or, in case less than all of the several series of Obligations are affected thereby, the holders of a majority in aggregate principal amount of the Obligations of the series affected thereby which are outstanding under the Master Indenture at the time of the execution of such Supplemental Master Indenture or Mortgage amendment, shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by the Obligated Group Members and the Master Trustee of such Supplemental Master Indentures or Mortgage amendment as shall be deemed necessary and desirable by the Obligated Group Members for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture or in any Supplemental Master Indenture or Mortgage amendment; provided, however, that nothing contained in the provisions of the Master Indenture summarized under this caption shall permit, or be construed as permitting, (i) an extension of the stated maturity or reduction in the principal amount of or reduction in the rate or extension of the time of paying of interest on or reduction of any premium payable on the redemption of, any Obligation, without the consent of the holder of such Obligation, (ii) a reduction in the aforesaid aggregate principal amount of Obligations the holders of which are required to consent to any such Supplemental Master Indenture, without the consent of the holders of all the Obligations at the time outstanding which would be affected by the action to be taken, (iii) the creation of any lien ranking prior to or on a parity with the lien of the Master Indenture with respect to the trust estate, if any, subject to the Master Indenture or terminate the lien of the Master Indenture on any Property at any time subject to the Master Indenture or deprive the holder of any Obligation of the security afforded by the lien of the Master Indenture except as otherwise provided in the Master Indenture, without the consent of the holders of all the Obligations at the time outstanding which would be affected by the action taken, or (iv) modification of the rights, duties or immunities of the Master Trustee, without the written consent of the Master Trustee.

RELATED BOND TRUSTEE DEEMED TO BE OBLIGATION HOLDERS

For the purposes of consents, approvals, waivers of defaults, direction of remedies, appointment or removal of the Master Trustee under the Master Indenture, each Related Bond Trustee shall be deemed the holder of the Obligation or Obligations pledged to secure the Related Bonds with respect to which such Related Bond Trustee is acting as trustee. The foregoing notwithstanding, in the case of any series of Related Bonds supported by credit enhancement, unless contrary provision is made in the Related Bond Indenture or unless the credit enhancer is insolvent or has failed to honor its obligations to provide such credit enhancement, the Related Bond Trustee shall exercise such rights as it may have as a holder of an Obligation in accordance with the directions of the credit enhancer; provided, however, that no credit enhancer shall have the power to consent in lieu of Obligation holders to any Supplemental Master Indenture entered into for any purpose described in clauses (a) through (c) of the first paragraph under the caption “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –DEFAULTS AND REMEDIES.”

D-44 REMOVAL OF THE MASTER TRUSTEE

The Master Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Master Trustee and to the Obligated Group Agent, and signed by the owners of a majority in aggregate principal amount of Obligations then outstanding; provided, however, that for any Obligation for which the Master Trustee also serves as the Related Bond Trustee or in like capacity, the beneficial holders of a majority in aggregate principal amount of the respective Related Bonds may sign such an instrument as the holder of the Obligation or Obligations pledged to secure such Related Bonds. So long as no event of default or event which with the passage of time or giving of notice or both would become such an event of default has occurred and is continuing under the Master Indenture, the Master Trustee may be removed with or without cause at any time by an instrument in writing signed by the Obligated Group Agent, delivered to the Master Trustee. The foregoing notwithstanding, the Master Trustee may not be removed by the Obligated Group Agent unless written notice of the delivery of such instrument signed by the Obligated Group Agent is mailed to the owners of all Obligations outstanding under the Master Indenture, which notice indicates the Master Trustee will be removed and replaced by the successor trustee named in such notice, such removal and replacement to become effective on the 90th day next succeeding the date of such notice, unless the owners of not less than ten percent (10%) in aggregate principal amount of such Obligations then outstanding under the Master Indenture shall object in writing to such removal and replacement; provided, however, that for any Obligation for which the Master Trustee also serves as the Related Bond Trustee or in like capacity, the beneficial holders of a majority in aggregate principal amount of the respective Related Bonds shall have the right to make such objection. Such notice shall be mailed by first class mail, postage prepaid, to the owners of all such Obligations then outstanding at the address of such owners then shown on the Obligation register.

APPOINTMENT OF SUCCESSOR MASTER TRUSTEE BY THE OBLIGATION HOLDERS;TEMPORARY MASTER TRUSTEE

In case the Master Trustee under the Master Indenture shall resign or be removed, or be dissolved, or shall be in the process of dissolution or liquidation, or otherwise becomes incapable of acting under the Master Indenture, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the owners of a majority in aggregate principal amount of Obligations then outstanding, by an instrument or concurrent instruments in writing signed by such owners, or by their attorneys in fact, duly authorized; provided, however, that for any Obligation for which the Master Trustee also serves as the Related Bond Trustee or in like capacity, the beneficial holders of a majority in aggregate principal amount of the respective Related Bonds shall have the right to make such appointment. The foregoing notwithstanding, so long as the Obligated Group is not in default under the Master Indenture, the Obligated Group Agent shall have the right to appoint any such successor trustee. In case of such vacancy the Obligated Group Agent may appoint a temporary Master Trustee to fill such vacancy until a successor Master Trustee shall be appointed by the Obligation holders in the manner above provided; provided further, that if no permanent successor Master Trustee shall have been appointed by the Obligation holders within the six calendar months next succeeding the month during which the Obligated Group Agent appoints such a temporary Master Trustee, such temporary Master Trustee shall without any further action on the part of the Obligated Group Agent or the Obligation holders become the permanent successor Master Trustee. The foregoing notwithstanding, any such temporary Master Trustee so appointed by the Obligated Group

D-45 Agent shall immediately and without further act be superseded by any successor Master Trustee so appointed by such Obligation holders.

SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGE

The following information is a summary of certain provisions of the Mortgages. Reference is made to the Mortgages for a full and complete statement of the provisions thereof.

GENERAL

The Mortgages secure the payment of the Obligations, the performance by the Obligated Group Members of their obligations under the Master Indenture and the performance by the Mortgagor (as defined below) of its obligations under the applicable Mortgage (collectively, the “Secured Obligations”).

REPRESENTATIONS AND WARRANTIES

Each of Presence Chicago Network and Presence Central and Suburban Network (as applicable, the “Mortgagor”) makes the following representations and warranties as the basis for its covenants in the applicable Mortgage: (a) it is a not for profit corporation duly incorporated under the laws of the State of Illinois, is in existence and duly authorized to conduct its business in the State of Illinois, is duly authorized and has full power under the laws of the State of Illinois and all other applicable provisions of law and its articles of incorporation and by-laws to create, issue, enter into, execute and deliver the Mortgage and all action on its part necessary for the valid execution and delivery of the Mortgage has been duly and effectively taken; (b) the execution and delivery of the Mortgage, the consummation of the transactions contemplated thereby, and the fulfillment of the terms and conditions thereof do not and will not conflict with or result in a breach of any of the terms or conditions of any corporate restriction or of any agreement or instrument to which it is now a party, and do not and will not constitute a default under any of the foregoing. The Mortgagor has full power and lawful authority to mortgage and grant a security interest in the Mortgaged Property (as defined in the applicable Mortgage) to the Master Trustee. The Mortgage constitutes (i) a direct and valid lien upon the Mortgaged Real Estate (as defined in the Mortgage), subject only to Permitted Exceptions, and (ii) a legal, valid and binding obligation of the Mortgagor, enforceable in accordance with its terms. The easements, rights-of-way, liens, encumbrances, covenants, conditions, restrictions, exceptions, minor defects, irregularities of title and encroachments on adjoining real estate which are Permitted Exceptions, if any, now existing with respect to the Mortgaged Real Estate do not and will not materially adversely affect the value of the Mortgaged Real Estate currently affected thereby, or materially impair or materially interfere with the operation and usefulness thereof for the purpose for which they were acquired or are held by the Mortgagor; (c) to the best of the Mortgagor's knowledge, no Hazardous Materials are present on the Mortgaged Property in violation of any applicable Environmental Laws. The Mortgagor will not cause or permit any Hazardous Material to be brought upon, kept, stored, released, produced, manufactured, disposed of, used treated, generated or otherwise handled on, in, about or beneath the Mortgaged Property or any portion thereof by the Mortgagor, its agents, employees, contractors, invitees, any tenants or subtenants, or any other person, except to the extent such Hazardous Material is commonly used in the operation of the Mortgaged Real Estate as hospital and health care facilities and in the construction or normal operation (including renovation or repair) of the Mortgaged Property and such Hazardous Material is handled, used and disposed of in compliance with all applicable Environmental Laws; and (d) the Mortgaged Property and

D-46 its intended use substantially and materially comply with applicable laws, governmental regulations and the terms of any enforcement action commenced by any federal, state, regional or local governmental agency, including, without limitation, all applicable Environmental Laws.

MORTGAGED PROPERTY

The Mortgaged Property under the Mortgages consists of the Mortgaged Real Estate legally described in the Mortgages, generally consisting of eight (8) acute care hospitals and related parking owned and operated by the applicable Mortgagor, together with the entire interest of Mortgagor (whether now owned or hereafter acquired) in and to said Real Estate and in and to all buildings, structures, improvements and appurtenances now standing, or at any time hereafter constructed or placed upon the Real Estate (except as may be provided for in the applicable Mortgage), including, without limitation, all building materials, building equipment and fixtures of every kind and nature whatsoever on the Mortgaged Real Estate or in any building, structure or improvement now standing or hereafter constructed or placed thereon, and the reversion or reversions, and remainder or remainders, in and to the Real Estate, and together with the entire interest of the Mortgagor in and to all and singular the tenements, hereditaments, easements, rights of way, rights, privileges and appurtenances to the Mortgaged Real Estate, belonging or in any way appertaining thereto, and all right, title and interest of the Mortgagor in, to and under any streets, ways or alleys adjoining said Real Estate or any part thereof including all bridges thereover and tunnels thereunder, including without limitation all claims or demands whatsoever of the Mortgagor either in law or in equity, in possession or expectancy of, in and to the Mortgaged Real Estate, so far as may be permitted by law, all property of the character described in this paragraph, which is now owned or hereafter acquired by the Mortgagor and affixed to or attached to or placed on the Real Estate, is and shall be considered as, fixtures and appurtenances to the Real Estate, together with all rents, income, issues and profits therefrom.

MAINTENANCE OF LIEN

The Mortgagor will, at its own expense, take all necessary action to maintain and preserve the lien and security interest of the Mortgage as a first priority lien and security interest, subject only to Permitted Exceptions, so long as any of the Secured Obligations remain outstanding.

INSPECTION OF MORTGAGED PROPERTY AND RECORDS

The Master Trustee will have the right to inspect the Mortgaged Property and all books, records and documents relating thereto at all reasonable times, and access thereto will be permitted for that purpose.

EVENT OF DEFAULT DEFINED

The term “Event of Default" wherever used in the Mortgage shall mean (i) the failure of the Mortgagor to comply with any covenant, agreement or warranty contained in the Mortgage within thirty (30) days after the Master Trustee has given written notice thereof to the Mortgagor, provided that, if such default cannot with due diligence and dispatch be wholly cured within thirty (30) days but can be wholly cured, no Event of Default will be deemed to occur so long as Mortgagor has commenced to cure such default within said thirty (30) day period and continuously and with reasonable diligence

D-47 prosecutes such cure to completion, or (ii) an “Event of Default” has occurred under the Master Indenture.

REMEDIES

When any Event of Default has occurred and is continuing, the Master Trustee may, at its sole option and upon written notice to Mortgagor, accelerate the Secured Obligations to the date of such notice and declare the Secured Obligations to be immediately due and payable, and, in addition thereto, Master Trustee will have the right and option, in its sole discretion, to exercise any one or more or all of the other remedies available to it pursuant to the provisions of Article IV of the Mortgage, the terms of the Master Indenture or any other remedies available at law or in equity or by statute; it being expressly agreed that no remedy therein or in the Master Indenture is intended to be exclusive of any other remedy or remedies, but each and every remedy will be cumulative and will be in addition to every other remedy given therein or now or thereafter existing at law or in equity or by statute.

POSSESSION BY THE MASTER TRUSTEE

When any Event of Default has occurred and is continuing, the Master Trustee will, if applicable law permits, have the right to enter into and upon the Mortgaged Property and take possession thereof or to appoint an agent or trustee for the collection of the rents, income, issues and profits of the Mortgaged Property.

FORECLOSURE

When any Event of Default has occurred and is continuing, the Master Trustee will have the right to foreclose the lien thereof for the Secured Obligations or any part thereof. In any suit to foreclose the lien thereof, there will be allowed and included as Secured Obligations, in the judgment of foreclosure, all costs and expenses that may be paid or incurred by or on behalf of the Master Trustee for reasonable attorneys' fees, appraiser's fees, outlays for documentary and expert evidence, stenographer's charges, an environmental assessment of the Mortgaged Property and any additional investigation necessitated thereby, publication costs and costs (which may be estimated as to items to be expended after entry of the judgment) of procuring all such abstracts of title, title, searches and examinations, title insurance policies and similar data and assurance with respect to title, as the Master Trustee may deem reasonably necessary either to prosecute such suit or to evidence to bidders at sales which may be had pursuant to such judgment, the true conditions of the title to or the value of the Mortgaged Property. All expenditures and expenses incurred in the prosecution of such foreclosure, and such other expenses and fees as may be incurred in the protection of the Mortgaged Property and the maintenance of the lien of the Mortgage, including the reasonable fees of any attorney employed by the Master Trustee in any litigation or proceedings affecting the Mortgage, the Secured Obligations or the Mortgaged Property, including probate, bankruptcy and appellate proceedings, or in preparation of the commencement or defense of any proceedings or threatened suit or proceeding, shall constitute Secured Obligations and shall be immediately due and payable by the Mortgagor.

RECEIVER

Upon, or at any time after the filing of a complaint to foreclose the Mortgage, a court of competent jurisdiction may, upon the application of the Master Trustee, appoint a receiver (at the

D-48 Mortgagor's expense) of the Mortgaged Property. Such appointment may be made either before or after sale, without regard to solvency or insolvency of the Mortgagor at the time of application for such receiver, and without regard to the then value of the Mortgaged Property or whether the same is then occupied as a homestead or not; and the Master Trustee thereunder or any employee or agent thereof may be appointed as such receiver. Such receiver will have the power to collect the rents, income, issues and profits of the Mortgaged Property during the pendency of such foreclosure suit and, in case of a sale and deficiency, during the full statutory period of redemption, if any, whether there be a redemption or not, as well as during any further times when the Mortgagor, except for the intervention of such receiver, would be entitled to collection of such rents, income, issues and profits and all other powers which may be necessary or are usual in such cases for the protection, possession, control, management and operation of the Mortgaged Property during the whole of said period. The court may, from time to time, authorize the receiver to apply the net income from the Mortgaged Property in such receiver's hands in payment in whole or in part of: (a) the Secured Obligations or the indebtedness secured by a judgment foreclosing the Mortgage, or any tax, special assessment, or other lien that may be or become superior to the lien thereof or of such judgment, provided such application is made prior to the foreclosure sale; or (b) the deficiency in case of a sale and deficiency.

CONDITIONS FOR RELEASE

The Master Trustee will be required to execute and deliver to the Mortgagor releases or subordinations of the lien and encumbrance of this Mortgage (each a “Release”) as to all or specified portions of the Mortgaged Property (each such portion a “Released Property”), provided in each event that (i) at the time of the request for such Release there exists no uncured Event of Default under the Mortgage, and (ii) such Release is to effectuate either (A) the transfer, conveyance or other transaction permitted under the Master Indenture, including but not limited to the provisions of the Master Indenture summarized under the captions “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – SALE,LEASE OR OTHER DISPOSITION OF PROPERTY” and “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE –LIENS ON PROPERTY,” (B) the grant of a lien constituting a Permitted Encumbrance under the terms of the Master Indenture (see “DEFINITIONS OF CERTAIN TERMS –Permitted Encumbrances,” or (C) a Release which has been consented to by the holders of all Outstanding Obligations under the Master Indenture. Each Release shall be in form and substance acceptable to Mortgagor and the Mortgagee and shall be suitable for recording in the office of the County Recorder for the county in which the Released Property is located.

CONFLICTS WITH THE MASTER INDENTURE

In the event any of the terms or provisions of the Mortgage conflict with the Master Indenture, the Master Indenture will control to the extent it applies to the Mortgagor or the ownership, operation or use of any of the Mortgaged Property.

D-49 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E FORM OF OPINION OF BOND COUNSEL

[Dated Date of Initial Issuance]

Illinois Finance Authority Presence Health Network, as Obligated Group Chicago, Illinois Agent Chicago, Illinois

Wells Fargo Bank, N.A., as bond trustee J.P. Morgan Securities LLC Chicago, Illinois Chicago, Illinois

Re: $______Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance on the date hereof by the Illinois Finance Authority (the “Authority”) of the $______Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) (the “Series 2016C Bonds”). The Series 2016C Bonds are being issued under the provisions of the Illinois Finance Authority Act, as amended (the “Act”), and under and pursuant to the Bond Trust Indenture dated as of August 1, 2016 (the “Bond Indenture”), between the Authority and Wells Fargo Bank, National Association, as bond trustee (the “Bond Trustee”). Capitalized terms used herein, but not defined herein, have the meanings set forth in the Bond Indenture.

The proceeds from the sale of the Series 2016C Bonds are being loaned to Presence Health Network, an Illinois not for profit corporation (the “Borrower”), pursuant to the Loan Agreement dated as of August 1, 2016 (the “Loan Agreement”), between the Authority and the Borrower. The proceeds of the Series 2016C Bonds will be used, together with other available funds, for the purpose of (i) financing, refinancing or reimbursing certain costs of the planning, design, acquisition, construction, renovation, improvement, expansion, completion and/or equipping of certain of the health facilities (the “Project”) owned or leased by the Borrower and Presence Care Transformation Corporation, Presence Chicago Hospitals Network, Presence Central and Suburban Hospitals Network, Presence Senior Services – Chicagoland and Resurrection University (collectively, the “Users”); (ii) refunding the Illinois Finance Authority Revenue Bonds, Series 1999A (Resurrection Health Care) (the “Series 1999A Bonds”); (iii) refunding the Illinois Finance Authority Revenue Bonds, Series 1999B (Resurrection Health Care) (the “Series 1999B Bonds”); (iv) refunding the Illinois Finance Authority Revenue Refunding Bonds, Series 2009 (Resurrection Health Care Corporation) (the “Series 2009 Bonds”); (v) refunding the Illinois Finance Authority Revenue Bonds, Series 2009A (Provena Health) (the “Series 2009A Bonds”); (vi) refunding the Illinois Finance Authority Revenue Bonds, Series 2010A (Provena Health) (the “Series 2010A Bonds”); (vii) refunding the Illinois

E-1 Finance Authority Revenue Refunding Bonds, Series 2016A (Presence Health Network) (the “Series 2016A Bonds”); (vii) refunding a portion of the Illinois Finance Authority Taxable Revenue Refunding Bonds, Series 2016B (Presence Health Network) (the “Series 2016B Bonds” and, collectively with the Series 1999A Bonds, the Series 1999B Bonds, the Series 2009 Bonds, the Series 2009A Bonds, the Series 2010A Bonds and the Series 2016A Bonds, the “Prior Bonds”), and (ix) paying certain expenses incurred in connection with the refunding of the Prior Bonds and the issuance of the Series 2016C Bonds, all as permitted under the Act.

In order to secure the payment of the Series 2016C Bonds, the Borrower, concurrently with the issuance and delivery of the Series 2016C Bonds, is issuing and delivering to the Authority, and the Authority is assigning to the Bond Trustee, all of its right, title and interest in and to the $______Direct Note Obligation, Series 2016C (Illinois Finance Authority) (the “Series 2016C Obligation”) of the Borrower. The Series 2016C Obligation is being issued by the Borrower pursuant to the Master Trust Indenture dated as of August 1, 2016 (the “Master Indenture”), among the Borrower, Presence Care Transformation Corporation, Presence Chicago Hospitals Network, Presence Central and Suburban Hospitals Network, Presence Life Connections, Presence Senior Services – Chicagoland, Presence Healthcare Services (each, an “Obligated Group Member” and, collectively, the “Obligated Group”) and The Bank of New York Mellon Trust Company, N.A., as master trustee (the “Master Trustee”). Pursuant to the terms of the Loan Agreement and the Series 2016C Obligation, the Borrower is obligated to make payments sufficient to pay the principal of, premium, if any, and interest on the Series 2016C Bonds. Pursuant to the terms of the Master Indenture, the Obligated Group Members and each other Person (as defined in the Master Indenture) which hereafter executes the Master Indenture agree to be jointly and severally liable (subject to the Master Indenture’s provisions permitting a Member to leave the Obligated Group) on all Obligations (as defined in the Master Indenture) issued under the Master Indenture, including the Series 2016C Obligation.

In connection with the execution and delivery of the Master Indenture, there has been executed and delivered (i) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Hospitals Network in favor of the Master Trustee relating to Presence Mercy Medical Center located in Aurora, Illinois, (ii) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Hospitals Network in favor of the Master Trustee, relating to Presence Resurrection Medical Center located in Chicago, Illinois, (iii) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Hospitals Network in favor of the Master Trustee, relating to Presence Saint Francis Hospital located in Evanston, Illinois, (iv) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Hospitals Network in favor of the Master Trustee, relating to Presence Saint Joseph Hospital located in Chicago, Illinois, (v) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Hospitals Network in favor of the Master Trustee, relating to Presence Saint Joseph Hospital located in Elgin, Illinois, (vi) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Hospitals Network in favor of the Master Trustee, relating to Presence Saint Joseph

E-2 Medical Center located in Joliet, Illinois, (vii) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Chicago Hospitals Network in favor of the Master Trustee, relating to Presence Saints Mary and Elizabeth Medical Center located in Chicago, Illinois, and (viii) the Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of August 1, 2016 executed by Presence Central and Suburban Hospitals Network in favor of the Master Trustee, relating to Presence St. Mary’s Hospital located in Kankakee, Illinois (collectively, the “Mortgages”). The Mortgages secure, among other things, the payment of all amounts payable on all Obligations (as defined in the Master Indenture) issued under the Master Indenture, including the Series 2016C Obligation.

In connection with the issuance of the Series 2016C Bonds, (i) the Borrower and the Users have executed and delivered a Use Agreement dated as of August 1, 2016 (the “Use Agreement”) and (ii) the Authority, the Bond Trustee, the Borrower and the Users have executed a Tax Exemption Certificate and Agreement dated the date hereof (the “Tax Agreement”), which places certain restrictions on the investment of moneys held in the funds established by the Bond Indenture and which, under certain circumstances, would require the transfer of certain moneys held in such funds to a Rebate Fund created under the Tax Agreement.

As bond counsel, we have examined the following:

(a) certified copies of the proceedings of the Authority authorizing or approving, among other things, the execution and delivery of the Bond Indenture, the Loan Agreement, the Use Agreement, the Master Indenture, the Series 2016C Obligation and the Tax Agreement, the use and distribution of the Official Statement and the issuance and sale of the Series 2016C Bonds;

(b) the executed Series 2016C Obligation and executed counterparts of the Bond Indenture, the Loan Agreement, the Use Agreement, the Master Indenture and the Tax Agreement;

(d) executed opinions of Jeannie C. Frey, Chief Legal Officer and General Counsel of the Borrower, Nixon Peabody LLP, special counsel to the Obligated Group, and Schiff Hardin LLP, special counsel to the Authority;

(e) a report of Causey Demgen & Moore P.C., independent certified public accountants, verifying the accuracy of certain mathematical computations relating to the Series 2016C Bonds and certain series of the Prior Bonds (the “Verification Report”); and

(f) such other documents and showings and related matters of law as we have deemed necessary in order to enable us to render this opinion.

Based upon the foregoing and in reliance upon the matters hereinafter referred to, we are of the opinion that:

E-3 1. The Bond Indenture, the Loan Agreement and the Tax Agreement have been duly authorized by all necessary action on the part of the Authority, have been duly executed and delivered by authorized officers of the Authority and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, except to the extent limited by bankruptcy, reorganization or other similar laws affecting creditors’ rights generally and by the availability of equitable remedies, and except to the extent that the enforcement of the indemnification provisions of the Loan Agreement may be limited by federal or state securities laws. The Series 2016C Obligation has been pledged and assigned by the Authority to the Bond Trustee pursuant to the Bond Indenture as security for the Series 2016C Bonds.

2. The Bond Indenture creates a valid assignment to the Bond Trustee of the rights of the Authority in and to the Loan Agreement (with certain limited exceptions referred to in the Bond Indenture), and a valid pledge and assignment to the Bond Trustee of the Series 2016C Obligation as security for the Series 2016C Bonds.

3. The Series 2016C Bonds have been duly authorized by all necessary action on the part of the Authority, have been duly executed by authorized officers of the Authority, authenticated by the Bond Trustee and issued by the Authority and constitute the legal, valid and binding limited obligations of the Authority enforceable in accordance with their terms, except to the extent limited by bankruptcy, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies, and the Series 2016C Bonds are entitled to the benefits and security of the Bond Indenture.

4. Subject to compliance by the Authority, the Borrower and the Users with certain covenants, under present law, interest on the Series 2016C Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended (the “Code”), but we express no opinion as to whether interest on the Series 2016C Bonds is taken into account in computing adjusted current earnings, which is used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such covenants of the Authority, the Borrower or the Users could cause the interest on the Series 2016C Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2016C Bonds. Interest on the Series 2016C Bonds is not exempt from present Illinois income taxation. Ownership of the Series 2016C Bonds may result in other federal, state and local tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Series 2016C Bonds.

We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Series 2016C Bonds.

E-4 In rendering this opinion, we have relied upon (a) the opinions of Chief Legal Officer and General Counsel of the Borrower and Nixon Peabody LLP, referred to in paragraph (d) above, with respect to, among other things, (i) the status of the Borrower and the Users as organizations described in Section 501(c)(3) of the Code that are exempt from federal income taxation under Section 501(a) of the Code and (ii) the validity and binding effect upon and enforceability against the Borrower and the Users, as applicable, of the Master Indenture, the Loan Agreement, the Use Agreement, the Series 2016C Obligation and the Tax Agreement, subject to the exceptions set forth in said opinion and (b) the information contained in the Verification Report, including the mathematical computations of the yield on the Series 2016C Bonds, certain Prior Bonds and the yield on certain investments. In rendering the opinions in paragraph 4 hereof, we have relied upon certificates of even date herewith of the Borrower and the Users with respect to certain material facts within their knowledge relating to the application of the proceeds of the Series 2016C Bonds. In rendering this opinion, we have also relied upon certifications of the Authority with respect to certain material facts within the knowledge of the Authority.

We make no statement and render no opinion with respect to the enforceability, the effectiveness or the priority of the Mortgages.

Our opinion represents our legal judgment based upon our review of the law and the facts that we deem relevant to render such opinion and is not a guaranty of a result. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted,

E-5 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX F

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by Presence Health Network, an Illinois not for profit corporation (the “Corporation”), acting as Obligated Group Agent, on its own behalf and on behalf of the members of an obligated group (collectively, the “Obligated Group” or “Obligated Group Members” and individually, a “Member” or “Obligated Group Member”) and any future Obligated Group Member under the Master Indenture (defined below), and Digital Assurance Certification, L.L.C., as dissemination agent (the “Dissemination Agent” or “DAC”), in connection with the issuance of $[PAR] Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) (the “Bonds”). The Bonds are being issued pursuant to a Bond Trust Indenture related to the Bonds, dated as of August 1, 2016 (the “Bond Indenture”), between the Illinois Finance Authority (the “Issuer”) and Wells Fargo Bank, National Association, as bond trustee (the “Bond Trustee”). The proceeds of the Bonds are being loaned by the Issuer to the Corporation pursuant to a Loan Agreement related to the Bonds, dated as of August 1, 2016 (the “Loan Agreement”), between the Issuer and the Corporation. The obligations of the Corporation under the Loan Agreement are secured by the Direct Note Obligation, Series 2016C (Illinois Finance Authority) (the “Series 2016C Obligation”) issued by the Corporation, on behalf of the Obligated Group pursuant to the Master Trust Indenture, dated as of August 1, 2016 (the “Master Indenture”), among the Corporation, the other Obligated Group Members, and The Bank of New York Mellon Trust Company, N.A., as master trustee (the “Master Trustee”). The Corporation and each other Obligated Group Member will be jointly and severally liable for payment on the Series 2016C Obligation.

The services provided by DAC under this Disclosure Agreement solely relate to the execution of instructions received from the Corporation through use of the DAC system and do not constitute “advice” within the meaning of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”). DAC will not provide any advice or recommendation to the Corporation or anyone on the Corporation’s behalf regarding the “issuance of municipal securities” or any “municipal financial product” as defined in the Act and nothing in this Disclosure Agreement shall be interpreted to the contrary.

The Corporation (on its own behalf and on behalf of the Obligated Group Members) and the Dissemination Agent covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Corporation and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter (as defined below) in complying with the Rule (defined below). The Corporation and the Dissemination Agent acknowledge that the Issuer has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any Holder or Beneficial Owner of the Bonds, with respect to the Rule.

SECTION 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Filing Date” shall mean the date, set forth in Section 3(a), by which the Annual Report is to be filed with the MSRB.

“Annual Report” shall mean any Annual Report provided by the Corporation pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Audited Financial Statements of the System” shall mean the audited financial statements of the System prepared in accordance with the requirements of Section 406 of the Master Indenture.

“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).

F-1 “Bond Trustee” shall mean Wells Fargo Bank, National Association, acting in its capacity as bond trustee for the Bonds, or any successor bond trustee.

“Certification” shall mean a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Quarterly Report, Audited Financial Statements of the System, Unaudited Financial Statements of the System, Listed Event notice, or Failure to File Event notice, delivered to the Dissemination Agent is the Annual Report, Quarterly Report, Audited Financial Statements of the System, Unaudited Financial Statements of the System, Listed Event notice, or Failure to File Event notice required to be submitted to the MSRB under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Dissemination Agent by the Disclosure Representative and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. A form of Certification is set forth in Exhibit C.

“Corporation” shall mean the Corporation as defined in the introductory paragraph to this Disclosure Agreement and any entity that succeeds to the role of Obligated Group Agent under the Master Indenture.

“Disclosure Representative” shall mean James Kelley, Chief Financial Officer or Tina Johnson, System Director, Treasury or his or her designee, or such other person as the Obligated Group Agent shall designate in writing to the Dissemination Agent from time to time.

“Dissemination Agent” shall mean Digital Assurance Certification, L.L.C., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Corporation and which has filed with the Corporation a written acceptance of such designation.

“Failure to File Event” shall mean the Corporation’s failure to file an Annual Report on or before the Annual Filing Date or failure to file a Quarterly Report on or before the Quarterly Filing Date, as applicable.

“Force Majeure Event” shall mean: (i) acts of God, war, or terrorist action; (ii) failure or shut-down of the Electronic Municipal Market Access system maintained by the MSRB; or (iii) to the extent beyond the Dissemination Agent’s reasonable control, interruptions in telecommunications or utilities services, failure, malfunction or error of any telecommunications, computer or other electrical, mechanical or technological application, service or system, computer virus, interruptions in Internet service or telephone service (including due to a virus, electrical delivery problem or similar occurrence) that affect Internet users generally, or in the local area in which the Dissemination Agent or the MSRB is located, or acts of any government, regulatory or any other competent authority the effect of which is to prohibit the Dissemination Agent from performance of its obligations under this Disclosure Agreement.

“Holder” shall mean the person in whose name any Bond shall be registered.

“Information” shall mean, collectively, the Annual Reports, the Quarterly Reports, the Audited Financial Statements of the System (if any), the Unaudited Financial Statements of the System (if any), the Listed Event notices and the Failure to File Event notices.

“Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Agreement.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at .

“Official Statement” shall mean the official statement relating to the Bonds, dated [______], 2016.

“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

“Quarterly Filing Date” shall mean the date, set forth in Section 3(c), by which the Quarterly Report is to be filed with the MSRB.

F-2 “Quarterly Report” shall mean any Quarterly Report provided by the Corporation pursuant to, and as described in, Section 3 of this Disclosure Agreement.

“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“System” has the meaning given such term in the Master Indenture.

“Unaudited Financial Statements of the System” shall mean the unaudited financial statements of the System consisting of a consolidated statement of financial position and consolidated statements of operations and changes in unrestricted net assets and a consolidated statement of cash flows (or comparably named statements), presented on a basis substantially consistent with the Audited Financial Statements of the System (with the exception of the inclusion of required footnotes).

SECTION 3. Provision of Annual and Quarterly Reports.

(a) The Corporation shall provide, annually, an electronic copy of the Annual Report and the Certification to the Dissemination Agent not later than the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Dissemination Agent shall provide the Annual Report to the MSRB not later than one hundred fifty (150) days after the end of the System’s fiscal year (which fiscal year currently ends on December 31), commencing with the Annual Report for the fiscal year ending December 31, 2016. Such date and each anniversary thereof is the Annual Filing Date. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the Audited Financial Statements of the System 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. If the System’s fiscal year changes, the Corporation shall give notice of such change in a filing with the MSRB and the date above shall be deemed modified to a date one hundred fifty (150) days following the changed fiscal year date.

If on the fifteenth (15th) day prior to the Annual Filing Date, the Dissemination Agent has not received a copy of the Annual Report and the Certification, the Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind the Corporation of its undertaking to provide the Annual Report. Upon such reminder, the Disclosure Representative shall either (i) provide the Dissemination Agent with an electronic copy of the Annual Report and the Certification no later than two (2) business days prior to the Annual Filing Date, or (ii) instruct the Dissemination Agent in writing (which may be by e-mail) that the Corporation will not be able to file the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB in substantially the form attached as Exhibit A, accompanied by a cover sheet completed by the Dissemination Agent in the form set forth in Exhibit B.

If the Dissemination Agent has not received an Annual Report and Certification by 6:00 p.m. Eastern time on an Annual Filing Date (or, if such Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter), a Failure to File Event shall have occurred and the Corporation irrevocably directs the Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit A without reference to the anticipated filing date for the Annual Report, accompanied by a cover sheet completed by the Dissemination Agent in the form set forth in Exhibit B.

If Audited Financial Statements of the System are prepared but not available prior to the Annual Filing Date, the Disclosure Representative shall, when the Audited Financial Statements of the System are available, provide in a timely manner an electronic copy to the Dissemination Agent, accompanied by a Certification, for filing with the MSRB.

(b) In addition to the Annual Report required to be filed pursuant to section (3)(a), the Corporation shall provide, quarterly, an electronic copy of the Quarterly Report and Certification to the Dissemination Agent not later than the Quarterly Filing Date. Promptly upon receipt of an electronic copy of the Quarterly Report and Certification,

F-3 the Dissemination Agent shall provide the Quarterly Report to the MSRB not later than sixty (60) days after the end of each fiscal quarter of the System (currently ending March 31, June 30, September 30 and December 31), commencing with the fiscal quarter ending September 30, 2016. Such dates and each such date thereafter are the Quarterly Filing Dates. 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. The Quarterly Report shall consist of the Unaudited Financial Statements of the System.

If on the fifth (5th) day prior to each Quarterly Filing Date, the Dissemination Agent has not received a copy of the Quarterly Report and Certification, the Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail), to remind the Corporation of its undertaking to provide the Quarterly Report. Upon such reminder, the Disclosure Representative shall either (i) provide the Dissemination Agent with an electronic copy of the Quarterly Report and the Certification no later than two (2) business days prior to the Quarterly Filing Date, or (ii) instruct the Dissemination Agent in writing (which may be by e-mail) that the Corporation will not be able to file the Quarterly Report within the time required under this Disclosure Agreement, state the date by which the Quarterly Report for such fiscal quarter will be provided and instruct the Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB in substantially the form attached as Exhibit A, accompanied by a cover sheet completed by the Dissemination Agent in the form set forth in Exhibit B.

If the Dissemination Agent has not received a Quarterly Report and Certification by 6:00 p.m. Eastern time on a Quarterly Filing Date (or, if such Quarterly Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter), a Failure to File Event shall have occurred and the Corporation irrevocably directs the Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit A without reference to the anticipated filing date for the Quarterly Report, accompanied by a cover sheet completed by the Dissemination Agent in the form set forth in Exhibit B.

(c) Any Information received by the Dissemination Agent before 6:00 p.m. Eastern time on any business day that it is required to file with the MSRB pursuant to the terms of this Disclosure Agreement and that is accompanied by a Certification and all other information required by the terms of this Disclosure Agreement will be filed by the Dissemination Agent with the MSRB no later than 11:59 p.m. Eastern time on the same business day; provided, however, the Dissemination Agent shall have no liability for any delay in filing with the MSRB if such delay is caused by a Force Majeure Event provided that the Dissemination Agent uses reasonable efforts to make any such filing as soon as possible.

(d) Upon receipt of an Annual Report or Quarterly Report and accompanying Certification for filing with the MSRB, the Dissemination Agent shall file a report with the Corporation certifying that the Annual Report or Quarterly Report has been provided pursuant to this Disclosure Agreement, and stating the date it was provided to the MSRB and the CUSIP numbers for which it was filed.

SECTION 4. Content of Annual Reports. The Annual Report shall contain or include by reference the following:

(a) The Audited Financial Statements of the System for the prior fiscal year. If the Audited Financial Statements of the System are not available by the time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Audited Financial Statements of the System shall be provided to the MSRB in the same manner as the Annual Report when they become available.

(b) Unless contained in the Audited Financial Statements of the System provided in Section 4(a) above, an update of the following information contained in Appendix A to the Official Statement:

1. A list of the Obligated Group Members and any other Credit Group Members as of the end of the most recent fiscal year.

2. Information for the most recent fiscal year setting forth the percentage of consolidated total revenue of the System and percentage of consolidated total assets accounted for by the Obligated Group.

F-4 3. Information for the most recent fiscal year substantially similar to the information in the utilization statistics tables under the caption “ACUTE CARE MINISTRIES – Historical Utilization of Acute Care Ministries” and including the total number of available beds as of the end of the most recent fiscal year for the acute care hospitals of the System.

4. Information for the most recent fiscal year substantially similar to the information in the utilization statistics table under the caption “PRESENCE SENIOR CARE MINISTRIES – Historical Utilization of Senior Care Facilities.”

5. Information for the most recent fiscal year substantially similar to the information in the table relating to the System’s payor mix under the caption “FINANCIAL OPERATING INFORMATION – Sources of Gross Patient Service Revenues.”

6. Information concerning historical capitalization for the most recent fiscal year substantially similar to the information in the table under the caption “FINANCIAL AND OPERATING INFORMATION – Historical and Pro Forma Capitalization.”

7. Information concerning the Annual Debt Service Coverage Ratio (as calculated pursuant to the Master Indenture) for the most recent fiscal year substantially similar to the information in the first five lines of the table under the caption “FINANCIAL AND OPERATING INFORMATION – Historical and Pro Forma Coverage of Debt Service.”

8. Information concerning Days Cash on Hand (as calculated pursuant to the Master Indenture) as of the end of the most recent fiscal year substantially similar to the information in the table under the caption “FINANCIAL AND OPERATING INFORMATION – Liquidity Position.”

9. Information in the aggregate or by pension plan for the most recent fiscal year regarding the annual contribution to the System’s pension plans similar to the information under the caption “MISCELLANEOUS – Retirement Plans.”

Any or all of the items listed above may be set forth in one or more documents or may be included by specific reference to other documents, including official statements of debt issues with respect to which any Obligated Group Member is an “obligated person” (as defined by the Rule), which have been made available to the public on the MSRB’s website. The Corporation shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) The Corporation shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, in a timely manner not in excess of ten (10) business days after the occurrence of the event:

1. Principal and interest payment delinquencies;

2. Non-payment related defaults, if material;

3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers, or their failure to perform;

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other

F-5 material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

7. Modifications to rights of Bondholders, if material;

8. Bond calls, if material, and tender offers;

9. Defeasances;

10. Release, substitution, or sale of property securing repayment of the Bonds, if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the obligated person;

Note: For the purposes of the event identified in subparagraph (12), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

13. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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; or

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) If the Corporation learns of the occurrence of a Listed Event described in (a) above, the Disclosure Representative shall, in a timely manner not in excess of ten (10) business days after its occurrence, notify the Dissemination Agent in writing of the occurrence of such Listed Event. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) and shall be accompanied by a Certification. Such notice or Certification shall identify the Listed Event that has occurred, include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Disclosure Representative for the Dissemination Agent to disseminate such information, and identify the date the Disclosure Representative desires for the Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Listed Event).

(c) The Dissemination Agent is under no obligation to notify the Corporation or the Disclosure Representative of an event that may constitute a Listed Event. In the event the Dissemination Agent so notifies the Corporation or the Disclosure Representative, the Disclosure Representative will within two (2) business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Listed Event, if the Corporation determines that a Listed Event has occurred), instruct the Dissemination Agent that (i) a Listed Event has not occurred and no filing is to be made or (ii) a Listed Event has occurred and the Dissemination Agent is to report the occurrence pursuant to subsection (b) of this Section 5, together with a Certification. Such Certification shall identify the Listed Event that has occurred, include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Disclosure Representative for the Dissemination Agent to disseminate such information, and identify the date the Disclosure Representative desires for the Dissemination Agent to disseminate

F-6 the information (provided that such date is not later than the tenth business day after the occurrence of the Listed Event).

(d) If the Dissemination Agent has been instructed by the Disclosure Representative as prescribed in paragraph (b) or (c) of this Section 5 to report the occurrence of a Listed Event, the Dissemination Agent shall promptly file a notice of such occurrence with the MSRB pursuant to Section 5. This notice will be filed with a cover sheet completed by the Dissemination Agent in the form set forth in Exhibit B.

SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB, in accordance with the Rule.

SECTION 7. CUSIP Numbers. Whenever providing information to the Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements of the System, Unaudited Financial Statements of the System, Listed Event notices and Failure to File Event notices, the Corporation shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates.

SECTION 8. Additional Disclosure Obligations. The Disclosure Representative acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Corporation, and that the duties and responsibilities of the Dissemination Agent under this Disclosure Agreement do not extend to providing legal advice regarding such laws. The Disclosure Representative acknowledges and understands that the duties of the Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement.

SECTION 9. Termination of Reporting Obligation. The Corporation’s and the Dissemination Agent’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of the Bonds, when the Obligated Group Members are not or are no longer obligated persons with respect to the Bonds, or upon delivery by the Disclosure Representative to the Dissemination Agent of an opinion of counsel expert in federal securities laws to the effect that continuing disclosure is no longer required. If the Corporation’s obligations under the Loan Agreement are assumed in full by some other entity, such person shall be responsible for compliance with this Disclosure Agreement in the same manner as if it were the Corporation and the original Corporation shall have no further responsibility hereunder. If such termination or substitution occurs prior to the final maturity of the Bonds, the Corporation shall give notice of such termination or substitution in a filing with the MSRB.

SECTION 10. Dissemination Agent. The Corporation may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent, upon providing 30 days prior written notice to the Dissemination Agent. The initial Dissemination Agent shall be Digital Assurance Certification, L.L.C. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Corporation pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing 30 days written notice to the Corporation. If at any time there is not any other designated Dissemination Agent, the Corporation shall be the Dissemination Agent. If a successor Dissemination Agent is appointed to assist the Corporation in carrying out its obligations under this Disclosure Agreement, such successor Dissemination Agent shall execute an acceptance of duties as Dissemination Agent. Notwithstanding any replacement or appointment of a successor, the Corporation shall remain liable until payment in full for any and all sums owed and payable to the Dissemination Agent.

SECTION 11. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Corporation and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Corporation which does not impose any greater duties, nor greater risk of liability on the Dissemination Agent) and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

F-7 (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5, it may only be 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 Corporation or any other obligated person with respect to the Bonds or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Bond Indenture for amendments to the Bond Indenture with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially and adversely impair the interests of the Holders or Beneficial Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Corporation shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented. 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 a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if reasonably feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the (unaudited) basis of the former accounting principles.

Notwithstanding the preceding paragraph, the Dissemination Agent and the Corporation shall have the right to adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days prior written notice of the intent to do so together with a copy of the proposed amendment to the other party. No such amendment shall become effective if the Disclosure Representative shall, within 10 days following the giving of such notice, send a notice to the Dissemination Agent in writing that it objects to such amendment.

SECTION 12. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Corporation from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, Quarterly Report or notice of occurrence of a Listed Event required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Corporation chooses to include any information in any Annual Report, Quarterly Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Agreement, the Corporation shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Quarterly Report or notice of occurrence of a Listed Event or any event required to be reported.

SECTION 13. Default. In the event of a failure of the Corporation or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Corporation or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Bond Indenture or the Loan Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Corporation or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 14. Duties, Immunities and Liabilities of the Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Corporation agrees to indemnify and save the Dissemination Agent and its respective officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its

F-8 powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Corporation for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the Corporation from time to time and all reasonable expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Corporation, the Holders or Beneficial Owners of the Bonds or any other party. The Dissemination Agent shall have no responsibility for the Corporation’s failure to report to the Dissemination Agent a Listed Event or a duty to determine the materiality thereof. The Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the Corporation has complied with this Disclosure Agreement. The Dissemination Agent may conclusively rely upon Certifications of the Corporation at all times. The obligations of the Corporation under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 15. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the Corporation: Presence Health Network 200 South Wacker Drive, 11th Floor Chicago, Illinois 60606 Attention: Chief Financial Officer Telephone: (312) 308-3972 Email: [email protected]; [email protected]

To the Dissemination Agent: Digital Assurance Certification, L.L.C. 390 North Orange Avenue, 17th Floor Orlando, Florida 32801 Telephone: (407) 515-1100 Facsimile: (407) 515-6513 Email: [email protected]

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

SECTION 16. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Obligated Group Members, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 17. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of Illinois.

F-9 SECTION 18. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Dated: [______], 2016

PRESENCE HEALTH NETWORK

By: Treasurer

DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Dissemination Agent

By: Authorized Representative

F-10 EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL OR QUARTERLY REPORT

Name of Issuer: Illinois Finance Authority

Name of Bond Issue: Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network)

Name of Corporation: Presence Health Network

Date of Issuance: [______], 2016

NOTICE IS HEREBY GIVEN that Presence Health Network (the “Corporation”) has not provided [an Annual Report]/[a Quarterly Report] with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated the above-mentioned date of issuance. [The Corporation anticipates that the [Annual Report]/[Quarterly Report] will be filed by ______.]

Dated: ______.

DIGITAL ASSURANCE CERTIFICATION, L.L.C. as Dissemination Agent

By:

cc: Presence Health Network

F-11 EXHIBIT B

EVENT NOTICE COVER SHEET

This cover sheet and accompanying “event notice” will be sent to the MSRB, pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D).

Issuer’s and/or Other Obligated Person’s Name: [C1] ______Issuer’s Six-Digit CUSIP Number: [C2] ______or Nine-Digit CUSIP Number(s) of the bonds to which this event notice relates: [C3] ______Number of pages attached: [C4]______Description of Notice Events (Check One): [C5]

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, IRS notices or events affecting the tax status of the Bonds;” 7. “Modifications to rights of Bond holders, if material;” 8. “Bond calls, if material, and tender offers;” 9. “Defeasances;” 10. “Release, substitution, or sale of property securing repayment of the Bonds, if material;” 11. “Rating changes;” 12. “Bankruptcy, insolvency, receivership or similar event of the obligated person;” 13. “Merger, consolidation, or acquisition of an obligated person, if material;” and 14. “Appointment of a successor or additional trustee, or the change of name of a trustee, if material.”

____ Failure to provide [annual]/[quarterly] financial information as required. [C6]

I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly:

Signature: ______Name: [C7] ______Title: [C8] ______Digital Assurance Certification, L.L.C. 390 N. Orange Avenue, Suite 1750 Orlando, FL 32801 (407) 515-1100

F-12 EXHIBIT C

FORM OF CERTIFICATION

Date: [______]

RE: Officer’s Certification for Presence Health Network (“Presence”) Relating to the [Annual/ Quarterly/ Financial Statements/ Listed Events] Filing Issues Including: Illinois Finance Authority Revenue Bonds, Series 2016C (Presence Health Network) (the “Bonds”) [CUSIP: ______]

I hereby certify that the [Annual Report/ Quarterly Report/ Audited Financial Statements of the System/ Unaudited Financial Statements of the System/ Listed Event notice/ Failure to File Event notice] (as defined in the Continuing Disclosure Agreement described below) filed on [date] constitutes the [Annual Report/ Quarterly Report/ Audited Financial Statements of the System/ Unaudited Financial Statements of the System/ Listed Event notice/ Failure to File Event notice] required by the Continuing Disclosure Agreement, dated as of [______], 2016 (the “Continuing Disclosure Agreement”), by and between Presence and Digital Assurance Certification, L.L.C. (“DAC”), as dissemination agent for the Bonds.

[Following the occurrence of a Listed Event (as defined in the Continuing Disclosure Agreement), this Certification shall also: (i) identify the Listed Event, (ii) include the text of the disclosure that Presence desires to make, (iii) authorize DAC to disseminate the information and (iv) identify the date for DAC to disseminate such information (provided that such date is not later than the tenth business day after the occurrence of the Listed Event).]

I further certify that the information complies with the Continuing Disclosure Agreement and the Rule (as defined in the Continuing Disclosure Certificate) as required. DAC shall be entitled to rely on this Certification.

If you have further questions about this matter please do not hesitate to call.

[Signature]

[Name of Disclosure Representative] [Title] [Phone number]

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APPENDIX G

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company (“DTC”) New York, NY, will act as securities depository for the Series 2016C Bonds. The Series 2016C Bonds will be offered as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2016C Bond certificate will be issued for each maturity of the Series 2016C Bonds bearing interest at a particular rate, each in the aggregate principal amount of such maturity and will be deposited with DTC.

DTC 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 (“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 (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at

Purchases of the Series 2016C Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016C Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2016C Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2016C Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their beneficial ownership interests in the Series 2016C Bonds, except in the event that use of the book-entry system for the Series 2016C Bonds is discontinued.

To facilitate subsequent transfers, all Series 2016C Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2016C Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016C Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2016C Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2016C Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016C Bonds, such as redemptions, defaults, and proposed

G-1

amendments to the bond documents. For example, Beneficial Owners of the Series 2016C Bonds may wish to ascertain that the nominee holding the Series 2016C Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Trustee and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of a Series of Series 2016C Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Series 2016C Bonds of such Series to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2016C 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 applicable Authority for such Series as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2016C Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, redemption proceeds and interest payments on the Series 2016C 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 Authority or the 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 Participants and not of DTC, its nominee, the Bond Trustee, the Obligated Group Members, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, redemption proceeds and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Bond Trustee. Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to any Series of the Series 2016C Bonds at any time by giving reasonable notice to the Authority or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2016C Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2016C Bond certificates for such Series 2016C Bonds will be printed and delivered to DTC or Owners, as applicable.

THE PRECEDING INFORMATION PROVIDED IN THIS APPENDIX G HAS BEEN PROVIDED BY DTC. NO REPRESENTATION IS MADE BY THE AUTHORITY, THE OBLIGATED GROUP MEMBERS, THE UNDERWRITER OR THE BOND TRUSTEE AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY DTC OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE OF THIS OFFICIAL STATEMENT.

THE BOND TRUSTEE, AS LONG AS A BOOK-ENTRY-ONLY SYSTEM IS USED FOR THE SERIES 2016C BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS OF THE SERIES 2016C BONDS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY SUCH NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE SERIES 2016C BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

G-2

The Authority, the Obligated Group Members, the Underwriter and the Bond Trustee cannot and do not give any assurances that DTC will distribute to Participants, or that Participants or others will distribute to the Beneficial Owners, payments of principal of and interest and premium, if any, on the Series 2016C Bonds paid or any redemption or other notices or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. None of the Authority, the Obligated Group Members, the Underwriter or the Bond Trustee is responsible or liable for the failure of DTC or any Direct Participant or Indirect Participant to make any payments or give any notice to a Beneficial Owner with respect to the Series 2016C Bonds or any error or delay relating thereto.

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Illinois Finance Authority • Revenue Bonds, Series 2016C (PRESENCE HEALTH NETWORK)