This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other change without any notice. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. * ©

Dated: DateofDelivery B N responsibility ofDTCanditsparticipants.SeeAppendixG,“ owner, asnomineeofDTC,paymentsontheSeries2016Bondswillbemadetosuchregisteredanddisbursement willbethe representing theirinterestsintheSeries2016Bondspurchased.Ownershipwillbeevidencedbybook‑entryonly.AslongasCede&Co.is registered New York,York(“DTC”),thesecuritiesdepositoryforSeries2016Bonds.PurchasersofBondswillnotreceivecertificates initially issued,theSeries2016BondswillberegisteredinnameofCede&Co.,asownerandnomineeforTheDepositoryTrust Company, payable bytheBondTrusteetoregisteredownersofSeries2016BondsoneachMay15andNovember15,commencing 2016.As The sourcesofpaymentof,andsecurityfor,theSeries2016BondsaremorefullydescribedinthisOfficialStatement. Obligation andcertainofitsrightsundertheapplicableLoanAgreementtoBondTrusteeassecurityforrelatedseriesSeries2016 Bonds. issued undertheMasterIndenture(asdefinedherein).PursuanttoapplicableBondIndenture,eachAuthoritywillpledgeandassignits Series2016 will be payable solely from payments to be made under the related Loan Agreement and on the related Series 2016 Obligation (as defined herein) to be (the “SarpyAuthority”and,togetherwiththeDouglasAuthority,Authorities”)andBMC. Loan Agreement”and,togetherwiththeDouglasAgreement, the “Loan Agreements ”) betweenHospitalAuthorityNo. 1 ofSarpyCounty, Medical Center,LLC,aNebraskalimitedliabilitycompany(“BMC”),pursuanttotheprovisionsofLoanAgreementdatedasAugust1,2016(the“Sarpy of DouglasCounty,Nebraska(the“Authority”)andTNMC.TheproceedsfromthesaleSarpyBondswillbeloanedtoBellevue (“TNMC”), pursuantto the provisionsofaLoan Agreement datedasofAugust1,2016 (the“DouglasLoanAgreement”)betweenHospitalAuthorityNo.2 and FirstNationalBankofOmaha,asbondtrustee(the“BondTrustee”). Indentures ofTrust,eachdatedasAugust1,2016(the“Bond”),betweentheissuingAuthorities(asdefinedherein),respectively, “Sarpy AuthorityBonds”and,togetherwiththeDouglasBonds,Series2016”)willbeissuedandsecuredunderseparateBond Authority Bonds”)and(ii)HospitalNo.1ofSarpyCounty,NebraskaHealthFacilitiesRevenue(NebraskaMedicine)Series2016(the herein. exempt frompresentNebraskastateincometaxation.ForamorecompletedescriptionofsuchopinionsBondCounsel,see“ Counsel isalsooftheopinionthatunderexistinglaws,regulations, rulings andjudicialdecisions,interest on theSeries2016Bondsis gross incomeforfederaltaxpurposesandisnotaspecificpreferenceitemofthealternativeminimumtax.Bond accuracy ofcertainrepresentationsandcontinuingcompliancewithcovenants,interestontheSeries2016Bondsisexcludablefrom 2016 B P C on oraboutAugust__,2016. by theircounselChapmanandCutler LLP,Chicago,Illinois.TheSeries2016Bondsareexpectedtobeavailable fordeliverythroughthefacilitiesofDTC Omaha, Nebraska,fortheDouglasAuthority byJosephC.Byrne,Esq,fortheSarpyAuthorityAdams& SullivanP.C.,L.L.O.andfortheUnderwriters 2016 BondsbyKutakRockLLP,Omaha,Nebraska,BondCounsel.Certain legalmatterswillbepasseduponfortheObligatedGroupbyKutakRockLLP, modification oftheofferwithoutanynotice,andtofinalapproval the Series2016BondsbyAuthoritiesandtoapprovaloflegality an informedinvestmentdecision. for theSeries2016Bonds.InvestorsmustreadthisentireOfficialStatement, includingtheAppendices,toobtaininformationessentialmakingof AN S C A S O PO

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ook O O PP ew R BD Statement. responsible for the selection of CUSIP numbers and neither make any representation as to their correctness on the Series 2016 Bonds or asset forth in this Official Companies, Inc.,and issetforthhereinforconvenience referenceonly.NeithertheUnderwriters, theAuthoritiesnorMembers oftheObligatedGroupare Copyright 2008,American BankersAssociation.CUSIP datahereinisprovidedbyStandard & Poor’sCUSIPServicesBureau,a division oftheMcGraw‑Hill Preliminary, subject tochange. LITICAL

D N UNTY C I DG R S The Series2016Bondsaresubjecttooptional,extraordinaryandmandatoryredemption,optionalpurchase,assetforthherein.See“ In theopinionofKutakRockLLP,BondCounsel,underexistinglaws,regulations,rulingsandjudicialdecisionsassuming The Series 2016 Bonds are being issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof. Interest will be Except as described in this Official Statement, the principal of, redemption premium, if any, and interest on each series of the Series 2016 Bonds The proceedsfromthesaleofDouglasAuthorityBondswillbeloanedtoNebraskaMedicalCenter,anonprofitcorporation The (i)HospitalAuthorityNo.2ofDouglasCounty,NebraskaHealthFacilitiesRevenueBonds(NebraskaMedicine)Series2016(the“ T The Series2016Bondsareofferedwhen,asandifissuedreceived by theUnderwriters(asdefinedherein),subjecttopriorsale,withdrawal,or This cover pagecontainscertaininformation for immediate reference only. It is not intended to be acomplete summary of the termsofor security E O CRE ssue OP I onds TITUTE H V NTIN ntry

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Maturities, Principal Amounts, Interest Rates, Yields and CUSIPs©

Maturity Principal Amount Interest Rate Yield CUSIP©

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$149,605,000* Hospital Authority No. 1 of Sarpy County, Nebraska Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016

Maturities, Principal Amounts, Interest Rates, Yields and CUSIPs©

Maturity Principal Amount Interest Rate Yield CUSIP©

$______% Term Bond due May 15, 20___; Yield ____%; CUSIP© ______$______% Term Bond due May 15, 20___; Yield ____%; CUSIP© ______

* Preliminary, subject to change. © Copyright 2008, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Services Bureau, a division of the McGraw‑Hill Companies, Inc., and is set forth herein for convenience for reference only. Neither the Underwriters, the Authorities nor the Members of the Obligated Group are responsible for the selection of CUSIP numbers and neither make any representation as to their correctness on the Series 2016 Bonds or as set forth in this Official Statement

REGARDING THE OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security other than the offering of the Series 2016 Bonds identified on the cover. No dealer, broker, sales representative or other person has been authorized by the Authorities, TNMC, BMC, any other Member of the Obligated Group described herein or the Underwriters to give any information or to make any representation with respect to the Series 2016 Bonds other than as contained in this Official Statement. Any other information or representation should not be relied upon as having been given or authorized by the Authorities, TNMC, BMC, any other Members of the Obligated Group or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Series 2016 Bonds, by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale.

This Official Statement has been approved by TNMC, as Obligated Group Representative on behalf of itself and the other Members of the Obligated Group, and its use and distribution for the purposes of offering and selling the Series 2016 Bonds have been authorized by TNMC, as Obligated Group Representative on behalf of the Members of the Obligated Group. Certain information set forth herein has been obtained from the Members of the Obligated Group, The Depository Trust Company (“DTC”) and from other sources which are believed to be reliable. The information and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the parties referred to above since the date hereof.

The Authorities have furnished only the information included in this Official Statement under the headings “INTRODUCTION—The Authorities,” “THE AUTHORITIES,” “LITIGATION—The Douglas Authority” and “LITIGATION—The Sarpy Authority.” Neither Authority has reviewed or approved any information in this Official Statement except information relating to it under such headings.

The information in Appendix G, “BOOK-ENTRY SYSTEM” has been furnished by DTC. The information set forth herein under the heading “UNDERWRITING” has been furnished by the Underwriters.

All other information set forth herein has been furnished by the Members of the Obligated Group, unless otherwise indicated.

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

CUSIP numbers are included in this Official Statement for the convenience of the holders and potential holders of the Series 2016 Bonds. No assurance can be given that the CUSIP numbers for the Series 2016 Bonds will remain the same after the date of the issuance and delivery of the Series 2016 Bonds.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT CERTAIN TRANSACTIONS THAT STABILIZE THE PRICE OF THE SERIES 2016 BONDS. SUCH TRANSACTIONS MAY CONSIST OF BIDS OR PURCHASES FOR THE PURPOSES OF MAINTAINING THE PRICE OF THE SERIES 2016 BONDS. IN ADDITION, IF THE UNDERWRITERS OVERALLOT (THAT IS, SELL MORE THAN THE AGGREGATE PRINCIPAL AMOUNT OF THE SERIES 2016 BONDS SET FORTH ON THE COVER PAGE OF THIS OFFICIAL STATEMENT) AND THEREBY CREATE A SHORT POSITION IN SUCH BONDS IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY REDUCE THAT SHORT POSITION BY PURCHASING BONDS IN THE OPEN MARKET. IN GENERAL, PURCHASES OF A SECURITY FOR THE

PURPOSE OF STABILIZATION OR TO REDUCE A SHORT POSITION COULD CAUSE THE PRICE OF A SECURITY TO BE HIGHER THAN IT MIGHT OTHERWISE BE IN THE ABSENCE OF SUCH PURCHASES. THE UNDERWRITERS MAKE NO REPRESENTATION OR PREDICTION AS TO THE DIRECTION OR THE MAGNITUDE OF ANY EFFECT THAT THE TRANSACTIONS DESCRIBED ABOVE MAY HAVE ON THE PRICE OF THE SERIES 2016 BONDS. IN ADDITION, THE UNDERWRITERS MAKE NO REPRESENTATION THAT THEY WILL ENGAGE IN SUCH TRANSACTIONS OR THAT SUCH TRANSACTIONS, IF COMMENCED, WILL NOT BE DISCONTINUED WITHOUT NOTICE.

NEITHER THE SERIES 2016 BONDS NOR ANY OTHER SECURITY RELATING TO THE SERIES 2016 BONDS HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THE BOND INDENTURES NOR THE MASTER INDENTURE HAS BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE EXEMPTIONS FROM REGISTRATION AND FROM QUALIFICATION IN ACCORDANCE WITH APPLICABLE PROVISIONS OF FEDERAL OR STATE SECURITIES LAWS CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NO STATE NOR ANY AGENCY THEREOF HAS PASSED UPON THE MERITS OF THE SERIES 2016 BONDS OR ANY RELATED SECURITY OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

In making any investment decision, investors must rely upon their own examination of the terms of the offering, including the merits and risks involved.

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 are generally identifiable by the terminology used such as “plan,” “anticipate,” “expect,” “estimate,” “project,” “budget” or similar words. Such forward-looking statements include, among others, statements under the heading “BONDHOLDERS’ RISKS” in the forepart of this Official Statement and under the headings “FINANCIAL INFORMATION—Management Discussion of Historical Financial Results” and “FINANCIAL INFORMATION—Management Discussion of Obligated Group Pro Forma Financial Information” in Appendix A to 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 which 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 Members of the Obligated Group do not plan to issue any updates or revisions to those forward-looking statements if or when their expectations, or events, conditions or circumstances on which such statements are based, occur.

TABLE OF CONTENTS

HEADING PAGE

INTRODUCTION ...... 1 PLAN OF FINANCE ...... 5 THE AUTHORITIES ...... 6 THE SERIES 2016 BONDS ...... 7 SECURITY FOR THE SERIES 2016 BONDS ...... 12 ESTIMATED SOURCES AND USES OF FUNDS...... 17 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ...... 18 BONDHOLDERS’ RISKS ...... 19 LITIGATION ...... 64 LEGAL MATTERS ...... 64 TAX EXEMPTION ...... 65 CONTINUING DISCLOSURE AGREEMENT ...... 67 DESCRIPTION OF RATINGS ...... 68 INDEPENDENT AUDITORS ...... 68 FINANCIAL STATEMENTS ...... 69 UNDERWRITING ...... 69 FINANCIAL ADVISOR ...... 70 MISCELLANEOUS ...... 70

APPENDIX A — The Nebraska Medicine Obligated Group APPENDIX B-1 — Audited Consolidated Financial Statements of The Nebraska Medical Center APPENDIX B-2 — Audited Consolidated Financial Statements of UNMC Physicians APPENDIX C — Definitions of Certain Terms and Summary of Certain Legal Documents APPENDIX D — Summary of Nebraska Medicine Organizational Documents APPENDIX E — Form of Continuing Disclosure Agreement APPENDIX F — Forms of Opinions of Bond Counsel APPENDIX G — Book-Entry System

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OFFICIAL STATEMENT

∗ * $130,420,000 $149,605,000 HOSPITAL AUTHORITY NO. 2 OF DOUGLAS HOSPITAL AUTHORITY NO. 1 OF SARPY COUNTY, NEBRASKA COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) (NEBRASKA MEDICINE) SERIES 2016 SERIES 2016

INTRODUCTION

PURPOSE OF THIS OFFICIAL STATEMENT

The purpose of this Official Statement, including the cover page, the inside cover page and the Appendices hereto, is to set forth information in connection with (i) the issuance by the Hospital Authority No. 2 of Douglas County, Nebraska (the “Douglas Authority”) of its Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 in the aggregate principal amount of $130,420,000* (the “Douglas Authority Bonds”) and (ii) the issuance by the Hospital Authority No. 1 of Sarpy County, Nebraska (the “Sarpy Authority” and, together with the Douglas Authority, the “Authorities”) of its Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 in the aggregate principal amount of $149,605,000* (the “Sarpy Authority Bonds” and, together with the Douglas Authority Bonds, the “Series 2016 Bonds”). Certain terms used herein are defined in Appendix C hereto. The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of its terms and conditions. All statements herein relating to such documents are qualified in their entirety by reference to each such document. Copies of such documents will be available for inspection at the office of the hereinafter described Bond Trustee.

THE OBLIGATED GROUP AND CREDIT GROUP

In connection with the issuance of the Series 2016 Bonds, The Nebraska Medical Center, a Nebraska nonprofit corporation (“TNMC”), , LLC, a Nebraska limited liability company (“BMC” and, together with TNMC, the “Borrowers”) and UNMC Physicians, a Nebraska nonprofit corporation (“UNMCP”), will enter into a Master Trust Indenture dated as of August 1, 2016 (as it may be supplemented and amended from time to time, the “Master Indenture”) with First National Bank of Omaha, as master trustee (the “Master Trustee”). Under the terms of the Master Indenture, the Obligated Group Representative may designate certain entities as a Designated Affiliate. As of the date of issuance of the Series 2016 Bonds, TNMC, BMC and UNMCP will be the sole members of the Obligated Group and no Designated Affiliates will have been so designated. The Members of the Obligated Group and the Designated Affiliates, if any are so designated, are collectively referred to herein as the “Credit Group.”

Other Persons may become Members of the Obligated Group or Designated Affiliates in accordance with the procedures set forth in the Master Indenture; however, TNMC has no plans to add

∗ Preliminary, subject to change.

members to the Obligated Group or Designated Affiliates in the immediately foreseeable future. See “SUMMARY OF THE MASTER INDENTURE—Parties Becoming Members of the Obligated Group” and “— Selection of Designated Affiliates” in Appendix C hereto for a description of such procedures. TNMC has been designated to act as the Obligated Group Representative under the Master Indenture and, as such, is authorized to take certain actions on behalf of the other Members of the Obligated Group pursuant to the Master Indenture.

TNMC, BMC and UNMCP (collectively, the “Members of the Obligated Group” or the “Obligated Group”) comprise an integrated clinical operation doing business as Nebraska Medicine. The Members of the Obligated Group are under the common control and governance of The Board of Regents of the University of Nebraska, a corporate body politic of the State of Nebraska (the “Board of Regents”), Clarkson Regional Health Services, Inc., a Nebraska nonprofit corporation (“CRHS”), as is newly-incorporated Nebraska Medicine, a Nebraska nonprofit corporation organized on July 1, 2016 (the “Parent”). The Parent was created pursuant to the terms of a System Integration Agreement (see the caption “CORPORATE STRUCTURE—Recent Reorganization” in Appendix A hereto) dated July 1, 2016 (the “SIA”) by and among the Board of Regents, CRHS, the Parent, TNMC, and UNMCP to coordinate the functions of the Members of the Obligated Group.

The Parent and the Obligated Group are a clinically integrated health system that as of July 1, 2016 employs more than 7,800 individuals, including approximately 500 physicians, with 661 licensed hospital beds (577 of which are in service as of July 1, 2016) and 45 ambulatory clinics at 21 locations, in Omaha, Nebraska and the surrounding area. The Obligated Group generated more than $1 billion in revenue in the fiscal year ended June 30, 2015. The Members of the Obligated Group have provided care for patients from all 50 states and 53 countries.

Appendix A contains information regarding the history, organization and financial performance of TNMC, UNMCP and BMC. Appendix B-1 contains certain audited consolidated financial statements of TNMC and its affiliates, including BMC, and Appendix B-2 contains certain audited consolidated financial statements of UNMCP. Appendix D contains a summary of the SIA and related documents.

THE AUTHORITIES

Each Authority is a public corporation and body politic of the State of Nebraska. The formation of the Douglas Authority was approved by the Board of County Commissioners of Douglas County on March 5, 1974, pursuant to the provisions of the Nebraska Hospital Authorities Act, Sections 23-3579 to 23-35,120, of the Revised Statutes of Nebraska, as amended (the “Act”). The formation of the Sarpy Authority was approved by the Board of County Commissioners of Sarpy County on December 21, 1972, pursuant to the provisions of the Act.

PURPOSE OF THE SERIES 2016 BONDS

The Douglas Authority Bonds will be issued pursuant to a Bond Indenture of Trust dated as of August 1, 2016 (the “Douglas Bond Indenture”) between the Douglas Authority and First National Bank of Omaha, as bond trustee (the “Bond Trustee”). The proceeds of the Douglas Authority Bonds will be loaned to TNMC pursuant to a Loan Agreement dated as of August 1, 2016 (the “Douglas Loan Agreement”) between TNMC and the Douglas Authority. The Sarpy Authority Bonds will be issued

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pursuant to a Bond Indenture of Trust dated as of August 1, 2016 (the “Sarpy Bond Indenture” and, together with the Douglas Bond Indenture, the “Bond Indentures”) between the Sarpy Authority and the Bond Trustee. The proceeds of the Sarpy Authority Bonds will be loaned to BMC pursuant to a Loan Agreement dated as of August 1, 2016 (the “Sarpy Loan Agreement” and, together with the Douglas Loan Agreement, the “Loan Agreements”) between BMC and the Sarpy Authority.

The proceeds of the Douglas Authority Bonds, together with certain other moneys, will be applied by TNMC to (i) prepay and refinance the outstanding portion of certain capital lease obligations and pay the swap termination costs related thereto, (ii) pay or reimburse a portion of the costs associated with the acquisition, construction, equipping and furnishing of the Lauritzen Outpatient Center, Village Point Outpatient Center and other renovations, additions and improvements to TNMC’s facilities, all as more fully described in Appendix A hereto (the “TNMC Project”), and (iii) pay certain costs of issuing and selling the Douglas Authority Bonds. The proceeds of the Sarpy Authority Bonds, together with certain other moneys, will be applied by BMC to (i) prepay and refinance the outstanding portion of certain capital lease obligations and pay the costs related thereto, (ii) pay or reimburse the costs associated with the acquisition of the BMC hospital facility, all as more fully described in Appendix A hereto (the “BMC Project” and, together with TNMC Project, the “Projects”), and (iii) pay certain costs of issuing and selling the Sarpy Authority Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

SECURITY FOR THE SERIES 2016 BONDS

Each series of the Series 2016 Bonds and the interest thereon are special, limited obligations of the respective Authority, payable by each Authority solely from certain payments to be made by the respective Borrower under the related Loan Agreement and certain other funds held by the Bond Trustee under the related Bond Indenture and not from any other fund or source of the respective Authority. Each series of the Series 2016 Bonds is secured by the related Bond Indenture and the related Loan Agreement as described herein. The obligation to repay the loans made to the Borrowers under the Loan Agreements is evidenced and secured by the Series 2016 Obligations (as defined herein) issued to the respective Authority under the Master Indenture as described herein. Payments under each Loan Agreement and each Series 2016 Obligation are required to be sufficient, together with other funds available for such purpose, to pay when due the principal of, premium, if any, and interest on the related series of the Series 2016 Bonds.

Pursuant to the related Bond Indenture, each Authority will assign to the Bond Trustee, for the benefit and security of the registered owners of the related series of the Series 2016 Bonds, substantially all of the rights of each respective Authority in the related Loan Agreement and the related Series 2016 Obligation, including all Loan Payments payable thereunder.

The Douglas Authority Bonds do not constitute a debt, liability, or general obligation of the State of Nebraska or any political subdivision thereof or a pledge of the faith and credit of the State of Nebraska, but are payable solely from the sources pledged to the payment thereof under the Douglas Bond Indenture. Neither the faith and credit nor the taxing power of the State of Nebraska or any political subdivision thereof is pledged to the payment of the principal of or the interest on the Douglas Authority Bonds. The Douglas Authority has no taxing power.

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The Sarpy Authority Bonds do not constitute a debt, liability, or general obligation of the State of Nebraska or any political subdivision thereof or a pledge of the faith and credit of the State of Nebraska, but are payable solely from the sources pledged to the payment thereof under the Sarpy Bond Indenture. Neither the faith and credit nor the taxing power of the State of Nebraska or any political subdivision thereof is pledged to the payment of the principal of or the interest on the Sarpy Authority Bonds. The Sarpy Authority has no taxing power.

The Master Indenture expresses the general covenants relating to and provides the terms and conditions upon which Indebtedness of the Members of the Obligated Group and any other affiliated entity as may hereafter become a Member of the Obligated Group may be incurred and secured. To evidence and secure the obligations of TNMC to make Loan Payments under the Douglas Loan Agreement sufficient to pay the principal of, redemption premium, if any, and interest on the Douglas Authority Bonds, TNMC will issue Obligation No. 1 (Hospital Authority No. 2 of Douglas County, Nebraska) Series 2016 (the “Douglas Authority Obligation”), payable to the Douglas Authority, in the same aggregate principal amount as the Douglas Authority Bonds. To evidence and secure the obligations of BMC to make Loan Payments under the Sarpy Loan Agreement sufficient to pay the principal of, redemption premium, if any, and interest on the Sarpy Authority Bonds, BMC will issue Obligation No. 2 (Hospital Authority No. 1 of Sarpy County, Nebraska) Series 2016 (the “Sarpy Authority Obligation” and, together with the Douglas Authority Obligation, the “Series 2016 Obligations”), payable to the Sarpy Authority, in the same aggregate principal amount as the Sarpy Authority Bonds. All of the right, title and interest of each Authority in its respective Series 2016 Obligation will be pledged and assigned by each Authority to the Bond Trustee pursuant to the related Bond Indenture. The Series 2016 Obligations will be secured under the Master Indenture on a parity basis with any additional Obligations that may hereafter by issued under and in accordance with the terms of the Master Indenture (collectively, “Obligations”).

The Master Indenture provides that the Members of the Obligated Group are jointly and severally liable with respect to the payment of Obligations issued thereunder. While no property of the Members of the Obligated Group (other than their Gross Revenues) will be mortgaged, assigned or pledged under the Master Indenture, each Member covenants thereunder not to create or permit any lien on its Property and will not incur any Indebtedness (as defined in the Master Indenture) except as specifically permitted under the terms of the Master Indenture. See “SUMMARY OF THE MASTER INDENTURE－Limitations on Creation of Liens” and “－Limitations on Indebtedness” in Appendix C hereto.

In the event one or more Designated Affiliates were to be designated hereafter, no such Designated Affiliate will become directly obligated to make payments due under the Loan Agreements or the Series 2016 Obligations; however, each Designated Affiliate will have covenanted to pay or otherwise transfer to the Controlling Member such amounts of money as are necessary to pay principal of and premium, if any, and interest on all Outstanding Obligations under the Master Indenture and other related payments, including such amounts of money as are necessary to enable the Borrowers to make payments due under the Series 2016 Obligations. The Master Indenture further requires each Designated Affiliate to covenant to take certain actions and to comply with certain covenants contained in the Master Indenture. See “SECURITY FOR THE SERIES 2016 BONDS—The Master Indenture—Designated Affiliates” herein.

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For further information concerning the security for the Series 2016 Bonds, see “SECURITY FOR THE SERIES 2016 BONDS” herein.

CONTINUING DISCLOSURE

TNMC, on behalf of itself and the other Members of the Obligated Group, has entered into a Continuing Disclosure Agreement dated as of August 1, 2016 (the “Continuing Disclosure Agreement”) pursuant to which TNMC has agreed to provide certain information both annually and for each of the first three fiscal quarters and to provide notice of certain events to the Municipal Securities Rulemaking Board (the “MSRB”), in an electronic format as prescribed by the MSRB. The MSRB has designated its Electronic Municipal Market Access system (“EMMA”), found at http://emma.msrb.org, as the sole repository for such disclosure filings. For further information, see “CONTINUING DISCLOSURE AGREEMENT” herein and Appendix E hereto.

BONDHOLDERS’ RISKS

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

PLAN OF FINANCE

Each Authority will lend the proceeds received by the Authority from the issuance and sale of the applicable series of Series 2016 Bonds to the respective Borrower pursuant to the related Loan Agreement.

The proceeds of the Douglas Authority Bonds, together with certain other moneys (which include certain charitable donations for the TNMC Project), including donations received from third party donors, will be applied by TNMC to (i) prepay and refinance the outstanding portion of certain capital lease obligations and pay the swap termination costs related thereto, (ii) pay or reimburse the costs associated with TNMC Project, all as more fully described in Appendix A hereto, and (iii) pay certain costs of issuing and selling the Douglas Authority Bonds.

The proceeds of the Sarpy Authority Bonds, together with certain other moneys, will be applied by BMC to (i) prepay and refinance the outstanding portion of certain capital lease obligations and pay the costs related thereto, (ii) pay or reimburse the costs associated with the BMC Project, all as more fully described in Appendix A hereto, and (iii) pay certain costs of issuing and selling the Sarpy Authority Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein.

For a more detailed description of the Projects, see “THE PROJECTS” in Appendix A hereto.

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THE AUTHORITIES

THE DOUGLAS AUTHORITY

Formation of the Douglas Authority was approved by the Board of County Commissioners of Douglas County on March 5, 1974, pursuant to the provisions of the Act. The Douglas Authority is a public corporation and body politic of the State of Nebraska. The Douglas Authority has the power to issue bonds and lend the proceeds from the sale of such bonds to any nonprofit health care provider within its boundaries for the purposes of constructing, furnishing and equipping new facilities for use as a hospital, constructing additions or improvements to existing facilities, furnishing, equipping, altering, renovating and remodeling such existing facilities and refunding outstanding bonded debt of the Douglas Authority. The Douglas Authority also has the power to issue bonds for the purpose of refinancing indebtedness incurred for the benefit of a hospital.

The Douglas Authority Bonds are limited obligations of the Douglas Authority, payable by the Douglas Authority solely out of revenues pledged therefor under the Douglas Bond Indenture. The Douglas Authority has no taxing power. The Douglas Authority Bonds do not constitute a debt, loan, credit or pledge of the faith and credit or taxing power of the State of Nebraska or any political subdivision thereof, including, but not limited to, Douglas County, Nebraska.

The Douglas Authority Bonds are being issued by the Douglas Authority pursuant to the provisions of the Act in order to finance the TNMC Project. The Douglas Authority has not prepared or assisted in the preparation of this Official Statement and, except for the information regarding the Douglas Authority contained under “INTRODUCTION—The Authorities,” “THE AUTHORITIES—The Douglas Authority” and “LITIGATION—The Douglas Authority” herein, the Douglas Authority is not responsible for any statements made in this Official Statement. Accordingly, except for the information under such captions, the Douglas Authority disclaims responsibility for the disclosures set forth in this Official Statement or otherwise made in connection with the offer, sale and distribution of the Douglas Authority Bonds.

THE SARPY AUTHORITY

Formation of the Sarpy Authority was approved by the Board of County Commissioners of Sarpy County on December 21, 1972, pursuant to the provisions of the Act. The Sarpy Authority is a public corporation and body politic of the State of Nebraska. The Sarpy Authority has the power to issue bonds and lend the proceeds from the sale of such bonds to any nonprofit health care provider within its boundaries for the purposes of constructing, furnishing and equipping new facilities for use as a hospital, constructing additions or improvements to existing facilities, furnishing, equipping, altering, renovating and remodeling such existing facilities and refunding outstanding bonded debt of the Sarpy Authority. The Sarpy Authority also has the power to issue bonds for the purpose of refinancing indebtedness incurred for the benefit of a hospital.

The Sarpy Authority Bonds are limited obligations of Sarpy County, payable by the Sarpy Authority solely out of revenues pledged therefor under the Sarpy Bond Indenture. The Sarpy Authority has no taxing power. The Sarpy Authority Bonds do not constitute a debt, loan, credit or pledge of the

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faith and credit or taxing power of the State of Nebraska or any political subdivision thereof, including, but not limited to, Sarpy County, Nebraska.

The Sarpy Authority Bonds are being issued by the Sarpy Authority pursuant to the provisions of the Act in order to finance the BMC Project. The Sarpy Authority has not prepared or assisted in the preparation of this Official Statement and, except for the information regarding the Sarpy Authority contained under “INTRODUCTION—The Authorities,” “THE AUTHORITIES—The Sarpy Authority” and “LITIGATION—The Sarpy Authority” herein, the Sarpy Authority is not responsible for any statements made in this Official Statement. Accordingly, except for the information under such captions, the Sarpy Authority disclaims responsibility for the disclosures set forth in this Official Statement or otherwise made in connection with the offer, sale and distribution of the Sarpy Authority Bonds.

THE SERIES 2016 BONDS

Reference is made to the Bond Indentures and to the summary of certain provisions of the Bond Indentures included in Appendix C hereto for a more complete description of the Series 2016 Bonds. The discussion herein is qualified by such reference.

GENERAL

The Series 2016 Bonds will be issued as fully registered bonds without coupons in denominations of $5,000 and any integral multiple thereof, will initially be dated as of the date of their initial delivery, will mature in the amounts and on the dates set forth on the inside front cover page hereof.

The Series 2016 Bonds will be made available to Beneficial Owners (as defined below) in book- entry form only, in authorized denominations. Beneficial Owners of the Series 2016 Bonds will not receive certificates representing their interests in the Series 2016 Bonds, except as described below. While the Series 2016 Bonds are held in 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 in Appendix G, “BOOK-ENTRY SYSTEM,” interest payments on a Series 2016 Bond will be made on each Interest Payment Date (as hereinafter defined) to the registered owner thereof appearing on the registration books for the Series 2016 Bonds (referred to as the Bond Register) as the holder thereof as of the close of business of the Bond Trustee on the last day of the calendar month preceding each Interest Payment Date (whether or not a Business Day, as hereinafter defined) (referred to as the 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 as the owner may have filed with the Bond Trustee for that purpose, or at the written expense of any owner of at least $1,000,000 in aggregate principal amount of Series 2016 Bonds be transmitted by wire transfer in immediately available funds to the bank for credit to the account number on file with the Bond Trustee at least five Business Days prior to the Interest Payment Date but not later than the close of business of the Bond Trustee on the Record Date for any Interest Payment Date.

In the event that the Series 2016 Bonds are no longer held in a book-entry only system, the principal of and premium, if any, on the Series 2016 Bonds will be payable at the designated corporate

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trust office of the Bond Trustee or at the office of any Paying Agent named in the holder’s Bond. Notwithstanding the foregoing, payment of defaulted interest on the Series 2016 Bonds shall cease to be payable to the holders of such Bonds on the relevant Record Date and shall be made to the persons who shall be the registered owners thereof on the Special Record Date fixed by the Bond Trustee notice whereof being given to the holders not less than 10 days prior to such Special Record Date.

INTEREST

Interest on the Series 2016 Bonds will be payable on May 15 and November 15 of each year (each such date referred to as an Interest Payment Date), commencing November 15, 2016. The Series 2016 Bonds shall bear interest (based on a 360-day year of twelve 30-day months) at the rates and will mature in the amounts and on the dates set forth on the inside front cover page of this Official Statement.

REDEMPTION OF THE SERIES 2016 BONDS

Optional Redemption. The Douglas Authority Bonds maturing on and after May 15, 20___, and the Sarpy Authority Bonds maturing on and after May 15, 20___, are subject to redemption prior to their stated maturities, at the option of the respective Authority, at the written direction of the applicable Borrower, on or after May 15_, 20___, in whole or in part on any date, at a redemption price of 100% of the principal amount of Series 2016 Bonds called for redemption, together with accrued interest thereon to the date fixed for redemption.

No redemption of less than all of a series of the Series 2016 Bonds at the time outstanding, as described in this paragraph, shall be made unless the aggregate principal amount of such series of Series 2016 Bonds to remain outstanding after such redemption is in an authorized denomination.

Extraordinary Redemption. The Series 2016 Bonds are subject to redemption prior to their respective stated maturities at the option of the respective Authority, at the written direction of the applicable Borrower in whole or in part on any date within one year of the occurrence of any of the following events: (i) the Property of the applicable Borrower has been damaged or destroyed to such extent that, in the opinion of the Borrower Representative, (x) normal operations at such Borrower’s facilities are prevented or are likely to be prevented for a period of four consecutive months, or (y) the restoration of the Property is not economically feasible and (ii) title (including leasehold title, if any) to, or the temporary use of, all or substantially all of the Property of the applicable Borrower has been taken under the exercise of the power of eminent domain by any governmental authority, or person, firm or corporation acting under governmental authority which, in the opinion of the Borrower Representative, is likely to result in normal operations at the applicable Borrower’s facilities being prevented for a period of four consecutive months.

Series 2016 Bonds redeemed under this paragraph shall be redeemed at the redemption price equal to the principal amount of the Series 2016 Bonds so redeemed plus interest accrued thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The Douglas Authority Bonds maturing on and after May 15, ____, are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof and accrued interest to the redemption date.

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As and for a sinking fund for the redemption of Douglas Authority Bonds maturing on May 15, ______, there shall be deposited pursuant to Obligation No. 2 in the Debt Service Fund a sum which is sufficient to redeem (after credit as provided below) the following principal amounts of Bonds maturing on May 15:

MAY 15 PRINCIPAL AMOUNT OF THE YEAR

* Maturity

The Sarpy Authority Bonds maturing on and after May 15, ____, are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof and accrued interest to the redemption date.

As and for a sinking fund for the redemption of Sarpy Authority Bonds maturing on May 15, ______, there shall be deposited pursuant to Obligation No. 1 in the Debt Service Fund a sum which is sufficient to redeem (after credit as provided below) the following principal amounts of Bonds maturing on May 15:

MAY 15 PRINCIPAL AMOUNT OF THE YEAR

* Maturity

Purchase in Lieu of Redemption; Application of Purchase and Redemption to Bond Sinking Fund Payments. In lieu of redeeming the Series 2016 Bonds, at the option of the applicable Borrower, to be exercised on or before the 45th day next preceding each mandatory redemption date, the applicable Borrower may: (i) deliver to the Bond Trustee for cancellation Series 2016 Bonds in the aggregate principal amount desired; (ii) furnish to the Bond Trustee funds, together with appropriate instructions, for the purpose of purchasing any of said Series 2016 Bonds from any Owner thereof in the open market at a price not in excess of 100% of the principal amount thereof, whereupon the Bond Trustee shall expend such funds for such purposes to such extent as may be practical; or (iii) elect to receive a credit in respect to the mandatory redemption obligation for any Series 2016 Bonds of the same maturity and interest rate which prior to such date have been redeemed (other than through mandatory sinking fund redemption) and cancelled by the Bond Trustee and not theretofore applied as a credit against any redemption obligation. Each Series 2016 Bond so delivered or previously purchased or redeemed shall be

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credited at 100% of the principal amount thereof on the obligation of the Authority to redeem Series 2016 Bonds of the same maturity and interest rate on the next mandatory redemption date applicable to Series 2016 Bonds of such maturity and interest rate that is at least 45 days after receipt by the Bond Trustee of such instructions from the applicable Borrower, and any excess of such amount shall be credited on future mandatory redemption obligations for Series 2016 Bonds of the same maturity and interest rate in chronological order or such other order as the applicable Borrower may designate, and the principal amount of Series 2016 Bonds of the same maturity and interest rate to be redeemed on such future mandatory redemption dates shall be reduced accordingly.

Optional Purchase of the Series 2016 Bonds. The Authorities and, by their acceptance of the Series 2016 Bonds, the Owners of the Series 2016 Bonds irrevocably grant to the applicable Borrower and any assigns of the applicable Borrower with respect to this right, the option to purchase, at any time and from time to time, any Bond which is redeemable as described above under “Optional Redemption” at a purchase price equal to the redemption price therefor. To exercise such option, the applicable Borrower will give the Bond Trustee a written request exercising such option as though such written request were a written request of the respective Authority for redemption, and the Bond Trustee shall thereupon give the Owners of the Series 2016 Bonds to be purchased notice of such purchase in the manner described below under “Notice of Redemption” as though such purchase were a redemption and the purchase of such Series 2016 Bonds shall be mandatory and enforceable against the owners of the Series 2016 Bonds. On the date fixed for purchase pursuant to any exercise of such option, the applicable Borrower shall pay the purchase price of the Series 2016 Bonds then being purchased to the Bond Trustee in immediately available funds, and the Bond Trustee will pay the same to the sellers of such Series 2016 Bonds against delivery thereof. Following such purchase, the Bond Trustee will cause such Series 2016 Bonds to be registered in the name of the applicable Borrower or its nominee and shall deliver them to the applicable Borrower or its nominee. In the case of the purchase of less than all of a series of the Series 2016 Bonds, the particular Series 2016 Bonds to be purchased shall be selected as though such purchase were a redemption.

No purchase of the Series 2016 Bonds as described under this heading shall operate to extinguish the indebtedness evidenced thereby.

Notice of Redemption. Notice of redemption shall be mailed by the Bond Trustee, not less than 30 nor more than 60 days prior to the redemption date, to the respective registered owners of any Series 2016 Bonds designated for redemption at their addresses appearing on the bond registration books of the Bond Trustee or at such other address as is furnished in writing by such registered owner of the Bond Trustee. Each notice of redemption shall state the redemption date, the place or places of redemption, the maturities, and, if less than all of any such maturity, the distinctive number of the Series 2016 Bonds of such maturity to be redeemed and, in the case of Series 2016 Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Series 2016 Bonds the redemption price thereof or of said specified portion of the principal thereof in the case of a Series 2016 Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Series 2016 Bonds be then surrendered. The failure of the registered owner to receive such notice, or any defect in such notice, shall not affect the validity of the proceedings for the redemption of Series 2016 Bonds.

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If at the time the Bond Trustee gives notice of a redemption described above, there shall not have been deposited with the Bond Trustee moneys sufficient to redeem all the Series 2016 Bonds called for redemption, such notice will state that it is conditional, that is, subject to the deposit of the redemption moneys with the Bond Trustee on or prior to the redemption date, and such notice shall be of no effect unless such moneys are so deposited.

EXCHANGE AND TRANSFER

Upon surrender for transfer or exchange of any Series 2016 Bond at the designated corporate trust office of the Bond Trustee, the respective Authority shall execute, and the Bond Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Series 2016 Bonds of the same maturity and interest rate, of any Authorized Denomination and of a like aggregate principal amount. Every Series 2016 Bond presented or surrendered for transfer or exchange shall (if so required by the respective Authority or the Bond Trustee, as bond registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the respective Authority and the Bond Trustee, as bond registrar, duly executed by the Owner thereof or such Owner’s attorney or legal representative duly authorized in writing. All Series 2016 Bonds surrendered upon any exchange or transfer provided for in the Bond Indentures shall be promptly cancelled and destroyed by the Bond Trustee.

All Series 2016 Bonds issued upon any transfer or exchange of Series 2016 Bonds shall be the valid obligations of the respective Authority, evidencing the same debt, and entitled to the same security and benefits under the Bond Indentures, as the Series 2016 Bonds surrendered upon such transfer or exchange. No service charge shall be made for any registration, transfer or exchange of Series 2016 Bonds, but the Bond Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Series 2016 Bonds, and such charge shall be paid before any such new Series 2016 Bond shall be delivered.

The Bond Trustee shall not be required (a) to transfer or exchange any Series 2016 Bond during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of such Series 2016 Bond and ending at the close of business on the day of such publication or mailing or (b) to transfer or exchange any Series 2016 Bond so selected for redemption in whole or in part, during a period beginning at the opening of business on any Record Date for such Series 2016 Bonds and ending at the close of business on the relevant interest payment date therefor.

The Person in whose name any Series 2016 Bond shall be registered on the bond register shall be deemed and regarded as the absolute Owner thereof for all purposes, except as otherwise provided in the Bond Indentures, and payment of or on account of the principal of and premium, if any, and interest on any such Series 2016 Bond shall be made only to or upon the order of the Owner thereof or such Owner’s legal representative, but such registration may be changed as herein provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2016 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 2016 Bonds. Transfers of beneficial ownership interests in the Series 2016 Bonds may be made as described in Appendix G, “BOOK-ENTRY SYSTEM” while the Book- Entry Only System remains in effect.

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SECURITY FOR THE SERIES 2016 BONDS

GENERAL

Each of the Douglas Authority Bonds and the Sarpy Authority Bonds are separately issued and secured under their respective Bond Indentures. Under the Bond Indentures, the Authorities will assign and pledge to the Bond Trustee (1) the applicable Series 2016 Obligation, (2) certain rights of the applicable Authority under the applicable Loan Agreement, (3) all Loan Payments receivable by the applicable Authority therefrom, and (4) the funds and accounts (except the Rebate Fund), including the money and investments in them, which the respective Bond Trustee holds under the terms of the applicable Bond Indenture. Each Series 2016 Obligation will constitute an unconditional promise by the Obligated Group to pay amounts sufficient to pay principal of (whether at maturity, upon a sinking fund redemption, by acceleration or call for redemption) and premium, if any, and interest on the related series of the Series 2016 Bonds.

SPECIAL, LIMITED OBLIGATIONS

The Series 2016 Bonds are special, limited obligations of the related Authority, issued and secured under separate Bond Indentures between each Authority and the Bond Trustee as described herein and payable solely from certain payments under separate Loan Agreements (each Authority will enter into a separate Loan Agreement) and the related Series 2016 Obligation issued under the Master Indenture.

The Douglas Authority Bonds shall not constitute a debt, liability, or general obligation of the State of Nebraska, the County of Douglas or of any other political subdivision of the State of Nebraska within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the faith and credit or the taxing power of the State of Nebraska, the County of Douglas or of any other political subdivision of the State of Nebraska. The issuance of the Douglas Authority Bonds shall not, directly, indirectly, or contingently, obligate the State of Nebraska, the County of Douglas or any other political subdivision of the State of Nebraska to levy any form of taxation therefor or to make any appropriation for their payment. The Douglas Authority has no taxing power.

The Sarpy Authority Bonds shall not constitute a debt, liability or general obligation of the State of Nebraska, the County of Sarpy or of any other political subdivision of the State of Nebraska within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the faith and credit or the taxing power of the State of Nebraska, the County of Sarpy or of any other political subdivision of the State of Nebraska. The issuance of the Sarpy Authority Bonds shall not, directly, indirectly, or contingently, obligate the State of Nebraska, the County of Sarpy or any other political subdivision of the State of Nebraska to levy any form of taxation therefor or to make any appropriation for their payment. The Sarpy Authority has no taxing power.

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THE BOND INDENTURES

Under each Bond Indenture, the related Authority will pledge and assign to the Bond Trustee, for the benefit of the related bondowners, substantially all of its rights under the related Loan Agreement and the related Series 2016 Obligation, including all Loan Payments and other amounts payable under such Loan Agreement (except for certain fees, expenses and advances and any indemnity payments payable to the related Authority and any rebate payments payable to the Government) as security for the payment of the principal of and interest on the applicable series of Series 2016 Bonds. See “SUMMARY OF THE BOND INDENTURES” in Appendix C hereto.

For a description of provisions in the Bond Indentures providing for the release and substitution of the Series 2016 Obligations, see “SUMMARY OF THE BOND INDENTURES—Release and Substitution of Borrower Obligations” in Appendix C hereto.

THE LOAN AGREEMENTS

Under each Loan Agreement, the applicable Borrower is required to make Loan Payments to the Bond Trustee for deposit into the respective Debt Service Fund in amounts that will be sufficient to pay the principal of and interest on the applicable series of Series 2016 Bonds when due, and to make certain other payments. The obligations of each Borrower to make Loan Payments and to pay other amounts under the respective Loan Agreement are absolute and unconditional without any abatement or diminution thereof. Pursuant to the Master Indenture, the applicable Borrower will execute and deliver to the related Authority the related Series 2016 Obligation, evidencing the loan of proceeds of the applicable series of the Series 2016 Bonds to the applicable Borrower by the Authorities and the obligation of the applicable Borrower to repay the loans. See “SUMMARY OF THE LOAN AGREEMENTS” in Appendix C hereto.

THE MASTER INDENTURE

Series 2016 Obligations. To secure the payment of the Loan Payments required to be made pursuant to the Douglas Loan Agreement, TNMC will issue the Douglas Authority Obligation under the Master Indenture, payable to the Douglas Authority, which Douglas Authority Obligation will be pledged and assigned by the Douglas Authority to the Bond Trustee to secure the payment of the Douglas Authority Bonds. To secure the payment of the Loan Payments required to be made pursuant to the Sarpy Loan Agreement, BMC will issue the Sarpy Authority Obligation under the Master Indenture, payable to the Sarpy Authority, which Sarpy Authority Obligation will be pledged and assigned by the Sarpy Authority to the Bond Trustee to secure the payment of the Sarpy Authority Bonds. The Series 2016 Obligations will stand on a parity under the Master Indenture with each other and with any additional Obligations that may hereafter be issued under and in accordance with the terms of the Master Indenture.

The Master Indenture provides that the Bond Trustee will be treated as the holder of the Series 2016 Obligations for purposes of the Master Indenture and will have the right, with respect to certain provisions of the Master Indenture, including without limitation provisions relating to defaults and supplements, to give notices, consents and approvals, request or consent to accelerations, control and direct proceedings, grant waivers and consents, direct the making of appointments and consent to supplements. Each Bond Indenture provides that the Bond Trustee will take such actions upon the

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direction of not less than a majority of the Bondholders of the related series of the Series 2016 Bonds. Upon the issuance of the Series 2016 Bonds, the Bond Trustee will at that time be treated as the holder of a majority of the aggregate principal amount of all Obligations outstanding on such date, subject to the issuance of additional Obligations.

Obligations. Under the Master Indenture, the Obligated Group Representative may issue Obligations to evidence or secure Indebtedness (as defined in the Master Indenture). All Members of the Obligated Group are jointly and severally liable with respect to the payment of each Obligation issued under the Master Indenture. Initially, TNMC, BMC and UNMCP will be the sole Members of the Obligated Group. For a more detailed discussion of entry to or withdrawal from the Obligated Group, see “SUMMARY OF THE MASTER INDENTURE—Parties Becoming Members of the Obligated Group” and “— Withdrawal From the Obligated Group” in Appendix C hereto.

Designated Affiliates. Under the Master Indenture, a Designated Affiliate, if any is so designated, will not be directly obligated to pay amounts due under the Series 2016 Obligations, and neither the Master Trustee, the Bond Trustee, nor the Bondholders will have any claim against any Designated Affiliate with respect to payment of amounts due under the Series 2016 Obligations. On the date of issuance of the Series 2016 Bonds, no Designated Affiliates will have been designated by TNMC.

Each Designated Affiliate, if any is so designated, covenants and agrees to pay or otherwise transfer to a Controlling Member (i) such amounts as are necessary to make payments due under the Series 2016 Obligations and (ii) such other amounts as are necessary to enable the Obligated Group to make each payment due under the Series 2016 Obligations. See “SUMMARY OF THE MASTER INDENTURE—Security; Payment of Principal and Interest” in Appendix C hereto. The Master Indenture also requires each Designated Affiliate, if any is designated, to comply with certain covenants contained in the Master Indenture, which include requirements for maintenance of corporate existence, compliance with a rate covenant, and restrictions on liens on property, on incurrence of additional indebtedness, on sale, lease and disposition transactions and on consolidations, mergers and transfers of property. For example, see “SUMMARY OF THE MASTER INDENTURE—Insurance,” “—Limitations on Creation of Liens,” “—Limitations on Indebtedness,” “—Income Available for Debt Service,” “—Sale, Lease or Other Disposition of Property” and “—Consolidation, Merger, Sale or Conveyance” in Appendix C hereto.

Pledge of Gross Revenues. The Series 2016 Obligations are general obligations of the Members of the Obligated Group and are secured by a pledge of the Gross Revenues of the Obligated Group. “Gross Revenues” means all revenues, income, receipts and money received by or on behalf of the Members of the Obligated Group from all sources, excluding Excluded Property but including the following: (a) gross revenues derived from the operation and possession of each Member’s facilities; (b) gifts, grants, bequests, donations and contributions of each Member, but excluding (i) any gifts, grants, bequests, donations, and contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Obligations and (ii) funds of a Member of the Obligated Group derived therefrom which due to donor restrictions cannot legally be used to pay Obligations; (c) proceeds derived from (i) condemnation proceeds, (ii) accounts receivable, (iii) securities and other investments, (iv) inventory and other tangible and intangible property, (v) Financial Products Receipts, (vi) medical reimbursement programs and agreements, (vii) insurance proceeds and (viii)

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contract rights and other rights and assets now or hereafter owned by each Member; (d) rentals received from the lease of office space; and (e) amounts received from Designated Affiliates.

Accounts receivable of the Members of the Obligated Group which constitute Gross Revenues and are pledged as security under the Master Indenture may be sold if such sale is in accordance with the provisions of the Master Indenture. Any lien in favor of the Maser Trustee created under the Master Indenture on such accounts receivable would terminate and be immediately released upon any such sale with respect to any such accounts receivable so sold. See “BONDHOLDERS’ RISKS—Certain Matters Relating to Enforceability of Security Interest in Gross Revenues” and “SUMMARY OF THE MASTER INDENTURE—Limitations on Creation of Liens” in Appendix C hereto.

Rate Covenant. Each Member of the Obligated Group agrees to manage its business, and each Controlling Member agrees to cause each Designated Affiliate to manage its business, such that Income Available for Debt Service of the Credit Group, calculated at the end of each Fiscal Year, will not be less than 1.10 times the Debt Service Requirement on all Outstanding Indebtedness of the Credit Group for the Fiscal Year.

If for any Fiscal Year the Income Available for Debt Service is not sufficient to satisfy such requirement, the Obligated Group Representative covenants to retain a Consultant to make recommendations to increase Income Available for Debt Service in the following Fiscal Year to the level required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest level attainable (provided, however, that a Consultant need not be hired for such purpose more frequently than once in any two year period). Each Obligated Group Member agrees, and the Controlling Member agrees to cause each Designated Affiliate, to consider any recommendations of the Consultant and shall be obligated to implement such recommendations to the extent such recommendations are practicable and operationally feasible. So long as the provisions of the Master Indenture described above are complied with, the requirements of the Master Indenture will be deemed to have been complied with even if Income Available for Debt Service for the following Fiscal Year is below the required level so long as the Income Available for Debt Service of the Credit Group is sufficient to pay the debt service on all Indebtedness of the Credit Group for such Fiscal Year; but in no event may the ratio of Income Available for Debt Service to the Debt Service Requirement for any Fiscal Year be less than 1.00.

If a report of a Consultant is delivered to the Master Trustee and the Related Bond Issuer, which report shall state that Industry Restrictions have been imposed which make it impossible for Income Available for Debt Service to satisfy the requirements described above, then the required amount of Income Available for Debt Service will be temporarily reduced to the maximum coverage permitted by such Industry Restrictions during the duration of such Industry Restrictions but in no event less than an amount to pay the debt service on all Indebtedness of the Credit Group for such Fiscal Year; but in no event may the ratio of Income Available for Debt Service to the Debt Service Requirement for any Fiscal Year be less than 1.00.

The ratio of Income Available for Debt Service to the Debt Service Requirement may be less than 1.00 in any Fiscal Year, provided that the Income Available for Debt Service to the Debt Service Requirement for the prior Fiscal Year was 1.00 or greater and that there is filed with the Master Trustee (at the same time the Obligated Group Representative sends the Consultant’s report to the Master Trustee as required by the first paragraph under this subcaption) a certificate of the Obligated Group

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Representative which indicates that the Days Cash on Hand of the Obligated Group as of the last day of such Fiscal Year was not less than 150.

See “SUMMARY OF THE MASTER INDENTURE—Income Available for Debt Service” in Appendix C hereto.

Negative Pledge. While no property of the Members of the Obligated Group, other than the Gross Revenues, will be mortgaged, assigned or pledged to the Master Trustee under the Master Indenture, each Member of the Credit Group agrees not to create or permit any lien on its Property (as defined in the Master Indenture) other than certain Permitted Liens (as defined in the Master Indenture). See “SUMMARY OF THE MASTER INDENTURE—Limitations on Creation of Liens” in Appendix C hereto.

Transfer of Assets. Each Member of the Credit Group agrees to restrictions on the ability to sell, lease or otherwise dispose of its assets. See “SUMMARY OF THE MASTER INDENTURE—Sale, Lease or Other Disposition of Property” in Appendix C hereto.

Additional Indebtedness. The Master Indenture restricts the ability of the Members of the Obligated Group and the Designated Affiliates, if any are so designated, to incur Indebtedness. The Credit Group may incur Additional Indebtedness provided that the Credit Group meets certain financial tests and other requirements of the Master Indenture. See “SUMMARY OF THE MASTER INDENTURE— Limitations on Indebtedness” in Appendix C hereto. Additional Obligations may be secured under the Master Indenture on a parity basis with the Series 2016 Obligations and any other Outstanding Obligations with respect to the Gross Revenues.

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∗ ESTIMATED SOURCES AND USES OF FUNDS

The following table sets forth the estimated sources and uses of funds related to the Series 2016 Bonds:

SOURCES OF FUNDS: Douglas Sarpy Authority Bonds Authority Bonds Total Principal Amount of Series 2016 Bonds $130,420,000 $149,605,000 $280,025,000 Net Original Issue (Discount)/Premium 27,147,000 (1,498,000) 25,649,000 Obligated Group Funds/Donations(1) 47,472,000 1,366,000 48,838,000 TOTAL SOURCES $205,039,000 $149,473,000 $354,512,000

USES OF FUNDS: TNMC Project $161,215,000 - $161,215,000 TNMC Capital Lease Payoff 40,811,000 - 40,811,000 Interest Rate Swap Termination 1,752,000 - 1,752,000 BMC Project and Refinance Term Loan - 130,255,000 130,255,000 BMC Capital Lease Payoff - 17,849,000 17,849,000 Costs of Issuance(2) 1,261,000 1,369,000 2,630,000 TOTAL USES $205,039,000 $149,473,000 $354,512,000 ______(1) Includes amounts to be used to construct and equip the Lauritzen Outpatient Center and to equip the Fred and Pamela Buffett Cancer Center. See “THE PROJECTS” in Appendix A hereto. (2) Includes Underwriters’ discount, legal and accounting fees, trustee fees, printing costs, rating agency fees and other miscellaneous expenses incurred in connection with the issuance of the Series 2016 Bonds.

∗ Preliminary, subject to change.

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ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS

The following table sets forth, for each fiscal year ending June 30, the amounts estimated to be paid by the Members of the Obligated Group for principal of and interest on the Series 2016 Bonds (totals may not foot due to rounding).

YEAR ENDING SERIES 2016 BONDS AGGREGATE DEBT (JUNE 30) PRINCIPAL INTEREST SERVICE

Totals:

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BONDHOLDERS’ RISKS

The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2016 Bonds. Such discussion is not exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2016 Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto and additional information in the form of the complete documents summarized herein, copies of which are available as described in this Official Statement.

GENERAL

Each series of the Series 2016 Bonds is a limited obligation of the related Authority, payable solely from certain funds held by the Bond Trustee under the related Bond Indenture, the amounts received from the applicable Borrower under the related Loan Agreement and amounts received from the Obligated Group under the related Series 2016 Obligation. See “SECURITY FOR THE SERIES 2016 BONDS” above. The Series 2016 Bonds do not constitute a debt, liability or obligation of the State of Nebraska or any political subdivision thereof, and are not payable in any manner from taxation. The ability of the Obligated Group to realize revenues in amounts sufficient to pay debt service on the Series 2016 Bonds when due is affected by and subject to conditions which may change in the future to an extent and with effects that cannot be determined at this time. No representation or assurance is given or can be made that revenues will be realized by the Obligated Group in amounts sufficient to provide funds for payment of debt service on the Series 2016 Bonds when due and the other obligations of the Obligated Group.

The receipt of future revenues by the Members of the Obligated Group is subject to, among other factors, federal and state laws, regulations and policies affecting the health care industry and the policies and practices of the Medicare and Medicaid programs, major managed care providers, private insurers and other third party payors and private purchasers of health care services. The effect on the Members of the Obligated Group of recently enacted laws and regulations and recently adopted policies and of future changes in federal and state laws, regulations and policies and private third party payor policies, cannot be determined at this time. The future financial condition of the Obligated Group could also be adversely affected by loss of established third party payor contracts or an adverse determination by a government agency with respect to an Obligated Group Member’s tax-exempt status.

Future economic conditions, which may include an inability to control expenses in periods of inflation and other conditions, including demand for health care services, changes in the rate of health insurance coverage and the distribution of health insurance coverage types, the availability and affordability of provider insurance (including without limitation, malpractice and casualty insurance), new or emerging forms of care or treatment, the availability of nursing and other professional personnel, the capability of the Obligated Group’s management, the receipt of grants and contributions, referring physicians’ and self-referred patients’ confidence in the Members of the Obligated Group, economic and demographic developments in the United States, the State of Nebraska and the service areas of the Members of the Obligated Group, and competition from other health care institutions in the service areas, together with changes in the structure of the health care delivery system and payment for that care (e.g. accountable care organizations or value-based purchasing), reimbursement rates, costs, and governmental

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laws, regulations and policies, may adversely affect revenues and expenses and, consequently, the ability of the Members of the Obligated Group to make payments on the Series 2016 Obligations.

This discussion of risk factors is not intended to be exhaustive and should be read in conjunction with all other parts of this Official Statement.

IMPACT OF ECONOMIC RECESSION AND DISRUPTION OF CREDIT MARKETS

The economic downturn that began in 2008 had and may continue to have negative repercussions upon the national and global economies, including a scarcity of credit, lack of confidence in the financial sector, extreme volatility in the financial markets, increase in interest rates, reduced business activity, increased consumer bankruptcies and increased business failures and bankruptcies.

The current economic climate has adversely affected the health care sector generally. Patient service revenues and inpatient volumes have not increased as historic trends would otherwise indicate and some health care entities have experienced increased self-pay admissions, increased levels of bad debt and uncompensated care, and reduced demand for elective procedures. The economic climate has also increased stresses on state budgets, potentially resulting in reductions in Medicaid payment rates and tightening of Medicaid eligibility standards, and delays of payment of amounts due under Medicaid and other state or local payment programs.

The Members of the Obligated Group have holdings in a broad range of investments. Market fluctuations have affected and will continue to affect materially the value of those investments and those fluctuations may be material. Market disruptions have exacerbated the market fluctuations and negatively affected over certain time periods the investment performance of securities in the Obligated Group’s portfolio. During certain fiscal years, investment income has constituted a significant portion of the non- operating income of the Members of the Obligated Group. In other years, the Members of the Obligated Group have experienced losses on their investments that have adversely affected the non-operating results of the Members of the Obligated Group. No assurance can be given that the investments of the Members of the Obligated Group will produce positive returns or that losses on investments will not occur in the future. See “FINANCIAL INFORMATION—Management Discussion of Historical Financial Results” in Appendix A hereto.

POTENTIAL CHANGES TO TAX TREATMENT OF BONDS

Proposals to alter or eliminate the exclusion of interest on tax-exempt bonds from gross income for some or all taxpayers have been made in the past and may be made again in the future. Such legislative proposals, if enacted, could alter the federal and/or state tax treatment described under the heading “BONDHOLDERS’ RISKS—Tax Exempt Status; Continuing Legal Requirements” herein, and certain of which, whether or not enacted, could adversely affect the market value or marketability of the Series 2016 Bonds. Certain legislative proposals, if enacted, could tax all or a portion of the interest on tax exempt bonds, including the Series 2016 Bonds, for certain taxpayers under the regular income tax, the alternative minimum tax or otherwise, and could apply to bonds issued before, on, or after the date of enactment.

It is unclear whether any legislation will be proposed or enacted affecting the tax treatment of interest on the Series 2016 Bonds. If any such legislation is retroactive and applies to tax-exempt bonds,

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including the Series 2016 Bonds, previously issued for the benefit of the Members of the Obligated Group, the adoption of any such legislation could adversely affect the market value or marketability of the Series 2016 Bonds and the financial condition of the Members of the Obligated Group. In addition, the adoption of any such legislation could increase the cost to the Members of the Obligated Group of financing future capital needs.

MAIN CAMPUS LEASE AGREEMENT

TNMC leases the majority of its main campus from the Board of Regents and CRHS pursuant to a lease agreement between TNMC, as lessee, and the Board of Regents and CRHS, as lessors (the “Lease Agreement”). The Lease Agreement may be terminated prior to the expiration of its term in 2062 (i) upon certain events resulting in damage or destruction of the leased premises, (ii) upon certain events resulting in condemnation of the leased premises, (iii) upon mutual written agreement of TNMC, the Board of Regents and CRHS, (iv) upon the termination of the Successor Joint Operating Agreement dated as of July 1, 2016 (the “SJOA”) (see “SUCCESSOR JOINT OPERATING AGREEMENT” described in Appendix D hereto) or a successor joint operating agreement as provided in the Lease Agreement or (v) upon default thereunder. This termination may occur prior to the maturity date for the Series 2016 Bonds and because the facilities leased from the Board of Regents and those leased from CRHS, respectively, may not be able to operate separately in an efficient manner, any such termination could have a material adverse impact on the operations and financial condition of the Members of the Obligated Group. In addition, in the event the SJOA is terminated and the term of the Lease Agreement is continued, the Lease Agreement requires the payment of rent in an amount that could be material to the financial condition of the Obligated Group, as described at the caption “CORPORATE STRUCTURE—Recent Reorganization—Joint Operating Agreement and Lease Agreement” in Appendix A hereto. See “SUMMARY OF THE LEASE AGREEMENT” in Appendix D hereto.

NONPROFIT HEALTH CARE ENVIRONMENT

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

Recently, an increasing number of the operations or practices of health care providers have been challenged or questioned to determine if they are in compliance with the regulatory requirements for nonprofit tax-exempt organizations and consistent with the societal expectations of such organizations. These challenges or examinations, 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 of these challenges is that nonprofit may not confer community benefits that justify the benefit received from tax-exempt status. Areas that have come under examination have included pricing practices, billing and collection practices, charitable care, executive compensation, exemption of property from real property taxation, private use of facilities financed with tax-exempt bonds and others. These challenges and questions have come from a variety of sources, including state attorneys general, the Internal Revenue Service (the “IRS”), labor unions, Congress, state legislatures, other federal and state

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agencies and patients and in a variety of forums, including hearings, audits and litigation. These challenges and examinations, and any resulting legislation, regulations, judgment or penalties could have a material adverse effect on the Obligated Group. The following are some examples of the challenges and examinations facing nonprofit health care organizations:

Congressional Hearings. 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. See “BONDHOLDERS’ RISKS— Nonprofit Health Care Environment—Internal Revenue Service Form 990 and IRS Examination of Tax Exempt Bonds and Community Benefit Practices” below.

Internal Revenue Service Form 990 and IRS Examination of Tax Exempt Bonds and Community Benefit Practices. IRS Form 990 is used by 501(c)(3) not-for-profit organizations to submit information required by the federal government for tax-exemption. The form provides for enhanced transparency as to the operations of such exempt organization, requiring detailed public disclosure of information relating to areas the IRS has deemed compliance risk areas, including executive compensation practices, corporate governance, loans to management and others, joint ventures and other transactions, political campaign activities, tax-exempt bond compliance and community benefit requirements.

Schedule K to Form 990 is intended to address what the IRS believes may be significant noncompliance with recordkeeping and retention requirements for tax-exempt bonds. Accordingly, Schedule K requires the detailed reporting of information relating to tax-exempt bonds, including compliance with the arbitrage rules and rules limiting the private use of bond-financed facilities. The IRS has indicated that more resources will be invested in audits of tax-exempt bonds in the charitable organization sector with specific review of private use. The effect of the IRS’s scrutiny of tax-exempt bonds cannot be determined.

The IRS has also undertaken a community benefit initiative directed at hospitals. To that end, hospitals are required to attach their audited financial statements to Form 990 and include a schedule describing how the hospital provides community benefit and addresses community health needs (see “BONDHOLDERS’ RISKS—Tax Exempt Status; Continuing Legal Requirements” below). As the IRS collects and reviews information from hospitals regarding the types and quantities of community benefits provided, the IRS may issue a more stringent interpretation of community benefit. Findings from Form 990 relating to community benefit may also revive Congressional proposals to add requirements for a hospital’s tax-exempt status, including a requirement to provide a minimum level of charity care.

Consumer Class Action Litigation Relating to Billing and Collection Practices. 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. The cases are proceeding in various courts around the country with inconsistent results. While it is not possible to make general predictions, some hospitals and health systems have incurred substantial costs in defending such lawsuits and in some cases have entered into substantial settlements. See “LITIGATION” in Appendix A hereto.

Challenges to Real Property Tax Exemptions. Recently, a number of states have challenged the real property tax exemptions afforded to certain nonprofit health care providers by state and local taxing authorities 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. In recent years, state, county and local

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taxing authorities have been undertaking audits and reviews of the operations of tax-exempt healthcare providers with respect to their property tax exemption for both real and personal property. In some cases, particularly where such authorities are dissatisfied with the amount of services provided to indigents, the property tax-exempt status of the healthcare providers has been questioned. Many of the buildings owned and occupied by Members of the Obligated Group are currently exempt from Nebraska property taxes. Management is not aware of any challenges to the tax-exempt status to these properties of the Members of the Obligated Group.

Indigent Care. Tax-exempt hospitals often treat large numbers of indigent patients who are unable to pay in full for their medical care. General economic conditions that affect the number of employed individuals who have health coverage affects the ability of patients to pay for health care. Similarly, changes in government policy, which may result in coverage exclusions under local, county, state and federal health care programs, may increase the frequency and severity of indigent treatment by such hospitals and other providers. It is also possible that future legislation could require that tax-exempt hospitals maintain minimum levels of indigent care as a condition of federal income tax exemption and exemption from certain state and local taxes.

FEDERAL BUDGET

Federal Budget Cuts. The Budget Control Act of 2011 (the “Budget Control Act”) limited the federal government’s discretionary spending to levels necessary to reduce expenditures between federal fiscal years 2012 and 2021 by $917 billion as compared to the federal budget baseline as of 2011. The Budget Control Act also created a Joint Select Committee on Deficit Reduction (the “Supercommittee”) tasked with making recommendations to further reduce the federal deficit by $1.2 trillion. Due to the Supercommittee’s failure to act within the time specified in the Budget Control Act, sequestration (across the board cuts) in an amount necessary to achieve $1.2 trillion in savings began on March 1, 2013. While a wide range of spending is exempted from sequestration—including Social Security, Medicaid, Veteran’s benefits and pensions, federal retirement funds, civil and military pay, child nutrition, and other programs—Medicare is not exempted from sequestration. As a result of these across the board spending reductions, Medicare provider payments are reduced annually by 2% of total program costs. In addition, the Bipartisan Budget Act of 2013 was signed into law in December 2013, extending sequestration for Medicare and other programs another two years, through 2023.

Additionally, federal health care reform legislation has also resulted in significant reimbursement cuts. See “HEALTH CARE REFORM—Federal Health Care Reform” below for additional information.

Because Congress may make changes to the budget in the future, it is impossible to predict the impact these and any additional spending cuts may have upon the Members of the Obligated Group. Reductions in Medicare and/or Medicaid spending may have a material adverse effect upon the financial condition of the Members of the Obligated Group.

Debt Limit Increase. Through legislation, the federal government has created a debt “ceiling” or limit on the amount of debt that may be issued by the United States Treasury. In past years, political disputes have arisen with the federal government related to debt ceiling increase authorization. Any failure by Congress to increase the federal debt ceiling may impact the federal government’s ability to incur additional debt, pay its existing debt, or to satisfy its obligations relating to the Medicare and Medicaid programs. Management of the Obligated Group is unable to determine what impact any failure to increase the federal debt ceiling may have on the operations and financial condition of the Obligated Group, although such impact may be material.

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STATE BUDGETS

Many states face severe financial challenges, including the erosion of general fund tax revenues. These challenges have resulted in a shortfall between revenue and spending demands. State financial challenges, including budget shortfalls, may negatively affect hospitals in a number of ways, including, but not limited to, a decreased percentage of patients with private insurance, a greater number of indigent patients who are unable to pay for their care, reductions in Medicaid reimbursement rates and delays in Medicaid reimbursement. Management of the Obligated Group is unable to determine what impact any future state budget challenges may have on the operations and financial condition of the Obligated Group, although such impact may be material.

HEALTH CARE REFORM

Federal Health Care Reform. The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Health Care Reform Law”) is designed to overhaul the United States health care system and addresses almost all aspects of hospital and provider operations, including the delivery of health care services, the financing of health care costs, health care provider reimbursement and the legal obligations of health care providers, insurers, employers and consumers. Some provisions of the Health Care Reform Law took effect immediately or within a few months of approval, while other were or will be phased in over time, and due of the complexity of the Health Care Reform Law, additional legislation will likely be considered and enacted over time. The full ramifications of the Health Care Reform Law may only become apparent over time and through regulatory or judicial interpretation.

Portions of the Health Care Reform Law have already been limited as a result of legislative amendment or judicial interpretation and efforts to repeal the Health Care Reform Law or certain provisions thereof are from time to time pending in Congress. In June 2012, the U.S. Supreme Court upheld most provisions of the Health Care Reform Law, including the requirement that individuals maintain health insurance coverage. The Supreme Court also ruled that the federal government could not compel states to comply with the Health Care Reform Law’s requirement to expand Medicaid by eliminating all federal funds a state receives for its existing Medicaid program. In June 2015, the U.S. Supreme Court held that health insurance subsidies under the Health Care Reform Law would be available in all states, including those with a federally-facilitated health insurance exchange. The Health Care Reform Law continues to be subject to further judicial interpretation and attempt to repeal or amend the law. It is not possible to predict the outcome of future legislative attempts to repeal or amend the Health Care Reform Law or what affect continued judicial interpretations will have on the Health Care Reform Law. Such uncertainties regarding the implementation of the Health Care Reform Law create unpredictability for health care providers’ strategic and business planning efforts, which in itself constitutes a risk.

Substantial changes have occurred and are anticipated to occur in the United States health care system as a result of the Health Care Reform Law. Changes include new payment models which may result in 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 may receive reduced payments for care, millions of previously uninsured Americans have obtained health insurance coverage. Requirements for state “health insurance exchanges”, discussed in more detail below, could fundamentally alter the health insurance market and negatively impact providers by enabling insurers to aggressively negotiate rates. Cost containment measures set forth in the law will likely curb federal

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Medicare and Medicaid spending further to the detriment of hospitals, physicians, and other health care providers.

Beginning in 2014, the Health Care Reform Law imposed the use and availability 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 must be included by commercial insurers in contracts with providers. The exchanges may alter the health insurance markets in ways that cannot be predicted.

High-deductible insurance plans have become more common in recent years, and the Health Care Reform Law is expected to encourage the increase in high-deductible insurance plans as the health insurance exchanges include a variation of plans, some of which may offer lower monthly premiums in return for higher deductibles. High-deductible plans may contribute to lower inpatient volumes as patients may forego or choose less expensive medical treatment to avoid having to pay the costs associated with high deductibles. It is also likely that some patients with high-deductible plans will not be able to pay the patient’s portion of medical bills insured under high -deductible plans.

The Health Care Reform Law 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 also allows states, beginning in 2014, to expand Medicaid eligibility to 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 is funding 100% of such coverage costs for three years, beginning in 2014, with cost coverage phasing down to 90% by 2020. However, as stated above, the U.S. Supreme Court’s decision made the decision by states to expand Medicaid optional. In the event a state chooses not to participate in the expanded Medicaid program, the net effect of the reforms in the Health Care Reform Law could be significantly reduced. The State of Nebraska has elected not to expand Medicaid under the Health Care Reform Law at this time.

The Health Care Reform Law also contains a significant number of provisions related to health care fraud and abuse and program integrity as well as significant amendments to existing criminal, civil and administrative anti-fraud statutes. See “BONDHOLDERS’ RISKS—Regulatory and Contractual Matters” below. Increased compliance and regulatory requirements, disclosure and transparency obligations, quality of care expectations and extraordinary enforcement provisions that could greatly increase potential legal exposure are all aspects of the Health Care Reform Law that could increase operating expenses to the Members of the Obligated Group.

With respect to charity care, the Health Care Reform Law contains many features from previous tax exemption reform proposals, including a set of sweeping changes applicable to charitable hospitals exempt under Section 501(c)(3) of the Internal Revenue Code. The Health Care Reform Law: (a) imposes new eligibility requirements for 501(c)(3) hospitals, coupled with an excise tax for failures to meet certain of those requirements; (b) requires mandatory IRS review of the hospitals’ entitlement to exemption; (c) sets forth new reporting requirements including information related to community health needs assessments and audited financial statements; and (d) imposes further reporting requirements on the Secretary of the Treasury regarding charity care levels, bad debt expenses, unreimbursed costs for services, and costs incurred for community benefit. The Health Care Reform Law does not, however, mandate specific levels of charity care for nonprofit hospitals despite the efforts of Senate Finance Committee ranking Republican Charles E. Grassley (R-Iowa) and others to propose such a requirement. See “BONDHOLDERS’ RISKS—Tax Exempt Status; Continuing Legal Requirements” below.

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The Health Care Reform Law will also require the promulgation of substantial regulations with significant effects on the health care industry and third-party payors. In response, third-party payors as well as suppliers and vendors of goods and services to health care providers are expected to impose new contractual terms and conditions. Thus, the health care industry will be subjected to significant new statutory and regulatory requirements as well as contractual terms and conditions, and consequently to structural and operational changes and challenges, for a substantial period of time.

Management of the Obligated Group is analyzing the Health Care Reform Law and will continue to do so in order to assess the effects of the legislation and/or regulations, and judicial interpretations thereof, on current and projected operations, financial performance and financial condition. However, management cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation or promulgated regulations.

Nebraska Health Care Reform. The State of Nebraska has elected not to expand Medicaid under the Health Care Reform Law at this time. In addition, the State of Nebraska opted to forgo establishing and operating a state-based health insurance exchange and has ceded that authority to the federal government. The impact of forgoing Medicaid expansion and a state-based health insurance exchange on (i) the commercial health insurance industry in Nebraska; (ii) the scope of health coverage for Nebraskans who are currently uninsured, and (iii) the reimbursement of Nebraskan providers is not known at this time and may have a material adverse effect on the Obligated Group. See also “BONDHOLDERS’ RISKS— Federal Programs and Laws Affecting Health Care Facilities—The Medicaid Program and Nebraska Medicaid” below.

Health Care Payment Reform. As a part of the Health Care Reform Law, the payment structure from governmental payors, including Medicare and Medicaid and other government programs, as well as from private payors, has been altered from traditional methodologies. With varying effective dates, the annual Medicare market basket updates for many providers, including hospitals, will be reduced, and adjustments to payments for expected productivity gains will be implemented. The Health Care Reform Law also provides for the implementation of various demonstration projects and pilot projects to test, evaluate, encourage, and expand existing and new payment structures and methodologies to reduce health care expenditures while maintaining or improving quality of care. Such projects include bundled payments under Medicare and Medicaid, and comparative effectiveness research programs that compare the clinical effectiveness of medical treatments and develop recommendations concerning practice guidelines and coverage determinations.

Certain other provisions of the Health Care Reform Law encourage the creation of new health care delivery programs, such as accountable care organizations in which a group of providers is held jointly responsible for improving the quality and cost of health care of a certain population, with the opportunity to share in financial benefits that result, or combinations of provider organizations that voluntarily meet quality thresholds and are able to share in the cost savings they achieve for the Medicare program. The outcomes of these projects and programs, including their effect on payments to providers and financial performance, cannot be predicted. The effect, however, may be the reduction of net revenue of the Members of the Obligated Group.

COMPETITION AMONG HEALTH CARE PROVIDERS

Increased competition from a wide variety of sources, including specialty hospitals, other hospitals and health care systems, inpatient and outpatient health care facilities, home health care, long-term care and skilled nursing services facilities, clinics, physicians and others, may adversely affect the utilization and/or revenues of hospitals. Existing and potential competitors may not be subject to

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various restrictions applicable to hospitals. Future competition may arise from new sources not currently anticipated or prevalent.

Specialty hospitals that attract away an important segment of an existing hospital’s admitting specialists may be particularly damaging. For example, some large hospitals may have significant dependence on heart surgery programs, as revenue streams from those programs may cover significant fixed overhead costs. The expiration of the Stark Law moratorium on physician investment in specialty hospitals in 2005 led to an increase in physician-owned hospitals. Effective December 31, 2010, the Health Care Reform Law banned new physician-owned hospitals and prohibited existing physician-owned hospitals from expanding the number of operating rooms, procedure rooms, or beds for which a hospital was licensed as of March 23, 2010 unless an exception is requested and granted by the U.S. Department of Health and Human Services (“HHS”). Nonetheless, specialty hospitals formed on or before December 31, 2010, continue to represent a significant competitive challenge for full-service hospitals.

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. These new technologies could result in higher hospital costs. 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. See “SERVICE AREA AND COMPETITION” in Appendix A hereto for a description of the principal competitors of the Members of the Obligated Group in their service areas and certain information regarding service area economics.

ACTION BY PURCHASERS OF HOSPITAL SERVICES AND CONSUMERS

Major purchasers of hospital services could take action to restrict 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 lobbying 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.

FACILITY DAMAGE

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

CONSTRUCTION

Construction of the Projects is subject to the usual risks associated with construction projects, including, but not limited to, delays in the issuance of necessary approvals or permits, strikes, shortages of materials, cost escalations, change in scope, failure of contractors to perform and adverse weather conditions. Such events could result in delaying completion or increasing the cost of such Projects.

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HOSPITAL AFFILIATION, MERGER, ACQUISITION AND DISPOSITION

The Members of the Obligated Group routinely evaluate and selectively pursue potential merger and affiliation candidates on a consistent basis as part of their overall strategic planning and development process. Such planning and discussions may result in the growth of the number and change in composition of entities affiliated with the Members of the Obligated Group over time. As part of its ongoing planning and property management functions, the Obligated Group reviews the use, compatibility and business viability of many of the Members’ operations and, from time to time, may pursue changes in the use or disposition of various Obligated Group assets, including hospital facilities. Likewise, the Members of the Obligated Group may conduct discussions with third parties about the potential acquisition of operations or properties that may become affiliated with the Members of the Obligated Group in the future or about the potential sale of some of the operations and properties that currently are affiliated with the Members of the Obligated Group. Discussions with respect to affiliation, merger, acquisition, disposition, or change of use are held on a periodic and usually confidential basis with other parties and may include the execution of non-binding letters of intent. As a result, it is possible that the organizations and assets that currently make up the Obligated Group may change from time to time, subject to provisions in the Master Indenture and other financing documents that apply to merger, sale, disposition or purchase of assets or with respect to joining or withdrawing from the Obligated Group. See “SUMMARY OF THE MASTER INDENTURE—Parties Becoming Members of the Obligated Group” and “—Withdrawal From the Obligated Group” in Appendix C hereto.

The Members of the Obligated Group are affiliated with certain other nonprofit and for-profit corporations. In certain instances, such affiliated entities may conduct operations that may subject the Members of the Obligated Group to potential legal or financial liabilities. In certain cases, the Members of the Obligated Group may fund the affiliated entities on a startup or ongoing basis, and this funding may be significant. See “OTHER PARTNERSHIPS AND AFFILIATIONS” in Appendix A hereto.

In addition to relationships with hospitals and physicians, the Members of the Obligated Group may pursue investments, ventures, affiliations, development and acquisitions of other healthcare-related entities. These may include home healthcare, long-term care entities or operations, pharmaceutical providers and other healthcare enterprises that support the overall operations and mission of the Members of the Obligated Group. In addition, the Members of the Obligated Group may pursue such transactions with health insurers, HMOs, PPOs, third-party administrators and other health insurance-related businesses. Because of the integration occurring throughout the healthcare field, the Members of the Obligated Group will consider such arrangements where there is a perceived strategic or operational benefit.

All such initiatives may involve significant capital commitments and/or capital or operating risk in businesses in which the Members of the Obligated Group may have less expertise than in hospital operations. There can be no assurance that these projects, if pursued, will not have a material adverse effect on the financial condition of the Members of the Obligated Group.

FEDERAL PROGRAMS AND LAWS AFFECTING HEALTH CARE FACILITIES

American Recovery and Reinvestment Act of 2009. The American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) was signed into law in February, 2009. The Recovery Act includes certain provisions which are intended to provide financial relief to health care providers. The Recovery Act temporarily increased amounts paid by the federal government to the states to fund Medicaid. Title XIII of the Recovery Act, otherwise known as the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), provides for an investment of almost $20 billion in public

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monies for the development of a nationwide health information technology (“HIT”) infrastructure. The HIT infrastructure is intended to improve health care quality, reduce health care costs and facilitate access to necessary information. Among other things, the HITECH Act provides financial incentives (through the Medicaid and Medicare programs), as well as loans and grants to encourage practitioners and providers to adopt and engage in the “meaningful use” of qualified electronic health records (“EHR”) systems. Eventually, Medicare payments will be reduced for providers and practitioners who fail to meet EHR meaningful use deadlines. Management of the Obligated Group does not anticipate that compliance with the HITECH Act will have a material adverse effect on the operations of the Obligated Group.

The HITECH Act also modified the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) (as further discussed below) to strengthen the privacy and security protection for individuals’ health information. For example, the HITECH Act significantly increased fines and the scope of remedies for violations of HIPAA and breaches of the security of electronic health records. If certain procedures and technologies are not in place, the HITECH Act requires disclosure to affected individuals, news media and HHS in the event security of protected information is breached. Criminal penalties are enforceable against persons who obtain or disclose protected health information without authorization. In addition, a state’s attorney general can bring civil actions against a person on behalf of residents adversely affected by violations of either HIPAA or the HITECH Act. The attorney general can either seek to enjoin further violations or obtain money damages on behalf of the residents harmed. HHS is now performing periodic audits of health care providers to ensure that required policies under the HITECH Act are in place. Individuals harmed by violations of HIPAA or the HITECH Act will be able to recover a percentage of monetary penalties or a monetary settlement based upon methods to be established by HHS for this private recovery in the next few years. Any violation of the HITECH Act is subject to HIPAA civil and criminal penalties.

The HITECH Act also (i) extends the reach of HIPAA beyond “covered entities,” such as health care providers, plans and clearing-houses, to their business associates, (ii) imposes a breach notification requirement on HIPAA covered entities, (iii) limits certain uses and disclosures of individually identifiable health information, (iv) restricts covered entities’ marketing communications and (v) permits imposition of civil monetary penalties for a HIPAA violation even if an entity did not know and would not, by exercising reasonable diligence, have known of a violation.

The effect of the Recovery Act, including the HITECH Act, on the Members of the Obligated Group cannot be determined at this time.

Implementation of Revised ICD-10. In 2009, CMS published the final rule for adopting the International Classification of Disease, 10th Revision coding system (“ICD-10”), requiring health care organizations to implement ICD-10 no later than October 2013. That deadline was extended to October 1, 2015. 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. Successful ICD-10 implementation is not without risk as implementation required staff retraining, process redesign, and the modification of computer applications to accommodate a dramatic increase in code digit size. The ICD-10 transition has the potential to create a temporary coding and payment backlog, as well as an increase in claims errors. Additionally, 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 the cash flows of health care organizations. Health care organizations are dependent on outside software vendors, clearinghouses and third party billing services to develop products and services for the full and successful implementation of ICD-10. Health care providers will be dependent upon the ability of Medicare, Medicaid and other payors to timely process and pay claims under ICD-10.

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Federal Privacy Laws. HIPAA addresses the confidentiality of individuals’ health information. HIPAA requires the establishment of distinct privacy and security protections for individually identifiable health information. HHS promulgated privacy regulations under HIPAA (the “Privacy Regulations”) that protect patient medical records and other personal health information maintained by health care providers, hospitals, health plans, health insurers and health care clearinghouses. Management of the Obligated Group believes that its operations and information systems substantially comply with the Privacy Regulations.

Security regulations (the “Security Regulations”) have also been promulgated under HIPAA. Additionally, HHS promulgated regulations to standardize the electronic transfer of information pursuant to certain enumerated transactions (the “Code Set Transactions”). Management of the Obligated Group believes that all of its health care facilities are in substantial compliance with the Security Regulations and the Code Set Transactions.

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

On January 25, 2013, HHS 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 private health information; (ii) establishing four levels of culpability with respect to civil monetary penalties assessed for HIPAA violations (civil penalties generally ranging from $100 to $50,000 per violation, with caps of $25,000 to $1.5 million for all violations of a single requirement in a calendar year, depending on the severity of the violation and the level of culpability involved); (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; (vii) rights of individuals to restrict disclosure of their health information; (viii) stricter requirements regarding the protection of genetic information and (ix) an expanded definition of “business associate” and enforcement authority over business associates. HHS’ Office for Civil Rights (“OCR”) has increased its compliance auditing and enforcement efforts, and several large settlements have resulted. Failure to comply with the obligations imposed by the HIPAA Omnibus Rule could have a material adverse effect on the financial condition or operations of the Obligated Group.

Section 340B Drug Pricing Program. Hospitals that participate 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 drugs for patients at a reduced cost. The federal agency that administers the 340B Program, HHS’s Health Resources and Services Administration, issued a proposed rule on August 28, 2015 which addresses key policy issues related to the 340B Program, including but not limited to, eligibility requirements for participating hospitals, outpatient facilities and patients, registration requirements, drug eligibility, and manufacturer compliance. If adopted in its current form, the proposed rule could, among other things, restrict Members of the Obligated Group from purchasing drugs from the 340B Program. Such restrictions could have a material adverse effect on the Obligated Group.

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Additionally, eligibility for the 340B Program is determined annually and there is no guarantee that eligibility one year will result in eligibility in future years.

Medicare and Medicaid Programs. Medicare and Medicaid are the commonly used names for hospital reimbursement or payment programs governed by certain provisions of the federal Social Security Act. Medicare is an exclusively federal program and Medicaid is jointly funded by federal and state governments and governed by both federal and state laws. Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older, blind, or disabled or who qualify for the End Stage Renal Disease Program. Medicaid is designed to pay providers for care given to the medically indigent and others who receive federal aid. Medicaid is funded by federal and state appropriations and is administered by the individual states. Federal funding is provided to a state for its Medicaid program in the form of matching payments in amounts equal to a percentage of state Medicaid expenditures, ranging from 50% to 100%, depending upon the use of the funds and the per capita income of the state recipient. These federal medical assistance percentages (“FMAPs”) are recalculated for each federal fiscal year. Receipt of federal funding is contingent on a state Medicaid program’s compliance with federal standards regarding beneficiary eligibility, coverage, benefits, fraud enforcement and use of FMAP payments. A number of provisions of the Health Care Reform Law impact FMAPs (e.g., FMAPs of up to 100% for certain newly eligible individuals, increased FMAPs for disaster-affected states, payment rate increases, specific preventative services and immunizations, smoking cessation for pregnant women, and home health services for patients with certain chronic conditions). Hospital benefits are available under each participating state’s Medicaid program, within prescribed limits, to persons meeting certain minimum income or other eligibility requirements, including children, the aged, the blind and/or the disabled.

Health care providers have been and will continue to be significantly impacted by changes in the last several years to the federal health care laws and regulations, particularly those pertaining to Medicare and Medicaid. The purpose of much of the recent statutory and regulatory activity has been to reduce the rate of increase in health care costs, particularly costs paid under the Medicare and Medicaid programs. The Health Care Reform Law amended Medicaid funding and substantially increased the potential number of Medicaid beneficiaries by creating a new national Medicaid minimum eligibility criteria that covers most Americans with household income up to 133% of the federal poverty level, effective January 1, 2014. In June 2012, the Supreme Court ruled that states could decline to expand Medicaid coverage without losing their existing federal funding for the program. Because increased Medicaid funding generally brings more patients to most hospital providers, certain outcomes, such as a state refusing to expand Medicaid coverage, while Medicaid payment cuts are implemented, could put hospital providers at greater risk. The State of Nebraska has elected not to expand Medicaid under the Health Care Reform Law at this time. With respect to Medicare, the Health Care Reform Law, among other things, mandates significant reimbursement modifications, such as moving from a fee-for-service model to a quality of care model where value-based payments are tied to certain clinical objectives, including, but not limited to, patient outcomes and patient satisfaction.

Past federal budgets have contained cuts to the Medicare and Medicaid program budgets. In addition, due to the sequestration required by the Budget Control Act discussed above, cuts to the Medicare program of 2% of total program costs began on April 1, 2013. See “BONDHOLDERS’ RISKS— Federal Budget—Federal Budget Cuts.” While it is uncertain whether future federal budgets will propose additional cuts to these programs, any reduction in the level of Medicare and/or Medicaid spending or a reduction in the rate of increase of Medicare and/or Medicaid spending may have an adverse impact on the revenues of the Members of the Obligated Group derived from the Medicare and Medicaid programs.

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The following is a summary of the Medicare and Medicaid programs and certain risk factors related thereto.

The Medicare Program. Medicare is the federal health insurance system under which physicians, hospitals and other health care providers are reimbursed or paid for services provided to eligible elderly and disabled persons or persons who qualify for the End Stage Renal Disease Program. Medicare is administered by the Centers for Medicare & Medicaid Services (“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 surveyed by the CMS delegated agency in the state in which the provider is located. The requirements for Medicare certification are subject to change and, therefore, it may be necessary for hospitals to effect changes from time to time in their facilities, equipment, personnel, billing, policies and services. CMS may determine that a provider is not in compliance with its Conditions of Participation. In that event, a notice of termination of participation in Medicare may be issued or other sanctions potentially could be imposed.

Certain Members of the Obligated Group are certified as providers for Medicare services and for the fiscal years ended June 30, 2015 and 2014, Medicare payments represented approximately 37.5% and 38.3%, respectively, of the Obligated Group’s gross patient service revenues. See “PAYOR ANALYSIS AND UTILIZATION—Payor Mix” in Appendix A to this Official Statement. Any revisions to the Medicare program or to the Members’ classification under the Medicare program may significantly affect the Obligated Group’s revenues. The laws and regulations governing Medicare reimbursement are extremely complex and subject to interpretation. In addition, there is no guarantee that the reimbursement methodologies described below for Medicare inpatient and outpatient services will continue in their present format, since those methodologies and the associated payment rates have been the frequent subject of Congressional action.

In addition, there is no assurance that the Members of the Obligated Group will be paid amounts that will reflect adequately their operating costs incurred in providing inpatient hospital services to Medicare beneficiaries, as well as any changes in the cost of providing health care or in the cost of health care technology being made available to Medicare beneficiaries.

Hospital Inpatient Reimbursement. Hospitals are generally paid for inpatient services provided to Medicare beneficiaries through an inpatient prospective payment system (“IPPS”) based on established categories of treatments or conditions known as diagnosis related groups (“DRGs”). DRGs are a system of classifying inpatient hospital services based on a person’s medical diagnosis, any secondary diagnoses, surgical procedures, age, sex and presence of any complications. Payments are made to hospitals based on the DRG assignment for each patient’s diagnosis. Hospital reimbursement will be set at specific rates established by Medicare for that particular patient’s DRG, regardless of the actual costs incurred by the hospital for such treatment. DRG rates are subject to adjustment by CMS 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. Further, it is anticipated that there will be reductions in rates paid to Medicare managed care plans that may ultimately be passed on to providers.

Generally, Medicare payment rates to hospitals are adjusted annually based on a “market basket” of estimated costs increases, which have averaged approximately 2-3% annually in recent years. The Health Care Reform Law required automatic 0.25% reductions in the “market basket” for federal fiscal years 2010 and 2011, and calls for reductions ranging from 0.10% to 0.75% each year through federal fiscal year 2019. Additionally, the Health Care Reform Law provides for “market basket” adjustments based on overall national economic productivity statistics.

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Several significant Medicare payment reform measures designed to incentivize hospitals based on quality and performance measures have implemented reimbursement incentives and penalties: the Readmission Reduction Program, the Hospital Value-Based Purchasing Program, the Hospital Inpatient Quality Reporting Program, and the Hospital-Acquired Condition Reduction Program (see “BONDHOLDERS’ RISKS—Federal Programs and Laws Affecting Health Care Facilities—Medicare Payment for Preventable Medical Errors” below). The Readmission Reduction Program reduces Medicare payments by specified percentages to hospitals with excess or preventable hospital admissions based on historical discharge data. The Hospital Value-Based Purchasing Program, funded through an across-the-board reduction to the IPPS standardized DRG amounts, reallocates and redistributes Medicare reimbursement funds to hospitals based on how well they perform on quality and patient experience measures. Under the Hospital Inpatient Quality Reporting Program, annual payment updates to hospitals that do not successfully report designated quality measures are reduced by 2.0 percentage points, and beginning in federal fiscal year 2015, hospitals that did not participate successfully in the program were penalized one-quarter of the percentage increase in their payment updates. Management of the Obligated Group is not aware of any situation in which a Medicare readmission penalty, Hospital Value-Based Purchasing Program performance measure, or payment reduction related to quality reporting is being, or may in the future be, assessed that would materially and adversely affect the financial condition or results of the operations of the Members of the Obligated Group.

Effective October 1, 2013, CMS adopted a policy known as the Inpatient Hospital Prepayment Review (or the “Two-Midnight” rule). The Two-Midnight rule specifies that hospital stays spanning two or more midnights after the patient is admitted as an inpatient will be presumed to be “reasonable and necessary” for purposes of inpatient reimbursement. Stays lasting less than two midnights must be treated and billed as outpatient. In addition, the rule implemented a 0.2 percent reduction in IPPS payments to hospitals. The American Hospital Association and several hospitals filed lawsuits against DHHS contending that the rule deprives hospitals of proper Medicare reimbursement for caring for patients. In its FY 2017 Inpatient Prospective Payment System Proposed Rule published on April 27, 2016, CMS has proposed to (i) reverse the Two-Midnight Rule’s 0.2 percent reduction in hospital payments, and (ii) implement a temporary one-time increase of 0.6 percent in FY 2017 payments to offset cuts made in the three preceding fiscal years. If adopted as a final rule, inpatient hospitals across the country will see an increase in their reimbursement rates. However, there is no guarantee CMS’s proposed rule will be adopted as a final rule. Accordingly, management of the Obligated Group is currently unable to predict what effect the Two-Midnight rule will have on hospital revenues.

There can be no assurance that future changes in classifications of patient hospitalizations or revisions to annual documentation and coding adjustments or other payment update measures implemented in future prospective payment regulations will not result in fluctuations or declines in revenue.

Disproportionate Share Payments. The federal Medicare and state Medicaid laws permit states to include a “disproportionate share” adjustment in payments to hospitals in order to compensate those hospitals that serve a disproportionate share of indigent patients with a supplemental payment (collectively this program is referred to as “DSH”). The Health Care Reform Law and other federal legislation has reduced DSH funding or otherwise made cuts to the DSH program. There can be no assurance that DSH funding will not be further decreased beyond projected reductions or eliminated entirely.

Management estimates that the Obligated Group received DSH payments of $12.2 million and $13.5 million for fiscal years ended June 30, 2015 and 2014, respectively. There can be no assurance that an Obligated Group Member will qualify for DSH funding in the future. Modification to DSH

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funding at the federal level could result in a decreased federal allotment for overall Medicaid DSH funding or change the distribution of Medicaid DSH funds. Therefore, no assurance can be made that the supplemental payments will be available. Additionally, the federal government might determine that the disbursement of prior DSH payments was inconsistent with federal law and may seek recoupment of federal funds, which could result in the Obligated Group having to repay all or a significant portion of supplemental payments previously received.

Medicare Payment for Preventable Medical Errors. The Deficit Reduction Act of 2005 (the “DRA”) required the Secretary of HHS to identify complicating conditions present as a secondary diagnosis that are high cost and/or high volume and reasonably preventable through application of evidence-based guidelines (collectively referred to as “hospital-acquired conditions”). The DRA further required hospitals to begin reporting on claims for discharges, beginning October 1, 2007, whether the selected hospital-acquired conditions were present on admission. In its 2008 IPPS Final Rule, CMS included several conditions identified by the National Quality Forum as “never events” (i.e., inexcusable outcomes in a health care setting). Each year, additional conditions classified as hospital-acquired or never events have been added through the IPPS rulemaking process. All such conditions have negative payment implications when acquired during an inpatient stay. Effective July 1, 2011, federal payments to states for Medicaid services related to hospital-acquired conditions are prohibited. And, under the Hospital-Acquired Condition Reduction Program, commencing in federal fiscal year 2015, Medicare payments to certain hospitals that rank in the lowest-performing quartile with respect to hospital-acquired conditions are reduced by one percent. The incidence of adverse events and their payment implications continues to be an area of focus for regulators.

Other Medicare Service Payments. Medicare payment for skilled nursing services, psychiatric services, inpatient rehabilitation services, general outpatient services and home health services are subject to Medicare’s consolidated billing rules. Consolidated billing requires covered providers to bill Medicare for the entire package of services their patients receive, other than a few excluded services, based on regulatory formulas or pre-determined rates. There is no guarantee that these rates, which may fluctuate, will be adequate to cover the actual cost of providing these services to Medicare patients. In addition, there is no assurance that the Members of the Obligated Group will be fully reimbursed for all services which each bills through consolidated billing.

Reimbursement of Hospital Capital Costs. Hospital capital costs apportioned to Medicare patient use (including depreciation and interest) are paid by Medicare exclusively on the basis of a standard federal rate (based upon average national costs of capital), subject to limited adjustments specific to each 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’s facilities applicable to Medicare patient stays or will provide flexibility for hospitals to meet changing capital needs.

Medical Education Payments. Because the Members of the Obligated Group operate programs in affiliation with a , costs associated with conducting graduate medical education programs represent a portion of its expenditures. Medicare currently pays for a portion of the direct and indirect costs of medical education (including the salaries of residents and teachers and other overhead costs directly attributable to approved medical education programs). Payment for the direct costs of medical education (“GME”) is made on a “pass-through” basis, not PPS, based on a formula that reflects the hospital’s base year per-resident costs adjusted by inflation and the number of current-year reimbursable resident positions. Payment for indirect costs of medical education (“IME”) is based on the ratio of a hospital’s number of full-time equivalent residents to its number of beds. These payments are vulnerable to reduction or elimination. Further, there can be no assurance that payments to the Members

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of the Obligated Group for providing medical education will be sufficient to cover the costs associated with their medical education programs.

Medicare Advantage. Hospitals also receive payments from health plans under the Medicare Advantage program. The Health Care Reform Law 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 could in turn affect the scope of coverage of these plans or cause plan sponsors to negotiate lower payments to providers.

Physician Payments. Physicians may elect to “participate” or enroll in the Medicare program as a provider. Medicare Part B provides reimbursement for physician services, including employed and provider-based physicians, based upon a national fee schedule called the Resource-Based Relative Value Scale (“RBRVS”). The RBRVS system encourages a shift towards greater reimbursement for the provision of primary care, and a reduction of technology-based diagnostic procedures and surgical procedures. Under the RBRVS system, payments for services are determined by the “resource costs” necessary to provide such services. Payments also are adjusted for geographical differences. The costs have three components: physician work, practice expense and professional liability insurance. Payments are calculated by multiplying the combined costs of a service by a conversion factor. The conversion factor previously was determined by CMS’s Sustainable Growth Rate (“SGR”) system, which system annually accounted for changes in the Medicare fee-for-services enrollment, input prices, spending due to law and regulation and gross domestic product, effectively changing the RBRVS. The Medicare Access and Children’s Health Insurance Program Reauthorization Act (“MACRA”), adopted in 2015, repealed the SGR system and instead provides predictable payment increases. MACRA will increase physician Medicare reimbursement by 0.5% annually until 2019 and then will provide for no additional increases to base physician reimbursement until 2025. MACRA also requires CMS to implement a new two-track payment system for physicians and other eligible professionals by 2019. The two tracks seek to tie an increased percentage of physicians’ Medicare fee-for-service payments to outcomes through the new Merit-based Incentive Payment System and to encourage the adoption of “alternative payment models” (“APMs”). APMs move payment away from fee-for-service reimbursement, and instead pay providers based on the quality and cost of care for particular episodes (e.g., bundled payment), or defined patient populations (e.g., accountable care organizations).

Management of the Obligated Group is unable to predict what impact changes to physician reimbursement under MACRA may have on the financial condition of the Obligated Group, but such changes may be material. This continued shift in payment emphasis may affect the relationship between the Members of the Obligated Group and their related medical staffs and may increase pressure on hospitals to enter into bundled or global payment models, risk-based delivery models, or increase demands by physicians for payment from hospitals. Additionally, there is no guarantee that physician reimbursement will cover the Obligated Group’s actual costs of providing physician services to Medicare beneficiaries.

Physicians who opt not to participate in the Medicare program also may provide care to Medicare beneficiaries, but will be reimbursed at a lower fee schedule. Regardless of physician enrollment status, physicians who furnish health care services to Medicare beneficiaries must meet all applicable federal coding, documentation, and other compliance requirements.

Proposed New Payment Model for Medicare Part B Prescription Drugs. On March 8, 2016, CMS issued a proposed rule to test new payment models for Medicare Part B prescription drugs (outpatient drugs administered by physicians and hospital outpatient departments). According to CMS,

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the five-year pilot program is intended to test the effectiveness of strategies that remove the profit motive from using more expensive drugs over cheaper alternatives. The Medicare program currently pays providers the average sales prices of the Medicare Part B drug, plus a 6% “add-on.” Among other initiatives, the proposed payment model experiment would lower the 6% add-on payment to 2.5%, plus a flat fee of $16.80 per drug per day. If adopted in its current form, the proposed rule may result in drug reimbursement below average drug sales prices, which could have a material adverse effect on the financial condition and results of operations of the Members of the Obligated Group.

Medicare and Medicaid Audits and Withholds. Hospitals participating in Medicare and Medicaid are subject to audits and retroactive audit adjustments with respect to reimbursement claimed under those programs. Although management of the Obligated Group believes its reserves are adequate for this purpose, any such future adjustments could be material. Both Medicare and Medicaid regulations also provide for or require withholding payments in certain circumstances. Any such withholding with respect to the Members of the Obligated Group could have a material adverse effect on the financial condition and results of operations of the Members of the Obligated Group. In addition, contracts between hospitals and third-party payors often have contractual audit, setoff and withhold language that may cause substantial, retroactive adjustments. Such contractual adjustments also could have a material adverse effect on the financial condition and results of operations of the Members of the Obligated Group. Management of the Obligated Group is not presently aware of any situation in which a Medicare or other payment is being or may in the future be, withheld that would materially and adversely affect the financial condition or results of operations of the Members of the Obligated Group.

Under both the Medicare and Medicaid programs, certain health care providers, including hospitals, are required to report certain financial information on a periodic basis and with respect to certain types of classifications of information. Penalties are imposed for inaccurate reports. As these requirements are numerous, technical and complex, there can be no assurance that the Members of the Obligated Group will avoid incurring such penalties in the future. These penalties may be material and adverse and could include administrative, criminal or civil liability for making false statements or claims and/or an administrative action for exclusion from participation in the federal health care programs. Under certain circumstances, payments made may be determined to have been made as a consequence of improper claims subject to the federal False Claims Act (“FCA”) or other federal statutes, subjecting the provider to civil, administrative or criminal sanctions. The Department of Justice (“DOJ”) has initiated a number of national investigations involving proceedings under the FCA relating to alleged improper billing practices by hospitals. These actions have resulted in substantial settlement amounts being paid in certain cases. See also “BONDHOLDERS’ RISKS—Regulatory and Contractual Matters—False Claims Laws.”

Recovery Audit Contractors and Medicaid Integrity Contractors. CMS has implemented a Recovery Audit Contractor (“RAC”) program on a nationwide basis pursuant to which CMS engages private contractors to conduct post-payment reviews to detect and correct improper payments in the fee- for-service Medicare program. There is also a demonstration for RACs to conduct pre-payment reviews. The Health Care Reform Law expand 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 payments and higher administration costs to hospitals.

Management of the Obligated Group is not aware of a situation in which a recovery audit, if conducted, and any resulting payments made by the Members of the Obligated Group would materially adversely affect the financial condition of the Members of the Obligated Group. However, in light of the complexity of the regulations relating to the Medicare program and the ongoing threat of audits, there can

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be no assurance that any audit would not materially adversely affect the financial condition of the Members of the Obligated Group.

The Medicaid Program, Nebraska Medicaid and Iowa Medicaid. Medicaid is a program for medical assistance, funded jointly by the federal government and the states, for certain needy 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 spending. Payments made to healthcare providers under the Medicaid program are subject to change as a result of federal or state legislative and administrative actions, including changes in the methods for calculating payments, the amount of payments that will be made for covered services and the types of services that will be covered under the program. Such changes have occurred in the past and may be expected to occur in the future, particularly in response to federal and state budgetary constraints. Past federal budgets have contained cuts to the Medicaid program budgets. While it is uncertain whether future federal or state budgets will propose cuts to the program, any reduction in the level of Medicaid spending or a reduction in the rate of increase of Medicaid spending, would have an adverse impact on the revenues of the Obligated Group derived from the Medicaid program. See also “BONDHOLDERS’ RISKS—State Budgets.”

Hospitals that participate in the Medicaid program are subject from time to time to audits and other investigations relating to operations and billing practices, as well as to retroactive adjustment with respect to reimbursement under the Medicaid program. See “BONDHOLDERS’ RISKS—Federal Programs and Laws Affecting Health Care Facilities—Recovery Audit Contractors and Medicaid Integrity Contractors” above.

Nebraska has not adopted Medicaid expansion, though numerous bills have been introduced in the Nebraska legislature each year that would either expand Medicaid or implement a Medicaid- expansion waiver program. Governor Ricketts has stated his opposition to Medicaid expansion, and it is unclear at this time whether any such bill would have enough votes to withstand filibuster and, if passed, to override a veto. If Medicaid is not expanded in Nebraska, it could have a material adverse impact on the financial condition of the Obligated Group as it could lead to the unintended consequence of decreased hospital reimbursements under the Health Care Reform Law without a simultaneous increase in insured patients.

In an effort to further control Medicaid spending, Nebraska recently implemented expansion of its Medicaid managed care program to all of its counties. It is unclear at this time what impact the implementation of Medicaid managed care will have on the Obligated Group.

Medicaid is administered in Iowa by the Department of Human Services. Reimbursement for hospital services is based on similar methods used for reimbursement under the Medicare program. Inpatient hospital services are reimbursed on the basis of all payor DRGs calculated similar to those used in the Medicare prospective payment system. Outpatient hospital services are also prospectively reimbursed based on ambulatory patient groups. The amount of Medicaid reimbursement received by the Obligated Group Members in the future will depend on, among other things, fiscal considerations of both the federal and state governments in establishing their budgets for funding the Medicaid program.

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In an effort to contain costs, Iowa legislation in 2011 provided the Iowa Department of Human Services with the authority to implement certain cost-containment initiatives recommended by the governor of Iowa. In total, the initiatives aim to save the State of Iowa $20 million annually. Some of the cost-containment initiatives that may impact the Obligated Group Members include, but are not limited to changes to reimbursement policies for non-emergent emergency room visits, the institution of payments reductions for multiple procedure therapy claims and the elimination of payment for hospital acquired conditions.

Iowa has opted to undertake a hybrid model of Medicaid expansion, which includes the privatization of Medicaid in Iowa through a managed care system. Governor Branstad strongly opposed Medicaid expansion in Iowa, but later agreed to a modified version of Medicaid expansion that was adopted by the Iowa Legislature. In Iowa, residents up to 100 percent of the federal poverty line will receive the same benefits as state employees, and those premiums will be paid for entirely by federal Medicaid dollars. Residents between 101 percent and 138 percent of the poverty line will receive insurance from exchanges created by the Health Care Reform Law. Those residents’ premiums will be paid for with Medicaid funds in the first year, and also in ensuing years provided they accomplish physicians’ directives such as wellness check-ups and diet counseling. If a resident does not accomplish those objectives, he or she must pay a portion of the premium up to 2 percent of household income. CMS approved Iowa’s Medicaid expansion proposal in December 2013.

As of November 2014, enrollment in qualified health plans on Iowa’s Health Care Reform Law exchange has been voluntary for beneficiaries between 101% and 138% of the poverty level. In September 2015, Iowa submitted a waiver amendment request to amend its original Medicaid expansion model due to one of the two qualified health plans withdrawing from the Iowa Health Care Reform Law exchange and the other qualified health plan no longer accepting new Medicaid members. In February 2016, CMS approved Iowa’s plan to privatize Medicaid by moving to a managed care system. As of April 1, 2016, the healthcare of about 560,000 Iowa residents will be transferred from the state’s traditional Medicaid program to three private for-profit insurance companies.

For the fiscal years ended June 30, 2015 and 2014, the Obligated Group received approximately 11.8% and 13.4% of gross patient and resident service revenues from the Medicaid program. See “PAYOR ANALYSIS AND UTILIZATION—Payor Mix” in Appendix A hereto.

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 insurance. CMS administers SCHIP, but each state creates its own program based upon minimum federal guidelines. Nebraska provides SCHIP benefits to uninsured children as an expansion of its Medicaid programs. As with payments under those programs, there can be no guarantee that payments under SCHIP will adequately cover the cost of care for beneficiaries. 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, the state can lose its federal funding for the program. Under MACRA, federal funding for SCHIP was extended through September 30, 2017. There can be no assurance that federal funding for the program will be renewed. Any expiration or other loss of funding, or federal or state budget cuts to the program, could have an adverse effect on provider revenues.

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REGULATORY AND CONTRACTUAL MATTERS

State Regulation. Nebraska has established statutory and regulatory requirements for health care facilities. Failure to comply with laws and rules governing licensure and standards of care could result in the revocation of a hospital’s license and operating privileges, including licensure of inpatient facilities and outpatient programs such as hospitals, home health agencies, skilled nursing facilities, hospice programs and basic care facilities.

Many states, including Nebraska, have certificate of need (“CON”) laws, which laws, among other things, may require that a health care facility obtain state approval before constructing a health care facility, expanding a health care facility or changing a health care facility’s bed capacity. The general intent of a state CON law is to restrain health care facility costs and allow coordinated planning of new services and construction. Nebraska’s CON statute was modified in 1997 to discontinue state review of the construction or acquisition of new facilities, the purchase of clinical equipment, and the establishment of new services and capital expenditures. Restrictions for establishment of new acute care beds remain subject to CON review for both the initial establishment of beds and conversion of existing hospital beds to long-term care or rehabilitation beds. The CON requirement for the conversion of hospital beds to long-term care beds or rehabilitation beds permits conversion to be made without a CON so long as the bed capacity of the hospital, inclusive of all beds within the definition of bed capacity in the category of beds being increased, is not changed by more than 10 beds or more than 10% of the total bed capacity, whichever is less, over a two-year period. Management of the Obligated Group is not aware of any proceeding or investigation in which a violation of the Nebraska CON law is alleged or suspected.

Anti-Fraud and Abuse Laws. A federal law (known as the “Anti-Kickback Statute”) makes it a felony to knowingly and willfully offer, pay, solicit or receive remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in order to induce referrals for business that is reimbursable under any federal health care program. The Anti-Kickback Statute applies to many common health care transactions between entities and persons with which a hospital does business including hospital-physician joint ventures, medical director agreements, physician recruitment agreements, physician office leases and other transactions. The Anti-Kickback Statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain or pay money for the referral of services or to induce further referrals. Violation of the Anti-Kickback Statute may result in imprisonment for up to five years and/or fines of up to $25,000 for each act. In addition, the Office of Inspector General (“OIG”) has the authority to impose civil assessments and fines and to exclude hospitals engaged in prohibited activities from the Medicare, Medicaid, TRICARE (a health care program providing benefits to dependents of active duty and retired members of the United States military services) and other federal health care programs, for a period of not less than five years.

The Health Care Reform Law amended a number of provisions of the Anti-Kickback Statute. One such amendment provides that an Anti-Kickback Statute 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 Statute. The new standard could significantly expand criminal and civil fraud exposure for transactions and arrangements where there is no intent to violate the Anti-Kickback Statute. The Health Care Reform Law further amended the Anti-Kickback Statute to explicitly provide that a violation of the statute constitutes a false or fraudulent claim under the federal FCA, which prohibits the knowing presentation of a false, fictitious or fraudulent claim for payment to the United States government. Actions under the FCA may be brought by the United States Attorney General or as a qui tam action brought by a private individual in the name of the government.

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In addition to certain statutory exceptions to the Anti-Kickback Statute, the OIG has promulgated a number of regulatory “safe harbors” under the Anti-Kickback Statute designed to protect certain payment and business practices. However, only a limited number of final safe harbors have been established to date, and the safe harbors are narrow and do not cover a wide range of common economic relationships involving hospitals. The regulations do not purport to comprehensively describe all lawful or unlawful economic arrangements or other relationships between health care providers and referral sources. While the failure to comply with a statutory exception or regulatory safe harbor does not mean that an arrangement is unlawful, such failure may increase the likelihood of a regulatory challenge or the potential for investigation.

HIPAA created a new program operated jointly by HHS and the United States Attorney General to fund and coordinate federal, state and local law enforcement with respect to fraud and abuse including the Anti-Kickback Statute. HIPAA also provides for minimum periods of exclusion from a federal health care program for fraud related to the federal health care programs, provides for intermediate sanctions and expands the scope of civil monetary penalties.

Pursuant to the mandates of HIPAA, the DRA and the HITECH Act, increased emphasis is being placed on federal investigations and prosecutions of Medicare and Medicaid “fraud and abuse” cases and increases in personnel investigating and prosecuting such cases have been reported, which will most likely result in a higher level of scrutiny of hospitals and health care providers, including the Members of the Obligated Group.

Management of the Obligated Group believes that the Members of the Obligated Group have used their best efforts to comply with the Anti-Kickback Statute and the state conflict of interest law. However, because of the breadth of those laws and the narrowness of the safe harbor regulations, there can be no assurance that regulatory authorities will not take a contrary position or that the Members of the Obligated Group will not be found to have violated the Anti-Kickback Statute.

At the present time, Management of the Obligated Group is not aware of any pending or threatened claim, investigation or enforcement action regarding the Anti-Kickback Statute, if determined adversely to the Members of the Obligated Group would have a material adverse effect on the Obligated Group’s financial condition.

See also “BONDHOLDERS’ RISKS－Regulatory and Contractual Matters—Physician Recruitment and Service Agreements.”

Physician Self-Referral Prohibition - Stark Law. Another federal law (known as the “Stark Law”) prohibits, subject to limited exceptions, a physician who has a financial relationship or whose immediate family has a financial relationship, with entities (including hospitals) providing “designated health services” from referring Medicare patients to these entities for the furnishing of “designated health services.” The Stark Law defines designated health services as including: physical therapy services, occupational therapy services, or other diagnostic services (including MRIs, CT scans and ultrasound procedures), durable medical equipment, radiation therapy services, parenteral and enteral nutrients, equipment and supplies, prosthetics, orthotics and prosthetic devices, home health services, outpatient prescription drugs, inpatient and outpatient hospital services and clinical laboratory services. The Stark Law also prohibits the entity receiving the referral from filing a claim or billing for the services arising out of the prohibited referral. The prohibition applies regardless of the reasons for the financial relationship and the referral; no finding of intent to violate the Stark Law is required. Sanctions for violation of the Stark Law include denial of payment for the services provided in violation of the prohibition, refunds of amounts improperly collected, a civil penalty of up to $15,000 for each service

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arising out of the prohibited referral, exclusion from participation in the federal health care programs and a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law’s prohibition. Violations of the Stark Law may also serve as the basis for liability under the FCA. The types of financial arrangements between a physician (or a physician’s immediate family member) and an entity that trigger the self-referral prohibitions of the Stark Law are broad and include ownership and investment interests and compensation arrangements as well as certain disclosure obligations.

Regulations promulgated under the Stark Law are subject to frequent amendment. Such amendments may require the Members of the Obligated Group to amend or terminate certain arrangements with physicians to comply with new regulatory requirements.

Although the Stark Law only applies to the Medicare program, a number of states have passed similar statutes pursuant to which similar types of prohibitions are made applicable to all other health plans or third-party payors. Additionally, several recent federal district court opinions have held that the Stark Law applies to Medicaid claims.

Although management of the Obligated Group believes that the arrangements of the Members of the Obligated Group with physicians do not violate the Stark Law, each as currently interpreted, there can be no assurance that regulatory authorities will not take a contrary position or that the Members of the Obligated Group will not be found to have violated such laws. Sanctions under the Stark Law, including exclusion from the Medicare and Medicaid programs, could have a material adverse effect on the financial condition and results of operations of the Members of the Obligated Group, as would any significant penalties, demands for refunds or denials of payment.

See also “BONDHOLDERS’ RISKS—Regulatory and Contractual Matters—Physician Recruitment and Service Agreements.”

False Claims Laws. There are principally three federal statutes addressing the issue of “false claims.” First, the civil FCA imposes civil liability (including substantial monetary penalties and damages) on any person or corporation that (1) knowingly presents or causes to be presented a false or fraudulent claim for payment to the United States government; (2) knowingly makes, uses or causes to be made or used a false record or statement to obtain payment; or (3) engages in a conspiracy to defraud the federal government by getting a false or fraudulent claim allowed or paid. A showing of specific intent to defraud the federal government is not required to establish the requisite knowledge. “Knowingly” is broadly defined to include not only actual knowledge but also deliberate ignorance or reckless disregard of the facts. This statute authorizes private persons to file qui tam actions on behalf of the United States. 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 the Members of the Obligated Group and no assurances can be made that such actions will not be filed in the future.

The Fraud and Enforcement and Recovery Act (“FERA”), signed into law on May 20, 2009, has expanded potential exposure under the civil FCA for a wide range of business transactions involving federal government funds. Pursuant to FERA amendments, the civil FCA may impose liability for false claims with more remote connections to the federal government. FERA has the effect of expanding liability for the retention of money owed to the government, including overpayments by Medicare.

The Health Care Reform Law further expanded the civil FCA by requiring a person who receives an overpayment to report and repay the overpayment within 60 days after the overpayment is identified or the date any corresponding cost report is due, whichever is later. The Health Care Reform Law defines

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overpayments as “any funds that a person receives or retains under Medicare or Medicaid to which the person, after applicable reconciliation is not entitled.” Failure to repay any overpayment within the deadline could lead to liability under the FCA.

In addition, the Health Care Reform Law eliminates “public disclosure” as a jurisdictional defense to qui tam suits. The “public disclosure bar” previously required dismissal of a qui tam suit where the allegations were publicly disclosed in (i) a criminal, civil or administrative proceeding, (ii) a congressional, administrative or U.S. Government Accountability Office report, hearing, audit or investigation, or (iii) news media. Under the Health Care Reform Law, courts are directed to dismiss the qui tam suit if the relator is not the original source of the claims or allegations that were publicly disclosed, unless the government opposes the dismissal.

In addition to the civil FCA, the Civil Monetary Penalties Law authorizes the imposition of substantial civil money penalties against an entity that engages in activities including, but not limited to, (1) knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way; (2) knowingly giving or causing to be given false or misleading information reasonably expected to influence the decision to discharge a patient; (3) offering or giving remuneration to any beneficiary of a federal health care program likely to influence the receipt of reimbursable items or services; (4) arranging for reimbursable services with an entity which is excluded from participation from a federal health care program; (5) knowingly or willfully soliciting or receiving remuneration for a referral of a federal health care program beneficiary; (6) using a payment intended for a federal health care program beneficiary for another use; or (7) knowingly making or causing to be made a false statement, omission or misrepresentation of material fact in any application, bid or contract to participate in a federal health care program. Penalties include up to $50,000 for each item or service claimed and damages of up to three times the total amount claimed. The Secretary of HHS, acting through the OIG, also has both mandatory and permissive authority to exclude individuals and entities from participation in federal health care programs pursuant to this statute.

In addition, pursuant to HIPAA, the commission of either one of the prohibited practices listed below may lead to civil monetary penalties: (1) the practice or pattern of presenting a claim for an item or service on a reimbursement code that the person knows or should know will result in greater payment than appropriate, i.e., upcoding and (2) engaging in a practice of submitting claims for payment for medically unnecessary services. Violation of such prohibited practices could amount to civil monetary penalties of up to $10,000 for each item or service involved. Management of the Obligated Group does not expect that the prohibited practices provisions of HIPAA will affect the Members of the Obligated Group in a material respect.

Finally, it is a criminal federal health care fraud offense to: (1) knowingly and willfully execute or attempt to execute any scheme to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, representations or promises any money or property owned or controlled by any health care benefit program. Penalties for a violation of this federal law include fines and/or imprisonment and a forfeiture of any property derived from proceeds traceable to the offense.

The DRA provides financial incentives to states that pass similar false claims statutes or amend existing false claims statutes that track the FCA more closely with regard to penalties and rewards to qui tam relators. A number of states, including Nebraska, have passed similar statutes expanding the prohibition against the submission of false claims to nonfederal third-party payors.

At the present time, management of the Obligated Group is not aware of any pending or threatened claims, investigations or enforcement actions regarding the FCA or Nebraska false claims laws

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which, if determined adversely to the Members of the Obligated Group, taken as a whole, would have a material adverse effect on the financial condition of the Members of the Obligated Group.

Health Plans and Managed Care. For the fiscal years ended June 30, 2015 and 2014, commercial insurance plans represented approximately 41.7% and 38.8%, respectively, of the Obligated Group’s gross patient service revenues, of which Blue Cross Blue Shield of Nebraska provided approximately 20.5% and 18.2%, respectively, of the Obligated Group’s gross patient service revenues. The loss or unfavorable renegotiation of the Blue Cross Blue Shield of Nebraska contract could have a material adverse impact on the operations and financial condition of the Obligated Group.

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

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

HMO and PPO provider contracts generally obligate a health care provider to provide services to HMO and PPO participants at a discount from established charges. Currently, many HMOs and PPOs pay providers on a negotiated fee-for-service basis or, for institutional care, on a fixed rate per day of care, which, in each case, usually is discounted from the typical charges for that service or care. The discounts offered to HMOs and PPOs may 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/or 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 hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” or otherwise directed to receive care at a particular hospital. The hospital may assume financial risk for the cost and scope of institutional care given. If payment is insufficient to meet the hospital’s actual costs of care or if utilization by such enrollees materially exceeds projections, the financial condition of the hospital could erode rapidly and significantly.

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

Failure to maintain contracts could have the effect of reducing the market share and net patient services revenues of the Members of the Obligated Group. Conversely, participation may result in lower net income if the Members of the Obligated Group are unable to adequately contain their costs. Thus, managed care poses a significant business risk that hospitals face.

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Physician Recruitment and Service Agreements. The IRS, CMS and OIG have issued various pronouncements that could limit physician service, recruiting and retention arrangements. In IRS Revenue Ruling 97-21, the IRS ruled that tax-exempt hospitals that provide recruiting and retention incentives to physicians risk loss of tax-exempt status unless the incentives are reasonably necessary to address a community need and accordingly provide a community benefit; improvement of a charitable hospital’s financial condition does not necessarily constitute such a purpose. With respect to physician service contracts, the IRS takes the position that the compensation paid must be consistent with the value of services actually provided by the physician. The OIG also has taken the position that any arrangement between a federal health care program-certified facility and a physician that is intended even in part to encourage the physician to refer patients may violate the federal Anti-Kickback Statute unless a regulatory exception applies. Physician service, recruitment and retention arrangements may also implicate the Stark Law. While the OIG has promulgated a practitioner recruitment safe harbor to the Anti-Kickback Statute, it is limited to recruitment in areas that are health professional shortage areas (“HPSAs”). OIG also requires consistency with fair market for certain other exceptions that may apply to service contracts and may allege that any amount paid above fair market value implies an intent to induce referrals. The Stark Law exception for practitioner recruitment is not limited to HPSAs, rather it applies to the recruitment of physicians who are relocating their practices to the geographic area served by the hospital, if certain requirements are met. The Stark Law also contains an exception pertaining to retention arrangements that allows hospitals, in limited circumstances, to pay incentives to retain a physician in underserved areas. In addition, the Stark Law includes certain exceptions that may apply to service contracts, many of which also require (among other things) that payments to the physician are consistent with fair market value for services actually performed.

The sanctions which could be imposed by the IRS or the other regulatory authorities or the courts for violations of IRS regulations, the Stark Law and the Anti-Kickback Statute and for false claims under the FCA and other similar federal or state laws include, among other things, the loss of tax-exempt status of the Members of the Obligated Group, repayment of up to three times the amount of claim payments related to services provided or referred by affected physicians, exclusion of the Members of the Obligated Group from federal health care programs, including the Medicare and Medicaid programs, and/or additional monetary penalties.

Management of the Obligated Group believes that the physician recruitment arrangements of the Members of the Obligated Group are in material compliance with these laws and regulations, but no assurance can be given that regulatory authorities will not take a contrary position or that the Members of the Obligated Group will not be found to have violated applicable law or that future laws, regulations or policies will not have a material adverse impact on the ability of the Members of the Obligated Group to recruit and retain physicians.

Emergency Medical Treatment and Active Labor Act. The federal Emergency Medical Treatment and Active Labor Act (“EMTALA”) imposes certain requirements on hospitals and facilities with emergency departments. Generally, EMTALA requires that hospitals and other facilities with emergency departments provide “appropriate medical screening” to patients who come to the to determine if an emergency medical condition exists. If so, the hospital must stabilize the patient within the capabilities of the hospital and the patient cannot be transferred unless stabilization has occurred or the transfer is done pursuant to EMTALA requirements. Failure to comply with EMTALA may result in a hospital’s exclusion from the Medicare and/or Medicaid programs, as well as imposition of civil monetary penalties. As such, failure of the Members of the Obligated Group to meet their responsibilities under EMTALA could adversely affect the financial condition of the Members of the Obligated Group.

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Management of the Obligated Group believes its policies and procedures are in material compliance with EMTALA, but no assurance can be given that a violation of EMTALA will not be found. Any sanctions imposed as a result of an EMTALA violation could have a material adverse effect on the future operations or financial condition of the Members of the Obligated Group.

Enforcement Activity. Enforcement activity against health care providers has increased. Enforcement authorities may aggressively pursue perceived violations of health care laws. In the current regulatory climate, it is anticipated that many hospitals and physician groups may be subject to an audit, investigation or other enforcement action regarding the health care fraud laws mentioned above. For example, HHS recently approved federal funding for state Medicaid fraud control units to conduct data-mining activities to detect patterns of abuse. 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 also be damaging to the reputation and business of a hospital, regardless of outcome.

Certain acts or transactions may result in violation or alleged violation of a number of the federal health care fraud laws described above and therefore penalties or settlement amounts often are compounded. Generally these risks are not covered by insurance.

Joint Ventures. The OIG has expressed its concern in various advisory bulletins that many types of joint venture arrangements involving hospitals may implicate the Anti-Kickback Statute, since the parties to joint ventures are typically in a position to refer patients of federal health care programs. In addition, under the federal tax laws governing Section 501(c)(3) organizations, a tax-exempt hospital’s participation in a joint venture with for-profit entities must further the hospital’s exempt purposes and the joint venture arrangement must permit the hospital to act exclusively in the furtherance of its exempt purposes, with only incidental benefit to any for-profit partners. If the joint venture does not satisfy these criteria, the hospital’s tax exemption may be revoked, the hospital’s income from the joint venture may be subject to tax or the parties may be subject to some other sanction. Finally, many hospital joint ventures with physicians may also implicate the federal Stark Law.

Any evaluation of compliance with the Anti-Kickback Statute or tax laws governing Section 501(c)(3) organizations depends on the totality of the facts and circumstances, while the Stark Law requires strict compliance with an exception if the prohibition is triggered. While management of the Obligated Group believes that the joint venture arrangements to which the Members of the Obligated Group are a party are in material compliance with the Anti-Kickback Statute, OIG pronouncements, the tax laws governing Section 501(c)(3) organizations and the Stark Law, there can be no assurance that regulatory authorities will not take a contrary position or that such transactions will not be found to have violated these laws and related regulations. Any determination that the Members of the Obligated Group are not in compliance with these laws and related regulations could have a material adverse effect on the future financial condition of the Members of the Obligated Group.

The Members of the Obligated Group may in the future enter into joint ventures with physicians. The ownership and operation of certain of these joint ventures may not meet safe harbors under the Anti-Kickback Statute. Management of the Obligated Group has proceeded or is proceeding with the transactions related to the joint ventures on the assumption, after consultation with its legal counsel, that each of the transactions related to the joint ventures is in material compliance with the Stark Law and the tax laws governing Section 501(c)(3) organizations, and is otherwise generally in material compliance with the Anti-Kickback Statute. However, there can be no assurance that regulatory authorities will not

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take a contrary position or that such transactions will not be found to have violated the Stark Law, the tax laws governing Section 501(c)(3) organizations and/or the Anti-Kickback Statute. Any such determination could have a material adverse effect on the future operations or financial condition of the Members of the Obligated Group.

Review of Outlier Payments. CMS reviews health care providers that are receiving large proportions of their Medicare revenues from outlier payments. Outlier payments are additions or adjustments to standard payments due to unusual variations in the type of amount of care. Health care providers found to have obtained inappropriately high outlier payments will be subject to further investigation by CMS and potentially the OIG.

Enforcement Affecting Clinical Research. In addition to increasing enforcement of laws governing payment and reimbursement, the federal government has also heightened enforcement of laws and regulations governing the conduct of clinical trials at hospitals. HHS elevated and strengthened its Office of Human Research Protections, 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. The FDA’s inspection of facilities has increased significantly in recent years. These agencies’ enforcement powers range from substantial fines and penalties to exclusions of researchers and suspension or termination of entire research programs.

Exclusive or Anti-Competitive Credentialing. Some hospitals have adopted admissions policies for their medical staffs that deny staff appointment or privileges to physicians that compete against the subject hospital (“exclusive” or “economic credentialing”). CMS has announced that it will examine whether exclusive credentialing violates provisions of federal law, including the Stark Law. CMS action could lead to regulations prohibiting or restricting exclusive credentialing. Any final rule or regulation of CMS on exclusive credentialing could adversely affect the Members’ policies.

NEGATIVE RANKINGS BASED ON CLINIC OUTCOMES, COST, QUALITY, PATIENT SATISFACTION AND OTHER PERFORMANCE MEASURES

Health plans, Medicare, Medicaid, employers, trade groups and other purchasers of health services, private standard-setting organizations and accrediting agencies increasingly are using statistical and other measures in efforts to characterize, publicize, compare, rank and change the quality, safety and cost of health care services provided by hospitals and physicians. Published rankings such as “score cards,” “P4P (pay-for performance)” and other financial and non-financial incentive programs are being introduced to affect the reputation and revenue of hospitals and the members of their medical staffs and to influence the behavior of consumers and providers such as the Members of the Obligated Group. 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 negatively may adversely affect its reputation and financial condition.

FUTURE LEGISLATION

Legislation is periodically introduced in the U.S. Congress and in the legislature of the State of Nebraska that could result in limitations on hospital revenues, reimbursement, costs or charges or that could require an increase in the quantity of indigent care required to maintain charitable status. The

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effects on the Members of the Obligated Group of such legislation, if enacted, cannot accurately be determined at this time.

In addition to legislative proposals previously discussed herein, other legislative proposals that could have an adverse effect on the Members of the Obligated Group include: (a) any changes in the taxation of nonprofit corporations or in the scope of their exemption from income or property taxes; (b) limitations on the amount or availability of tax-exempt financing for corporations described in Section 501(c)(3) of the Code; (c) regulatory limitations affecting the Members’ ability to undertake capital projects or develop new services; and, (d) elimination of the exclusion of interest on tax-exempt bonds from gross income for all or some taxpayers. The scope and effect of any such legislation that may be adopted cannot be predicted.

Legislative bodies, including Congress as described above, have considered legislation concerning 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 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. Any such legislation or similar legislation, if enacted, may have the effect of subjecting a portion of the income of the Members of the Obligated Group to federal or state income taxes or to other tax penalties and adversely affect the ability of the Members of the Obligated Group, taken as a whole, to generate net revenues sufficient to meet their obligations and to pay the debt service on the Series 2016 Bonds and their other obligations.

PHYSICIAN RELATIONSHIPS

Integrated Physician Groups. As integrated health care providers, the Members of the Obligated Group employ physicians and participate in relationships with certain other physician groups.

Many hospitals and health systems are pursuing strategies with physicians in order to offer an integrated package of health care services, including physician and hospital services, to patients, health care insurers and managed care providers. These integration strategies may take many forms, including management service organizations (“MSOs”) that provide physicians or physician groups with a combination of financial and managed care contracting services, office and equipment, office personnel and management information systems. Integration objectives may also be achieved via physician-hospital organizations, or PHOs, organizations which are typically jointly owned or controlled by a hospital and physician group for the purpose of managed care contracting, implementation and monitoring. Other integration structures include hospital-based clinics or medical practice foundations, which may purchase and operate physician practices as well as provide all administrative services to physicians. Additionally, some hospitals and health systems are pursuing accountable care arrangements, which include varying degrees of clinical and financial integration with physician groups and other health care providers to improve efficiencies and quality outcomes for population-management in a risk-sharing model. Many of these integration strategies are capital intensive and may create certain business and legal liabilities for the related hospital or health system. Further, it is unclear whether the creation of accountable care organizations (“ACOs”) and the contractual arrangements expected to be entered into by ACOs and/or members of ACOs will result in private business use and will therefore be an impediment to the implementation of the Health Care Reform Law.

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Often the start-up capitalization for such structures, as well as operational deficits, are funded by the sponsoring hospital or health system. Depending on the size and organizational characteristics of a particular strategy, these capital requirements may be substantial. In some cases, the sponsoring hospital or health system may be asked to provide a financial guarantee for the debt of a related entity which is carrying out an integrated delivery strategy. In certain of these structures, the sponsoring hospital or health system may have an ongoing financial commitment to support operating deficits, which may be substantial on an annual or aggregate basis. 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.

These types of integrated delivery strategies are generally designed to conform to existing trends in the delivery of medicine, to implement anticipated aspects of health care reform, to increase physician availability to the community and/or enhance the managed care capability of the affiliated hospital and physicians. However, these goals may not be achieved, and, if the structure is not functionally successful, it may produce materially adverse results that are counterproductive to some or all of the above-stated goals.

All such integrated delivery strategies carry with them the potential for legal or regulatory risks in varying degrees. Such strategies may call into question compliance with the Medicare fraud and abuse laws, relevant antitrust laws and federal or state tax exemption. Such risks will turn on the facts specific to the implementation, operation or future modification of any integrated delivery system. In addition, depending on the type of structure, a wide range of governmental billing and other issues may arise, including questions of the authorization of the entity to bill for or on behalf of the physicians involved. Other related legal and regulatory risks may arise, including employment, pension and benefits, requirements for risk-bearing organizations, and corporate practice of medicine, particularly in the current atmosphere of frequent and often unpredictable changes in federal and state legal requirements regarding health care and medical practice. The ability of hospitals or health systems to conduct integrated physician operations may also be altered or eliminated in the future by legal or regulatory interpretation or changes or by health care fraud enforcement.

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

Accountable Care Organizations. The Health Care Reform Law establishes a Medicare Shared Savings Program (“MSSP”) that seeks to promote accountability and coordination of care through the creation of ACOs. The program will allow hospitals, physicians and others to form MSSP ACOs and work together to invest in infrastructure and redesign integrated delivery processes to achieve high quality and efficient delivery of services. MSSP ACOs that achieve quality performance standards will be eligible to share in a portion of the amounts saved by the Medicare program. HHS has significant discretion to determine key elements of the program, including what steps providers must take to be considered a MSSP ACO, how to decide if Medicare program savings have occurred and what portion of such savings will be paid to MSSP ACOs. In November 2011, CMS published the final rules regarding ACOs, and in June 2015, CMS issued a final rule to update and improve policies governing the MSSP. These regulations are complex, and it remains unclear whether the qualification requirements will be a

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formidable barrier. It is probable that hospital participants in MSSP ACOs will have to marshal a large upfront financial investment to form unique and untested ACO structures, which may or may not succeed in gaining qualification. For those that do qualify, it is not clear if the savings will be adequate to recoup the initial investment. In addition, although final rules for the MSSP program published jointly by the OIG and CMS on October 29, 2015 provide for waivers of certain federal fraud and abuse laws, there may remain regulatory risks for participating hospitals, as well as financial and operational risks. The applicable regulating bodies have published guidance for MSSP ACOs to follow in order to comply with the law, but the published guidance is complex. In particular, since the federal MSSP ACO regulation does not preempt state law, Nebraska providers participating as a federal ACO must be organized and operated in compliance with any existing Nebraska statutes and regulations. Numerous organizations have formed ACOs and been selected by CMS to participate in the MSSP. In addition, it is anticipated that private insurers may seek to establish similar incentives for providers, while requiring less infrastructural and organizational change. 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.

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.

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

Physician Supply. Sufficient community-based physician supply is important to hospitals and health systems. A shortage of physicians, especially in primary care, could become a significant issue for health providers to face in the coming years. Any physician shortage will be compounded by the expansion of coverage to the uninsured under the Health Care Reform Law. In addition, CMS annually reviews overall physician reimbursement formulas. Changes to physician compensation formulas could lead to physicians locating their practices in communities with lower Medicare and Medicaid populations. The Members of the Obligated Group may be required to invest additional resources for recruiting and retaining physicians or may be required to increase the percentage of employed physicians in order to continue serving the growing population base and maintain market share.

Physician Contracting. The Members of the Obligated Group may contract with physician organizations (such as independent physician associations, physician-hospital organizations, and accountable care organizations) to arrange for the provision of physician and ancillary services. Because physician organizations are separate legal entities with their own goals, obligations to shareholders, financial status, and personnel, there are risks involved in contracting with physician organizations.

The success of the Members of the Obligated Group is partially dependent upon the Members’ ability to attract physicians to join the physician organizations at facilities operated by the Members of the Obligated Group and to participate in its networks, and upon the ability of the physicians, including

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the employed physicians, to perform their obligations and deliver high quality patient care in a cost-effective manner. There can be no assurance that the Members of the Obligated Group will be able to attract and retain the requisite number of physicians, or that physicians will deliver high quality health care services. Without contracting with a sufficient number and type of providers, the Members of the Obligated Group could fail to be competitive, could fail to keep or attract payor contracts, or could be prohibited from operating until their physician organizations provide adequate access to patients. Such occurrences could have a material adverse effect on the business or operations of the Members of the Obligated Group.

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. They potentially 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 and Contractual Matters,” above), tax exemption issues (see “BONDHOLDERS’ RISKS—Tax Exempt Status; Continuing Legal Requirements,” 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 populations of individuals, 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. 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 developments, could incur losses from assuming increased risk and could incur damage to reputations.

OTHER HEALTH CARE PROFESSIONALS AND EMPLOYEES

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

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. Legislation or regulation on any of the above or related topics could have a material adverse impact on the Members of

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the Obligated Group and, in turn, the Members’ ability to make payments with respect to the Series 2016 Bonds.

Employee/Labor Relations and Collective Bargaining. The ability of the Members of the Obligated Group to employ and retain qualified employees, including any senior management, and their ability to maintain good relations with such employees and the unions they may be represented by affect the quality of services to patients and the financial condition of the Members of the Obligated Group. 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. In addition, various proposals have recently been made with the intent of making it easier to form, join or assist labor organizations. One such example is the Employee Free Choice Act (“EFCA Act”). The EFCA Act was introduced in Congress on March 10, 2009 with the stated purpose of amending the National Labor Relations Act to establish an easier system to enable employees to form, join, or assist labor organizations to provide for mandatory injunctions for unfair labor practices during organizing efforts. To date, it has not become law. It is uncertain, at this time, whether this proposed legislation will become law, or if it does, what its final provisions will be. 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 collective bargaining 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 of the Obligated Group Members’ employees are represented by labor unions. See “EMPLOYEE RELATIONS— Union Activity” in Appendix A.

Wage and Hour Class Actions and Litigation. Federal law and many states 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 Members of the Obligated Group could have a material adverse impact on its financial condition and result of operations. Currently, no such class action lawsuits are pending against the Members of the Obligated Group.

Staffing Shortages. In past years, the health care industry experienced a scarcity of nursing personnel, respiratory therapists, radiation technicians, pharmacists and other trained health care technicians. A significant factor underlying this trend included a decrease in the number of persons entering such professions. As a result of the recent growth in the unemployment rate, however, these shortages have lessened throughout the country. Competition for employees, coupled with increased recruiting and retention costs, could increase hospital operating costs, possibly significantly. Growth, therefore, could be constrained which could have a material adverse impact on the financial conditions and results of operations of the Members of the Obligated Group.

Pension and Benefit Funds. As large employers, hospitals may incur significant expenses to fund pension and benefit plans for employees and former employees and to fund required workers’ compensation benefits. Funding obligations in some cases may be erratic or unanticipated and may require significant commitments of available cash needed for other purposes. In addition, to the extent investment returns are lower than anticipated or losses on investments occur, the Members of the Obligated Group may also be required to make additional deposits in connection with pension fund liabilities.

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PROFESSIONAL LIABILITY CLAIMS AND GENERAL LIABILITY INSURANCE

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

The ability of, and the cost to, the Members of the Obligated Group to insure or otherwise protect themselves against malpractice claims may adversely affect their future results of operations or financial condition.

Litigation also arises from the corporate and business activities of hospitals, from a hospital’s status as an employer, 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, certain of these risks may not be covered by insurance. For example, some antitrust claims or business disputes are not covered by insurance and may, in whole or in part, become a direct liability of the Members of the Obligated Group if determined or settled adversely.

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

CLASS ACTIONS AND LITIGATION

Hospitals and health care 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 care systems. These class action suits have most recently focused on hospital billing and collections practices, and they may be used for a variety of currently unanticipated causes of action. Since the subject matter of class action suits may involve uninsured risks, and since such actions often involve allege large classes of plaintiffs, they may have material adverse consequences on hospitals and health systems in the future.

LICENSURE AND ACCREDITATIONS

The Members of the Obligated Group have been subject to periodic review by The Joint Commission and various federal, state and local agencies. The Members of the Obligated Group are currently accredited by The Joint Commission. Failure to receive accreditation or licensure could have a material adverse impact on the Members of the Obligated Group. Renewal and continuance of certain of these licenses, certifications and accreditations are based on inspections, surveys, audits, investigations or other reviews, some of which may require or include affirmative action or response by the Members of the Obligated Group. Management of the Obligated Group currently anticipates no difficulty renewing or continuing currently held licenses, certifications or accreditations. Nevertheless, actions in any of these areas could result in the loss of utilization or revenues or the Members’ ability to operate all or a portion of their facilities and, consequently, could adversely affect the Members’ ability to make principal, interest and premium, if any, payments with respect to the Series 2016 Bonds. No assurance can be given as to the effect on future operations of existing laws, regulations and standards for certification or accreditation or of any future changes in such laws, regulations and standards.

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ANTITRUST

Enforcement of the antitrust laws against health care providers is becoming more common and antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, third-party contracting, physician relations and joint venture, merger, affiliation and acquisition activities. Enforcement activity by federal and state agencies in the health care sector continues to be very active. In particular, the Federal Trade Commission (the “FTC”) has publicly acknowledged increasing enforcement action in the areas of hospital and physician combinations. Violation of the antitrust laws could subject a hospital to criminal and civil enforcement by federal and state agencies, as well as treble damage liability by private litigants. At various times, the Members of the Obligated Group may be subject to an investigation by a governmental agency charged with the enforcement of the antitrust laws or may be subject to administrative or judicial action by a federal or state agency or a private party.

The most common areas of potential liability are joint activities among providers with respect to payor contracting, medical staff credentialing, hospital and physician mergers and acquisitions and allegations of exclusion of competitors from market opportunities. From time to time, the Members of the Obligated Group may be involved in joint contracting activity or affiliation discussions with other hospitals or providers. The precise degree to which this or similar joint activities may expose the Members of the Obligated Group to antitrust risk from governmental or private sources is dependent on specific facts which may change from time to time. Physicians who are subject to adverse peer review proceedings may file federal antitrust actions against hospitals, although the Health Care Quality and Improvement Act may provide immunity from such claims if certain requirements are met. Hospitals regularly have disputes regarding credentialing and peer review and therefore may be subject to liability in this area.

In addition, hospitals occasionally indemnify medical staff members who are involved in such credentialing or peer review activities and may also be liable with respect to such indemnity. Recent court cases have challenged alleged agreements to exclude competitors from managed care networks. Such activities may result in monetary liability for the participating hospitals under certain circumstances where a competitor suffers business damage. Government or private parties are entitled to challenge mergers, acquisitions, joint ventures, or other affiliations that may injure competition. Liability in any of these or other antitrust areas of liability may be substantial, depending on the facts and circumstances of each case and may have a material adverse impact on the Members of the Obligated Group.

ENVIRONMENTAL LAWS AND REGULATIONS

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

The Members of the Obligated Group may be subject to requirements related to investigating and remedying hazardous substances located on their property, including such substances that may have migrated off of their 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 compliance with such environmental

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laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations and/or increase their cost; may result in legal liability, damages, injunctions or fines; and may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and may not be covered by insurance. There is no assurance that the Members of the Obligated Group will not encounter such problems in the future and such problems may result in material adverse consequences to the operations or financial condition of the Members of the Obligated Group.

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

The Master Trustee or the Bond Trustee may decline to enforce the Master Indenture or the Bond Indentures, as the case may be, if the related trustee has not been indemnified to its satisfaction, in accordance with its indenture, for all liabilities it may incur as a consequence thereof. Such liabilities may include, but are not limited to, costs associated with complying with environmental laws and regulations.

CYBERSECURITY RISKS

The Members of the Obligated Group rely on digital technology to conduct its customary operations. Despite the implementation of network security measures, Obligated Group information technology systems may be vulnerable to breaches, hacker attaches, computer viruses, physical or electronic break-ins and other similar events or issues. For example, in the past several years a number of individuals or entities have sought to gain unauthorized access to digital systems of large organizations for the purpose of misappropriating assets or information or causing operational disruptions. Such events or issues could lead to inadvertent disclosure of protected health information or other confidential information or could have an adverse effect on the ability of the Obligated Group to generate revenues or upon the favorable utilization of its facilities. The Obligated Group maintains a network security system designed to prevent “cyber-attacks” by third parties and minimize its impact on operations; however no assurances can be given that such network security systems will be completely successful.

ENFORCEMENT OF REMEDIES; RISKS OF BANKRUPTCY

The obligations of the Members of the Obligated Group under the Master Indenture and the Series 2016 Obligations are general obligations of the Members of the Obligated Group and are secured only by the security interest granted to the Master Trustee in the Gross Revenues of the Members of the Obligated Group. Enforcement of the remedies mentioned under the headings “SUMMARY OF THE BOND INDENTURES—Events of Default and Remedies,” “SUMMARY OF THE LOAN AGREEMENTS—Remedies on Default” and “SUMMARY OF THE MASTER INDENTURE” in Appendix C to this Official Statement may be limited or delayed in the event of application of federal bankruptcy laws or other laws affecting creditors’ rights and may be substantially delayed and subject to judicial discretion in the event of litigation or the required use of statutory remedial procedures.

If the Members of the Obligated Group were to file a petition for relief under Title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), the filing would operate as an automatic stay

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of the commencement or continuation of any judicial or other proceeding against the Members of the Obligated Group and any interest they have in their property. If the bankruptcy court so ordered, a Member of the Obligated Group’s property, including its accounts receivable and proceeds thereof, could be used, at least temporarily, for the benefit of such Member’s bankruptcy estate despite the claims of its creditors.

In a case under the current Bankruptcy Code, the Obligated Group could file a plan of reorganization. The plan is the vehicle for satisfying, and provides for the comprehensive treatment of all claims against the Members of the Obligated Group, and could result in the modification of rights of any class of creditors, secured or unsecured. To confirm a plan of reorganization, with one exception discussed below, it must be approved by the vote of each class of impaired creditors. A class approves a plan if, of those who vote, those holding more than one-half in number and two-thirds in amount vote in favor of a plan. Approval by classes of interests requires a vote in favor of the plan by two-thirds in amount. If these levels of votes are attained, those voting against the plan or not voting at all are nonetheless bound by the terms thereof. Other than as provided in the confirmed plan, all claims and interests are discharged and extinguished. If fewer than all of the impaired classes accept the plan, the plan may nevertheless be confirmed by the bankruptcy court, and the dissenting claims and interests would be bound thereby. For this to occur, one of the impaired classes must vote to accept the plan and the bankruptcy court must determine that the plan does not “discriminate unfairly” and is “fair and equitable” with respect to the nonconsenting class or classes. The Bankruptcy Code establishes different fair and equitable tests for secured claims and interest holders. To be confirmed, the bankruptcy court must also determine that a plan, among other requirements, provides creditors with not less than would be received in the event of liquidation, is proposed in good faith, and that the debtor’s performance is feasible.

RISKS RELATED TO OBLIGATED GROUP FINANCINGS

The obligations of the Members of the Obligated Group under the Series 2016 Obligations and the Master Indenture are limited to the same extent as the obligations of debtors typically affected by bankruptcy, insolvency and the application of general principles of creditors’ rights and as additionally described below. The Master Indenture permits the addition of other Members of the Obligated Group if certain conditions are met. See “SUMMARY OF THE MASTER INDENTURE—Parties Becoming Members of the Obligated Group” in Appendix C hereto.

The joint and several obligations described herein of the Members of the Obligated Group to make payments of debt service on the Series 2016 Obligations issued pursuant to and under the Master Indenture may not be enforceable to the extent (1) enforceability may be limited by applicable bankruptcy, moratorium, reorganization, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights and by general equitable principles or (2) such payments (a) are requested to be made with respect to payments on any Obligation that is issued for a purpose that is not consistent with the charitable purposes of the Member of the Obligated Group from which such payment is requested or that is issued for the benefit of any entity other than a tax-exempt organization; (b) are requested to be made from any money or assets that are donor restricted or which are subject to a direct or express trust which does not permit the use of such money or assets for such payment; (c) would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by the Members of the Obligated Group from which such payment is requested; or (d) are requested to be made pursuant to any loan violating applicable usury laws. The extent to which the money or assets of any present or future Member of the Obligated Group falls within the categories referred to above cannot be determined and could be substantial. The foregoing notwithstanding, the accounts of the Members of the Obligated Group are and will continue to be combined for financial reporting purposes and will be used in

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determining whether various covenants and tests contained in the Master Indenture (including tests relating to the issuance of additional indebtedness) are satisfied.

A Member may not be required to make any payment of any Obligation or portion thereof or the recipient of such payment may be compelled to return such payment, the proceeds of which were not lent or otherwise disbursed to the Members of the Obligated Group to the extent that such payment would conflict with or would be prohibited or avoidable under applicable laws.

The application of the law relating to the enforceability of guaranties or obligations of a Member of the Obligated Group to make debt service payments on behalf of another Member of the Obligated Group is not amenable to an unqualified declaration of whether a transfer would be prohibited or subject to avoidance.

As a general matter, in addition to a transfer of property made with the actual intent to hinder, defraud or delay creditors, a transfer of an interest in property by an entity may be avoided if the transfer is made for less than “reasonably equivalent value” or “fair consideration” and the transferor (i) is insolvent (e.g., is unable to pay its debts as they become due), (ii) rendered insolvent by the transaction, (iii) is undercapitalized (i.e., operating or about to operate without property constituting reasonably sufficient capital given its business operations) or (iv) intended or expected to incur debts that it could not pay as they became due.

The lack of certainty in the treatment of transfers is attributable to several factors. First, there is no true uniform law governing fraudulent transfers. Such transfers may be avoided under the Bankruptcy Code, state law variants of the Uniform Fraudulent Transfer Act and its predecessor, the Uniform Fraudulent Conveyance Act or other non-uniform statutes or common law principles. Second and more importantly, the standards for determining the reasonable equivalence of value or the fairness of consideration and the measure for determining insolvency are subjective standards resolved in the exercise of judicial discretion after engaging in a fact intensive analysis. This subjectivity has resulted in a conflicting body of case law and a lack of certainty as to whether a given transfer would be subject to avoidance.

In addition, the Bankruptcy Code provides a means to avoid transfers of a debtor’s interests in property made on account of an antecedent debt within 90 days of the debtor filing for relief or one year if the transferee is an “insider,” if, as a result of that transfer, the transferee receives more than it would have received in a liquidation of the debtor under Chapter 7 of the Bankruptcy Code. Whether a payment made by a Member would be determined to be avoidable would be dependent on the particular circumstances surrounding the transfer.

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

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CERTAIN MATTERS RELATING TO ENFORCEABILITY OF SECURITY INTEREST IN GROSS REVENUES

The enforceability of the security interest in Gross Revenues granted in the Master Indenture may be limited by a number of factors, including: (i) provisions prohibiting the direct payment of amounts due to health care providers from Medicaid and Medicare programs to persons other than such providers; (ii) the absence of an express provision permitting assignment of receivables due under the contracts between the Members of the Obligated Group and third-party payors, and present or future legal prohibitions against such assignment; (iii) certain judicial decisions which cast doubt upon the right of the Master Trustee, in the event of the bankruptcy of the Members of the Obligated Group, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs; (iv) commingling of proceeds of accounts receivable with other moneys of the Members of the Obligated Group not so pledged under the Master Indenture; (v) statutory liens; (vi) rights arising in favor of the United States of America or any agency thereof; (vii) constructive trusts or equitable or other rights impressed or conferred thereon by a federal or state court in the exercise of its equitable jurisdiction; (viii) federal bankruptcy laws which may affect the enforceability of the Master Indenture or the security interest of the Members of the Obligated Group which are earned by the Members of the Obligated Group within 90 days preceding the commencement of bankruptcy proceedings by or against the Members of the Obligated Group and during the pendency of such proceedings; (ix) rights of third parties in Gross Revenues converted to cash and not in the possession of the Master Trustee; and (x) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code, as from time to time in effect.

Accounts receivable of the Members of the Obligated Group which constitute Gross Revenues and are pledged as security under the Master Indenture may be sold or pledged if such sale or pledge is in accordance with the provisions of the Master Indenture. If a prior security interest in accounts receivable is granted, the Master Trustee’s security interest therein would be subordinated to such prior interest and the holders of such prior security interest would have a claim to the Obligated Group’s accounts receivable prior to the security interest therein which secures all Obligations. The lien created under the Master Indenture on accounts receivable would terminate and be immediately released upon any such sale.

MATTERS RELATING TO THE SECURITY FOR THE SERIES 2016 BONDS

Pursuant to the terms of the Master Indenture, the Members of the Obligated Group may incur additional Indebtedness (including Indebtedness secured by additional Obligations), letters of credit and other third party guarantees which is entitled to the benefits of security which does not extend to any other Debt (including the Series 2016 Obligations). Such security may include Liens on the Property of the Obligated Group (including health care facilities) or any depreciation reserve, debt service or interest reserve or similar fund established for such additional Indebtedness. See “SUMMARY OF THE MASTER INDENTURE—Limitations on Indebtedness” and “—Limitations on Creation of Liens” in Appendix C hereto.

The rights and remedies afforded to the holders of Obligations by the Master Indenture, including without limitation the right to demand acceleration of Obligations (including the Series 2016 Obligations) upon the occurrence of an event of default under the Master Indenture including, without limitation, a payment default under the Series 2016 Obligations, may only be initiated by the holders of 50% in aggregate principal amount of the Obligations, subject to the right of the holders of a majority in

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aggregate principal amount of the Obligations to direct all remedies under the Master Indenture. At the time the Series 2016 Bonds are issued, the Bond Trustee for the Series 2016 Bonds will be the holder of the Series 2016 Obligations. See “SUMMARY OF THE MASTER INDENTURE—Events of Default” and “— Holders’ Control of Proceedings” in Appendix C hereto.

The Master Indenture may also be amended with the consent of the holders of not less than fifty percent (50%) in aggregate principal amount of the Obligations. Such amendments could be material and could result in the modification, waiver or removal of significant covenants or restrictions, and such percentage of Obligations holders may be comprised wholly or partially of related bond trustees or the holders of additional Obligations issued after the issuance of the Series 2016 Obligations. Certain amendments to the Master Indenture may also be made at the discretion of the Master Trustee but without Bondholder consent. See “SUMMARY OF THE MASTER INDENTURE—Supplements Not Requiring Consent of Holders in Appendix C.

Certain amendments to the Bond Indentures and Loan Agreements may be made in the discretion of the Bond Trustee. Other amendments to the Bond Indentures and the Loan Agreements may be made with the prior written consent of the holders of not less than a majority of the aggregate principal amount of the Series 2016 Bonds.

Under certain circumstances, the Series 2016 Obligation may be replaced by substitute obligations. The Bond Indenture does not require that another master indenture under which substitute obligations would be issued to contain covenants similar to the Master Indenture nor require that Obligations be secured by a security interest in Gross Revenues. See “SUMMARY OF THE BOND INDENTURES—Release and Substitution of Borrower Obligation” in Appendix C hereto.

MARKET FOR BONDS

Subject to prevailing market conditions, the Underwriters intend, but are not obligated, to make a market in the Series 2016 Bonds. There is presently no secondary market for the Series 2016 Bonds and no assurance can be given that a secondary market will develop. Consequently, investors may not be able to resell the Series 2016 Bonds purchased should they need or wish to do so and any sale may be at a price less than the price at which the Series 2016 Bonds were purchased.

TAX EXEMPT STATUS; CONTINUING LEGAL REQUIREMENTS

The tax exempt status of interest on the Series 2016 Bonds depends, among other things, upon maintenance by the Members of the Obligated Group of their status as organizations described in Section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general rules based on the Code, Treasury regulations and judicial decisions regarding the organization and operation of tax-exempt hospitals and health systems, 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 traditional activities of health care providers, such as medical office building leases, have been the subject of interpretations by the IRS in the form of private letter rulings, many activities or categories of activities have not been fully addressed in any official opinion, interpretation or policy of the IRS. The IRS’ interpretation of and position on these rules as they affect the organization

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and operation of health care organizations (for example, with respect to providing charity care, joint ventures, physician and executive compensation, physician recruitment and retention, etc.) are constantly evolving. The IRS can, and in fact occasionally does, alter or reverse its positions concerning tax-exemption issues, even concerning long-held positions upon which tax-exempt health care organizations have relied.

In addition to violations of the Code and Treasury regulations, the IRS has asserted that tax-exempt hospitals that are in violation of Medicare and Medicaid regulations regarding inducement for referrals may also be subject to revocation of their tax-exempt status. Because a wide variety of hospital-physician transactions potentially violate these broadly stated prohibitions on inducement for referrals, the IRS has broadened the range of activities that may directly affect tax exemption, without defining specifically how those rules will be applied. As a result, tax-exempt hospitals, particularly those that have extensive transactions with physicians, are currently subject to an increased degree of scrutiny and perhaps enforcement by the IRS. The IRS’s policy position is not necessarily indicative of a judicial determination of the applicable issues.

The Members of the Obligated Group participate in transactions with physicians either directly or indirectly. Management believes that the transactions to which the Members of the Obligated Group are a party are consistent with the requirements of the Code as to tax-exempt status, but, as noted above, there is uncertainty as to the state of the law.

Section 4958 of the Code imposes excise taxes on “excess benefit transactions” between “disqualified persons” and tax-exempt organizations such as the Members of the Obligated Group. According to the legislative history and regulations associated with Section 4958, these excise taxes may be imposed by the IRS either in lieu of or in addition to revocation of exemption. These intermediate sanctions may be imposed in situations in which a “disqualified person” (such as a voting member of the board, certain officers and others in a position to exercise substantial influence over the affairs of the exempt organization) engages in “excess benefit transactions” such as (i) a transaction with a tax-exempt organization on other than a fair market value basis, (ii) receipt of unreasonable compensation from a tax-exempt organization or (iii) receipt of payment in an arrangement that otherwise violates the prohibition against private inurement. A disqualified person who benefits from an excess benefit transaction will be subject to an excise tax equal to 25% of the amount of the excess benefit. Organization managers who participate in the excess benefit transaction knowing it to be improper are subject to an excise tax equal to 10% of the amount of the excess benefit, subject to a maximum penalty of $20,000 per transaction. A second penalty, in the amount of 200% of the excess benefit, may be imposed on the disqualified person (but not upon the organization manager) if the excess benefit is not corrected within a specified period of time. Fair market value and reasonable compensation for tax purposes typically reflect a range rather than a specific dollar amount, and the IRS does not rule in advance on whether a transaction results in more than fair market value payment or more than reasonable compensation to a disqualified person. Although it is not possible to predict what enforcement action, if any, the IRS might take related to potential excess benefit transactions, the regulations indicate that not all excess benefit transactions jeopardize exempt status. Rather, the IRS will consider all relevant facts and circumstances including: the size and scope of the organization’s activities that further exempt purposes before and after the excess benefit transaction or transactions occurred; the size and scope, and frequency, of any excess benefit transactions; whether the organization has implemented appropriate safeguards reasonably calculated to prevent excess benefit transactions; and whether the organization has corrected, or made good faith efforts to correct, any excess benefit such as by obtaining repayment of the amount of any excess benefit.

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Moreover, the legislation is potentially favorable to taxpayers because it provides the IRS with a punitive option short of revocation of exempt status to deal with incidents of private inurement. However, the standards for tax exemption have not been changed, including the requirement that no part of the net earnings of an exempt entity inure to the benefit of any private individual. Consequently, although the IRS has only infrequently revoked the tax exemption of nonprofit health care corporations in the past, the risk of revocation remains and there can be no assurance that the IRS will not direct enforcement activities against any of the Members of the Obligated Group.

In certain cases, the IRS has imposed substantial monetary penalties and future charity care or public benefit obligations on tax-exempt hospitals in lieu of revoking their tax-exempt status, as well as requiring that certain transactions be altered, terminated or avoided in the future and/or requiring governance or management changes. These penalties and obligations are typically imposed on the tax-exempt hospital pursuant to a “closing agreement” with respect to the hospital’s alleged violation of Section 501(c)(3) exemption requirements. Given the uncertainty regarding how tax-exemption requirements may be applied by the IRS, the Members of the Obligated Group are, and will be, at risk for incurring monetary and other liabilities imposed by the IRS through this “closing agreement” or similar process. Like certain of the other business and legal risks described herein which apply to large multi-hospital systems, these liabilities are probable from time to time for some systems in the nonprofit health care industry and could be substantial, in some cases involving millions of dollars, and in extreme cases could be materially adverse.

The Health Care Reform Law places additional requirements on tax-exempt hospitals for them to receive and maintain their Section 501(c)(3) federal tax exempt status. One significant new requirement is that tax-exempt hospitals must perform a community health needs assessment every three years and develop an implementation strategy to meet the identified needs. Requirements relating to community health needs assessments are effective for taxable years beginning after March 23, 2012, while other requirements are effective for taxable years beginning after March 23, 2010. Any tax-exempt hospital that fails to satisfy the community health needs assessment requirement for any taxable year will be subject to an excise tax penalty of $50,000. Furthermore, the United States Secretary of the Treasury or that individual’s delegate is to review the community benefit activities of each tax-exempt hospital at least every three years, as well as 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. Another major element of the Health Care Reform Law relating to tax-exempt status of hospitals involves charges. A hospital must limit the amounts charged for emergency room or other medically necessary care provided to patients eligible for assistance under the hospital’s financial assistance policy to no more than the amounts generally billed to patients who have insurance covering such care. In other words, hospitals cannot charge persons eligible for financial assistance higher rates than the amounts generally billed to patients who have insurance covering such care. The Health Care Reform Law also requires that tax-exempt hospitals have a written financial assistance policy in place. Finally, the Health Care Reform Law prohibits a hospital from engaging in extraordinary collection actions (which may include, among other things, a restriction on filing suit) before it has made reasonable efforts to determine whether the subject individual is eligible for financial assistance. 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.

The Tax Exempt and Governmental Entities Division of the IRS is responsible for the Team Examination Program (referred to as “TEP”) of the IRS, which conducts audits of exempt organizations using teams of revenue agents. The TEP audit teams consider a wide range of possible issues, including

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the community benefit standard, private inurement and private benefit, partnerships and joint ventures, retirement plans and employee benefits, employment taxes, tax-exempt bond financing, political contributions and unrelated business income. In addition, the IRS conducts compliance checks and correspondence audits that focus initially on limited issues, such as executive compensation, unrelated business income or community benefit. Such limited scope reviews can be expanded in certain circumstances to include a variety of other issues as in a TEP audit. 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.

The Members of the Obligated Group could be audited by the IRS. Management of the Obligated Group believes that the Members of the Obligated Group have properly complied with the tax laws. Nevertheless, because of the complexity of the tax laws and the presence of issues about which reasonable persons can differ, a TEP or other audit could result in additional taxes, interest and penalties. A TEP or other audit also could potentially affect the tax-exempt status of the Members of the Obligated Group.

In addition, as a result of the increased scrutiny of community benefit activity by the IRS, tax-exempt hospitals may be required to increase resources spent on qualifying activities. On February 12, 2009, the IRS released its Final Report containing the results of a two-year study focusing on community benefit reporting practices and executive compensation practices of tax-exempt hospitals. The results are based on a compliance check survey the IRS sent to 544 hospitals in May 2006 and builds on the analysis of results first released by the IRS in its Interim Report in July 2007, and the results of a 2004 compliance check on executive compensation arrangements of 501(c)(3) tax-exempt organizations generally, a final report on which was issued in March 2007. The Final Report, however, does not reach specific conclusions concerning whether the existing community benefit standard is appropriate and whether tax-exempt hospital executives are being compensated appropriately.

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

As described herein under the caption “BONDHOLDERS’ RISKS—Tax Exempt Status; Continuing Legal Requirements,” failure to comply with certain legal requirements may cause the interest on the Series 2016 Bonds to become included in gross income of the recipients thereof for federal income tax purposes. The Indenture does not provide for the payment of any additional interest or penalty in the event the interest on the Series 2016 Bonds is determined to be includible in gross income for federal income tax purposes.

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LIMITATIONS ON CONTRACTUAL AND OTHER ARRANGEMENTS IMPOSED BY THE INTERNAL REVENUE CODE

As tax-exempt organizations, the Members of the Obligated Group are limited with respect to their use of practice income guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other means of recruiting and retaining physicians. Uncertainty in this area has been somewhat reduced by the issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and has issued a detailed audit guide suggesting that field agents scrutinize numerous activities of the hospitals in an effort to determine whether any action should be taken with respect to limitations on or revocation of tax-exempt status or assessment of additional tax. Any suspension, limitation or revocation of the Members’ tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Members of the Obligated Group and might lead to loss of tax exemption of interest on the Series 2016 Bonds.

BOND RATINGS

There can be no assurance that the rating assigned to the Series 2016 Bonds at the time of issuance 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 2016 Bonds. See the information under the heading “DESCRIPTION OF RATINGS” below.

INTEREST RATE SWAP RISK

The Members of the Obligated Group, upon the issuance of the Series 2016 Bonds, are not party to or have plans to enter into any interest rate agreement, such as a swap agreement, to hedge interest rate risk. The Members of the Obligated Group, however, may periodically hereafter enter into such agreements. The Obligated Group’s swap agreements may be secured under the Master Indenture and may be subject to early termination upon the occurrence of certain specified events. If either the Members of the Obligated Group or the counterparty terminates such an agreement when the agreement has a negative value to the Members of the Obligated Group, the Members of the Obligated Group could be obligated to make a termination payment to the counterparty in the amount of such negative value, and such payment could be substantial and potentially materially adverse to the Obligated Group’s financial condition. In the event of an early termination of a swap agreement, there can be no assurance that (i) the Members of the Obligated Group will receive any termination payment payable to them by the swap counterparty, (ii) the Members of the Obligated Group will have sufficient amounts to pay a termination payment payable by them to the swap counterparty, or (iii) the Members of the Obligated Group will be able to obtain a replacement swap agreement with comparable terms.

The Members of the Obligated Group may be required to post collateral to secure their obligations under swap agreements, if so entered into, in certain circumstances. The Members’ ability to place a lien on their collateral is limited by the Master Indenture. See “SUMMARY OF THE MASTER INDENTURE－Limitations on Creation of Liens” and “－Limitations on Indebtedness” in Appendix C hereto. If the Members of the Obligated Group are unable to secure their obligations under their swap agreements with sufficient collateral, the swap counterparty will have the right to terminate such swap agreement. In the event of such termination, the Members of the Obligated Group could be required to make a termination payment to the swap counterparty, the amount of which could be substantial.

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ADDITIONAL RISK FACTORS

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

1. Increased efforts by insurers and governmental agencies to limit the cost of hospital services (including, without limitation, the implementation of a system of prospective review of hospital rate changes and negotiating discounted rates), to reduce the number of hospital beds and to reduce utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety and outpatient care.

2. Cost increases without corresponding increases in revenue could result from, among other factors: increases in the salaries, wages and fringe benefits of hospital and clinic employees; increases in costs associated with advances in medical technology or with inflation; or future legislation which would prevent or limit the ability of the Members of the Obligated Group to increase revenues.

3. An inflationary economy and difficulty in increasing charges and other fees charged while at the same time maintaining the amount or quality of health services may affect the Obligated Group’s operating margins.

4. The possible inability to obtain future governmental approvals to undertake projects necessary to remain competitive both as to rates and charges as well as quality and scope of care could adversely affect the operations of the Members of the Obligated Group.

5. Imposition of wage and price controls for the health care industry, such as those that were imposed and adversely affected health care facilities in the early 1970s.

6. Increased unemployment or other adverse economic conditions, which could increase the proportion of patients who are unable to pay fully for the cost of their care. In addition, increased unemployment caused by a general downturn in the economy of the Obligated Group’s service areas or by the closing of operations of one or more major employers in such service areas may result in a significant change in the demographics of such service areas, such as a reduction in the population.

7. Efforts by taxing authorities to impose or increase taxes related to the property and operations of nonprofit organizations or to cause nonprofit organizations to increase the amount of services provided to indigents to avoid the imposition or increase of such taxes.

8. Adoption of a so-called “flat tax” federal income tax, a reduction in the marginal rates of federal income taxation or replacement of the federal income tax with another form of taxation, any of which might adversely affect the market value of the Series 2016 Bonds.

9. Changes in law or revenue rulings governing the nonprofit or tax-exempt status of charitable corporations such as the Members of the Obligated Group, such that nonprofit corporations, as a condition of maintaining their tax-exempt status, are required to provide increased indigent care at reduced rates or without charge or discontinue services previously provided.

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In the future, other events may adversely affect the operation of the Members of the Obligated Group, as well as other health care facilities, in a manner and to an extent that cannot be determined at this time.

LITIGATION

THE DOUGLAS AUTHORITY

There is no pending or, to the actual knowledge of the Douglas Authority official responsible for signing that certain Bond Purchase Agreement in connection with the sale of the Douglas Authority Bonds, without inquiry or investigation, threatened suit, action or proceeding against the Douglas Authority before any court, arbitrator, administrative agency or other governmental authority that challenges the Douglas Authority’s execution and delivery of the Douglas Authority Bonds, the Douglas Bond Indenture or the Douglas Loan Agreement.

THE SARPY AUTHORITY

There is no pending or, to the actual knowledge of the Sarpy Authority official responsible for signing that certain Bond Purchase Agreement in connection with the sale of the Sarpy Authority Bonds, without inquiry or investigation, threatened suit, action or proceeding against the Sarpy Authority before any court, arbitrator, administrative agency or other governmental authority that challenges the Sarpy Authority’s execution and delivery of the Sarpy Authority Bonds, the Sarpy Bond Indenture or the Sarpy Loan Agreement.

THE OBLIGATED GROUP

There is no litigation pending or, to the knowledge of the Obligated Group Representative, threatened which in any manner questions the right of the Obligated Group to secure the Series 2016 Bonds in accordance with the provisions of the Bond Indentures, the Loan Agreements or the Master Indenture. There is no litigation, proceeding or investigation pending or, to the knowledge of the Obligated Group Representative threatened, against any Member of the Obligated Group, except litigation, proceedings or investigations in which the probable ultimate recoveries and the estimated costs and expenses of defense, in the opinion of management, either will be entirely within the applicable insurance policy limits of such Member of the Obligated Group (subject to applicable deductibles) or will not have a materially adverse effect on the operations or condition, financial or otherwise, of the Obligated Group taken as a whole.

LEGAL MATTERS

Legal matters incident to the authorization and validity of the Series 2016 Bonds are subject to the approval of Kutak Rock LLP, Bond Counsel, whose approving opinion will be delivered with the Series 2016 Bonds. Certain legal matters will be passed on for the Obligated Group by their counsel, Kutak Rock LLP, for the Douglas Authority by Joseph C. Byrne, Esq, for the Sarpy Authority by Adams & Sullivan P.C., L.L.O, and for the Underwriters by their counsel, Chapman and Cutler LLP.

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TAX EXEMPTION

GENERAL

In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2016 Bonds is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described in the preceding sentence assumes the accuracy of certain representations and compliance by the Authorities and the Borrowers with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series 2016 Bonds. Failure to comply with such covenants could cause interest on the Series 2016 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2016 Bonds. The Authorities and the Borrowers have covenanted to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Series 2016 Bonds. Bond Counsel is also of the opinion that, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2016 Bonds is exempt from present Nebraska state income taxation.

Notwithstanding Bond Counsel’s opinion that interest on the Series 2016 Bonds is not a specific preference item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings of certain corporations (i.e. alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation’s earnings and profits under Subchapter C of the Code), and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of such corporations’ adjusted current earnings over their federal alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses).

The Douglas Authority Bonds and the Sarpy Authority Bonds are being sold and issued concurrently. The Douglas Authority Bonds and the Sarpy Authority Bonds will constitute a single issue of bonds for certain federal income tax purposes relating to the exclusion from gross income of interest on the Douglas Authority Bonds and the Sarpy Authority Bonds, respectively. A failure to comply with tax- related covenants as described in the first paragraph under this caption with respect to either of the Douglas Authority Bonds or the Sarpy Authority Bonds may cause interest on all the Series 2016 Bonds to become subject to federal income taxation, possibly from the date of issuance of the Series 2016 Bonds.

The accrual or receipt of interest on the Series 2016 Bonds may otherwise affect the federal income tax liability of the owners of the Series 2016 Bonds. The extent of these other tax consequences will depend upon such owner’s particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Series 2016 Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Series 2016 Bonds.

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BACKUP WITHHOLDING

As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Series 2016 Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments to any beneficial owner who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2016 Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

ORIGINAL ISSUE DISCOUNT

Certain maturities of the Series 2016 Bonds may be sold at a discount from the principal amount payable on such Series 2016 Bonds at maturity (collectively, the “Discount Bonds”). The difference between the initial public offering prices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated in the same manner for federal income tax purposes as interest, as described above.

The amount of original issue discount that is treated as having accrued with respect to such Discount Bond is added to the cost basis of the owner of the Discount Bond in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of such Discount Bond that are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes.

Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days which are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to (a) the product of (i) the yield to maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount that would have been the tax basis of such Discount Bond at the beginning of the particular accrual period if held by the original purchaser, (b) less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis for purposes of the preceding sentence is determined by adding to the initial public offering price on such Discount Bond the sum of the amounts that have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount that would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.

Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond. Subsequent purchasers of Discount Bonds that purchase such Discount Bonds for a price that is higher or lower than the “adjusted issue price” of such Discount Bonds at the time of purchase should consult their tax advisors as to the effect on the accrual of original issue discount.

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ORIGINAL ISSUE PREMIUM

Certain maturities of the Series 2016 Bonds may be sold at a premium from the principal amount payable on such Series 2016 Bonds at maturity (collectively, the “Premium Bonds”). An amount equal to the excess of the issue price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. An initial purchaser of a Premium Bond must amortize any premium over such Premium Bond’s term using constant yield principles, based on the purchaser’s yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, generally by amortizing the premium to the call date, based on the purchaser’s yield to the call date and giving effect to any call premium). As premium is amortized, the amount of the amortization offsets a corresponding amount of interest for the period and the purchaser’s basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser’s basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult with their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond.

CHANGES IN FEDERAL AND STATE TAX LAW

From time to time, there are legislative proposals in the Congress and in the states that; if enacted, could alter or amend the federal and state tax matters referred to under this heading “TAX EXEMPTION” or adversely affect the market value of the Series 2016 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. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2016 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2016 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2016 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2016 Bonds and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

CONTINUING DISCLOSURE AGREEMENT

TNMC, on behalf of itself and the other Members of the Obligated Group, has entered into the Continuing Disclosure Agreement for the benefit of the Bondholders to provide certain information annually and quarterly for each of the first three fiscal quarters and to provide notice of certain events pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the “Rule”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The information to be provided, together with the notices of certain enumerated events, will be filed with the MSRB through the EMMA website of the MSRB. The information to be provided on an annual and quarterly basis, the events which will be noticed on an occurrence basis and the other terms of the Continuing Disclosure Agreement,

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including termination, amendment and remedies, are set forth under “FORM OF CONTINUING DISCLOSURE AGREEMENT” in Appendix E hereto.

Failure by TNMC to comply with the Continuing Disclosure Agreement will not constitute an event of default under the Master Indenture, Bond Indentures or Loan Agreements and Bondholders are limited to the remedies described in the Continuing Disclosure Agreement. See “FORM OF CONTINUING DISCLOSURE AGREEMENT” in Appendix E hereto. Failure by TNMC to comply with the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2016 Bonds in the secondary market. Consequently, any such failure may adversely affect the transferability and liquidity of and the market price for the Series 2016 Bonds.

Within the last five years, the Obligated Group filed the required quarterly and annual information as many as four days late for multiple periods. Management of the Obligated Group has since revised its procedures with respect to its continuing disclosure obligations.

DESCRIPTION OF RATINGS

Standard & Poor’s Rating Services, a Division of the McGraw-Hill Companies, and Fitch, Inc. have each assigned a rating of “AA-” to the Series 2016 Bonds. The ratings and an explanation of their significance may be obtained from the rating agency furnishing such rating. Such ratings reflect only the respective views of the rating agencies.

The Obligated Group has furnished such rating agencies with certain information and materials relating to the Series 2016 Bonds and the Obligated Group that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies, and assumptions by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant or if requested by the Obligated Group for withdrawal. None of the Authorities, the Underwriters or the Obligated Group has undertaken any responsibility to oppose any proposed revision or withdrawal of the ratings of the Series 2016 Bonds. Neither of the Authorities nor the Underwriters has undertaken any responsibility to bring to the attention of the holders of the Series 2016 Bonds any such proposed revision or withdrawal. Any such revision or withdrawal of such ratings could have an adverse effect on the market price for and marketability of the Series 2016 Bonds.

INDEPENDENT AUDITORS

The consolidated financial statements of The Nebraska Medical Center and its affiliates, as of June 30, 2015 and 2014 and for the fiscal years then ended, included in Appendix B-1 to this Official Statement, and the consolidated financial statements of UNMCP as of June 30, 2015 and for the fiscal year then ended, included in Appendix B-2 to this Official Statement, have been audited by KPMG LLP, independent auditors, as stated in their reports thereon.

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FINANCIAL STATEMENTS

The consolidated financial statements of The Nebraska Medical Center included in Appendix B-1 include the assets and liabilities and results of operations of certain affiliates which are not Members of the Obligated Group. In the aggregate, those affiliates accounted for approximately 1.53% of TNMC total consolidated unrestricted revenue and approximately 3.14% of TNMC net assets for the year ended June 30, 2015.

At June 30, 2015, UNMCP had approximately $113.3 million in unrestricted liquid assets that have since been transferred to UNMC Science and Research Fund, a Nebraska nonprofit corporation, on June 30, 2016. See “FINANCIAL INFORMATION - Management Discussion of Obligated Group Pro Forma Financial Information” in Appendix A hereto.

UNDERWRITING

Barclays Capital Inc. and Wells Fargo Securities (collectively, the “Underwriters”), have agreed to purchase the Series 2016 Bonds at a purchase price of $______(representing the aggregate principal amount of the Series 2016 Bonds less Underwriters’ discount of $______, less original issue discount of $______plus original issue premium of $______). Pursuant to each Bond Purchase Agreement, the Obligated Group has agreed to indemnify the Underwriters and the respective Authority against certain liabilities. The Underwriters reserve the right to join with dealers and other underwriters in offering the Series 2016 Bonds to the public. The obligation of the Underwriters to accept delivery of the Series 2016 Bonds is subject to the various conditions of the Purchase Contract.

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriters have from time to time performed and may in the future perform various investment banking services for the Authorities and the Obligated Group for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) 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 time hold long or short positions in such securities and instruments. Such investment and security activities may involve securities and instruments of the Authorities or the Obligated Group.

Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association, which conducts its municipal securities sales, trading and underwriting operations through the Wells Fargo Bank, NA Municipal Products Group, a separately identifiable department of Wells Fargo Bank, National Association, registered with the Securities and Exchange Commission as a municipal securities dealer pursuant to Section 15B(a) of the Securities Exchange Act of 1934.

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Wells Fargo Bank, National Association, acting through its Municipal Products Group (“WFBNA”), one of the underwriters of the Series 2016 Bonds, has entered into an agreement (the “Distribution Agreement”) with its affiliate, Wells Fargo Advisors, LLC (“WFA”), for the distribution of certain municipal securities offerings, including the Series 2016 Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Series 2016 Bonds with WFA. WFBNA also utilizes the distribution capabilities of its affiliate Wells Fargo Securities, LLC (“WFSLLC”), for the distribution of municipal securities offerings, including the Series 2016 Bonds. In connection with utilizing the distribution capabilities of WFSLLC, WFBNA pays a portion of WFSLLC’s expenses based on its municipal securities transactions. WFBNA, WFSLLC, and WFA are each wholly-owned subsidiaries of Wells Fargo & Company.

FINANCIAL ADVISOR

The Obligated Group has retained Hammond Hanlon Camp LLC, acting thought its wholly- owned subsidiary, H2C Securities Inc., as financial advisor in connection with the issuance of the Series 2016 Bonds. Although Hammond Hanlon Camp LLC has assisted in the preparation of this Official Statement, Hammond Hanlon Camp 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.

MISCELLANEOUS

The references herein to the Bond Indentures, the Series 2016 Bonds, the Loan Agreements, the Series 2016 Obligations, the Master Indenture and the Continuing Disclosure Agreement, and other materials are brief outlines of certain provisions thereof. Such outlines do not purport to be complete, and for full and complete statements of such provisions reference is made to such instruments and other materials, executed counterparts of which will be on file at the principal trust office of the Bond Trustee subsequent to the delivery of the Series 2016 Bonds.

All statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between any Member of the Obligated Group or any Authority and the purchasers or owners of any of the Series 2016 Bonds.

The Authorities have not prepared nor made any independent investigation of the information contained in this Official Statement except the information under “INTRODUCTION—The Authorities,” “THE AUTHORITIES,” “LITIGATION—The Douglas Authority” and “LITIGATION—The Sarpy Authority.”

It is anticipated that CUSIP identification numbers will be printed on the Series 2016 Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute a failure or refusal by any purchaser to accept delivery of and pay for the Series 2016 Bonds.

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

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The delivery of this Official Statement has been duly authorized by TNMC, as Obligated Group Representative.

Authorized and approved:

THE NEBRASKA MEDICAL CENTER, as Obligated Group Representative

By: ______Its: ______

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APPENDIX A

NEBRASKA MEDICINE OBLIGATED GROUP

[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

Page

INTRODUCTION AND HISTORY ...... A-1

CORPORATE STRUCTURE ...... A-2 Recent Reorganization ...... A-2 Organization Chart ...... A-3 Corporate Members ...... A-4 Nebraska Medicine ...... A-5 Relationship to University of Nebraska Medical Center ...... A-5

OBLIGATED GROUP MEMBERS ...... A-8 The Nebraska Medical Center ...... A-8 Bellevue Medical Center, LLC ...... A-9 UNMC Physicians ...... A-9

GOVERNANCE AND MANAGEMENT ...... A-10 Board of Directors...... A-10 Conflicts of Interest ...... A-11 Committees ...... A-13 Executive Management ...... A-13

FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS ...... A-15 Annual Fund Transfer to Members ...... A-15 Academic Affiliation Agreement ...... A-15 Other Support Services ...... A-16

OTHER PARTNERSHIPS AND AFFILIATIONS...... A-16 ...... A-16 Nebraska Orthopaedic Services, Inc. and Nebraska Orthopaedic Hospital, LLC ...... A-16 Nebraska Health Network ...... A-17 Enhance Health Network ...... A-17 Shenandoah Memorial Hospital ...... A-17 Community Hospital Association ...... A-17

AWARDS AND RECOGNITIONS ...... A-17

FACILITIES ...... A-18 Nebraska Medical Center Campus ...... A-18 Village Pointe Facilities ...... A-21 Bellevue Medical Center ...... A-22 Other Clinical Facilities ...... A-22

THE PROJECTS ...... A-22 Lauritzen Outpatient Center ...... A-22

Equipping of Cancer Center and Other Facilities at Nebraska Medical Center Campus ...... A-22 Village Pointe Outpatient Center ...... A-23 Bellevue Medical Center ...... A-23

SERVICES ...... A-24 Comprehensive List of Services ...... A-24 Key Specialty Services ...... A-25

LICENSES, ACCREDITATION, CERTIFICATIONS AND MEMBERSHIPS ...... A-26

MEDICAL STAFF ...... A-27 Active Medical Staff ...... A-27

EMPLOYEE RELATIONS ...... A-29 Employees and Turnover ...... A-29 Union Activity ...... A-29

SERVICE AREA AND COMPETITION ...... A-30 Service Area ...... A-30 Inpatient Origination ...... A-31 Population of Service Area ...... A-31 City of Omaha Economic Indicators ...... A-31 Competition ...... A-33

PAYOR ANALYSIS AND UTILIZATION ...... A-33 Payor Mix ...... A-33 Historical Hospital Utilization ...... A-34

FINANCIAL INFORMATION ...... A-34 Historical Financial Information ...... A-34 Management Discussion of Historical Financial Results...... A-37 Pro Forma Financial Information ...... A-38 Management Discussion of Obligated Group Pro Forma Financial Information ...... A-41 Accounting Policies ...... A-44 Debt Service Coverage ...... A-46 Historical and Pro Forma Capitalization ...... A-46 Days Cash on Hand ...... A-47

INSURANCE ...... A-49

LITIGATION ...... A-49

WEBSITE INFORMATION ...... A-50

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APPENDIX A

NEBRASKA MEDICINE OBLIGATED GROUP

The Members of the Obligated Group under the Master Indenture are The Nebraska Medical Center (“TNMC”), Bellevue Medical Center, LLC (“BMC”) and UNMC Physicians (“UNMCP”), which are the only entities obligated to make payments on the Obligations. Each such Member of the Obligated Group is, and since late 2014 has been, doing business under the trade name Nebraska Medicine.

INTRODUCTION AND HISTORY

TNMC, BMC and UNMCP (collectively, the “Members of the Obligated Group” or the “Obligated Group”) comprise an integrated clinical health care operation doing business as Nebraska Medicine. As of July 1, 2016, a multi-year process for the integration of the Members of the Obligated Group and the reorganization of their governance was formalized. As a part of the governance reorganization, there was created Nebraska Medicine, a Nebraska nonprofit corporation (the “Parent”). The Parent has not yet received federal tax exempt status as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The Parent was created pursuant to the terms of a System Integration Agreement (see the caption “CORPORATE STRUCTURE—Recent Reorganization” below in this Appendix A) dated as of July 1, 2016 (the “SIA”) by and among the Parent, TNMC, The Board of Regents of the University of Nebraska, a corporate body politic of the State of Nebraska (the “Board of Regents”), Clarkson Regional Health Services, Inc., a Nebraska nonprofit corporation (“CRHS”) and UNMCP to coordinate the functions of the Members of the Obligated Group. References herein to “Nebraska Medicine” refer to the combined operations of the Obligated Group, their affiliates and the Parent. For a description of the change in corporate members of TNMC and UNMCP on the Exemption Approval Date (as hereafter defined) see the caption “CORPORATE STRUCTURE—Recent Reorganization—System Integration Agreement” below in this Appendix A.

The Obligated Group and one or more of the predecessors to the operations of the Obligated Group have been providing services in Omaha, Nebraska for more than a century. TNMC was established in 1997 as a result of the combination of Bishop Clarkson Memorial Hospital, founded in 1869 and University Hospital, founded in 1917. UNMCP was established in 1995. BMC was formed in 2008. In May 2014, BMC became wholly owned by TNMC. Effective July 1, 2014, TNMC, BMC and UNMCP financially and clinically integrated their operations under common management and pursuant to contractual arrangements to form the clinical enterprise now known as Nebraska Medicine.

The Parent and the Obligated Group are a clinically integrated health system that (as of July 1, 2016) employs more than 7,800 individuals, including 507 physicians, with 661 licensed hospital beds (577 of which were in service as of June 30, 2016) and 45 ambulatory clinics at 21 locations, in Omaha, Nebraska and the surrounding area. The Obligated Group generated more than $1 billion in revenue in the fiscal year ended June 30, 2016. The Members of the Obligated Group have provided care for patients from all 50 states and 53 countries.

Nebraska Medicine is known for leadership, distinction and innovation in a number of clinical specialties, including solid , bone marrow transplantation, cancer services, heart care, trauma, neurological sciences, and infectious disease/bioterrorism. Nebraska Medicine is the only provider of heart, lung, liver, small bowel, kidney and pancreas transplants in Nebraska, and is the primary provider of bone marrow transplants in Nebraska. Nebraska Medicine

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operates a 24/7 comprehensive for adults and the only 24/7 comprehensive trauma center for children in Omaha, Nebraska. In addition, Nebraska Medicine is the only clinical cancer center in its service area certified by the National Cancer Institute and maintains one of only two burn centers in its service area.

Together with the University of Nebraska Medical Center (“UNMC”) (see the caption “CORPORATE STRUCTURE—Relationship to University of Nebraska Medical Center” below in this Appendix A), the Parent and the Members of the Obligated group operate an academic medical center based in Omaha, Nebraska.

CORPORATE STRUCTURE

Recent Reorganization

System Integration Agreement. The SIA was entered into to provide for the creation of the Parent (see the caption “Nebraska Medicine” below), to formalize the integration and common management of the financial and clinical operations of Members of the Obligated Group and to reorganize the governance of such entities under the ultimate authority of the Board of Regents and CRHS.

The intended benefits of integration include unified governance and strategic vision for the clinical enterprise, an aligned focus on patient experience and quality of care, a single information technology platform and system (enabling patients to receive one statement inclusive of liability for services provided at or by TNMC, BMC and UNMCP) consolidated financial reporting, single contracting for managed care, expense reductions in managerial and administrative functions and an improved supply chain.

The SIA requires that UNMCP’s articles of incorporation initially named TNMC as UNMCP’s sole corporate member. Upon the receipt of a favorable determination of the tax-exempt status of the Parent under Section 501(c)(3) of the Code (referred as the “Exemption Approval Date”), the Parent will replace TNMC as UNMCP’s sole corporate member. Also upon the Exemption Approval Date, TNMC will amend its articles of incorporation and bylaws to provide that the Parent will replace the Board of Regents and CRHS as TNMC’s sole member. See the caption “Organization Chart” below. Further, the current TNMC and UNMCP articles of incorporation and bylaws provide that the members of each entity’s Board of Directors will be the same as the members of the Parent’s Board of Directors.

For a summary of certain terms of the SIA, see Appendix D to the Official Statement.

Joint Operating Agreement and Lease Agreement. In connection with the clinical integration and governance reorganization, the Board of Regents, CRHS, the Parent and TNMC entered into a Successor Joint Operating Agreement dated as of July 1, 2016 (as further defined in Appendix D, the “SJOA”) to provide for, among other things, the ongoing joint operation of the facilities of TNMC that have been operated jointly by TNMC since 1997 under a prior joint operating agreement and amendments. In addition, the prior lease agreement with respect to such facilities owned by the Board of Regents or CRHS and operated by TNMC was replaced with an Amendment No. 5 to Lease Agreement dated as of July 1, 2016 (as further defined in Appendix D, the “Lease Agreement”) by the Board of Regents and CRHS, as lessors, and TNMC, as lessee. The term of the Lease Agreement is to October 1, 2062. The Lease Agreement may be terminated prior to the expiration of its term upon certain events, including upon termination of the SJOA or a successor joint operating agreement as provided in the Lease Agreement, as described at the caption “LEASE AGREEMENT—Cancellation of Lease Term” in Appendix D to the Official Statement.

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The SJOA provides that in the event that the annual Fund Transfers to the Board of Regents and CRHS (described at the caption “FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS—Annual Fund Transfer to Members” in this Appendix A) are not paid for more than two fiscal years, under certain circumstances involving a corrective action plan and notices to the parties as provided in the SJOA, either the Board of Regents or CRHS may withdraw as a corporate member and terminate the SJOA. For a description of the provisions related to withdrawal, see the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Term and Termination—Corrective Action Plan upon Failure to Deliver Fund Transfers; Withdrawal of Member” in Appendix D to the Official Statement.

The Lease Agreement does not require rental payments to be paid currently by TNMC, but provides for certain rent payments to begin in the event that CRHS withdraws as a corporate member and terminates the SJOA as described above. The Lease Agreement provides for a process to determine fair market rental value and implement the payment of monthly rent by TNMC to CRHS. Because the facilities of the former Bishop Clarkson Memorial Hospital and related properties are a substantial portion of the hospital facilities operated by TNMC, the amount of any such rent could be sufficient to materially adversely affect the financial condition of TNMC. See the caption “LEASE AGREEMENT—Rent” in Appendix D to the Official Statement.

For a summary of certain terms of the SJOA and the Lease Agreement, see Appendix D to the Official Statement.

Organization Chart

The chart below depicts the organizational relationship of the Parent and the Obligated Group effective as of July 1, 2016.

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Board of Regents of the 50% Member 50% Member Clarkson Regional University of Nebraska Health Services

Nebraska Medicine

The Nebraska Medical Center UNMC Physicians

NHS Nebraska Bellevue Clarkson Orthopaedic Health Medical College Services, Inc. Partners, Inc. Center, LLC

46.45% Owner 50% Owner

Nebraska Nebraska Obligated Group Members Orthopaedic Health Hospital Network Non-Obligated Group Members

1 Prior to the Exemption Approval Date (as defined herein), the Board of Regents and Clarkson Regional Health Services, rather than Nebraska Medicine, will be the corporate members of The Nebraska Medical Center. 2 Prior to the Exemption Approval Date, The Nebraska Medical Center, rather than Nebraska Medicine, will be the sole corporate member of UNMC Physicians.

Corporate Members

Board of Regents. The Board of Regents, a corporate body politic, is a one of two corporate members of the Parent. The Board of Regents does business, in part, through UNMC, an administrative unit of the Board of Regents. In addition to UNMC, the Board of Regents is the governing body for three other campuses of the University of Nebraska located in Omaha, Lincoln and Kearney, Nebraska. Members of the board include eight regents elected by public vote to serve terms of six years from districts across the State of Nebraska and four student regents. The Board of Regents selects professors and officers of the University of Nebraska, including the chancellor of UNMC.

UNMC operates seven colleges, including a medical school affiliated with TNMC and UNMCP, utilizing academic and research facilities that are located on or adjacent to the campus of the Nebraska Medical Center clinical facilities in mid-town Omaha, Nebraska. UNMC specializes in programs of health professions education, patient care, and research. Its professional schools include the Colleges of Medicine (“COM”), Nursing, and Dentistry and the School of Allied Health Professions. As of May 31, 2016, UNMC maintained a faculty of approximately 1,323 full-time-equivalent faculty members and a student body of approximately 3,790 students.

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The Board of Regents is the owner of the facilities comprising the former University Hospital, which since 1997 have been leased to TNMC and operated by TNMC pursuant to the SJOA as described at the caption “Recent Reorganization—Joint Operating Agreement and Lease Agreement” above.

The Board of Regents is not a Member of the Obligated Group and is not a party to or obligated pursuant to the Loan Agreements or the Master Indenture. The Board of Regents is not in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds.

CRHS. CRHS, a Nebraska nonprofit corporation, is the other corporate member of the Parent. Prior to the merger of three related nonprofit corporations in 2001, CRHS was known as Bishop Clarkson Memorial Hospital. CRHS has from time to time supported charitable, health care and educational endeavors, including for the benefit of TNMC and Clarkson College (see the caption “OTHER PARTNERSHIPS AND AFFILIATIONS—Clarkson College” in this Appendix A).

CRHS is the owner of the former Bishop Clarkson Memorial Hospital facilities, which since 1997 have been leased to TNMC and operated by TNMC pursuant to the SJOA as described at the caption “Recent Reorganization—Joint Operating Agreement and Lease Agreement” above.

CRHS is not a Member of the Obligated Group and is not a party to or obligated pursuant to the Loan Agreements or the Master Indenture. CRHS is not in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds.

Nebraska Medicine

Nebraska Medicine, a Nebraska nonprofit corporation (the “Parent”), was organized on June 22, 2016 to facilitate and support the integration of UNMCP and TNMC and certain other activities of the Board of Regents and CRHS. The Parent has not yet received federal tax exempt status as an organization described in Section 501(c)(3) of the Code. The incorporation of the Parent was part of reorganizing the prior relationship between the Board of Regents and CRHS with respect to governance of the Members of the Obligated Group as described under the caption “Recent Reorganization” above, and helped to formalize the integration of the clinical enterprise health care system of the Members of the Obligated Group doing business for nearly two years as Nebraska Medicine, all for the purpose of promoting the health of the community through the provision of hospital and clinical care and for supporting medical education and research.

Following the Exemption Approval Date, the Parent will effectively serve as the parent company for the clinical operations of the entities it controls, which will initially consist of the Members of the Obligated Group and certain subsidiary entities which are not Members of the Obligated Group. Prior to the Exemption Approval Date, the Parent is not expected to be funded with significant assets other than control of its subsidiary entities, and stand-alone operations are expected to consist of assisting in the coordination of common governance and management for the Members of the Obligated Group.

The Parent is not a Member of the Obligated Group and is not a party to or obligated pursuant to the Loan Agreements or the Master Indenture. The Parent is not in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds.

Relationship to University of Nebraska Medical Center

Overview. The Obligated Group’s hospital facilities are the primary acute-care teaching medical center for UNMC. The Obligated Group has approved a common mission and vision statement with UNMC and the Obligated Group and UNMC utilize a unified brand including a shared licensed

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trademark. Since 1997, more than $250 million of philanthropic funds from The University of Nebraska Foundation, an organization independent from the Board of Regents, has been used to support the construction of buildings used by the Members of the Obligated Group. Furthermore, the bylaws of TNMC and UNMCP stipulate that, unless determined otherwise by super-majority vote of their governing boards, the Chancellor of UNMC will be the ex officio Chairperson of the governing boards of TNMC and UNMCP, as described at the caption “GOVERNANCE AND MANAGEMENT—Board of Directors” in this Appendix A.

UNMC is not a Member of the Obligated Group and is not a party to or obligated pursuant to the Loan Agreements or the Master Indenture. UNMC is not in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds. Information regarding UNMC is included in this Appendix A to provide a summary description of the academic affiliation and certain aspects of the resulting operational relationship between UNMC and the Members of the Obligated Group, as described herein.

University of Nebraska Medical Center. UNMC is an academic health sciences center governed by the Board of Regents and one of four campuses of the University of Nebraska. It is the State’s only public health sciences university. UNMC traces its roots to 1881 when the State’s first medical college began. Today, its professional schools include the College of Medicine, College of Nursing, College of Dentistry, College of Pharmacy, College of Public Health, and College of Allied Health Professions as well as two institutes. Graduate studies are offered at UNMC, and degrees are granted by the system- wide Graduate College. In its recently released 2017 ranking, U.S. News and World Report ranked UNMC’s College of Medicine’s primary care program 5th nationally (out of 153 medical schools), its physician assistant program tied for 9th, its physical therapy program tied for 28th, its pharmacy program tied for 25th, its public health program tied for 39th, its nursing program tied for 46th and its research tied for 63rd.

UNMC maintains a public website on which it periodically posts certain information of the type included in this Appendix A (available at: http://www.unmc.edu/). None of the information included on UNMC’s website is incorporated by reference into the Official Statement. The Authorities, the Members of the Obligated Group and the Underwriters take no responsibility for the information contained on such website.

Academic Affiliation between UNMC and Nebraska Medicine. Key aspects of the relationship between UNMC, the Parent and TNMC are set forth in the AAA (as defined under the caption “FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS—Academic Affiliation Agreement” in this Appendix A). The AAA provides for, among other things, a common vision of the three organizations and their commitment to promote the educational and research missions for UNMC Faculty, Students, and House Officers in the Parent, TNMC and its associated regional partnerships and networks. The Parent and TNMC are committed to maintaining its system, including hospitals, and other clinical sites as an environment supportive of the academic mission and programs of UNMC. TNMC and its affiliates and subsidiaries provide the primary teaching sites for UNMC’s educational programs. Under the AAA, UNMC, the Parent, and TNMC agree to maintain an environment supportive of discovery and research, which includes clinical research, translational research, basic research, and health outcomes studies. References to TNMC as a party to the AAA shall mean the Parent following the Exemption Approval Date (see the caption “CORPORATE STRUCTURE—Recent Reorganization—System Integration Agreement” in this Appendix A).

Pursuant to the AAA, and as further described at the caption “FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS—Academic Affiliation Agreement” in this Appendix A, TNMC is expected to make annual fund transfers to UNMC to promote the educational, research and

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administrative activities of UNMC in furtherance of and as investments in the academic and research missions. TNMC provides customary funding for the allowable costs of accredited and non-accredited house officer training programs approved by the Graduate Medical Education Committee and funds the Dean’s Development and Innovation Fund (the “DDIF”), elements of which include an academic growth fund, academic support expenses, research expenses and faculty educational allowances. For amounts to be funded pursuant to the AAA, the AAA provides for a formal budget development process involving both the Parent and UNMC that will take into consideration the Parent’s financial targets (see the caption “ACADEMIC AFFILIATION AGREEMENT—Financial Arrangement” in Appendix D to the Official Statement).

Common Campus and Shared Services. TNMC’s facilities and UNMC’s main campus facilities are co-located on a campus consisting of clinical, research, educational, administrative and support facilities, as described at the caption “FACILITIES—Nebraska Medical Center Campus” in this Appendix A. For a description of the lease of certain facilities by TNMC from the Board of Regents, see the caption “CORPORATE STRUCTURE—Recent Reorganization—Joint Operating Agreement and Lease Agreement” above in this Appendix A. As such, the organizations have agreements in place related to such matters as utilities and contracted services, such as information technology and security as discussed at the caption “FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS— Other Support Services” in this Appendix A.

The Fred and Pamela Buffett Cancer Center (the “FPBCC”), scheduled to open in 2017, is being designed and constructed to allow for the co-location of both clinical and research activities. The FPBCC’s construction is estimated to cost $323 million, the largest project ever on the Nebraska Medicine/UNMC campus. Sources of funds for the cost of the FPBCC include $90 million from the State of Nebraska, the City of Omaha and Douglas County and certain private charitable contributions through the University of Nebraska Foundation, making this project the largest private public partnership in campus history. The FPBCC clinical portion, to be known as the C.L. Werner Cancer Hospital, will be leased by the Board of Regents to TNMC pursuant to a Comprehensive Cancer Center Lease Agreement dated as of March 26, 2014 (the “Cancer Center Lease”), between the Board of Regents, as landlord, and TNMC, as tenant, in exchange for lease payments in amounts tied to debt service on certain bonds issued by the University of Nebraska Facilities Corporation, including bonds issued in anticipation of the receipt of pledged charitable contributions.

Pursuant to the Cancer Center Lease, TNMC will make rent payments to the Board of Regents in an amount equal to debt service on bonds issued by The University of Nebraska Facilities Corporation (the “UNFC”) as follows: (i) interest-only on the $65,965,000 principal amount UNMC Cancer Center Bonds, Series 2014A issued by the UNFC on April 15, 2014 with a final maturity of February 15, 2024, which bonds were issued in anticipation of the receipt by the Board of Regents of proceeds of charitable contributions pledged for the FBPCC, and (ii) principal and interest on the $35,280,000 principal amount UNMC Cancer Center Bonds, Series 2016 issued by the UNFC on January 28, 2016 with a final maturity of February 15, 2031. TNMC will also pay operating and maintenance costs with respect to the leased space and certain common areas in the building. The term of the Cancer Center Lease is 40 years from its date, with an automatic 40-year extension of the term if the SJOA or a successor joint operating agreement is in effect as provided in the Cancer Center Lease. The Cancer Center Lease may be terminated prior to the expiration of its term (i) upon certain events resulting in damage or destruction of the leased facility or (ii) upon the termination of the SJOA or a successor joint operating agreement as provided in the Cancer Center Lease. TNMC plans to amend the term of the Cancer Center Lease to 29 years. If the term of the Cancer Center Lease is not amended, TNMC’s obligations thereunder may be treated as debt. See the caption “FINANCIAL INFORMATION—Accounting Policies” in this Appendix A.

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UNMC maintains a public website on which it periodically posts certain information regarding the FBPCC (available at: http://buffettcancercenter.com/). None of the information included on the FBPCC website is incorporated by reference into the Official Statement. The Authorities, the Members of the Obligated Group and the Underwriters take no responsibility for the information contained on such website.

Research. As provided in the AAA, a Clinical Research Center (the “CRC”) will be maintained as a joint enterprise of UNMC, TNMC and, after the Exemption Approval Date, the Parent, to conduct and oversee all clinical research performed at the Obligated Group’s facilities. The Director of the CRC must have a faculty appointment and be approved by TNMC, and will be designated by and report to the Associate Vice Chancellor for Clinical Research of UNMC, who will also serve as the Vice President of Clinical Research. The AAA also provides that UNMC and TNMC will use a Joint Institutional Review Board to the extent permitted by law, and TNMC will appoint a coordinator to facilitate the submission of research protocols across all sites and services within TNMC.

System Master Facility Planning. In partnership with UNMC, the Obligated Group in 2015 launched the development of a comprehensive master facilities plan. The objective includes all space needs for both the Parent and the university (specifically, administration, acute care, ambulatory, education, faculty, research and outreach) and a plan that is transformational, technology-rich, flexible and accommodates strategic growth for ten years. Guiding principles include: enhancing the experience for all; creating adaptable and expandable environments; improving efficiency and value; supporting the clinical, education, research and outreach missions; and incorporating strategic deliverables/commitments.

OBLIGATED GROUP MEMBERS

The Nebraska Medical Center

TNMC is a Nebraska nonprofit corporation and an organization described in Section 501(c)(3) of the Code, doing business as Nebraska Medicine. The Board of Regents and CRHS are the two corporate members of TNMC, but as described above under “CORPORATE STRUCTURE—Recent Reorganization,” following the Exemption Approval Date, the Parent will be the sole member of TNMC.

TNMC operates a 606 licensed bed (519 of which were in service as of June 30, 2016) acute-care hospital and clinical health care facility in Omaha, Nebraska (the “Nebraska Medical Center Campus”) pursuant to the terms of the SJOA. The Nebraska Medical Center Campus is the primary teaching hospital for UNMC. In addition, TNMC operates clinics primarily around the Omaha metropolitan area. TNMC also operates a clinic in Grand Island, Nebraska and manages the student health center on the University of Nebraska-Lincoln campus in Lincoln, Nebraska.

TNMC was formed in 1997 through the combination of the former Bishop Clarkson Memorial Hospital (previously operated by CRHS) and the former University Hospital (previously owned by the Board of Regents) and operated by UNMC) located on adjacent campuses that were combined into a single campus by the construction of the Hixson Lied Center. See “FACILITIES—Nebraska Medical Center Campus” in this Appendix A. TNMC operates pursuant to the SJOA described at the caption “CORPORATE STRUCTURE—Recent Reorganization—Joint Operating Agreement and Lease Agreement” above in this Appendix A.

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Bellevue Medical Center, LLC

BMC is a single-member Nebraska limited liability company owned by TNMC and is doing business as Nebraska Medicine. The Bellevue Medical Center (defined below) opened in 2010. The members of BMC initially included TNMC and multiple physicians and physician groups, including UNMCP. TNMC acquired 100% membership in BMC as of May 2014.

BMC operates an acute-care hospital and related facilities, including medical office facilities, in Bellevue, Nebraska (the “Bellevue Medical Center”), with 55 licensed beds (all of which were in service as of June 30, 2016). Bellevue Medical Center is located approximately 10 miles south of TNMC’s main Nebraska Medical Center campus.

UNMC Physicians

UNMCP is a Nebraska nonprofit corporation and an organization described in Section 501(c)(3) of the Code, doing business as Nebraska Medicine. As of June 30, 2016, UNMCP employs approximately 500 physicians and other providers in more than 100 specialties and subspecialties. TNMC is the sole member of UNMCP, but as described above under “CORPORATE STRUCTURE— Recent Reorganization,” following the Exemption Approval Date, the Parent will be the sole member of UNMCP.

UNMCP was formed by the Board of Regents in 1995 to serve as the “faculty practice plan” of UNMC. UNMCP provides health care services through the professional practices of physicians and other health professionals employed by, or contracted to, UNMCP. Each of the physicians and other advanced practice providers employed by UNMCP hold faculty appointments at UNMC.

In July 2009, approximately 55 physicians formerly employed by UNMCP moved to and created a pediatric practice plan, Children’s Specialty Physicians, an affiliation between Children’s Hospital & Medical Center and UNMC. The physicians employed by Children’s Specialty Physicians are members of UNMC’s medical service plan, but are not employees of UNMCP. Children’s Specialty Physicians is not a Member of the Obligated Group and is not a party to or obligated pursuant to the Loan Agreements or the Master Indenture. Children’s Specialty Physicians is not in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds.

UNMCP historically consisted of clinical departments, responsible for the delivery of medical care to patients, and administrative departments, responsible for administrative services overseeing quality, risk, clinical operations, regulatory compliance, human resource management, financial oversight, and the billing, collecting, and distribution of medical service fees generated by member clinicians through clinical activities. For the fiscal years ended June 30, 2015 and 2016, an initial step in financially and operationally integrating the Obligated Group’s health care clinical enterprise operating as Nebraska Medicine involved transferring management of those administrative functions to TNMC, including cash collections, patient billings, accounts payable and other support functions. As of July 1, 2016, UNMCP continues to actively employ faculty physicians, provide clinical services to patients of the Obligated Group, and to support educational research and service programs of UNMC. The Parent, initially through TNMC, will, upon the Exemption Approval Date, assume the administrative support services and management necessary to efficiently deliver professional health care services at the Obligated Group’s facilities.

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GOVERNANCE AND MANAGEMENT

Board of Directors

The Board of Directors of the Parent also serves as the governing board for each of the Members of the Obligated Group.

The Board of Directors of the Parent, TNMC and UNMCP consists of fifteen Directors, comprised of eleven voting Directors (subject to the limitations on the voting rights of the Chairperson set forth in the bylaws of the Parent) and four nonvoting Directors. Not less than four (4) of the voting Directors are required to be physicians, which physicians are not required to be members of the medical staff of the entities affiliated with the Parent (the “Physician Directors”). The individuals serving as (i) Chief Executive Officer of the Parent, (ii) the Dean of the College of Medicine of UNMC, (iii) the Chief of Staff of the TNMC Medical Staff, and (iv) the Chief Nursing Officer of TNMC are ex officio nonvoting Directors. The Chancellor of UNMC is an ex officio voting Director (subject to the limitations on the voting rights of the Chairperson set forth in the bylaws of the Parent) and will initially be the Chairperson of the Board of Directors of the Parent, TNMC and UNMCP.

The bylaws of the Parent, TNMC and UNMCP each provide that its board shall consult with the President of the University of Nebraska with respect to any future Chancellor of UNMC, with the goal that the appointee, as Chancellor, will also be appointed Chairperson of the boards of TNMC and UNMCP. The boards will interview final candidates for the position of Chancellor of UNMC, and upon a super-majority vote of 70%, the boards will confidentially advise the President of the University of Nebraska as to whether each such candidate would be acceptable to serve as Chairperson. If appointed by the President of the University of Nebraska as Chancellor of UNMC, any such candidate deemed acceptable by a super-majority vote of 70% would assume the position of Chairperson. Any other candidate selected by the President of the University of Nebraska as Chancellor of UNMC would not assume the position of Chairperson, and the boards would select a Chairperson from one of the other Directors.

The Board of Managers of BMC has delegated full authority to the Board of Directors of TNMC, its single member.

The terms of one-half of the initial Directors expire on December 31, 2018 and the terms of other one-half of the initial Directors expire on December 31, 2019. Terms will be assigned to each Director by vote at a Board of Directors meeting. Subsequent appointed Directors will serve four-year terms. For a description of the process for nominating and electing the Board of Directors, see the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Organization, Governance and Powers of Nebraska Medicine—Board of Directors” in Appendix D to the Official Statement.

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The current Members of the Board of Directors of the Parent, TNMC and UNMCP and their principal occupations are as follows:

Name (Title) Business Affiliation (Title)

Jeffrey P. Gold, MD, Chancellor of UNMC Chairman

Mogens C. Bay, Vice Chair Chairman and Chief Executive Officer, Valmont Industries, Inc.

Louis W. Burgher MD, PhD† President, Clarkson College

James T. Canedy, MD† President, Clarkson Regional Health Services

Lance M. Fritz Chairman, President, Chief Executive Officer Union Pacific

Bruce E. Grewcock, Treasurer President and Chief Executive Officer, Peter Kiewit Sons, Inc.

Nancy Keegan† Retired Investor and Investment Banker

James Linder, MD, Secretary Chief Strategist, University of Nebraska

James E. McClurg, PhD President, Technical Development Resources Company

Debra J. Romberger, MD Chair, Internal Medicine, UNMC College of Medicine

Carl V. Smith, MD Senior Associate Dean, UNMC College of Medicine and Chair, Obstetrics and Gynecology

Bradley E. Britigan, MD* Dean, UNMC College of Medicine

Daniel J. DeBehnke, MD* Chief Executive Officer, Nebraska Medicine

Sue Nuss, PhD* Chief Nursing Officer, Nebraska Medicine

George Greene, MD* Chief of Medical Staff, TNMC

* Ex officio; non-voting. † Serves on the audit committee.

Conflicts of Interest

The bylaws of TNMC and UNMCP each contain a conflict of interest provision providing that no contract or transaction entered in to by TNMC or UNMCP shall be rendered invalid by the fact that a Director or officer of TNMC or UNMCP, respectively, holds a direct or indirect pecuniary interest in such

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contract or transaction or may otherwise have an interest which is or might be adverse to the interests of TNMC or UNMCP, respectively, if at the meeting of the Board of Directors making, authorizing or confirming such contract or transaction:

(i) the interested Director or officer discloses (or causes to be disclosed) the material facts of his or her interest in such contract or transaction and is recused from voting with respect to such contract or transaction, and

(ii) such contract or transaction is adopted or ratified by a majority of all of the voting Directors who are not so interested after first determining in good faith that (i) such contract or transaction is in the best interests of TNMC or UNMCP, respectively, notwithstanding the adverse or potentially adverse interests of any interested Director or officer, and (ii) such contract or transaction was not entered into solely because of the position of such interested Director or officer with TNMC or UNMCP, respectively.

Members of the Board of Directors of TNMC or UNMCP have disclosed the following relationships which may involve a pecuniary interest in contracts with TNMC or UNMCP:

• Bruce E. Grewcock is also Chief Executive Officer and President of Kiewit Corporation, which provides various construction services to the Obligated Group, including with respect to the Projects.

• Mogens C. Bay also serves as a member of the board of directors for Kiewit Corporation, which provides various construction services to the Obligated Group, including with respect to the Projects.

• Louis W. Burgher MD, PhD is employed by TNMC.

• James T. Canedy, MD is employed by CRHS, a Corporate Member of the Parent, serves as the president of SimplyWell LLC, which provides various services to the Obligated Group and, as a physician, also owns part of Nebraska Orthopaedic Hospital, LLC.

• James T. Canedy, MD and Carl V. Smith, MD are board members of Nebraska Orthopaedic Hospital, LLC.

• Jeffrey P. Gold, MD, James Linder, MD, Debra J. Romberger, MD and Carl V. Smith, MD are employed by the Board of Regents of the University of Nebraska, a Corporate Member of the Parent.

The Members of the Obligated Group have also adopted a conflict of interest policy (the “Conflict of Interest Policy”). The purpose of the Conflict of Interest Policy is to protect the Members of the Obligated Group when contemplating entering into a transaction or arrangement that might benefit the private interests of members of the Board of Directors, officers, employees, members of committees, medical directors, contracted vendors and their employees, and consultants of the Obligated Group. The policy states that an interested person, defined as any covered person that has or who has a direct or indirect financial interest or may be in a position to make choices, influence choices, or participate in decision making, must disclose the existence of a conflict of interest to the Board Chairman or Chief Executive Officer, who may escalate the matter to the Board or appropriate committee of the Board. Prior to a decision being made regarding whether a conflict of interest exists, the interested person shall be given the opportunity to disclose all material facts to the Board or members of committees with Board delegated powers considering the proposed transaction or arrangement. Agenda items requiring decisions

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which may trigger a conflict of interest by the Board or committee shall be noted in advance of the meeting. The policy also states that the interested person may make a presentation to the Board or committee, but afterwards he or she will leave the meeting during the discussion of and the vote on the transaction or arrangement involving the potential conflict of interest. Violation of the conflict of interest policy will result in disciplinary and corrective action, including, if appropriate, removal of the person from his or her office or position.

Committees

Pursuant to the bylaws of the Parent, the Board of Directors may designate one or more committees, including a Nominating Committee, an Audit Committee, a Compensation Committee, a Finance Committee, a Development Committee and a Quality Committee, made up of two or more Directors; provided, however, that such committees will not include an Executive Committee. The Directors serving as Chair and Vice Chair for each committee will be voted on at the August 2016 Board of Directors meeting.

Executive Management

The principal executive management personnel of the Parent and each Member of the Obligated Group include the following:

Daniel J. DeBehnke, M.D., MBA, Chief Executive Officer. Commencing August 1, 2016, Age 56. Dr. DeBehnke previously served as CEO of Medical College Physicians and as senior associate dean for clinical affairs – adult practice and professor of emergency medicine at the Medical College of Wisconsin. Dr. DeBehnke was selected to serve as the Chief Executive Officer after a thorough national search as he had the qualifications of both a detailed administrative executive and the physician training and background allowing him to deliver leadership at all levels of the organization. Dr. DeBehnke holds a registered technologists degree from Mercy Center’s School of Radiologic Technology; a Bachelor of Science Degree from the University of Wisconsin at Oshkosh and a medical degree from University of Wisconsin at Madison. Dr. DeBehnke completed his residency training in emergency medicine from Wright State University Integrated Residency in Dayton, Ohio, serving as chief resident during his tenure. Following his medical training, Dr. DeBehnke received a Master’s Degree in Business Administration from the University of Massachusetts-Amherst and Eisenberg School of Management in Amherst, Massachusetts.

Michael Ash, M.D., Chief Transformation Officer. Joined 2014, Age 44. Dr. Ash became the Chief Transformation Officer in 2014. He graduated in 1994 with a Bachelor of Science Degree in pharmacy and earned his medical degree from the University of Missouri at Kansas City in 1998. Following an internal medicine residency at Baylor College of Medicine in Houston, he joined an internal medicine practice. In 2003, he joined Cerner in Kansas City, Missouri, working in health information technology.

Dennis Bierle, Chief Operating Officer of System Wide Clinical Operations. Joined 2008, Age 54. Mr. Bierle assumed the role of Chief Operating Officer of System Wide Clinical Operations in the spring of 2015. He joined UNMCP in 2008 as Chief Operating Officer. Prior to UNMCP, Mr. Bierle served an executive leadership role as Vice President of Operations at Sanford Health. He has experience leading clinic operations through installation of the EPIC electronic health record system at both Nebraska Medicine and Sanford Health. Mr. Bierle also has leadership experience with Cigna HealthCare as the Director of the National Appeals Unit. Mr. Bierle completed a Bachelor of Science Degree in Business Administration from Dakota State University in Madison, South Dakota and has a Master’s Degree in Healthcare Administration from Bellevue University in Bellevue, Nebraska.

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Chad Brough, Chief Experience Officer. Joined 2016, Age 45. Mr. Brough is an executive leader with experience in operations and patient, physician, and employee satisfaction. Mr. Brough holds a Bachelor of Arts Degree in Business Administration from Hanover College in Hanover, Indiana and a Master’s Degree in Business Administration from Indiana University. Mr. Brough has experience as a senior healthcare leader in patient experience, workforce development, management/operations, quality improvement and organizational development.

Stephanie Daubert, Chief Financial Officer. Joined 1988, Age 47. Ms. Daubert joined the predecessors to Nebraska Medicine 27 years ago. She was appointed Chief Financial Officer in January 2014. Prior to her appointment, Ms. Daubert served as the controller of TNMC from 2002 to 2013 and previously in various positions ranging from patient care to accounting and finance. In 1992, Ms. Daubert received her Bachelor of Arts and Science Degree in Accounting from the University of Nebraska at Omaha. She is in the process of completing a Master’s Degree in Business Administration at Creighton University, expected in December 2016.

Harris Frankel, M.D., Chief Medical Officer and Senior Vice President of Medical Affairs. Joined 2011, Age 55. Dr. Frankel has spent more than 20 years in private practice before transitioning in 2011 to a full-time neurology faculty position at UNMC, where he serves as associate professor. He has worked with local and state medical associations and been an advocate for peers and patients. Dr. Frankel continues to see patients in addition to his administrative duties. Dr. Frankel holds a medical degree from the University of Nebraska Medical Center and completed his residency training in neurology from the University of Texas Southwestern Medical Center.

Rosanna Morris, MBA, BSN, RN, NE-BC, Executive Vice President. Joined 2007, Age 49. Ms. Morris served as Interim Chief Executive Officer following the retirement of former Chief Executive Officer Bill Dinsmoor in the spring of 2015. Ms. Morris has been with the organization for eight years, serving as system Chief Nursing Officer and as Chief Operating Officer. Ms. Morris will be departing the organization for a position in Michigan following Dr. DeBehnke’s transition.

Sue Nuss, Ph.D., Chief Nursing Officer. Joined 1996, Age 53. Dr. Nuss was selected to serve as Chief Nursing Officer in March of 2015. Dr. Nuss joined TNMC in 1996 as a clinical nurse specialist in the Pediatric /Stem Cell Transplant Program. Dr. Nuss transitioned into nursing administration seven years ago and most recently has been in the role of Executive Director of Nursing Practice and Care Transitions at TNMC. She has nursing degrees from Syracuse University (B.S.N.), Seton Hall University (M.S.N.) and University of Nebraska Medical Center (Ph.D.) and has practiced nursing in New York, New Jersey and Nebraska.

Cory Shaw, Chief Operating Officer, System Network Development. Joined 1993, Age 47. Mr. Shaw served as Chief Executive Officer of UNMCP prior to his appointment as Chief Operating Officer of System Network Development in January 2014. Mr. Shaw holds a Bachelor of Arts Degree from the University of Nebraska at Lincoln and a Master’s Degree of Health Administration from the University of Missouri at Columbia.

Frank Venuto, Chief Human Capital Officer. Joined 2015, Age 56. Mr. Venuto became Chief Human Capital Officer in June 2015. Mr. Vento joined TNMC as interim executive director of human resources in April 2015. Mr. Venuto previously served as Vice President of Human Resources at academic health systems in Maryland, including the University of Maryland Medical System and Baltimore Washington Medical Center dating back nearly 25 years. Mr. Venuto received a Bachelor of Science Degree in business administration and health services management from Towson State University in Towson, Maryland. Additionally, he holds a Master’s Degree in Administrative Science from Johns

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Hopkins University in Baltimore, Maryland and has certifications from the Society of Human Resources Management as a Senior Certified Professional.

FUND TRANSFERS TO MEMBERS AND OPERATING PAYMENTS

Annual Fund Transfer to Members

Pursuant to the SJOA, TNMC and the Parent agree, subject to annual consideration and approval by the Parent Board, to transfer $16 million at the end of each fiscal year beginning in the fiscal year ending June 30, 2017, with $8 million to each of the Board of Regents and CRHS. This amount has been increased from $12 million transferred, with $6 million to each of the Board of Regents and CRHS, in recent years, including for fiscal year ended June 30, 2016. The SJOA provides that these transfers must not interfere with (1) ongoing operations and due payment of operating expenses or (2) setting aside reserves for needs under any board-approved strategic plan, as determined in good faith by the board. The transfers are discretionary; however, the SJOA provides that TNMC and the Parent should expect and be able to make full fund transfers in each fiscal year and shall make the payments absent a super- majority vote (70% of voting directors) of the Parent Board to not make or to reduce the payments. Any reductions in the fund transfers will be equally reduced to the Board of Regents and CRHS. Because the Parent is not expected to have significant assets, the annual transfers will be paid by TNMC and transferred at the direction of the Parent. For a description of provisions of the SJOA regarding any failures to pay these annual transfers, see the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Term and Termination—Corrective Action Plan upon Failure to Deliver Fund Transfers; Withdrawal of Member” in Appendix D to the Official Statement.

In addition to, and following the satisfaction of the annual fund transfer described above, in the event that there is cash, including unrestricted investments, on hand in excess of 150 days based on the audited financial statements, and upon a super-majority vote (70% of voting directors) of the board, TNMC and the Parent may, but are not be required to, make an additional annual return of excess capital to each of the Board of Regents and CRHS. See the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Fund Transfers” in Appendix D to the Official Statement.

Academic Affiliation Agreement

The Academic Affiliation Agreement for Education and Research, dated as of July 1, 2016 (the “AAA”), by and among TNMC, the Parent and the Board of Regents, doing business through its administrative unit UNMC, amends and restates the prior Academic Affiliation Agreement executed as of October 1, 1997 between UNMC and TNMC in connection with the prior joint operating agreement. In connection with the SJOA and pursuant to the AAA, TNMC has agreed to financially support certain education, research, operational and clinical activities of the COM that further the mission and objectives of TNMC. For a summary of certain terms of the AAA, see Appendix D to the Official Statement.

For the fiscal years ended June 30, 2015 and 2016, certain funding for the COM was provided by TNMC to UNMC pursuant to an Academic Program Funding Agreement dated as of July 1, 2014 (the “Funding Agreement”) between TNMC and the Board of Regents, doing business through its administrative unit UNMC. In connection with integration of the clinical operations of UNMCP, TNMC and BMC, the Funding Agreement implemented a new funds flow model for moneys supporting activities of the COM, including certain funding provided by TNMC pursuant to the predecessor academic affiliation agreement replaced by the AAA. Upon the implementation of the governance reorganization on July 1, 2016, the Funding Agreement was terminated and the funding from TNMC for the COM after that date is pursuant to the AAA.

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The historical amount of funding provided by TNMC to UNMC for the COM for fiscal year 2013 was approximately $61.8 million, for fiscal year 2014 was approximately $63.9 million and for fiscal year 2015 was approximately $68.6 million. The amount of funding provided by TNMC to UNMC for the COM for fiscal year 2016 is approximately $72.1 million. These amounts include graduate medical education funding, DDIF, program and salary support. These numbers exclude reoccurring purchased services such as utilities and technology support. Funding provided by TNMC to UNMC for the COM under the AAA is anticipated to increase by an inflationary amount in subsequent years.

Other Support Services

UNMC also provides TNMC with certain other supplies and services, such as security, mail and printing services. UNMC is also TNMC’s main utility provider, including electricity, telephone, steam and chilled water. The payments provided by TNMC to UNMC for these services and supplies for fiscal year 2013 was approximately $31.3 million, for fiscal year 2014 was approximately $33.5 million and for fiscal year 2015 was approximately $26.7 million. The decrease in services and supplies for fiscal year 2015 was due to reclassifications resulting from the implementation of new funds flow methodologies between the Obligated Group and UNMC.

OTHER PARTNERSHIPS AND AFFILIATIONS

None of Clarkson College, Nebraska Orthopaedic Services, Inc., Nebraska Orthopaedic Hospital, LLC, Shenandoah Memorial Hospital, Community Hospital Association, Nebraska Health Network or Enhance Health Network (each described below) is a Member of the Obligated Group or is a party to or obligated pursuant to the Loan Agreements or the Master Indenture. No entity described under this caption “OTHER PARTNERSHIPS AND AFFILIATIONS” is in any manner obligated to pay principal of, premium, if any, or interest on the Series 2016 Bonds.

Clarkson College

Clarkson College is a Nebraska nonprofit corporation, of which TNMC is the sole corporate member. Clarkson College is a private, accredited college in Omaha, Nebraska offering diploma, certificate and degree opportunities in the fields of Nursing, Health Care Business, Health Care Services, Physical Therapist Assistant, Radiologic Technology, Medical Imaging, Imaging Informatics and Professional Development. The college has maintained continuous accreditation with The Higher Learning Commission North Central Association of Colleges and Schools (“NCA”) since 1984.

Nebraska Orthopaedic Services, Inc. and Nebraska Orthopaedic Hospital, LLC

NHS Orthopaedic Services, Inc., a for-profit subsidiary of TNMC, holds a 46.45% interest in Nebraska Orthopaedic Hospital, LLC (“NOH”), a Nebraska limited liability corporation. The remaining interest in NOH is held by Outlook LLC (“Outlook”). Outlook currently has 22 members, comprised of 21 orthopedic physicians and UNMCP. TNMC has historically received dividend distributions, which over the past five fiscal years totaled $23.8 million. NOH owns and operates a specialty hospital providing diagnostic, surgical and rehabilitative services to persons with musculoskeletal conditions.

On March 31, 2016, NOH issued $26.5 million in debt (the “NOH Debt”), the principal of which is payable annually through October 1, 2040 and the interest on which is payable semiannually at a fixed rate of 4.05%. The proceeds of the NOH Debt were used to purchase the existing hospital facility operated by NOH. TNMC guaranteed payment of the NOH Debt. Pursuant to a contribution agreement with CRHS, in the event TNMC makes payment pursuant to its guaranty of the NOH Debt within the first ten years the debt is outstanding, on or before March 31, 2026, under certain circumstances set forth in

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the contribution agreement, TNMC is entitled to certain contribution payments from CRHS in an amount not to exceed $10 million. Based on the results of operations of NOH over the last three calendar years, NOH would have had sufficient funds to cover the payment of debt service on the NOH Debt guaranteed by TNMC.

Nebraska Health Network

Nebraska Health Network, a Nebraska nonprofit corporation, is jointly controlled by Nebraska Health Partners (“NHP”), TNMC’s physician hospital organization (“PHO”) and Methodist Health Partners (“MHP”), Methodist Health System, Inc.’s PHO, and includes as providers their affiliated physicians and hospitals. The Nebraska Health Network participants include over 1,200 specialists and primary care providers. Nebraska Health Network is governed by a 12-member board which includes physicians and chief financial officers from Nebraska Medicine and Methodist Health System. Several physicians are also members and leaders of the Nebraska Health Network Medical Management and Membership Committees. See the caption “FINANCIAL INFORMATION—Management Discussion of Obligated Group Pro Forma Financial Information—Strategy” in this Appendix A.

Enhance Health Network

Enhance Health Network is a partnership of health care providers. Formerly known as the Regional Provider Network, the network is a for-profit partnership that delivers health care through shared services and clinical integration. The nine founding members of the network are: Nebraska Medicine and Nebraska Methodist Health System in Omaha, in Lincoln, Fremont Health in Fremont, Columbus Community Hospital in Columbus, Faith Regional Health Services in Norfolk, Mary Lanning Healthcare in Hastings, Great Plains Health in North Platte and Regional West Health Services in Scottsbluff. See the caption “FINANCIAL INFORMATION—Discussion of Pro Forma Financial Information—Strategy” in this Appendix A.

Shenandoah Memorial Hospital

TNMC entered into a joint venture with Shenandoah Memorial Hospital for the purpose of forming Shenandoah/NHS Regional Ventures, LLC (“Shenandoah”), which owns and operates Shenandoah Memorial Hospital, a 75 licensed bed acute-care hospital, and a long-term care facility in Shenandoah, Iowa. TNMC owns 49% of Shenandoah.

Community Hospital Association

TNMC entered into an affiliation agreement with Community Hospital Association, Inc., which owns and operates Community Hospital, an 18-bed acute-care hospital located in Fairfax, Missouri.

AWARDS AND RECOGNITIONS

Among the many awards that the Members of the Obligated Group have received, the Obligated Group and their affiliates have earned certain noteworthy awards and recognition for excellence in patient care, including the following:

• U.S. News & World Report has named the Nebraska Medical Center the #1 hospital in the state for four years in a row, starting in 2012 and through 2015-2016, the most recent year for which the rankings are available.

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• Becker’s Hospital Review has named the Nebraska Medical Center as one of the 100 Great Hospitals in America for three straight years, from 2014 to 2016.

• According to Newsweek’s list of “Top Cancer Doctors 2015,” 75% of the top cancer doctors in the State of Nebraska are at TNMC.

• Magnet recognized by the American Nurses Credentialing Center, first recognized in 2007 and re-recognized in 2012.

• The Joint Commission Gold Seal of Approval, Heart Failure, Disease Specific Care; Advanced Certification, Ventricular Assist Device; First Nationally Certified Stroke Center in Nebraska since 2007.

• National Research Corporation Consumer Choice Award winner for 13 years running from 2004 to 2016.

FACILITIES

Nebraska Medical Center Campus

The Nebraska Medical Center Campus, located in mid-town Omaha, Nebraska, covers approximately 79 acres and contains over 4 million square feet of floor space in over 20 buildings. In addition, outpatient facilities totaling approximately 300,000 square feet are located in suburban Omaha and the surrounding communities.

The diagram below depicts certain of the facilities on the campus, with certain of the buildings operated by TNMC labeled in “red” type, certain of the UNMC buildings labeled in “black” type and Clarkson College buildings labeled in “blue” type. Descriptions of the TNMC facilities follow the diagram.

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University Tower. This approximately 681,000 square foot facility, of which approximately 66% is leased pursuant to the Lease Agreement and occupied by TNMC and 34% is occupied by UNMC, features an oncology/ special care unit, surgical intensive care unit, general medical/surgical inpatient care, biocontainment unit and adult crisis (psychiatric) unit. It also includes a full range of women’s services that include labor and delivery, pediatric intensive care unit, and adolescent care. The oncology/hematology special care unit will relocate to the FPBCC when it opens in June 2017. The vacated square footage will be used to create additional private inpatient rooms, decreasing the number of semi-private inpatient rooms on campus.

Clarkson Tower. This approximately 575,000 square foot facility, which is leased pursuant to the Lease Agreement and occupied by TNMC, offers inpatient specialty care units, including , neurosciences, orthopedics, and solid organ transplant, as well as the medical, neuro, and cardiovascular intensive care units. Space is also provided for a burn unit that treats the area’s most severely burned patients, radiation oncology, inpatient dialysis, cardiac catheterization lab, an observation unit, and surgical pre-operative and post-operative care as well as support space for inpatient services.

Lied Transplant Center. The Lied Transplant Center, constructed in 1999, is a 14-story, approximately 259,000 square foot building that is home to a model for solid organ, bone marrow and stem cell transplants, and cancer care. It includes an oncology treatment center, transplant center, research facilities, and 44 inpatient beds, with plans to convert another 22 rooms to inpatient beds in the

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upcoming year. TNMC occupies approximately 60% of the Lied Transplant Center pursuant to the Lease Agreement, with the remaining 40% occupied by UNMC. Bone marrow, stem cell transplant, and cancer care services will relocate from this building to the FPBCC when it opens in June 2017. The vacated square footage will be repurposed to support expanded solid organ transplant and other ambulatory services.

Durham Outpatient Center. The Durham Outpatient Center is an approximately 247,000 square foot facility that opened in 1993. Patient registration, ambulatory clinics that include internal medicine, cardiology, surgery, obstetrics and gynecology, pediatrics, family medicine, adult dentistry, oral/maxillofacial surgery, oral/facial prosthetics along with a diagnostic services and outpatient pharmacy occupy the facility.

Specialty Services Pavilion. The Specialty Services Pavilion, which is leased pursuant to the Lease Agreement and occupied by TNMC, houses the diabetes center, pain management and psychology services. In addition, 17 guestrooms are utilized for hotel services for patients and visitors.

Kiewit Tower. This approximately 53,000 square foot office building, which is leased pursuant to the Lease Agreement and occupied by TNMC, provides on-campus space for corporate services of TNMC. The facility provides space for the executive offices, clinical administration, and nursing resource and development programming.

Clarkson Doctors Buildings North and South. The Clarkson Doctors Buildings North and South provide a total of approximately 120,000 square feet of medical office buildings that house some of the leading private practice physicians in the region in areas of specialty that include cardiovascular care, neurological care and other care services. TNMC leases these buildings pursuant to the Lease Agreement, occupying approximately 60,000 square feet of these buildings, with the remaining space occupied by physicians. Services provided in space occupied by TNMC and UNMCP include cardiac rehabilitation, wound care, and neurosciences clinic and procedure space.

Storz Pavilion. This facility consists of approximately 100,000 square feet on three levels, which is leased pursuant to the Lease Agreement and occupied by TNMC. This multipurpose pavilion provides an out-of-hospital visitor center experience, connected to the Clarkson Tower, with a food service and resource center for people visiting TNMC. It also serves as a primary location for large educational forums and meetings held by the hospital or community groups. An information technology learning lab and meeting rooms are located in the basement level. Finally, the Storz Pavilion also houses the Clarkson boardroom for Board of Directors, executive and Medical Staff meetings.

Hixson Lied Center. This facility contains approximately 145,000 square feet on land leased from the Board of Regents and CRHS in the center of TNMC’s campus between the Clarkson and University Towers. The facility houses the Emergency department on the first floor with decontamination stations and the necessary containment areas to respond to Nuclear, Biological and Chemical threats. The second floor contains 23 larger-sized Operating Rooms, and five Interventional Radiology Suites. The third floor provides a public and staff circulation corridor with access to a rooftop garden overlooking a landscaped courtyard. The fourth floor houses the 34-bed Neonatal Intensive Care Unit.

East Campus Corporate Pavilion. TNMC leases approximately 160,000 square feet of office space in a building on the campus of Mutual of Omaha insurance company, approximately one-half mile from TNMC’s main campus. The facility provides space for finance, marketing, human resources, quality, revenue cycle, call center and other corporate functions.

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Health Information Management. Health information management is an approximately 50,000 square foot building, which is leased and occupied by TNMC. Health information management services, including coding, medical information release, scanning, and medical records storage, are located in this building.

Business Services Center. This approximately 50,000 square foot office building, leased pursuant to the Lease Agreement and occupied by TNMC, provides on campus space for corporate services including information technology.

Clarkson Family Medicine. The Clarkson Family Medicine building consists of approximately 20,000 square feet, which is leased and serves as the location for the Family Medicine’s residency program and occupies approximately 6,600 square feet on the first floor. The remainder of the building is support space for the residency program.

Truhlsen Eye Institute. The Truhlsen Eye Institute is an approximately 55,000 square foot building on the southeast part of campus. It contains the clinic, diagnostics functions, and optical shop. Additionally, the building has space dedicated to the ophthalmology clinical and research faculty offices and lecture space. The clinical functions of this building occupy approximately 35,000 square feet of the total building.

Fred and Pamela Buffett Cancer Center. The FBPCC is scheduled to open in June 2017. This facility will include the Suzanne and Walter Scott Cancer Research Tower, an approximately 252,000 square foot, 10-story, 98-laboratory tower dedicated to research, including breast, brain, pancreatic, gastrointestinal, prostate, lymphoma, leukemia, lung, head and neck, and women’s cancer, as well as cancer vaccines, drug development and pediatric cancer; the C.L. Werner Cancer Hospital, an approximately 325,000 square foot, seven-story, 108-bed inpatient treatment center; and a multidisciplinary outpatient center, which includes clinics and infusion, radiation therapy, surgery, radiology and collaborative treatment/diagnostics services. The facility is 100% owned by UNMC and the clinical space is leased to TNMC pursuant to the Cancer Center Lease. For information regarding the Cancer Center Lease see the caption “CORPORATE STRUCTURE—Relationship to University of Nebraska Medical Center—Common Campus and Shared Services” in this Appendix A.

Lauritzen Outpatient Center. The Lauritzen Outpatient Center is scheduled to be completed in late fall 2016 and will have approximately 170,000 square feet of new clinical, research, and educational space. This facility will include the Fritch Surgery Center, a suite of 10 state-of-the-art operating rooms specifically designed to support outpatient procedures. Up to 4 of the operating rooms will be dedicated to ophthalmology surgery affiliated with the Truhlsen Eye Institute. Procedures done at the Fritch Surgery Center will be outpatient only, all surgeries requiring overnight stays will continue to be performed at TNMC’s main hospital operating rooms.

Village Pointe Facilities

The Village Pointe Campus is an approximately 87,000 square foot development in West Omaha. The Village Pointe Campus consists of three buildings that provide services for cancer care, infusion, and radiation oncology, the Dream’s Med Spa and Aesthetic Surgery Center, Village Pointe Center with 23-hour observation capabilities, ambulatory clinics to include otolaryngology, ophthalmology, general medicine, OB and gynecology, pain clinic and procedures, endoscopy, radiology, and other subspecialties. The Dream’s Med Spa and Aesthetic Surgery Center building is owned by UNMCP. The other two facilities are leased from a local developer. See the caption “THE PROJECTS—Village Pointe Outpatient Center” in this Appendix A.

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Bellevue Medical Center

Bellevue Medical Center occupies an approximately 270,000 square foot campus, featuring a 90 bed community hospital and medical office building. The medical office building is home to a retail pharmacy, cardiac rehab, physical therapy, family medicine practice, oncology services, and space the landlord subleases to private practice groups. The 4th floor of the building is currently leased to Madonna Rehabilitation Hospital (“Madonna”). Madonna will vacate the space in October 2016 when their new West Omaha facility is complete. After Madonna vacates this space, BMC plans to occupy it and relicense 36 beds, bringing the total licensed beds for the facility to 91. See the caption “THE PROJECTS—Bellevue Medical Center” in this Appendix A.

Other Clinical Facilities

Oakview Medical Building. The Oakview Medical Building consists of two separate but connected buildings owned by developers with approximately 30,000 total square footage. TNMC and UNMCP currently occupy approximately 16,500 square feet of this space for Cardiology, Family Medicine, and Orthopedic clinics and laboratory services. CRHS owns the land on which the buildings reside and leases the land to developers. The buildings are then leased to the occupants by the developers.

Primary Care Clinics. Across the community, UNMCP leases and operates seven clinics ranging from 5,000 to 17,000 square feet.

THE PROJECTS

Lauritzen Outpatient Center

A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $53.4 million will be used to pay or reimburse TNMC for a portion of the costs of constructing and equipping the Lauritzen Outpatient Center, estimated to cost $76 million. The Lauritzen Outpatient Center will house a number of outpatient clinics, which are currently located in the DOC on TNMC’s main campus. Charitable funds pledged in the approximate amount of $22 million will be used to pay costs related to the building’s top floor, which will house the UNMC Department of and Rehabilitation research laboratories and educational space. It also will include a new center for telemedicine to provide a hub for teaching and outcomes research related to telemedicine and its role in health care. Up to 4 of the operating rooms will be dedicated to ophthalmology surgery affiliated with the Truhlsen Eye Institute. Donated funds were used to support construction of these operating rooms.

The 10 new operating rooms will allow TNMC to decommission the existing operating rooms in University Tower and reallocate that space. The Lauritzen Outpatient Center will also be home to a number of outpatient clinics, including general surgery, otolaryngology, oral surgery, , plastics, oral facial plastic and orthopedics. The building will also provide physical therapy/occupational therapy, radiology, laboratory draw and retail pharmacy services.

Equipping of Cancer Center and Other Facilities at Nebraska Medical Center Campus

Cancer Center Equipment. A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $8.6 million will be used to pay or reimburse TNMC for a portion of the estimated $33 million cost of equipping the FBPCC. The FBPCC, a collaboration of TNMC and UNMC, will be a multidisciplinary cancer center with a research tower and inpatient cancer and outpatient cancer areas. See the caption “FACILITIES—Nebraska Medical Center Campus” in this Appendix A.

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Parking Facilities. A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $17.5 million will be used to pay or reimburse TNMC for a portion of the costs of constructing the Lot 6 parking garage. The Lot 6 parking garage is a seven-story garage constructed immediately east of the existing Lot 5 parking garage and was constructed between September 2014 and November 2015. The structure combines a structural steel frame with post-tensioned decks and can park 735 vehicles.

Other Facilities. A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $9.2 million will be used to pay or reimburse TNMC for a portion of the costs of constructing and equipping maternal fetal medicine, commonly known as women’s services. Women’s services has been constructed in multiple phases over the past three years. Occupying the fourth floor of University Tower, the program represents a consolidation of services originally housed in both Clarkson and University Towers. Currently, the completed portions of the project house nursery, caesarian section suites, obstetrics delivery and post-partum services. The recently commenced fourth phase of the project adds administrative, support, conference and call room spaces. The fourth phase is expected to be completed during fiscal year 2017.

Refinancing of Capital Lease. A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $42.5 million will be used to (i) refinance a portion of TNMC’s EPIC electronic medical records system and other equipment and improvements to TNMC’s facilities previously financed or refinanced pursuant to a capital lease and (ii) make a termination payment for an interest rate swap agreement related to such capital leases.

Village Pointe Outpatient Center

A portion of the proceeds of the Douglas Authority Bonds in the approximate amount of $26.2 million will be used to construct a new outpatient surgery center and other expanded services in west Omaha (the “Village Pointe Expansion and Renovation”). The space was set aside for future growth when various clinics opened in 2010. In addition to the operating rooms, the Village Pointe Expansion and Renovation also will include a significant expansion of clinic and diagnostic radiology space. The Village Pointe Expansion and Renovation will offer outpatient procedures and surgeries that require an overnight stay. The Village Pointe Expansion and Renovation will add approximately 42,000 finished square feet for the TNMC services provided at that location. The project partially opened in late 2015 with the remainder scheduled to open in late summer 2016. See the caption “FACILITIES—Village Pointe Facilities” in this Appendix A.

Bellevue Medical Center

A portion of the proceeds of the Sarpy Authority Bonds in the approximate amount of $130.2 million will be used by BMC to purchase the Bellevue Medical Center hospital facility (the “BMC Hospital”) from TNMC. TNMC will use the proceeds of the “purchase” to repay existing short-term bank financing in an approximate principal amount of $130 million used by TNMC for the purchase on December 31, 2015 of the BMC Hospital. In addition, approximately $17.8 million of the proceeds of the Sarpy Authority Bonds will be used by BMC to refinance existing capital lease financing for equipment and furnishings at the BMC Hospital. See the caption “FACILITIES—Bellevue Medical Center” in this Appendix A.

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SERVICES

Comprehensive List of Services

The following presents a comprehensive list of services available at Nebraska Medicine:

Anesthesia Pediatric * Bariatric Services* Pediatric Neonatal ICU* Biocontainment Unit* Pediatric-Surgery General* Burn Services* Physical Therapy Cardiology Psychology* Cardiology - Cardiac Cath, Cardiac Rehab Radiation Oncology* Cardiology - EKG/ECHO Radiology – Bone Clinical Laboratory Services Radiology – CT Critical Care/Intensive Care Radiology – Interventional Diabetes/ Radiology – Mammography Dialysis Radiology – MRI Emergency Services Radiology – Nuclear Employee Health* Radiology – Neuroradiology Family Practice Respiratory Care Internal Medicine* Rheumatology* General Medicine Sleep Center* Genetic Testing/Counseling* Sleep Disorders/Sleep Lab Geriatrics* Speech Therapy GI/Endoscopy/Motility Subacute Nursing* HIV/AIDS Clinic* Surgery – Bariatric* Hyperbaric Medicine* Surgery, Cardiothoracic* Intestinal Nutritional Restart Program* Surgery, Dental Surgery* – Inpatient Dialysis Surgery, Emergency Med Neurology Surgery, General Neurology – Stroke Program Surgery, OB/GYN – General Surgery, Ophthalmology* OB/GYN – High Risk* Surgery, Oral Surgery* OB/GYN – Oncology and Incontinence* Surgery, Ortho Occupational Therapy Surgery, Otolaryngology* Oncology Surgery, Plastics Ophthalmology Surgery, Pre-Op, OR, PACU; Outpatient CareCenter Orthopedics Surgery, Trauma* Otolaryngology and Maxillofacial Surgery* Surgery, Urology Pain Management Surgery, Vascular Surgery Pathology Transplant – Bone Marrow Transplant Program* Pediatrics – General Transplant – Kidney/Pancreas* Pediatric Cardiology* Transplant – Liver* Pediatric Endocrinology* Transplant – Lung* Pediatric * Transplant – Small Bowel* Pediatric Hematology/Oncology* Transplant – Tissue Pediatric – ICU* Trauma* Pediatric Nephrology* Wound Center* Pediatric Neurology*

* Services available only at TNMC.

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Key Specialty Services

Cancer and Stem Cell Transplantation. The Obligated Group provides comprehensive cancer treatment options, including treatment of hematologic lymphoma, leukemia, head and neck cancer, breast cancer and other types of cancer, which are also supported by research in bone marrow and stem cell transplantation that is conducted on the TNMC/UNMC campus. TNMC is a founding member of the National Comprehensive Cancer Network. TNMC is the only clinical cancer center in its service area certified by the National Cancer Institute. A multi-disciplinary approach to care with physician specialists who are recognized in their field, a clinic dedicated to 24 hour patient care, and the FPBCC, a single facility that provides comprehensive cancer clinical services co-located with state of the art research strengthen the Obligated Group’s cancer services.

TNMC’s stem cell transplantation program was established in 1983. The program has pioneered autologous transplantation using peripheral stem cells as an alternative rescue product; conducted ground- breaking transplant studies; and performed transplants in alternate settings other than traditional inpatient hospital units. For the eleven months ended May 31, 2016, TNMC performed 149 stem cell transplants.

Solid Organ Transplantation. Nebraska Medicine is one of only ten health systems in the United States with transplant programs for all solid organs (liver, intestine, kidney, pancreas, lung and heart) and operates one of the busiest solid organ transplant programs in the world. TNMC’s transplant program dates back 45 years to the start of the kidney transplant program in 1970. In 1985, TNMC began a liver transplant program, among the first in the country, and in 1989, TNMC began one of the first pancreas transplant programs. TNMC also contributes to the emerging field of islet cell transplantation, a procedure where a patient’s chronic pancreatitis is treated by extracting the islet cells from the pancreas and implanting them in the liver. TNMC is one of a very small number of centers in the United States to offer this expertise. TNMC operates the largest intestinal rehabilitation and transplantation program in the world. TNMC has also performed over 200 heart transplants in the last 10 years, and restarted the lung transplant program in the spring of 2016. The cardiac transplant team works closely with heart failure experts and leaders in the field of ventricular assist devices.

For the eleven months ended May 31, 2016, TNMC performed 240 solid organ transplants, including liver, kidney, heart and lung. The success of TNMC’s solid organ transplant program is bolstered by research done on the TNMC/UNMC campus. Patients have come to TNMC for single- or multiple-organ transplant from all 50 states and 15 foreign countries.

Neurology/Neurosurgery. Core neurological sciences services include diagnosis and treatment of stroke, degenerative diseases and movement disorders. Specialists have dedicated training in specific neurological conditions, including tumors of the brain or spine, epilepsy, dementia, stroke, multiple sclerosis, Parkinson’s disease, spinal disorders, degenerated or herniated disk, pain syndromes, vascular malformations and aneurysms. The Nebraska Medical Center Campus is home to the region’s only Magnetoencephalography Scanner. The device is used frequently with epilepsy patients. It maps the brain and gives surgeons a precise location of the origin of the patient’s seizure. If surgery is an option, this approach allows neurosurgeons to remove less brain tissue and to do so more accurately. TNMC has earned the Gold Seal of Approval from The Joint Commission for stroke care. The Stroke Program also earned the Gold Plus Award from the American Stroke Association and the American Heart Association. Within the neurological sciences department, TNMC has been named a center of Excellence for Huntington’s disease by the Huntington’s Disease Society of America. It is one of just 29 such centers nationally. U.S. News & World Report ranks TNMC nationally as one of America’s best hospitals for neurology and neurosurgery.

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Heart and Vascular Services. Heart and vascular services provided by the Obligated Group range from maintenance and monitoring of heart and vascular issues to complex, minimally invasive surgery performed in catheterization labs or hybrid operating rooms. TNMC has become experienced in the use of mechanical assist devices for heart failure patients. The Obligated Group’s cardiac ventricular assist device program has the second-highest volume in the nation. For the eleven months ended May 31, 2016, TNMC performed more than 590 open heart surgeries. TNMC specialists also perform transcatheter aortic valve replacement to repair aortic stenosis. TNMC is ranked among the best hospitals in the region for cardiology and heart surgery by U.S. News & World Report. Its congestive heart failure and acute myocardial infarction (heart attack) programs each received the Gold Seal of Approval certification from The Joint Commission. These are the first and only nationally certified programs of their kind in Nebraska.

Trauma. TNMC is home to one of the region’s state designated Comprehensive Trauma Centers in Nebraska serving adult patients and the only state-designated Comprehensive Trauma Center serving pediatric patients. The center is ready around the clock to treat the most critical injuries. TNMC experienced an approximate 50% volume increase after expanding trauma services to 24/7 coverage in 2014. For the eleven months ended May 31, 2016, TNMC’s emergency department/trauma center served over 80,600 people, of which 17,600 were admitted to the hospital as inpatient or observation patients. TNMC is strategically expanding trauma services and staffing to prepare for American College of Surgeon verification as a Level 1 Trauma Center in 2017.

Primary Health Care Services. Nebraska Medicine is home to a broad network of primary care ambulatory clinics located throughout the Omaha metro region treating both adult and pediatric patients. For the eleven months ended May 31, 2016, the Obligated Group had 159,439 patient encounters in ambulatory, primary care clinics. The ambulatory primary and specialty care network currently has approximately 45 clinics located in the Omaha area, of which 15 are primary-care-focused with planned expansion of this service including the July 1, 2016 opening of the first clinic located outside of the Omaha Metro in Grand Island, Nebraska. Additionally, the Obligated Group is actively recruiting over 30 new physicians to serve patients at six planned clinic expansion sites increasing the network of primary care physicians which will both serve the immediate health care needs of the community while creating greater referral networks to recommend specialists and programs throughout the health system.

Biocontainment Unit. TNMC operates a 10 bed biocontainment unit which is the largest unit in the United States. In 2014, TNMC’s biocontainment team treated three American Ebola patients during the outbreak of the disease in West Africa and monitored many others. The biocontainment unit was commissioned in 2005 by the U.S. Centers for Disease Control. It is a joint project between the State of Nebraska, Nebraska Medicine and the University of Nebraska. The center is equipped to safely care for anyone exposed to highly contagious and dangerous disease. TNMC and UNMC have been named one of three National Ebola Treatment and Education Centers in the United States.

LICENSES, ACCREDITATION, CERTIFICATIONS AND MEMBERSHIPS

The Obligated Group is accredited by The Joint Commission through 2016. The most recent survey for BMC was conducted during May 2016. TNMC and UNMCP will be surveyed in the latter half of 2016 as part of the three-year accreditation cycle.

TNMC has also obtained accreditation from the College of American Pathologists for its clinical laboratories, from the Commission on Laboratory Accreditation for physician practices managed by TNMC, and from Clinical Laboratory Improvement Amendments for TNMC’s clinics. In addition, TNMC’s clinical laboratory also holds several specialty accreditations with the American Association for Blood Banks, American Society of Crime Laboratory Directors Laboratory Accreditation Board,

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American Society for Histocompatibility and Immunogenetics and the Foundation for the Accreditation of Hematopoietic Cell Therapies. Other accreditations include the American College of Surgeons Commission on Cancer, for Cancer Programs, and the Burn Center Verification Program for Hospitals conducted by the American Burn Association and the American College of Surgeons.

In addition to the voluntary accreditations, the State of Nebraska licenses TNMC’s hospital, BMC’s hospital, the Oakview health care facility, Village Pointe Cancer Center, Village Pointe Outpatient Ambulatory Surgery, Village Pointe Endoscopy and Truhlsen Eye Institute and Specialty Care Center.

TNMC and BMC require board certification (unless a waiver is granted) for employed physicians. UNMCP requires American Board of Medical Specialties, American Osteopathic Association or American Board of Oral or Maxillofacial Surgery board certification for employed physicians.

MEDICAL STAFF

Active Medical Staff

Service Specialty and Academic/Private Practice Categories. A roster of the various disciplines and numbers of faculty as of June 30, 2016 is provided in the table below along with the respective percentage that are board-certified by specialty.

Service/Division – Category Report As of June 30, 2016

% of Board Employed Other Total Board Specialty Certified by -UNMCP Credentialed Credentialed Certified Specialty Anesthesia 85 11 96 54 56.3% Dentistry 2 2 4 4 100.0% Emergency Medicine 28 11 39 25 64.1% Family Medicine 32 36 68 61 89.7% Medicine 176 127 279 273 97.8% Obstetrics/Gynecology 17 13 30 26 86.7% Ophthalmology 8 12 20 19 95.0% Orthopedic 11 28 39 38 97.4% Otolaryngology 10 12 22 19 86.4% Pathology 35 - 35 24 68.6% Pediatrics - 96 120 92 76.7% 14 3 17 13 76.5% Radiation Oncology 6 - 6 5 83.3% Radiology 24 10 34 34 100.0% Surgery 44 36 80 79 98.8% Grand Total 492 397 889 766 86.2%

Employed Physicians. As of May 31, 2016, TNMC employed 16 physicians and UNMCP employed 488 physicians that work in multiple clinics in Omaha.

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Turnover. Set forth below is the turnover of acting physicians with admitting privileges (excluding emeritus physicians over the age of 70) at the Obligated Group for calendar years 2011 through 2015 and for the first six months of 2016.

Active Physician Turnover

Calendar Year Additions Terminations/Resignations Net Additions 2011 134 (59) 75 2012 74 (116) (42) 2013 59 (76) (17) 2014 78 (75) 3 2015 139 (63) 76 2016* 72 (42) 30 556 (431) 125

* Numbers represent January 1 – June 30, 2016.

Top Admitting Physicians. The following table sets forth the percentage of total inpatient discharges by the top 20 admitting physicians at TNMC and BMC. Data is derived from total inpatient discharges for the eleven months ended May 31, 2016.

Inpatient Discharges by Physician Eleven Months Ended May 31, 2016

Rank Physician Specialty Age of Physician % of Discharges

1 Family Medicine 53 1.74% 2 Acute Care Surgery 36 1.31% 3 Family Medicine 58 1.25% 4 Orthopaedic Surgery 59 1.19% 5 Family Medicine 44 1.03% 6 Family Medicine 32 1.02% 7 Acute Care Surgery 60 1.01% 8 Acute Care Surgery 36 0.97% 9 Family Medicine 60 0.95% 10 Pediatric Emergency Medicine 54 0.92% 11 Pediatric Emergency Medicine 54 0.91% 12 Hospitalist 31 0.91% 13 Family Medicine 40 0.89% 14 Hospitalist 37 0.88% 15 Hematology-Oncology 63 0.86% 16 Transplantation 41 0.85% 17 Acute Care Surgery 67 0.85% 18 Acute Care Surgery 38 0.85% 19 Neurosurgery 42 0.83% 20 Psychiatry 57 0.83% Subtotal for top 20 physicians 20.04% Subtotal for all other physicians 79.96% Total 100.0%

The average age of the top 20 physicians listed above is 48 years.

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Age of Admitting Physicians. The following table sets forth the percentage distribution of physicians by age in the Obligated Group for the eleven month period ended May 31, 2016.

Age of Physicians Eleven Months Ended May 31, 2016

Age of Physician % Distribution

21-30 1.36% 31-40 37.86% 41-50 24.88% 51-60 27.22% 61+ 8.69% 100.00%

EMPLOYEE RELATIONS

Employees and Turnover

As of May 31, 2016, the Obligated Group employed approximately 7,800 full-time, part-time and casual labor employees and experiences a turnover rate as set forth in the table below.

Historical full-time-equivalent total employees and nursing employees and corresponding turnover percentages for TNMC and BMC for the fiscal year ended June 30, 2014 and for the Obligated Group for the fiscal year ended June 30, 2015 and for the eleven-month period ended May 31, 2016 are as follows:

Fiscal Year Ended Fiscal Year Ended 11 Months Ended June 30, 2014 June 30, 2015 May 31, 2016

Employee Headcount 5,234 7,231 7,817 Total Employee FTEs 4,168 5,926 6,345 Turnover % 17.04% 14.99% 17.85%

Nursing Employee Headcount 1,285 1,462 1,656 Total Nursing FTEs 1,087 1,241 1,415 Turnover % 14.79% 13.61% 16.24%

Union Activity

No employees of the Obligated Group are represented by a collective bargaining unit or are subject to any collective bargaining agreements. To the best knowledge of management of the Obligated Group, there currently are no ongoing and active efforts to organize a collective bargaining unit among the Obligated Group’s employees. However, hospital and health care employees across the United States are increasingly organized in collective bargaining units and may be involved in work stoppages and strikes in connection with such collective bargaining units. Many hospitals have collective bargaining agreements in place. Employees subject to collective bargaining agreements may include essential nursing and technical personnel, as well as food service, maintenance and other trade personnel.

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SERVICE AREA AND COMPETITION

Service Area

The Obligated Group’s primary service area consists of two counties in their entirety and five partial counties with a reach of approximately 40 miles. The secondary service area is made of approximately 40 counties with an average distance of 130 miles. During the fiscal year ended June 30, 2015, the Obligated Group received 71% of its inpatients from the primary service area. During the fiscal year ended June 30, 2015, 96% of the Obligated Group’s patients, based on discharges, were from Nebraska, western Iowa, northwest Missouri and southeast South Dakota. The Obligated Group attracts patients from throughout the United States and internationally to its programs.

The diagram below depicts unique patient origin at the zip code level. The primary service area, identified with dark shading, typically accounts for 70-80% of patients in any fiscal year. The secondary service area, identified with light shading, typically accounts for 80-90% of patients in any fiscal year. Service areas are concentric and contiguous.

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Inpatient Origination

The following table details the inpatient origin in terms of discharges for TNMC and BMC for the fiscal years ended 2013, 2014, 2015 and the eleven-month periods ended May 31, 2015 and 2016. The majority of inpatients discharged live in the Omaha MSA (comprising the cities of Omaha, Nebraska and Council Bluffs, Iowa, and surrounding areas).

Inpatient Origin

Fiscal Year Ended 11 Months Ended

2013 2014 2015 May 31, 2015 May 31, 2016 Discharges % Discharges % Discharges % Discharges % Discharges % Omaha MSA 19,686 74.4% 19,105 74.2% 21,268 74.4% 19,484 74.5% 20,148 74.9% Other Nebraska 3,406 12.9% 3,453 13.4% 3,961 13.9% 3,601 13.8% 3,737 13.9% Western Iowa 1,672 6.3% 1,775 6.9% 2,013 7.0% 1,840 7.0% 1,949 7.2% Missouri/South 233 0.9% 235 0.9% 247 0.9% 235 0.9% 215 0.8% Dakota/Kansas Outside Regions 1,450 5.5% 1,189 4.6% 1,085 3.8% 998 3.8% 852 3.2% Total 26,447 100% 25,757 100% 28,574 100% 26,158 100% 26,901 100%

Population of Service Area

According to ESRI Business Analyst, the Omaha MSA population grew by more than 5% from 2010 to a population of approximately 946,500 people as of 2015. The Omaha MSA population is expected to grow an additional 5.1% by 2020 to approximately 994,500 people. The service area encompassing Nebraska and portions of western Iowa, northwest Missouri and southeast South Dakota contains a population of more than 3.6 million people according to 2015 estimates. Such area’s population is expected to grow 3.6% from 3.6 million persons in 2015 to more than 3.8 million persons in 2020.

City of Omaha Economic Indicators

Employment. The Omaha MSA has seen a relatively stable economic outlook, with unemployment remaining below the national average. In April 2016, the U.S. Bureau of Labor Statistics reported the unemployment rate was 3.2% for the Omaha-Council Bluffs metropolitan area and 3.0% for the State of Nebraska as compared with 4.7% for the United States as a whole. The table below shows the annual unemployment rate for the Omaha-Council Bluffs metropolitan area, the State of Nebraska and the United States for the previous five years.

Annual Average Unemployment Rate Not Seasonally Adjusted

Omaha/Council Bluffs Nebraska National 2011 4.8 4.4 8.9 2012 4.4 4.0 8.1 2013 4.1 3.8 7.4 2014 3.6 3.3 6.2 2015 3.2 3.0 5.3 Source: Bureau of Labor Statistics

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According to the Greater Omaha Economic Development Partnership, the Omaha MSA is home to more than 82,000 businesses, including four Fortune 500 headquarters (Berkshire Hathaway, Union Pacific, Peter Kiewit and Mutual of Omaha) and five Fortune 1000 headquarters (Valmont Industries, Green Plains Inc., TD Ameritrade, West Corporation and Werner Enterprises). The top twenty employers in the Omaha MSA are included in the table below.

Major Employers

Number of Rank Company Employees 1 Offutt Air Force Base 7,500+ 2 CHI Health 7,500+ 3 Omaha Public Schools 5,000-7,499 4 Methodist Health Center 5,000-7,499 5 Nebraska Medicine 5,000-7,499 6 University of Nebraska Medical Center 2,500-4,999 7 First Data Corp. 2,500-4,999 8 Union Pacific 2,500-4,999 9 Hy-Vee Inc. 2,500-4,999 10 First National Bank of Nebraska 2,500-4,999 11 West Corp. 2,500-4,999 12 Walmart Stores 2,500-4,999 13 ConAgra Foods 2,500-4,999 14 Mutual of Omaha 2,500-4,999 15 Creighton University 2,500-4,999 16 University of Nebraska at Omaha 2,500-4,999 17 Millard Public Schools 2,500-4,999 18 City of Omaha 2,500-4,999 19 PayPal Inc. 2,500-4,999 20 Omaha Public Power District 1,000-2,499 Source: Greater Omaha Economic Development Partnership

Cost of Living. The Omaha area cost of living is lower than the national average. The Greater Omaha Economic Development Partnership reports Omaha’s median income at $56,445 compared to $53,133 for the nation. The median price of an existing home in Omaha was $157,700 in first quarter 2016 compared to the U.S. median price of $217,600 according to the National Association of Realtors.

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Competition

The table below identifies market share in the Omaha/Council Bluffs area by discharge for fiscal years ended June 30, 2013, 2014 and 2015.

FY2013 FY2014 FY2015 Market Market Market Share Share Share

Nebraska Medicine Nebraska Medical Center 22.4% 22.6% 24.0% Bellevue Medical Center 3.7% 3.8% 4.0% Total 26.1% 26.4% 28.0%

Nebraska Orthopaedic 1.0% 1.0% 1.5%

Methodist Health System Methodist 18.5% 18.7% 21.2% Jennie Ed 3.6% 3.6% 3.9% Total 22.1% 22.3% 25.1%

CHI Health Bergan 14.3% 14.8% 13.1% Immanuel 8.9% 9.6% 8.9% Creighton 8.0% 7.6% 6.0% Lakeside 7.7% 7.4% 6.3% Mercy 5.3% 5.6% 5.3% Midlands 2.1% 1.7% 1.4% Total 46.3% 46.7% 41.1%

Children’s Hospital 4.4% 3.6% 4.4%

Total 100.0% 100.0% 100.0% Source: Nebraska and Iowa State Claims Database (includes all inpatient discharges).

PAYOR ANALYSIS AND UTILIZATION

Payor Mix

The following table identifies the approximate percentage of gross patient service revenue for TNMC and BMC by payor source for the fiscal year ended June 30, 2013 and for the Obligated Group for the fiscal years ended June 30, 2014 and 2015 and for the eleven month periods ended May 31, 2015 and 2016.

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Eleven Months Fiscal Year Ended June 30, Ended May 31,

2013 2014 2015 2015 2016 Medicare 38.8% 38.3% 37.5% 37.6% 38.6% Medicaid 12.7% 13.4% 11.8% 12.0% 12.5% Blue Cross 17.6% 18.2% 20.5% 20.5% 19.6% Commercial 21.6% 20.6% 21.2% 21.3% 20.3% Self-Pay and Other 9.3% 9.5% 9.0% 8.6% 9.0% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Historical Hospital Utilization

The following table sets forth key utilization statistics for TNMC and BMC for the fiscal years ended June 30, 2013 and 2014 and for the Obligated Group for the fiscal year ended June 30, 2015 and for the eleven-month periods ended May 31, 2015 and 2016.

Eleven Months Fiscal Year Ended June 30, Ended May 31,

Statistics 2013 2014 2015 2015 2016 Discharges 26,447 25,757 28,574 26,158 26,901 Observation Stays 3,976 5,599 5,914 5,408 5,905 Patient Days 139,266 146,575 158,304 144,740 151,005 Avg. Length of Stay 5.3 5.7 5.5 5.5 5.6 Inpatient Avg. Daily Census 381.6 401.6 433.7 432.1 449.4 Inpatient Occupancy % 62.20% 66.40% 75.30% 75.1% 77.9% Case Mix Index (All Acute) 1.75 1.84 1.83 1.83 1.91 Available Beds 613 605 576 575 574

Procedural Volumes Deliveries 2,568 2,636 2,615 2,395 2,295 Surgery Cases – Inpatient 8,607 8,440 9,368 8,522 8,895 Surgery Cases – Outpatient 9,896 10,168 12,284 10,480 11,381 Total Surgeries 18,503 18,608 21,652 19,002 20,276

Emergency Visits 79,008 77,546 86,276 77,389 80,632

FINANCIAL INFORMATION

Historical Financial Information

Set forth below are summaries of the historical Statements of Operations and Balance Sheet data (the “Historical Financial Statements”) of TNMC, which also includes the financial results of BMC, Clarkson College, NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of and for the years ended June 30, 2013, 2014 and 2015, which have been derived from the audited consolidated financial statements of TNMC, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The Historical Financial Statements should be read in connection with the audited consolidated financial statements of TNMC included as Appendix B-1.

The Historical Financial Statements include the financial results of Clarkson College, NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc.; however, Clarkson College, NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are not Members of the Obligated Group.

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The consolidated financial statements of TNMC summarized below include the assets and liabilities and results of operations of certain affiliates which are not Members of the Obligated Group. In the aggregate, those affiliates accounted for approximately 1.53% of TNMC total consolidated unrestricted revenue and approximately 3.14% of TNMC net assets for the year ended June 30, 2015.

Historical Consolidated Statements of Operations (dollars in thousands)

Fiscal Year Ended June 30, 2013 2014 2015 Unrestricted revenue Patient service revenue, net $808,603 $869,756 $1,012,190 Provision for uncollectible accounts (54,641) (61,978) (75,411) Net patient service revenue $753,962 $807,778 $936,779 Other revenue 48,777 53,677 48,580 Total unrestricted revenue $802,739 $861,455 $985,359

Operating expenses Salaries, wages and benefits $352,270 $350,645 $434,100 Purchased services, supplies, other 370,363 417,232 437,927 Clinic contribution expense 5,198 5,291 - Depreciation and amortization 54,462 52,629 52,129 Interest 4,222 3,940 3,383 Gain on sale of property and equip. 1,379 408 762 Total operating expenses $787,894 $830,145 $928,301

Operating income $14,845 $31,310 $57,058

Nonoperating income $10,039 $8,846 $11,192

Excess of revenues over expenses $24,884 $40,156 $68,250

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Historical Consolidated Balance Sheets (dollars in thousands)

June 30, 2013 2014 2015 Assets Current assets Cash and cash equivalents $85,143 $113,575 $132,392 Short-term investments 151,066 153,906 155,652 Patient accounts receivable, net 123,904 126,251 156,057 Other current assets 29,373 33,728 47,837 Total current assets $389,486 $427,460 $491,938

Assets limited as to use Long-term investments 45,549 53,153 54,750 Assets held by trustee 6,321 6,626 6,559 Total assets limited as to use $51,870 $59,779 $61,309

Property and Equipment, net 408,628 378,289 415,010 Other assets 20,758 27,135 25,387 Total noncurrent assets 481,256 465,203 501,706 Total assets $870,742 $892,663 $993,644

Liabilities Current liabilities Current portion of LT debt, capital leases 28,459 12,484 12,054 Payable to affiliates 22,185 21,608 40,915 Line of credit 14,971 11,045 15,000 Accounts payable 44,821 47,499 60,226 Other current liabilities 66,660 72,407 100,121 Total current liabilities $177,096 $165,043 $228,316 Noncurrent liabilities LT debt and capital leases 86,901 83,464 71,813 Other long-term liabilities 13,252 10,959 7,319 Total noncurrent liabilities 100,153 94,423 79,132 Total liabilities $277,249 $259,466 $307,448

Net assets Unrestricted 589,024 618,383 671,878 Unrestricted: noncontrolling interest (8,955) - - Temporarily restricted 10,908 12,313 11,740 Permanently restricted 2,516 2,501 2,578 Total net assets $593,493 $633,197 $686,196

Total liabilities and net assets $870,742 $892,663 $993,644

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Management Discussion of Historical Financial Results

Historical June 30, 2015 Compared to Historical June 30, 2014. For the fiscal year ended June 30, 2015 TNMC had total operating revenue of $985.4 million, an increase of $123.9 million over operating revenue of $861.5 million for the fiscal year ended June 30, 2014. For the fiscal year ended June 30, 2015, operating revenue was comprised of net patient service revenue of $936.8 million and other operating revenue of $48.6 million. The increase in revenue was primarily driven by an increase in inpatient discharges and hospital-based outpatient visits as TNMC experienced strong demand for many of its services. Additionally, for approximately 10 months of fiscal year ended June 30, 2015, Nebraska Medicine saw an increase in demand from patients with Blue Cross and Blue Shield of Nebraska (“BCBS”) health insurance, as one its primary competitors, CHI Health, lost its contract and “in network” status with BCBS. CHI Health and BCBS signed a new two-year contract that became effective July 15, 2015.

For the fiscal year ended June 30, 2015, TNMC had operating expenses of $928.3 million, an increase of $98.2 million compared to operating expenses of $830.1 million for the fiscal year ended June 30, 2014. TNMC experienced an increase in several expense categories, including an increase of $83.5 million in expenses related to employee compensation, from $350.6 million for fiscal year ended June 30, 2014 to $434.1 million for fiscal year ended June 30, 2015, due to employee increases to meet higher patient demand and implementation of new funds flow methodologies with the COM. Additionally, purchased services, supplies and other expense increased by $20.7 million, from $417.2 million for fiscal year ended June 30, 2014 to $437.9 million for fiscal year ended June 30, 2015.

Based on changes in operating revenues and operating expenses, for the fiscal year ended June 30, 2015, operating income was $57.1 million (5.8% operating margin) compared to $31.3 million (3.6% operating margin) for fiscal year ended June 30, 2014.

For the fiscal year ended June 30, 2015, TNMC had non-operating income of $11.2 million, an increase of $2.4 million compared to non-operating income of $8.8 million for fiscal year ended June 30, 2014 driven by changes in the market value of investments. For the fiscal year ended June 30, 2015, TNMC had excess income of $68.3 million, an increase of $28.1 million compared to excess of revenues over expenses of $40.2 million for fiscal year ended June 30, 2014.

Historical June 30, 2014 Compared to Historical June 30, 2013. For the fiscal year ended June 30, 2014 TNMC had total operating revenue of $861.5 million, an increase of $58.8 million over operating revenue of $802.7 million for the fiscal year ended June 30, 2013. For the fiscal year ended June 30, 2014, operating revenue was comprised of net patient service revenue of $807.8 million and other operating revenue of $53.7 million. The increase in revenue was primarily driven by an increase in inpatient discharges and hospital-based outpatient visits as TNMC experienced strong demand for many of its services.

For the fiscal year ended June 30, 2014, the TNMC had operating expenses of $830.1 million, an increase of $42.2 million compared to operating expenses of $787.9 million for the fiscal year ended June 30, 2013. TNMC benefited from an initiative to improve expenses throughout the organization to better align its resources and reduce costs for employee compensation by $1.7 million, from $352.3 million for fiscal year ended June 30, 2013 to $350.6 million for fiscal year ended June 30, 2014. Offsetting this was an increase in purchased services, supplies and other of $46.8 million from $370.4 million for fiscal year ended June 30, 2013 to $417.2 million for fiscal year ended June 30, 2014 due to increases in consulting to support strategic initiatives and increases in pharmaceutical and medical supply expenses resulting from increased utilization.

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Sustainable Margin Improvement. In 2013, the Obligated Group worked with a consulting firm to evaluate opportunities to improve and sustain operating margin into the future. The results identified several major opportunities to improve operations, including clinical effectiveness, throughput and productivity, corporate and shared services, supply chain and purchased services, physician productivity and incentives, revenue cycle, workforce optimization and clinical program development.

Based on changes in operating revenues and operating expenses, for the fiscal year ended June 30, 2014, operating income was $31.3 million (3.6% operating margin) compared to $14.8 million (1.8% operating margin) for fiscal year ended June 30, 2013.

For the fiscal year ended June 30, 2014, TNMC had non-operating income of $8.8 million, a decline of $1.2 million compared to non-operating income of $10.0 million for fiscal year ended June 30, 2013, due to a $2.3 million gain on the sale of an investment held recognized in 2013. For the fiscal year ended June 30, 2014, TNMC had excess of revenues over expenses of $40.2 million, an increase of $15.3 million compared to excess income of $24.9 million for fiscal year ended June 30, 2013.

Pro Forma Financial Information

As set forth below, the unaudited Proforma Statements of Operations and unaudited Proforma Balance Sheets for the Obligated Group (the “Proforma Financial Statements”) aggregate the Statements of Operations and Balance Sheets of each Member of the Obligated Group as if they were affiliated for fiscal year ended June 30, 2015 and the eleven months ended May 31, 2015 and 2016. The unaudited Proforma Financial Statements for the fiscal year ended June 30, 2015 and the 11 month periods ended May 31, 2015 and 2016 were derived from each Member of the Obligated Group’s internal unaudited financial statements. The unaudited Proforma Financial Statements are not presented in accordance with generally accepted accounting principles as they are in conformity with the SIA. The unaudited summary of financial information for the 11 month period ended May 31, 2016 should not be considered indicative of the results that may be expected for any other interim period or for the full fiscal year.

As mentioned previously, effective July 1, 2014, TNMC and UNMCP entered into an Interim Clinical Enterprise Integration and Management Agreement, which integrated the operations of TNMC, BMC and UNMCP under common management doing business under the trade name Nebraska Medicine. UNMCP appointed TNMC to provide management services. The operational integration of the organizations provided a number of benefits, including consolidation of TNMC’s, BMC’s and UNMCP’s financial management. Since July 1, 2014, the internal financial statements presented to the governing board for reporting purposes have been proforma consolidations inclusive of TNMC and all subsidiaries except Clarkson College.

The Proforma Financial Statements are comprised of the historical financial statements of TNMC (which includes BMC) and the historical financial statements of UNMCP and exclude the results of Clarkson College for consistency with internal financial statements presented to the governing board. Clarkson College will continue to be controlled by TNMC. Certain assets and liabilities of UNMCP have been excluded, as in accordance with the SIA these assets and liabilities transferred to the UNMC Science and Research Fund, a Nebraska nonprofit corporation (“SRF”) on June 30, 2016.

The unaudited Pro Forma Financial Statements are summaries only and should be read in connection with the audited consolidated financial statements of TNMC included as Appendix B-1 and the audited consolidated financial statements of UNMCP included as Appendix B-2. The audited consolidated financial statements include affiliates that are not Members of the Obligated Group and assets subsequently transferred to SRF. In aggregate, net of the effect of intercompany eliminations and reclassifications, the affiliates of TNMC, BMC and UNMCP that are not Members of the Obligated

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Group including the SRF assets accounted for approximately $17.3 million (approximately 1.5%) of the total unrestricted revenue and had excess of revenue over expenses of approximately $2.6 million for the year ended June 30, 2015. As of June 30, 2015, these affiliates had total assets of approximately $142.3 million (approximately 12.5%) of the historical total consolidated assets of TNMC and UNMCP.

NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are included in the unaudited Pro Forma Financial Statements set forth below. NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are not Members of the Obligated Group.

Pro Forma Statements of Operations Obligated Group and Affiliates1 (dollars in thousands) UNAUDITED

Fiscal Year Eleven Months Ending Ended May 31 June 30, 2015 2015 2016

Unrestricted revenue Patient service revenue, net $1,184,888 $1,076,560 $1,191,494 Provision for uncollectible accounts (87,032) (79,354) (87,073) Net patient service revenue $1,097,856 $997,206 $1,104,421 Other revenue 50,950 40,891 74,636 Total unrestricted revenue $1,148,806 $1,038,097 $1,179,057

Operating expenses Salaries, wages and benefits $ 588,513 $529,065 $595,177 Purchased services, supplies, other 443,335 401,155 466,115 Clinic contribution expense 2,825 3,534 2,535 Depreciation and amortization 51,193 46,675 54,758 Impairment of long-lived assets 777 725 - Interest 3,143 3,215 3,707 Gain on sale of property and equip. (17) (54) (35) Total operating expenses $1,089,769 $984,315 $1,122,257

Operating income $59,037 $53,782 $56,800

Nonoperating income Other nonoperating income 11,190 9,654 6,608 Total nonoperating income $11,190 $9,654 $6,608

Excess of revenues over expenses $70,227 $63,436 $63,408

1 Includes the Obligated Group, NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are not Members of the Obligated Group.

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Pro Forma Balance Sheets of Obligated Group and Affiliates1* (dollars in thousands) UNAUDITED

June 30, May 31, 2015 2016 Assets Current assets Cash and cash equivalents $150,303 $156,053 Short-term investments 155,652 157,183 Patient accounts receivable, net 181,747 205,261 Other current assets 53,959 57,811 Total current assets $541,661 $576,308

Long-term investments $36,033 $36,551 Assets held by trustee 6,559 - Total assets limited as to use $42,592 $36,551 Property and Equipment, net $401,725 $559,758 Other assets 25,266 24,620 Total Noncurrent Asset $469,583 $620,929 Total Assets $1,011,244 $1,197,237

Liabilities Current liabilities Current portion of LT debt/cap. leases $11,825 $7,175 Short-term loan - 130,000 Payable to affiliates 18,923 15,310 Line of credit 15,000 14,810 Accounts payable 63,691 61,762 Other current liabilities 139,044 148,778 Total current liabilities $248,483 $377,835

Noncurrent liabilities LT debt and capital leases $66,778 $57,052 Other long-term liabilities 9,165 12,076 Total noncurrent liabilities $75,943 $69,128 Total liabilities $324,426 $446,963

Net assets Unrestricted $675,063 $737,868 Temporarily restricted 10,108 10,759 Permanently restricted 1,647 1,647 Total net assets $686,818 $750,274 Total liabilities and net assets $1,011,244 $1,197,237

1 Includes the Obligated Group, NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are not Members of the Obligated Group. * Excludes the assets and liabilities of UNMCP transferred to SRF on June 30, 2016.

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Management Discussion of Obligated Group Pro Forma Financial Information

Year Ended 6/30/2015 Proforma Obligated Group Compared to Year Ended 6/30/2015 Historical. The primary differences between the audited Historical Financial Statements and the unaudited Proforma Financial Statements are:

• Inclusion of revenues and income of UNMCP: For the year ended June 30, 2015, UNMCP had total operating revenues of $179.6 million, comprised of $161.1 million in net patient service revenue and $18.5 million in other contractual revenue. UNMCP had a total operating loss of $25.4 million due to operating expenses that exceeded operating revenues and the classification of support payments from TNMC. UNMCP recognized $25.2 million in non- operating income, comprised of a $23.8 million transfer from TNMC to support UNMCP’s financial obligations to the COM under the Funding Agreement, which are included in operating expenses.

• Elimination of Intercompany Transactions: Historically, there have been a number of transactions between TNMC and UNMCP, as TNMC has been responsible for funding for UNMCP’s financial obligations relating to the COM under the Funding Agreement. For the fiscal year ended June 30, 2015, in accordance with the SIA, TNMC recorded an expense of $23.8 million, and UNMCP recorded non-operating revenue of $23.8 million, which have been eliminated in the proforma Obligated Group financial statements along with an intercompany payable and receivable.

• Elimination of assets transferred to SRF: At June 30, 2015, UNMCP had approximately $113.3 million in unrestricted liquid assets that have since been transferred to SRF on June 30, 2016, in accordance with the SIA. Therefore, $113.3 million has been eliminated from the proforma Obligated Group balance sheet and ($0.2) million in related operating losses on the assets subsequently transferred to SRF.

• Elimination of Clarkson College: For the year ended June 30, 2015, Clarkson College had $15.0 million in operating revenue and $17.0 million in operating expenses, resulting in a $2.0 million operating loss. Additionally, over the same period, Clarkson College recognized a transfer from TNMC of $2.6 million. The revenues, expenses and income of Clarkson College have been eliminated from the year ended June 30, 2015 proforma Obligated Group financial statements.

Proforma Financial Statements 11- Months Ended May 31, 2016 Compared to 11- Months Ended May 31, 2015. For the 11-months ended May 31, 2016 the Obligated Group had total operating revenue of $1,179.1 million an increase of $141.0 million over operating revenue of $1,038.1 million for the 11-months ended May 31, 2015. For the 11-months ended May 31, 2016, operating revenue was comprised of net patient service revenue of $1,104.4 million and other operating revenue of $74.7 million. The increase in net patient service revenue was primarily driven by an increase in inpatient discharges, hospital-based outpatient visits and physician clinic visits as the Obligated Group continued to experience strong demand for many of its services.

For the 11-months ended May 31, 2016, the Obligated Group had operating expenses of $1,122.3 million, an increase of $138.0 million over operating expenses of $984.3 million for the 11-months ended May 31, 2015. The Obligated Group experienced an increase in several expense categories, including an

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increase of $66.1 million in expenses related to employee compensation, as the number of physicians and non-physician employees increased to meet higher utilization of services. Additionally, pharmaceutical expenses increased by $36.9 million, or 41%, and medical and clinical supplies expenses increased by $15.1 million, or 14.5% due to increased patient activity and utilization of services as described above. A portion of the increase in pharmaceutical expense was due to high acquisition costs for drugs used to treat a rare, complex condition. The high pharmaceutical cost associated with the treatment of this complex condition is not expected to continue going forward. Operating income was $56.8 million (4.8% operating margin) compared to $53.8 million (5.2% operating margin) for the 11 months ended May 31, 2015.

For the 11-months ended May 31, 2016, the Obligated Group had non-operating income of $6.6 million, a slight decline of $3.1 million compared to the 11-months ended May 31, 2016 due to lower investment returns. For the 11-months ended May 31, 2016, the Obligated Group had excess income of $63.4 million which was unchanged from 11-months ended May 31, 2015.

Liquidity and Capital Resources. As of May 31, 2016, the Obligated Group had unrestricted cash and investments of $335.7 million, comprised of $313.2 million in cash and short-term investments and $22.5 million in unrestricted long-term investments. This represents an increase of $7.3 million since fiscal year ended June 30, 2015, when the Obligated Group had unrestricted cash and investments of $328.4 million, comprised of $306.0 million in cash and short-term investments and $22.4 million in unrestricted long-term investments. As of May 31, 2016, days cash on hand was 105.7.

Upon issuance of the Series 2016 Bonds, unrestricted liquidity is expected to increase by $83.6 million due to reimbursement for capital expenditures on a number of projects.

Historically, the Obligated Group has utilized an investment policy, but is in the process of creating a new investment policy for the Parent working with its investment advisors and the Finance Committee of the Board of Directors. The Obligated Group’s investments have been conservatively invested in short-term to medium-term high quality fixed income securities and large-cap equity securities all with immediate liquidity. The new investment policy will allow the Obligated Group to diversify its investments modestly in an attempt to achieve a higher return, but will continue to primarily be allocated to high quality fixed income and large-cap equity securities. The Obligated Group has never invested in alternative investments such as private equity or hedge funds and is not recommending a change to this practice in the new investment policy.

Strategy. Nebraska Medicine is in the process of implementing a number of important strategic initiatives that incorporate a focus on the delivery of high quality, patient centered care that is value driven and cost effective. Like other academic health systems, the Obligated Group’s clinical service portfolio includes large programs dedicated to complex episodic care, as well as community-based primary care services, that additionally supports the teaching and research mission of UNMC.

As the health care industry moves away from the traditional fee for service model of payment to one that rewards physicians for retaining quality outcomes while lowering costs, the Obligated Group has developed a strategic framework to guide strategic planning and addresses the need to sustain and grow the strong clinical programs within both the traditional episodic care and population health management domains.

As described below, the Obligated Group has created a number of strategic networks and partnerships that focus on population health management and accountable care, and continually examines potential local, regional and national partnerships to collaborate on strategies to improve clinical quality

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and patient satisfaction, reduce costs and increase value, while also securing patient referrals and growing market share.

Nebraska Health Network. Nebraska Health Network is a partnership between NHP, PHO, and MHP, Methodist Health System Inc.’s PHO, and their affiliated physicians and hospitals. The Nebraska Health Network is a physician-led accountable care network that features a broad network of over 1,200 specialists and primary care providers dedicated to improving the health of all patients by delivering high- quality, affordable and accessible health services throughout Nebraska and western Iowa. The Nebraska Health Network focuses on partnerships and products with insurers and with individual employers to create financial predictability for employers and create new revenue streams for physicians. Additionally, Nebraska Health Network expects to provide employers with the opportunity to customize an approach to health care benefits that will keep employees healthy while lowering organizational health care expenditures.

In September 2015, Nebraska Health Network announced an agreement with BCBS to provide comprehensive treatment for patients in Omaha and the surrounding areas. Under this arrangement, Nebraska Health Network physicians are rewarded financially if they perform better than projected on patient experience, outcomes and costs. Additionally, a higher emphasis is placed on keeping patients healthy by proactively coordinating care and reducing waste and unnecessary medical expenditures, and quality metrics, such as accessibility, care coordination, medication monitoring and readmission management, ensuring that patient care remains at the forefront while receiving care. See the caption “OTHER PARTNERSHIPS AND AFFILIATIONS—Nebraska Health Network” in this Appendix A.

Enhance Health Network. The Obligated Group is a founding partner and active participant with Enhance Health Network, a for-profit alliance of 59 independent health systems and nearly 3,000 professional providers across Nebraska, Iowa and Missouri to jointly develop capabilities and share services and best practices to lower costs through economies of scale, reduced inefficiencies and improved care. Enhance Health Network provides an active and ongoing program to evaluate and modify the clinical practice patterns of the physician participants to create a high degree of interdependence and collaboration among the physicians to control costs and ensure quality. Initiatives of Enhance Health Network include joint purchasing of drugs, supplies, and physician preference items; regional sharing and optimizing of staffing resources, including shared administrative support services; and effective cost management initiatives, including joint purchasing of information technology infrastructure and software. See the caption “OTHER PARTNERSHIPS AND AFFILIATIONS—Enhance Health Network” in this Appendix A.

Relationship with Madonna. In November 2014, UNMC and the Obligated Group announced an agreement with Madonna to provide physician and academic services at the new Madonna rehabilitation and long-term care hospital being built west of Village Pointe in Omaha. The new hospital, scheduled to open in fall of 2016, is a 110-bed facility with the full continuum of inpatient rehabilitation care that can serve adult and pediatric patients with traumatic brain injuries, spinal cord injuries, stroke and neurological diseases. Madonna’s Omaha campus also will become the primary training site for a new UNMC supported residency program in Physical Medicine and Rehabilitation (“PM&R”).

In April 2014, Madonna established a long-term care hospital and inpatient rehabilitation services at the Bellevue Medical Center with clinical assistance from UNMC and the Obligated Group. The affiliation agreement provides a wider range of clinical services, as well as academic programs, when Madonna opens its new Omaha campus in the fall of 2016.

Value Creation. The Obligated Group has defined a process for ensuring that value-creation is a core focus and priority, including building substantial cost containment and revenue enhancement into

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the budgeting process, creating a management incentive program to correlate performance with outcomes, revising and updating a corporate balanced scorecard to monitor progress with routine frequency, creating an operations balanced scorecard to detail specific high-priority initiatives and creating a margin improvement committee, consisting of senior executives, to track progress.

Acquisition of Internal Medical Associates Clinic. On July 1, 2016, TNMC assumed operations of Internal Medical Associates Clinic extending its primary care services to Grand Island, Nebraska and the surrounding community. The Tri-Cities area, consisting of Kearney, Hastings and Grand Island, is the largest concentration of population in the state outside of Omaha and Lincoln. More than 10,500 patients are served annually at the primary care clinic, which includes six internal medicine physicians, one rheumatologist and four advanced practice providers. Current Internal Medical Associates Clinic’s patients will have online access to their medical records through the Obligated Group’s electronic health record system. TNMC does not plan or expect to make any staffing changes, other than enrolling current staff members as employees.

Capital Expansion Plans. Capital expenditures in fiscal year 2017 are projected to total approximately $172 with approximately $73 million committed to the completion of the Lauritzen Outpatient Center and FPBCC. In addition to the projects described at the caption “THE PROJECTS” in this Appendix A, the Obligated Group maintains a long-term capital plan to continually invest in facilities to meet patient needs. Certain priorities include the renovation of the infrastructure of certain facilities, investment in information technology, acquisition of clinical equipment and expansion of primary care services.

Sterile Processing Center. TNMC is currently developing a state-of-the-art sterile processing center (“SPC”), located within the immediate proximity of the Nebraska Medical Center Campus. The SPC will serve as the central sterilization plant for the Obligated Group’s clinical facilities. The estimated size of the SPC is 35,000 square feet and is expected to have total construction costs of approximately $25 million to be incurred by a third-party developer. TNMC expects to operate the facility, which will be subject to a long-term lease from this third-party developer.

Primary Care Expansion. To support population health management strategies and advent of value-based care, the Obligated Group plans to expand its primary care services to meet the current and future needs of its growing patient base. The Obligated Group plans to lease and operate new clinics and new primary care providers in its primary service area.

Accounting Policies

Management of the Obligated Group considers its critical accounting policies to be those that involve accounting issues requiring the exercise of the most significant judgments and estimates in the preparation of its financial statements. Some of these accounting policies include, but are not limited to, recognition of net patient service revenues, provisions for uncollectible accounts, and estimated professional liability reserves. Management relies on historical experience and other assumptions believed to be reasonable under the circumstances in making its estimates. Actual results could differ from those estimates.

The Obligated Group derives patient revenues from Medicare, Medicaid, managed care providers and other patient sources. Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from Medicare, Medicaid, managed care and other payers. Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The estimates of reimbursement amounts are made based on historical payment experience by payer modified to reflect management’s interpretation of the applicable laws, regulations and contract terms.

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Management of the Obligated Group continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms that result from contract renegotiations and renewals. Due to the complexities involved in these estimations of net revenue earned, there exists at least a reasonable possibility that recorded estimates will change by a material amount in the near future. Management of the Obligated Group provides for reasonable adjustments that may result from final settlements with these payers.

The Obligated Group’s estimates of uncollectible accounts primarily related to services provided to patients without insurance or those with high deductible amounts, are based upon management’s assessment of historical and expected net collections, business and economic conditions, trends in federal and state governmental health care coverage and other collection indicators. Adverse changes in payer mix, economic conditions or trends in federal and state governmental health care coverage could materially affect the actual collection of accounts receivable.

The Obligated Group operates in an environment of medical malpractice and professional liability risks. To address tort reform, the State enacted the Nebraska Hospital-Medical Liability Act, which placed a statutory ceiling on medical professional liability claims. Currently, the Act establishes a liability cap of $2,250,000 in medical malpractice cases against participating hospitals and physicians. In addition, the State established a pooled Patient Compensation Fund providing up to $400,000 coverage for individual settlements exceeding $100,000. The Obligated Group participates in the pooled fund, and as a result, are self-insured for the first $100,000 per claim filed after 1975. The Obligated Group is insured under a commercial insurance policy on a claims-made basis which provides limits of $1,000,000 per occurrence and $3,000,000 annual aggregate. The deductible is $250,000 per occurrence and in the aggregate. In the event that the current policy is not renewed or replaced with equivalent insurance, claims based on occurrences during its term, but reported subsequently, will be uninsured. Professional liability claims can fluctuate significantly due to time lags in initial reporting of claims. Management relies on the estimates of an outside firm that specializes in professional liability claims to estimate its exposure. Differences between the estimated and actual results can result in material adjustments to the recorded liability. The Obligated Group also carries excess coverage providing for $50,000,000 per occurrence and in the aggregate. See the caption “INSURANCE” in this Appendix A

The Financial Accounting Standards Board (FASB) has recently issued new accounting standards that may impact the Obligated Group’s financial statements. The standards that are expected to have the most significant impact on the Obligated Group’s financial statements include: Leases and Revenue Recognition.

The leases standard is effective for annual periods beginning after December 15, 2019. This will require that all leases, both operating and capital, longer than 12 months that meet the standard’s new test to be recognized on-balance sheet by recording a right of use asset and a corresponding liability. Additionally, this standard has altered the qualifications and judgments to identify whether certain lease transactions will be on or off balance sheet.

The Revenue Recognition standard is effective for annual periods beginning after December 15, 2018. This standard eliminates the transaction and industry specific revenue recognition guidance under current GAAP and replaces revenue recognition with a principle-based approach.

In addition, there will be additional enhancements that will result from the FASB’s Not for Profit financial reporting project which management believes will enhance the disclosures and reporting requirements in its financial statements.

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Debt Service Coverage

The following table sets forth for the fiscal years ended June 30, 2013, 2014 and 2015 the revenues reflected in the financial statements of TNMC available to pay debt service and the extent to which revenues covered maximum annual debt service requirements on the long-term indebtedness of TNMC outstanding during those fiscal years. The table also indicates the extent to which revenues available for debt service would provide coverage of maximum annual principal and interest payments on all long-term indebtedness that is expected to be reflected in the financial statements after the issuance of the Series 2016 Bonds. The debt service coverage is computed on a basis consistent with the computation of debt service under the Master Indenture and excludes debt service on operating leases. The summary should be read in conjunction with the financial statements of TNMC included as Appendix B-1 to the Official Statement. Reference is hereby made to such financial statements, including the notes thereto. There can be no assurance that TNMC will generate the revenues set forth below in subsequent years. TNMC is counterparty to one interest rate swap agreement, which will be terminated in conjunction with the issuance of the Series 2016 Bonds.

Fiscal Year Ended June 30, ($ in thousands) TNMC Obligated

Group1 2015 2013 2014 2015 Pro Forma

Excess of revenues over expenses $24,884 $40,156 $68,250 $70,227 Plus: Depreciation and amortization 54,462 52,629 52,129 51,193 Interest expense 4,222 3,940 3,383 3,143 Net Income available for debt service $83,568 $96,725 $123,762 $124,563

Proforma maximum annual long-term debt service2 $18,460 $18,460 $18,460 $18,460* Pro forma maximum annual long-term debt service coverage ratio 4.5x 5.2x 6.7x 6.7x

1 Includes NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are not Members of the Obligated Group. 2 Includes the debt indicated in the Pro Forma column of the Capitalization table under the heading “Historical and Pro Forma Capitalization” below. Also includes debt service on 20% of the NOH Debt guaranteed by TNMC as described at the caption “OTHER PARTNERSHIPS AND AFFILIATIONS—Nebraska Orthopaedic Services, Inc. and Nebraska Orthopaedic Hospital, LLC” in this Appendix A. * Preliminary; subject to change.

Historical and Pro Forma Capitalization

The following table sets forth the capitalization of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 and pro forma capitalization of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 assuming the issuance of the Series 2016 Bonds.

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Capitalization

(dollars in thousands)

As of Pro Forma May 31, 2016 Total Debt1

Line of Credit $14,810 $14,810 Current Loan – Bellevue Purchase 130,000 0 Debt Obligation payable to 2019 1,338 1,338 Capital Lease payable to 2023 4,084 4,084 Capital Lease Obligation to 2024 41,947 0 Capital Lease Obligation to 2024 16,858 0 Series 2016 Bonds* 0 280,025 Total $209,037 $300,257

Net Assets2 $737,868 $737,868

Total Capitalization $946,905 $1,038,125

Long-Term Debt to Capitalization 22.1% 28.9%

* Preliminary; subject to change. 1 Includes both current and long-term portions but does not include TNMC’s guaranty of the NOH Debt described at the caption “OTHER PARTNERSHIPS AND AFFILIATIONS—Nebraska Orthopaedic Services, Inc. and Nebraska Orthopaedic Hospital, LLC” in this Appendix A. 2 Excludes temporarily and permanently restricted Net Assets.

Days Cash on Hand

The following table sets forth the days cash on hand of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 and days cash on hand of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 assuming the issuance of the Series 2016 Bonds, including reimbursement from Series 2016 Bond proceeds for capital expenditures made with cash in the amount of $83.6 million.

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Days Cash on Hand

(dollars in thousands) As of Pro Forma* May 31, 2016

Cash and cash equivalents $156,053 $239,650 Short-term investments 157,183 157,183 Unrestricted Board-designated investments 22,457 22,457 Total1 $335,693 $419,290

Operating expenses and interest 1,122,257 1,122,257 Less: Depreciation and amortization 54,758 54,758 Total $1,067,499 $1,067,499

Average Daily Net Operating Expenses $3,177 $3,177

Days Cash on Hand 105.7 132.0

* Preliminary; subject to change 1 Includes reimbursement from Series 2016 Bond proceeds of capital expenditures made with cash in the amount of $83.6 million.

The following table sets forth the cash to debt of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 and the cash to debt of the Obligated Group and NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. as of May 31, 2016 assuming the issuance of the Series 2016 Bonds, including reimbursement from Series 2016 Bond proceeds for capital expenditures made with cash in the amount of $83.6 million.

Cash to Debt

(dollars in thousands) As of Pro Forma* May 31, 2016

Cash and cash equivalents $156,053 $239,650 Short-term investments 157,183 $157,183 Unrestricted Board-designated investments 22,457 22,457 Total $335,693 $419,290

Short-term Debt (including Line of Credit) $144,810 $14,810 Current Portion – Long-Term Debt 7,175 687 Long-Term Debt 57,052 284,760 Total $209,037 $300,257

Cash to Debt 160.6% 139.6%

* Preliminary; subject to change

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INSURANCE

The Obligated Group has maintained a comprehensive commercial property and casualty insurance program since its inception. Specifically, the Obligated Group maintains the following coverage:

• Hospital professional and general liability coverage of $1,000,000 per occurrence and $3,000,000 in the aggregate. Additionally, the Members of the Obligated Group are qualified participants under the Nebraska Hospital-Medical Liability Act discussed below.

• Large deductible workers’ compensation policy with a per claim retention of $300,000 and an aggregate stop-loss based on audited payroll (current stop-loss is at $4,000,000).

• Directors and officers liability coverage with an annual aggregate limit of $20,000,000.

• Commercial umbrella/excess liability policy with a $50,000,000 limit.

The state of Nebraska has adopted the Nebraska Hospital-Medical Liability Act (the “Medical Liability Act”), which limits recovery from any and all qualifying health care providers and the Excess Liability Fund (as further described below) for any incidents occurring after December 31, 2014 resulting in injury or death of a patient covered by the Medical Liability Act to not more than $2,250,000. As health care providers qualified under the Medical Liability Act, the Members of the Obligated Group are not liable to any patient or his or her representative who is covered by the Medical Liability Act for an amount in excess of its current deductible of $250,000 for all claims or causes of action arising from any occurrence during the period that the Medical Liability Act is effective with respect to such patient. In order to qualify under the Medical Liability Act, health care providers must maintain minimum levels of insurance. The Obligated Group has been continuously qualified under the Medical Liability Act. Additionally, the Obligated Group maintains a “wrap-around endorsement” on its professional liability insurance policy which would respond to a claim should a patient opt out of the Medical Liability Act, or should such Act be found unconstitutional at a future date. However, the Nebraska Supreme Court held the Act constitutional in its May 16, 2003 opinion in the case of Gourley v. Nebraska Methodist Health System.

Management of the Obligated Group routinely monitors claims and litigation activity. Management of the Obligated Group believes that all material claims and litigation currently outstanding are adequately covered by liability insurance, and where subject to deductibles or self-insured retention, adequate reserves are in place so that the ultimate result of any such claims or actions will not have a materially adverse effect upon the financial condition of the organization.

LITIGATION

As providers of health care services, the Members of the Obligated Group are subject to various claims and litigation arising in the ordinary course of business. The of such claims and litigation is not limited to, but generally falls into, the following categories: professional liability, general liability, workers’ compensation and other employment related claims. Health care providers may from time to time be subject to claims and litigation which fall outside those general categories. A class action lawsuit (Ronald Duros, Plaintiff, v. The Nebraska Medical Center and Clarkson Regional Health Services, Defendants: Case No. 8:16-cv-220) was recently filed in the United States District Court for the District of Nebraska alleging improper billing practices by TNMC and CRHS, including but not limited to seeking payment from the patient and his auto insurer instead of the applicable health insurance company, placing unlawful liens upon the patient’s property and third-party claims, turning the collection of such

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bills over to a collection agency and/or reporting the patient to credit bureaus. The class was never certified and the lawsuit has been dismissed, but is subject to being refiled. Although the case was in the early stages of review and discovery, management of the Members of the Obligated Group, in consultation with counsel retained to defend the case, believe that there is no validity to the plaintiff’s allegations. In addition, a case by a patient (Stacey L. Komar, Plaintiff, v. the State of Nebraska, the Board of Regents of the University of Nebraska, and Nebraska Medicine, Defendants: Case No. CI 1561- 96) alleging a physician inappropriately accessed protected health information was recently dismissed by the District Court of Douglas County, Nebraska and is on appeal in the Nebraska Court of Appeals.

Except for those cases discussed in the previous paragraph, there is no litigation pending or, to the best knowledge of management of the Members of the Obligated Group, threatened, except litigation and claims related to professional liability, general liability, workers’ compensation and employment-related claims, in which the estimated probable judgments and estimated costs of defense, in the opinion of management of the Members of the Obligated Group in consultation with counsel, will be entirely within the limits of the Members of the Obligated Group’s insurance coverage. Furthermore, there is no litigation or proceedings pending or threatened other than those described above, which would, in the opinion of management of the Members of the Obligated Group, have a materially adverse impact on the financial condition of the organization.

WEBSITE INFORMATION

Nebraska Medicine maintains a public website on which it periodically posts certain information, including information regarding its services, its partners, its accreditations and other news (available at: http://www.nebraskamed.com/). None of the information included on Nebraska Medicine’s website is incorporated by reference into the Official Statement.

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APPENDIX B-1

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE NEBRASKA MEDICAL CENTER

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THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidated Financial Statements June 30, 2015 and 2014 (With Independent Auditors’ Report Thereon)

THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA

Table of Contents

Page

Independent Auditors’ Report 1

Financial Statements:

Consolidated Balance Sheets – June 30, 2015 and 2014 3

Consolidated Statements of Operations – Years ended June 30, 2015 and 2014 4

Consolidated Statements of Changes in Net Assets – Years ended June 30, 2015 and 2014 5

Consolidated Statements of Cash Flows – Years ended June 30, 2015 and 2014 6

Notes to Consolidated Financial Statements 7

Exhibit I – Consolidating Balance Sheet – June 30, 2015 32

Exhibit II – Consolidating Statement of Operations – Year ended June 30, 2015 33

Exhibit III – Consolidating Statement of Changes in Net Assets – Year ended June 30, 2015 34

Exhibit IV – Consolidating Balance Sheet – June 30, 2014 35

Exhibit V – Consolidating Statement of Operations – Year ended June 30, 2014 36

Exhibit VI – Consolidating Statement of Changes in Net Assets – Year ended June 30, 2014 37

KPMG LLP Suite 300 1212 N. 96th Street Omaha, NE 68114-2274

Suite 1600 233 South 13th Street Lincoln, NE 68508-2041

Independent Auditors’ Report

The Board of Directors The Nebraska Medical Center:

We have audited the accompanying consolidated financial statements of The Nebraska Medical Center and Affiliates, which comprise the consolidated balance sheets as of June 30, 2015 and 2014, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

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

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Clarkson College, a consolidated affiliate, as of and for the year ended June 30, 2015, which statements reflect total assets constituting 1.7% and total revenue constituting 1.5% of the related consolidated totals. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Clarkson College, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

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

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

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

Opinion In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Nebraska Medical Center and Affiliates as of June 30, 2015 and 2014, and the results of their operations and their cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

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

Omaha, Nebraska October 19, 2015

2

THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidated Balance Sheets June 30, 2015 and 2014 (Dollars in thousands)

Assets 2015 2014 Current assets: Cash and cash equivalents $ 132,392 113,575 Short-term investments 155,652 153,906 Patient accounts receivable, net of allowance for uncollectible accounts of $38,924 and $36,687 in 2015 and 2014, respectively 156,057 126,251 Other receivables 23,627 15,058 Inventories and prepaid expenses 22,921 16,534 Other current assets 1,289 2,136 Total current assets 491,938 427,460 Assets limited as to use: Long-term investments 54,750 53,153 Assets held by trustee 6,559 6,626 Total assets limited as to use 61,309 59,779 Property and equipment, net 415,010 378,289 Other assets: Deferred debt issuance costs 287 375 Investment in joint ventures 12,284 10,818 Notes receivable 438 1,025 Other assets 12,378 14,917 Total other assets 25,387 27,135 Total assets $ 993,644 892,663 Liabilities and Net Assets Current liabilities: Current portion of long-term debt and capital lease obligations $ 12,054 12,484 Accounts payable 60,226 47,499 Salaries, wages, and vacation payable 55,175 43,407 Accrued interest payable 291 351 Payable to affiliates 40,915 21,608 Line of credit 15,000 11,045 Other accrued liabilities 33,400 25,815 Estimated third-party payor settlements 11,255 2,834 Total current liabilities 228,316 165,043 Other long-term liabilities 6,231 10,104 Interest rate swap liability 1,088 855 Long-term debt and capital lease obligations, excluding current portion 71,813 83,464 Total liabilities 307,448 259,466 Net assets: Unrestricted 671,878 618,383 Temporarily restricted 11,740 12,313 Permanently restricted 2,578 2,501 Total net assets 686,196 633,197 Total liabilities and net assets $ 993,644 892,663

See accompanying notes to consolidated financial statements.

3 THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidated Statements of Operations Years ended June 30, 2015 and 2014 (Dollars in thousands)

2015 2014 Unrestricted revenue, gains, and other support: Patient service revenue, net of contractual adjustments and discounts $ 1,012,190 869,756 Provision for uncollectible accounts 75,411 61,978 Net patient service revenue 936,779 807,778 Rental income and other support 34,492 39,248 Tuition and fees 14,088 14,429 Total unrestricted revenue, gains, and other support 985,359 861,455 Operating expenses: Salaries and wages 359,310 282,640 Employee benefits 74,790 68,005 Purchased services, supplies, and other 437,927 417,232 Clinic contribution expense — 5,291 Depreciation and amortization 52,129 52,629 Impairment of long-lived assets 777 171 Interest 3,383 3,940 (Gain) loss on sale of property and equipment (15) 237 Total operating expenses 928,301 830,145 Operating income 57,058 31,310 Other income (loss): Investment income 6,446 6,407 Equity in net income of joint venture 5,355 2,758 Interest rate swap fair value adjustment (233) (855) Other (376) (300) Total other income, net 11,192 8,010 Excess of revenue over expenses before noncontrolling interest 68,250 39,320 Noncontrolling interest in losses of consolidated subsidiary — 836 Excess of revenue over expenses 68,250 40,156 Other changes in unrestricted net assets: Capital distributions to sponsors (12,000) (12,000) Change in pension accounts (1,310) 12,582 Change in unrealized gains and losses on investments, net (2,298) 3,141 Transfers to affiliated entities (183) — Contributions used for purchase of property and equipment 1,055 12 Matching college grants (19) (13) Redemption of Bellevue Medical Center shares — (14,570) Other — 51 Increase in unrestricted net assets $ 53,495 29,359

See accompanying notes to consolidated financial statements.

4 THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidated Statements of Changes in Net Assets Years ended June 30, 2015 and 2014 (Dollars in thousands)

Temporarily Permanently Unrestricted restricted restricted Total Balance, June 30, 2013 $ 589,024 10,908 2,516 602,448 Excess of revenue over expenses 40,156 — — 40,156 Capital distributions to sponsors (12,000) — — (12,000) Change in pension accounts 12,582 — — 12,582 Restricted gifts and grants — 1,071 (15) 1,056 Change in unrealized gains and losses on investments, net 3,141 484 — 3,625 Contributions for the purchase of property and equipment 12 — — 12 Restricted interest and investment income — 780 — 780 Net assets released from restrictions for use in operations — (930) — (930) Matching College grants (13) — — (13) Redemption of Bellevue Medical Center shares (14,570) — — (14,570) Other 51 — — 51 Increase in net assets 29,359 1,405 (15) 30,749 Balance, June 30, 2014 618,383 12,313 2,501 633,197 Excess of revenue over expenses 68,250 — — 68,250 Capital distributions to sponsors (12,000) — — (12,000) Change in pension accounts (1,310) — — (1,310) Restricted gifts and grants — 856 77 933 Transfers to affiliated entities (183) — — (183) Change in unrealized gains and losses on investments, net (2,298) 174 — (2,124) Contributions for the purchase of property and equipment 1,055 (880) — 175 Restricted interest and investment income — 302 — 302 Net assets released from restrictions for use in operations — (1,025) — (1,025) Matching College grants (19) — — (19) Increase in net assets 53,495 (573) 77 52,999 Balance, June 30, 2015 $ 671,878 11,740 2,578 686,196

See accompanying notes to consolidated financial statements.

5 THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidated Statements of Cash Flows Years ended June 30, 2015 and 2014 (Dollars in thousands)

2015 2014 Cash flows from operating activities: Increase in net assets $ 52,999 30,749 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation and amortization 52,129 52,629 Amortization of deferred debt issuance costs 88 88 (Gain) loss on sale of property and equipment (15) 237 Provision for uncollectible accounts 75,411 61,978 Equity in net income of joint venture (5,355) (2,758) Cash received from joint ventures 3,889 1,877 Noncontrolling interest in losses of consolidated subsidiary — (836) Impairment of long-lived assets 777 171 Restricted gifts and grants (933) (1,056) Contributions for the purchase of property and equipment (175) (12) Redemption of Bellevue Medical Center Shares — 14,570 Capital distributions to sponsors 12,000 12,000 Interest rate swap fair value adjustment 233 855 Restricted interest and investment income (302) (780) Realized and unrealized losses on investments, net 93 (5,444) Change in pension accounts 1,310 (12,582) Matching college grants 19 13 Changes in assets and liabilities: Patient accounts receivable (105,217) (64,325) Other receivables (12,646) (3,444) Inventories and prepaid expenses (6,387) 15 Other assets 685 1,596 Accounts payable 12,727 2,678 Salaries, wages, and vacation payable 11,768 8,491 Accrued interest payable (60) 50 Payable to affiliates 19,384 1,847 Other accrued liabilities 3,712 2,040 Estimated third-party payor settlements 12,498 (4,565) Net cash provided by operating activities 128,632 96,082 Cash flows from investing activities: Purchases of short-term investments (68,409) (82,663) Sales of short-term investments 67,396 85,708 Purchases of assets limited as to use (20,157) (35,381) Sales of assets limited as to use 18,627 27,798 Additions to property and equipment (89,437) (21,352) Net cash used in investing activities (91,980) (25,890) Cash flows from financing activities: Principal payments on long-term debt and capital lease obligations (12,444) (20,890) Payments received on notes receivable 2,363 1,054 Proceeds (repayments) from (on) line of credit 3,955 (3,926) Issuance of long-term debt 363 144 Redemption of Bellevue Medical Center Shares — (4,779) Capital distributions to sponsors (12,077) (14,424) Restricted contributions and interest received 5 1,061 Net cash used in financing activities (17,835) (41,760) Net increase in cash and cash equivalents 18,817 28,432 Cash and cash equivalents, beginning of year 113,575 85,143 Cash and cash equivalents, end of year $ 132,392 113,575 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 3,115 3,802 Supplemental disclosures of noncash items: During 2014, NMC entered into capital lease obligations of $1,334. $ — — In conjunction with distributions declared, receivable from affiliates of $8,425 were forgiven in lieu of repayments during 2014. — —

See accompanying notes to consolidated financial statements.

6 THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(1) Organization The Nebraska Medical Center and Affiliates (NMC) is a not-for-profit acute care hospital, which provides and promotes effective and efficient quality healthcare and related services, and supports the academic mission of the University of Nebraska Medical Center (UNMC). NMC operates the largest hospital in the area, which facilitates the clinical operations of both private and academic physicians, serving primarily eastern Nebraska and western Iowa.

NMC was formed on October 1, 1997 pursuant to a Joint Operating Agreement between the Board of Regents of the University of Nebraska (Board of Regents); Clarkson Regional Health Services, Inc. (CRHS); and Bishop Clarkson Memorial Hospital (Clarkson), integrating the operations and facilities of parties commonly referred to as University and Clarkson Hospitals (note 3).

The consolidated financial statements include the accounts of NMC, Bellevue Medical Center, LLC (BMC), Clarkson College (the College), NHS Orthopaedic Services, Inc., and Nebraska Health Partners, Inc. The College is an educational institution that maintains and offers programs of study including, but not limited to, degrees in nursing. BMC is a Nebraska limited liability company, formed originally between numerous physicians and physician groups, including UNMC Physicians (UNMCP) and NMC. The corporation is 100% owned by NMC as of June 30, 2014. BMC was formed to lease and operate an acute care hospital located in Bellevue, Nebraska. NHS Orthopedic Services, Inc. owns a minority interest in Nebraska Orthopedic Hospital (NOH) (note 14). Nebraska Health Partners, Inc. is a contracting entity, negotiating contracted rates with third party insurance carriers rates for NMC. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Effective July 1, 2014, NMC and UNMCP entered into an Interim Clinical Enterprise Integration and Management Agreement (the Interim Agreement). The Clinical Enterprise is defined as The Nebraska Medical Center, Bellevue Medical Center, and UNMCP. Under the terms of the agreement, UNMCP designates NMC as its agent and service provider to provide management services to UNMCP and to facilitate the financial, operational, and managerial integration of the Clinical Enterprise effective July 1, 2014. During the term of this agreement, the parties will continue to work toward finalization of the legal integration and creation of a permanent governance structure for the Clinical Enterprise. As part of the permanent integration, certain working capital items will be contributed to the Clinical Enterprise (note 11).

(2) Summary of Significant Accounting Policies The following is a summary of significant accounting policies of NMC. These policies are in accordance with U.S. generally accepted accounting principles.

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

7 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(b) Cash and Cash Equivalents Cash and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less when purchased.

(c) Inventories Inventories are stated at the lower of cost or market. Cost is determined principally using the first-in, first-out cost method.

(d) Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying consolidated balance sheets. Investments in common, collective trusts are recorded at net asset value (NAV) as a practical expedient to fair value. Investment income or loss (including realized gains and losses on investments, interest, and dividends) is included in the excess of revenue over expenses unless the income or loss is restricted by donor or law. Unrealized gains and losses on investments are excluded from the excess of revenue over expenses unless the investments are trading securities.

NMC periodically reviews its investment portfolio to determine whether any unrealized losses are other than temporary. Based on this evaluation, there were no other-than-temporary losses recognized in 2015 and 2014.

Short-term investments include investments with maturity dates in excess of one year as they are considered to be available for sale for use in day-to-day operations.

(e) Provision for Uncollectible Accounts The provision for uncollectible accounts is based upon management’s assessment of expected net collections considering the accounts receivable aging, historical collections experience, economic conditions, trends in healthcare coverage, and other collection indicators. Management periodically assesses the adequacy of the allowances for uncollectible accounts and contractual adjustments based upon historical write-off experience by payor category. The results of these reviews are used to establish the net realizable value of patient accounts receivable. NMC follows established guidelines for placing certain patient balances with collection agencies. Self-pay accounts are charged against the allowance for uncollectible accounts at the time of transfer to the collection agency. Deductibles and coinsurance are classified as either third-party or self-pay receivables on the basis of which party had the original financial responsibility, while the total gross revenue remains classified based on the primary payor at the time of service. There are various factors that can impact collection trends, such as changes in the economy, which in turn may have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through the emergency departments, the increased burden of copayments and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and the estimation process. Net patient accounts receivable have been adjusted to the estimated amounts expected to be collected and do not bear interest. During 2015 and 2014, net write-offs approximated $36,487 and $25,291, respectively.

8 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(f) Assets Limited as to Use Assets limited as to use primarily includes assets held by trustees under indenture agreements, designated assets set aside by the board of directors for future capital improvements, over which the board of directors retains control and may, at its discretion, subsequently use for other purposes; and assets whose use has been limited by donors to a specific time period or purpose.

(g) Property and Equipment Property and equipment acquisitions are recorded at cost. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method based on the following useful lives: Land improvements 10–40 years Buildings and improvements 5–40 years Equipment and furnishings 3–20 years

Equipment under capital lease obligations is amortized on the straight-line method over the shorter period of the lease term or their estimated useful lives. Equipment under capital lease obligations with a bargain purchase option or where title passes at the end of the lease are amortized over their estimated useful lives. Such amortization is included in depreciation and amortization in the accompanying consolidated statements of operations. Interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets. During 2015 and 2014, there was $302 and $197, respectively, of interest capitalized.

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

(h) Long-Lived Assets NMC reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

(i) Investment in Joint Ventures NMC has invested in various joint ventures and accounts for such investments using either the equity or the cost methods of accounting based on the relative percentage of ownership.

9 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(j) Deferred Debt Issuance Costs In connection with the issuance of Hospital Revenue Bonds and Educational Finance Authority Revenue Bonds, NMC and the College incurred certain financing costs, which are being amortized over the term of the bonds.

(k) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by NMC and the College has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by NMC and the College in perpetuity.

(l) Excess of Revenue over Expenses The consolidated statements of operations include excess of revenue over expenses. Changes in unrestricted net assets, which are excluded from excess of revenue over expenses, consistent with industry practice, include unrealized gains and losses on investments other than trading securities, permanent transfers of assets to and from affiliates for other than goods and services, contributions of long-lived assets (including assets acquired using contributions that by donor restriction were to be used for the purpose of acquiring such assets), donations to sponsors, redemption of BMC shares, and change in pension accounts.

(m) Net Patient Service Revenue Revenue is recorded during the period the services are provided. NMC has agreements with third-party payors that provide for payments to NMC at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per-diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined.

(n) Charity Care NMC provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because NMC does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue in the consolidated statements of operations. The cost of services and supplies furnished under NMC’s charity policy are estimated by using a patient-based cost accounting system and aggregated to $17,635 and $14,427 in 2015 and 2014, respectively. Discounts are given to patients that do not have third-party insurance and do not meet the guidelines for governmental assistance programs. Charity adjustments are based on balances remaining after the self-pay discount program is applied.

(o) Donor-Restricted Gifts Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received. Conditional promises to give and indications of intentions to give are reported at fair value

10 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

at the date the gift is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated asset. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the accompanying consolidated statements of operations as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions in the accompanying consolidated financial statements.

(p) Estimated Malpractice Costs The provision for estimated medical malpractice claims includes estimates of the ultimate costs for both reported claims and claims incurred but not reported.

(q) Income Taxes NMC and the College have been recognized as tax-exempt organizations by the Internal Revenue Service as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and are exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. BMC is a single member limited liability corporation owned by NMC and is considered a disregarded entity for federal and state income taxes. NHS Orthopedic Services, Inc. and Nebraska Health Partners, Inc. are for-profit corporations, which paid taxes of $2,445 and $1,227 in 2015 and 2014, respectively.

NMC has adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 provides specific guidance on how to address uncertainty in accounting for income tax assets and liabilities, prescribing recognition thresholds and measurement attributes. There were no uncertain tax positions at June 30, 2015 or 2014.

(r) Fair Value of Financial Instruments NMC utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. NMC determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 Level 1 Inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date  Level 2 Inputs: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly  Level 3 Inputs: Unobservable inputs for the asset or liability

11 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(3) Joint Operating Agreement On October 1, 1997, the Board of Regents and CRHS entered into a Joint Operating Agreement (the Agreement) forming NMC for the purpose of providing the highest quality patient care, education, and research. The Agreement integrated the operations and physical facilities of parties commonly referred to as University and Clarkson Hospitals. NMC is governed by a board of directors comprising six members appointed by CRHS and six members appointed by the Board of Regents.

The Agreement provided for the contribution of certain net assets by the Board of Regents and CRHS to NMC. NMC also entered into lease arrangements with CRHS and the Board of Regents providing for the lease of certain healthcare facilities. In addition, to the extent that sufficient funds are available as determined by the board of directors, annual cash flow distributions will be made to the Board of Regents and CRHS up to a specified amount determined by the board of directors. During both 2015 and 2014, NMC recorded distributions of $12,000. As of June 30, 2015 and 2014, $9,750 and $9,827 of distributions, respectively, remained unpaid. These balances are recorded in payable to affiliates in the accompanying consolidated balance sheets.

The Agreement provides for termination by the parties subject to complex provisions, including potential economic penalties and dispute resolution remedies. In connection with the Agreement, NMC also entered into an Academic Affiliation Agreement for Education and Research with the UNMC College of Medicine in support of the educational, research, and clinical mission of NMC (note 11).

(4) Noncontrolling Interest As of June 30, 2015 and 2014, the noncontrolling interest had unrestricted net assets of $0 and $0, respectively. In addition, the noncontrolling interest in losses of consolidated subsidiary was $0 and $836 for the years ended June 30, 2015 and 2014, respectively. During 2014, BMC redeemed the outstanding shares of the minority shareholders, resulting in NMC owning 100% of BMC as of June 30, 2014.

(5) Net Patient Service Revenue Revenue from the Medicare and Nebraska Medicaid programs accounted for approximately 25% and 6%, respectively, of NMC’s patient service revenue, net of contractual adjustments and discounts, for the year ended June 30, 2015, and 26% and 7%, respectively, of NMC’s patient service revenue, net of contractual adjustments and discounts, for the year ended June 30, 2014. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. The 2015 net patient service revenue decreased approximately $3,223 due to recording allowances required as a result of final settlements of prior years. The 2014 net patient service revenue increased approximately $1,755 due to the removal of allowances previously estimated that are no longer necessary as a result of final settlements of prior years.

NMC has also entered into payment agreements with certain commercial insurance carriers and health maintenance organizations. The basis for payment under these agreements includes discounts from

12 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

established charges, prospectively determined per-diem rates, fee schedules, and prospectively determined rates per discharge.

Patient service revenue, net of contractual allowances and discounts (but before the provision for bad debts), recognized in 2015 and 2014 from these major payor sources, is as follows: 2015 Third-party Total all payors Self-pay payors Patient service revenue, net of contractual adjustments and discounts $ 964,964 47,226 1,012,190 2014 Third-party Total all payors Self-pay payors Patient service revenue, net of contractual adjustments and discounts $ 817,989 51,767 869,756

(a) Medicare Inpatient acute care services and outpatient services rendered to Medicare program beneficiaries are paid at prospectively determined rates. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Certain inpatient nonacute services, defined capital, and medical education costs related to Medicare beneficiaries are paid on a cost reimbursement method. NMC is reimbursed for cost reimbursable items at a tentative rate with final settlement after a submission of annual cost reports by NMC and audits thereof by the Medicare fiscal intermediary.

(b) Nebraska Medicaid Inpatient services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. Certain outpatient services are reimbursed based on a percentage rate representing the average ratio of cost to charges discounted by 22%. Clinic services are paid based on fee schedule amounts.

13 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(6) Assets Limited as to Use The composition of assets limited as to use as of June 30, 2015 and 2014 is set forth in the following table. Investments are stated at fair value: 2015 2014 Long-term investments: Board-designated investments: Cash and cash equivalents $ 1,332 1,699 Fixed-income funds 2,369 2,387 Marketable equity securities 37,111 34,781 Total board-designated investments 40,812 38,867 Assets restricted by donor in long-term investments: Cash and cash equivalents 246 1,134 Commercial notes 4,216 4,287 Fixed-income funds 893 813 Marketable equity securities 8,583 8,052 Total assets restricted by donor in long-term investments 13,938 14,286 Total long-term investments $ 54,750 53,153 Assets held by trustee under indenture agreement: Cash and cash equivalents $ 6,559 6,626

Investment income and net gains included in the consolidated statements of operations for assets limited as to use and cash and cash equivalents comprise the following for the years ended June 30, 2015 and 2014: 2015 2014 Income: Investment income $ 4,415 4,588 Net realized gains and losses on sale of investments 2,031 1,819 $ 6,446 6,407 Other changes in unrestricted net assets: Change in unrealized gains and losses on investments, net $ 2,298 3,141

At June 30, 2015 and 2014, total unrealized losses on investments were $1,157 and $937, respectively. Investments with gross unrealized losses for less than 12 months were $642 and investments with gross unrealized losses for greater than 12 months were $515 at June 30, 2015.

14 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(7) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are available for the following purposes as of June 30, 2015 and 2014:

2015 2014 Capital acquisitions $ 38 38 Oncology programs 4,474 4,423 Other departmental programs 5,392 6,053 Scholarship and loan programs 575 566 Residency program 118 155 Other 1,143 1,078 Total temporarily restricted net assets $ 11,740 12,313

Included in temporarily restricted net assets as of June 30, 2015 and 2014 are pledges receivable of $135 and $159, respectively.

Permanently restricted net assets are required to be maintained in perpetuity, the income of which is restricted to the following purposes: 2015 2014 Residency program $ 1,000 1,000 Indigent care 50 50 Other 13 13 Physician leadership program 585 574 Scholarships 930 864 Total permanently restricted net assets $ 2,578 2,501

15 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(8) Concentrations of Credit Risk NMC grants credit without collateral to its patients, most of whom are insured under third-party payor agreements. The mix of receivables from patients and third-party payors at June 30, 2015 and 2014 was as follows: 2015 2014 Medicare 28% 27% Nebraska Medicaid 6 9 Managed care/Transplant 37 36 Self-pay 14 15 Commercial 5 3 Other 10 10 100% 100%

(9) Property and Equipment Property and equipment include amounts capitalized in connection with lease agreements (note 10) and consist of the following: 2015 2014 Land and improvements $ 18,235 17,929 Buildings and improvements 181,605 181,605 Equipment and furnishings 737,957 734,821 Rental property 5,465 5,465 Construction in progress 67,645 17,833 1,010,907 957,653 Less accumulated depreciation and amortization 595,897 579,364 Property and equipment, net $ 415,010 378,289

16 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(10) Long-Term Debt and Capital Lease Obligations At June 30, 2015 and 2014, NMC’s long-term debt and capital lease obligations consist of the following: 2015 2014 Hospital Authority No. 2 of Douglas County, Nebraska, Hospital Revenue Bonds, Series 2003, payable in varying annual installments to 2017, with remaining interest rates ranging from 4.55% to 4.65% (NMC). $ 8,366 12,160 Nebraska Educational Finance Authority Revenue Bonds, Series 2011, payable in varying annual installments to 2035, with an average interest rate of 4.9% (College). 5,205 5,370 Debt obligation to the Board of Regents of the University of Nebraska, payable in fixed quarterly installments through 2015, with interest rates fixed at 3.79% (NMC). — 245 Debt obligation payable in varying monthly installments to 2019, with interest rates ranging from 2.13% to 2.47% (NMC). 914 1,775 Capital lease for certain medical facilities, payable in equal installments of principal and interest through 2023, with interest imputed at 7.00%, collateralized by the leased premises. The building leased has a net book value of approximately $2,758 at June 30, 2015 (NMC). 4,533 4,992 Capital lease obligation for financed medical equipment payable in fixed monthly installments to 2016, with interest rates fixed at 2.57%. The assets leased have a net book value of approximately $266 at June 30, 2015 (NMC). 30 346 Capital lease obligation for financed IT software, medical equipment, and various renovation projects payable in variable monthly installments to 2024, with a variable interest rate of 1.36% (65% of one-month LIBOR plus 1.90%). The assets leased have a net book value of approximately $43,005 at June 30, 2015 (NMC). 46,195 50,628 Capital lease obligation for financed medical and general equipment, payable in varying monthly installments to 2024, with interest rates fixed at 4.37%. The assets leased have a net book value of approximately $18,624 at June 30, 2015 (BMC). 18,624 20,432 83,867 95,948 Less current portion 12,054 12,484 Long-term debt and capital lease obligations, excluding current portion $ 71,813 83,464

17 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

Scheduled principal repayments on long-term debt and payments on capital lease obligations for the next five fiscal years and thereafter are as follows:

Long-term Capital lease debt obligations 2016 $ 4,984 9,566 2017 4,502 9,537 2018 277 9,628 2019 212 9,647 2020 185 9,649 Thereafter 4,325 34,331 $ 14,485 82,358 Less amounts representing interest under the capital lease obligations 12,976 $ 69,382

In connection with the Agreement discussed in note 3, NMC entered into lease agreements with the Board of Regents and CRHS, the terms of which coincide with the Agreement. The lease agreements provide for the lease of the space previously assigned to University and Clarkson Hospitals and certain other common areas in exchange for annual lease payments approximating the debt service on the obligations of University and Clarkson Hospitals as of October 1, 1997. NMC has accounted for the leases as capital leases. Property and equipment capitalized in connection with the lease agreements are included in property and equipment in the accompanying consolidated balance sheets (note 9). In addition, the lease agreements with the Board of Regents provides for potential additional lease payments based on NMC achieving certain stipulated levels of profitability, as defined in the Agreement. The additional lease payments required totaled $2,825 and $0 for 2015 and 2014, respectively.

The lease agreements require NMC to comply with the terms and conditions of the Trust Indentures related to the outstanding obligations, including the maintenance of certain ratios, restrictions on the amount of additional loans, asset additions, transfers, and dispositions.

The terms and provision relating to the Hospital Revenue Bonds are included in a Loan Agreement and Trust Indenture dated November 1, 2003. The College refunded the Educational Finance Authority Revenue Bonds through the issuance of Revenue Refunding Bonds (Refunding Bonds) on May 18, 2011 in the amount of $5,760. The terms and provisions relating to the Refunding Bonds are included in the Loan Agreement and Trust Indenture dated May 18, 2011.

The Trust Indentures provide, among other things, for certain covenants related to the incurrence of additional indebtedness, a restriction on disposal of assets, maintenance of certain financial ratios, and the maintenance of certain funds to be used by the trustee to pay principal and interest on the bonds as they become due. The Refunding Bonds are secured by pledged revenue of the College.

18 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

During 2015 and 2014, NMC entered into long-term debt adding new principal of approximately $363 and $144, respectively.

During 2014, NMC refinanced and consolidated several existing capital leases into one long-term capital lease, and added new principal of approximately $1,334. BMC also refinanced and consolidated existing capital leases in 2014.

In conjunction with the refinancing of the NMC capital leases, NMC entered into an interest rate swap that provides a fixed interest rate of 2.85% to hedge against fluctuations in the variableness of the interest. NMC has accounted for the interest rate swap in accordance with FASB Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging, which requires that the derivatives be recorded at fair value in the consolidated financial statements and the change in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. NMC has not met the requirements for hedge accounting. At June 30, 2015 and 2014, the fair value of the interest rate swap was $1,088 and $855, respectively, which was shown as an interest rate swap liability in the consolidated balance sheets.

The maximum loss to NMC at June 30, 2015 if the financial institution failed to perform is $0, since NMC is in a liability position. NMC may be required to post collateral under the interest rate swap agreement depending on the liability position and credit ratings. NMC may require the financial institution to post collateral if the interest rate swap is in a net asset position. The amount and terms of the swap agreement are as follows: Notional amount of swap Interest rate Capital lease obligation for financed IT software, medical equipment, and various renovation projects (NMC) $ 46,159 2.850%

As of June 30, 2015, BMC has available an unsecured line of credit of $15,000 with interest at the 30-day LIBOR plus 2.5%, adjusted monthly. At June 30, 2015, the interest rate was 2.69%. The line of credit expires on January 15, 2016. As of June 30, 2015, $15,000 has been advanced on the line of credit.

As of June 30, 2015, BMC has available an unsecured letter of credit of $7,244 that expires on March 31, 2016. No amounts have been drawn against the letter of credit.

As of June 30, 2015 and 2014, NMC is in compliance with its long-term financial debt covenants.

(11) Related-Party Transactions NMC routinely has transactions with UNMC and UNMCP. Numerous members of the medical staff of NMC are also members of the faculty of UNMC and the practice plan of UNMCP and, in many other areas, the operations of NMC and these entities are integrated and overlap. In addition, NMC and UNMC have entered into an Academic Affiliation Agreement for Education and Research (note 3). In connection with the Agreement, NMC has agreed to financially support certain educational, research, operational, and clinical activities of the UNMC College of Medicine that further the mission and objectives of NMC. NMC also

19 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

provides financial support to UNMCP, a 501(c)(3) organization affiliated with UNMC, in connection with the operation of certain specialty and primary care clinics.

NMC manages the day-to-day functions for UNMCP, including cash collections, patient billings, accounts payable, and other support functions. NMC has assumed employment for certain nonphysician staff and clinical employees as of December 19, 2014. UNMCP contracted to lease back certain clinical staff after this date to support the clinical activities. In addition, NMC assumed the funding for certain UNMC College of Medicine costs during 2015, under an Academic Program Funding Agreement. These costs historically were funded by UNMCP by transfers to UNMC and then partially reimbursed by NMC through contracts with UNMCP. To the extent that the costs and expenses attributable to UNMCP exceed the cash receipts, NMC is responsible for the difference. NMC has recorded an expense of $23,821 to cover the shortfall of UNMCP, which is recorded in purchased services, supplies, and other on the consolidated statement of operations.

The schedule below depicts related-party transactions provided by NMC to UNMC and UNMCP. All transactions, are included in purchased services, supplies, and other in the accompanying consolidated statements of operations.

2015 2014 Academic affiliation agreement $ 24,085 22,089 Dean, department, and innovation fund 9,445 — Clinic shortfall and contribution expense 23,821 5,291 Clinical salary support 35,066 16,817 Program support — 24,956 Other purchased services and supplies 26,652 33,520 $ 119,069 102,673

In connection with these activities, NMC has recorded a payable to UNMC of $10,190 and $3,827 as of June 30, 2015 and 2014. NMC has also recorded amounts payable to UNMCP of $21,363 and $7,954 as of June 30, 2015 and 2014, respectively. In addition, NMC has recorded a $10,400 reduction to salary expense relating to the contract for employees leased to UNMCP. These balances are recorded in payable to affiliates in the accompanying consolidated balance sheets.

In addition, during 2015 and 2014, NMC recorded revenue from UNMC of $11,212 and $11,224, respectively, and revenue from UNMCP of $0 and $2,882, respectively, for support services provided by NMC. These amounts are recorded in rental income and other support in the accompanying consolidated statements of operations.

NMC provides certain support services to CRHS. During 2015 and 2014, CRHS also donated $1,980 and $1,575, respectively, to NMC in support of its operations.

NMC has entered into a management agreement with NOH whereby NMC provides human resources to consolidated NOH (note 14). Amounts paid by NOH to NMC in both 2015 and 2014 approximated $350.

20 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(12) Retirement Plans (a) Defined-Contribution Option NMC sponsors a defined-contribution retirement plan, The Nebraska Medical Center Retirement Plan – Base and Matching Contributions (the Plan). Generally, employees are eligible for participation after completing 12 months of continuous service and having attained the age of 21. The Plan provides for a retirement age of 65 or for earlier retirement under certain circumstances.

Effective January 1, 2015, for the defined-contribution option, NMC contributes 3% to all eligible plan participants, and also contributes an amount equal to 75% of the amount deferred by the employee under a separate 403(b) benefit plan, up to a maximum of 13% of the employee’s eligible compensation based on years of service. Benefits for the defined-contribution option vest over six years. Prior to January 1, 2015, NMC contributed 4% to all eligible plan participants, and also contributed an amount equal to 100% of the amount deferred by the employee under a separate 403(b) benefit plan, up to a maximum of 7% of the employee’s eligible compensation based on years of service.

The Plan provides employees with a noncontributory defined-contribution retirement option. During 2015 and 2014, NMC contributed $13,665 and $19,772, respectively, to the Plan in connection with this option.

(b) Defined-Benefit Option Formally, NMC sponsored a defined-benefit option, which was frozen December 31, 2009. For the defined-benefit option, benefits are based on years of service and the amount of compensation received during those years and vest over three years. Employee contributions are not permitted under the defined-benefit option except for certain rollover provisions.

The following table summarizes the projected benefit obligation, the fair value of plan assets, and the funded status at the measurement dates of June 30, 2015 and 2014: 2015 2014 Changes to benefit obligation: Benefit obligation at beginning of year $ 101,191 104,700 Service cost 175 175 Interest cost 4,085 4,739 Expenses paid (186) — Plan settlement (6,448) (5,447) Actuarial gain (1,070) (1,624) Benefits paid (1,420) (1,352) Benefit obligation at end of year 96,327 101,191

21 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

2015 2014 Changes in plan assets: Fair value of plan assets at beginning of year $ 114,099 108,443 Actual return on plan assets 1,338 12,455 Plan settlement (6,448) (5,447) Expenses paid (186) — Benefits paid (1,420) (1,352) Fair value of plan assets at end of year 107,383 114,099 Funded status at end of year $ 11,056 12,908 Amounts recognized in the consolidated balance sheets: Noncurrent assets $ 11,056 12,908 Net amount recognized $ 11,056 12,908

The accumulated benefit obligation as of June 30, 2015 and 2014 was $96,327 and $101,191, respectively.

The following is a summary of the components of net periodic pension cost for the years ended June 30, 2015 and 2014: 2015 2014 Service cost during the period $ 175 175 Interest cost on projected benefit obligation 4,085 4,739 Expected return on plan assets (6,531) (6,200) Amortization of unrecognized loss 1,609 2,762 Settlement gain recognized 1,964 1,550 Net periodic pension cost $ 1,302 3,026

Other changes in plan assets and benefit obligations recognized in other changes in unrestricted net assets in 2015 and 2014 are as follows: 2015 2014 Accumulated loss $ (29,341) (28,791) Total recognized in unrestricted net assets $ (29,341) (28,791)

22 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

2015 2014 Amounts recognized in changes in unrestricted net assets: Amortization of actuarial loss $ 3,573 4,312 Net (loss) gain recognized in the current period (4,123) 7,879 Total change in unrestricted net assets $ (550) 12,191

Included within the change in unrestricted net assets as of June 30, 2015 and 2014 are adjustments for ($760) and $391, respectively, related to NMC’s Supplemental Executive Retirement Plan. The estimated transition obligation, prior service cost, and net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $0, $0, and $(1,609), respectively.

Plan asset allocations and target allocations comprise the following investment classifications at June 30, 2015 and 2014: Target allocations 2015 2014 Equity securities 15% 15% 15% Fixed-income securities 85 84 84 Cash and cash equivalents — 11 100% 100% 100%

NMC’s overall investment objective is to provide a return on investment consistent with maintaining a funded ratio target, which is defined by NMC. During the fiscal year ended June 30, 2015, NMC moved to a liability-driven investment strategy. The strategies employed by NMC will provide the opportunity for returns within acceptable levels of risk of loss and volatility of returns with acceptable levels of risk of loss and volatility of returns with appropriate asset allocation being the primary tool to achieve the return objectives.

The following are the actuarial assumptions used by the Plan to develop the components of pension cost for the years ended June 30, 2015 and 2014: 2015 2014 Discount rate 4.25% 4.75% Rate of increase in compensation levels N/A N/A Expected long-term rate of return on plan assets 6.00% 6.00%

The expected long-term rate of return on plan assets reflects the anticipated rates of return on the classes of funds invested, or to be invested, to provide for the future obligation of the pension plan.

23 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

The determination of this rate considers the fund’s targeted asset allocation, the historical rates of return for each asset class, as well as the expected rates to be earned over the next 15 to 20 years.

The following are the actuarial assumptions used by the Plan to develop the components of the pension projected benefit obligation for the years ended June 30, 2015 and 2014:

2015 2014 Discount rate 4.25% 4.25% Rate of increase in compensation levels N/A N/A

The benefits expected to be paid in each year from 2016 to 2019 are as follows: 2016 $ 10,050 2017 7,476 2018 7,511 2019 7,908 2020 8,525

The aggregate benefits expected to be paid in the five years from 2021 to 2025 are $32,544. The expected benefits to be paid are based on the same assumptions used to measure NMC’s benefit obligation at June 30, 2015 and include estimated employee service.

NMC does not expect to contribute to its defined-benefit retirement plan in 2016.

The Plan’s investments are measured at fair value on a recurring basis were recorded using the fair value hierarchy at June 30, 2015 and 2014 as follows:

June 30, 2015 fair value/NAV Level 1 Level 2 Level 3 Plan assets: Cash and cash equivalents $ 234 234 — — Domestic equity 16,072 — 16,072 — Commercial notes 91,077 — 91,077 — Total plan assets $ 107,383 234 107,149 —

24 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

June 30, 2014 fair value/NAV Level 1 Level 2 Level 3 Plan assets: Cash and cash equivalents $ 953 953 — — Domestic equity 17,459 — 17,459 — Commercial notes 95,687 — 95,687 — Total plan assets $ 114,099 953 113,146 —

There were no transfers between levels for the years ended June 30, 2015 and 2014.

(13) Insurance Coverage NMC is insured under a claims-made policy for its professional liability and an occurrence-based policy for its general liability coverage, which expires October 15, 2016. The policy has a per occurrence limit of $1,000 and a $3,000 annual aggregate limit. The deductible is $250 per occurrence and $1,500 annual aggregate. In addition, NMC has excess coverage providing for $50,000 per occurrence and in the aggregate. In the event that the current policy is not renewed or replaced with equivalent insurance, claims based on occurrences during its term, but reported subsequently, will be uninsured. NMC is also insured under an occurrence-based policy for its workers’ compensation insurance. The policy has a deductible of $300 per occurrence with an aggregate stop loss, subject to payroll audit of $4,000.

NMC has established reserves for possible losses on both asserted and unasserted claims based upon an independent actuarial study. The actuarially estimated claims have been discounted using a discount rate of 3.0%.

NMC is also self-insured under its employee group health and dental program up to certain limits. Included in the accompanying consolidated statements of operations is a provision for premiums for excess coverage and payments for claims, including estimates of the ultimate costs for both reported claims and claims incurred, but not yet reported at year-end.

Management of NMC is presently not aware of any unasserted workers’ compensation, health and dental, and general or professional liability claims, which would have a material adverse impact on the accompanying consolidated financial statements.

(14) Joint Ventures NMC, through NHS Orthopaedic Services, Inc., holds a 46.45% equity position as of June 30, 2015 and 2014 in NOH, a specialty orthopedic hospital located in Omaha, Nebraska. NMC’s equity in the net income of NOH for the years ended June 30, 2015 and 2014, was $5,102 and $2,897, respectively, and has been reflected as such in the accompanying consolidated statements of operations.

25 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

NMC has entered into a joint venture with Shenandoah Memorial Hospital for the purpose of forming Shenandoah/NHS Regional Ventures, LLC (Shenandoah), which owns and operates an acute care hospital and a long-term care facility in Shenandoah, Iowa. NMC is entitled to a return on its investment based upon cash flows, as set forth in the Agreement. NMC has accounted for its investment based on its original cost.

NMC also entered into an affiliation agreement with Community Hospital Association, Inc., which owns and operates an acute care hospital located in Fairfax, Missouri. NMC is entitled to a return on its investment based upon a predefined formula, as set forth in the Agreement. NMC has accounted for its investment based on its original cost.

(15) Functional Expenses NMC provides general health care services to residents within its geographic location. Expenses related to providing these services are as follows: 2015 2014 Health care services $ 604,242 572,588 General and administrative 324,059 257,557 $ 928,301 830,145

(16) Contingencies The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, reimbursements for patient services, and Medicare and Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers. Violations of these laws and regulations could result in expulsion from government health care programs, together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that NMC is in compliance with fraud and abuse regulations, as well as other applicable government laws and regulations. While no regulatory inquiries have been made, which are expected to have a material effect on NMC’s consolidated financial statements, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

(17) Long-Lived Assets NMC reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Measurement of any impairment would include a comparison of the present value of the estimated future operating cash flows anticipated to be generated during the remaining life of the assets to the net carrying value of the assets. During 2015 and 2014, NMC identified $777 and $171, respectively, of assets, which were impaired. Those amounts are reflected as operating expenses in the accompanying consolidated statements of operations.

26 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(18) Fair Value Measurements (a) Fair Value of Financial Instruments The following table presents the carrying amounts and estimated fair values of NMC financial instruments at June 30, 2015 and 2014. The fair value of financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date:

2015 2014 Carrying Carrying amount Fair value amount Fair value

Financial assets: Cash and cash equivalents $ 132,392 132,392 113,575 113,575 Short-term investments 155,652 155,652 153,906 153,906 Patient accounts receivable 156,057 156,057 126,251 126,251 Other receivables 27,704 27,704 15,058 15,058 Assets limited as to use 61,309 61,309 59,779 59,779 Notes receivable 1,027 1,027 3,004 3,004 Financial liabilities: Accounts payable $ 60,226 60,226 47,499 47,499 Salaries, wages, and vacation payable 55,175 55,175 43,407 43,407 Accrued interest payable 291 291 351 351 Payable to affiliates 40,915 17,657 21,608 21,608 Line of credit 15,000 15,000 11,045 11,045 Other accrued liabilities 33,400 33,400 25,815 25,815 Estimated third-party payor settlements 15,332 15,332 2,834 2,834 Other long-term liabilities 6,231 6,231 10,104 10,104 Interest rate swap liability 1,088 1,088 855 855 Debt and capital lease obligations 83,867 87,171 95,948 102,656

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions. The fair values of the financial instruments shown in the table as of June 30, 2015 and 2014 represent management’s best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects NMC’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by NMC based on the best information available in those circumstances.

27 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents, patient accounts receivable, other receivables, notes receivable, accounts payable, salaries, wages and vacation payable, accrued interest payable, payable to affiliates, line of credit, other accrued liabilities, estimated third-party payor settlements, and other long-term liabilities – The carrying amount approximates fair value because of the short maturity of these instruments.

Short-term investments and assets limited as to use – The fair value is based on quoted market prices or estimated quoted market prices for similar securities, if available.

Interest rate swap liability – The fair value of the interest rate swap liability is determined using pricing models developed based on the swap interest rate and other observable market data.

Debt and capital lease obligations – The fair value was determined by discounting the future cash flows of the debt and capital lease obligations that reflect, among other things, market interest rates and NMC’s credit standing. The discount rate used for 2015 and 2014 was 4.34% and 4.37%, respectively.

28 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

(b) Fair Value Hierarchy The following tables present the financial instruments that are measured at fair value on a recurring basis (including items that are required to be measured at fair value) at June 30, 2015 and 2014:

2015 Fair value Level 1 Level 2 Level 3

Assets: Cash and cash equivalents $ 132,392 132,392 — — Short-term investments: Cash and cash equivalents $ 41,708 41,708 — — U.S. Treasury notes 39,701 — 39,701 — Commercial notes 74,243 — 74,243 —

Total short-term investments 155,652 41,708 113,944 — Long-term investments: Cash and cash equivalents 1,578 1,578 — — Commercial notes 4,216 — 4,216 — Common stock 32,853 32,853 — — Domestic equity funds 11,043 11,043 — — Fixed-income funds 3,262 3,262 — — International equity funds 1,798 1,798 — —

Total assets limited as to use 54,750 50,534 4,216 — Assets held by trustee: Cash and cash equivalents 6,559 6,559 — — Total assets $ 216,961 98,801 118,160 —

Liabilities: Interest rate swap $ 1,088 — 1,088 — Total liabilities $ 1,088 — 1,088 —

29 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

2014 Fair value Level 1 Level 2 Level 3

Assets: Cash and cash equivalents $ 113,575 113,575 — — Short-term investments: Cash and cash equivalents $ 42,205 42,205 — — U.S. Treasury notes 40,676 — 40,676 — Commercial notes 71,025 — 71,025 — Total short-term investments 153,906 42,205 111,701 — Long-term investments: Cash and cash equivalents 2,833 2,833 — — Commercial notes 4,287 — 4,287 — Common stock 30,501 30,501 — — Domestic equity funds 11,183 11,183 — — Fixed-income funds 3,200 3,200 — — International equity funds 1,149 1,149 — —

Total assets limited as to use 53,153 48,866 4,287 — Assets held by trustee: Cash and cash equivalents 6,626 6,626 — — Total assets $ 213,685 97,697 115,988 —

There were no transfers between levels for the years ended June 30, 2015 and 2014.

(19) Commitments (a) Operating Leases Certain buildings and equipment are being leased under long-term noncancelable operating leases. In most cases, management expects that, in the normal course of operations, the leases will be renewed or replaced by other leases. The total rent expense under operating leases for 2015 and 2014 was $19,821 and $18,731, respectively.

30 (Continued) THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Notes to Consolidated Financial Statements June 30, 2015 and 2014

The following is a schedule by year of future minimum rental payments required under noncancelable operating leases by NMC and BMC that have initial or remaining lease terms in excess of one year as of June 30, 2015: 2016 $ 19,524 2017 19,440 2018 19,382 2019 19,462 2020 19,572

(b) Other NMC and UNMC are developing the Fred and Pamela Buffett Cancer Center (the Cancer Center). The Cancer Center will be a $323,000 complex comprising a $110,000 10-story, 98-laboratory research tower named the Suzanne and Walter Scott Cancer Research Tower, a $213,000 7-story, 108-bed inpatient treatment center named the C.L. Werner Cancer Hospital; and additional outpatient cancer areas. The Cancer Center will be owned by UNMC and NMC’s commitment is to lease the clinical space from UNMC. The lease payments will begin before completion of the project and will be based on costs not funded by donations. Currently it is estimated that the present value of the lease payments will approximate $40,000.

During 2014, NMC’s Board of Directors approved the construction of the Lauritzen Outpatient Center (the Outpatient Center). The Outpatient Center will be a $70,000 4-story building and will house outpatient clinics, an outpatient surgery center, and other services. Approximately $20,600 of the project cost will be funded through donations, with the remainder funded through long-term debt. The building is projected to be completed in the fall of 2016. As of June 30, 2015, approximately $14,000 of costs have been expended.

(20) Subsequent Events NMC has reviewed subsequent events through October 19, 2015, the date the consolidated financial statements were available to be issued, and concluded that there were no events or transactions during this period that would require recognition or disclosure in the consolidated financial statements other than those already disclosed.

31 Exhibit I THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Balance Sheet June 30, 2015 (Dollars in thousands)

Hospital College Assets operations operations Eliminations Consolidated Current assets: Cash and cash equivalents $ 131,817 575 — 132,392 Short-term investments 155,652 — — 155,652 Patient accounts receivable, net of allowance for uncollectible accounts of $38,924 156,057 — — 156,057 Other receivables 22,787 843 — 23,627 Inventories and prepaid expenses 22,865 56 — 22,921 Other current assets 1,289 — — 1,289 Total current assets 490,464 1,474 — 491,938 Assets limited as to use: Long-term investments 52,507 2,243 — 54,750 Assets held by trustee 6,559 — — 6,559 Total assets limited as to use 59,066 2,243 — 61,309 Property and equipment, net 401,725 13,285 415,010 Other assets: Deferred debt issuance costs 165 122 — 287 Investment in joint ventures 12,284 — — 12,284 Notes receivable 438 — — 438 Investment in subsidiary 9,253 — (9,253) — Other assets 12,378 — — 12,378 Total other assets 34,518 122 (9,253) 25,387 Total assets $ 985,773 17,124 (9,253) 993,644 Liabilities and Net Assets Current liabilities: Current portion of long-term debt and capital lease obligations $ 11,884 170 — 12,054 Accounts payable 59,949 277 — 60,226 Salaries, wages, and vacation payable 55,175 — — 55,175 Accrued interest payable 211 80 — 291 Payable to affiliates 40,915 — — 40,915 Line of credit 15,000 — — 15,000 Other accrued liabilities 31,091 2,309 — 33,400 Estimated third-party payor settlements 11,255 — — 11,255 Total current liabilities 225,480 2,836 — 228,316 Other long-term liabilities 6,231 — — 6,231 Interest rate swap liability 1,088 — — 1,088 Long-term debt and capital lease obligations, excluding current portion 66,778 5,035 — 71,813 Total liabilities 299,577 7,871 — 307,448 Net assets (deficit): Unrestricted 671,878 6,689 (6,689) 671,878 Temporarily restricted 11,740 1,633 (1,633) 11,740 Permanently restricted 2,578 931 (931) 2,578 Total net assets 686,196 9,253 (9,253) 686,196 Total liabilities and net assets $ 985,773 17,124 (9,253) 993,644

See accompanying independent auditors’ report.

32 Exhibit II THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Statement of Operations Year ended June 30, 2015 (Dollars in thousands)

Hospital College operations operations Total Eliminations Consolidated Unrestricted revenue, gains, and other support: Patient service revenue, net of contractual adjustments and discounts $ 1,012,190 — 1,012,190 — 1,012,190 Provision for uncollectible accounts 75,411 — 75,411 — 75,411 Net patient service revenue 936,779 — 936,779 — 936,779 Rental income and other support 34,492 — 34,492 — 34,492 Tuition and fees — 14,968 14,968 (880) 14,088 Total unrestricted revenue, gains, and other support 971,271 14,968 986,239 (880) 985,359 Operating expenses: Salaries and wages 348,722 10,588 359,310 — 359,310 Employee benefits 72,549 2,241 74,790 — 74,790 Purchased services, supplies, and other 435,866 2,941 438,807 (880) 437,927 Depreciation and amortization 51,193 936 52,129 — 52,129 Impairment of long-lived assets 777 — 777 — 777 Interest 3,143 240 3,383 — 3,383 Gain (loss) on sale of property and equipment (17) 2 (15) — (15) Total operating expenses 912,233 16,948 929,181 (880) 928,301 Operating income (loss) 59,038 (1,980) 57,058 — 57,058 Other income (loss): Investment income 6,446 — 6,446 — 6,446 Equity in losses of subsidiary(1,980) — (1,980) 1,980 — Equity in net income of joint venture 5,355 — 5,355 — 5,355 Interest rate swap fair value adjustment (233) — (233) — (233) Other (376) — (376) — (376) Total other income, net 9,212 — 9,212 1,980 11,192 Excess of revenue over (under) expenses 68,250 (1,980) 66,270 1,980 68,250 Other changes in unrestricted net assets: Capital distributions to sponsors (12,000) — (12,000) — (12,000) Equity in other changes in net assets of subsidiary 2,588 — 2,588 (2,588) — Change in pension accounts (1,310) — (1,310) — (1,310) Change in unrealized losses on investments, net (2,298) — (2,298) — (2,298) Transfers from (to) affiliated entities (2,771) 2,588 (183) — (183) Net assets released from restrictions used for purchase of property and equipment 1,055 — 1,055 — 1,055 Matching college grants (19) — (19) — (19) Other — — — — — Increase (decrease) in unrestricted net assets $ 53,495 608 54,103 (608) 53,495

See accompanying independent auditors’ report.

33 Exhibit III THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Statement of Changes in Net Assets Year ended June 30, 2015 (Dollars in thousands)

Hospital College operations operations Eliminations Consolidated Unrestricted: Balance, June 30, 2014 $ 618,383 6,081 (6,081) 618,383 Excess of revenue over (under) expenses 68,250 (1,980) 1,980 68,250 Equity in other changes in net assets of subsidiary 2,588 — (2,588) — Change in pension accounts (1,310) — — (1,310) Capital distributions to sponsors (12,000) — — (12,000) Change in unrealized gains and losses on investments, net (2,298) — — (2,298) Transfers from (to) affiliated entities (2,771) 2,588 — (183) Contributions for the purchase of property and equipment 1,055 — — 1,055 Matching College grants (19) — — (19) Other — — — — Increase (decrease) in net assets 53,495 608 (608) 53,495 Balance, June 30, 2015 $ 671,878 6,689 (6,689) 671,878 Temporarily restricted: Balance, June 30, 2014 $ 12,313 1,555 (1,555) 12,313 Equity in other changes in net assets of subsidiary 78 — (78) — Restricted gifts and grants 508 348 — 856 Restricted interest and investment income 213 89 — 302 Change in unrealized gains and losses on investments, net 174 — — 174 Contributions for the purchase of property and equipment (880) — — (880) Net assets released from restrictions for use in operations (666) (359) — (1,025) Increase (decrease) in net assets (573) 78 (78) (573) Balance, June 30, 2015 $ 11,740 1,633 (1,633) 11,740 Permanently restricted: Balance, June 30, 2014 $ 2,501 864 (864) 2,501 Equity in other changes in net assets of subsidiary 67 — (67) — Restricted gifts and grants 10 67 — 77 Increase (decrease) in net assets 77 67 (67) 77 Balance, June 30, 2015 $ 2,578 931 (931) 2,578

See accompanying independent auditors’ report.

34 Exhibit IV THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Balance Sheet June 30, 2014 (Dollars in thousands)

Hospital College Assets operations operations Eliminations Consolidated Current assets: Cash and cash equivalents $ 113,019 556 — 113,575 Short-term investments 153,906 — — 153,906 Patient accounts receivable, net of allowance for uncollectible accounts of $36,687 126,251 — — 126,251 Other receivables 14,375 683 — 15,058 Inventories and prepaid expenses 16,494 40 — 16,534 Other current assets 2,136 — — 2,136 Total current assets 426,181 1,279 — 427,460 Assets limited as to use: Long-term investments 51,103 2,050 — 53,153 Assets held by trustee 6,626 — — 6,626 Total assets limited as to use 57,729 2,050 — 59,779 Property and equipment, net 364,850 13,439 — 378,289 Other assets: Deferred debt issuance costs 247 128 — 375 Investment in joint ventures 10,818 — — 10,818 Notes receivable 1,025 — — 1,025 Investment in subsidiary 8,500 — (8,500) — Other assets 14,917 — — 14,917 Total other assets 35,507 128 (8,500) 27,135 Total assets $ 884,267 16,896 (8,500) 892,663 Liabilities and Net Assets Current liabilities: Current portion of long-term debt and capital lease obligations $ 12,319 165 — 12,484 Accounts payable 46,830 669 — 47,499 Salaries, wages, and vacation payable 43,407 — — 43,407 Accrued interest payable 270 81 — 351 Payable to affiliates 21,608 — — 21,608 Line of credit 11,045 — — 11,045 Other accrued liabilities 23,539 2,276 — 25,815 Estimated third-party payor settlements 2,834 — — 2,834 Total current liabilities 161,852 3,191 — 165,043 Other long-term liabilities 10,104 — — 10,104 Interest rate swap liability 855 — — 855 Long-term debt and capital lease obligations, excluding current portion 78,259 5,205 — 83,464 Total liabilities 251,070 8,396 — 259,466 Net assets: Unrestricted 618,383 6,081 (6,081) 618,383 Noncontrolling interest — — — — Total unrestricted net assets 618,383 6,081 (6,081) 618,383 Temporarily restricted 12,313 1,555 (1,555) 12,313 Permanently restricted 2,501 864 (864) 2,501 Total net assets (deficit) 633,197 8,500 (8,500) 633,197 Total liabilities and net assets $ 884,267 16,896 (8,500) 892,663

See accompanying independent auditors’ report.

35 Exhibit V THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Statement of Operations Year ended June 30, 2014 (Dollars in thousands)

Hospital College operations operations Total Eliminations Consolidated Unrestricted revenue, gains, and other support: Patient service revenue, net of contractual adjustments and discounts $ 869,756 — 869,756 — 869,756 Provision for uncollectible accounts 61,978 — 61,978 — 61,978 Net patient service revenue 807,778 — 807,778 — 807,778 Rental income and other support 39,248 — 39,248 — 39,248 Tuition and fees — 15,309 15,309 (880) 14,429 Total unrestricted revenue, gains, and other support 847,026 15,309 862,335 (880) 861,455 Operating expenses: Salaries and wages 272,137 10,503 282,640 — 282,640 Employee benefits 65,714 2,291 68,005 — 68,005 Purchased services, supplies, and other 415,258 2,854 418,112 (880) 417,232 Clinic contribution expense 5,291 — 5,291 — 5,291 Depreciation and amortization 51,645 984 52,629 — 52,629 Impairment of long-lived assets 171 — 171 — 171 Interest 3,698 242 3,940 — 3,940 Loss on sale of property and equipment 227 10 237 — 237 Total operating expenses 814,141 16,884 831,025 (880) 830,145 Operating income (loss) 32,885 (1,575) 31,310 — 31,310 Other income (loss): Investment income 6,407 — 6,407 — 6,407 Equity in losses of subsidiary(1,575) — (1,575) 1,575 — Equity in net income of joint venture 2,758 — 2,758 — 2,758 Interest rate swap fair value adjustment (855) — (855) — (855) Other (300) — (300) — (300) Total other income, net 6,435 — 6,435 1,575 8,010 Excess of revenue over (under) expenses before noncontrolling interest 39,320 (1,575) 37,745 1,575 39,320 Noncontrolling interest in losses of consolidated subsidiary 836 — 836 — 836 Excess of revenue over (under) expenses 40,156 (1,575) 38,581 1,575 40,156 Other changes in unrestricted net assets: Capital distributions to sponsors (12,000) — (12,000) — (12,000) Equity in other changes in net assets of subsidiary 478 — 478 (478) — Change in pension accounts 12,582 — 12,582 — 12,582 Change in unrealized losses on investments, net 3,141 — 3,141 — 3,141 Transfers from (to) affiliated entities (478) 478 — — — Net assets released from restrictions used for purchase of property and equipment 12 — 12 — 12 Matching college grants (13) — (13) — (13) Redemption of Bellevue Medical Center shares (14,570) — (14,570) — (14,570) Other 51 — 51 — 51 Increase (decrease) in unrestricted net assets $ 29,359 (1,097) 28,262 1,097 29,359

See accompanying independent auditors’ report.

36 Exhibit VI THE NEBRASKA MEDICAL CENTER AND AFFILIATES OMAHA, NEBRASKA Consolidating Statement of Changes in Net Assets Year ended June 30, 2014 (Dollars in thousands)

Hospital College operations operations Eliminations Consolidated Unrestricted: Balance, June 30, 2013 $ 589,024 7,178 (7,178) 589,024 Excess of revenue over (under) expenses 40,156 (1,575) 1,575 40,156 Equity in other changes in net assets of subsidiary 478 — (478) — Change in pension accounts 12,582 — — 12,582 Capital distributions to sponsors (12,000) — — (12,000) Change in unrealized gains and losses on investments, net 3,141 — — 3,141 Transfers from (to) affiliated entities (478) 478 — — Contributions for the purchase of property and equipment 12 — — 12 Matching College grants (13) — — (13) Redemption of Bellevue Medical Center shares (14,570) — — (14,570) Other 51 — — 51 Increase (decrease) in net assets 29,359 (1,097) 1,097 29,359 Balance, June 30, 2014 $ 618,383 6,081 (6,081) 618,383 Temporarily restricted: Balance, June 30, 2013 $ 10,908 1,235 (1,235) 10,908 Equity in other changes in net assets of subsidiary 320 — (320) — Restricted gifts and grants 723 348 — 1,071 Restricted interest and investment income 454 326 — 780 Change in unrealized gains and losses on investments, net 484 — — 484 Net assets released from restrictions used for purchase of property and equipment — — — — Net assets released from restrictions for use in operations (576) (354) — (930) Increase (decrease) in net assets 1,405 320 (320) 1,405 Balance, June 30, 2014 $ 12,313 1,555 (1,555) 12,313 Permanently restricted: Balance, June 30, 2013 $ 2,516 864 (864) 2,516 Restricted gifts and grants (15) — — (15) Decrease in net assets (15) — — (15) Balance, June 30, 2014 $ 2,501 864 (864) 2,501

See accompanying independent auditors’ report.

37 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B-2

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF UNMC PHYSICIANS [THIS PAGE INTENTIONALLY LEFT BLANK]

UNMC PHYSICIANS Consolidated Financial Statements June 30, 2015 (With Independent Auditors’ Report Thereon)

UNMC PHYSICIANS

Table of Contents

Page(s)

Independent Auditors’ Report 1–2

Management’s Discussion and Analysis 3–7

Financial Statements:

Consolidated Statement of Net Position 8

Consolidated Statement of Revenue, Expenses, and Changes in Net Position 9

Consolidated Statement of Cash Flows 10

Notes to Financial Statements 11–20

KPMG LLP Suite 300 1212 N. 96th Street Omaha, NE 68114-2274

Suite 1600 233 South 13th Street Lincoln, NE 68508-2041

Independent Auditors’ Report

The Board of Directors UNMC Physicians:

Report on the Consolidated Financial Statements We have audited the accompanying consolidated statement of net position of UNMC Physicians, a component unit of the University of Nebraska, as of June 30, 2015 and the related consolidated statements of revenue, expenses, and changes in net position, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

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

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

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

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

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

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

Other Matters Required Supplementary Information

U.S. generally accepted accounting principles require that management’s discussion and analysis on pages 3 through 7 be presented to supplement the basic consolidated financial statements. Such information, although not a part of the basic consolidated financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic consolidated financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic consolidated financial statements, and other knowledge we obtained during our audit of the basic consolidated financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Omaha, Nebraska October 19, 2015

2

UNMC PHYSICIANS Management’s Discussion and Analysis June 30, 2015

As management of UNMC Physicians (UNMCP), we offer readers of the consolidated financial statements this narrative overview and analysis of the financial activities of UNMCP.

The consolidated financial statements presented consist of the statement of net position, the statement of revenue, expenses, and changes in net position, and the statement of cash flows. The notes to the consolidated financial statements are an integral part of the consolidated financial statements.

Effective July 1, 2014, UNMCP and The Nebraska Medical Center (TNMC) entered into an Interim Clinical Enterprise Integration and Management Agreement (the Interim Agreement). The Clinical Enterprise is defined as TNMC and UNMCP. Under the terms of the agreement, UNMCP designates TNMC as its agent and service provider to provide Management Services to UNMCP and to facilitate the financial, operational, and managerial integration of the Clinical Enterprise effective July 1, 2014. During the term of this agreement, the parties will continue to work towards finalization of the legal integration and creation of a permanent governance structure for the Clinical Enterprise. As part of the permanent integration, it is anticipated that a significant portion of the assets and liabilities of UNMCP will not be contributed to the Clinical Enterprise, and will remain in control of the UNMC College of Medicine.

With the Interim Agreement, TNMC manages the day-to-day functions for UNMCP including cash collections, patient billings, accounts payable, and other support functions. TNMC assumed employment for certain nonphysician staff and clinical employees as of December 19, 2014. UNMCP contracted to lease back certain clinical staff after this date to support the clinical activities. In addition, TNMC assumed the funding for certain UNMC College of Medicine costs during 2015, under an Academic Program Funding Agreement. These costs historically were funded by UNMCP by transfers to UNMC and then partially reimbursed by TNMC through their contracts with UNMCP. This has further reduced the other contract revenue.

To the extent that the costs and expenses attributable to UNMCP exceed the cash receipts, TNMC is responsible for the difference and the amount is shown as a Transfer from TNMC in the consolidated financial statements. This agreement and the integration are reflected in the narrative and analysis as noted below:

A. The consolidated statement of net position, which provides a view of the financial assets, liabilities, and net position at June 30, 2015:

Cash and cash equivalents decreased by $28.0 million, or 46%, from $61.0 million in 2014 to $33.0 million in 2015. The net decrease of $28.0 million from 2014 to 2015 was driven by increases in net patient service revenue, offset by decreases in other contractual revenue, and increases in cash paid to physicians and employees. Please refer to the statements of cash flows, as well as the discussion of the consolidated statement of cash flows in Section C that follows.

Patient accounts receivable increased by $3.7 million from $22.0 million at the end of 2014 to $25.7 million at the end of 2015. The increase is attributable to an increase in patient volumes and net patient services revenue. The receivable from TNMC increased by $9.8 million from $11.6 million in 2014 to $21.4 million in 2015. The increase in the receivable is due to the Interim Agreement, where TNMC is responsible for the day-to-day operations and the cash activities for UNMCP. Investments increased by $17.2 million from $47.7 million at the end of 2014 to $64.9 million at the end of 2015. The increase is due to investing excess cash of $21.8 million, the investment in a new joint venture of $2.3 million, the sale of restricted reserve investments of $7.9 million, and changes in economic conditions and performance of the financial markets. Please refer to the notes to the consolidated financial statements for a more detailed view of investments. 3 (Continued) UNMC PHYSICIANS Management’s Discussion and Analysis June 30, 2015

Net capital assets decreased by $1.8 million from 2014 to 2015 due to annual depreciation.

Current liabilities decreased by $1.2 million from $42.1 million at June 30, 2014 to $41.2 million at June 30, 2015. The decrease is driven by fees owed to the University of Nebraska Medical Center (UNMC) driven by the Interim Agreement where UNMCP no longer directly transfers money to UNMC to support the College of Medicine. TNMC has now assumed this liability. This is offset by increases in accrued expenses for physician payroll, including bonuses, and related accruals. In 2015, UNMCP entered into a new joint venture and has consolidated this company into its financial statements as UNMCP has the majority interest. The noncontrolling interest is $1.2 million as of June 30, 2015. There were no profits or losses in 2015.

The consolidated statements of revenues, expenses, and changes in net position for the year ended June 30, 2015:

B. Results of Operating Activities:

Net patient service revenue was $161.0 million in 2015, increasing 11% from the prior year. The increase was primarily due to increases in patient volumes of 15% over the prior year, partially due to reductions in competitor’s coverage for clinical services during 2015, which allowed UNMC Physicians to capture additional patients and volume.

Other contractual revenue was $18.5 million in 2015. This decreased significantly from the prior year driven by the Interim Agreement where TNMC is now managing the day-to-day functions of UNMCP, has assumed the responsibility from UNMCP for certain UNMC College of Medicine costs under the Academic Program Funding agreement, and no longer is contracting for specific services from UNMCP. See also the Transfers from TNMC below.

Operating expenses in 2015 were $205.0 million increasing 16% from the prior year driven by increases in physician salaries and benefits, contracted services for clinical staff after December 19, 2014, offset by decreases in other expenses, mainly donations. The contracting for clinical staff for the second half of the year had no material impact on the costs compared to the prior year. Operating expenses represented 114% of total operating revenue in 2015. Note 12 to the consolidated financial statements presents a more detailed view of operating expenses.

The University Of Nebraska Board Of Regents and the clinical Faculty members of the UNMC College of Medicine adopted a plan to ensure that faculty members could provide patient services and practice their profession of delivering high quality healthcare to patients. This care is an integral part of the role and mission of UNMC, along with education and research. The Medical Service Plan (the Plan) provides for the employment of physicians to engage in the practice of medicine. The Plan provides for the creation of UNMC Physicians as an entity to employ the physicians and deliver care to its patients. As a part of the Plan, UNMCP remits a portion of its income earned from patient-related services to UNMC to support the education and research objectives.

During 2015, in accordance with the Medical Service Plan, UNMC Physicians transferred $10.8 million to the College of Medicine for the Dean’s Development Fund and Department Development Funds, which are included in operating expenses. During 2015, there were no other transfers to UNMC due to the Interim Agreement where TNMC is responsible for payments due to UNMC.

4 (Continued) UNMC PHYSICIANS Management’s Discussion and Analysis June 30, 2015

Operating loss totaled $25.4 million in 2015, or (14) % of total operating revenue.

Results of Nonoperating Activities UNMC Physicians experienced a nonoperating gain on investments held of $893 thousand in 2015. The unrealized gains in investments during 2015 are directly related to changes in economic conditions and performance in the financial markets.

In 2015, due to the Interim Agreement, TNMC managed the day-to-day functions for UNMCP including cash collections, patient billings, accounts payable, and other support functions. To the extent that the costs and expenses attributable to UNMCP exceed the cash receipts, TNMC shall be responsible for the difference. As of June 30, 2015, TMMC owed UNMCP $23.8 million for patient and other contract revenue received less operating expenses paid. Excess of revenue over expenses was $(233) thousand for 2015.

C. Consolidated Statements of Cash Flows:

UNMC Physicians experienced negative cash flows from operations of $959 thousand in 2015. The negative cash flow driven by the Interim Agreement where TNMC is responsible for handling the cash on a day-to-day basis and the net impacts of cash are provided through the noncapital financing activities. Cash flows used in noncapital financing related activities were $11.1 million in 2015 driven by the change in transfers with UNMC and TNMC driven by the Interim Agreement. The net decrease reflects the implementation of the Interim Agreement where TNMC is now responsible for payments to UNMC, excluding the Dean’s Development Fund and Department Development Funds. UNMC Physicians did not spend any capital in 2015. Please refer to note 2 to financial statements for further information.

During 2015, UNMCP made an investment in a joint venture called HD, LLC. Since UNMCP has the majority interest of HD, LLC, the accounts of HD, LLC are consolidated into the consolidated financial statements. The noncontrolling interest of $1.2 million in included in the net cash provided by capital and financing activities.

Additionally, UNMC Physicians used $32.6 million to purchase investments in 2015 from cash, interest, and dividends. UNMC Physicians sold investments to either purchase new investments or to generate cash of $15.1 million. This included the purchase of a joint venture for $2.3 million, excluding the noncontrolling interests of $1.2 million reported above.

5 (Continued) UNMC PHYSICIANS Management’s Discussion and Analysis June 30, 2015

D. Condensed consolidated financial information as of and for the years ended June 30, 2015 and 2014 is as follows: 2015 2014 Current assets $ 85,029,067 100,480,956 Noncurrent assets 79,882,772 64,547,051 Total assets $ 164,911,839 165,028,007 Current liabilities $ 41,174,936 42,118,755 Noncurrent liabilities 3,299,773 3,407,422 Total liabilities 44,474,709 45,526,177 Net investment in capital assets 14,973,714 16,815,286 Unrestricted net assets 104,294,612 102,686,544 Restricted net assets reserved for noncontrolling interest 1,168,804 — Total net position 120,437,130 119,501,830 Total liabilities and net position $ 164,911,839 165,028,007 Operating revenue $ 179,625,832 219,773,295 Operating expenses 205,035,361 176,400,874 Operating income (loss) (25,409,529) 43,372,421 Nonoperating revenue, net 25,176,025 (23,772,110) Excess of revenue over expenses $ (233,504) 19,600,311

E. Notes to the Consolidated Financial Statements:

The notes to the consolidated financial statements are an integral part of the report and include information not necessarily evident in the statements themselves. These notes describe accounting policies followed by UNMC Physicians and also contain historical comparisons and other information that are useful when evaluating the financial health of UNMC Physicians.

6 (Continued) UNMC PHYSICIANS Management’s Discussion and Analysis June 30, 2015

F. Other:

This table summarizes comparative data elements considered relevant when considering accounts receivable management:

June 30, June 30, 2015 2014 Days in accounts receivable 54.5 39.4

G. Contact Information:

If you have any questions about this report or need additional information, contact Carl Smith, President, or Linda Scholting, Director of Finance/Controller, at 988145 Nebraska Medical Center, Omaha, Nebraska 68198-8101 or via email at [email protected] or [email protected].

7 UNMC PHYSICIANS Consolidated Statement of Net Position June 30, 2015

Assets Current assets: Cash and cash equivalents $ 33,018,025 Patient accounts receivable, net of allowance for doubtful accounts of $6,868,682 in 2015 25,690,844 Receivable from The Nebraska Medical Center 21,363,755 Other accounts receivable 4,031,856 Other assets 924,587 Total current assets 85,029,067 Investments 64,909,058 Capital assets: Land and land improvements 407,536 Buildings 4,427,095 Office equipment 3,614,309 Computer equipment 8,944,545 Medical equipment 5,957,649 Leasehold improvements 12,991,308 36,342,442 Less accumulated depreciation (21,368,728) Capital assets, net 14,973,714 Total assets $ 164,911,839 Liabilities and Net Position Current liabilities: Accounts payable $ 10,000 Accrued expenses 39,224,296 Fees payable to University of Nebraska Medical Center 1,265,640 Reserve for self-insurance 675,000 Total current liabilities 41,174,936 Long-term liabilities: Reserve for self-insurance 3,299,773 Total liabilities 44,474,709 Net position: Net investment in capital assets 14,973,714 Unrestricted 104,294,612 Restricted net assets reserved for noncontrolling interest 1,168,804 Total net position 120,437,130 Total liabilities and net position $ 164,911,839

See accompanying notes to consolidated financial statements.

8 UNMC PHYSICIANS Consolidated Statement of Revenues, Expenses, and Changes in Net Position Year ended June 30, 2015

Operating revenue: Net patient service revenue (net of provision for bad debts of approximately $12,300,000 in 2015 ) $ 161,077,015 Other contractual revenue 18,548,817 Total operating revenue 179,625,832 Operating expenses: Salaries and benefits 156,039,572 Dean and department development funds 10,811,350 Purchased services, supplies, and other 31,672,606 Occupancy costs 4,670,261 Depreciation 1,841,572 Total operating expenses 205,035,361 Operating loss (25,409,529) Nonoperating revenue: Transfers from TNMC 23,820,664 Interest and investment income 389,674 Realized and unrealized gains and losses on investments 893,733 Other revenue 71,954 Total nonoperating expenses, net 25,176,025 Excess of revenue over expenses (233,504) Net position, beginning of year 119,501,830 Contribution from noncontrolling interest 1,168,804 Net position, end of year $ 120,437,130

See accompanying notes to consolidated financial statements.

9 UNMC PHYSICIANS Consolidated Statement of Cash Flows Year ended June 30, 2015

Cash flows from operating activities: Cash received from providing professional medical services $ 157,339,998 Cash received from other revenue 27,146,704 Cash paid to physicians and employees (140,349,442) Cash paid to deans and departments (10,726,574) Cash paid to suppliers and others (34,369,395) Net cash used in operating activities (958,709) Cash flows used in noncapital financing activities: Other revenue 1,240,757 Transfers to University of Nebraska Medical Center (12,364,257) Net cash used in noncapital financing activities (11,123,500) Cash flows from capital and related financing activities: Purchases of capital assets — Sale of capital assets and land — Contribution by noncontrolling interest 1,168,804 Net cash provided by capital and related financing activities 1,168,804 Cash flows from investing activities: Interest and dividends received on investments 389,674 Purchases of investments (32,606,078) Sales of investments 15,104,366 Net cash used in investing activities (17,112,038) Net decrease in cash and cash equivalents (28,025,443) Cash and cash equivalents at beginning of year 61,043,468 Cash and cash equivalents at end of year $ 33,018,025 Reconciliation of operating income to net cash used in operating activities: Operating loss $ (25,409,529) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,841,572 Provision for bad debts 12,325,416 Changes in assets and liabilities: Patient accounts receivable (16,062,432) Receivable from University of Nebraska Medical Center 229,438 Receivable from The Nebraska Medical Center 14,087,667 Other accounts receivable 160,339 Prepaid expenses 474,236 Other assets 32,447 Accounts payable (9,457,162) Accrued expenses 22,733,370 Accounts payable to University of Nebraska Medical Center (1,940,546) Fees payable to University of Nebraska Medical Center (115,876) Reserve for self-insurance 142,351 Net cash used in operating activities $ (958,709)

See accompanying notes to consolidated financial statements.

10 UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(1) Summary of Significant Accounting Policies (a) Nature of Organization UNMC Physicians (UNMCP) is a Nebraska nonprofit corporation established by the University of Nebraska to provide a vehicle for the faculty of the College of Medicine of the University of Nebraska to develop an integrated practice for management of the clinical practice activities. UNMCP consists of clinical departments, responsible for the delivery of medical care to patients, and administrative departments, responsible for administrative services overseeing quality, risk, clinical operations, regulatory compliance, human resource management, financial oversight, and the billing, collecting, and distribution of medical service fees generated by member clinicians through clinical activities. The clinical departments are made up of member clinicians. The distribution of medical service fees to the member clinicians is governed by the terms of the University of Nebraska Medical Service Plan applicable to the member clinicians. Under Governmental Accounting Standards Board (GASB) Statement No. 14, UNMC Physicians is reported as a component unit of the University of Nebraska.

UNMCP has a 51% member interest in HD, LLC, a Nebraska Limited Liability Company formed between UNMCP and the Dennis L. Ross Trust whose purpose is to invest in a home dialysis joint venture, UROHSD, LLC. Since UNMCP has a majority interest in and voting control of HD, LLC, the accounts of HD, LLC. are consolidated within UNMCP and the noncontrolling interest is reflected in the accompanying consolidated financial statements.

Effective July 1, 2014, UNMCP and The Nebraska Medical Center (TNMC) entered into an Interim Clinical Enterprise Integration and Management Agreement (the Interim Agreement). The Clinical Enterprise is defined as TNMC and UNMCP. Under the terms of the agreement, UNMCP designates TNMC as its agent and service provider to provide Management Services to UNMCP to facilitate the financial, operational, and managerial integration of the Clinical Enterprise effective July 1, 2014. During the term of this agreement, the parties will continue to work towards finalization of the legal integration and creation of a permanent governance structure for the Clinical Enterprise. As part of the permanent integration, it is anticipated that a significant portion of the assets and liabilities of UNMCP will not be contributed to the Clinical Enterprise, and will remain in control of the UNMC College of Medicine.

With the Interim Agreement, TNMC manages the day-to-day functions for UNMCP including cash collections, patient billings, accounts payable, and other support functions. TNMC assumed employment for certain nonphysician staff and clinical employees as of December 19, 2014. UNMCP contracted to lease back certain clinical staff after this date to support the clinical activities. In addition, TNMC assumed the funding for certain UNMC College of Medicine costs during 2015 under an Academic Program Funding Agreement. These costs historically were funded by UNMCP through transfers to UNMC and then partially reimbursed by TNMC through its contracts with UNMCP. This change has further reduced the other contract revenue to UNMCP.

To the extent that the costs and expenses attributable to UNMCP exceed the cash receipts, TNMC is responsible for the difference and the amount is shown as a Transfer from TNMC in the accompanying consolidated financial statements. See note 11.

11 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(b) Basis of Accounting The consolidated financial statements are prepared on the economic resources measurement focus and the accrual basis of accounting and in accordance with pronouncements issued by GASB. The statements include majority owned subsidiaries or joint ventures and reflects eliminations between entities.

(c) Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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.

(d) Cash and Cash Equivalents Cash and cash equivalents include demand accounts and money market securities with original maturities of three months or less.

(e) Provision for Uncollectible Accounts The provision for uncollectible accounts is based upon management’s assessment of expected net collections considering the accounts receivable aging, historical collections experience, economic conditions, trends in healthcare coverage, and other collection indicators. Management periodically assesses the adequacy of the allowances for uncollectible accounts and contractual adjustments based upon historical write off experience by payor category. The results of these reviews are used to establish the net realizable value of patient’s accounts receivable. UNMCP follows established guidelines for placing certain patient balances with collection agencies. Self-pay accounts are charged against the allowance for uncollectible accounts at the time of transfer to the collection agency. Deductibles and coinsurance are classified as either third party or self-pay receivables on the basis of which party has the primary remaining financial responsibility, while the total gross revenue remains classified based on the primary payor at the time of service. There are various factors that can impact collection trends, such as changes in the economy, which in turn may have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through the emergency departments, the increased burden of copayments and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and the estimation process. Net patient accounts receivable have been adjusted to the estimated amounts expected to be collected and do not bear interest.

(f) Investments Investments in equity securities with readily determined fair values and all investments in debt securities are measured at fair value in the accompanying consolidated statement of net position. Interest, dividends, gains, and losses, both realized and unrealized, are included in nonoperating revenue (expenses) when earned. Alternative investments are valued at net asset value as a practical expedient to estimated fair value. The estimated values as determined by the general manager and

12 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

investment managers may differ significantly from the values that would have been used had ready markets for the investments existed.

UNMCP has invested in other entities and has accounted for such investments using the equity or cost method of accounting depending on ownership percent and control.

(g) Net Patient Service Revenue UNMCP has agreements with third-party payors that provide for payments to UNMC Physicians at amounts different from its established rates. Net patient service revenue is reported at the net realizable amounts from patients, third-party payors, and others for services rendered.

(h) Other Contractual Revenue UNMCP has agreements with TNMC, University of Nebraska Medical Center (UNMC), Department of Veteran Affairs (VA), and others to provide professional services and medical direction. UNMCP also has agreements with TNMC, Methodist Hospital, Children’s Hospital, and others that provide support for clinical programs.

(i) Operating Revenue and Expenses UNMCP’s consolidated statements of revenue, expenses, and changes in net position distinguish between operating and nonoperating revenue and expenses. Operating revenue result from exchange transactions associated with providing healthcare services – UNMCPs’ principal activity. Nonexchange revenue is reported as nonoperating revenue. Operating expenses are all expenses incurred to provide health care services, other than financing costs.

(j) Capital Assets Capital assets are stated at historical cost. It is UNMCPs’ policy to capitalize purchases of capital assets that are greater than $5,000 at the clinics and $1,000 in all other operating departments. These assets are depreciated using straight line and accelerated methods over their estimated useful lives of three to forty years.

(k) Income Taxes UNMCP has been recognized as a not for profit organization by the Internal Revenue Service as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and, accordingly, is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. In 2015, management has reported the tax, if any, for unrelated activities within the financial statements.

(l) Charity Care UNMCP provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because UNMCP does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue. The estimated costs of these services, using the cost to charge ratio, furnished under UNMCP’s charity care policy was $3,784,172 for the year ended June 30, 2015.

13 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(m) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, patient accounts receivable, receivable from UNMC, receivable from TNMC, accounts payable, accrued expenses, accounts payable to UNMC, and fees payable to UNMC approximate fair value because of the short maturity of these instruments.

(2) Noncontrolling Interests As of June 30, 2015, the noncontrolling interest had unrestricted net assets of $1,168,804. There were no revenues or expenses associated with this entity.

(3) Investments Investments at June 30, 2015 consist of the following: 2015 Original Fair value/ cost stated value Investments, at fair value: Equity and fixed income securities $ 37,558,220 38,124,982 Investments, at net asset value 19,198,764 23,548,741 Other investments (cost and equity method) 3,235,335 3,235,335 Total investments $ 59,992,319 64,909,058

Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to UNMCP. UNMCP has an investment policy, which manages credit risk for certain asset classes. UNMCP is limited to investing into federally backed securities, corporate bonds rated A or better, commercial paper rated P-a/A-1, and fixed income funds that invest primarily in investment grade securities, such as those rated BBB-/Baa3 or better (all ratings by Moody’s and Standard and Poor’s). UNMCP has no policy regarding credit risk of investments in equity securities and alternative investments.

Custodial Credit Risk – Deposits – Custodial credit risk is the risk that in the event of a bank failure, UNMCPs’ deposits may not be returned to it. UNMCP does not have a deposit policy for custodial credit risk. As of June 30, 2015, $24,254,390, of UNMCP’s bank balance of $24,754,390, was uninsured and uncollateralized.

Concentration of Credit Risk – UNMC Physicians places no limits on the amount it may invest in any one investment. UNMCP has invested in the following securities, which represent more than 5% of total investments at June 30, 2015: 2015 Westwood Diversified Core Equity LLC 9.3% MFB NTGI – QM Daily Russell Index Fund 6.8 U.S. Treasury Note Maturing 2020 7.7 U.S. Treasury Note Maturing 2018 7.7

14 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(4) Pension Plans UNMCP sponsors a defined contribution money purchase pension plan. This plan covers substantially all employees who meet age and length of service requirements of the plan. The plan is funded through UNMCP contributions are based upon a fixed percentage of the employees’ salaries. Total pension expense was $13,213,468 for the year ended June 30, 2015.

(5) Accounts Receivable and Payable Patient accounts receivable and accounts payable (including accrued expenses) reported as current assets and liabilities by UNMCP at June 30, 2015 consisted of the following amounts: Patient accounts receivable 2015 Receivable from patients and their insurance carriers $ 39,722,278 Receivable from Medicare 7,851,398 Receivable from Medicaid 8,200,611 Total accounts receivable 55,774,287 Less allowance for contractual allowances and uncollectible amounts (30,083,443) Patient accounts receivable, net $ 25,690,844

Accounts payable and accrued expenses 2015 Payable to employees (including payroll taxes) $ 37,283,656 Payable to suppliers and others 1,950,640 Total accounts payable and accrued expenses $ 39,234,296

(6) Capital Assets Capital assets additions, retirements, and balances for the year ended June 30, 2015 were as follows:

Balance Balance June 30, June 30, 2014 Additions Retirements 2015 Land and land improvements $ 407,536 — — 407,536 Building 4,427,095 — — 4,427,095 Office equipment 3,614,309 — — 3,614,309 Computer equipment 8,944,545 — — 8,944,545 Medical equipment 5,957,649 — — 5,957,649 Leasehold improvements 12,991,308 — — 12,991,308 Total at historical cost 36,342,442 — — 36,342,442

15 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

Balance Balance June 30, June 30, 2014 Additions Retirements 2015

Less accumulated depreciation: Office equipment $ 2,206,456 204,374 — 2,410,830 Building 606,692 111,496 — 718,188 Computer equipment 8,729,706 117,408 — 8,847,114 Medical equipment 3,282,800 528,202 — 3,811,002 Land improvements 94,240 12,711 — 106,951 Leasehold improvements 4,607,262 867,381 — 5,474,643 Total accumulated depreciation 19,527,156 1,841,572 — 21,368,728 Capital assets, net $ 16,815,286 (1,841,572) — 14,973,714

(7) Self-Insurance UNMCP maintains professional liability insurance through self-insurance and a third-party insurer. For claims filed inside the State of Nebraska, the commercial insurance provides coverage limits of $500,000 for each medical malpractice claim, or $1 million in the aggregate, with the Nebraska State Excess Liability Fund providing coverage from $500,000 to $1,750,000 for each medical malpractice claim. For claims filed outside the State of Nebraska, the commercial insurance provides coverage limits of $1 million per claim, or $3 million in the aggregate and an excess limit of $1 million per claim, or $1 million in the aggregate. Under the commercial insurance policy, UNMCP is subject to a deductible of $250,000 per claim or $1,250,000 in the aggregate. In connection with UNMCP’s self-insured portion, which would include incurred but not reported claims, a reserve is maintained of $3,974,773 at June 30, 2015. Based on historical experience and other factors, management believes that no additional reserve for retained risk is necessary at June 30, 2015. The change in the balance of the claims liability is as follows: Beginning of Current Claims End of year year liability year claims paid liability Fiscal year 2015 $ 3,832,422 839,004 696,653 3,974,773

16 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(8) Leasing Arrangements UNMCP is obligated under several noncancelable operating leases primarily for office space and expires over the next 5 to 15 years. The leases generally contain renewal options for periods up to 5 years and require UNMCP to pay all maintenance and insurance. Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease. Rental expense for operating leases during the year ended June 30, 2015 was $2,876,590. Future minimum lease payments as of June 30, 2015 are as follows: 2016 $ 2,387,170 2017 2,212,374 2018 1,615,521 2019 1,532,004 2020 1,417,786 Thereafter 4,805,963

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

Medicare and Medicaid – Services rendered to Medicare and Medicaid program beneficiaries are paid at prospectively determined rates.

Revenue from the Medicare and Medicaid programs accounted for approximately 23% and 6%, respectively, of UNMCP’s’ total gross patient service revenue for the year ended June 30, 2015. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates could change by a material amount in the near term.

UNMCP has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The basis for payment to UNMCP under these agreements includes prospectively determined rates and discounts from established charges.

Patient service revenue, net of contractual allowances and discounts, recognized in 2015 from these major payor sources, is as follows: 2015 Third-party Total – all payors Self-pay payors Net patient service revenue (net of provision for bad debts) $ 157,239,211 3,837,804 161,077,015

17 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(10) Concentrations of Credit Risk UNMCP grants credit without collateral to its patients, most of who are local residents and are insured under third-party payor agreements. The mix of receivables from patients and third-party payors at June 30, 2015 was as follows: Medicare 14% Medicaid 15 Commercial 38 Self-pay 25 Other 8 100%

(11) Related-Party Transactions TNMC manages the day-to-day functions for UNMCP including cash collections, patient billings, accounts payable, and other support functions. TNMC has assumed employment for certain nonphysician staff and clinical employees as of December 19, 2014. UNMCP contracted to lease back certain clinical staff after this date to support the clinical activities. The amount of contracted staff for the year ended June 30, 2015 was $10.4 million, which is included in purchased services in the accompanying consolidated financial statements. In addition, TNMC assumed the funding for certain UNMC College of Medicine costs during 2015 under an Academic Program Funding Agreement. These costs historically were funded by UNMCP through transfers to UNMC and then partially reimbursed by TNMC through its contracts with UNMCP. This has further reduced the other contract revenue.

To the extent that the costs and expenses attributable to UNMCP exceed the cash receipts, TNMC shall be responsible for the difference.

UNMCP has recorded a Transfer from TNMC of $23.8 million, which is recorded in nonoperating revenue on the accompanying, consolidated statement of revenue, expenses, and changes in net position. At June 30, 2015, UNMCP has recorded a receivable from TNMC of approximately $21.4 million.

UNMCP provided certain operational and support services to UNMC of $.9 million for the year ended June 30, 2015. In addition, UNMCP pays UNMC for the dean and department development accounts related to the medical services plan $10.8 million, of which $1.4 million is an outstanding payable at June 30, 2015.

18 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(12) Operating Expenses The following is a detail listing of UNMCP operating expenses for the year ended June 30, 2015: Salaries and benefits: Physician salary and benefits $ 118,699,393 Administrative/Clinic salary and benefits 37,340,179 Total salaries and benefits 156,039,572 Dean and department development funds 10,811,350 Purchased services, supplies, and other: Medical supplies/equipment 1,475,224 Medical malpractice expense 2,644,371 Contracted physician services 391,654 Laboratory services 56,611 Office supplies 228,635 Maintenance and repairs 139,700 Professional/consulting fees/marketing 1,689,561 Contracted services 12,167,131 Employee development/recognition 100,148 Travel and entertainment 245,826 Other department/clinic/administrative 12,533,745 Total purchased services, supplies, and other 31,672,606 Occupancy costs: Business lease 3,885,373 Utilities 70,191 Telephone 714,697 Total occupancy costs 4,670,261 Depreciation 1,841,572 Total operating expenses $ 205,035,361

19 (Continued) UNMC PHYSICIANS Notes to Consolidated Financial Statements June 30, 2015

(13) Laws and Regulations The is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government healthcare program participation requirements, reimbursements for patient services, and Medicare and Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that UNMCP is in compliance with fraud and abuse, as well as other applicable government laws and regulations. While no regulatory inquiries have been made which are expected to have a material effect on UNMCP financial statements, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

(14) Subsequent Events UNMCP has reviewed subsequent events through October 19, 2015, the date the consolidated financial statements were available to be issued, and concluded there were no events or transactions during this period that would require recognition or disclosure in the consolidated financial statements other than those already reflected.

20 APPENDIX C

DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN LEGAL DOCUMENTS

The following are summaries of certain provisions of the Master Indenture, Supplemental Master Trust Indentures, the Bond Indentures and the Loan Agreements. These summaries do not purport to be complete or definitive and are qualified in their entireties by reference to the full terms of such documents.

[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

Page

SUMMARY OF THE MASTER INDENTURE ...... C-1 General ...... C-1 Definitions ...... C-1 Amount of Indebtedness ...... C-13 Appointment of Obligated Group Representative ...... C-14 Designated Affiliate ...... C-14 Security; Payment of Principal and Interest ...... C-15 Insurance ...... C-16 Limitations on Creation of Liens ...... C-16 Limitations on Indebtedness ...... C-19 Income Available for Debt Service ...... C-22 Sale, Lease or Other Disposition of Property ...... C-22 Consolidation, Merger, Sale or Conveyance ...... C-23 Filing of Financial Statements, Certificate of No Default, Other Information ...... C-24 Parties Becoming Members of the Obligated Group ...... C-25 Withdrawal From the Obligated Group ...... C-26 Events of Default ...... C-26 Acceleration; Annulment of Acceleration ...... C-28 Additional Remedies and Enforcement of Remedies ...... C-28 Application of Moneys After Event of Default ...... C-29 Remedies Not Exclusive ...... C-30 Remedies Vested in the Master Trustee ...... C-30 Appointment of Receivers ...... C-30 Holders’ Control of Proceedings ...... C-30 Termination of Proceedings ...... C-31 Waiver of Events of Default ...... C-31 Notice of Default ...... C-32 Removal and Resignation of the Master Trustee ...... C-32 Supplements Not Requiring Consent of Holders ...... C-32 Supplements Requiring Consent of Holders ...... C-33 Satisfaction and Discharge of Master Indenture ...... C-34 SUMMARY OF THE SUPPLEMENTAL MASTER TRUST INDENTURES ...... C-34 General ...... C-34 SUMMARY OF THE BOND INDENTURES ...... C-35 Definitions ...... C-35 Trust Estate ...... C-40 Funds and Accounts ...... C-40 Investment of Moneys...... C-42 Release and Substitution of Borrower Obligation ...... C-42 Events of Default and Remedies ...... C-43 Acceleration of Maturity; Rescission and Annulment ...... C-44 Exercise of Remedies by the Bond Trustee ...... C-44 Limitation on Suits by Owners ...... C-45

Table of Contents (continued) Page

Control of Proceedings by Owners ...... C-46 Application of Moneys Collected ...... C-46 Supplemental Bond Indentures ...... C-47 Payment, Discharge and Defeasance of Bonds ...... C-49 The Bond Trustee ...... C-50 SUMMARY OF THE LOAN AGREEMENTS ...... C-50 General ...... C-50 Definitions ...... C-51 Loan Payments and Other Amounts Payable ...... C-51 Credits on Loan Payments ...... C-51 Additional Payments ...... C-52 Corporate Existence and Tax-Exempt Status ...... C-53 Assignment by the Borrower ...... C-53 Maintenance and Insurance ...... C-54 Casualty Loss and Condemnation ...... C-54 Events of Default ...... C-54 Remedies on Default ...... C-56 Amendments, Changes and Modifications ...... C-57

C-ii

SUMMARY OF THE MASTER INDENTURE

General

The Master Indenture authorizes the issuance of Obligations by the Obligated Group, which may be unsecured general obligations or, to the extent permitted by the Master Indenture, secured by a Lien on Property. An Obligation is stated in the Master Indenture to be a joint and several obligation of TNMC and each other Member of the Obligated Group. The summary of the Master Indenture set forth under this caption “SUMMARY OF THE MASTER INDENTURE” and elsewhere in the Official Statement, including but not limited in the section of the Official Statement captioned “SECURITY FOR THE SERIES 2016 BONDS,” does not purport to be complete or definitive and is qualified in its entirety by reference to the full form of the Master Indenture, together with all supplements and amendments thereto.

Definitions

Certain capitalized words and phrases used under this caption “SUMMARY OF THE MASTER INDENTURE” and under the caption “SUMMARY OF THE SUPPLEMENTAL MASTER TRUST INDENTURES” have the meanings set forth under this subcaption.

“Additional Indebtedness” means any Indebtedness (including all Obligations) incurred subsequent to the issuance of the Initial Obligations.

“Affiliate” means a corporation, partnership, joint venture, limited liability company, limited liability partnership, association, business trust or similar entity organized under the laws of the District of Columbia or any state of the United States which is directly or indirectly controlled by any Member of the Obligated Group or Designated Affiliate, by any other Affiliate or by any Person which controls any Member of the Obligated Group or Designated Affiliate or which controls any other Affiliate; provided, however, the term “Affiliate” shall not include any Member of the Obligated Group or Designated Affiliate. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of not less than a majority of its voting securities or the right to designate or elect not less than a majority of the members of its board of directors or other governing board or body by law, contract or otherwise.

“Aggregate Principal Amount” means at any time of determination the outstanding aggregate principal amount of a security and, in the case of a discount or non-interest bearing security, its accreted value calculated in accordance with the documents authorizing such security or if not so defined, GAAP, and, in the case of a Financial Products Agreement, the then applicable termination value of the Financial Products Agreement if such termination value to the Qualified Provider is greater than zero.

“Audited Financial Statements” means financial statements described in clauses (a) or (b) of the definition of Financial Statements set forth below.

“Balloon Long-Term Indebtedness” means (a) Long-Term Indebtedness payments of 25% or more of the principal of which are due by reason of maturity, mandatory redemption or mandatory tender in a single twelve-month period, which portion of the principal is not required by the documents pursuant to which such Indebtedness is issued to be amortized by payment or redemption prior to such date, and (b) Qualified Commercial Paper.

“BMC” means Bellevue Medical Center, LLC, a Nebraska limited liability company, and its successors and assigns.

“Capitalized Interest Deposit” shall mean funds on deposit in an account held by a Related Trustee which, pursuant to the terms of a Related Indenture, are required to be applied to the payment of interest on the Related Bonds.

“Code” means the Internal Revenue Code of 1986, as amended, and, when appropriate, any statutory predecessor or successor thereto, and all applicable regulations (whether proposed, temporary or final) thereunder and any applicable official rulings, announcements, notices, procedures and judicial determinations relating to the foregoing.

“Commitment Indebtedness” means an obligation or obligations of any Member of the Credit Group to repay amounts disbursed pursuant to a commitment from a Person to pay or refinance when due other Indebtedness of such Member or purchase when tendered for purchase by the holder thereof in accordance with the terms thereof (a) other Indebtedness of such Member of the Credit Group or (b) Indebtedness of a Person who is not a Member of the Credit Group which Indebtedness is guaranteed by a Guaranty of such Member or secured or payable from amounts paid on Indebtedness of such Member, which other Indebtedness or Guaranty was incurred in accordance with the provisions of the Master Indenture.

“Completion Indebtedness” means any Long-Term Indebtedness incurred by any Member of the Credit Group for the purpose of financing the completion of constructing or equipping facilities for which Indebtedness has theretofore been incurred in accordance with the provisions of the Master Indenture, to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time that such initial Indebtedness was originally incurred, and in accordance with the general plans and specifications for such facility as originally prepared in connection with the incurring of such initial Indebtedness with only such changes as have been made in conformance with the documents pursuant to which the original Indebtedness was incurred.

“Consultant” means a firm that is not, and no member, stockholder, director, officer or employee of which is, an officer, director, trustee or employee of any Member of the Credit Group or any Affiliate, and which is a professional management consultant or accounting firm having a favorable reputation and the skill and experience necessary to render the particular report required by the provisions of the Master Indenture in which such requirement appears and which is selected by the Obligated Group Representative.

“Controlling Member” means the Obligated Group Member designated by the Obligated Group Representative to establish and maintain control over a Designated Affiliate.

“Credit Group” means, collectively, TNMC, UNMCP, BMC and the other Members of the Obligated Group and the Designated Affiliates.

“Days Cash on Hand” means as of any date of determination the quotient derived by dividing (a) the sum of the Credit Group’s cash, cash equivalents and unrestricted investments available for operating purposes on such date of determination by (b) the average daily operating expenses (excluding depreciation and amortization, gain or loss on disposition of property and equipment and provision for bad debt if it is classified in operating expenses) of the Credit Group for the previous 12 months.

“Debt Service Coverage Ratio” means for any period for which a calculation is made, the ratio determined by dividing the Income Available for Debt Service for such period by the Maximum Debt Service Requirement.

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“Debt Service Requirement” means, for any period for which such determination is made, the aggregate of the payments required to be made in respect of principal (whether at maturity, as a result of mandatory redemption or mandatory tender or otherwise) and interest on Outstanding Long-Term Indebtedness of the Credit Group during such period, except that:

(a) with respect to Balloon Long-Term Indebtedness the amount of debt service taken into account shall, at the option of the Obligated Group Representative, assume that such Indebtedness is to be amortized over a 30-year period, beginning on the date of such calculation, on a level debt service basis and at the rate of interest specified in such obligation (determined as of the time of calculation of the Debt Service Requirement and, if such obligation bears interest at a variable rate or is Qualified Commercial Paper, calculated in the manner provided in the Master Indenture with respect to Variable Rate Indebtedness); provided, however, that if, as of the calculation date, the final maturity, mandatory redemption date or mandatory tender date for such Balloon Long-Term Indebtedness (other than Qualified Commercial Paper) is within 12 months and the Member of the Credit Group has not (i) obtained a firm commitment from a financial institution to retire such Balloon Long-Term Indebtedness, (ii) set aside or committed in an irrevocable reserve (which may be held by a Member of the Credit Group) in cash or other securities permitted as investments under the applicable Related Bond Indenture or other instrument securing such Balloon Long-Term Indebtedness in an amount sufficient to retire such Balloon Long-Term Indebtedness, or (iii) demonstrated that, as of the end of the most recent Fiscal Year or 12-month period for which Audited Financial Statements are available, the value of cash, cash equivalents and unrestricted investments available for operating purposes of the Credit Group as shown in the Audited Financial Statements for such Fiscal Year or 12-month period are equal to or greater than an amount equal to (A) the outstanding principal amount of such Balloon Long-Term Indebtedness, plus (B) 60 Days Cash on Hand, then the entire Outstanding amount of such Balloon Long-Term Indebtedness or, if a portion of the amount of principal payable on such maturity, mandatory redemption date or mandatory tender date has been set aside or committed in an irrevocable reserve described in (ii) above, the remaining amount required to retire such Balloon Long-Term Indebtedness, shall be included in the calculation of the Debt Service Requirement;

(b) the interest on Variable Rate Indebtedness shall be calculated at a rate equal to an assumed fixed rate of interest equal to the average interest rate outstanding on such Indebtedness for the most recent 24-month period; provided, however, that if the Indebtedness has not been outstanding for 24 months, then the interest rate shall be the average rate for the most recent 12 months or the interest rate in effect on the date of calculation, whichever is higher; provided further, if the debt has not been outstanding for a 12-month period, the assumed rate shall be (i) for tax-exempt debt the average of the interest rates set forth in the SIFMA Index on the first Business Day of each month for the most recent 24-month period and (ii) for taxable debt the average of the One-Month LIBOR interest rates determined on the first Business Day of each month for the most recent 24-month period;

(c) with respect to any Guaranty the amount of principal and interest taken into account shall equal 20% of the principal and interest on the indebtedness guaranteed (calculated as if it were Indebtedness), unless a payment has been made by the guarantor pursuant to the Guaranty at any time during the immediately preceding 24 months, in which case the amount of principal and interest for such Guaranty taken into account shall equal 100% of the principal and interest on the indebtedness guaranteed (calculated as if it were Indebtedness and in the manner provided above); provided however, that the amount of any principal and interest taken into account under this definition (c) shall not include any amount of such Guaranty that is subject to contribution or repayment to a Member of the Credit Group making such Guaranty by any Person

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that is not a Member of the Credit Group (other than reimbursement by the Person whose obligation is guaranteed by such Guaranty);

(d) no debt service shall be included for any Commitment Indebtedness unless an unreimbursed draw has been made with respect to such Commitment Indebtedness and, in such case, debt service on Commitment Indebtedness will be computed in accordance with the terms and conditions of such Commitment Indebtedness and, if applicable, the other terms and conditions of subsections (a) and (b) above; and

(e) with respect to Long-Term Indebtedness with respect to which a Financial Products Agreement has been entered into by a Member of the Credit Group, interest on such Long-Term Indebtedness shall be included in the determination of the Debt Service Requirement by including for any period an amount equal to the amount of interest payable on such Long-Term Indebtedness during such period at the rate or rates stated in such Long-Term Indebtedness plus any Financial Products Payments payable during such period minus any Financial Products Receipts receivable during such period; provided that in no event shall any calculation made pursuant to the Master Indenture as summarized in this subsection result in a number less than zero being included in the determination of the Debt Service Requirement; and provided, further, if the actual interest rate on such Long-Term Indebtedness or the actual amount of Financial Products Payments or Financial Products Receipts cannot be determined for the period for which the Debt Service Requirement is being calculated, the amount of interest deemed payable during such period on such Long-Term Indebtedness shall be determined by applying the average interest rate per annum which was in effect (or, if such Long-Term Indebtedness was not Outstanding during such 18-month period, which would have been in effect) or the average Financial Products Payments which would have been paid, or the average Financial Products Receipts which would have been received, as the case may be, for any 12 consecutive calendar months specified in an Officer’s Certificate during the 18 calendar months immediately preceding the date of calculation of the Debt Service Requirement; notwithstanding the foregoing, if the Financial Products Payments payable during such period are calculated at a fixed rate and the Financial Products Receipts during such period are calculated at a floating rate that bears a close correlation to the interest rate on such Long-Term Indebtedness, the amount of interest taken into account shall equal the Financial Products Payments for such period.

If the Indebtedness being calculated is with respect to a series of Related Bonds, portions of which may bear interest at types of rates and for periods of time different than those for other Related Bonds of that same series (“Modes”), each portion of the Indebtedness corresponding to a Mode then applicable to one or more Related Bonds is to be deemed separate Indebtedness for the purposes of this definition of Debt Service Requirement.

“Designated Affiliate” means any Person designated as a Designated Affiliate pursuant to the Master Indenture until such Person’s status as such is terminated pursuant to the Master Indenture.

“Event of Default” means any one or more of those events set forth in the section of the Master Indenture summarized under the subcaption “Events of Default” below.

“Excluded Facilities” means all land, improvements, equipment and other facilities (designated by the Obligated Group Representative in an Officer’s Certificate delivered to the Master Trustee) at and upon which no substantial health care or health care-related operations are then being conducted or are expected to be subsequently conducted by any Member of the Credit Group; provided, however, that (a) any Indebtedness incurred for or secured by such Excluded Facilities shall be non-recourse against any

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Property other than Excluded Facilities and (b) any funds of a Member of the Credit Group (other than funds derived from Excluded Facilities) used to acquire or otherwise pay for any such Excluded Facilities or pay any expenses in connection with Excluded Facilities must satisfy the provisions of the Master Indenture summarized under the subcaption “Sale, Lease or Other Disposition of Property” below with respect to disposition of Property. A Member of the Obligated Group may provide an Officer’s Certificate indicating that property previously designated as an Excluded Facility is no longer an Excluded Facility.

“Excluded Property” means any Excluded Facility and all rents, revenues or other income derived directly or indirectly from any of the foregoing.

“Financial Products Agreement” means an interest rate swap, cap, collar, option, floor, forward or other hedging agreement, arrangement or security, however denominated, identified to the Master Trustee in an Officer’s Certificate as having been entered into by a Member of the Credit Group with a Qualified Provider for the purpose of (a) reducing or otherwise managing the Member’s risk of interest rate changes or (b) effectively converting the Member’s interest rate exposure, in whole or in part, from a fixed rate exposure to a variable rate exposure, from a variable rate exposure to a fixed rate exposure, or from a variable rate exposure to a different variable rate exposure.

“Financial Products Payments” means payments periodically required to be paid to a counterparty by a Member of the Credit Group pursuant to a Financial Products Agreement.

“Financial Products Receipts” means amounts periodically required to be paid to a Member of the Credit Group by a counterparty pursuant to a Financial Products Agreement.

“Financial Statements” means, for any period, (a) the audited combined or consolidated financial statements of the Credit Group which are prepared and presented in accordance with GAAP (such financial statements shall include accompanying schedules of other financial information which present the details of the combining or consolidating balance sheets and statements of operations and changes in net assets of TNMC and should specifically identify the collective balances for the Credit Group, with inter-company items eliminated and excluding therefrom any revenues, expenses, assets, liabilities and other financial data with respect to Excluded Property), (b) special purpose audited financial statements of the Credit Group, but in all cases excluding therefrom any revenues, expenses, assets, liabilities and other financial data with respect to Excluded Property, or (c) an unaudited balance sheet, statement of operations and changes in net assets for such period for the Credit Group prepared by the Obligated Group Representative based on the accompanying unaudited combining or consolidating schedules delivered with audited financial statements or any special purpose audited financial statements of one or more parties. The combined or consolidated financial statements of TNMC prepared pursuant to (a) above shall be examined by independent certified public accountants in accordance with GAAP. The report of such independent certified public accountants shall express an opinion relative to such combined or consolidated financial statements. The Financial Statements of the Credit Group may exclude therefrom the financial information of any Member the assets of which represent less than 10% of Total Assets. The Financial Statements of the Credit Group may include therein the financial information of any non-Member the financial statements of which are combined or consolidated with those of the Credit Group and the assets of which represent less than 10% of Total Assets; provided that if the Financial Statements of the Credit Group include separated combining or consolidating statements for each non- Member (or non-Members in the aggregate), such Financial Statements may include non-Members which represent less than 50% of Total Assets. The Financial Statements of the Credit Group may include therein the Excluded Facilities of any Member which do not represent more than 10% of Total Assets and Excluded Property related to such Excluded Facilities.

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“Fiscal Year” means July 1 to June 30 or such other twelve-month period adopted as the Fiscal Year of the Credit Group as designated by the Obligated Group Representative.

“GAAP” means accounting principles generally accepted in the United States, consistently applied.

“Governing Body” means, when used with respect to the Obligated Group Representative or any other Member of the Credit Group, its board of directors, board of trustees or other board or group of individuals in which the powers of the Obligated Group Representative or the Member of the Credit Group are vested.

“Government Obligations” means (a) direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States, (b) evidences of a direct ownership in future interest or principal payments on obligations issued or guaranteed by the United States, which obligations are held in a custody account by a custodian satisfactory to the Master Trustee pursuant to the terms of a custody agreement, (c) obligations issued or guaranteed by any agency, department or instrumentality of the United States if the obligations are rated in one of the two highest rating categories (without regard to numerical or similar modifiers) of a national rating agency or (d) obligations issued by any state of the United States or any political subdivision, public instrumentality or public authority of any state, which obligations are fully secured by and payable solely from noncallable obligations of the type described in (a), (b) or (c) above which are held in trust.

“Gross Revenues” means all revenues, income, receipts and money received by or on behalf of any Member of the Obligated Group from all sources, excluding Excluded Property but including the following:

(a) gross revenues derived from the operation and possession of each Member’s facilities;

(b) gifts, grants, bequests, donations and contributions of each Member, but excluding (i) any gifts, grants, bequests, donations, and contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Obligations and (ii) funds of a Member of the Obligated Group derived therefrom which due to donor restrictions cannot legally be used to pay Obligations;

(c) proceeds derived from (i) condemnation proceeds, (ii) accounts receivable, (iii) securities and other investments, (iv) inventory and other tangible and intangible property, (v) Financial Products Receipts, (vi) medical reimbursement programs and agreements, (vii) insurance proceeds and (viii) contract rights and other rights and assets on the date of the Master Indenture or thereafter owned by each Member;

(d) rentals received from the lease of office space; and

(e) amounts received from Designated Affiliates.

“Guaranty” means any obligation of any Member of the Credit Group guaranteeing in any manner, directly, indirectly or contingently, and whether by payment, advance, purchase, reserve or otherwise, any obligation of any other Person which obligation of such other Person would, if such obligation were the obligation of a Member of the Credit Group, constitute Indebtedness under the Master Indenture.

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“Holder” means the registered owner of any Obligation issued in registered form.

“Income Available for Debt Service” means, unless the context provides otherwise, with respect to the Credit Group as to any period of time, net income, or excess of revenues over expenses (excluding income from all Irrevocable Deposits) before depreciation, amortization, and interest expense, as determined in accordance with GAAP, plus Limited Obligor Income for each Limited Obligor, and plus amounts from a Capitalized Interest Deposit applied or, during any such future period of time, required to be applied, to the payment of interest on Related Bonds; provided, that no determination thereof shall take into account:

(a) any revenue or expense of a Person that is not a Member of the Credit Group or 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, to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of principal of, redemption premium and interest on Indebtedness or the payment of operating expenses;

(c) the net proceeds of insurance (other than business interruption insurance) and condemnation awards;

(d) any unrealized gain or loss due to valuation of investments and Financial Products Agreements and any other similar instruments;

(e) extraordinary non-cash items;

(f) any realized loss on non-cash items due to other than the temporary impairment thereof; or

(g) any net income, or excess of revenues over expenses, or depreciation, amortization or interest expense or other expenses, related to or derived from Excluded Property.

“Indebtedness” means (a) all obligations for borrowed money incurred or assumed by any Member of the Credit Group, (b) all installment sales, conditional sales and capital lease obligations (but not leases meeting the definition of an operating lease for which an asset and liability is recognized under GAAP) of any Member of the Credit Group and (c) all Guaranties (other than any Guaranty by any Member of the Credit Group of Indebtedness of any other Member of the Credit Group), whether constituting Long-Term Indebtedness or Short-Term Indebtedness. Indebtedness shall not include (i) obligations of any Member of the Credit Group to any other Member of the Credit Group, (ii) any Financial Products Agreement, (iii) any non-recourse indebtedness incurred with respect to or secured by Excluded Property the liability for which indebtedness is effectively limited to such Excluded Property, (iv) obligations of any Member of the Credit Group for payments to donors under donated trusts or similar instruments, including without limitation, charitable gift annuities and (v) obligations of any Member of the Credit Group for payments to patients or residents pursuant to contracts for senior housing.

“Industry Restrictions” means federal, state or other applicable governmental laws or regulations affecting any Member of the Credit Group or its health care facilities or other facilities and placing

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restrictions and limitations on the (a) rates, fees and charges to be fixed, charged or collected by any Member of the Credit Group or (b) timing of the receipt of such revenues.

“Initial Members” means TNMC, UNMCP and BMC.

“Initial Obligations” means, collectively, all Obligations issued under the Master Indenture contemporaneously with the original execution and delivery of the Master Indenture.

“Insurance Consultant” means a Person or firm who is not, and no member, stockholder, director, officer or employee of which is, an officer, director, trustee or employee of a Member of the Credit Group or an Affiliate, which is an actuary or other Person qualified to survey risks and to recommend insurance coverage for hospitals, health-related facilities and services and organizations engaged in such operations and other facilities operated by Members of the Credit Group.

“Irrevocable Deposit” means the irrevocable deposit in trust of cash in an amount, or Government Obligations, or other securities permitted for such purpose pursuant to the terms of the documents governing the payment of or discharge of Indebtedness, the principal of and interest on which will be 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, of any such Indebtedness which would otherwise be considered Outstanding. The trustee of such deposit may be the Master Trustee, a Related Bond Trustee or any other trustee or escrow agent authorized to act in such capacity.

“Lien” means any mortgage, deed of trust or pledge of, security interest in or encumbrance on any Property of any Member of the Credit Group which secures any Indebtedness or any other obligation of any Member of the Credit Group or any other Person, other than an obligation to any Member of the Credit Group.

“Limited Obligor” means any Person, other than a Member of the Credit Group, on whose account any Member of the Credit Group has issued a Guaranty as consideration for such Person’s execution and delivery to such Member of the Credit Group of a Pledged Note.

“Limited Obligor Income” means, with respect to each Limited Obligor, as to any period of time, the lesser of (a) the amount included in the Debt Service Requirement relating to any Guaranty by a Member of the Credit Group of any indebtedness of the Limited Obligor or (b) the Limited Obligor Income Available for Debt Service; provided that if the amount included in the Debt Service Requirement for such period is at any time equal to 100% of the debt service on such indebtedness instead of 20% as provided with respect to a Guaranty in the definition of “Debt Service Requirement” summarized above, the Limited Obligor Income for such period shall be equal to zero.

“Limited Obligor Income Available for Debt Service” means, with respect to any Limited Obligor, as to any period of time, the Income Available for Debt Service, but calculated as to the Limited Obligor rather than the Members of the Credit Group.

“Long-Term Indebtedness” means all Indebtedness having a maturity longer than one year and Qualified Commercial Paper incurred or assumed by any Member of the Credit Group including: (a) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one year; (b) leases that meet the definition of a capital lease (but not those meeting the definition of an operating lease for which an asset and liability is recognized under GAAP) in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one year; (c) installment sale or conditional sale contracts having an original term in excess of one year; and (d) Short-Term Indebtedness if Commitment

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Indebtedness exists to provide financing to retire such Short-Term Indebtedness and such Commitment Indebtedness provides for the repayment of principal on terms which would, if such commitment were implemented, constitute Long-Term Indebtedness.

“Master Indenture” means the Master Trust Indenture, as originally executed by TNMC, UNMCP, BMC and the Master Trustee, and as from time to time amended and supplemented in accordance with the provisions of the Master Indenture.

“Master Trustee” means First National Bank of Omaha, and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as master trustee under the Master Indenture.

“Material Member of the Credit Group” means a Member of the Credit Group that holds more than 10% of the Total Assets of the Credit Group.

“Maximum Debt Service Requirement” means the highest Debt Service Requirement for the current or any subsequent Fiscal Year.

“Member” means a Member of the Credit Group or a Member of the Obligated Group, as the context may require.

“Member of the Credit Group” or “Credit Group Member” means each Member of the Obligated Group and any other Person designated as a Designated Affiliate pursuant to the Master Indenture, but excluding any Designated Affiliate that has been terminated pursuant to the provisions of the Master Indenture.

“Member of the Obligated Group” or “Obligated Group Member,” means the Obligated Group Representative and any other Person becoming a Member of the Obligated Group pursuant to the Master Indenture (as summarized under the subcaption “Parties Becoming Members of the Obligated Group below) but excluding any Member of the Obligated Group that has withdrawn from the Obligated Group pursuant to the Master Indenture (as summarized under the subcaption “Withdrawal From the Obligated Group” below). TNMC, UNMCP and BMC initially are the only Members of the Obligated Group.

“Non-Recourse Indebtedness” means any Indebtedness incurred to finance the acquisition of Property secured by a Lien on such Property, liability for which is effectively limited to the Property subject to such Lien with no recourse, directly or indirectly, to any other Property of the Credit Group.

“Obligated Group” means, collectively, the Members of the Obligated Group.

“Obligated Group Representative” means, initially, TNMC and thereafter any Person as may be designated as Obligated Group Representative pursuant to written notice to the Master Trustee executed by all of the Members of the Obligated Group.

“Obligation” means any obligation of the Obligated Group issued under the Master Indenture, as a joint and several obligation of each Obligated Group Member, which may be in the form set forth in a Supplement, including but not limited to notes, bonds, obligations, debentures, reimbursement agreements, loan agreements, guaranties, leases, Financial Products Agreements or other payment obligations.

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“Officer’s Certificate” means a certificate signed by the chairperson of the Governing Body of the Obligated Group Representative, or the president or chief executive officer, or the chief financial officer of the Obligated Group Representative.

“One-Month LIBOR” means the London interbank offered rate for United States dollar deposits for a one-month period, which rate appears on the display designated as Reuters Screen LIBOR01 Page (or such other page as may replace Reuters Screen LIBOR01 Page or such other service or services as may be nominated by the British Bankers’ Association for the purpose of displaying London interbank offered rates for United States dollar deposits), determined as of approximately 11:00 a.m., London time on the date of determination thereof (or, if not so reported, then as determined by a commercial or investment banking institution knowledgeable in municipal or corporate finance in a manner consistent with determining USD-LIBOR-BBA with a one month designated maturity as such terms are defined in the 2006 ISDA Definitions).

“Opinion of Bond Counsel” when used with reference to the Master Indenture means an opinion in writing signed by an attorney or firm of attorneys acceptable to the Obligated Group Representative, and experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds.

“Opinion of Counsel” means an opinion in writing signed by an attorney or firm of attorneys, including in-house counsel, acceptable to the Master Trustee, who may be counsel for any Member of the Credit Group or other counsel.

“Outstanding,” when used with reference to Obligations and other Indebtedness means, as of any date of determination, all Obligations and Indebtedness theretofore issued or incurred and not paid and discharged other than: (a) Obligations theretofore canceled by the Master Trustee or delivered to the Master Trustee for cancellation; (b) Indebtedness deemed paid and no longer outstanding pursuant to the terms thereof, whether by payment, prepayment, defeasance or otherwise; (c) Obligations in lieu of which other Obligations have been authenticated and delivered or have been paid pursuant to the provisions of the Master Indenture regarding mutilated, destroyed, lost or stolen Obligations unless proof satisfactory to the Master Trustee has been received that any such Obligation is held by a bona fide purchaser; (d) Obligations owned by any Obligated Group Member as provided in the Master Indenture; and (e) Obligations or Indebtedness for which there has been made an Irrevocable Deposit, but only to the extent that payment of debt service on such Obligation or Indebtedness is payable from such Irrevocable Deposit; provided, however, that if two or more obligations which constitute Indebtedness represent the same underlying obligation (as when an Obligation secures an issue of Related Bonds and another Obligation secures current repayment obligations to a bank under Commitment Indebtedness) for purposes of the various financial covenants contained in the Master Indenture, but only for such purposes, only one of such obligations shall be deemed Outstanding and the obligation so deemed to be Outstanding shall be that one which produces the greater amount to be included in the Debt Service Requirement to be included in the calculation of such covenants.

“Permitted Liens” has the meaning summarized under the subcaption “Limitations on Creation of Liens” below.

“Person” means any natural person, firm, association, corporation, partnership, joint stock company, a joint venture, trust, limited liability corporation or partnership, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body.

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“Pledged Note” means a promissory note executed by a Limited Obligor, as maker, in favor of a Member of the Credit Group, as payee, evidencing a sum certain liability of such maker to such payee, which is assigned by such payee to the Master Trustee.

“Property” means any and all rights, titles and interests in and to any and all assets whether real or personal, tangible or intangible and wherever situated, other than funds received as donations which are restricted by the donor to purposes inconsistent with payment of debt service on Obligations or operating expenses as determined in accordance with GAAP and other than Excluded Property.

“Property, Plant and Equipment” means all Property owned by the Members of the Credit Group which is classified as property, plant and equipment under GAAP.

“Qualified Commercial Paper” means commercial paper issued, incurred or assumed by any Member of the Credit Group or issued as Related Bonds, which commercial paper is rated in either of the two highest rating categories (without regard to numerical or similar modifiers) of either Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services or Fitch Ratings, or their respective successors, and which commercial paper is marketed by a nationally recognized commercial paper dealer, and for which there is in place and effective a commercial paper dealer agreement with such a party.

“Qualified Provider” means any financial institution or insurance company that is a party to a Financial Products Agreement if the unsecured long-term debt obligations of such financial institution or insurance company (or of the parent or a subsidiary of such financial institution or insurance company if such parent or subsidiary guarantees the performance of such financial institution or insurance company under such Financial Products Agreement), or obligations secured or supported by a letter of credit, contract, guarantee, agreement, insurance policy or surety bond issued by such financial institution or insurance company (or such guarantor parent or subsidiary), are rated in one of the three highest rating categories (without regard to numerical or similar modifiers) of a national rating agency at the time of the execution and delivery of the Financial Products Agreement.

“Related Bond Indenture” means any indenture, bond resolution, lease, loan or guaranty agreement or other comparable instrument or agreement pursuant to which a series of Related Bonds is issued.

“Related Bond Issuer” means the issuer of any issue of Related Bonds.

“Related Bond Trustee” means the trustee and its successors in the trusts created under any Related Bond Indenture.

“Related Bonds” means the revenue bonds or other obligations issued or incurred by any state, territory or possession of the United States or any municipal corporation or political subdivision formed under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof (“governmental issuer”), pursuant to a Related Bond Indenture, the proceeds of which are loaned or otherwise made available to (a) a Member of the Obligated Group in consideration of the execution, authentication and delivery of an Obligation to or for the order of such governmental issuer, or (b) any Person other than a Member of the Obligated Group in consideration of the issuance to such governmental issuer (i) by such Person (including a Designated Affiliate) of any evidence of indebtedness or other obligation of such Person and (ii) by a Member of the Obligated Group of a Guaranty in respect of such indebtedness or other obligation, which Guaranty is represented by an Obligation.

“Related Supplement” means a Supplement executed in connection with Related Bonds.

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“Securities Act of 1933” means the Securities Act of 1933, as amended, or similar legislation subsequently enacted.

“Short-Term Indebtedness” means all Indebtedness having a maturity of one year or less (other than the current portion of Long-Term Indebtedness and other than Qualified Commercial Paper) incurred or assumed by one or more Members of the Credit Group, including (a) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, of one year or less, (b) leases that are required to be capitalized in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one year or less, and (c) installment purchase or conditional sale contracts having an original term of one year or less.

“SIFMA” means the Securities Industry & Financial Markets Association (formerly the Bond Market Association).

“SIFMA Index” means, for the most recent date available, the level of the index which is issued weekly and which is compiled from the weekly interest rate resets of tax-exempt variable rate issues included in a database maintained by Municipal Market Data which meet specific criteria established from time to time by SIFMA and issued on Wednesday of each week, or if any Wednesday is not a Business Day, the immediately preceding Business Day. If the SIFMA Index is no longer published, then “SIFMA Index” shall mean the S&P Weekly High Grade Index. If the S&P Weekly High Grade Index is no longer published, then “SIFMA Index” shall mean the prevailing rate determined by a commercial or investment banking institution knowledgeable in municipal finance for tax-exempt state and local government bonds meeting criteria determined in good faith by such institution to be comparable under the circumstances to the criteria used by SIFMA to determine the SIFMA Index immediately prior to the date on which SIFMA ceased publication of the SIFMA Index.

“SJOA” means the Successor Joint Operating Agreement entered into as of July 1, 2016 by and among TNMC, Nebraska Medicine, a Nebraska nonprofit corporation, The Board of Regents of the University of Nebraska (the “BOR”) and Clarkson Regional Health System, Inc. (“CRHS”), which amended and restated the Joint Operating Agreement entered into as of October 1, 1997, as amended, between CRHS or its predecessors, the BOR and TNMC, as supplemented and amended.

“State” means the State of Nebraska.

“Subordinated Indebtedness” means any Indebtedness, other than Obligations, the payment of which is either unsecured or secured on a subordinate basis, but which is in any case specifically subordinated to the payment of principal and interest on Obligations and evidenced by a document which contains provisions substantially in the form set forth as an exhibit to the Master Indenture and for which the Obligated Group Representative has received an Opinion of Counsel to the effect that such Indebtedness constitutes Subordinated Indebtedness.

“Supplement” means an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture.

“Supplemental Master Trust Indenture No. 1” means the Supplemental Master Trust Indenture No. 1, by and between the Obligated Group Representative and the Master Trustee, as supplemented and amended.

“Supplemental Master Trust Indenture No. 2” means the Supplemental Master Trust Indenture No. 2, by and between the Obligated Group Representative and the Master Trustee, as supplemented and amended.

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“Tax-Exempt Bonds” means Related Bonds, the interest on which is excludable from gross income for federal income tax purposes.

“Tax-Exempt Organization” means a nonprofit organization, organized under the laws of the United States or any state thereof, that is an organization described in Section 501(c)(3) of the Code, and is exempt from federal income taxes under Section 501(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Tax Status” means, as applicable with respect to Related Bonds, the status of such obligations as (a) Build America Bonds described in Section 54AA(d)(1) of the Code if such section of the Code is applicable to any Related Bonds, (b) obligations described in Section 6431 of the Code or (c) having other similar tax characteristics affecting the tax status of interest paid with respect to such obligations, subsidies received by a Related Bond Issuer or credits made available to registered owners of such obligations.

“TNMC” means The Nebraska Medical Center, a nonprofit corporation duly organized and validly existing under the laws of the State, and its successors and assigns.

“Total Assets” means, at any point in time, all assets of the Credit Group, other than Excluded Property, as shown on the balance sheet in the most recent Audited Financial Statements available.

“Total Revenue” means total revenue as determined on a consolidated or combined basis, in accordance with GAAP consistently applied with the elimination of material intercompany balances and transactions; provided, however, that Total Revenue shall in all cases exclude any unrealized gains and losses on the valuation of investments.

“Transfer” means any sale, gift, donation or any other act or occurrence the result of which is (a) to dispossess (including through leasing, as a lessor) any Person of any asset or interest therein or (b) to acquire or otherwise pay for Excluded Facilities or pay any expenses in connection with Excluded Facilities; including specifically in all cases, but without limitation, the forgiveness of any debt; provided, however, that the payment of bills or other accounts in the ordinary course of business (other than with respect to Excluded Facilities) shall be excluded from this definition.

“Trust Indenture Act of 1939” means the Trust Indenture Act of 1939, as amended, or similar legislation subsequently enacted.

“UNMCP” means UNMC Physicians, a Nebraska nonprofit corporation.

“Variable Rate Indebtedness” means all or any portion of Indebtedness the interest rate on which has not been established at a fixed or constant rate to maturity.

Amount of Indebtedness

Each Member of the Obligated Group may incur Indebtedness by issuing Obligations under the Master Indenture (with the consent of the Obligated Group Representative and executed on behalf of the Members of the Obligated Group by the Obligated Group Representative) or by creating Indebtedness under any other document, in each case subject to the provisions and restrictions of the Master Indenture. No Obligations issued under the Master Indenture may be secured on a basis senior to other Obligations, except that the provision of bond insurance, a letter or line of credit, standby bond purchase agreement or other similar instrument or obligation issued by a financial institution or the establishment of a debt service reserve fund or account for the benefit of the Holders of certain Obligations will not be considered

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as the providing of security on a senior basis for such Obligations; provided, further, that any Obligation may be secured by a Permitted Lien as more fully described under the subcaption “Security; Payment of Principal and Interest” below. The principal amount of Indebtedness that may be created under the Master Indenture or under other documents is not limited, except as limited by the provisions of the Master Indenture, including the provisions of the paragraph describing “Limitations on Indebtedness” below, or of any Supplement. Each Member of the Obligated Group is and will be jointly and severally liable for each and every Obligation. The Initial Obligations are issued contemporaneously with the original execution and delivery of the Master Indenture. Each Obligation will be issued pursuant to a Supplement.

Appointment of Obligated Group Representative

Each Member of the Credit Group, by becoming a Member of the Credit Group, irrevocably appoints the Obligated Group Representative as its agent and true and lawful attorney in fact and grants to the Obligated Group Representative on its behalf (a) full and exclusive power to execute Supplements on behalf of the Obligated Group and each Member of the Obligated Group authorizing the issuance of Obligations or series of Obligations, (b) full and exclusive power to execute Obligations for and on behalf of the Obligated Group and each Member of the Obligated Group, (c) full and exclusive power to execute Supplements on behalf of the Obligated Group and each Member of the Obligated Group pursuant to the Master Indenture, (d) full power to prepare, or authorize the preparation of, any and all documents, certificates or disclosure materials reasonably and ordinarily prepared in connection with the issuance of Obligations under the Master Indenture or Related Bonds associated therewith, or to accomplish the purposes of the provisions of the Master Indenture summarized under the subcaptions “Supplements Not Requiring Consent of Holders” and “Supplements Requiring Consent of Holders” below, and to execute and deliver such items to the appropriate parties in connection therewith and (e) full power to enforce payment of any Obligation, pursuant to the provisions summarized under the subcaption “Security; Payment of Principal and Interest” below.

Designated Affiliate

The Controlling Member at all times shall either (i) maintain, directly or indirectly, control of each Designated Affiliate, including the power to direct the management, policies, disposition of assets and actions of such Designated Affiliate, whether through the ownership of voting securities, by contract, partnership interests, membership, reserved powers or the power to appoint members, trustees or directors or otherwise, to the extent required to cause such Designated Affiliate to comply with the terms and conditions of the Master Indenture, and to empower the Controlling Member to cause the Designated Affiliates to take certain actions or refrain from taking certain actions, or (ii) execute and have in effect such contracts or other agreements that are, in the Opinion of Counsel to the Credit Group, sufficient for the Controlling Member to cause such Designated Affiliate to comply with the terms and conditions of the Master Indenture and to empower the Controlling Member to cause the Designated Affiliate to take certain actions or refrain from taking certain actions. A copy of each such Opinion of Counsel shall be delivered to the Master Trustee and, so long as any Related Bonds are outstanding, the issuer of such Related Bonds and the Related Bond Trustee.

The Controlling Member shall cause each Designated Affiliate (subject to contractual and organizational limitations) to pay or otherwise transfer to the Controlling Member such amounts as are necessary to duly and punctually pay the required payments on all Outstanding Obligations and any other payments, in the applicable Supplement and in said Obligations, when and as the same become payable, whether at maturity, upon call for redemption, by acceleration of maturity or otherwise, all in accordance with the true intent and meaning thereof.

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The Obligated Group Representative may designate any Person as a Designated Affiliate under the Master Indenture, and such Person shall thereafter upon receipt by the Master Trustee of a resolution or other instrument of such Person accepting or acknowledging such description, be deemed a Designated Affiliate until such time as the Obligated Group Representative shall declare that such Person will no longer be a Designated Affiliate. The Obligated Group Representative shall designate for each Designated Affiliate an Obligated Group Member to serve as the Controlling Member for such Designated Affiliate. So long as a Person is designated as a Designated Affiliate, the Controlling Member shall maintain control of such Designated Affiliate. The Obligated Group Representative shall at all times maintain an accurate and complete list of all Designated Affiliates (and of the Controlling Members for such Designated Affiliates). Concurrent with the Obligated Group Representative designating a Person as a Designated Affiliate, the Obligated Group Representative shall provide to the Master Trustee (a) a revised list of Designated Affiliates and the financial information required to be delivered to the Master Trustee, (b) information demonstrating that one of the tests described in subsections (a)(i) or (ii) of the section captioned “Limitations on Indebtedness” summarized below would be met for the incurrence of one additional dollar of Long-Term Indebtedness and (c) the Opinion of Counsel required by the first paragraph of this caption.

No Designated Affiliate may withdraw from the Credit Group unless, prior to the taking of such action there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that: (a) immediately prior to and immediately after such withdrawal 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; and (b) one of the tests described in subsections (a)(i) or (ii) of the section captioned “Limitations on Indebtedness” summarized below would be met for the incurrence of one additional dollar of Long-Term Indebtedness, assuming such termination actually occurred at the beginning of the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements are available.

Upon the withdrawal of any Designated Affiliate from the Credit Group, all liability and all obligations of such Designated Affiliate under this Master Indenture shall cease.

Security; Payment of Principal and Interest

Each Member of the Credit Group represents and warrants in the Master Indenture that it has not pledged, mortgaged, encumbered or granted a security interest in any of its Property except for Permitted Liens, and covenants that it will not pledge, mortgage, encumber or grant a security interest in any of its Property except for Permitted Liens.

All Obligations issued pursuant to the Master Indenture will be joint and several general obligations of each Member of the Obligated Group equally and ratably secured by a pledge of the Gross Revenues as provided in the Master Indenture and summarized herein.

Each Member of the Obligated Group, respectively, pledges in the Master Indenture, and to the extent permitted by law grants a security interest to the Master Trustee in, all of its Gross Revenues and in any fund or account in which its Gross Revenues are deposited to secure the payment of Obligations under the Master Indenture and the performance by the Members of the Obligated Group of their other obligations under the Master Indenture.

Each Member of the Obligated Group jointly and severally covenants to promptly pay or cause to be paid the principal of, premium, if any, and interest on each Obligation issued pursuant to the Master Indenture at the place, on the dates and in the manner provided in the Master Indenture, in any

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Supplement and in said Obligation according to the terms thereof whether at maturity, upon proceedings for redemption, by acceleration or otherwise.

Insurance

Each Member of the Credit Group agrees in the Master Indenture that it will maintain, or cause to be maintained, insurance (which may include reasonable deductibles) of such types and in such amounts as is customary for health care providers of similar size and character and in accordance with prevailing industry practice. Such insurance may be provided by one or more self-insurance programs, shared or pooled insurance programs or programs of captive insurance companies considered to be adequate by the Obligated Group Representative except that hazard or casualty risk on any real or personal property owned, leased or used by a Member of the Credit Group, including Property, Plant and Equipment of the Credit Group, may not be self-insured (except for reasonable deductibles). The Obligated Group Representative is to employ an Insurance Consultant at least once every three years to prepare and file with the Master Trustee a report on the adequacy of the insurance maintained by the Obligated Group Representative and the other Members of the Credit Group.

Limitations on Creation of Liens

Each Member of the Obligated Group agrees in the Master Indenture, and the Controlling Member agrees in the Master Indenture that it will cause each Designated Affiliate, not to create or suffer to be created or permit the existence of any Lien upon Property now owned or hereafter acquired by it other than Permitted Liens. Permitted Liens may consist of the following:

(a) Liens arising by reason of good faith deposits with any Member of the Obligated Group or Designated Affiliate in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Member of the Obligated Group or Designated Affiliate to secure public or statutory obligations, or to secure, or in lieu of surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(b) Any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Member of the Obligated Group or Designated Affiliate to maintain self-insurance (if permitted under the provision of the Master Indenture summarized under the subcaption “Insurance” above or elsewhere in the Master Indenture) or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit sharing plans or other social security arrangements, or to share in the privileges or benefits required for companies participating in such arrangements;

(c) Any judgment lien or award against any Member of the Obligated Group or Designated Affiliate so long as such judgment is being contested in good faith and execution thereon is stayed or while the period for responsive pleading has not lapsed;

(d) (i) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law affecting any Property; (ii) any liens on any Property for taxes, assessments, levies, fees, water and sewer charges and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or goods or materials furnished in

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connection with such Property, which are not due and payable or which are not delinquent, or the amount or validity of which, are being contested in accordance with the Master Indenture and execution thereon is stayed or, with respect to liens of mechanics, materialmen, laborers, suppliers or vendors which have been due for less than 90 days; (iii) easements, rights of way, servitudes, restrictions, oil, gas or other mineral reservations and other minor defects, encumbrances and irregularities in the title to any Property, Plant and Equipment which do not materially impair the use of such Property, Plant and Equipment; and (iv) statutory landlord’s liens;

(e) (i) Leases whereunder any Member of the Obligated Group or any Designated Affiliate is lessor which relate to Property, Plant and Equipment which is of a type that is customarily the subject of such leases, including without limitation office space for physicians and educational institutions, food service facilities, research and development facilities, parking facilities, barber shops, beauty shops, flower shops, gift shops, radiology, pathology or other hospital-based specialty services and pharmacy and similar departments; (ii) leases whereunder any Member of the Obligated Group or any Designated Affiliate is lessor entered into in accordance with the provisions of the Master Indenture summarized under the subcaption “Sale, Lease or Other Disposition of Property” below; (iii) leases, licenses or similar rights to use Property whereunder any Member of the Obligated Group or any Designated Affiliate is lessor, lessee, licensor, licensee or the equivalent thereof existing as of the date of the Master Indenture and any renewals and extensions if payment is not yet due under the contract in question or if such Lien is being contested in accordance with the Master Indenture; and (iv) ground leases of unimproved real property;

(f) Such minor defects and irregularities of title as normally exist with respect to Property similar in character to the Property involved and which do not materially adversely affect the value of, or materially impair, the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof;

(g) Any Lien on pledges, gifts or grants to be received in the future including any income derived from the investment thereof and Liens on or in Property given, bequeathed or devised by the owner thereof existing at the time of such gift, bequest or devise, so long as such Liens attach solely to the Property which is the subject of such gift, bequest or devise, and any Indebtedness secured by such Liens is not assumed by any Member of the Obligated Group or any Designated Affiliate;

(h) Any Lien on inventory that does not exceed 25% of the book value thereof;

(i) Any Lien created by the Master Indenture (including without limitation the liens on the Gross Revenues as set forth in the provision of the Master Indenture summarized under the subcaption “Security; Payment of Principal and Interest” above) and any other Lien securing all Obligations on a parity basis;

(j) Liens on Property due to rights of third-party payors for recoupment of amounts paid to any Member of the Credit Group;

(k) Any Lien existing for not more than 30 days after any Member of the Credit Group has first received notice thereof;

(l) Rights of the United States under Section 291, Title 42, United States Code and similar rights under other state and federal statutes;

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(m) Liens on moneys deposited by patients or others with any Member of the Credit Group as security for or as prepayment for the cost of patient care or any rights of residents of life care or similar facilities to endowment or similar funds, or any rights of students to fees or tuition, deposited by or on behalf of such patients, residents or students;

(n) Any security interest in any depreciation reserve, debt service reserve, debt service or similar fund established pursuant to the terms of any Supplement, Related Bond Indenture or loan agreement in favor of the Master Trustee, the Related Bond Trustee, the Related Bond Issuer, the provider of any liquidity or credit support for such Related Bonds or the holder of the Indebtedness issued pursuant to such Supplement or Related Bond Indenture or any related Indebtedness;

(o) Any Liens on Property of any Person existing at the date such Person becomes a Member of the Obligated Group pursuant to the provision of the Master Indenture summarized under the subcaption “Parties Becoming Members of the Obligated Group” below or becomes a Designated Affiliate pursuant to the Master Indenture, or is merged into an Obligated Group Member or Designated Affiliate pursuant to the provision of the Master Indenture summarized under the subcaption “Consolidation, Merger, Sale or Conveyance” below, except that such Lien will qualify as a Permitted Lien under the subsection of the Master Indenture summarized by this subcaption only for as long as any Indebtedness secured by the Lien continues to exist without any increase, extension or renewal after the date upon which the Person became a Member of the Obligated Group or a Designated Affiliate or merges into an Obligated Group Member or Designated Affiliate and any such Person must provide a list of any such existing Liens to the Master Trustee on such date;

(p) The rights of sellers under hospital or other facility acquisition agreements other than Liens securing the payment of the sale price or any reversion rights;

(q) Any Lien arising by reason of any escrow established to pay debt service with respect to Obligations;

(r) Any Lien in favor of a creditor or a trustee on the proceeds of Indebtedness and any earnings thereon prior to the application of such proceeds and such earnings;

(s) Liens securing Non-Recourse Indebtedness incurred pursuant to the provision of the Master Indenture summarized in paragraph (e) under the subcaption “Limitations on Indebtedness” below;

(t) Any Lien on any Related Bond or any evidence of Indebtedness incurred by or on behalf of any Member of the Credit Group which secures only Commitment Indebtedness;

(u) Any Lien on particular accounts receivable if such Lien is given or made in connection with a sale, pledge, assignment or transfer of accounts receivable for the fair market value thereof, except that any Lien with recourse may not exceed 35% of total accounts receivable;

(v) Any Lien described in Exhibit B to the Master Indenture which is existing on the date of execution of the Master Indenture, except 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 Credit Group Member not subject to such Lien on such date unless such Lien as

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so increased, extended, renewed or modified otherwise qualifies as a Permitted Lien under the Master Indenture;

(w) Any Lien securing Financial Products Agreements pursuant to the Master Indenture;

(x) Liens on Property created in anticipation of the sale, assignment, transfer or other disposition of such Property (as permitted by the provision of the Master Indenture summarized under the subcaption “Sale, Lease or Other Disposition of Property” below) and which are required or are conditions to such disposition, provided that the Obligated Group Representative provides an Officer’s Certificate to the effect that such Lien will not adversely affect the Income Available for Debt Service of the Credit Group; and

(y) Any other Lien on Property securing Indebtedness, except that the aggregate outstanding balance of Indebtedness secured by Liens pursuant to the subsection of the Master Indenture summarized under this subcaption may not exceed the greater of (i) 10% of Total Assets of the Credit Group as shown in the Audited Financial Statements for the most recent Fiscal Year or 12-month period for which Audited Financial Statements are available and (ii) 20% of the total operating revenue of the Credit Group as shown in the Audited Financial Statements for the most recent Fiscal Year or 12-month period for which Audited Financial Statements are available.

Limitations on Indebtedness

Except as specifically provided in the Master Indenture, each Member of the Obligated Group Member agrees in the Master Indenture that it will not incur any Additional Indebtedness, and the Controlling Member in the Master Indenture agrees that it will cause each Designated Affiliate not to incur Additional Indebtedness, unless (1) in connection with the incurrence of such Additional Indebtedness the Officer’s Certificate described in the last paragraph under this subcaption is provided and (2) such Additional Indebtedness consists of one or more of the following:

(a) Long-Term Indebtedness may be incurred by any Member of the Credit Group if prior to incurrence of such Indebtedness:

(i) an Officer’s Certificate is filed with the Master Trustee demonstrating that for the most recent period of 12 full consecutive calendar months preceding the date of delivery of such Officer’s Certificate for which Audited Financial Statements are available, the Debt Service Coverage Ratio, taking into account all Outstanding Long-Term Indebtedness and the Long-Term Indebtedness then to be incurred as if it had been incurred at the beginning of such period, is not less than 1.20; or

(ii) an Officer’s Certificate is filed with the Master Trustee demonstrating that: (A) for the most recent period of 12 full consecutive calendar months preceding the date of delivery of such Officer’s Certificate for which Audited Financial Statements are available, the Debt Service Coverage Ratio, taking into account all Outstanding Long- Term Indebtedness, but not the Long-Term Indebtedness then to be incurred, is not less than 1.20; and (B) the prospective Debt Service Coverage Ratio, taking the proposed Long-Term Indebtedness into account, for, (1) in the case of Long-Term Indebtedness (other than a Guaranty) to finance capital improvements, each of the two Fiscal Years next succeeding the date on which such capital improvements are expected to be placed in operation, or, (2) in the case of Long-Term Indebtedness not financing capital

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improvements or in the case of a Guaranty, each of the two Fiscal Years next succeeding the date on which the Indebtedness is to be incurred, is not less than 1.35, as shown in such Officer’s Certificate for such periods, accompanied by a statement of the relevant assumptions upon which such prospective statements are based; or

(iii) immediately after giving effect to any Long-Term Indebtedness incurred pursuant to the paragraph of the Master Indenture summarized by this paragraph (iii), the aggregate of Long-Term Indebtedness Outstanding under such paragraph does not exceed 20% of the Total Revenue of the Credit Group for the most recent period of 12 full consecutive calendar months for which Audited Financial Statements are available and, when the aggregate of Long-Term Indebtedness Outstanding under the paragraph of the Master Indenture summarized by this paragraph (iii) is combined with Short-Term Indebtedness incurred pursuant to the paragraph of the Master Indenture summarized by subsection (d) below, does not exceed in the aggregate 25% of the Total Revenue of the Credit Group for the most recent period of 12 full consecutive calendar months for which Audited Financial Statements are available.

The Credit Group will be deemed to be in compliance with the test for the incurrence of Long-Term Indebtedness summarized in either paragraph (i) or (ii) above without attaining the Debt Service Coverage Ratio required by such paragraph if a Consultant files a report with the Master Trustee (A) stating that in his or her opinion the failure to generate sufficient Income Available for Debt Service to attain the required Debt Service Coverage Ratio is caused by compliance with Industry Restrictions or changes in public or private third-party reimbursement programs and the Credit Group has generated Income Available for Debt Service at the highest levels practicable and (B) reporting on prospective financial statements that demonstrate that the Debt Service Coverage Ratio was, for the tests summarized in paragraphs (i) and (ii)(A) above, and is projected to be, for the test summarized in paragraph (ii)(B) above, as the case may be, not less than 1.00.

(b) Completion Indebtedness may be incurred by any Member of the Credit Group without limitation so long as there is filed with the Master Trustee (i) an Officer’s Certificate stating that at the time the original Indebtedness for the capital improvements to be completed was incurred, such Member of the Credit Group had a reasonable belief that the proceeds of such Indebtedness together with other available moneys would be sufficient to complete such capital improvements, (ii) a certificate of an independent architect setting forth the amount reasonably expected to be required to complete the capital improvement for which the Indebtedness was incurred and (iii) an Officer’s Certificate stating that the proceeds of the Completion Indebtedness proposed, together with any other available moneys, including estimated investment earnings exceed the amount set forth in clause (ii) of this subsection.

(c) Long-Term Indebtedness may be incurred by any Member of the Credit Group for the purpose of refunding any Outstanding Indebtedness if prior to the incurrence thereof there is delivered to the Master Trustee an Officer’s Certificate demonstrating that: (i) the Maximum Debt Service Requirement will not increase by more than 15% after the incurrence of such proposed refunding Long-Term Indebtedness and after giving effect to the disposition of the proceeds thereof; or (ii) the total Debt Service Requirement over the life of the proposed refunding Long-Term Indebtedness will not exceed by more than 15% the total Debt Service Requirement on the existing Indebtedness proposed to be refunded and which will not remain Outstanding after giving effect to the disposition of the proceeds of the proposed refunding Long- Term Indebtedness; or (iii) the requirements of subsection (a) above are met.

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(d) Short-Term Indebtedness may be incurred by any Member of the Credit Group if immediately after the incurrence of such Short-Term Indebtedness (i) the Outstanding principal amount of all such Short-Term Indebtedness does not exceed 15% of the Total Assets of the Credit Group for the most recent period of 12 full consecutive calendar months for which Audited Financial Statements are available or (ii) the aggregate principal amount of Short-Term Indebtedness Outstanding combined with the principal amount of Long-Term Indebtedness incurred pursuant to the subsection of the Master Indenture summarized by subsection (a)(iii) above Outstanding, does not exceed 25% of the Total Assets of the Credit Group for the most recent period of 12 full consecutive calendar months for which Audited Financial Statements are available, except that the Credit Group is to be free from all Short-Term Indebtedness, except for an amount equal to not more than 3% of Total Assets, for a period of 20 consecutive calendar days in each Fiscal Year.

(e) Non-Recourse Indebtedness, Subordinated Indebtedness and Commitment Indebtedness may be incurred without limitation.

For purposes of the section of the Master Indenture summarized under this subcaption, the conversion of Indebtedness from Variable Rate Indebtedness to Indebtedness bearing a fixed interest rate or from one type of Variable Rate Indebtedness to another type of Variable Rate Indebtedness or from Indebtedness bearing a fixed interest rate to Variable Rate Indebtedness pursuant to the terms of the documents providing for the issuance of such Indebtedness will not be considered to be incurrence of Indebtedness. No Additional Indebtedness will be deemed to arise when any funding occurs under any Commitment Indebtedness.

For the purposes of meeting the tests set forth in the subsections of the Master Indenture summarized by subsections (a) through (e) above, any Indebtedness that will no longer be Outstanding on the proposed issuance date of the Indebtedness then to be incurred will be excluded from the calculations required by such tests.

Indebtedness incurred pursuant to any one of the subsections of the Master Indenture summarized under this subcaption may be reclassified as Indebtedness incurred pursuant to any other of such subsections if the tests set forth in the subsection to which such Indebtedness is to be reclassified are met at the time of such reclassification.

Concurrent with the issuance of any Additional Indebtedness, the Obligated Group Representative is to furnish the Master Trustee with an Officer’s Certificate containing the following information, certifications and calculations (except that no such Officer’s Certificate will be required for Indebtedness incurred pursuant to the paragraph summarized by paragraph (a)(iii) above):

(A) identification of the Indebtedness to be incurred and the subsection of the section of the Master Indenture summarized under this subcaption pursuant to which such Indebtedness is to be incurred; and

(B) certifications demonstrating compliance with the provisions of such subsection and that no Event of Default then exists under the Master Indenture and that upon issuance of the Additional Indebtedness no Event of Default will exist under the Master Indenture and that no event will have occurred which with the passage of time or the giving of notice or both would become an Event of Default (except that such Officer’s Certificate is not required to state that no Event of Default is then existing in connection with the issuance of Additional Indebtedness which is issued to refund any Indebtedness theretofore issued and then Outstanding if the Obligated Group Representative has delivered an Officer’s Certificate accompanied by an

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Opinion of Counsel acceptable to the Master Trustee as to any conclusions of law supporting such Officer’s Certificate that any existing Event of Default under the Master Indenture will be cured by such refunding).

Income Available for Debt Service

Each Member of the Obligated Group agrees in the Master Indenture to manage its business, and each Controlling Member agrees in the Master Indenture to cause each Designated Affiliate to manage its business, such that the Income Available for Debt Service of the Credit Group, calculated at the end of each Fiscal Year, will not be less than 1.10 times the Debt Service Requirement on all Outstanding Indebtedness of the Credit Group for such Fiscal Year.

If for any Fiscal Year the Income Available for Debt Service is not sufficient to satisfy the requirement summarized in the paragraph above, the Obligated Group Representative covenants in the Master Indenture to retain a Consultant to make recommendations to increase Income Available for Debt Service in the following Fiscal Year to the level required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest level attainable (except that a Consultant need not be hired for such purpose more frequently than once in any two-year period). The Obligated Group Representative will within 10 days following receipt of such recommendations, transmit a copy to the Master Trustee and the Related Bond Trustee. Each Obligated Group Member agrees in the Master Indenture, and the Controlling Member agrees in the Master Indenture to cause each Designated Affiliate, to consider any recommendations of the Consultant and will be obligated to implement such recommendations to the extent such recommendations are practicable and operationally feasible. So long as the provisions of the section of the Master Indenture summarized under this subcaption are complied with, such section will be deemed to have been complied with even if Income Available for Debt Service for the following Fiscal Year is below the required level so long as the Income Available for Debt Service of the Credit Group is sufficient to pay the debt service on all Indebtedness of the Credit Group for such Fiscal Year; but in no event, except as set forth in the last paragraph of this subcaption, may the ratio of Income Available for Debt Service to the Debt Service Requirement for any Fiscal Year be less than 1.00.

If a report of a Consultant is delivered to the Master Trustee and the Related Bond Trustee, which report states that Industry Restrictions have been imposed which make it impossible for Income Available for Debt Service to satisfy the first paragraph of the section of the Master Indenture summarized under this subcaption, then the required amount of Income Available for Debt Service will be temporarily reduced to the maximum coverage permitted by such Industry Restrictions during the duration of such Industry Restrictions; but in no event, except as set forth in the last paragraph of this subcaption, may the ratio of Income Available for Debt Service to the Debt Service Requirement for any Fiscal Year be less than 1.00.

The ratio of Income Available for Debt Service to the Debt Service Requirement may be less than 1.00 in any Fiscal Year, provided that the Income Available for Debt Service to the Debt Service Requirement for the prior Fiscal Year was 1.00 or greater and that there is filed with the Master Trustee (at the same time the Obligated Group Representative sends the Consultant’s report to the Master Trustee as required by the second paragraph of this subcaption) a certificate of the Obligated Group Representative which indicates that the Days Cash on Hand of the Obligated Group as of the last day of such Fiscal Year was not less than 150.

Sale, Lease or Other Disposition of Property

Each Member of the Obligated Group agrees in the Master Indenture, and the Controlling Member agrees in the Master Indenture that it will cause all Designated Affiliates, not to Transfer in any

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Fiscal Year any Property except for the following types of Transfers: (a) Transfers of Property to any Person, if such Transfer is made in the ordinary course of business; (b) Transfers of Property to any Person if such Property has, or within the next succeeding 24 months will, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property; (c) Transfers of Property to any Member of the Credit Group without limit; (d) Transfers of Property in an amount in any Fiscal Year not exceeding five percent (5%) of (i) the Total Assets of the Credit Group as shown in the Audited Financial Statements of the Credit Group for the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements are available or (ii) at the option of the Obligated Group Representative, the fair market value of the assets included within Total Assets of the Credit Group as reasonably determined in an Officer’s Certificate; (e) Transfers of Property to any Person if such Property consists solely of assets that are specifically restricted by the donor or grantor to a particular purpose the result of which is that neither the Property nor the income nor any earnings thereon will ever be available to pay debt service on Indebtedness or operating expenses in connection with any Property and the Transfer thereof will not impair the economic value of the remaining Property; (f) Transfers of Property to any Person so long as the Member of the Credit Group proposing to make such Transfer receives as consideration for such Transfer cash, services or other property equal to the fair market value of the asset so transferred; (g) Transfers of Property to any Person if such Property is replaced with property of comparable value and utility, as determined in the reasonable opinion of such Member of the Credit Group; (h) Transfers of Property permitted to be Transferred by the Master Indenture pursuant to a consolidation merger or sale as summarized under the subcaption “Consolidation, Merger, Sale or Conveyance” below; (i) Fund Transfers as more fully described in the SJOA (see the section captioned “SUCCESSOR JOINT OPERATING AGREEMENT— Fund Transfers” in Appendix D to the Official Statement) and (j) Transfers of Property to any Person, so long as prior to the Transfer there is delivered to the Master Trustee an Officer’s Certificate demonstrating that immediately after such Transfer one of the tests summarized in paragraphs (a)(i) or (ii) under the subcaption “Limitations on Indebtedness” above would be met for the incurrence of one additional dollar of Long-Term Indebtedness, assuming such Transfer actually occurred at the beginning of the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements of the Credit Group are available.

In addition to the foregoing, the Members may not sell, lease or otherwise dispose of any Property unless it is established to the satisfaction of the Master Trustee that (i) such sale, lease or other disposition complies with the terms of any applicable Deed of Trust, (ii) the security of such Deed of Trust and the ability of the trustee thereunder to foreclose upon the remaining Property will not be impaired as a result of the disposition of such property, and (iii) the appropriate Member shall have conveyed to the trustee under the Deed of Trust such rights-of-way, easements and other rights in land as are required for ingress to and egress from the remaining portion of the Property, for the utilization of the facilities located thereon and for utilities required to serve such facilities.

Consolidation, Merger, Sale or Conveyance

Each Member of the Credit Group agrees in the Master Indenture, and the Controlling Member agrees in the Master Indenture that it will cause each Designated Affiliate, not to merge or consolidate with, or sell or convey all or substantially all of its Property to any Person that is not a Member of the Credit Group unless: (i) at the time of such consolidation, merger, sale or conveyance (including without limitation the purchase of all or substantially all of the Property of a Member of the Credit Group) such successor corporation is an entity organized under the laws of the District of Columbia or one of the states of the United States and becomes a Member of the Obligated Group in accordance with the Master Indenture or becomes a Designated Affiliate pursuant to the Master Indenture (except that if an Obligated Group Member and a Designated Affiliate merge, the surviving entity will remain an Obligated Group

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Member) and executes and delivers to the Master Trustee an appropriate instrument containing the agreement of such successor corporation to assume, jointly and severally, the due and punctual payment of the principal of, premium, if any, and interest 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 Member; (ii) an Officer’s Certificate is delivered to the Master Trustee demonstrating that no Member of the Credit Group, including such successor corporation, immediately after such merger, consolidation, sale or conveyance would be in default in the performance or observance of any covenant or condition of the Master Indenture and one of the tests summarized in paragraphs (a)(i) or (ii) under the subcaption “Limitations on Indebtedness” above would be met for the incurrence of one additional dollar of Long-Term Indebtedness, assuming such merger, consolidation, sale or conveyance actually occurred at the beginning of the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements are available; and (iii) if all amounts due or to become due on any Related Bond have not been fully paid to the holder thereof, there must be delivered to the Master Trustee and each Related Bond Trustee (A) an Opinion of Bond Counsel to the effect that the consummation of such merger, consolidation, sale or conveyance, whether or not contemplated on any date of the delivery of any Related Bonds, would not adversely affect the validity of such Related Bonds or result in the inclusion of interest payable on such Related Bonds that are Tax- Exempt Bonds in gross income for purposes of federal income taxation or otherwise affect the Tax Status of such Related Bonds, (B) an Opinion of Counsel, in form and substance satisfactory to the Related Bond Trustee to the effect that the consummation of such transaction (1) would not require the registration of the Related Bonds under the Securities Act of 1933 or any state securities law, or the Related Supplement under the Trust Indenture Act of 1939 or any state securities law, or if such registration is required, that all applicable registration and qualification provisions of said Acts have been complied with, and (2) will not adversely affect the status as a Tax-Exempt Organization of any Member which otherwise has such status and (C) an Opinion of Counsel to the effect that the consummation of such merger, consolidation, sale or conveyance complies with all applicable federal and state laws and regulations.

Concurrent with such consolidation, merger, sale or conveyance, the Obligated Group Representative must furnish the Master Trustee with an Officer’s Certificate of the Obligated Group Representative to the effect that no Event of Default then exists under the Master Indenture and that upon such consolidation, merger, sale or conveyance no Event of Default will exist under the Master Indenture and that no event will have occurred which with the passage of time or the giving of notice or both would become an Event of Default.

Filing of Financial Statements, Certificate of No Default, Other Information

Each Member of the Obligated Group agrees, in the Master Indenture and the Controlling Member agrees in the Master Indenture to cause any Designated Affiliate, to comply with the following covenants: (a) each Member of the Credit Group will keep adequate records and books of accounts, including books of records and accounts of all Property in which complete and correct entries will be made, in accordance with GAAP (such books at all times to be subject to the inspection by the Master Trustee and any Holder, or their representatives duly authorized in writing; except that the Master Trustee will not be obligated to inspect such books); (b) the Obligated Group Representative will cause Financial Statements to be prepared annually as soon as practicable; (c) within 30 days after receipt of the audit report mentioned below but in no event later than 180 days after the end of each fiscal reporting period for which the Financial Statements of the Credit Group are reported upon by independent certified public accountants (an “audit report”), it will file or cause to be filed with the Master Trustee and with each Holder who may have so requested in writing or on whose behalf the Master Trustee may have so requested a copy of the audited Financial Statements of the Credit Group as of the end of such fiscal reporting period accompanied by the opinion of the independent certified public accountants. Such

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audited Financial Statements are to be prepared in accordance with GAAP and are to include such statements necessary for a fair presentation of unrestricted fund balance, financial position, results of operations and changes in unrestricted fund balance and cash flows as of the end of such fiscal reporting period; (d) within 30 days after receipt of the audit report mentioned above but in no event later than 180 days after the end of each Fiscal Year, it will file or cause to be filed with the Master Trustee and with each Holder who may have so requested in writing or on whose behalf the Master Trustee may have so requested, an Officer’s Certificate stating the Debt Service Coverage Ratio for such fiscal reporting period and the ratio of Income Available for Debt Service to the Debt Service Requirement for such fiscal reporting period and stating whether, to the best knowledge of the signer, any Member of the Credit Group is in default in the performance of any covenant contained in the Master Indenture and, if so, specifying each such default and any proposed remedy then being pursued of which the signer may have knowledge; (e) if an Event of Default has occurred and is continuing, it will (i) file with the Master Trustee such other financial statements and information concerning the operations and financial affairs of any Member of the Credit Group (or of any consolidated or combined group of companies, including the Obligated Group Representative and consolidated or combined Members of the Obligated Group and including any other Member of the Credit Group) as the Master Trustee may from time to time reasonably request, excluding specifically donor records, patient records and personnel records and (ii) provide access to the facilities of any Member of the Credit Group for the purpose of inspection by the Master Trustee during regular business hours or at such other times as the Master Trustee may reasonably request; and (f) within 30 days after its receipt thereof (if not filed earlier pursuant to some other provision of the Master Indenture), it will file or cause to be filed with the Master Trustee a copy of each report which any provision of the Master Indenture requires to be prepared by a Consultant or an Insurance Consultant.

Parties Becoming Members of the Obligated Group

Persons that are not Members of the Obligated Group may become Members of the Obligated Group if: (a) the Person that is becoming a Member of the Obligated Group executes and delivers to the Master Trustee an instrument (i) containing the agreement of such Person to become a Member of the Obligated Group under the Master Indenture and thereby become subject to compliance with all provisions of the Master Indenture pertaining to a Member of the Obligated Group, including the performance and observance of all covenants and obligations of a Member of the Obligated Group under the Master Indenture, and (ii) containing the unconditional agreement of such Person to jointly and severally make payments upon each Obligation at the times and in the amounts provided in each such Obligation; (b) each instrument executed and delivered to the Master Trustee in accordance paragraph (a) is to be accompanied by an Opinion of Counsel, addressed to the Master Trustee, to the effect that such instrument has been duly authorized, executed and delivered by such Person and constitutes a valid and binding obligation enforceable in accordance with its terms, with such exceptions and limitations as are customary; (c) there must be filed with the Master Trustee an Officer’s Certificate demonstrating that one of the conditions for the incurrence of one additional dollar of Long-Term Indebtedness summarized in the paragraphs (a)(i) or (ii) under the subcaption “Limitations on Indebtedness” above would be met, assuming such admission actually occurred at the beginning of the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements are available; (d) if all amounts due or to become due on any Related Bond have not been paid in full to the holders thereof, there must be delivered to the Master Trustee and Related Bond Trustee (i) an Opinion of Bond Counsel to the effect that the consummation of such transaction would not adversely affect the validity of such Related Bonds or result in inclusion of interest payable on any such Related Bond that is a Tax-Exempt Bond in gross income for purposes of federal income taxation or otherwise affect the Tax Status of any such Related Bonds and (ii) an Opinion of Counsel, in form and substance satisfactory to the Related Bond Trustee, to the effect that the consummation of such transaction (A) would not require the registration of the Related Bonds under the Securities Act of 1933 or any state securities law, or the Related Supplement under the

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Trust Indenture Act of 1939 or any state securities law, or if such registration is required, that all applicable registration and qualification provisions of said Acts have been complied with, and (B) will not adversely affect the status as a Tax-Exempt Organization of any Member which otherwise has such status; and (e) there must be delivered to the Master Trustee by the Person becoming a Member of the Obligated Group an irrevocable power of attorney authorizing the execution of Obligations by the Obligated Group Representative.

Concurrent with the addition of such Obligated Group Member, the Obligated Group Representative is to furnish the Master Trustee with an Officer’s Certificate to the effect that no Event of Default then exists under the Master Indenture and that upon addition of such Obligated Group Member no Event of Default will exist under the Master Indenture and that no event will have occurred which with the passage of time or the giving of notice or both would become an Event of Default and acknowledging the addition of such Person as a Member of the Obligated Group which will be bound by all provisions of the Master Indenture.

Withdrawal From the Obligated Group

TNMC may not withdraw from the Obligated Group. No other Member of the Obligated Group may withdraw from the Obligated Group unless, prior to the taking of such action: (a) if all amounts due on any Related Bond have not been paid in full to the holders thereof, there must be delivered to the Master Trustee and the Related Bond Trustee an Opinion of Bond Counsel, in form and substance satisfactory to the Related Bond Trustee, to the effect that such Member’s withdrawal from the Obligated Group would not result in the inclusion of interest payable on any such Related Bond that is a Tax- Exempt Bond in gross income for the purposes of federal income taxation or otherwise affect the Tax Status of any such Related Bond; (b) there is delivered to the Master Trustee an Officer’s Certificate to the effect that one of the tests summarized in paragraphs (a)(i) or (ii) under the subcaption “Limitations on Indebtedness” above would be met for the incurrence of one additional dollar of Long-Term Indebtedness, assuming such withdrawal actually occurred at the beginning of the most recent Fiscal Year or period of 12 full consecutive calendar months for which Audited Financial Statements are available; and (c) there is delivered to the Master Trustee an Officer’s Certificate of the Obligated Group Representative to the effect that immediately prior to and immediately after such withdrawal no Event of Default exists under the Master Indenture and no event will have occurred which with the passage of time or the giving of notice or both would become such an Event of Default.

Upon the withdrawal of any Member from the Obligated Group pursuant to the provisions of the Master Indenture summarized under this subcaption, all liability of such Member of the Obligated Group with respect to all Obligations Outstanding under the Master Indenture will cease, and the Lien of the Master Indenture on any Property of such Member of the Obligated Group will be released.

Events of Default

Event of Default, as used in the Master Indenture, means any of the following events:

(a) the Members of the Obligated Group fail to make any payment of the principal of, premium, if any, or interest on any Obligations issued and Outstanding under the Master Indenture when and as the same become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof and of the Master Indenture;

(b) any Member of the Credit Group fails duly to perform, observe or comply with any other covenant or agreement on its part under the Master Indenture for a period of 30 days after the date on which written notice of such failure, requesting the same to be remedied, has been given to the Obligated

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Group Representative by the Master Trustee, or to the Obligated Group Representative and the Master Trustee by the Holders of at least 50% in Aggregate Principal Amount of Obligations then Outstanding, except that if said failure is such that it cannot be corrected within 30 days after the receipt of such notice, it will not constitute an Event of Default if corrective action is instituted within such 30-day period and diligently pursued until the Event of Default is corrected;

(c) any representation or warranty made by any 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 is not corrected or brought into compliance within 30 days after written notice thereof to the Obligated Group Representative by the Master Trustee or the Holders of at least 50% in Aggregate Principal Amount of the Outstanding Obligations;

(d) an event of default occurs under a Related Bond Indenture or upon a Related Bond;

(e) any Member of the Credit Group fails to make any required payment with respect to any Indebtedness for borrowed money the outstanding principal amount of which is in excess of 2% of Total Assets for the most recent Fiscal Year for which Financial Statements are available (other than Obligations issued and Outstanding under the Master Indenture and other than Non-Recourse Indebtedness), whether such Indebtedness exists on the date of the Master Indenture or thereafter is created, and any period of grace with respect thereto has expired, or an event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness the outstanding principal amount of which is in excess of 2% of Total Assets for the most recent Fiscal Year for which Financial Statements are available (other than Non-Recourse Indebtedness), whether such Indebtedness exists on the date of the Master Indenture or thereafter is created, occurs, which event of default is not waived by the holder of such mortgage, indenture or instrument, and as a result of such failure to pay or other event of default such Indebtedness has been accelerated, except that such default will not constitute an Event of Default within the meaning of the subsection of the Master Indenture summarized under this subcaption if within 60 days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, any Member of the Credit Group in good faith contests the obligation to pay or the existence of such Indebtedness;

(f) the entry of a decree or order by a court having jurisdiction in the premises for relief against any Material Member of the Credit Group, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Member under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, custodian, assignee or sequestrator (or other similar official) of such Member or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; and

(g) the institution by any Material Member of the Credit Group of proceedings of an order for relief, or the consent by it to an order for relief against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement, adjustment, compensation or relief under the United States Bankruptcy Code or any other similar applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, custodian, assignee, trustee or sequestrator (or other similar official) of such Member of the Credit Group or of any substantial part of its Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due.

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Acceleration; Annulment of Acceleration

Upon the occurrence and during the continuation of an Event of Default under the Master Indenture, the Master Trustee may and, upon the written request of (a) the Holders of not less than 50% in Aggregate Principal Amount of Obligations Outstanding or (b) any Person properly exercising the right given to such Person under any Supplement to require acceleration of the Obligations issued pursuant to such Supplement, must, by notice to the Members of the Obligated Group declare such Obligations Outstanding immediately due and payable, whereupon such Obligations will become and be immediately due and payable, anything in the Obligations or in any other section of the Master Indenture to the contrary notwithstanding, except that if the terms of any Supplement give a Person the right to consent to acceleration of the Obligations issued pursuant to said Supplement, the Obligations issued pursuant to such Supplement may not be accelerated by the Master Trustee unless such consent is properly obtained pursuant to the terms of such Supplement. In the event Obligations are accelerated there will be due and payable on such Obligations an amount equal to the total principal amount of all such Obligations, plus all interest accrued thereon to the date of acceleration and, to the extent permitted by applicable law, which accrues to the date of payment.

At any time after the principal of the Obligations has been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, if (a) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay all matured installments of interest and interest on installments of principal and interest and principal or redemption prices then due (other than the principal then due only because of such declaration) of all Obligations Outstanding, (b) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay the charges, compensation, expenses, disbursements, advances, fees and liabilities of the Master Trustee, (c) all other amounts then payable by the Obligated Group under the Master Indenture have been paid or a sum sufficient to pay the same has been deposited with the Master Trustee, and (d) every Event of Default (other than a default in the payment of the principal of such Obligations then due only because of such declaration) has been remedied, then the Master Trustee may, and upon the written request of Holders of not less than 50% Aggregate Principal Amount of the Obligations Outstanding must, annul such declaration and its consequences with respect to any Obligations or portions thereof not then due by their terms, except that no such annulment is to extend to Obligations issued pursuant to a Supplement which provides that no such declaration may be annulled by the Master Trustee unless consent of a particular Person is obtained without the consent of such Person. No such annulment will extend to or affect any subsequent Event of Default or impair any right consequent thereon.

Additional Remedies and Enforcement of Remedies

Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than 50% in Aggregate Principal Amount of the Obligations Outstanding, together with indemnification of the Master Trustee to its satisfaction therefor, must, proceed forthwith to protect and enforce its rights and the rights of the Holders under the Master Indenture by such suits, actions or proceedings as the Master Trustee, being advised by counsel, deems expedient, but only to the extent permitted by law, including but not limited to: (a) enforcement of the right of the Holders to collect and enforce the payment of amounts due or becoming due under the Obligations; (b) suit upon all or any part of the Obligations; (c) civil action to require any Person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Obligations to account as if it were the trustee of an express trust for the Holders; (d) civil action to enjoin any acts or things which may be unlawful or in violation of the rights of the Holders; (e) realize upon the security interest in the Gross Revenues and exercise all of the rights and remedies of a secured party under applicable state laws; (f) exercise of any and all remedies under any instruments providing security

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to the Master Trustee for payment or performance under Obligations; and (g) enforcement of any other right of the Holders conferred by law or by the Master Indenture, except that such Holders will have no recourse under the Master Indenture to Excluded Property.

Regardless of the happening of an Event of Default, the Master Trustee, if requested in writing by the Holders of not less than 50% in Aggregate Principal Amount of the Obligations then Outstanding, must, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised are necessary or expedient (a) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation of the Master Indenture, or (b) to preserve or protect the interests of the Holders, so long as such request and the action to be taken by the Master Trustee are not in conflict with any applicable law or the provisions of the Master Indenture and, in the sole judgment of the Master Trustee, is not unduly prejudicial to the interests of the Holders not making such request.

Application of Moneys After Event of Default

During the continuance of an Event of Default all moneys received by the Master Trustee pursuant to any right given or action taken pursuant to the Master Indenture (except for security given with respect to particular Obligations to the extent permitted in the Master Indenture, which security will only be applied to payment of debt service on such particular Obligations), after payment of (i) the costs and expenses of the proceedings resulting in the collection of such moneys and of the fees, expenses and advances incurred or made by the Master Trustee with respect thereto and all other fees and expenses of the Master Trustee under the Master Indenture and (ii) in the sole discretion of the Master Trustee, the payment of the expenses of operating the Property of any Members of the Obligated Group, are to be applied as follows:

(a) Unless the principal of all Outstanding Obligations has become or has been declared due and payable: First: to the payment to the Persons entitled thereto of all installments of interest then due on Obligations in the order of the maturity of such installments and, if the amount available is not sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the Persons entitled thereto, without any discrimination or preference; and Second: to the payment to the Persons entitled thereto of the unpaid principal installments of any Obligations which have become due, whether at maturity or by call for redemption, in the order of their due dates, and if the amounts available are not sufficient to pay in full all Outstanding Obligations due on any date, then to the payment thereof ratably, according to the amounts of principal installments due on such date, to the Persons entitled thereto, without any discrimination or preference.

(b) If the principal of all Outstanding Obligations has become or has been declared due and payable, to the payment of the principal and interest then due and unpaid upon Outstanding Obligations without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Obligation over any other Obligation, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference.

(c) If the principal of all Outstanding Obligations has been declared due and payable, and if such declaration thereafter has been rescinded and annulled under the provisions of the Master Indenture, then, subject to the provisions of the Master Indenture summarized under this subcaption in the event that the principal of all Outstanding Obligations later becomes due or is declared due and payable, the moneys will be applied in accordance with the provisions of the section of the Master Indenture summarized under this subcaption.

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Whenever moneys are to be applied by the Master Trustee pursuant to the provisions of the Master Indenture summarized under this subcaption, such moneys are to be applied by it at such times, and from time to time, as the Master Trustee determines, 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 applies such moneys, it is to fix the date upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such dates will cease to accrue. The Master Trustee is to 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 will not be required to make payment to the Holder of any unpaid Obligation until such Obligation is presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Obligations and interest thereon have been paid under the provisions of the Master Indenture summarized under this subcaption and all expenses and charges of the Master Trustee have been paid, any balance remaining will be paid to the Person entitled to receive the same; if no other Person is entitled thereto, then the balance will be paid to the Members of the Obligated Group, their respective successors, or as a court of competent jurisdiction may direct.

Remedies Not Exclusive

No remedy by the terms of the Master Indenture conferred upon or reserved to the Master Trustee or the Holders is intended to be exclusive of any other remedy, but each and every such remedy is to be cumulative and will be in addition to every other remedy given under the Master Indenture or existing at law or in equity or by statute on or after the date of the Master Indenture.

Remedies Vested in the Master Trustee

All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Obligations may be enforced by the Master Trustee without the possession of any of the Obligations or the production thereof in any trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining as plaintiffs or defendants any Holders. Subject to the provisions of the section of the Master Indenture summarized under the subcaption “Application of Moneys After Default” above, any recovery or judgment will be for the equal benefit of the Holders.

Appointment of Receivers

Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Master Trustee and the Holders of Obligations under the Master Indenture, the Master Trustee will be entitled, as a matter of right, to the extent permitted under applicable law, to the appointment of a receiver or receivers of the rights and properties pledged under the Master Indenture and of the revenues, issues, payments and profits thereof, pending such proceedings, with such powers as the court making such appointment confers.

Holders’ Control of Proceedings

If an Event of Default has occurred and is continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of not less than 50% in Aggregate Principal Amount of Obligations then Outstanding will have the right, at any time, by an instrument in writing executed and delivered to the Master Trustee and accompanied by indemnity satisfactory to the Master Trustee, to direct the method and place of conducting any proceeding 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

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Master Indenture, so long as such direction is not in conflict with any applicable law or the provisions of the Master Indenture, and so long as the Master Trustee will have the right to decline to follow any such direction if the Master Trustee in good faith determines that the proceeding so directed would involve it in personal liability or would be unduly prejudicial to the interest of any Holders not joining in such direction. Nothing in the section of the Master Indenture summarized under this subcaption is to impair the right of the Master Trustee in its discretion to take any other action under the Master Indenture which it may deem proper and which is not inconsistent with such direction by Holders.

The foregoing notwithstanding, the Holders of 50% in Aggregate Principal Amount of the Obligations then Outstanding which are entitled to the exclusive benefit of certain security (to the extent provided in the Master Indenture) in addition to that intended to secure all or other Obligations will 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, the Supplement or Supplements pursuant to which such Obligations were issued or so secured with respect to such separate security, except that such direction may not be otherwise than in accordance with the provisions of law and of the Master Indenture.

Termination of Proceedings

In case any proceeding taken by the Master Trustee on account of an Event of Default has been discontinued or abandoned for any reason or has been determined adversely to the Master Trustee or to the Holders, then the Members of the Credit Group, the Master Trustee and the Holders are to be restored to their former positions and rights under the Master Indenture, and all rights, remedies and powers of the Master Trustee and the Holders are to continue as if no such proceeding had been taken.

Waiver of Events of Default

No delay or omission of the Master Trustee or of any Holder to exercise any right or power accruing upon any Event of Default is to impair any such right or power or is to be construed to be a waiver of any such Event of Default or an acquiescence therein. Every power and remedy given to the Master Trustee and the Holders, respectively, may be exercised from time to time and as often as may be deemed expedient by them.

The Master Trustee may waive any Event of Default which in its opinion has been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Master Indenture or before the completion of the enforcement of any other remedy under the Master Indenture.

Notwithstanding anything contained in the Master Indenture to the contrary, the Master Trustee, upon the written request of the Holders of not less than 50% of the Aggregate Principal Amount of Obligations then Outstanding, is to waive any Event of Default under the Master Indenture and its consequences; provided, however, that, except under the circumstances set forth in the provisions of the Master Indenture summarized under the subcaption “Acceleration; Annulment of Acceleration” above, a default in the payment of the principal of, premium, if any, or interest on any Obligation, when the same become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Outstanding Obligations with respect to which such payment default exists.

In case of any waiver by the Master Trustee of an Event of Default under the Master Indenture, the Members of the Credit Group, the Master Trustee and the Holders are to be restored to their former

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positions and rights under the Master Indenture, respectively, but no such waiver is to extend to any subsequent or other Event of Default or impair any right consequent thereon.

Notice of Default

The Master Trustee, within 10 days after a responsible officer of the Master Trustee has actual knowledge of the occurrence of an Event of Default, is to mail to each Related Bond Issuer and all Holders as the names and addresses of such Holders appear upon the records of the Master Trustee, notice of such Event of Default known to the Master Trustee, unless such Event of Default has been cured before the giving of such notice; provided that, except in the case of the Events of Default specified in subsections (a), (f) and (g) of the section of the Master Indenture summarized under the subcaption “Events of Default” above, the Master Trustee is to be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors of the Master Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

Removal and Resignation of the Master Trustee

The Master Trustee may resign or may be removed at any time by an instrument or instruments in writing signed by the Holders of not less than 50% of the Aggregate Principal Amount of Obligations then Outstanding or, if no Event of Default has occurred and is continuing, by an instrument in writing signed by the Obligated Group Representative. No such resignation or removal is to become effective unless and until a successor Master Trustee (or temporary successor trustee as provided below) has been appointed and has assumed the trusts created by the Master Indenture. Written notice of such resignation or removal is to be given to the Members of the Obligated Group and to each Holder at the address then reflected on the records of the Master Trustee and such resignation or removal is to take effect upon the appointment and qualification of a successor Master Trustee. A successor Master Trustee may be appointed at the direction of the Holders of not less than 50% in Aggregate Principal Amount of Obligations Outstanding or by the Obligated Group Representative if the Master Trustee was removed by the Obligated Group Representative. In the event a successor Master Trustee has not been appointed and qualified within 60 days of the date notice of resignation is given, the Master Trustee, any Member of the Obligated Group or any Holder may apply to any court of competent jurisdiction for the appointment of a temporary successor Master Trustee to act until such time as a successor is appointed as described above.

Supplements Not Requiring Consent of Holders

The Obligated Group Representative, on behalf of the Members of the Credit Group, and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Supplements for one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in the Master Indenture; (b) to correct or supplement any provision in the Master Indenture which may be inconsistent with any other provision in the Master Indenture, or to make any other provisions with respect to matters or questions arising under the Master Indenture and which will not materially and adversely affect the interests of the Holders; (c) to grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them, subject to provisions of the Master Indenture; (d) to grant additional security or covenants to a specific Holder, a credit enhancer or a liquidity provider; (e) to qualify the Master Indenture under the Trust Indenture Act of 1939 or corresponding provisions of federal law from time to time in effect; (f) to create and provide for the issuance of Indebtedness as permitted under the Master Indenture; (g) to obligate a successor to any Member of the Obligated Group as provided in the Master Indenture; (h) to add a new Member, to provide for the withdrawal of a Member, or designate or delete a Designated Affiliate as provided in the Master Indenture; and (i) to make any other change in the Master Indenture

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that, in the opinion of the Obligated Group Representative and the Master Trustee, will not prejudice in any material respect the interests of the Holders of the Outstanding Obligations.

In addition, the Obligated Group Representative, when authorized by resolution or other action of equal formality by the Governing Body of the Obligated Group Representative, and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Supplements to modify, amend, change or remove any covenant, agreement, term or provision of the Master Indenture other than a modification of the types described above, provided that written notice of the substance of such proposed Supplement is given by the Obligated Group Representative to each rating agency then maintaining a rating at the request of TNMC or the Obligated Group Representative on any Obligations or Related Bonds and to the Master Trustee not less than 30 days prior to the date such Supplement is to take effect and the ratings, if any, on any Related Bonds or Obligations are not lowered or withdrawn by any such rating agency as a result of such proposed Supplement.

Supplements Requiring Consent of Holders

Other than Supplements referred to in the provisions of the Master Indenture summarized under the subcaption “Supplements Not Requiring Consent of Holders” above, and subject to the terms and provisions and limitations contained in the Master Indenture and not otherwise, the Holders of not less than 50% in Aggregate Principal Amount of Obligations then Outstanding will 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 Representative, on behalf of the Members of the Credit Group and the Master Trustee, of such Supplements as are deemed necessary and desirable 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, except that nothing will permit or be construed as permitting a Supplement which would: (a) effect a change in the times, amounts or currency of payment of the principal of, premium, if any, and interest on any Obligation or a reduction in the principal amount or redemption price of any Obligation or the rate of interest thereon, without the consent of the Holder of such Obligation; (b) permit the preference or priority of any Obligation over any other Obligation except as expressly provided in the Master Indenture, without the consent of the Holders of all Obligations then Outstanding; or (c) reduce the Aggregate Principal Amount of Obligations then Outstanding the consent of the Holders of which is required to authorize such Supplement without the consent of the Holders of all Obligations then Outstanding.

Any such consent will be binding upon the Holder giving such consent and upon any subsequent Holder of such Obligation and of any Obligation issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Obligation giving such consent or by a subsequent Holder thereof by filing with the Master Trustee, prior to the execution by the Master Trustee of such Supplement, such revocation. At any time after the Holders of the required Aggregate Principal Amount or number of Obligations have filed their consents to the Supplement, the Master Trustee is to make and file with the Obligated Group Representative a written statement to that effect. Such written statement will be conclusive that such consents have been so filed.

If the Holders of the required Aggregate Principal Amount of the Obligations Outstanding have consented to and approved the execution of such Supplement as provided in the Master Indenture, no Holder will have any right to object to the execution thereof, or 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 Master Trustee or any Member of the Obligated Group from executing the same or from taking any action pursuant to the provisions thereof.

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Satisfaction and Discharge of Master Indenture

If (a) the Obligated Group Representative delivers to the Master Trustee for cancellation all Obligations theretofore authenticated (other than any Obligations which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in the Supplement) and not theretofore canceled, or (b) all Obligations that have not become due and payable and have not been canceled or delivered to the Master Trustee for cancellation are deemed to have been paid and discharged pursuant to the terms of the Supplement under which such Obligations were issued, and if in all cases the Members of the Obligated Group also pay or cause to be paid all other sums payable under the Master Indenture by the Members of the Obligated Group or any thereof, then the Master Indenture will cease to be of further effect, and the Master Trustee, on demand of the Obligated Group Representative and at the cost and expense of the Members of the Obligated Group, will, upon written request of the Obligated Group Representative, and upon receipt by the Master Trustee of an Officer’s Certificate and an Opinion of Counsel acceptable to the Master Trustee, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Master Indenture have been complied with, execute proper instruments acknowledging satisfaction of and discharging the Master Indenture. Each Member of the Obligated Group, respectively, by the Master Indenture agrees to reimburse the Master Trustee for any costs or expenses theretofore and thereafter reasonably and properly incurred by the Master Trustee in connection with the Master Indenture or such Obligations.

SUMMARY OF THE SUPPLEMENTAL MASTER TRUST INDENTURES

General

Contemporaneously with the issuance of the Bonds, the Obligated Group Representative (on behalf of the Members of the Obligated Group) and the Master Trustee entered into two Supplements, the Supplemental Master Trust Indenture No. 1 and the Supplemental Master Trust Indenture No. 2 to create Obligation No. 1 and Obligation No. 2 (as those terms are defined under the caption “SUMMARY OF THE BOND INDENTURES – Definitions” below) respectively. The following is a summary of certain provisions of the Supplemental Master Indenture No. 1 and the Supplemental Master Indenture No. 2. The Supplemental Master Indenture No. 1 and the Supplemental Master Indenture No. 2 are referred to herein collectively as the “Supplement Indentures”. Each of the Supplemental Master Indenture No. 1 and the Supplemental Master Indenture No. 2 is separately issued; however, except where noted herein, the terms and provisions of each of the Supplement Indentures are substantially the same. The summary of the Supplement Indentures set forth under this caption “SUMMARY OF THE SUPPLEMENTAL MASTER TRUST INDENTURES” and elsewhere in the Official Statement does not purport to be complete or definitive and is qualified in its entirety by reference to the full form of the Supplement Indentures. Certain capitalized words and phrases used under this caption “SUMMARY OF THE SUPPLEMENTAL MASTER TRUST INDENTURES” have the meanings set forth under the captions “SUMMARY OF THE MASTER INDENTURE—Definitions” and “SUMMARY OF THE BOND INDENTURES—Definitions.”

Each Supplement provides that the Obligation is an accelerable instrument for purposes of the provisions of the Master Indenture summarized in the first paragraph under the subheading “SUMMARY OF THE MASTER INDENTURE—Acceleration; Annulment of Acceleration.” Each Supplement also provides that, upon occurrence of an Event of Default under the Master Indenture with respect to such Obligation, the Holder of such Obligation will be entitled, by notice to the Master Trustee and the Obligated Group Representative, to require the Master Trustee to declare such Obligation immediately due and payable, subject to the provisions of the Master Indenture summarized under the subheading “SUMMARY OF THE MASTER INDENTURE—Acceleration; Annulment of Acceleration” and subject to such Supplement. The Holder of such Obligation is also entitled to consent to any acceleration of such

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Obligation, in accordance with the provisions of the Master Indenture referred to above, and, therefore, such Obligation may not be accelerated by the Master Trustee without the consent of the Holder thereof.

SUMMARY OF THE BOND INDENTURES

The following is a summary of certain provisions of the Douglas Bond Indenture and the Sarpy Bond Indenture. The Douglas Bond Indenture and the Sarpy Bond Indenture are referred to herein collectively as the “Bond Indentures”. Each of the Douglas Authority Bonds and the Sarpy Authority Bonds is separately issued and secured under the Douglas Bond Indenture and the Sarpy Bond Indenture, respectively. The terms and provisions of each of the Bond Indentures, except as set forth below, are substantially the same and the summary Bond Indenture below applies, except as set forth below, to each Bond Indenture. The summary of the Bond Indenture set forth under this caption “SUMMARY OF THE BOND INDENTURES” and elsewhere in the Official Statement does not purport to be complete or definitive and is qualified in its entirety by reference to the full form of the Bond Indenture.

Definitions

Certain capitalized words and phrases used under this heading “SUMMARY OF THE BOND INDENTURES” and the heading “SUMMARY OF THE LOAN AGREEMENTS” below have the meanings set forth under this subheading. Capitalized words and phrases used under such headings but not defined under this subheading have the meanings set forth under the subheading “THE MASTER INDENTURE—Definitions.”

“Act” means the Hospital Authorities Act, Sections 23-3579 to 23-35,120 of the Revised Statutes of Nebraska, as amended.

“Authorities” means both of, and “Authority” means (i) with respect to the Douglas Authority Bonds, the Douglas Authority, and (ii) with respect to the Sarpy Authority Bonds, the Sarpy Authority.

“Authorized Denomination” means $5,000 or any integral multiple thereof.

“Bond” or “Bonds” means (i) with respect to the bonds issued by the Douglas Authority, the Douglas Authority Bonds, and (ii) with respect to the Sarpy Authority, the Sarpy Authority Bonds.

“Bond Indentures” means both of, and “Bond Indenture” means (i) with respect to the Douglas Authority Bonds, the Douglas Bond Indenture, and (ii) with respect to the Sarpy Authority Bonds, the Sarpy Bond Indenture.

“Bond Purchase Agreement” means (i) with respect to the Douglas Authority Bonds, the Bond Purchase Agreement among the Douglas Authority, the Borrower and the Underwriter, pursuant to which the Douglas Authority Bonds were originally sold to the Underwriter, and (ii) with respect to the Sarpy Authority Bonds, the Bond Purchase Agreement among the Sarpy Authority, the Borrower and the Underwriter, pursuant to which the Sarpy Bonds were originally sold to the Underwriter.

“Bond Trustee” means First National Bank of Omaha, and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as trustee under each Bond Indenture.

“Borrower” means (i) with respect to the Douglas Authority Bonds, The Nebraska Medical Center, a Nebraska nonprofit corporation, and its successors and assigns, and (ii) with respect to the Sarpy

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Authority Bonds, the Bellevue Medical Center, LLC, a Nebraska limited liability company, and its successors and assigns.

“Borrower Obligation” shall mean (i) with respect to the Douglas Authority Bonds, Obligation No. 1, and (ii) with respect to the Sarpy Authority Bonds, Obligation No. 2.

“Borrower Representative” means the designated officer or officers of the Borrower, (b) any Person authorized by the bylaws or any resolution of the Borrower to act in such capacity or (c) any other Person designated as an authorized representative of the Borrower by a certificate signed by one of the officers listed in clause (a) above and filed with the Bond Trustee containing the specimen signature of such Person or Persons. Such certificate may designate an alternate or alternates each of whom shall be entitled to perform all duties of the Borrower Representative.

“Business Day” means a day other than (a) a Saturday, Sunday or legal holiday, (b) a day on which banks located in any city in which the designated corporate trust office or operations office of the Bond Trustee or any Paying Agent is located are required or authorized by law to remain closed or (c) a day on which the New York Stock Exchange or the Securities Depository is closed.

“Capitalized Interest Account” means the account by that name created within the Debt Service Fund by the Bond Indenture.

“Cede & Co.” means Cede & Co., as nominee of The Depository Trust Company, New York, New York.

“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the Authority or the Borrower and related to the authorization, issuance, sale and delivery of the Bonds, including, but not limited to, advertising and printing costs, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of the Bond Trustee and the Master Trustee (including reasonable counsel fees), initial and ongoing fees and charges of the Authority, legal fees and charges, fees and disbursements of consultants and professionals, Rating Agency fees, fees and charges for preparation, execution, transportation and safekeeping of the Bonds, and any other cost, charge or fee in connection with the original issuance of Bonds.

“Costs of Issuance Fund” means the fund by that name created by the Bond Indenture.

“Debt Service Fund” means the fund by that name created by the Bond Indenture.

“Defeasance Obligations” means: (a) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in clause (b) below); and (b) direct obligations of (including obligations issued or held in book-entry form on the books of) the Department of the Treasury of the United States.

“Douglas Authority” means the Hospital Authority No. 2 of Douglas County, Nebraska, a public corporation and body politic created and validly existing under the laws of the State.

“Douglas Authority Bonds” means the Douglas Authorities Health Facilities Revenue Bonds (Nebraska Medicine), Series 2016, issued pursuant to the Douglas Bond Indenture.

“Douglas Bond Indenture” means the Bond Indenture of Trust as originally executed by the Douglas Authority and the Bond Trustee, as from time to time amended and supplemented by Supplemental Bond Indentures in accordance with the provisions of the Douglas Bond Indenture.

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“Douglas Loan Agreement” means the Loan Agreement dated as of August 1, 2016 between the Douglas Authority and the Borrower.

“Fitch” means Fitch Ratings, Inc., and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Fitch shall be deemed to refer to any other nationally recognized securities rating service designated by the Borrower, with notice to the Authority and Bond Trustee.

“Interest Payment Date” means each May 15 and November 15, commencing November 15, 2016, and the maturity date or the redemption date of any Bonds.

“Loan Agreements” means both of, and “Loan Agreement” means (i) with respect to the Douglas Authority Bonds, the Douglas Loan Agreement, and (ii) with respect to the Sarpy Authority Bonds, the Sarpy Loan Agreement.

“Loan Payments” means the payments of principal of and interest on the Loan referred to in the Loan Agreement.

“Loans” means both of, and “Loan” means (i) with respect to the Douglas Authority Bonds, the loan of the proceeds of the Douglas Authority Bonds made by the Douglas Authority to the Borrower pursuant to the Loan Agreement and (ii) with respect to the Sarpy Authority Bonds, the loan of the proceeds of the Sarpy Bonds made by the Sarpy Authority to the Borrower pursuant to the Loan Agreement.

“Moody’s” means Moody’s Investors Service, Inc., and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Moody’s shall be deemed to refer to any other nationally recognized securities rating service designated by the Borrower, with notice to the Authority and Bond Trustee

“Obligation No. 1” means Obligation No. 1 issued by the Douglas Authority under the Master Indenture, which secures the obligation of the Borrower to repay the Loan.

“Obligation No. 2” means Obligation No. 2 issued by the Sarpy Authority under the Master Indenture, which secures the obligation of the Borrower to repay the Loan.

“Officer’s Certificate” means a written certificate of the Borrower signed by the Borrower Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Borrower with respect to matters set forth therein, and which certificate in each instance, including the scope, form, substance and other aspects thereof, is acceptable to the Bond Trustee.

“Opinion of Bond Counsel” when used with reference to the Bond Indenture or Loan Agreement means a written opinion of any legal counsel acceptable to the Borrower and the Authority who shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exemption from federal income taxation of interest on such obligations.

“Outstanding” means, when used with respect to the Bonds, as of the date of determination, all Bonds theretofore authenticated and delivered under the Bond Indenture, except: (a) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation as provided in the Bond Indenture; (b) Bonds for whose payment or redemption money or Defeasance Obligations in the necessary amount has been irrevocably deposited with the Bond Trustee or any Paying Agent in trust for the Owners of such Bonds as provided in the Bond Indenture; provided that, if such Bonds are to be

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redeemed, notice of such redemption has been duly given pursuant to the Bond Indenture or provision therefor satisfactory to the Bond Trustee has been made; (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under the Bond Indenture; and (d) Bonds alleged to have been destroyed, lost or stolen which have been paid as provided in the Bond Indenture.

“Owner” or “Owners” means the registered owner or owners or beneficial owner or owners, as the context may require, of one or more Bonds.

“Paying Agent” means the Bond Trustee and any other commercial bank or trust institution organized under the laws of any state of the United States or any national banking association designated pursuant to the Bond Indenture or any Supplemental Bond Indenture as paying agent for any Bonds at which the principal of, redemption premium, if any, and interest on such Bonds will be payable.

“Permitted Investments” means, if and to the extent the same are at the time legal for investment of funds held under the Bond Indenture, any of the following:

(a) direct obligations of the United States, including obligations the principal and interest of which are unconditionally guaranteed, and trust receipts evidencing a direct ownership interest in such obligations;

(b) direct obligations of any United States government agency or instrumentality;

(c) obligations issued by any state of the United States, or any political subdivision thereof, rated at the time of purchase by at least two nationally recognized rating agencies in one of the three highest rating categories, and obligations fully secured by and payable solely from an escrow fund held by a trustee consisting of cash or obligations described in paragraph (a) above;

(d) (1) debt obligations of any United States corporation or trust, which obligations are rated at the time of purchase by at least two nationally recognized rating agencies in one of the three highest rating categories, or (2) commercial paper rated at the time of purchase by at least two nationally recognized rating agencies in the highest rating category (without incorporating refinements or gradation of rating category by numerical modifier or otherwise);

(e) certificates of deposit or time deposits of any bank, trust company or savings and loan which deposits are fully insured by a federally sponsored deposit insurance program;

(f) bankers acceptances of any bank which bank or its parent holding company’s debt conforms to the rating requirements of paragraph (d) above;

(g) repurchase agreements, entered in conformance with prevailing industry standard guidelines, of obligations listed in paragraph (a) or (b) above, delivered versus payment to the Bond Trustee and continuously collateralized at 102% or greater, with counterparties having debt rated in conformance with the rating requirements of paragraph (d) above;

(h) investment agreements of any corporation which agreements or the corporation’s long term debt is rated by at least two nationally recognized rating agencies in one of the three highest rating categories; and

(i) shares of a money market fund or commingled trust which fund’s or trust’s investments are restricted to these Permitted Investments, including any such fund or trust which is a proprietary fund or trust of the Bond Trustee or any of its affiliates.

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“Person” means any natural person, firm, association, corporation, partnership, limited liability company, joint stock company, a joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body

“Project” means, with respect to each Bond Indenture, the Project set forth in the Bond Indenture, which in each case is more fully described at the caption “THE PROJECT” in Appendix A to the Official Statement.

“Project Fund” means the Project Fund created by the Bond Indenture.

“Rating Agency” means Fitch, Moody’s or S&P, to the extent that such Rating Agency is then maintaining a rating on the Bonds, and any other nationally recognized securities rating service requested by the Borrower to maintain a rating on the Bonds.

“Rating Category” or “Rating Categories” means one or more of the generic rating categories of a nationally recognized rating agency without regard to any refinement or gradation of such rating category or categories by numerical modifier or otherwise.

“Rebate Fund” means the Rebate Fund created by the Bond Indenture.

“Record Date” means the Regular Record Date unless a Special Record Date is applicable under the Bond Indenture.

“Regular Record Date” means the last day of the calendar month (whether or not a Business Day) immediately prior to each Interest Payment Date.

“Sarpy Authority” means the Hospital Authority No. 1 of Sarpy County, Nebraska, a public corporation and body politic created and validly existing under the laws of the State.

“Sarpy Authority Bonds” the Sarpy Authority’s Health Facilities Revenue Bonds (Nebraska Medicine), Series 2016, issued pursuant to the Sarpy Bond Indenture

“Sarpy Bond Indenture” means the Bond Indenture of Trust as originally executed by the Sarpy Authority and the Bond Trustee, as from time to time amended and supplemented by Supplemental Bond Indentures in accordance with the provisions of the Bond Indenture

“Sarpy Loan Agreement” means the Loan Agreement dated as of August 1, 2016 between the Sarpy Authority and the Borrower.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, and its successors and assigns, and, if such firm is dissolved or liquidated or no longer performs the functions of a securities rating service, S&P will be deemed to refer to any other nationally recognized securities rating service designated by the Borrower, with notice to the Authority and Bond Trustee.

“Securities Depository” means, initially, The Depository Trust Company, New York, New York, and its successors and assigns.

“Special Record Date” means the Special Record Date as established and as defined in the Bond Indenture.

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“Supplemental Bond Indenture” means any indenture supplemental or amendatory to the Bond Indenture entered into by the Authority and the Bond Trustee.

“Supplemental Loan Agreement” means any agreement supplemental or amendatory to the Loan Agreement entered into by the Authority and the Borrower pursuant to the provisions of the Loan Agreement.

“Tax Compliance Agreement” means the Tax Compliance Agreement among the Authority, the Borrower and the Bond Trustee as from time to time amended in accordance with the provisions thereof.

“Trust Estate” means (a) all right, title and interest of the Authority (including, but not limited to, the right to enforce any of the terms thereof except the terms relating to the Unassigned Rights which may be enforced only with the Authority’s prior written consent) in, to and under (i) the Loan Agreement (except the Unassigned Rights), including all Loan Payments paid by the Borrower under the Loan Agreement, (ii) the Borrower Obligation and (iii) all financing statements or other instruments or documents evidencing, securing or otherwise relating to the Loan; and all moneys and securities from time to time held by the Bond Trustee under the terms of the Bond Indenture, and any and all other property (real, personal or mixed) of every kind and nature from time to time, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Bond Indenture by the Authority or by anyone in its behalf or with its written consent, to the Bond Trustee, which is authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the Bond Indenture.

“Unassigned Rights” means (a) the Authority’s rights under the Loan Agreement, (b) the Authority’s rights to receive notices and other documents contemplated by the Loan Agreement and (c) the Authority’s rights to perform certain discretionary acts contemplated by the Loan Agreement.

“Underwriter” means, collectively, Barclays Capital, Inc. and Wells Fargo Securities, LLC.

Trust Estate

The Authority transferred in trust, pledged and assigned to the Bond Trustee, and granted a security interest to the Bond Trustee in the Trust Estate.

Funds and Accounts

The Bond Indenture establishes certain funds and accounts in the custody of the Bond Trustee, and in the name of the Authority, including the funds summarized below.

Costs of Issuance Fund. The moneys in the Costs of Issuance Fund will be disbursed by the Bond Trustee from time to time and shall be applied to pay the Costs of Issuance of the Bonds upon receipt of written disbursement requests of the Borrower in substantially the form required by the Bond Indenture and signed by the Borrower Representative, in amounts equal to the amount of Costs of Issuance certified in such written requests. At such time as the Bond Trustee is furnished with an Officer’s Certificate stating that all Costs of Issuance have been paid, and in any case not later than six months from the date on which the Bonds are originally issued, the Bond Trustee will transfer any moneys remaining in the Costs of Issuance Fund to the Project Fund.

Debt Service Fund. The Bond Trustee is to deposit and credit to the Debt Service Fund and the Capitalized Interest Account therein, as and when received, the following: (a) the amounts, if any, required to be deposited therein under the Bond Indenture, and all Loan Payments made by the Borrower

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pursuant to the Loan Agreement; (b) interest earnings and other income on Permitted Investments required to be deposited in the Debt Service Fund pursuant to the Bond Indenture; and (c) all other moneys received by the Bond Trustee under and pursuant to any of the provisions of the Bond Indenture, the Loan Agreement, the Master Indenture or the Borrower Obligation, when accompanied by written directions from the Person depositing such moneys that such moneys are to be paid into the Debt Service Fund.

The moneys in the Debt Service Fund and the Capitalized Interest Account will be held in trust and, except as otherwise provided in the Bond Indenture, will be expended solely as follows: (i) to pay interest on the Bonds as the same becomes due; (ii) to pay principal of the Bonds as the same mature or become due and upon mandatory sinking fund redemption thereof; and (iii) to pay principal of and redemption premium, if any, on the Bonds as the same become due upon redemption prior to maturity. The moneys in the Capitalized Interest Account are to be expended solely to pay interest on the Bonds as set forth in the Bond Indenture. The Bond Trustee is authorized and directed to withdraw sufficient funds from the Debt Service Fund to pay principal of, redemption premium, if any, and interest on the Bonds as the same become due and payable at maturity or upon redemption and to make said funds so withdrawn available to the Bond Trustee and any Paying Agent for the purpose of paying said principal, redemption premium, if any, and interest. After payment in full of the principal of, redemption premium, if any, and interest on the Bonds (or after provision has been made for the payment thereof as provided in the Bond Indenture), all rebatable arbitrage to the United States and the fees, charges and expenses of the Bond Trustee, any Paying Agents and the Authority, and any other amounts required to be paid under the Bond Indenture and the Loan Agreement, all amounts remaining in the Debt Service Fund are to be paid to the Borrower upon the expiration or sooner termination of the Loan Agreement.

Project Fund. Moneys in the Project Fund will be (a) disbursed by the Bond Trustee to the Borrower from time to time, upon receipt of written disbursement requests of the Borrower in substantially the form required by the Bond Indenture and signed by the Borrower Representative and (b) transferred to the Debt Service Fund by the Bond Trustee from time to time, upon receipt of a written direction of the Borrower signed by the Borrower Representative, to pay interest on the Bonds. The Bond Trustee will have no responsibility to make any determination with respect to the documents filed with it, but it will retain such documents so long as the Bonds are outstanding. Upon completion of the Project as certified by the Borrower, any remaining moneys in the Project Fund will be transferred, at the direction of the Borrower, to the Debt Service Fund to pay interest on the Bonds, to pay principal of the Bonds or to redeem the Bonds pursuant to the optional redemption provisions of the Bond Indenture.

Rebate Fund. The Bond Indenture creates and establishes with the Bond Trustee for the benefit of the United States a Rebate Fund in the name of the Authority which is to be expended in accordance with the provisions thereof and the Tax Compliance Agreement. The Borrower is responsible for making all such deposits to the Rebate Fund as required in the Tax Compliance Agreement and the Loan Agreement. The Bond Trustee will invest the Rebate Fund at the written direction of a duly authorized officer of Borrower pursuant to the Tax Compliance Agreement and will deposit income from said investments immediately upon receipt thereof in the Rebate Fund, all as set forth in the Tax Compliance Agreement. For purposes of determining rebate calculations on every fifth anniversary of the Bond Year as defined in the Tax Compliance Agreement or on any other date on which any other calculations may be required with respect thereto pursuant to the Tax Compliance Agreement, Borrower will employ, at its own expense, a firm with recognized expertise in the area of rebate calculation and will promptly notify the Authority of such selection. The Authority and the Bond Trustee will be entitled to rely on the calculations required to be made pursuant to the Bond Indenture and will not be responsible for any loss or damage resulting from any action taken or omitted to be taken in reliance upon such calculations.

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Investment of Moneys

Moneys held as part of the Costs of Issuance Fund, the Project Fund, the Debt Service Fund and the Rebate Fund shall be invested by the Bond Trustee at the written direction of a Borrower Representative in Permitted Investments (a) with respect to the Costs of Issuance Fund and the Project Fund maturing in the amounts and at the times necessary to provide funds to make the payments to which such moneys are applicable as estimated in a certificate of a Borrower Representative filed with the Bond Trustee, and (b) with respect to the Debt Service Fund and the Rebate Fund, maturing in the amounts and at the times necessary to provide funds to make the payments to which such moneys are applicable. All such Permitted Investments purchased shall mature or be redeemable or otherwise subject to a put on a date or dates prior to the time when the moneys so invested will be required for expenditure. The Bond Trustee shall sell and reduce to cash a sufficient portion of such investments whenever the cash balance in a fund is insufficient for the purposes of such fund. The Bond Trustee may make any and all investments permitted by the provisions of the Bond Indenture through its or its affiliates’ own trust or bond departments, as principal or agent. The Bond Trustee shall, subject to the other provisions of the Bond Indenture summarized under this subcaption, invest moneys held as part of the funds under the Bond Indenture in those Permitted Investments as directed by the Borrower, or if no such direction shall be received, then the Bond Trustee shall hold such funds uninvested in cash.

The Bond Trustee shall determine the value of all investments in the Debt Service Fund, Costs of Issuance Fund, Project Fund and Rebate Fund at least semiannually, and such value shall be equal to the lower of cost or fair market value of such investments as reasonably determined by the Bond Trustee.

Release and Substitution of Borrower Obligation

Within ten days of receipt of notice from the Master Trustee, the Bond Trustee shall surrender to the Master Trustee the Borrower Obligation and any other note, instrument or obligation issued pursuant to the Master Indenture and pledged pursuant to the Bond Indenture for the payment of the Bonds (the “Pledged Obligations”) upon presentation to the Bond Trustee of the following:

(a) An original replacement note or notes or similar instruments or obligations (singly or collectively, the “Substitute Obligations”) issued under and pursuant to and secured by a master trust indenture or similar document (the “Replacement Master Indenture”) executed by one or more entities (collectively, the “New Obligated Group”) and an independent corporate trustee (the “New Trustee”), (a) which Substitute Obligations have been duly authenticated by the New Trustee under the terms of the Replacement Master Indenture and are in a principal amount, bear interest at, have prepayment terms, and are otherwise similar tenor to the Pledged Obligations surrendered;

(b) An Opinion of Counsel addressed to the Bond Trustee and the Authority (in form and substance acceptable to the Bond Trustee and Authority) to the effect that:

(i) the Replacement Master Indenture has been duly authorized, executed and delivered by each member of the New Obligated Group, the Substitute Obligations have been duly authorized, executed and delivered by the New Obligated Group and the Replacement Master Indenture and the Substitute Obligations are each legal, valid and binding obligations of each member of the New Obligated Group;

(ii) all requirements and conditions to the issuance of the Substitute Obligations set forth in the Replacement Master Indenture have been complied with and

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satisfied, including, but not limited to, the perfection of any security interest created thereunder; and

(iii) registration of the Substitute Obligations under the Securities Act of 1933, as amended, is not required or that such registration has occurred.

(c) An officer’s certificate certifying that, after giving effect to such Substitute Obligations and assuming the New Obligated Group consisted the Obligated Group under the original Master Indenture and that the Substitute Obligations were issued under the original Master Indenture, the New Obligated Group would not be in default under the provisions of the Master Indenture;

(d) An Opinion of Bond Counsel (which opinion, including the scope, form, substance and other aspects thereof, is acceptable to the Bond Trustee and which opinion may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that the surrender of the Pledged Obligations and the acceptance by the Bond Trustee of the Substitute Obligations will not adversely affect the validity of the Bonds or any exemption for the purposes of federal income taxation to which interest on the Bonds would otherwise be entitled;

(e) Evidence that each rating on the Bonds after the delivery of the Substitute Obligation will remain in the same or a higher category (without regard to any refinement or gradation of rating category by numerical modifier or otherwise or any related ratings outlook) as such rating on the Bonds immediately prior to delivery of the Substitute Obligation;

(f) An original executed counterpart of the Replacement Master Indenture; and

(g) Such other opinions and certificates as the Bond Trustee may reasonably require, together with such reasonable indemnities as the Bond Trustee may request.

Events of Default and Remedies

The Bond Indenture provides that the term “event of default” means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest on any Bond when such interest becomes due and payable;

(b) default in the payment of the principal of, or premium, if any, on, any Bond when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise);

(c) default in the performance, or breach, of any covenant or agreement of the Authority in the Bond Indenture (other than a default covenant or agreement in the performance of which is specifically dealt with elsewhere in this paragraph), and continuance of such default or breach for a period of 30 days after the Bond Trustee has given to the Authority and the Borrower (or the Owners of at least 25% in principal amount of the Bonds Outstanding have given to the Authority, the Borrower and the Bond Trustee) a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 30-day period, but can reasonably be expected to be fully remedied, such

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default shall not constitute an event of default if the Authority shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(d) any event of default under the Loan Agreement or the Master Indenture shall occur and is continuing and has not been waived.

Acceleration of Maturity; Rescission and Annulment

If an event of default occurs and is continuing, the Bond Trustee may, and shall if requested by the Owners of not less than 25% in principal amount of the Bonds Outstanding, by written notice to the Authority and the Borrower, declare the principal of all Bonds Outstanding and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on any Bonds has been obtained by the Bond Trustee as provided in the Bond Indenture, the Owners of a majority in principal amount of the Bonds Outstanding may, by written notice to the Authority, the Borrower and the Bond Trustee, rescind and annul such declaration and its consequences if:

(a) there is deposited with the Bond Trustee a sum sufficient to pay: (i) all overdue installments of interest on all Bonds; (ii) the principal of, and premium, if any, on, any Bonds which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Bonds (iii) interest upon overdue installments of interest at the rate or rates prescribed therefor in the Bonds; and (iv) all sums paid or advanced by the Bond Trustee under the Bond Indenture and the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel; and

(b) all events of default, other than the nonpayment of the principal of Bonds which have become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Bond Indenture.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

Exercise of Remedies by the Bond Trustee

Upon the occurrence and continuance of any event of default under the Bond Indenture, unless the same is waived as provided in the Bond Indenture, the Bond Trustee shall have the following rights and remedies, in addition to any other rights and remedies provided under the Bond Indenture or by law:

(a) Right to Bring Suit, Etc. The Bond Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Bonds Outstanding, including interest on overdue principal, and premium, if any, and on overdue installments of interest, and any other sums due under the Bond Indenture, to realize on or to foreclose any of its interests or liens under the Bond Indenture or with respect to the Loan Agreement and Obligation No. 1, to enforce and compel the performance of the duties and obligations of the Authority as set forth in the Bond Indenture and to enforce or preserve any other rights or interests of the Bond Trustee under the Bond Indenture with respect to any of the Trust Estate or otherwise existing at law or in equity.

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(b) Exercise of Remedies at Direction of Owners. If requested in writing to do so by the Owners of not less than 25% in principal amount of Bonds Outstanding, and if indemnified as provided in the Bond Indenture, the Bond Trustee shall be obligated to exercise such one or more of the rights and remedies conferred by the Bond Indenture as the Bond Trustee shall deem most expedient in the interests of the Owners.

(c) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and of the Owners under the Bond Indenture, the Bond Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer.

(d) Suits To Protect the Trust Estate. The Bond Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Bond Indenture and to protect its interests and the interests of the Owners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under the Bond Indenture or be prejudicial to the interests of the Owners or the Bond Trustee, or to intervene (subject to the approval of a court of competent jurisdiction) on behalf of the Owners in any judicial proceeding to which the Authority or the Borrower is a party and which in the judgment of the Bond Trustee has a substantial bearing on the interests of the Owners.

(e) Enforcement Without Possession of Bonds. All rights of action under the Bond Indenture or any of the Bonds may be enforced and prosecuted by the Bond Trustee without the possession of any of the Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Bond Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel, and subject to the provisions of the Bond Indenture, be for the equal and ratable benefit of the Owners of the Bonds in respect of which such judgment has been recovered.

(f) Restoration of Positions. If the Bond Trustee or any Owner has instituted any proceeding to enforce any right or remedy under the Bond Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Bond Trustee or to such Owner, then and in every case the Authority, the Bond Trustee and the Owners shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Bond Indenture, and thereafter all rights and remedies of the Bond Trustee and the Owners shall continue as though no such proceeding had been instituted.

Limitation on Suits by Owners

No Owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to the Bond Indenture, or for the appointment of a receiver or trustee or for any other remedy under the Bond Indenture, unless:

(a) such Owner has previously given written notice to the Bond Trustee of a continuing event of default;

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(b) the Owners of not less than 25% in principal amount of the Bonds Outstanding shall have made written request to the Bond Trustee to institute proceedings in respect of such event of default in its own name as Bond Trustee under the Bond Indenture;

(c) such Owner or Owners have offered to the Bond Trustee indemnity as provided in the Bond Indenture against the fees, costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Bond Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such written request has been given to the Bond Trustee during such 60-day period by the Owners of a majority in principal amount of the Outstanding Bonds; it being understood and intended in the Bond Indenture that no one or more Owners of Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Bond Indenture to affect, disturb or prejudice the lien of the Bond Indenture or the rights of any other Owners of Bonds, or to obtain or to seek to obtain priority or preference over any other Owners or to enforce any right under the Bond Indenture, except in the manner provided in the Bond Indenture and summarized herein and for the equal and ratable benefit of all Outstanding Bonds. Notwithstanding the foregoing or any other provision in the Bond Indenture, however, the Owner of any Bond shall have the right which is absolute and unconditional to receive payment of the principal of, and premium, if any, and interest on such Bond on the respective stated maturity expressed in such Bond (or, in the case of redemption, on the redemption date) and nothing contained in the Bond Indenture shall affect or impair the right of any owner to institute suit for the enforcement of any such payment.

Control of Proceedings by Owners

Subject to the right of the Bond Trustee to receive indemnity as provided in the Bond Indenture, the Owners of a majority in principal amount of the Bonds Outstanding shall have the right, during the continuance of an event of default:

(a) to require the Bond Trustee to proceed to enforce the Bond Indenture, either by judicial proceedings for the enforcement of the payment of the Bonds and the foreclosure of the Bond Indenture, or otherwise; and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee under the Bond Indenture, except that: (i) such direction shall not be in conflict with any rule of law or the Bond Indenture; (ii) the Bond Trustee may take any other action deemed proper by the Bond Trustee which is not inconsistent with such direction; and (iii) the Bond Trustee shall not determine that the action so directed would be unjustly prejudicial to the Owners not taking part in such direction.

Application of Moneys Collected

Any moneys collected by the Bond Trustee pursuant to the provisions of the Bond Indenture describing events of default and remedies thereof (after the deductions for payment of fees, costs and expenses of proceedings resulting in the collection of such moneys) together with any other sums then held by the Bond Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Bond Trustee and, in case of the distribution of such money on account of principal, or

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premium, if any, or interest, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST, to the payment of all undeducted amounts due the Bond Trustee under certain compensation and reimbursement provisions of the Bond Indenture relating to the Bond Trustee;

SECOND, to the payment of the whole amount then due and unpaid upon the Outstanding Bonds for principal, and premium, if any, and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Bond Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal, and premium, if any, and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal and interest, without any preference or priority, ratably according to the aggregate amount so due;

THIRD, to the payment of the Authority’s fees and expenses; and

FOURTH, to the payment of the remainder, if any, to the Borrower or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

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) 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 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 shall not be required to make payment to the Owner of any unpaid Bond until such Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid.

Supplemental Bond Indentures

Without the consent of the Owners of any Bonds, the Authority and the Bond Trustee may from time to time enter into one or more Supplemental Bond Indentures for any of the following purposes:

(a) to correct or amplify the description of any property at any time subject to the lien of the Bond Indenture, or better to assure, convey and confirm unto the Bond Trustee any property subject or required to be subjected to the lien of the Bond Indenture, or to subject to the lien of the Bond Indenture additional property;

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of Bonds as set forth in the Bond Indenture, additional conditions, limitations and restrictions thereafter to be observed;

(c) to evidence the appointment of a separate trustee or co-trustee or the succession of a new trustee under the Bond Indenture;

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(d) to add to the covenants of the Authority or to the rights, powers and remedies of the Bond Trustee for the benefit of the Owners of all Bonds or to surrender any right or power conferred in the Bond Indenture upon the Authority;

(e) to cure any ambiguity, to correct or supplement any provision in the Bond Indenture which may be inconsistent with any other provision in the Bond Indenture or to make any other change, with respect to matters or questions arising under the Bond Indenture, which shall not be inconsistent with the provisions of the Bond Indenture, provided such action shall not materially adversely affect the interests of the Owners of the Bonds;

(f) to modify, eliminate or add to the provisions of the Bond Indenture to such extent as shall be necessary to effect the qualification of the Bond Indenture under the Trust Indenture Act of 1939, as amended, or the registration of the Bonds under the Securities Act of 1933, as amended, or under any similar federal statute hereafter enacted, or to permit the qualification of the Bonds for sale under the securities laws of the United States or any state of the United States; and

(g) to make any other change in the Bond Indenture that, in the opinion of the Bond Trustee, will not prejudice in any material respect the interests of the Owners of the Outstanding Bonds.

With the prior written consent of the Owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Bond Indenture, the Authority and the Bond Trustee may enter into one or more Supplemental Bond Indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Bond Indenture or of modifying in any manner the rights of the Owners of the Bonds under the Bond Indenture; provided, however, that no such Supplemental Bond Indenture shall, without the consent of the owner of each Outstanding Bond affected thereby:

(a) change the stated maturity of the principal of, or any installment of interest on, any Bond, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, any Bond, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date);

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose Owners is required for any such Supplemental Bond Indenture, or the consent of whose Owners is required for any waiver provided for in the Bond Indenture of compliance with certain provisions of the Bond Indenture or certain defaults under the Bond Indenture and their consequences;

(c) modify the obligation of the Authority to make payment on or provide funds for the payment of any Bond;

(d) modify or alter the provisions of the proviso to the definition of the term “Outstanding”;

(e) modify any of the provisions of the Bond Indenture describing the amendment of Supplemental Bond Indentures without consent of Owners of the Bonds or provisions set forth in the Bond Indenture describing waiver of past defaults, except to increase any percentage provided

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thereby or to provide that certain other provisions of the Bond Indenture cannot be modified or waived without the consent of the Owner of each Bond affected thereby; or

(f) permit the creation of any lien ranking prior to or on a parity with the lien of the Bond Indenture with respect to any of the Trust Estate or terminate the lien of the Bond Indenture on any property at any time subject to the Bond Indenture or deprive the Owner of any Bond of the security afforded by the lien of the Bond Indenture.

The Bond Trustee may in its discretion determine whether or not any Bonds would be affected by any Supplemental Bond Indenture and any such determination shall be conclusive upon the Owners of all Bonds, whether theretofore or thereafter authenticated and delivered under the Bond Indenture. The Bond Trustee shall not be liable for any such determination made in good faith.

So long as the Borrower is not in default under the Loan Agreement, a Supplemental Bond Indenture which affects any rights of the Borrower will not become effective unless and until the Borrower consents in writing to the execution and delivery of such Supplemental Bond Indenture.

Payment, Discharge and Defeasance of Bonds

Bonds will be deemed to be paid and discharged and no longer Outstanding under the Bond Indenture and will cease to be entitled to any lien, benefit or security of the Bond Indenture if the Authority shall pay or provide for the payment of such Bonds 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 such Bonds, as and when the same become due and payable;

(b) by delivering such Bonds to the Bond Trustee for cancellation; or

(c) by depositing in trust with the Bond Trustee moneys and Defeasance Obligations in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity or redemption dates (including the payment of the principal of, premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof); provided that, if any such Bonds are to be redeemed prior to the maturity thereof, proper notice of redemption of such Bonds shall have been previously given in accordance with the requirements of the Bond Indenture, or in the event said Bonds are not by their terms subject to redemption within the next succeeding 45 days or are not to be redeemed within the next succeeding 45 days, the Borrower shall have given the Bond Trustee, on behalf of the Authority, in form satisfactory to the Bond Trustee, irrevocable instructions to notify, as soon as practicable, the Owners in accordance with the requirements of the Bond Indenture, that a deposit has been made with the Bond Trustee and that said Bonds are deemed to have been paid in accordance with the requirements of the Bond Indenture and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal of and the applicable redemption premium, if any, on said Bonds, plus interest thereon to the due date thereof; provided further that, such notice must state the impact of the defeasance on any bond redemption rights of the Borrower.

The Bonds may be defeased in advance of their maturity or redemption dates only with cash or Defeasance Obligations pursuant to the section of the Bond Indenture summarized in paragraph (c) above, subject to receipt by the Bond Trustee of (i) a verification report prepared by independent certified public accountants, or other verification agent, satisfactory to the Bond Trustee, (ii) an escrow agreement and

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(iii) an Opinion of Bond Counsel addressed and delivered to the Bond Trustee and the Authority to the effect that the payment of the principal of and redemption premium, if any, and interest on all of the Bonds then Outstanding and any and all other amounts required to be paid under the provisions of the Bond Indenture have been provided for in the manner set forth in the Bond Indenture and to the effect that so providing for the payment of any Bonds will not cause the interest on the Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Bond Indenture.

The foregoing notwithstanding, the liability of the Authority in respect of such Bonds shall continue, but the Owners thereof shall thereafter be entitled to payment only out of the moneys and Defeasance Obligations deposited with the Bond Trustee as summarized above. Moneys and Defeasance Obligations so deposited with the Bond Trustee pursuant to the Bond Indenture will not be a part of the Trust Estate but shall constitute a separate trust fund for the benefit of the Persons entitled thereto. Such moneys and Defeasance Obligations shall be applied by the Bond Trustee to the payment (either directly or through any Paying Agent, as the Bond Trustee may determine) to the Persons entitled thereto, of the principal, and premium, if any, and interest for whose payment such moneys and Defeasance Obligations have been deposited with the Bond Trustee.

The Bond Trustee

Except during the continuance of an event of default under the Bond Indenture, the Bond Trustee will undertake to perform such duties and only such duties as are specifically set forth in the Bond Indenture. At the time of an event of default under the Bond Indenture and during the continuation thereof, the Bond Trustee will exercise such of the rights and powers vested in it by the Bond Indenture, and will use the same degree of care and skill in its exercise, as a prudent person in the conduct of its own affairs.

The Bond Indenture provides that the Bond Trustee will be entitled to act upon opinions of counsel as specified in the Bond Indenture and will not be responsible for any loss or damage resulting from reliance thereon in good faith. In addition, the Bond Indenture provides that the Bond Trustee will be entitled to rely on certain other instruments and it will not be liable for any action taken or omitted to be taken by it in good faith as provided in the Bond Indenture.

SUMMARY OF THE LOAN AGREEMENTS

General

The Loan Agreements provide for the Loans from the respective Authorities to the respective Borrowers of the proceeds of the applicable Bonds. Each Borrower will be obligated to repay its Loan by making Loan Payments of principal and interest to the Bond Trustee for the account of the applicable Authority and for deposit in the Debt Service Fund created under the applicable Bond Indenture. The terms and provisions of each of the Loan Agreements, except as set forth below, are substantially the same and the summary Loan Agreement below applies, except as set forth below, to each Loan Agreement. The summary of the Loan Agreement set forth under this caption “SUMMARY OF THE LOAN AGREEMENTS” and elsewhere in the Official Statement does not purport to be complete or definitive and is qualified in its entirety by reference to the full form of the Loan Agreement.

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Definitions

Certain capitalized words and phrases used under this caption “SUMMARY OF THE LOAN AGREEMENTS” have the meanings set forth under the captions “SUMMARY OF THE MASTER INDENTURE—Definitions” and “SUMMARY OF THE BOND INDENTURES—Definitions.”

Loan Payments and Other Amounts Payable

The Borrower is required to deposit moneys directly with or to the account of the Bond Trustee as repayment of the Loan until the principal of, premium, if any, and interest on the Bonds have been paid or provision for the payment thereof has been made in accordance with the Bond Indenture, as follows: (a) into the Debt Service Fund not less than five days preceding each interest payment date on the Bonds, an amount which is not less than the interest to become due on such interest payment date, except that the Borrower may be entitled to certain credits on such payments as permitted under the Loan Agreement; (b) into the Debt Service Fund not less than five days preceding each principal payment date on the Bonds, an amount which is not less than the next installment of principal due on the Bonds on such principal payment date, except that the Borrower may be entitled to certain credits on such payments as permitted under the Loan Agreement; and (c) into the Debt Service Fund on or before the date required or permitted by the Loan Agreement or the Bond Indenture for the redemption of Bonds, the amount intended or required to redeem Bonds then Outstanding if the Borrower exercises its right to redeem Bonds under any provision of the Bond Indenture or if any Bonds are required to be redeemed under any provision of the Bond Indenture.

Notwithstanding any schedule of payments upon the Loan set forth in the Loan Agreement or in the Borrower Obligation, the Borrower will make payments upon the Loan and will be liable therefor at the times and in the amounts (including interest, principal and redemption premium, if any) equal to the amounts to be paid as interest, principal and redemption premium, if any, whether at maturity or by optional or mandatory sinking fund redemption upon all Bonds from time to time Outstanding under the Bond Indenture.

Unpaid Loan Payments will bear interest at the applicable rate of interest on the Bonds. Any interest charged and collected on an unpaid Loan Payment will be deposited to the credit of the Debt Service Fund and applied to pay interest on overdue amounts in accordance with the Bond Indenture.

Credits on Loan Payments

Notwithstanding any provision contained in the Loan Agreement or in the Bond Indenture to the contrary, the Borrower is to receive credit for payment on the Loan, in addition to any credits resulting from payment or prepayment from other sources, as follows:

(a) any moneys deposited by the Bond Trustee or the Borrower in the Debt Service Fund as interest will be credited against the obligation of the Borrower to pay interest on the Loan as the same becomes due;

(b) any moneys deposited by the Bond Trustee or the Borrower in the Debt Service Fund as principal will be credited against the obligation of the Borrower to pay the principal of the Loan as the same becomes due;

(c) the investment income accruing to the Debt Service Fund and the amount of any moneys transferred by the Bond Trustee from any other fund held under the Bond Indenture and deposited in the Debt Service Fund as interest or principal will be credited against the obligation

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of the Borrower to pay interest or principal, as the case may be, on the Loan as the same become due;

(d) on installments of principal and interest in an amount equal to the principal amount of Bonds for the payment at maturity or redemption of which sufficient amounts (as determined pursuant to the Bond Indenture) in cash or Defeasance Obligations are on deposit as provided in the Bond Indenture, to the extent such amounts have not previously been credited against such payments, and the interest on such Bonds from and after the date fixed for payment at maturity or redemption thereof (which credits will be made against the installments of principal and interest which would have been used, but for such call for redemption, to pay principal of and interest on such Bonds when due);

(e) on installments of principal and interest in an amount equal to the principal amount of Bonds acquired by the Borrower and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee on behalf of the Borrower and canceled, and the interest on such Bonds from and after the date interest thereon has been paid prior to cancellation (which credits will be made against the installments of principal and interest which would have been used, but for such cancellation, to pay principal of and interest on such Bonds when due); and

(f) on installments of principal and interest in an amount equal to payments made under the Borrower Obligation which have been received by the Bond Trustee.

Additional Payments

The Borrower will make the following additional payments to the following Persons:

Authority Fees. The Borrower will pay expenses required to be paid to the Authority or to any payee designated by the Authority, incurred by or on behalf of the Authority at any time related to the Project which are not paid from the amounts held under the Bond Indenture, including, without limitation, legal fees and expenses incurred in connection with the interpretation, performance, enforcement or amendment of the Loan Agreement, the Bond Indenture, the Tax Compliance Agreement or any other documents relating to the Project or the Bonds or in connection with any federal or state tax audit or any questions or other matters arising under such documents (the “Extraordinary Authority Costs”). Amounts payable or reimbursable, as the case may be, pursuant to the section of the Loan Agreement summarized in this paragraph, and included in the definition of “Extraordinary Authority Costs,” include, but are not limited to, (i) all costs of printing any replacement Bonds required to be issued under the Bond Indenture to the extent such costs are not paid by the Registered Owners and (ii) the fees and expenses of any experts retained by the Authority pursuant to the terms of the Bond Indenture, the Loan Agreement and the Tax Compliance Agreement.

Bond Trustee, Agent and Professional Fees. The Borrower will pay to the Bond Trustee and any Paying Agent, registrars, counsel, accountants, rebate analysts, and other Persons when due, all reasonable fees, charges and expenses of such Persons for services rendered under the Bond Indenture, the Loan Agreement, the Master Indenture, the Borrower Obligation or any other document related thereto and expenses incurred in the performance of such services thereunder for which such Persons are entitled to payment or reimbursement, including expenses of compliance with the Tax Compliance Agreement, and such obligations of the Borrower described in this paragraph will survive discharge and termination of the Loan Agreement.

Advances by Bond Trustee. The Borrower will pay to the Bond Trustee the amount of all advances of funds made by the Bond Trustee under the provisions of the Loan Agreement or the Bond

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Indenture, with interest thereon at the prime rate announced from time to time by the commercial banking affiliate of Bond Trustee.

Arbitrage Rebate Payments. The Borrower will pay to the Bond Trustee all amounts to be deposited to the Rebate Fund, as and when the same become due as determined pursuant to the Bond Indenture and the Tax Compliance Agreement, to the extent there are no other amounts available to make such deposits, and the Bond Trustee will apply such funds in compliance with the Bond Indenture.

Costs of Enforcement. In the event the Borrower defaults under any of the provisions of the Loan Agreement and the Bond Trustee and/or the Authority employ attorneys or incur other expenses for the collection of required payments or the enforcement of performance or observance of any obligation or agreement on the part of the Borrower contained in the Loan Agreement, the Borrower on demand therefor is to pay to the Bond Trustee and/or the Authority, as applicable, the reasonable fees of such attorneys and such other expenses so incurred by the Bond Trustee and/or the Authority. The Borrower also will pay, and will indemnify the Authority and the Bond Trustee from and against, all fees, costs, expenses and charges, including reasonable counsel fees, incurred for the collection of payments due or for the enforcement or performance or observance of any covenant or agreement of the Borrower under the Loan Agreement, the Borrower Obligation, the Bond Indenture, the Tax Compliance Agreement or any other document related to the foregoing. The obligations of the Borrower summarized under this caption will survive the termination of the referenced documents or removal of the Bond Trustee.

Taxes and Assessments. The Borrower will pay all taxes and assessments with respect to its property; provided, however, that the Borrower will have the right to protest any such taxes or assessments and will have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest, or contest would materially adversely affect the rights or interests of the Authority or the Bond Trustee.

Removal or Substitution of Bond Trustee. The Borrower agrees in the Loan Agreement to pay all costs and expenses which may be incurred in connection with any removal or substitution of the Bond Trustee and the appointment of any successor trustee.

Other Amounts Payable. The Borrower will pay to the Person or Persons entitled thereto, any other amounts which the Borrower has agreed to pay under the Loan Agreement or which the Borrower is required to pay under the Bond Indenture.

Corporate Existence and Tax-Exempt Status

Except as otherwise expressly provided in the Loan Agreement or the Master Indenture, the Borrower has agreed to (a) preserve and keep in full force and effect its corporate or other separate legal existence, (b) remain qualified to do business and conduct its affairs in each jurisdiction where ownership of its property or the conduct of its business or affairs requires such qualification, (c) maintain its status as a Tax-Exempt Organization and (d) operate the Project as a “hospital” under the Act.

Assignment by the Borrower

The Borrower will not assign the Loan Agreement, as a whole or in part, without the prior written consent of the Authority and the Bond Trustee, unless such assignment is pursuant to a merger, consolidation or transfer of the Borrower’s property substantially as an entirety permitted under the Master Indenture and the Loan Agreement, or unless the following conditions are met:

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(a) No assignment will relieve the Borrower from primary liability for any of its obligations under the Loan Agreement, and in the event of any such assignment, the Borrower will continue to remain primarily liable for payment of the amounts specified in the Loan Agreement and the performance and observance of the other agreements to be performed and observed by the Borrower under the Loan Agreement to the same extent as though no assignment had been made.

(b) The assignee will assume the obligations of the Borrower under the Loan Agreement to the extent of the interest assigned.

(c) If there remains unpaid any Bond which bears interest that is not includable in gross income under the Code, the Bond Trustee and the Authority have received an Opinion of Bond Counsel, in form and substance satisfactory to the Authority, to the effect that under then existing law the consummation of such assignment, whether or not contemplated on any date of the delivery of such Bond, would not cause the interest payable on such Bond to become includable in gross income for federal income tax purposes.

(d) The Borrower will, within 30 days after the delivery thereof, furnish or cause to be furnished to the Bond Trustee and the Authority a true and complete copy of each assignment and assumption of obligations.

Maintenance and Insurance

The Borrower will be obligated to maintain its Property, including the Project, in good repair and working order. During the term of the Loan Agreement, the Borrower must also cause its health care facilities, to be insured against loss to the extent provided in the Master Indenture. See “SUMMARY OF THE MASTER INDENTURE—Insurance” herein.

Casualty Loss and Condemnation

Upon casualty loss or condemnation of the Borrower’s health care facilities, all buildings, improvements and equipment acquired in the repair, rebuilding or restoration of the Borrower’s health care facilities pursuant to the provisions of the Bond Indenture will be deemed a part of the Borrower’s health care facilities and will be available for use and occupancy by any Member of the Obligated Group without the payment of any payments under the Loan Agreement other than the Loan Repayments and other payments specifically required to be made as described under “—Loan Payments and Other Amounts Payable” and “—Additional Payments” herein. See also “SUMMARY OF THE MASTER INDENTURE—Insurance” herein.

Events of Default

The following are certain of the “events of default” under the Loan Agreement:

(a) default in the payment of any interest on the Loan or the Borrower Obligation when such interest becomes due and payable;

(b) default in the payment of the principal of, or premium, if any, on the Loan or the Borrower Obligation when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise);

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(c) default in the performance, or breach, of any covenant or agreement of the Borrower in the Loan Agreement (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere in the section of the Loan Agreement summarized under this subcaption), and continuance of such default or breach for a period of 30 days after the Bond Trustee or the Authority has given to the Borrower (or the Owners of at least 25% in principal amount of the Bonds Outstanding have given to the Bond Trustee and the Borrower) a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 30-day period, but can reasonably be expected to be fully remedied, such default will not constitute an event of default if the Borrower immediately upon receipt of such notice commences the curing of such default and thereafter prosecutes and completes the same with due diligence and dispatch;

(d) any representation or warranty made by the Borrower in the Loan Agreement or in any written statement or certificate furnished to the Authority or the Bond Trustee or the purchaser of any Bond in connection with the sale of any Bond or furnished by the Borrower pursuant to the Loan Agreement proves untrue in any material respect as of the date of the issuance or making thereof and is not corrected or brought into compliance within 30 days after the Bond Trustee or the Authority has given to the Borrower (or the Owners of at least 25% in principal amount of the Bonds Outstanding have given to the Bond Trustee and the Borrower) a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 30-day period, but can reasonably be expected to be fully remedied, such default will not constitute an event of default if the Borrower immediately upon receipt of such notice commences the curing of such default and thereafter prosecutes and completes the same with due diligence and dispatch;

(e) the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Borrower, or adjudging the Borrower as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, adjustment or composition of or in respect of the Borrower under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Borrower or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order remains unstayed and in effect for a period of 60 consecutive days;

(f) the commencement by the Borrower of a voluntary case, or the institution by it of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the United States Bankruptcy Code or any other applicable federal or state law, or the consent or acquiescence by it to the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability or its failure to pay its debts generally as they become due, or the taking of corporate action by the Borrower in furtherance of any such action; or

(g) the occurrence and continuance of any “event of default” specified in the Bond Indenture or in the Master Indenture that has not been properly cured or waived.

The foregoing provisions of subsections (c) and (d) of the section of the Loan Agreement summarized above are subject to the following limitations: If by reason of force majeure the Borrower is unable in whole or in part to carry out its agreements contained in the Loan Agreement, other than the

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obligations on the part of the Borrower contained in certain payment provisions in the Loan Agreement, in certain tax and arbitrage covenant provisions of the Loan Agreement and in certain insurance provisions in the Loan Agreement, the Borrower will not be deemed in default during the continuance of such inability. The term “force majeure” means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States or of the State or any of their departments, agencies, or officials, or any civil or military authority, including, without limitation, orders, rules or regulations of any such entities having jurisdiction over the rates and fees charged by the Borrower for its facilities and services; insurrections; riots; epidemics; landslides; lightning; earthquake; fire; hurricane; tornadoes; storms; floods; washouts; droughts; arrests; restraint of government and people; civil disturbances; explosions, breakage or accident to machinery, transmission pipes or canals, partial or entire failure of utilities; or any other cause or event not reasonably within the control of the Borrower. The Borrower agrees in the Loan Agreement, however, if possible, to remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements; provided, that the settlement of strikes, lockouts and other industrial disturbances will be entirely within the discretion of the Borrower, and the Borrower will not be required to make settlement of strikes, lockouts or other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the Borrower unfavorable to the Borrower.

Remedies on Default

Acceleration of Maturity; Rescission and Annulment. If an event of default under the Loan Agreement occurs and is continuing, the Bond Trustee, as assignee of the Authority, may and will if requested by the Owners of not less than 25% in principal amount of the Bonds Outstanding, by written notice to the Authority and the Borrower, declare the principal of the Loan and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest will become immediately due and payable.

At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on the Loan has been obtained by the Bond Trustee as provided in the Loan Agreement, the Bond Trustee may, by written notice to the Authority and Borrower, rescind and annul such declaration and its consequences if: (a) there is deposited with the Bond Trustee a sum sufficient to pay: (i) all overdue installments of interest on the Loan; (ii) the principal of, and premium, if any, on the Loan which has become due otherwise than by such declaration of acceleration and interest thereon at the rate prescribed therefor in the Bond Indenture; (iii) interest upon overdue installments of interest at the rate prescribed therefor in the Loan Agreement; and (iv) all sums paid or advanced by the Bond Trustee under the Bond Indenture and the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel; and (b) all events of default, other than the nonpayment of the principal of the Loan which has become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Loan Agreement. No such rescission and annulment will affect any subsequent default or impair any right consequent thereon.

Exercise of Remedies by the Bond Trustee. Upon the occurrence and continuance of any event of default under the Loan Agreement, unless the same is waived as provided in the Loan Agreement, the Bond Trustee, as assignee of the Authority, will have the following rights and remedies, in addition to any other rights and remedies provided under the Loan Agreement or by law:

Right To Bring Suit, Etc. The Bond Trustee, as assignee of the Authority, may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Loan, including interest on overdue principal and premium, if any, and on overdue installments of interest, and any other sums due under the Loan Agreement, to realize on or to foreclose any of its interests or liens

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under the Loan Agreement, to enforce and compel the performance of the duties and obligations of the Borrower as set forth in the Loan Agreement and to enforce or preserve any other rights or interests of the Bond Trustee, as assignee of the Authority, under the Loan Agreement or otherwise existing at law or in equity.

Exercise of Remedies at Direction of Owners. If requested in writing to do so by the Owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Bond Indenture, the Bond Trustee, as assignee of the Authority, will be obligated to exercise such one or more of the rights and remedies conferred by the Loan Agreement as the Bond Trustee deems most expedient in the interests of the Owners of the Bonds.

Restoration of Positions. If the Bond Trustee, as assignee of the Authority, has instituted any proceeding to enforce any right or remedy under the Loan Agreement by suit, foreclosure or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Bond Trustee, then and in every case the Borrower and the Bond Trustee, as assignee of the Authority, will, subject to any determination in such proceeding, be restored to their former positions and rights under the Loan Agreement, and thereafter all rights and remedies of the Bond Trustee will continue as though no such proceeding had been instituted.

Whenever any event of default has occurred and is continuing which results from the failure of the Borrower to pay to or perform for the Authority any payment covenant, agreement or warranty not assigned to the Bond Trustee, the Authority may (but need not) proceed directly against the Borrower and may take any action at law or in equity which it may deem necessary or desirable to collect or enforce such payment or performance in default.

Amendments, Changes and Modifications

Without the consent of the Owners of any Bonds, the Authority and the Borrower may from time to time enter into one or more Supplemental Loan Agreements, with the consent of the Bond Trustee so long as any Bonds are Outstanding, for any of the following purposes:

(a) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of the Loan, as set forth in the Loan Agreement, additional conditions, limitations and restrictions thereafter to be observed;

(b) to evidence the succession of another Person to the Borrower (in accordance with the Master Indenture) and the assumption by any such successor of the covenants of the Borrower contained in the Loan Agreement;

(c) to add to the covenants of the Borrower or to the rights, powers and remedies of the Bond Trustee for the benefit of the Owners of all of the Bonds or to surrender any right or power conferred in the Loan Agreement upon the Borrower;

(d) to cure any ambiguity, to correct or supplement any provision in the Loan Agreement which may be inconsistent with any other provision in the Loan Agreement or to make any other provisions, with respect to matters or questions arising under the Loan Agreement, which will not be inconsistent with the provisions of the Loan Agreement, so long as such action does not adversely affect the interests of the Owners of the Outstanding Bonds;

(e) to amend or supplement any provision relating to the Unassigned Rights, so long as such action does not adversely affect the interests of the Owners of the Outstanding Bonds; or

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(f) to make any other change in the Loan Agreement that, in the opinion of the Borrower and the Bond Trustee, will not prejudice in any material respect the interests of the Owners of the Outstanding Bonds.

In addition to entering into Supplemental Loan Agreements as described in the previous paragraph, with the consent of the Owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Loan Agreement, the Authority and the Borrower may enter into Supplemental Loan Agreements, with the consent of the Bond Trustee, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Loan Agreement or of modifying in any manner the rights of the Bond Trustee and the Owners of the Bonds under the Loan Agreement, except that no such Supplemental Loan Agreement will, without the consent of the Owner of each Outstanding Bond affected thereby:

(a) change the stated maturity of the principal of, or any installment of interest on, the Loan, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, the Loan, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date);

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose Owners is required for any such Supplemental Loan Agreement, or the consent of whose Owners is required for any waiver provided for in the Loan Agreement of compliance with certain provisions of the Loan Agreement or certain defaults under the Loan Agreement and their consequences; or

(c) modify any of the provisions described in this paragraph, except to increase any percentage provided thereby or to provide that certain other provisions of the Loan Agreement cannot be modified or waived without the consent of the Owner of each Bond affected thereby.

The Bond Trustee may in its discretion determine whether or not any Bonds would be affected by any Supplemental Loan Agreement and any such determination will be conclusive upon the Owners of all Bonds, whether theretofore or thereafter authenticated and delivered under the Loan Agreement. The Bond Trustee will not be liable for any such determination made in good faith. It will not be necessary for the required percentage of Owners of Bonds to approve the particular form of any proposed Supplemental Loan Agreement, but it will be sufficient if such act approves the substance thereof.

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APPENDIX D

SUMMARY OF NEBRASKA MEDICINE ORGANIZATIONAL DOCUMENTS

This Appendix D provides a summary of certain provisions of the Articles of Incorporation and Bylaws of TNMC, the Articles of Incorporation and Bylaws of UNMC Physicians, the System Integration Agreement, the Successor Joint Operating Agreement, the Lease Agreement and the Academic Affiliation Agreement, as described in this Appendix D. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of those documents.

[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

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DEFINITIONS ...... D-1

ARTICLES AND BYLAWS OF THE NEBRASKA MEDICAL CENTER ...... D-2 Powers and Purpose ...... D-2 Powers Reserved to Members ...... D-3 Board of Directors...... D-3 Fund Transfers ...... D-4 Duration and Member Withdrawal ...... D-4 Dissolution ...... D-4

ARTICLES AND BYLAWS OF UNMC PHYSICIANS ...... D-5 Powers and Purpose ...... D-5 Powers Reserved to Members ...... D-6 Board of Directors...... D-6 Dissolution ...... D-7

SYSTEM INTEGRATION AGREEMENT ...... D-7 General ...... D-7 Creation of the Health System ...... D-7 Control of UNMCP ...... D-7 Advisory Boards ...... D-8 Asset Transfer to UNMC Science Research Fund ...... D-8

SUCCESSOR JOINT OPERATING AGREEMENT ...... D-8 General ...... D-8 Operation Prior to Receipt of Tax Exemption ...... D-9 Reorganization upon Receipt of Tax Exemption ...... D-9 Organization, Governance and Powers of Nebraska Medicine ...... D-9 Commitment to Operate as a Unified Health System ...... D-13 Financial Relationships ...... D-14 Fund Transfers ...... D-15 Tax Exempt Status ...... D-16 Dispute Resolution and Remedies ...... D-16 Breach of Definitive Agreements Not Resulting in Termination ...... D-18 Term and Termination ...... D-18 Third Party Beneficiaries ...... D-19

LEASE AGREEMENT ...... D-19 General ...... D-20 Change in Leased Premises ...... D-20 Use of Leased Premises ...... D-20 Parking ...... D-20 Furnishing ...... D-21 Rent ...... D-21 Option to Purchase ...... D-22 Real Estate Taxes ...... D-22 Care, Maintenance and Services to the Leased Premises ...... D-22

Table of Contents (continued)

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Alterations ...... D-23 Insurance ...... D-23 Damage or Destruction of the Leased Premises ...... D-24 Condemnation ...... D-24 Indemnity and Subrogation ...... D-24 Pledge of Leasehold Interest ...... D-25 Term ...... D-25 Cancellation of Lease Term ...... D-25 Default ...... D-26 Surrender of Leased Premises ...... D-26 Restoration and Return of Licensed Beds on Termination ...... D-26 Mutual Indemnities ...... D-27

ACADEMIC AFFILIATION AGREEMENT ...... D-27 General ...... D-27 Purpose ...... D-27 Term ...... D-28 Financial Arrangement...... D-28 Educational Programs ...... D-29 Indemnification ...... D-29 Clinical Research Activities ...... D-30 Dispute Resolution Process ...... D-31

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DEFINITIONS

A summary of the meaning of certain defined terms used in this Appendix D is set forth in this section. This summary is not a complete statement of such defined terms and is qualified in its entirety by reference to the terms of the Articles of Incorporation and Bylaws of TNMC, the Articles of Incorporation and Bylaws of UNMC Physicians, the SIA, the SJOA, the Lease Agreement and the AAA (each as defined herein).

Capitalized terms appearing in this Appendix D but not otherwise defined in this Appendix D shall have the following definitions, unless the context clearly requires a different meaning:

“AAA” means that certain Academic Affiliation Agreement for Education and Research, dated as of July 1, 2016, by and between the BOR, TNMC, and the Health System.

“BMC” means Bellevue Medical Center, LLC, a Nebraska limited liability company.

“Board” means the Board of Directors of Nebraska Medicine.

“BOR” means the Board of Regents of the University of Nebraska, a body politic of the State of Nebraska and corporate body politic doing business through its administrative unit UNMC.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“CRHS” means Clarkson Regional Health Services, Inc., a Nebraska nonprofit corporation and its predecessors.

“Definitive Agreements” means each of the SJOA, the SIA, the Articles of Incorporation and Bylaws of TNMC and the Health System, as applicable, Lease Agreement, the AAA and the Fund Agreement between UNMCP and the UNMC Science Research Fund, dated July 1, 2016, as amended from time to time.

“Exemption Approval Date” means the date when the Health System receives approval from the Internal Revenue Service of federal tax-exempt status under Section 501(c)(3) of the Code.

“Health System” means Nebraska Medicine, a Nebraska nonprofit corporation (and does not mean TNMC prior to the Exemption Approval Date).

“Lease Agreement” means Amendment No. 5 to the Lease Agreement dated as of July 1, 2016 by and between TNMC, as lessee, and the BOR and CRHS, as successor to the former Bishop Clarkson Memorial Hospital and the former Clarkson Regional Health Services, Inc., as lessors, amending and restating the Lease Agreement entered into as of October 1, 1997, as previously amended, by and between TNMC (formerly known as Nebraska Health System), as lessee, and the BOR and CRHS, or its predecessors.

“Leased Premises” means the real property owned by the BOR or CRHS and leased to TNMC pursuant to and described in the Lease Agreement, including certain health care facilities comprising the former University Hospital and Bishop Clarkson Memorial Hospital.

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“Nebraska Medicine” means TNMC prior to the Exemption Approval Date and the Health System thereafter.

“SJOA” means the Successor Joint Operating Agreement entered into as of July 1, 2016 by and among TNMC, the Health System, the BOR and CRHS.

“Super Majority Vote” means 70% of all Directors who are eligible to vote, not including the Board Chair.

“SIA” means that certain System Integration Agreement dated July 1, 2016 among TNMC, the Health System, the BOR, CRHS and UNMCP.

“TNMC” means The Nebraska Medical Center, a Nebraska nonprofit corporation.

“UNMC” means the University of Nebraska Medical Center, an administrative unit of the BOR.

“UNMCP” means UNMC Physicians, a Nebraska nonprofit corporation.

ARTICLES AND BYLAWS OF THE NEBRASKA MEDICAL CENTER

A summary of certain provisions of the Articles of Incorporation and Bylaws of TNMC are set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of the Articles of Incorporation and Bylaws of TNMC.

Powers and Purpose

Pursuant to the Amended and Restated Articles of Incorporation of The Nebraska Medical Center dated July 1, 2016 (the “Articles of Incorporation”), TNMC is organized as a public benefit corporation exclusively for charitable, educational and scientific purposes as described in Section 501(c)(3) of Code.

TNMC shall have as its purpose and objective to: (i) receive and administer funds exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Code; (ii) act as an integrated, multientity health care system; (iii) provide for and promote effective and efficient quality health care, health care-related services, scientific advances in public health and health promotion and wellness services in the market area served by TNMC; and (iv) otherwise advance purposes consistent with the general purposes set forth in the Articles of Incorporation and Bylaws (as defined below).

TNMC shall possess and be fully authorized to exercise any and all powers and rights conferred by the laws of the State of Nebraska on nonprofit corporations under the Nebraska Nonprofit Corporation Act which an organization exempt under Section 501(c)(3) of the Code may possess or exercise.

Limitations. TNMC shall not engage directly or indirectly in any activity, that would invalidate its status (a) as a corporation that qualifies as an exempt organization under Section 501(c)(3) of the Code or (b) as a corporation, contributions to which are deductible under Section 170(c)(2) of the Code. No part of the net earnings or principal of TNMC shall inure to the benefit of or be distributed to any director, trustee or officer of TNMC or of any affiliated organizations, or any private individual (except that reasonable compensation may be paid for goods or services rendered to or for TNMC in connection with one or more of its purposes), and no director, trustee or officer of TNMC or any affiliated organizations, or any private individual, shall be entitled to share in the distribution of any of TNMC’s assets on

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dissolution of TNMC; provided, however, that affiliated organizations shall not include the BOR or CRHS.

Powers Reserved to Members

The current Members of TNMC are the BOR and CRHS (each, a “Member” and collectively, the “Members”). After the Exemption Approval Date, the sole Member of TNMC shall be the Health System.

None of the following actions shall occur without the prior written consent of each Member: (a) any amendment to the Articles of Incorporation; (b) a merger or consolidation of TNMC with or into any other entity; (c) sale, transfer, lease, disposition or change in use of (i) more than fifty percent (50%) of the assets of the clinical operations of TNMC, whether owned directly or indirectly (as determined based upon fair market value); or (ii) such other assets as the TNMC Board (as defined below) by Super Majority Vote shall designate; provided, however, that any sale, conveyance, transfer or other disposal of any interest in the event of default of any mortgage or pledge securing debt incurred in compliance with the Articles of Incorporation and Bylaws shall not require the approval of such Member, so long as each Member has been given written notice of such event of default and a reasonable opportunity to cure, in such Member’s sole discretion; (d) entry into a new joint operating agreement, integration agreement or similar agreement, or any amendment to any existing similar agreement, including the SIA, or the SJOA or any other change of control of TNMC; (e) issuance or incurrence of indebtedness resulting in a debt-to-equity ratio in excess of 40% or a debt service coverage ratio less than 1.25, with such ratios defined and calculated as provided in the financial ratio calculation addendum attached to the Articles of Incorporation; (f) a liquidation or dissolution of TNMC; (g) admission of one or more additional Members of TNMC; (h) entry into any affiliations that would result in a change in the size of the TNMC Board, a change to the quorum requirements applicable to the TNMC Board, or change the supermajority voting requirements of the TNMC Board; (i) approval of the Bylaws and any amendment to the Bylaws resulting as a consequence of the admission of any new Member; (j) approval of any amendment to the Bylaws as and to the extent provided for in the Bylaws; or (k) a gift, pledge, donation, grant or contract having the result of a donation, no matter how denominated, other than to the members (in equal amounts) in excess of one million dollars ($1,000,000).

Board of Directors

Governance and management of the affairs of TNMC shall be vested in a board of directors (the “TNMC Board” with each member of the TNMC Board, a “Director”).

Pursuant to the Amended and Restated Bylaws of TNMC, effective as of July 1, 2016 (the “Bylaws”), the selection, composition, and replacement of the TNMC Board is as described at the captions “SUCCESSOR JOINT OPERATING AGREEMENT—Organization, Governance and Powers of Nebraska Medicine—Board of Directors—Selection and Term” and “SUCCESSOR JOINT OPERATING AGREEMENT—Organization, Governance and Powers of Nebraska Medicine—Board of Directors—Removal and Replacement” in this Appendix D. At such point that the Health System becomes the sole Member of TNMC (upon the Exemption Approval Date), the members of the TNMC Board shall be the same persons who serve as the members of the Board of the Health System.

A quorum for the conduct of business by the TNMC Board shall consist of not less than sixty percent (60%) of the voting Directors who would be eligible to vote on the matter, other than the Board Chair (a “Quorum”).

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Except for matters requiring a Super Majority Vote of the Directors, action of the TNMC Board on a matter shall require a Quorum and the affirmative vote of not less than sixty percent (60%) of Directors in office who would be eligible to vote on the matter, other than the Board Chair. The Board Chair may cast a deciding vote in the event of a tie.

A Super Majority Vote requires greater than or equal to seventy percent (70%) of all the Directors in office who would be eligible to vote on the matter, other than the Board Chair. The Board Chair cannot cast his or her vote to achieve a Super Majority Vote. A Super Majority Vote is required for the following Board actions: (a) removal of a Board Chair from such role; (b) removal of any voting Director prior to expiration of his or her term; (c) selection or removal of the TNMC CEO; (d) recommendation of admission of additional organizations as Members of TNMC; (e) capital fund transfers to the Members; (f) recommendation of changes in the Articles of Incorporation of TNMC; (g) entry into any merger, consolidation, joint operating agreement or dissolution of such other extraordinary transaction which also requires approval of the Members (h) changes of the Bylaws of TNMC (subject to Member approval and/or review); (i) designation of candidates for UNMC Chancellor who will be deemed acceptable to serve as Board Chair; (j) approval of TNMC’s annual budget and strategic plan; (k) adoption of a conflict of interest policy of TNMC and any subsequent amendments thereto; and (l) any other matter that under applicable law requires a Super Majority Vote.

TNMC shall indemnify any person serving as a Director of TNMC to the full extent permitted by the Nebraska Nonprofit Corporation Act, and may also indemnify its officers and employees to the full extent provided by law, from and against liabilities and expenses incurred by reason of such individuals being made a party to a proceeding because the individual is or was a Director, officer or employee of TNMC, subject to terms and conditions of the Bylaws of TNMC.

Fund Transfers

The Bylaws of TNMC contain the provisions for Fund Transfers to the BOR and CRHS that are summarized at the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Fund Transfers” in this Appendix D.

Duration and Member Withdrawal

The Bylaws provide that unless terminated and wound up as provided in the next sentence or under applicable law, the duration of TNMC shall be perpetual. A Member may withdrawal from TNMC as provided at the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Term and Termination—Corrective Action Plan Upon Failure To Deliver Fund Transfers; Withdrawal of Member” in this Appendix D.

Dissolution

Upon dissolution of TNMC, the TNMC Board shall, after paying or making provisions for the payment of all liabilities of TNMC, cause TNMC to distribute all assets of TNMC to the Member or Members (or their successors) in such manner as the TNMC Board shall determine consistent with the Bylaws; provided, however, that in no event shall any of the assets of TNMC be distributed to any Member (or successor thereof) that does not qualify at such time as a tax-exempt organization under Section 501(c)(3) of the Code, or the corresponding section of any future federal tax code, or a governmental entity. If either Member (or its successor) does not so qualify, then assets otherwise distributable to such non-qualifying Member shall be distributed, in the discretion of the TNMC Board, to (i) any other Member that does so qualify, (ii) to one or more other parties carrying out tax-exempt

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purposes within the meaning of Section 501(c)(3) of the Code, or the corresponding section of any future federal tax code or (iii) to the federal, state or local government for a public purpose. Any assets of TNMC not distributed by the TNMC Board in the foregoing manner shall be disposed of by order of a court of competent jurisdiction located in Douglas County, Nebraska exclusively for tax-exempt purposes within the meaning of Section 501(c)(3) of the Code, or the corresponding section of any future federal tax code, or to such organization or organizations, as said court shall determine, which are organized and operated exclusively for such purposes.

ARTICLES AND BYLAWS OF UNMC PHYSICIANS

A summary of certain provisions of the Articles of Incorporation and Bylaws of UNMCP, is set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of the Articles of Incorporation and Bylaws of UNMCP.

Powers and Purpose

Pursuant to the Amended and Restated Articles of Incorporation of UNMC Physicians effective July 1, 2016 (the “Articles of Incorporation”), UNMCP is organized as a public benefit corporation exclusively for charitable, educational and scientific purposes as described in Section 501(c)(3) of the Code.

UNMCP shall have as its purpose and objective to support and operate for the benefit of, and/or coordinate some or all of the functions of TNMC, the BOR and other publicly supported organizations that are closely related in purpose and function to TNMC (the “Supported Organizations”). In furtherance of those purposes, UNMCP shall undertake the following: (i) coordinate with the Health System in support of TNMC; (ii) endeavor to lead the world with its Supported Organizations in transforming lives to create a healthy future by supporting, promoting and enabling the delivery of extraordinary care, remarkable discovery and relevant learning; (iii) focus on supporting the achievement of the most exception experiences for all those served, providing the most trusted educators, providing extraordinary patient care, achieving the best health outcomes, enabling the most transformational discoveries, investing and reinvesting in excellence, embracing the principles of interdependence among UNMCP’s missions and functions, and attracting the most exceptional workforce, physician partners, affiliates and philanthropic supporters; (iv) to employ and make available physicians engaged in the practice of medicine as a faculty practice plan for the Supported Organizations as an integrated medical practice unit, at least thirty percent (30%) of whom are also concurrently employed by the University of Nebraska Medical College of Medicine as faculty, (v) to provide patients at the Supported Organizations with the service of qualified academic practitioners; (vi) to ensure that faculty members are engaged in clinical practice of medicine in order to maintain a high quality educational program, (vii) to provide high quality, cost effective and comprehensive health care services to the patients of the Supported Organizations; and (viii) to engage in any and all lawful activities which may be necessary, useful, suitable, desirable, or proper for the furtherance, accomplishment, fostering, or attainment of any or all of UNMCP’s mission and purposes.

The powers and rights of UNMCP shall be limited to supporting and operating for the benefit of, and/or coordinating some or all of the functions of, the Supported Organizations. Subject to the foregoing limitation, UNMCP shall possess and be fully authorized to exercise any and all powers and rights conferred by the laws of the State of Nebraska on nonprofit corporations under the Nebraska Nonprofit Corporation Act which an organization exempt under Section 501(c)(3) of the Code may possess or exercise.

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Limitations. Notwithstanding any other provisions of these Articles of Incorporation, UNMCP shall not engage directly or indirectly in any activity, that is impermissible for its status (a) as a corporation that qualifies as an exempt organization under Section 501(c)(3) of the Code, or (b) as a corporation, contributions to which are deductible under Section 170(c)(2) of the Code. No part of the net earnings or principal of UNMCP shall inure to the benefit of or be distributed to any director, trustee or officer of UNMCP or any affiliated organizations, or any private individual (except that reasonable compensation may be paid for goods or services rendered to or for UNMCP in connection with one or more of its purposes), and no director, trustee or officer of UNMCP or any affiliated organizations, or any private individual, shall be entitled to share in the distribution of any of UNMCP’s assets on dissolution of the Corporation.

Powers Reserved to Members

The sole member of UNMCP is TNMC (the “Member”). After the Exemption Approval Date, the sole Member of UNMCP shall be the Health System.

None of the following actions shall occur without the prior written consent of the Member: (a) any amendment to the Articles of Incorporation; (b) a merger or consolidation of UNMCP with or into any other entity; (c) sale, transfer, lease, disposition or change in use of more than fifty percent (50%) of the assets of UNMCP, whether owned directly or indirectly (as determined based upon fair market value); provided, however, that any sale, conveyance, transfer or other disposal of any interest in the event of default of any mortgage or pledge securing debt incurred in compliance with the Articles of Incorporation and the Amended and Restated Bylaws of UNMCP effective as of July 1, 2016 (the “Bylaws”) shall not require the approval of the Member, so long as the Member has been given written notice of such event of default and a reasonable opportunity to cure, in the Member’s sole discretion; (d) a liquidation or dissolution of UNMCP; and (e) approval of any amendment to the Bylaws of UNMCP.

Board of Directors

Governance and management of the affairs of UNMCP shall be vested in a board of directors (the “UNMCP Board”, with each member of the UNMCP Board, a “Director”)). The UNMCP Board shall be the same as the board of directors of its Member. If at any time the board of directors of the Member cannot be identical to the UNMCP Board, the UNMCP Board shall be selected by the board of directors of the Member.

A quorum for the conduct of business by the UNMCP Board shall consist of not less than sixty percent (60%) of the voting Directors who would be eligible to vote on the matter, other than the Chairperson (a “Quorum”).

Except for removal of a Director, which shall require a Super Majority Vote, action of the UNMCP Board on a matter shall require a Quorum and the affirmative vote of not less than sixty percent (60%) of Directors in office who would be eligible to vote on the matter, other than the Chairperson. The Chairperson may cast a deciding vote in the event of a tie. A super-majority vote requires greater than or equal to seventy percent (70%) of all the Directors in office who would be eligible to vote on the matter, other than the Chairperson (a “Super Majority Vote”). The Chairperson cannot cast his or her vote to achieve a Super Majority Vote.

TNMC shall indemnify any person serving as a Director of UNMCP to the full extent permitted by the Nebraska Nonprofit Corporation Act, and may also indemnify its officers and employees to the full extent provided by law, from and against liabilities and expenses incurred by reason of such individuals

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being made a party to a proceeding because the individual is or was a Director, officer or employee of UNMCP, subject to such terms and conditions as may be set forth in the Bylaws of UNMCP.

Dissolution

Upon dissolution of UNMCP, the UNMCP Board shall, after paying or making provisions for the payment of all liabilities of UNMCP, cause UNMCP to distribute all assets of UNMCP to the Member in such manner as the UNMCP Board shall determine consistent with the Bylaws of UNMCP; provided, however, that in no event shall any of the assets of UNMCP be distributed to the Member (or successor thereto) that does not qualify at such time as a tax-exempt organization under Section 501(c)(3) of the Code or as a governmental entity. If the Member (or its successor) does not so qualify, then assets otherwise distributable to such non-qualifying Member shall be distributed, in the discretion of the UNMCP Board, to (i) one or more other parties carrying out tax-exempt purposes within the meaning of Section 501(c)(3) of the Code, and/or (ii) the federal, state or local government for a public purpose. Any assets of UNMCP not distributed by the UNMCP Board in the foregoing manner shall be disposed of by order of a court of competent jurisdiction located in Douglas County, Nebraska, exclusively for tax-exempt purposes within the meaning of Section 501(c)(3) of the Code, or to such organization or organizations, as said court shall determine, which are organized and operated exclusively for such purposes.

SYSTEM INTEGRATION AGREEMENT

A summary of certain provisions of the SIA is set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of that document.

General

The System Integration Agreement (the “SIA”) was entered into on July 1, 2016 by and among the Health System, TNMC, the BOR, CRHS, and UNMCP. As used in the SIA, “Nebraska Medicine” shall mean TNMC prior to the Exemption Approval Date and the Health System thereafter. The SIA shall survive until such time as all obligations set forth therein are satisfied and fulfilled.

The parties to the SIA are guided by their joint commitment to clinical enterprise objectives and, when differences arise, agree to TNMC and UNMCP act in good faith and use their best efforts (pursuant to the SIA) to find innovative and fair approaches to reconcile such differences.

Creation of the Health System

The Health System was created and the Articles of Incorporation of the Health System have been filed with the Nebraska Secretary of State and the initial board adopted bylaws. The Parties agree to operate within the structure of the Health System and seek to achieve effective operation as a health system with such structure. See the caption “SUCCESSOR JOINT OPERATING AGREEMENT--Organization, Governance and Powers of Nebraska Medicine” in this Appendix D.

Control of UNMCP

On July 1, 2016, TNMC became the sole corporate member of UNMCP, and accordingly the operations of UNMCP and subsidiaries which are consolidated into its balance sheet came within the control and governance of TNMC. TNMC shall have effective control of all rights, assets and property of

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UNMCP and subsidiaries which are consolidated into its balance sheet. Upon the Exemption Approval Date, the Health System shall be substituted as the sole member of UNMCP such that it operates and is the member of both TNMC and UNMCP as sister subsidiaries.

Advisory Boards

The Clinical Chairs Advisory Board and a Clinical Community Advisory Board were created. The Clinical Chairs Advisory Board shall initially be comprised of the legacy UNMCP Board members and thereafter compromised of the UNMC clinical department chairs and such other physician faculty as may be nominated by the Clinical Chairs Advisory Board and approved by the Board of Nebraska Medicine. The Clinical Community Advisory Board shall be comprised of members of any of the Nebraska Medicine Medical Staffs who are not employed by TNMC, UNMCP, or UNMC for more than twenty-five percent (25%) of their time. The Clinical Community Advisory Board members shall be nominated by CRHS and approved by the Board of Nebraska Medicine. The Clinical Chairs Advisory Board and the Clinical Community Advisory Board will provide input to the Board of Nebraska Medicine with respect to appropriate matters, including physician culture, quality and faculty roles in teaching, research and clinical care delivery. The Board of Nebraska Medicine will consider in good faith the input provided by the respective boards; provided, however, that all decisions, except those that are reserved to the Members, are ultimately that of management and the Board of Nebraska Medicine.

Asset Transfer to UNMC Science Research Fund

Pursuant to the SIA, on or prior June 30, 2016, UNMCP transferred certain assets in an amount equal to $110,176,580 (the “Transferred Assets”) to the UNMC Science Research Fund (the “SRF”). Part of the Transferred Assets, in an amount equal to $4,110,965, were transferred to a restricted account within the SRF (the “Indemnity Fund”) in order to fund any approved professional liability obligations of UNMCP, if any, arising or accruing with respect to events occurring prior to July 1, 2014 and certain indemnification claims, if any, of TNMC or the Health System and their respective directors, officers or employees. The Indemnity Fund will be held until June 30, 2017 at which time any remaining balance will be promptly transferred to the general fund of the SRF.

SUCCESSOR JOINT OPERATING AGREEMENT

A summary of certain provisions of the SJOA is set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of that document.

General

The Successor Joint Operating Agreement entered into as of July 1, 2016 (the “SJOA”) by and among TNMC, the Health System, the BOR and CRHS (TNMC, the Health System and BOR are collectively referred to as the “Parties”), amended and restated the Joint Operating Agreement entered into as of October 1, 1997 among TNMC (formerly known as Nebraska Health System), the BOR and CRHS, or its predecessors, as previously supplemented and amended. The SJOA sets forth terms and conditions for the operation of Nebraska Medicine. References to “Nebraska Medicine” in the SJOA mean TNMC prior to the Exemption Approval Date and the Health System thereafter.

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Operation Prior to Receipt of Tax Exemption

TNMC Doing Business as Nebraska Medicine. As of July 1, 2016 and until the Exemption Approval Date, TNMC will and shall continue doing business as “Nebraska Medicine” and shall be an integrated, multientity academic health system consisting of the affiliated and combined health care operations of the clinical enterprise (the integrated clinical enterprise comprised of UNMC’s academic medical center and the patient service and related clinical operations of UNMCP and TNMC). Nebraska Medicine will, directly or indirectly (through UNMCP or otherwise), employ or direct personnel engaged in the hospital, clinic or supporting service operations of TNMC. Nebraska Medicine shall consolidate any and all functions as determined to be appropriate by the Board (as defined below).

Control of UNMCP. As of July 1, 2016, TNMC shall become the sole corporate member of UNMCP until the Exemption Approval Date, and accordingly the operations of UNMCP shall have come within the ultimate control and governance of TNMC. At July 1, 2016, TNMC shall have control of all rights, assets and property (including, but not limited to, all real, personal and mixed, tangible and intangible, choses in action, rights and credits) of UNMCP.

Reorganization Upon Receipt of Tax Exemption

Upon the date the Health System has obtained recognition of Section 501(c)(3) status, it shall use the name “Nebraska Medicine,” and TNMC shall no longer do business as “Nebraska Medicine” but shall then do business under a name mutually agreed by the Parties. In addition, on the Exemption Approval Date, the Health System shall become the sole member of TNMC and UNMCP. The Members (defined below) will remain the members of the Health System.

Organization, Governance and Powers of Nebraska Medicine

Members, Articles and Bylaws. Nebraska Medicine will initially have two members, the BOR and CRHS (collectively, the “Members”) and will be governed as provided in the Nebraska Medicine Articles of Incorporation and Nebraska Medicine Bylaws, as applicable, with all powers and authority provided therein. Nebraska Medicine shall have all corporate powers to govern the legacy TNMC, BMC and UNMCP organizations and the subsidiaries which are consolidated into their respective balance sheets or interests, unless otherwise specified or delegated by or under the provisions of the Nebraska Medicine Bylaws.

The provisions of the Articles of Incorporation and Bylaws of the Health System are substantially similar to the provisions of those of TNMC, to the extent summarized at the caption “ARTICLES AND BYLAWS OF THE NEBRASKA MEDICAL CENTER” in this Appendix D, except that the Bylaws of the Health System provide that in the event TNMC fails to make the full Fund Transfer (defined under the caption “Fund Transfers” below) for any fiscal year (absent a Super Majority Vote of the Board of the Health System), the Health System shall make such Fund Transfer on TNMC’s behalf within thirty (30) days following receipt of a written request therefor from CRHS or UNMC, subject in all respects to the terms of the SJOA summarized at the caption “Fund Transfers” below, with the Nebraska Medicine retaining the right to obtain reimbursement from TNMC of the amount of such Fund Transfer made on its behalf.

Board of Directors. The Board of Nebraska Medicine (the “Board”) will focus on governance and strategy, not day-to-day management of Nebraska Medicine. The Board will determine the process it will use to govern Nebraska Medicine and hold management accountable for performance. The Nebraska Medicine CEO and the Board Chair (as defined below) shall provide an annual report on Nebraska Medicine to the Members.

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(a) Selection and Term. The Board shall initially consist of fifteen (15) directors of the Board (the “Directors”), comprised of eleven (11) voting Directors (subject to the limitations on the voting rights of the Board Chair) and four (4) non-voting Directors. Ten (10) of the voting Directors shall be appointed (the “Appointed Directors”) with the remaining five (5) Directors (the ex-officio Directors) being comprised of the UNMC Chancellor (including any interim Chancellor), who shall also be a voting Director, the Chief Executive Officer of Nebraska Medicine, who shall be a non-voting Director, the Dean of UNMC’s College of Medicine, who shall be a non-voting Director, the Chief of the Medical Staff of Nebraska Medicine’s primary hospital supported organization, who shall be a non-voting Director, and the Chief Nursing Officer of Nebraska Medicine’s primary hospital supported organization, who shall be a non-voting Director. Not less than four (4) of the voting Directors, not including the UNMC Chancellor (or interim Chancellor), shall at all times be physicians, which such physicians shall not be required to be members of the medical staff of the any entities affiliated with Nebraska Medicine. Half of the Appointed Directors will initially serve a term of 3 years, the other half a term of 4 years. Subsequent terms and re-elections will be as provided in the Nebraska Medicine Bylaws.

(b) Fiduciary Duty. All Directors have a fiduciary duty to make decisions based on what they believe to be in the best interest of Nebraska Medicine overall and not of one component or Member. Conflict of interest polices consistent with best practices are set forth in the Nebraska Medicine Bylaws and will apply to all Directors of the Board. Directors will abstain and/or recuse themselves from a vote/or discussion as set forth in the conflict of interest policies.

Removal and Replacement. Any Director (other than an ex-officio Director) may be removed upon a Super Majority Vote (as defined below) of the Directors in office, in which event a replacement shall be selected as set forth in the SJOA and described below. Any ex-officio Director shall be automatically removed, without further action, in the event that such Director no longer holds the position designated for ex-officio Board membership.

An individual selected by the appointing authority to fill the position (including those in an interim capacity) designated for ex-officio Board membership will serve as the new ex-officio Director.

Each of the Members (or their designees) will select two (2) members of the Board to serve on the nominating committee (the “Nominating Committee”), for a total of four (4) participants on the Nominating Committee. With respect to any vacancies among the Appointed Directors, the Nominating Committee will confidentially present candidates to the Members, or their delegates, for approval. In considering Directors, the Nominating Committee will seek to achieve a Board that possesses the range of competencies necessary for effective governance and is committed to the overall mission of Nebraska Medicine, is reasonably diverse, includes some persons knowledgeable about communities beyond the Omaha, Nebraska community who are reasonably available to actively participate, and complies with governance requirements for a 501(c)(3) organization. A Member, after consulting with the other(s), can reject candidates presented, in which case the Nominating Committee will start the process again. After Member approval, the Board will review and select new Directors for the Board from such approved candidates. If the Board declines to appoint a nominee and requires more nominees, it will make such request to the Nominating Committee, which will then propose added nominees.

Board Chair. In recognition of the important role of the UNMC Chancellor as the Chairperson of the Board (the “Board Chair”), the BOR agrees that candidate(s) considered for

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appointment as future UNMC Chancellors shall be considered in consultation with the Board with the goal that the appointee, as Chancellor, will also be appointed as Board Chair by the Board. The Board will interview final candidates for the future UNMC Chancellor position and will seek to identify one or more UNMC Chancellor candidate(s) who can also successfully be selected to serve as the Board Chair. Thereafter, the Board, upon a Super Majority Vote of the Directors in office, will determine and then confidentially advise the University of Nebraska President of the previously identified Chancellor candidate(s) that will also be acceptable to serve as the Board Chair. Upon appointment by the University of Nebraska President of any such candidate previously approved by the Board, such future UNMC Chancellor will then assume the Board Chair position.

If the University of Nebraska President selects a UNMC Chancellor who was not approved by the Board, the Board may select a Board Chair from one of the other Directors. Interim UNMC Chancellors will not necessarily assume the Board Chair position; instead, the Board shall select an interim Board Chair, which may be the interim UNMC Chancellor or any of the other current Directors. The Board Chair (including the UNMC Chancellor or any Director other than the UNMC Chancellor serving as Board Chair), shall cast the deciding vote in the case of a tie vote among voting Directors, but he or she may not otherwise vote.

The Board Chair may be removed from such role by the Board by a Super Majority Vote. Upon such removal, the Board shall elect a Board Chair from one of the other Directors in office.

The Board Chair will be subject to an annual review process by Directors and such review will be provided to the Board Chair, the University of Nebraska President and the board chair for the CRHS board.

Quorum and Voting. A quorum for the conduct of business by the Board shall consist of not less than sixty percent (60%) of the voting Directors who would be eligible to vote on the matter, other than the Board Chair (a “Quorum”).

Except for matters requiring a Super Majority Vote of the Directors, action of the Board on a matter shall require a Quorum and the affirmative vote of not less than sixty percent (60%) of Directors in office who would be eligible to vote on the matter, other than the Board Chair. The Board Chair may cast a deciding vote in the event of a tie.

A super-majority vote requires greater than or equal to seventy percent (70%) of all the Directors in office who would be eligible to vote on the matter, other than the Board Chair (a “Super Majority Vote”). The Board Chair cannot cast his or her vote to achieve a Super Majority Vote. A Super Majority Vote is required for the following Board actions: (a) removal of a Board Chair from such role; (b) removal of any voting Appointed Director prior to expiration of his or her term; (c) selection or removal of the Nebraska Medicine CEO; (d) recommendation of admission of additional organizations as Members of Nebraska Medicine (subject to Member approval); (e) Fund Transfers (as defined below) to the Members; (f) recommendation of changes in the Articles of Incorporation of Nebraska Medicine (subject to Member approval); (g) changes of the Bylaws of Nebraska Medicine (subject to Member approval and/or review); (h) designation of candidates for UNMC Chancellor who will be deemed acceptable to serve as Board Chair; (i) approval of Nebraska Medicine’s annual budget and strategic plan; and (j) amendments to Nebraska Medicine’s conflict of interest policy; and (k) any other matter that under applicable law requires a Super Majority Vote.

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Powers Reserved to the Members. The following actions of Nebraska Medicine require the prior written approval of each Member: (a) amendments to Nebraska Medicine’s Articles of Incorporation; (b) issuance or incurrence by Nebraska Medicine and its affiliates (directly or indirectly owned or controlled or under direct or indirect common control) of Indebtedness resulting in a debt/equity ratio in excess of 40% or a debt coverage ratio less than 1.25, with such ratios defined and calculated as provided in the Articles of Incorporation of Nebraska Medicine, (c) sale, transfer, lease, disposition or change in use of (i) more than 50% of the assets of the clinical operations of Nebraska Medicine, whether owned directly or indirectly (as determined based upon fair market value); or (ii) such other assets as the Board by Super Majority Vote shall designate; provided, however, that any sale, conveyance, transfer or other disposal of any interest in the event of default of any mortgage or pledge securing debt incurred in compliance with Nebraska Medicine’s Articles of Incorporation and Bylaws shall not require the approval of such Member, so long as each Member has been given written notice of such event of default and a reasonable opportunity to cure, in such Member’s sole discretion; (d) merger or consolidation of Nebraska Medicine with any other entity; (e) entry into a new, or any amendment to any existing the SIA, SJOA or other change of control of Nebraska Medicine; (f) liquidation or dissolution of Nebraska Medicine; (g) admission of a new Member; (h) affiliations (including certain mergers, consolidations, management contracts, leases, joint operating agreements or joint ventures or other arrangement as provided in the SJOA) that would result in a change in the size of the Board, change the quorum requirements applicable to the Board, have a material adverse effect (as provided in the SJOA) on the academic mission of UNMC, or change the Super Majority Vote requirements of the Board; (i) approval of the inaugural Bylaws of Nebraska Medicine and any Bylaws changes resulting from the admission of a new Member; and (j) a gift, pledge, donation, grant or contract having the result of a donation, no matter how denominated, other than to the Members (in equal amounts) in excess of one million dollars ($1,000,000).

Upon written request of the Board to consent to a matter subject to a Member reserved power, each Member shall consider such matter in good faith and respond in writing to the Board as promptly as reasonably practicable, but in no event later than sixty (60) days after receipt of such written request; and if a Member fails to respond within such sixty (60) day period, its consent shall be deemed to have been given. If a Member exercises its reserved power not to approve a requested matter, it shall provide the Board with a written statement of reasons for refusal within the sixty (60) day period. A Member may decline to approve a requested matter if it states in good faith that it needs additional information to decide the matter.

Changes to Nebraska Medicine’s Bylaws. The Board, by Super Majority Vote of the Directors in office, may adopt changes to the Nebraska Medicine Bylaws. Such changes shall be deemed approved unless both Members object in writing within sixty (60) days following notice to the Members (or earlier if both Members waive the notice period in writing). During the notice period, either Member may raise the issue in writing to the other Member and the Board whether the proposed change materially adversely effects or reduces such Member’s reserved powers (as set forth in the Nebraska Medicine Bylaws), substantively contravenes the Definitive Agreements or substantially injures a Member; then:

(i) If a Member raises such an objection, the Members, together with the Board shall meet and confer to resolve the question by agreement and if they cannot so agree, the issue of whether the Member has a right to prevent such Bylaw change without its consent shall be decided by the dispute resolution process set forth in the SJOA. However, if such Bylaw change is materially adverse to a member, such change shall not be implemented.

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(ii) A Member shall not have the right to object to a Bylaw change that, in the written opinion of Nebraska Medicine counsel, is needed to comply with then-applicable law, requirements for 501(c)(3) organizations, Nebraska Medicine’s then-existing obligations under its long-term debt instruments, or the Joint Commission accreditation standards.

(iii) A Member at any time may suggest changes in Articles or Bylaws to the Board, subject to the Board’s approval requirements.

Changes to UNMCP’s Governing Documents and Board. The Articles of Incorporation and Bylaws of UNMCP may be amended only by the Board. UNMCP’s board shall be identical to the Board, unless the Board by Super Majority Vote decides another composition for the UNMCP board is optimal.

Changes to TNMC Governing Documents and Board. After the Exemption Approval Date, the Articles of Incorporation and Bylaws of TNMC may be amended only by the Board. The composition of TNMC’s board shall be identical to the Board.

Changes to BMC’s Governing Documents. The Articles of Organization and Operating Agreement of BMC may be amended only by the Board.

Chief Executive Officer. Nebraska Medicine will be physician-led, and the CEO should be a physician. The CEO shall report to the Board.

Physician Organizations. Nebraska Medicine will organize and operate one or, if deemed advisable by the Board, multiple physician organizations, at least one of which shall include UNMCP and, at least one of which shall include physicians practicing at Nebraska Medicine who are not affiliated with UNMC. Nebraska Medicine may include other physician organizations in the future which, for the avoidance of doubt, shall be separate physician organizations, and which together with UNMCP shall develop mechanisms for supporting the practice of both the community physicians and the UNMC faculty members (including the ability to support “two-paycheck physicians”); provided, however, that these physician organizations may be consolidated. In the event that there are multiple physician organizations, Nebraska Medicine shall use best practices to achieve the most favorable achievable contracts or agreements on behalf of all physician organizations of Nebraska Medicine. To the full extent that is legally permissible, Nebraska Medicine will attempt to negotiate agreements with payers on a common basis for all such physician organizations. In addition, Nebraska Medicine will expect to contract and cooperate with (a) Private Practice Associates, LLC, (b) Paramount Group, LLC, and (c) other private practice groups, so long as each of (a)-(c) fulfills the reasonable contracting requirements of Nebraska Medicine as determined by Nebraska Medicine.

Commitment To Operate as a Unified Health System

Blended Culture. The Board is responsible for building and upholding a blended culture where physicians can practice medicine, support education, and support research in an academic medical center environment that embraces a philosophy of excellence to eminence. The Parties understand and agree that the success of all physicians is paramount to the success of Nebraska Medicine. The Board shall require (i) that the Nebraska Medicine medical staff bylaws express a commitment to the overall clinical, educational and research missions of Nebraska Medicine, and (ii) that the medical staff be an “open medical staff”. An “open medical staff” means a medical staff which is open to physicians who are appropriately credentialed and who meet the other requirements as reasonably determined by the Board, provided that unless a given clinical department (including certain existing departments or such other

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departments as may be established by the Board) is subject to an exclusive contract or staffing arrangement approved in advance by a Super Majority Vote of the Board, the mere fact of being an independent or “community-based” physician shall not disqualify a physician from medical staff membership; accordingly, the medical staff will be open to “community-based” non-faculty as well as faculty physicians, employed physicians and other qualified healthcare professionals. The clinical chairs of UNMC departments will have the opportunity to be considered to serve as Nebraska Medicine service line clinical chairs; provided, however, and it is acknowledged and agreed that the best qualified candidate shall be selected.

Medical Staffs. Nebraska Medicine shall be committed to medical staff models at all sites, with no distinction between University of Nebraska-affiliated academic physicians, employed physicians and private practice physicians for purposes of granting medical staff membership. It will be the responsibility of the Board, the Chancellor, the CEO of Nebraska Medicine, the UNMC Deans, the clinical chairs and the chiefs of services across the medical staffs of Nebraska Medicine to encourage this cultural and operational unity.

Capital Expenditure and Operating Budgets. Nebraska Medicine management, in cooperation with UNMC, shall develop capital and operating budgets which shall include a projected balance sheet and statement of sources and uses of cash, and such projection shall include the Fund Transfer consistent with the strategic plan approved by the Board.

Revenue Recognition. Except to the extent otherwise required by applicable law, recognition of revenues, operating expenses and similar matters for Nebraska Medicine will be determined by Generally Accepted Accounting Principles (GAAP).

Payor Relationships. Nebraska Medicine’s leadership shall negotiate all relationships with payors. Third-party payors and alternative delivery systems include, but are not limited to insurers, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) or direct relationships with employers. Nebraska Medicine private sector physicians may negotiate and contract directly with any such third-party payors and alternative delivery systems for their own services if such payors and systems should elect to do so.

Medical Decision-making. Nebraska Medicine may not alter or interfere with the exercise by physicians of their independent medical judgment as to patient care matters, subject to applicable law, accreditation and customary institutional policies.

Nebraska Medicine Facilities. Buildings and leasehold improvements of each Member’s acute care hospital, physical plant and other leased facilities existing on October 1, 1997 will not change ownership but will be operated and occupied by TNMC pursuant to the Lease Agreement. All assets, facilities and equipment, including non-physical assets acquired, installed or constructed by TNMC after October 1, 1997, are and will be owned by TNMC, provided that repairs or improvements made to Clarkson College shall be owned by Clarkson College.

Financial Relationships

Financial Principles. The core financial principle for the operation of Nebraska Medicine shall be one unified organization, such that all revenues and expenses of Nebraska Medicine are regarded as incurred by Nebraska Medicine as a whole; that resources will be allocated based on what can best help Nebraska Medicine as a whole achieve its missions; that debt and other obligations will be supported by the resources of Nebraska Medicine; and that capital will be allocated based on mission enhancement and return on investment. Accordingly, no component of Nebraska Medicine shall have a specific right to a

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given level of resources, except to the limited extent there are specific commitments approved by or subject to policies established by the Board.

Financial Arrangements. Nebraska Medicine will maintain consolidated financial statements which shall be audited annually and shall be separate from those of CRHS, UNMC or the University of Nebraska Medical Center College of Medicine, and Nebraska Medicine will deliver such financial statements to the Members promptly following completion. Nebraska Medicine will also maintain unaudited (or audited, if requested by any Member) internal component level financial statements such that material funds flows, allocations, eliminations, and Fund Transfers among Parties (including any affiliates directly or indirectly owned or controlled or under direct or indirect common control) will be transparent and disclosed in a timely manner.

Liabilities Not Assumed. Nebraska Medicine shall not assume liabilities of CRHS or the BOR relating to hazardous substances (as provided in the SJOA) existing in, on or under properties prior to October 1, 1997. TNMC shall continue at its expense the abatement of asbestos at University Tower and Clarkson Tower.

Fund Transfers

Consistent with TNMC’s and Nebraska Medicine’s nonprofit status under the Code, Fund Transfers must not interfere in (1) ongoing operations and due payment of TNMC and Nebraska Medicine operating expenses (as such is defined in GAAP, the “Operating Costs”) or (2) setting aside reserves for needs under any Board-approved strategic plan, as determined in good faith by the Board. TNMC and/or Nebraska Medicine should expect and be able to make full Fund Transfers in each fiscal year.

TNMC shall make and Nebraska Medicine shall cause TNMC to make the full Fund Transfers each year, unless the Board of Directors of TNMC and Nebraska Medicine, in their discretion, each determine by Super Majority Vote that in a given year the payment would materially adversely impact TNMC’s and Nebraska Medicine’s operating requirements; otherwise, such full Fund Transfer in the amount of six million dollars ($6,000,000) for its fiscal year 2016 and eight million dollars ($8,000,000) beginning in its fiscal year 2017, shall be transferred in each fiscal year to each of (1) CRHS and (2) UNMC, through the UNMC Chancellor’s office (each, a “Fund Transfer” and, collectively, the “Fund Transfers”). The amount of the Fund Transfer shall be reviewed every five (5) years by the Board in an endeavor to sustain the real value of the Fund Transfer. In the event that TNMC fails to make the full Fund Transfer for any Fiscal Year (absent any Super Majority Vote to not make such transfer as set forth in this paragraph and the next paragraph), Nebraska Medicine shall make such Fund Transfer on TNMC’s behalf, subject to the provisions of the next paragraph and the terms of a Corrective Action Plan (see the caption “Term and Termination - Corrective Action Plan Upon Failure To Deliver Fund Transfers; Withdrawal of Member” below) with Nebraska Medicine retaining the right to obtain reimbursement from TNMC of the amount of such Fund Transfer.

The Board of Directors of TNMC and Nebraska Medicine, along with Nebraska Medicine leadership will make a good-faith effort as part of the annual budget preparation cycle to honor the Fund Transfer. However, if the financial needs of TNMC and Nebraska Medicine so warrant (as described in the previous paragraph), the Fund Transfer to each of CRHS and BOR may be equally reduced by a Super Majority Vote of the Boards of Directors of TNMC and Nebraska Medicine. Should the Boards of Directors of TNMC and Nebraska Medicine be unable to make a full Fund Transfer for more than two consecutive years, a Member may choose to trigger a Corrective Action Plan (as defined below). See the caption “Term and Termination—Corrective Action Plan Upon Failure to Deliver Fund Transfers; Withdrawal of Member” below.

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In addition to, and following satisfaction of, the Fund Transfer, upon exceeding one hundred fifty (150) days cash on hand based upon the audited financial statements for any such fiscal year, the Board, by Super Majority Vote of the Board, annually may (but is not required to) pay or cause TNMC to pay (1) CRHS and (2) UNMC, through the UNMC Chancellor’s office, an additional return of excess capital (which shall not constitute or be deemed a distribution of income or profits), known as the “margin payment.” If the Board approves any such margin payment, it shall pay on a ratio of eighty percent (80%) to UNMC, through the UNMC Chancellor’s office and twenty percent (20%) to CRHS, with the eighty percent (80%) paid to the UNMC Chancellor’s office to be used to fund program(s) of excellence, which are in existence or will be created to enhance the alignment of academic programs and high quality patient-centered care.

Tax Exempt Status

Health System. The Health System is a Nebraska nonprofit corporation which is organized and shall be operated exclusively for religious, charitable, scientific and educational purposes and to support the functions of TNMC and UNMCP, each of which is described in Section 501(c)(3) of the Code which is exempt from federal income taxes under Section 501(a) of the Code and is not a private foundation as defined in Section 509(a) of the Code. The Health System shall apply for tax-exempt status under Section 501(c)(3) of the Code and determination that it is not a private foundation as defined in Section 509(a) of the Code. Following the Exemption Approval Date, the Health System shall maintain such tax-exempt status.

TNMC. TNMC has been determined to be and is an organization described in Section 501(c)(3) of the Code which is exempt from federal income taxes under Section 501(a) of the Code and is not a private foundation as defined in Section 509(a) of the Code. TNMC covenants to maintain such tax-exempt status.

BOR and CRHS. BOR and CRHS have been determined to be and are organizations described in Section 501(c)(3) of the Code which are exempt from federal income taxes under Section 501(a) of the Code. BOR and CRHS each covenant to maintain such tax-exempt status.

Dispute Resolution and Remedies

Mediation and Arbitration Requirement and Exceptions. Any controversy or claim arising out of, under, or relating to the Definitive Agreements or the breach thereof which cannot be solved by mediation, except for matters as to which a Party seeks and obtains equitable relief pursuant to the provisions below, shall be settled by binding arbitration pursuant to the terms as set forth below, subject to the legality of such binding arbitration.

Subject to complying with the arbitration terms set forth in at the caption “Arbitration” below, upon the occurrence of a breach of any of the Definitive Agreements, the Party not in breach shall be entitled to all available remedies set forth at the captions “Breach of Definitive Agreements Not Resulting in Termination” and “Term and Termination—Corrective Action Plan Upon Failure To Deliver Fund Transfers; Withdrawal of Member” below. Notwithstanding the foregoing, in the event that a Party seeks injunctive or similar relief for a breach of the SJOA, such Party shall be entitled to seek such equitable relief without first resorting to arbitration. If a Party’s action for injunctive or other equitable relief is dismissed, such Party may pursue further resolution of such dispute(s) through arbitration.

Arbitration. Any matters regarding the arbitration not specifically set forth or defined in the SJOA, to the extent not inconsistent with the terms of the SJOA, shall be administered pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Except as may be specifically

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provided in the SJOA or in the Commercial Arbitration Rules of the American Arbitration Association, the arbitrators shall have discretion to establish and determine the conduct and rules of the proceedings.

In the event of a dispute under the SJOA, a Party may serve written notice upon the Parties subject to the dispute demanding arbitration and identifying specifically the matters to be arbitrated. Within ten (10) days thereafter, each Member shall appoint one person to act as an arbitrator. Such person shall be independent, have no personal or pecuniary interest, either directly or indirectly from any business or family relationship, in the outcome of the matters disputed, and such person shall not be an employee, agent or contractor of the Member. If a Member fails to appoint an arbitrator within the allotted time, the other Member may appoint an arbitrator for it, provided that such arbitrator meets the qualifications described above. Once two arbitrators are appointed, they shall have ten (10) days from the date of the appointment of the last of the arbitrators to appoint a third arbitrator, who shall likewise be disinterested. If the two arbitrators appointed are unable to appoint a third arbitrator within the allotted time, then the Members agree to approach the American Arbitration Association for a list of ten (10) names and each Member shall have ten (10) days from the date of receipt of such list within which to select six (6) names from the list of ten (10), ranking them in order of preference, starting with the number one through six. The third arbitrator shall be the person selected by both Members with the lowest number of combined points in the combination of their total rankings as designated by the Members. When selected, the third arbitrator shall serve as chairperson of the panel. The arbitrators shall be compensated in the same amount and in the same manner as arbitrators paid under the rules of the American Arbitration Association for commercial arbitrations. The compensation of the arbitrators shall be borne equally between the Parties. Expenses of witnesses and of preparation for the arbitration, including the cost of counsel and other expenses, shall be borne by the Party incurring such expenses. All other expenses not specifically relating to the presentation of its case by either side shall be borne equally by the Parties.

The Parties shall cooperate in providing relevant information to one another within a reasonable amount of time before commencement of the arbitration hearing, but all such information which is requested by a Party shall be exchanged no later than five (5) days before the scheduled date of the commencement of the arbitration hearing. This shall include (i) the names, addresses and occupations of witnesses or affiants and a brief statement of the subject matter and nature of the testimony for which they will be presented; and (ii) identification of and exchange of all exhibits or documents to be offered or used at the arbitration hearing. Unresolved discovery disputes may be brought to the attention of the arbitration panel and such disputes shall be disposed of by the panel. The arbitrators may, at the request of a Party, establish reasonable limitations on discovery. A preliminary administrative conference shall be held not less than five (5) nor more than ten (10) days before the arbitration hearing and at such preliminary conference the Parties shall specify issues to be resolved, stipulate to uncontested facts, and consider any other matters which will expedite, or, if unresolved, could delay the arbitration proceedings. In addition, at this preliminary conference, the arbitration panel shall actively work to seek out a settlement to the dispute(s) at issue.

The arbitration hearing shall occur not less than twenty-five (25) days nor more than forty-five (45) days following the date of the appointment of the third arbitrator unless extended by mutual agreement of the Parties in interest or by the arbitrators. All Parties shall be permitted to present their respective cases without regard to the formalities of the rules of evidence as used in the courts of the State of Nebraska. The arbitrators, with the guidance and arguments of the Parties, may give such weight to the matters presented as they deem appropriate. The final decision of the arbitrators as well as all other decisions of the arbitrators shall be made by a vote of at least two out of three of the arbitrators. The final decision of the arbitrators shall be in writing with a clear and concise statement of their decision and shall specify the factual and legal basis for their decision. The decision of the arbitrators shall be submitted to the Parties no later than five (5) days after the conclusion of the arbitration proceeding. Upon receipt of

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the written decision of the arbitrators, any Party may request a clarification session by making such request to the chairperson. If requested by a Party or otherwise deemed useful by the arbitrators, the arbitrators will convene a further session at which time either side may ask for clarification of the decision as to any matter(s). The arbitrators shall then forthwith issue in writing any clarifications to their decision which they deem appropriate. The decision of the arbitrators with respect to any matter submitted to arbitration under the SJOA shall be final and binding upon, and fully enforceable against, the Parties and shall not be subject to judicial appeal. A Party may seek judicial enforcement, in any court having jurisdiction, of any final decision of the arbitrators.

Breach of Definitive Agreements Not Resulting in Termination

Notice and Cure Period. A Member or Nebraska Medicine (the “Alleging Party”) may bring a complaint of a material breach of any of the Definitive Agreements (except the breach of non-payment of Fund Transfers to a Member), against a Member or Nebraska Medicine by providing written notice to the allegedly breaching party (the “Breaching Party”) stating the basis for the alleged breach in a reasonably clear manner. The Breaching Party shall have ninety (90) days (the “Cure Period”) and the Alleging Party, the Breaching Party and the other non-breaching parties, if any, shall confer periodically in an effort to accelerate and agree on an adequate cure.

Remedy. If the breach remains uncured after the Cure Period, the Alleging Party may bring the complaint of alleged breach to a court of competent jurisdiction in order to obtain one of the following forms of relief: (a) money damages, (b) specific performance, (c) injunctive relief against future similar breaches or (d) other forms of relief available so long as in no event will such relief include rescission, partition of assets or termination, except as summarized under the caption “Term and Termination” below.

Term and Termination

Term. The duration of the SJOA shall be perpetual, unless terminated and wound up as summarized below under this caption “Term and Termination” or under applicable law.

Termination. The SJOA may only be terminated by (i) mutual written agreement of Nebraska Medicine, TNMC, the BOR and CRHS, or (ii) upon the withdrawal of a Member upon the failure of the required covenant-based Corrective Action Plan as described at the caption “Corrective Action Plan Upon Failure To Deliver Fund Transfers; Withdrawal of Member” below.

Corrective Action Plan Upon Failure To Deliver Fund Transfers; Withdrawal of Member. Upon the written request of a Member whose Fund Transfers are not made in the amounts described under the caption “Fund Transfers” above and the non-payment of such Fund Transfer exceeds two (2) fiscal years, then:

(a) The Board shall engage a qualified independent advisory firm to work with it to develop a corrective action plan (the “Corrective Action Plan”) for adoption by the Board that is designed to restore TNMC’s and Nebraska Medicine’s ability to resume full payment of Fund Transfers within a reasonable period of time.

(b) If, despite such Corrective Action Plan, the Fund Transfers are not resumed within three (3) years of the initial request, then upon one-year’s written notice, an unpaid Member whose Fund Transfers remain unrestored may withdraw from Nebraska Medicine.

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(c) If the Corrective Action Plan fails to resolve the issues, the Parties recognize that future issues are, as of the date of the SJOA, of an unknown magnitude or nature at an unknown time with unknown causes or consequences; therefore, the Members pledge to work together in good faith to agree to an equitable process and a workable implementation plan for the withdrawing Member, since such a process was impossible to create as of the date of the SJOA. Such plan shall include the resolution of (i) the remaining financial and other interests and rights of any withdrawing Member; (ii) the remaining financial and other interests and rights of the remaining Member(s); and (iii) the lawful rights and interests of third parties.

(d) If the Members cannot agree to an equitable process, the process and implementation plan for such Member’s withdrawal and compensation shall be decided by the dispute resolution process summarized at the caption “Dispute Resolution and Remedies” above.

(e) Promptly upon receipt of the notice of withdrawal, Nebraska Medicine shall use its best efforts (commercially reasonable, prompt and diligent efforts of a type and quality consistent with what a responsible and motivated person, with a firm commitment to accomplish the obligations specified, would expend in similar circumstances, but not including the requirement of instituting litigation) to cause the payment, satisfaction or resolution of all of its outstanding long-term debt (including any long-term debt of an affiliate for which Nebraska Medicine is jointly and severally obligated) whether such long-term debt is now existing or incurred hereafter, through redemption, legal defeasance, assumption or otherwise in accordance with the terms of such long-term debt, with such payment, satisfaction or resolution to be consummated on or before the anticipated date of withdrawal in accordance with the notice.

(f) The withdrawal of a Member and the termination of the SJOA shall not, in and of themselves, cause the termination of the Lease Agreement; provided, however, that the withdrawal of a Member shall cause the provisions described at the caption “LEASE AGREEMENT—Rent—Withdrawal Rent” in this Appendix D and the provisions described at the caption “LEASE AGREEMEENT—Option to Purchase” in this Appendix D to become effective.

(g) In the event of the withdrawal of a Member and the termination of the SJOA, all other Definitive Agreements not specifically addressed in the SJOA shall be amended appropriately to take account thereof.

(h) Nothing summarized under this caption “Term and Termination” shall require the termination of existence, winding up or dissolution of Nebraska Medicine. In the event of the withdrawal of CRHS and a termination of the SJOA, the BOR shall have the right to continue to operate Nebraska Medicine, as its sole Member (or with others as it may later determine).

Third Party Beneficiaries

Nothing in the SJOA is intended to confer any legal or equitable right or remedy, claim or benefit on any person or entity not a party to the SJOA, as third-party beneficiary or otherwise.

LEASE AGREEMENT

A summary of certain provisions of the Lease Agreement is set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of that document.

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General

The Amendment No. 5 to Lease Agreement dated as of July 1, 2016 (the “Lease Agreement”) by and among TNMC, as lessee, and the BOR and CRHS (as successor to the former Bishop Clarkson Memorial Hospital and the former Clarkson Regional Health Services, Inc.), as lessors (collectively, the “Parties”), amended and restated the Lease Agreement entered into on October 1, 1997, as previously amended, by and between the Parties. TNMC, as lessee, has leased the Leased Premises, including certain furnishings, shared space, common areas and parking areas, from the BOR and CRHS, as lessors (CRHS and the BOR are collectively referred to as, the “Lessors”).

Change in Leased Premises

At any time during the term of the Lease Agreement, TNMC and Lessors may by mutual written addendum to the Lease Agreement reduce the space of the Leased Premises or subject additional space to the terms of the Lease Agreement, and any such additional space shall become part of the Leased Premises, the shared spaces, the common areas, or the Parking Area (as defined below) as may be provided in such addendum.

Use of Leased Premises

TNMC agrees to use the Leased Premises only for general medical, including hospital, related health care services (such as, by way of example, but not limited to, pharmacy, medical equipment supplier, optometry, etc.), ancillary educational and/or research purposes and other services in support of the foregoing that are customary in similar medical facilities (such as gift shops, florists and food service providers).

TNMC shall not make any use of the Leased Premises which would increase Lessors’ cost for insurance on the Leased Premises, or result in a cancellation thereof. In the event TNMC’s use of the Leased Premises does, in fact, cause increased insurance cost to Lessors, TNMC shall pay to Lessors on demand all such increases in said insurance premiums. Additionally, Lessors shall have the right to adopt, publish, and enforce reasonable building regulations governing use, access, security, health and safety, and conduct (hereafter “Building Regulations”). TNMC will cooperate with Lessors on the enforcement of such Building Regulations, including excluding individual agents, employees, licensees, and invitees of TNMC in unusual cases. TNMC will not be under the authority of the BOR and its policies.

Parking

The BOR has granted a license for and the right for TNMC employees, students, patients, invitees and licensees, in common with the BOR and its employees, licensees, invitees, and patients to the use of certain parking lots included in the Leased Premises (the “Parking Area”) for TNMC’s use, for the purpose of parking motor vehicles, to the extent reasonably necessary in connection with TNMC’s use of the Leased Premises. Such right of use shall be subject to rules and regulations imposed by the BOR and approved by a joint BOR and TNMC parking committee established to allocate maintenance and improvement costs. The BOR expressly reserves the right, at any time, to alter the size or layout of the Parking Area, to change the points of ingress or egress, to change the designated parking lots, to control access to the Parking Area, and to establish any other rules and regulations governing the use of the Parking Area. Charges for parking may be implemented upon the mutual written consent of the Parties.

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Furnishings

All of the furnishings used at the Leased Premises, including hospital equipment, fixtures and supplies (the “Furnishings”) are owned (or leased from third parties) by TNMC. TNMC assumes all risk, responsibility, and liability arising from or incident to the use, maintenance, operation, condition, or possession of the Furnishings, unless such loss, theft, or destruction is the result of the intentional or negligent acts or omissions of Lessors, their employees, and its agents. The Furnishings shall be used and operated by TNMC in a careful manner and in compliance with all applicable laws, ordinances, and regulations and shall not be wasted, abused or misused. The Furnishings shall not be used in any manner or for any purpose which would cause any insurance provided for by the Lease Agreement to be suspended, cancelled, inapplicable or increased in cost.

Rent

Base Rent. Lessors and TNMC contemplate that the rent is fully prepaid with no additional rental becoming due and payable, except as provided below. The following constitute the prepaid rent, including all applicable extensions of such term; (a) the rent paid by TNMC to Lessors from the October 1, 1997 to or prior to July 1, 2016 and (b) maintenance, improvement, extension and replacement of facilities and improvements included in and on the Leased Premises, as from time to time previously provided by TNMC. There shall be no refund of any rent in the event of early termination of the Lease Agreement.

Additional Rent. All interest and charges that may accrue in the event of TNMC’s failure to comply with the terms of the Lease Agreement, and all costs and expenses which Lessors may incur by reason of any default by TNMC, or any failure by TNMC to comply with the terms of the Lease Agreement, together with any interest thereon, shall be deemed to be additional rent (“Additional Rent”), to be paid by TNMC to Lessors upon demand.

Delinquent Payments. All delinquent payments from TNMC to Lessors shall bear interest at ten percent (10%) per annum from the date that is thirty (30) days following written notice by Lessor to TNMC until the date paid.

Withdrawal Rent. In the event of withdrawal of CRHS from TNMC in accordance with the terms of the SJOA, effective with the effective date of withdrawal, TNMC shall pay CRHS withdrawal rent as Additional Rent.

Determination of Withdrawal Rent Amount. At the time of withdrawal, the Parties agree to arrive at a specific determination of the fair market rental value of the right to use the Leased Premises, as follows: the BOR and CRHS shall each select an independent appraiser experienced in the valuation of health care organizations. The two appraisers shall individually determine the fair market rental value of the Leased Premises, provided that the appraisers (including any third appraiser described below) shall not consider the historic lack of rental payments as a factor in their appraisals. If the two appraisals are within a range of ten percent (10%) of each other determined using the lower appraisal as the base, the average of the two appraisals will be used. If the appraisals differ by more than ten percent (10%), the two appraisers shall mutually agree upon the selection of a third experienced appraiser. The average of the two fair market values determined by the three appraisers, which are closest in amount, shall constitute the fair market value of the Leased Premises.

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Payment of Withdrawal Rent. The payment of withdrawal rent shall commence with the date of withdrawal and be due and payable on the monthly anniversary of the effective date of the withdrawal during the lease term.

Adjustment of Withdrawal Rent Amounts. Withdrawal rent payments, shall be adjusted upward at each sixtieth (60th) anniversary of the first payment and then at each subsequent sixtieth (60th) anniversary of the first payment by seven and one-half percent (7.5%).

Termination of Fund Transfers. TNMC’s obligation to make Fund Transfers to CRHS pursuant to the SJOA shall terminate upon (a) the withdrawal of CRHS from TNMC, (b) the termination of the SJOA, and (c) the payment of withdrawal rent.

Option To Purchase

In the event of withdrawal of CRHS from TNMC, commencing with the date of the giving of the withdrawal notice, and continuing for one hundred twenty (120) days, TNMC is granted the option to purchase the property interest of CRHS (the “CRHS Parcels”), for cash where such closing shall be simultaneous with the closing of the final withdrawal of CRHS from TNMC. The purchase price shall be determined utilizing the same methodology used to determine withdrawal rent set forth at the caption “Rent—Withdrawal Rent—Determination of Withdrawal Rent Amount” above, provided that the appraisers shall determine fair market value rather than fair market value rental, and the other terms shall otherwise be commercially customary as compared to similar transactions.

Real Estate Taxes

The Leased Premises and Furnishings are currently exempt from ad valorem taxation. Lessors agree to cooperate with TNMC in any action or proceeding relating to such exempt status and to take such action in connection therewith as TNMC may request. If for any reason, by change of law or otherwise, the Leased Premises and Furnishings may become subject to ad valorem taxes, TNMC agrees to pay as additional sums an amount equal to all such ad valorem taxes attributable to the Leased Premises when and as the same becomes due during the term of the Lease Agreement.

Care, Maintenance and Services to the Leased Premises

During the term of the Lease Agreement, TNMC shall furnish, at TNMC’s cost, the following services for the Leased Premises: (i) adequate heating, lighting, and air-conditioning at all hours; (b) all maintenance, repair and capital additions to the interior and exterior of the Leased Premises, including all common areas and shared spaces, including maintaining and repairing the structures, shells and improvements of the Leased Premises and all heating, air conditioning, mechanical, electrical, plumbing, ventilation, and other systems; and (c) electricity, water and other utilities for use on the Leased Premises. Maintenance and repair includes cleaning and housekeeping services in the Leased Premises or construction, alteration, maintenance, or repair of the improvements, or maintenance or repair of Furnishings. If Lessors deem any repairs required to be made by TNMC necessary, they may demand that TNMC make the same forthwith. If TNMC refuses, Lessors may proceed with such repairs at TNMC’s expense. Notwithstanding the foregoing, the cost of such services for the shared space shall be allocated to Lessors and TNMC based on the reasonable allocation of percentage occupancy by the usage of Lessors and TNMC respectively.

TNMC shall keep the foundation, outer walls and the roof of the portions of the Leased Premises, and the plumbing, heating and air conditioning, and electrical systems, including structures and systems behind the walls of such Leased Premises, in good repair. TNMC shall keep the remaining portions of

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the Leased Premises, including, without limitation, all partitions, doors, fixtures, equipment, and appurtenances thereof, including all lighting and plumbing fixtures located within the Leased Premises, in good repair and in a clean, sanitary, and safe condition, unless the same are damaged by the act or neglect of either Lessor or either Lessor’s employees, agents, contractors, or invitees. TNMC shall be responsible for proper storage and removal of its hazardous wastes in accordance with applicable federal and state laws and regulations.

Alterations

TNMC shall not erect or install any exterior or interior signs or advertising media or door lettering except in accordance with Lessors’ signage standards and shall not make any alterations, additions, or improvements in or to the Leased Premises that would materially change the character and use of the Leased Premises, or are reasonably estimated to be more than twenty million dollars ($20,000,000) in cost, without the written consent of Lessors which shall not be unreasonably withheld, and in case such consent shall be given, all alterations, additions and improvements shall be so made and installed by TNMC. All alterations, additions, and improvements shall be at TNMC’s cost and shall become the property of Lessors at the termination of the Lease Agreement. Lessors shall maintain an insurable interest during the term of the Lease Agreement in all additions, fixtures, and improvements made by TNMC and that in the event of any casualty loss to said additions, fixtures and improvements, Lessors shall be entitled to the proceeds from any insurance which Lessors have carried on the same.

Insurance

TNMC shall, throughout the term of the Lease Agreement, at its sole cost and expense, provide and keep in full force and effect comprehensive general liability insurance with respect to the Leased Premises and the operations of TNMC, with limits of liability of not less than $3,000,000 per incident and $5,000,000 in the aggregate. Such insurance shall name Lessors as additional named insureds. Any such policy may provide for a deductible in an amount not greater than $100,000. If TNMC fails to provide any such insurance, Lessors shall have the right, but no obligation, to purchase such insurance and charge the expense thereof to TNMC, and TNMC shall repay to Lessors any premiums therefore paid by TNMC upon demand.

TNMC shall, at its own expense, keep the Leased Premises insured to the extent of its full insurable value during the term of the Lease Agreement, or any extended term hereof, with all risk property insurance. TNMC shall maintain, at its own expense, all risk property insurance covering any and all contents (the “Contents”) owned by TNMC and Lessors at the Leased Premises for the insurable value thereof in such amounts as TNMC deems appropriate, subject, however, to the terms of any other agreement between the Parties with respect to any specific items of equipment or furnishing constituting a part of the Leased Premises.

The proceeds of such all-risk property insurance received by TNMC shall be applied (a) toward the cost of replacement, restoration or repair of the Leased Premises and the Contents in an amount that represents its portion of the total proceeds of such insurance received by TNMC and Lessors, or (b) toward payment, on a proportional basis, of the obligations of TNMC under the Lease Agreement and other then-existing obligations of TNMC in accordance with the terms of such obligations. The proceeds of such insurance received by each Lessor shall be applied toward the cost of replacement, restoration or repair of the Leased Premises and the Contents in an amount that represents its portion of the total proceeds of such insurance received by TNMC and Lessors. TNMC shall be responsible for the payment of any deductible amount applicable to such insurance. If TNMC fails to provide any such insurance, Lessors shall have the right, but no obligation, to purchase such insurance and charge the expense thereof to TNMC, and TNMC shall repay to Lessors any premiums therefor paid by Lessors upon demand by

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Lessors. TNMC shall not use the Furnishings if any of the insurance provided for in the Lease Agreement is not in full force and effect. TNMC shall bear all risks of loss, theft, damage, or destruction of the Furnishings at all times whether or not insurance is in effect, except as otherwise provided in the Lease Agreement.

Damage or Destruction of the Leased Premises

Total Destruction. In the event the Leased Premises are totally destroyed, TNMC shall, in its sole discretion, within 60 days thereafter elect whether to repair and replace the Leased Premises or to terminate the Lease Agreement. If TNMC elects to repair and replace the Leased Premises, TNMC shall commence such work promptly and shall, to the extent that TNMC has available insurance proceeds from insurance payments to TNMC and Lessors, complete the same with reasonable diligence. If TNMC elects to terminate the Lease Agreement, it shall be deemed terminated as of the date of election and the proceeds of insurance shall be applied as described at the caption “Insurance” above. The rent shall be abated from the date of such damage until the Lease Agreement is terminated or until the damage is repaired.

Partial Destruction. In the event the Leased Premises are partially destroyed, TNMC shall, in its sole discretion, within 60 days thereafter elect whether to repair the Leased Premises or to terminate the Lease Agreement. In the event TNMC elects to repair the Leased Premises, TNMC shall commence such work promptly and shall, to the extent that TNMC has available insurance proceeds from insurance payments, but excluding any “deductible” to be furnished by TNMC, to TNMC and Lessors, complete the same with reasonable diligence. If TNMC elects to terminate the Lease Agreement, it shall be deemed terminated as of the date of election and the proceeds of insurance shall be applied as described at the caption “Insurance” above. The rent shall be abated from the date of such damage until the Lease Agreement is terminated or until the damage is repaired, as applicable, in proportion to the square footage of the Leased Premises which is rendered unusable due to such damage. In the event TNMC is unable to elect within 60 days after the date the Leased Premises is partially destroyed to repair the Leased Premises or to terminate the Lease Agreement, the Parties shall be deemed to have elected to continue the Lease Agreement for the undamaged portion of the Leased Premises.

Condemnation

If the whole or any part of the Leased Premises shall be taken by any public authority under the power of eminent domain, then the term of the Lease Agreement shall cease as to the whole or part so taken from the date the possession of such whole or part shall in fact be taken for any purpose, and the rent shall be paid up to that day, and if any such portion of the Leased Premises is so taken as to destroy the usefulness of the Leased Premises for the purposes for which the Leased Premises were leased, then, from that day, TNMC shall have the right either to terminate the Lease Agreement and declare the same null and void or to continue in the possession of the remainder of the same, except that the rent shall be reduced in proportion to the amount of the Leased Premises taken. All damages awarded for such taking shall be allocated according to the interests of Lessors and TNMC in the Leased Premises as assigned by the court or awarding authority. The proceeds of any such damages awarded to Lessors and TNMC shall be applied by Lessors and TNMC in the same manner as described at the caption “Insurance” above.

Indemnity and Subrogation

TNMC agrees to indemnify, reimburse, and hold Lessors harmless from any and all claims, demands, suits, judgments, causes of action, losses, damages, costs and expenses which may be asserted against or sustained by Lessors by reason of breach or violation of any term or provision of the Lease

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Agreement by TNMC or by reason of TNMC’s failure duly to observe or perform any term or provision of the Lease Agreement.

TNMC and Lessors, and each of them, remised, released, and discharged the other Party and any officer, agent, employee, or representative of such Party, of and from any liability whatsoever, except intentional or willful damage to property, hereafter arising from loss or damage caused to property by fire or other casualty for which insurance (permitting waiver of liability and containing a waiver of subrogation) is carried by the Party which incurs the loss or damage at the time of such loss or damage to the extent of any recovery by such Party under such insurance. With respect to the policies or coverages of all risk property insurance referred to above at the caption “Insurance” above, each Party shall endeavor to secure and exchange with the other Party an endorsement to each such policy from the insurer or carrier accordingly and accepting and extending coverage on the basis that subrogation has been waived.

Pledge of Leasehold Interest

The Lease Agreement does not prohibit TNMC from pledging its leasehold interest under the Lease Agreement as security for the payment of obligations of TNMC. TNMC agrees that it will not during the term of the Lease Agreement encumber the Leased Premises with the lien of any mortgage, trust deed, or other security instrument placed by TNMC on the Leased Premises unless such pledging shall comply with the SJOA and the Articles of Incorporation of TNMC. Lessors agreed to observe and perform the terms of the Lease Agreement in such manner as will not at any time inhibit TNMC’s ability to comply with the terms of any such mortgage, trust deed, or other security agreement now or hereafter placed by TNMC on TNMC’s leasehold interest in the Leased Premises. In the event TNMC defaults in payment to any secured creditor holding a security interest on TNMC’s leasehold interest, Lessors (or either of them singly) shall be given notice and shall be permitted, but not required, to pay directly to such creditor to cure any default by TNMC and TNMC shall be obligated to pay such amounts to the applicable Lessor. If such payment cures TNMC’s default, TNMC shall be entitled to continue to occupy the premises for the term of the Lease Agreement.

Term

The term of the Lease Agreement commenced on October 1, 1997 and, as extended, shall continue until October 1, 2062, the sixty-fifth (65th) anniversary of the original commencement date, unless sooner terminated as described under the captions “Option to Purchase,” “Damage or Destruction of the Leased Premises” and “Condemnation” above and “Cancellation of Lease Term” and “Default” below.

Cancellation of Lease Term

Mutual Consent. The Lease Agreement may be terminated by mutual written agreement of TNMC and the Lessors. Unless otherwise agreed between the Parties, TNMC shall pay rent as described at the caption “Rent” above unless TNMC exercises its option to purchase the Leased Premises as described at the caption “Option to Purchase” above and then such parcel of the withdrawing Lessor shall be owned by TNMC and the Lease Agreement shall terminate only with respect to the parcel of the withdrawing Lessor.

Automatic Termination. The Lease Agreement will be automatically cancelled upon the effective date of the termination of the SJOA; provided, however, that if the termination of the SJOA results from the withdrawal of CRHS as a member of TNMC and, notwithstanding such withdrawal, the operations of TNMC continue and there has been no purchase of CRHS’s interest in the Leased Premises,

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the Lease Agreement shall continue and TNMC shall pay CRHS withdrawal rent as set forth at the caption “Rent—Withdrawal Rent” above.

Default

If TNMC shall: (a) default in the payment of any item of rent, (b) default in the performance of any of the covenants and agreements and shall have failed to cure such default within one year following written notice of such default from Lessors to TNMC, (c) willfully or maliciously do injury to the Leased Premises, or (d) abandon the Leased Premises or cease conducting business operations thereon, Lessors shall have the right, at any time thereafter, upon 30 days’ written notice to TNMC (unless any default, other than a payment default cannot reasonably be cured within such 30-day period, in which event TNMC shall within such 30-day period commence and diligently pursue curing such default and complete such cure as soon as reasonably practicable), to declare the Lease Agreement void and the term of the Lease Agreement ended and may re-enter the Leased Premises and expel TNMC without prejudice to any remedies which Lessors may have, but subject to the rights and obligations of the Parties pursuant to the SJOA. In the event of any default on the part of TNMC, Lessors shall have the right to exercise any other right or remedy that they have, according to law, and, in addition, Lessors may resume possession of the Leased Premises and renegotiate the same for the remainder of the term of the Lease Agreement, but TNMC shall nevertheless be liable to Lessors for the obligations under the Lease Agreement for the remaining portion of the term and all expenses, including court costs and attorneys’ fees and related costs occasioned by the default of TNMC.

Surrender of Leased Premises

Upon the termination of the Lease Agreement, TNMC shall deliver the Leased Premises and Furnishings to Lessors on an “AS IS” basis in as good condition as when originally accepted by TNMC on October 1, 1997, ordinary wear and tear and approved or permitted improvements or modifications excepted. Any installation or attachments to the Leased Premises shall, at the election of Lessors, constitute a part of the Leased Premises and remain with the Leased Premises. In the event Lessors desire any such installations or attachments to be removed, TNMC shall, at its expense, remove the same making any necessary repairs and restorations to the Leased Premises. Any property remaining in the Leased Premises after the vacation or abandonment of the Leased Premises shall become the property of Lessors.

Restoration and Return of Licensed Beds on Termination

The Parties entered into the original Lease Agreement in 1997 with the expectation that Lessors will have their respective licensed bed capacity existing on October 1, 1997 restored to them upon the termination of the Lease Agreement. However, given intervening campus development of the Leased Premises, changes in hospital utilization, and possible changes in law and regulations over the long term of the Lease Agreement, there can be no assurance as to what the licensed bed capacity of the combined Leased Premises may be, or what the location/configuration of beds versus other hospital functions may be, at any given future time. Accordingly, the Parties have agreed that upon termination of the Lease Agreement, unless there is a purchase of Lessors’ interest in the Leased Property as set forth at the caption “Option to Purchase” above (in which event the purchaser shall acquire all licensed bed capacity): (a) the Parties will in good faith seek to restore to each Lessor a fair and equitable part of the then-existing licensed bed capacity of the Leased Premises; (b) as part of the appraisal process for determining withdrawal rent, a Lessor that is unable for regulatory or structural reasons to receive its full fair and equitable portion of the licensed bed capacity shall be fairly compensated for the difference; (c) the Parties shall cooperate with each other in any required submission to the Department of Health or any other regulatory body or in any other steps that may reasonably be necessary to effect the restoration of

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licensed beds to each Lessor; and (d) no Party will take any action following notice of termination that would preclude or impede the foregoing measures.

Mutual Indemnities

TNMC shall indemnify and save Lessors harmless from and against any and all claims, actions, damages, liabilities, losses, and expenses arising from or out of any occurrence in, about, in connection with, upon, or at the Leased Premises arising from or out of the occupancy or use by TNMC of the Leased Premises or any part thereof or occasioned wholly or in part by an act or omission of TNMC, its agents, assigns, contractors, or employees. If Lessors shall, without fault on their part or on the part of their agents, contractors, or employees be made a Party to any litigation commenced by or against TNMC as to which this indemnity shall relate, Lessors shall, within 10 business days thereafter, give notice thereof to TNMC and TNMC shall protect and hold Lessors harmless and shall pay all costs, expenses, and reasonable attorneys’ fees incurred or paid by Lessors or TNMC in connection with any such litigation; provided, however, that TNMC may defend any such litigation on behalf of TNMC with counsel chosen by TNMC but reasonably acceptable to Lessors.

Lessors shall indemnify and save TNMC harmless from and against any and all claims, actions, damages, liabilities, losses and expense arising from or out of any occurrence in respect to title to the Leased Premises, occurrences in areas not part of the Leased Premises and acts or omissions of Lessors, their agents, assigns, contractors or employees. If TNMC shall, without fault on its part or the part of its agents, contractors, or employees, be made a Party to any litigation commenced by or against Lessors, then TNMC shall give written notice thereof to Lessors within 10 business days after same shall occur, and Lessors shall protect and hold TNMC harmless and shall pay all costs and expenses and reasonable attorneys’ fees incurred or paid by Lessors or TNMC in connection with any such litigation; provided, however, that Lessors may defend any such litigation on behalf of TNMC with counsel of chosen by Lessors’ but reasonably acceptable to TNMC.

ACADEMIC AFFILIATION AGREEMENT

A summary of certain provisions of the AAA is set forth in this section. This summary is not a complete statement of all the terms of such documents and is qualified in its entirety by reference to the terms of that document.

General

The Academic Affiliation Agreement for Education and Research dated (the “AAA”) was entered into on July 1, 2016 by the BOR, the Health System and TNMC order to provide a more seamless, convenient and high quality patient-centered care service and to facilitate the integration of UNMC’s preeminent academic medical center and patient service and Nebraska Medicine’s clinical operations into an integrated clinical enterprise involving both academic and non-academic providers and to document their commitment to their ongoing academic relationship and the funding of certain costs of UNMC and the conduct of certain academic programs.

Purpose

UNMC desires to enhance its mission of teaching, research and service and both UNMC and Nebraska Medicine wish to promote the educational and research experience for UNMC faculty, students and house officers in Nebraska Medicine and its associated regional partnerships and networks. Nebraska Medicine is committed to maintaining its system, including hospitals, ambulatory care and other clinical sites, as an environment supportive of the academic mission and programs of UNMC.

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Nebraska Medicine and its affiliates and subsidiaries shall be the primary, but not exclusive, teaching sites for UNMC educational programs (except where other arrangements, such as in pediatrics, or for training outside Nebraska, are otherwise approved by the Dean of the respective college of UNMC). Efforts will be made to develop new teaching sites within Nebraska Medicine which meet required academic standards; however, UNMC shall retain the right to enlist additional teaching sites outside Nebraska Medicine as needed for accreditation and effective clinical training within its academic programs. In general (unless academic accreditation or special needs otherwise require), with respect to a new program or service of UNMC, Nebraska Medicine shall be given the first opportunity and right of first refusal with respect to any such program or service. For a new graduate medical education program, a GMEC (hereafter defined) committee will first approve and then present the opportunity to Nebraska Medicine leadership for consideration.

The AAA shall not affect the opportunity for Nebraska Medicine to serve as a training site for Clarkson College unless this relationship is changed by mutual consent.

Term

The term of the AAA will be coextensive with the term of the SJOA. See the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Term and Termination” in this Appendix D.

Financial Arrangement

Funds Flow. For the fiscal year ending June 30, 2016 and beyond, the following flow of funds provisions shall apply:

(a) GMEC Training Programs. Nebraska Medicine shall provide customary funding for the allowable costs (as described below) of accredited and non-accredited house officer training programs approved by the Graduate Medical Education Committee (“GMEC”), a standing committee of the UNMC College of Medicine (“COM”) and shall have the right to recover all available funds reimbursed by sources such as Medicare, Medicaid and training grants costs also may be offset by any available funding received from outside sources by the COM in support of the residency and fellowship programs. Allowable costs shall be defined by a Graduate Medical Education (“GME”) Finance and Workforce Committee.

Nebraska Medicine will provide the GMEC an annual operating budget. Annually the GMEC will present their annual budget including any requested adjustments during the annual Nebraska Medicine budget planning cycle. Nebraska Medicine will establish a contingency fund for GMEC funding requests that occur outside of the planning cycle.

(b) Dean’s Development and Innovation Fund. Nebraska Medicine shall provide annual funding to the Dean’s Development and Innovation Fund (the “DDIF”). The annual operating budget for Nebraska Medicine will include an expense line item for DDIF funding, the amount of which shall be mutually agreed upon so as to ensure that all elements of the DDIF are funded at an appropriate level. (Section IV.A.2) As soon as practicable following the end of the fiscal year, the Parties will cooperate to reconcile the moneys paid as DDIF funding with the total amount expended for DDIF purposes in such fiscal year. If the actual DDIF expenses are less than the amount provided for DDIF funding, the funds remaining will be credited by UNMC to the academic growth fund. (Section IV.A.5.4) The elements of the DDIF include an academic growth fund, academic support expenses and research expenses, each to be used by the Dean of the COM, and educational allowances for faculty.

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(c) Clinical Research. Nebraska Medicine will provide a minimum of $1,500,000 annually to the UNMC Vice Chancellor of Research to support clinical research activities. Annually there will be a formal budget development process for Clinical Research that will be integrated into both the Nebraska Medicine and UNMC budget development process, projecting specific revenues and expenses.

(d) Additional “Non-AAA” Agreements. There are, and are expected to be, additional “non-AAA agreements” between TNMC and UNMC that will remain in place for matters, including, but not limited to, purchase of: utilities, contracted services (including information technology, security and security dispatch), medical direction relating to the Munroe Meyer Institute, College of Dentistry GME, College of Pharmacy GME, the College of Allied Health and the College of Nursing. The amount of payments by TNMC to UNMC pursuant to such agreements under this section will be developed through the UNMC annual budgeting process and approved by TNMC as described at the caption “UNMC Budget Process” below.

UNMC Budget Process. There will be a formal budget development process that will be integrated into both Nebraska Medicine and UNMC, projecting specific revenues and expenses. Operational funding for UNMC and the expected amount of funds to be provided by Nebraska Medicine will be proposed by UNMC as part of its annual budgeting process for each college and department, and will take into consideration Nebraska Medicine’s financial targets. It is expected that Nebraska Medicine will provide such funding, provided that it is able to meet its fund transfer obligations under the SJOA.

If operational funding which was not part of the approved budget is needed by UNMC, a supplemental funding request must be initiated by the UNMC and reviewed before submission to Nebraska Medicine for consideration. Nebraska Medicine shall be under no obligation to approve any such request submitted by UNMC.

Educational Programs

Educational activities conducted at Nebraska Medicine include, but are not limited to: Allied Health, Dental, Medical, Nursing, Public Health and Pharmacy professional or undergraduate programs, graduate and post-graduate programs including Residency Education, Master’s Degree and Non-physician Doctoral programs and continuing education programs. Nebraska Medicine will not initiate new education programs leading to a degree or post-graduate residency or other certificate programs other than through UNMC. The AAA does not preclude existing education programs such as those with Creighton University, Clarkson Family Medicine and Clarkson College. Furthermore, the existing education programs may be modified to meet changing accreditation requirements. As Nebraska Medicine develops clinical collaborations, efforts will be made to involve UNMC education programs in these collaborative relationships whenever feasible and appropriate.

Indemnification

UNMC shall maintain certain liability insurance and, to the extent permitted by law, UNMC agrees to indemnify and hold harmless Nebraska Medicine from any and all costs, expenses claims, demands, causes of action, liabilities and responsibilities to the extent arising out of any negligent act or omission of UNMC faculty (including clinical volunteer faculty), employees, house officers or students. UNMC may seek contribution or indemnity from insurers or other responsible third parties.

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Clinical Research Activities

Clinical Research. UNMC and Nebraska Medicine agree to maintain an environment supportive of discovery and research, which includes clinical research (such as chart-based observational or epidemiological studies, direct interventional studies, and computerized information studies), translational (“bench to bedside” research), basic research, and health outcomes studies. Patients at Nebraska Medicine suitable for clinical research may be approached by the attending physician (or others if consistent with the IRB-approved practices, if required). Investigators may utilize Nebraska Medicine ambulatory and inpatient services and clinical resources, including professional services, at a research contract price to be negotiated by the Nebraska Medicine Vice President for Research not below the actual cost to Nebraska Medicine and not exceeding the allowable costs under the sponsor agreement.

A separate fund for clinical research, the Clinical Research Support Fund, will be made available to support research performed solely within Nebraska Medicine, on a competitive basis, to UNMC faculty and Nebraska Medicine-employed investigators. This fund is available to trainees as well, working in collaboration with UNMC faculty on staff of Nebraska Medicine. This fund will consist of at least $1 million per annum in research charges, whereby charges associated with the proposal (laboratory, radiology, medications, professional fees) would be written off as part of an approved proposal. The grant fund will be administered and peer-reviewed by the Scientific and Pilot Grant Review Committee (described below), and the Nebraska Medicine Vice President for Research will, in turn, annually report on the status of those funds and the outcome (publications and grants submitted or funded) resulting from this fund.

Publications that include studies performed using the Research Support Fund will acknowledge that support was provided by the fund. Indirect cost return associated with an extramurally funded grant that includes studies performed at one or more sites of Nebraska Medicine by UNMC faculty will be the sole property of UNMC. All new inventions and intellectual property created by the faculty, students, or staff of UNMC or resulting from the use of UNMC personnel, property, facilities, or other UNMC resources, shall be solely owned by UNMC.

Clinical Research Center. A Clinical Research Center (“CRC”) will be maintained as a joint enterprise of UNMC and Nebraska Medicine to conduct and oversee all clinical research performed at Nebraska Medicine. The existence of the Clinical Research Center does not preclude other centers to coordinate research between UNMC and other institutions, such as Children’s Hospital and Medical Center, the Omaha VA Medical Center, Boys Town, or other facilities.

The Director of the CRC must have a faculty appointment, be approved by Nebraska Medicine, and will be designated by and report to the Associate Vice Chancellor for Clinical Research of UNMC, also the Vice President of Clinical Research of Nebraska Medicine.

The Scientific and Pilot Grant Review Committee of the CRC is comprised of the director, the CRC manager, a biostatistician, and active clinical researchers, preferably with extramural funding, including at least one active clinical researcher from each of the following groups: COM, College of Nursing, College of Pharmacy, College of Public Health, College of Dentistry, and School of Allied Health. Additional members may be appointed by the CRC Director as appropriate. The Nebraska Medicine Vice President for Research or a Nebraska Medicine designee will serve as an ex-officio member of the group. This committee is responsible for review and approval of protocols submitted for completion within the CRC or using CRC resources, including the Clinical Research Support Fund.

Nebraska Medicine will use its reasonable efforts to maintain existing and, as necessary, additional space for the CRC and other clinical research activities, in proximity to other clinical space for

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purposes of facilitating conduct of clinical research. Nebraska Medicine will continue to provide monetary support for CRC personnel and expenses as mutually agreed upon by a submitted annual budget by the CRC Director and approved by the Nebraska Medicine Vice President for Clinical Research. Nebraska Medicine and academic units can contract with the CRC for clinical research training of personnel, students and house staff. Nebraska Medicine will avoid any policy concerning utilization of the facility which would interfere with the ability of the CRC to apply for or be approved for applicable National Institutes of Health research programmatic funding (e.g., Clinical and Translational Science Award and established service center practices).

Dispute Resolution Process

The dispute resolution process shall be the same as that set forth in the SJOA. See the caption “SUCCESSOR JOINT OPERATING AGREEMENT—Dispute Resolution and Remedies” in this Appendix D.

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT [THIS PAGE INTENTIONALLY LEFT BLANK]

CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT dated as of August 1, 2016 (the “Agreement”), is made by and between The Nebraska Medical Center, a nonprofit corporation duly organized and validly existing in the State of Nebraska, on behalf of itself and the Obligated Group (as defined in the hereinafter referenced Master Indenture) as Obligated Group Representative (the “Group Agent”) and First National Bank of Omaha (the “Dissemination Agent”), in connection with the issuance of the (i) $______Hospital Authority No. 2 of Douglas County, Nebraska Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Douglas County Bonds”), and (ii) $______Hospital Authority No. 1 of Sarpy County, Nebraska Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Sarpy County Bonds” and, together with the Douglas County Bonds, the “Bonds”) under the circumstances summarized in the following recitals (with each capitalized term used but not otherwise defined therein having the meaning assigned to it in Section 1):

A. Payment of the Douglas County Bonds is secured by the Group Agent’s Obligation No. 1 (Hospital Authority No. 2 of Douglas County, Nebraska) Series 2016 (the “Douglas County Obligation”) issued under the Master Trust Indenture, dated as of August 1, 2016 (the “Master Trust Indenture”), by and among the Corporation, The Bellevue Medical Center, LLC (“BMC”), UNMC Physicians, as the members of the Obligated Group (each, an “Obligated Group Member” or “Member” and, collectively, the “Obligated Group,” “Obligated Group Members” or “Members”), and First National Bank of Omaha, as master trustee (the “Master Trustee”), as amended and supplemented by the Supplemental Master Trust Indenture No. 1, dated as of August 1, 2016 (the “Supplemental Master Indenture No. 1”), by and between the Corporation, as the Obligated Group Representative, and the Master Trustee. Payment of the Sarpy County Bonds is secured by BMC’s Obligation No. 2 (Hospital Authority No. 1 of Sarpy County, Nebraska) Series 2016 (the “Sarpy County Obligation” and, together with the Douglas County Obligation, the “Series 2016 Obligations”) issued under the Master Trust Indenture, as amended and supplemented by the Supplemental Master Trust Indenture No. 2, dated as of August 1, 2016 (the “Supplemental Master Indenture No. 2”) (the Master Trust Indenture, as supplemented by the Supplemental Master Indenture No. 1, Supplemental Indenture No. 2 and as from time to time hereinafter further supplemented and amended, is referred to herein as the “Master Indenture”), by and between the Corporation, as the Obligated Group Representative, and the Master Trustee. The current Members, together with such other entities that become Members of the Group, are hereinafter collectively referred to herein as the “Obligated Issuers.” By virtue of the execution hereof by the Group Agent, each Obligated Issuer is deemed to have executed this Agreement.

B. The Hospital Authority No. 2 of Douglas County, Nebraska (the “Douglas Authority”) has determined to issue and sell the Douglas County Bonds and to loan the proceeds of the Douglas County Bonds to the Group Agent under a Loan Agreement dated as of August 1, 2016 (the “Douglas County Loan Agreement”). The Hospital Authority No. 1 of Sarpy County, Nebraska (the “Sarpy Authority” and, together with the Douglas Authority, the “Authorities”) has determined to issue and sell the Sarpy County Bonds and to loan the proceeds of the Sarpy County Bonds to BMC under a Loan Agreement dated as of August 1, 2016 (the “Sarpy County Loan Agreement” and, together with the Douglas County Loan Agreement, the “Loan Agreements”).

C. The Bonds will be issued pursuant to and secured by two separate Bond Indentures of Trust dated as of August 1, 2016 (collectively, the “Bond Indentures”) between the applicable Authority and

E-1 First National Bank of Omaha, as bond trustee (the “Bond Trustee”), under which the applicable Authority will assign to the Bond Trustee any rights it may have under the related Loan Agreement and the related Series 2016 Obligation to receive payments from the Obligated Group for payment of principal of and interest and any premium on the Bonds.

D. The Group Agent has represented that there will not be any other “obligated persons” within the meaning of the Rule other than the Members with respect to the Bonds at the time the Bonds are delivered by the Authorities to the Original Purchaser and that the Group Agent does not presently intend for any other person to become committed by contract or any other arrangement to support payment of any part of the obligations with respect to the Bonds at any time after they are issued.

E. The Original Purchaser is required under the Rule not to purchase or sell the Bonds in a primary offering unless the Original Purchaser has reasonably determined that the Obligated Issuers have made an agreement in accordance with the provisions of the Rule.

NOW, THEREFORE, in consideration of the recitals and the mutual representations and agreements hereinafter contained, the Group Agent and the Dissemination Agent agree, in accordance with the provisions of the Rule, for the benefit of the holders and beneficial owners from time to time of the Bonds, as follows:

Section 1. Purpose of This Agreement. This Agreement is executed and delivered by and on behalf of the Obligated Issuers as of the date set forth below, for the benefit of the registered or beneficial owners of the Bonds and in order to assist the Original Purchaser in complying with the requirements of the Rule (as defined below). The Group Agent represents that the Members are the only “obligated persons” within the meaning of the Rule with respect to the Bonds at the time the Bonds are delivered to the Original Purchaser.

Section 2. Definitions and Interpretation. In addition to the words and terms defined elsewhere in this Agreement or by reference to the Loan Agreement or Bond Indenture, unless the context or use clearly indicates another or different meaning or intent:

“Accounting Principles” means the accounting principles applied from time to time in the preparation of the Obligated Issuers’ annual financial statements, initially generally accepted accounting principles as promulgated from time to time by the Financial Accounting Standards Board.

“Annual Information” means, with respect to any fiscal year of the Group Agent: (a) audited financial statements of the Obligated Issuers; (b) information similar to that contained in the following headings in Appendix A to the Official Statement: (1) “PAYOR ANALYSIS AND UTILIZATION”; and (2) “FINANCIAL INFORMATION” (however, financial information shall not include any pro forma financial information and, beginning in fiscal year 2017, the financial information shall be the financial information for the Obligated Issuers which may include its consolidated affiliates); and (3) if justified by the facts and circumstances, a discussion of recent developments; and (c) a narrative explanation discussing the Obligated Issuers’ financial performance and, if necessary to avoid misunderstanding, regarding the presentation of financial and operating data concerning the Obligated Issuers and in judging the financial and operating condition of the Obligated Issuer. In the event that the audited financial statements are not available by the Filing Date, the Annual Information shall include unaudited financial statements, with the

E-2 audited financial statements to be provided as required herein for the Annual Information as soon thereafter as the same are available.

“Authorized Disclosure Representative” means the person or persons at the time designated to act on behalf of the Group Agent by written certificate furnished to the Dissemination Agent (substantially in the form of Exhibit D hereto), containing the specimen signature of such person or persons and signed on behalf of the Group Agent. That certificate may designate an alternate or alternates, each of whom shall have the same authority, duties and powers as such Authorized Disclosure Representative.

“Bondholder” has the meaning assigned to it in the Bond Indentures.

“Business Day” means any day other than a Saturday, Sunday or a day on which the Dissemination Agent is required, or authorized or not prohibited by law (including executive orders), to close and is closed.

“EMMA” means the MSRB’s Electronic Municipal Market Access system accessible at http://emma.msrb.org/default.aspx.

“Filing Date” means (i) with respect to the Annual Information, the 180th day following the end of each Fiscal Year (or the next succeeding Business Day if that day is not a Business Day) and (ii) with respect to the Quarterly Information, the 60th day following the end of each Quarterly Period (or the next succeeding Business Day if that day is not a Business Day).

“Fiscal Year” means each fiscal year of the Obligated Issuers, commencing with the fiscal year ending on June 30, 2016.

“MSRB” means the Municipal Securities Rulemaking Board.

“Notice Addresses”:

(a) As to the Group Agent, at:

The Nebraska Medical Center 987400 Nebraska Medical Center 333 S. 44th Street, Kiewit Tower, 1st Floor Omaha, NE 68198-7400 Attention: Chief Financial Officer

(b) As to the Dissemination Agent, at:

First National Bank of Omaha Attn: Corporate Trust 1620 Dodge St – Stop 8144 Omaha, NE 68197 Email: [email protected]

E-3 “Official Statement” means the final Official Statement of the Obligated Group relating to the Bonds dated ______, 2016.

“Original Purchaser” means initially Barclays Capital Inc. and Wells Fargo Securities LLC and any successor or assigns thereto.

“Rule” means Rule 15c2-12 prescribed by the SEC pursuant to the Securities Exchange Act of 1934.

“SEC” means the United States Securities and Exchange Commission.

“Quarterly Information” means, with respect to any Quarterly Period: (a) unaudited financial statements of the Obligated Issuers for each of the four fiscal quarters constituting such Quarterly Period; and (b) “FINANCIAL INFORMATION” (however, financial information shall not include any pro forma financial information and the financial information shall be the financial information for the Obligated Issuers which may include its consolidated affiliates).

“Quarterly Period” means each three-month fiscal quarter of the Obligated Group, commencing with the three-month period ending on September 30, 2016.

“Specified Events” means the occurrence of any of the following events, within the meaning of the Rule, with respect to the Bonds: (i) principal and interest payment delinquencies; (ii) nonpayment related defaults, if material; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) modifications to rights of holders or beneficial owners, if material; (viii) Bond calls, if material, and tender offers; (ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds, if material; (xi) rating changes, (xii) bankruptcy, insolvency, receivership or similar event of an obligated person; (xiii) 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; and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material.

The terms “obligated person” and “primary offering” have the respective meaning assigned in paragraph (f) of the Rule.

The captions and headings in this Agreement are solely for convenience of reference and in no way define, limit or describe the scope or intent of any Sections, subsections, paragraphs, subparagraphs or clauses hereof. Reference to a Section means a section of this Agreement and to an exhibit means an exhibit to this Agreement, unless otherwise indicated.

E-4 Section 3. Provision of Annual and Quarterly Information; Audited Financial Statements. (a) The Group Agent shall or, upon delivery to the Dissemination Agent pursuant to this Section 3(a), the Dissemination Agent shall, provide or cause to be provided to the MSRB, in an electronic format (by transmission to EMMA) and accompanied by identifying information as prescribed by the MSRB, the Annual Information not later than the Filing Date for that Fiscal Year. The audited consolidated annual financial statements and other financial information of the Obligated Issuers and affiliates, including financial information about the Obligated Issuers, to be provided as part of the Annual Information will be prepared in accordance with the Accounting Principles. Not later than five Business Days prior to the Filing Date, the Group Agent shall provide the Annual Information to the Dissemination Agent.

(b) The Group Agent shall or, upon delivery to the Dissemination Agent pursuant to this Section 3(b), the Dissemination Agent shall, provide or cause to be provided to the MSRB, in an electronic format (by transmission to EMMA) and accompanied by identifying information as prescribed by the MSRB, the Quarterly Information not later than the Filing Date for that Quarterly Period. The unaudited consolidated quarterly financial statements and other financial information of the Obligated Issuers and affiliates, including financial information about the Obligated Issuers, to be provided as part of the Quarterly Information will be prepared in accordance with the Accounting Principles. Not later than fifteen Business Days prior to the Filing Date, the Group Agent shall provide the Quarterly Information to the Dissemination Agent.

(c) The Group Agent expects that Annual Information and Quarterly Information will be filed by the Dissemination Agent with the MSRB. However, in the event that the Group Agent files such information with the MSRB, the Group Agent hereby agrees to provide or cause to be provided to the Dissemination Agent, not later than the Filing Date for each Fiscal Year or Quarterly Period, as the case may be, either (i) a copy of any such documents filed with the MSRB, or (ii) a notice of any filings made with the MSRB that provide the Annual Information for the preceding Fiscal Year or the Quarterly Information for the preceding Quarterly Period, as the case may be.

(d) If the Dissemination Agent has not received the Annual Information for a Fiscal Year by its close of business on the fifth Business Day preceding the Filing Date for that Fiscal Year or if the Dissemination Agent has not received the Quarterly Information for a Quarterly Period by its close of business on the fifteenth Business Day preceding the Filing Date for that Quarterly Period, the Dissemination Agent shall provide a notice to the Authorized Disclosure Representative, not later than its close of business on the next Business Day, substantially in the form of Exhibit A, by facsimile transmission (or other means similarly prompt) and by certified or registered mail, postage prepaid, return receipt requested. If the Dissemination Agent has not received that Annual Information by its close of business on the Filing Date or if the Dissemination Agent has not received that Quarterly Information by its close of business on the Filing Date, the Dissemination Agent shall provide a notice to the Authorized Disclosure Representative, not later than its close of business on the next Business Day, substantially in the form of Exhibit B, by facsimile transmission (or other means similarly prompt). The Group Agent shall be entitled to provide written evidence of the submission of the Annual Information or Quarterly Information in accordance with Section 3, including a certificate of the Authorized Disclosure Representative as to the relevant facts, and, if applicable, a written statement regarding any failure to comply with Section 3. The Dissemination Agent shall be entitled to rely conclusively upon any written evidence provided by the Group Agent regarding the provision of that information to the MSRB. If, in any instance, the required information was not timely filed or the Group Agent fails to provide evidence,

E-5 by 3:00 p.m., New York, New York time, on the first Business Day following the Filing Date, of their timely filing with the MSRB, the Dissemination Agent shall send or cause to be sent promptly after receipt of any such evidence or statement from the Group Agent, but in any event not later than its close of business on the second Business Day following the Filing Date, a notice substantially in the form of Exhibit C, modified to reflect the pertinent facts, to the MSRB by facsimile transmission (or other means similarly prompt).

(e) The Group Agent acknowledges that it, and not the Dissemination Agent, is solely responsible for the accuracy, completeness, and timeliness of the Annual Information, the Quarterly Information and the notices required by Section 4 below. The Annual Information and the Quarterly Information shall be accompanied by a written certificate from the Group Agent that the information provided to the Dissemination Agent pursuant to this Section 3 constitutes the Annual Information or Quarterly Information that it purports to be and complies with this Agreement and the Rule, and the Dissemination Agent shall be entitled to rely conclusively on such certificate.

(f) Unless otherwise required by law and subject to technical and economic feasibility, the Group Agent and the Dissemination Agent shall transmit the information required by this Section 3 and Section 4 below in an electronic format as prescribed by the MSRB. All documents provided to the MSRB shall be accompanied by identifying information as prescribed by the MSRB.

Section 4. Notice of Specified Events; Changes in Accounting Principles or Fiscal Year. (a) The Group Agent shall, or upon delivery of the information to the Dissemination Agent, the Dissemination Agent shall, provide or cause to be provided to the MSRB, in an electronic format (by transmission to EMMA) and accompanied by identifying information as prescribed by the MSRB, in a timely manner, (i) notice of any Specified Event, if that Event is material, (ii) notice of its failure to provide or cause to be provided the Annual Information or Quarterly Information with respect to itself on or prior to the Filing Date, and (iii) notice of any material change in the Accounting Principles applied in the preparation of the annual financial statements of the Group Agent or any change in the dates on which the Fiscal Year of the Obligated Issuers begins and ends.

(b) The Dissemination Agent shall promptly notify the Authorized Disclosure Representative upon becoming aware of the occurrence of any Specified Event.

(c) If the Group Agent becomes aware of a Specified Event that is material, the Group Agent shall prepare and provide promptly to the Dissemination Agent a form of notice of that event and the Dissemination Agent shall file that notice as promptly as reasonably possible, to the MSRB in an electronic format (by transmission to EMMA) and accompanied by identifying information as prescribed by the MSRB. The Dissemination Agent shall provide notice to the Group Agent, not later than the third Business Day after it files any such notice, identifying each person with which that notice was filed and the date it was sent to the addressee.

(d) In the event the Bonds are no longer held at a securities depository, the Dissemination Agent shall mail to each holder, by first class mail, postage prepaid, a copy of any notice that is filed with it by the Group Agent in accordance with subsection 4(a).

E-6 Section 5. Corporation; Dissemination Agent. The Group Agent represents that it, Bellevue Medical Center, LLC and UNMC Physicians will be the only obligated persons with respect to the Bonds at the time the Bonds are delivered by the Authorities to the Original Purchaser and that no other person is currently expected to become so committed. Either the Group Agent or the Dissemination Agent may, from time to time, appoint or engage an agent to act on its behalf in performing its obligations under this Agreement and may discharge any such agent, with or without appointing a successor; provided, that neither the Group Agent nor the Dissemination Agent shall be relieved in any respect by appointment of an agent from primary liability for the performance of its obligations under this Agreement.

Section 6. Remedy for Breach. This Agreement shall be solely for the benefit of the holders and beneficial owners from time to time of the Bonds. The exclusive remedy for breach of the Agreement by the Group Agent shall be limited, to the extent permitted by law and except as hereinafter provided, to a right of holders and beneficial owners to cause to be instituted and maintained, proceedings in equity to obtain the specific performance by the Group Agent of its obligations hereunder. Any such proceedings shall be instituted and maintained only by the Dissemination Agent, which may institute and maintain any such proceedings in its discretion and shall institute and maintain any such proceedings at the direction of holders of not less than 25% in aggregate principal amount of the Bonds then outstanding; provided that, any holder or beneficial owner may exercise individually any such right to require the Group Agent to specifically perform its obligation to provide or cause to be provided a pertinent filing if such a filing is due and has not been made. Any failure of the Group Agent to comply with the provisions of this Agreement shall not be a default or failure, or an Event of Default, under the Loan Agreement, the Bond Indenture, or the Master Indenture.

Section 7. Performance by the Dissemination Agent; Compensation. (a) The Dissemination Agent shall have only such duties under this Agreement as are specifically set forth in this Agreement, and the Group Agent agrees to indemnify and hold harmless the Dissemination Agent, its officers, directors, employees and agents, from and against any loss, cost, expense or liability that it may incur arising out of or in the exercise or performance of its obligations under this Agreement, including any costs and expenses (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons regularly in its employ) of defending any claim of liability, but excluding liabilities due to the negligence or bad faith of the Dissemination Agent.

(b) The Group Agent agrees to pay to the Dissemination Agent from time to time reasonable compensation for services provided by the Dissemination Agent under this Agreement and to pay or reimburse the Dissemination Agent upon request for all reasonable expenses, disbursements and advances incurred or made in accordance with this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons regularly in its employ), except to the extent that any such expense, disbursement or advance is due to the negligence or bad faith of the Dissemination Agent.

(c) The obligations of the Group Agent under this Section shall survive resignation or removal of the Dissemination Agent and termination of other provisions of this Agreement pursuant to Section 9.

(d) The Dissemination Agent is a party to this Agreement for and on behalf of the holders and beneficial owners of the Bonds and shall not be considered to be the agent of the Group Agent when performing any actions required to be taken by the Dissemination Agent under this Agreement.

E-7 (e) The Dissemination Agent shall not have any obligation under this Agreement to investigate or determine whether any filing made under this Agreement complies with federal securities laws or rules.

Section 8. Amendment. This Agreement may be amended, and noncompliance by the Group Agent with any provision of this Agreement may be waived, as may be necessary or appropriate to achieve its compliance with any applicable federal securities law or rule, to cure any ambiguity, inconsistency or formal defect or omission, and to address any change in circumstances arising from a change in legal requirements, change in law, or change in the identity, nature, or status of the Obligated Issuers, or type of business conducted by the Obligated Issuers. Any such amendment or waiver shall not be effective unless this Agreement (as amended or taking into account such waiver) would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any applicable amendments to or official interpretations of the Rule, as well as any change in circumstances, and until either (a) the Group Agent and the Dissemination Agent shall have received a written opinion of bond counsel or other qualified independent special bond counsel selected by the Dissemination Agent, or the Dissemination Agent shall have determined, that the amendment would not materially impair the interests of holders or beneficial owners of the Bonds, or (b) the Dissemination Agent shall have received the written consent to the amendment or waiver of the holders of at least a majority of the principal amount of the Bonds then outstanding. Annual Information containing any amended operating data or financial information shall explain, in narrative form or in footnotes, the reasons for any such amendment and the impact of the change on the type of operating data or financial information being provided.

Section 9. Term. The obligations of the Group Agent under this Agreement shall remain in effect only for such period that (i) any Bonds are outstanding in accordance with their terms and (ii) any of the Obligated Issuers remain an obligated person with respect to any of the Bonds within the meaning of the Rule, subject to the survival of certain provisions to the extent expressly provided in Section 7. The obligation of the Group Agent to provide the Annual Information, Quarterly Information and notices of events set forth in subsection 4(a) shall terminate, if and when the Obligated Issuers no longer remain obligated persons with respect to any of the Bonds, provided that the Group Agent shall provide notice of such termination to the MSRB.

Section 10. Notices. Except as otherwise expressly provided in this Agreement, it shall be sufficient service or giving of any notice, if that notice is either mailed by first class mail, postage prepaid, addressed to the relevant party at its Notice Address, or transmitted by facsimile transmission addressed to the relevant party at its number for receipt of facsimile transmissions set forth in its Notice Address. The Group Agent and the Dissemination Agent may designate from time to time, by notice given hereunder, any further or different addresses (including facsimile transmission numbers) to which any subsequent notice shall be sent.

Section 11. Assignment. The Group Agent may assign its obligations under this Agreement only in connection with the assignment of its obligations under and in accordance with the provisions of any contractual commitment or other arrangement to support payment of all or any part of the Bonds, including without limitation with respect to the Series 2016 Obligations; provided, that the Group Agent shall not assign its obligations under this Agreement so long as the Obligated Issuers remain obligated persons with respect to any of the Bonds and except to the assignee of their obligations under any such contractual commitment or other arrangement to support payment of the Bonds. The Group Agent may

E-8 assign its obligations under any such contractual commitment or other arrangement, without remaining primarily liable for the performance of those obligations, only if the assignee of the Group Agent assumes its obligations under this Agreement. Any assignment by the Group Agent of its obligations under this Agreement shall not be effective unless and until the assignee of the Group Agent shall have expressly assumed in writing, for the benefit of the holders and beneficial owners from time to time of each series of the Bonds, by an instrument in form and substance satisfactory to the Dissemination Agent, the obligations of the Group Agent under this Agreement or enters into a new agreement for purposes of the Rule that is substantially similar to the undertaking of the Group Agent under this Agreement.

Section 12. Beneficiaries. This Agreement shall inure solely to the benefit of the Obligated Issuers, the Dissemination Agent and the holders and beneficial owners from time to time of the Bonds, and any official, employee or agent thereof acting for and on its behalf, and shall not create any rights in any other person or entity.

Section 13. Severability. In case any section or provision of this Agreement, or any covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder or any application thereof, is for any reason held to be illegal or invalid, such illegality or invalidity shall not affect the remainder thereof or any other section or provision thereof or any other covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder (except to the extent that such remainder or section or provision or other covenant, stipulation, obligation, agreement, act or action, or part thereof is wholly dependent for its operation on the provision determined to be invalid), which shall be construed and enforced as if such illegal or invalid portion were not contained therein, nor shall such illegality or invalidity of any application thereof affect any legal and valid application thereof, and each such section, provision, covenant, stipulation, obligation, agreement, act or action, or part thereof shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.

Section 14. Counterparts. This 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.

Section 15. Governing Law. This Agreement shall be deemed to be an agreement made under the laws of the State of Nebraska and for all purposes shall be governed by and construed in accordance with the laws of the State of Nebraska.

E-9

IN WITNESS WHEREOF, the Group Agent and the Dissemination Agent have caused this Agreement to be duly executed in their respective names, all as of the date set forth above.

THE NEBRASKA MEDICAL CENTER, on behalf of itself and the Obligated Group as Obligated Group Representative

By: ______Title: ______

FIRST NATIONAL BANK OF OMAHA

By: ______Title: ______

E-10

EXHIBIT A

$______HOSPITAL AUTHORITY NO. 2 OF DOUGLAS COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

$______HOSPITAL AUTHORITY NO. 1 OF SARPY COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

NOTICE OF FAILURE TO FILE [ANNUAL INFORMATION] [QUARTERLY INFORMATION]

TO: Authorized Disclosure Representative The Nebraska Medical Center

The undersigned, as the Dissemination Agent under the Continuing Disclosure Agreement dated as of August 1, 2016 (the “Agreement”) between the undersigned and The Nebraska Medical Center, hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement), that you, as of the date of this notice, have not provided or caused to be provided to the undersigned the [Annual Information] [Quarterly Information] that is required under the Agreement to be so provided not later than ______. The [Annual Information] [Quarterly Information] is required under the Agreement to be provided or caused to be provided to the undersigned not later than that date.

[______]

Dated: ______By: ______

E-11

EXHIBIT B

$______HOSPITAL AUTHORITY NO. 2 OF DOUGLAS COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

$______HOSPITAL AUTHORITY NO. 1 OF SARPY COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

SECOND NOTICE OF FAILURE TO FILE [ANNUAL INFORMATION] [QUARTERLY INFORMATION]

TO: Authorized Disclosure Representative, The Nebraska Medical Center

The undersigned, as the Dissemination Agent under the Continuing Disclosure Agreement, dated as of August 1, 2016 (the “Agreement”) between the undersigned and The Nebraska Medical Center, on behalf of itself and the Group as Obligated Group Representative, hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement), that you, as of the date of this notice, have not provided or caused to be provided to the undersigned the [Annual Information] [Quarterly Information] that was required under the Agreement to be so provided not later than ______.

Please provide the required [Annual Information] [Quarterly Information] to the undersigned, together with written evidence as to whether that information has been provided to the MSRB and, if so, when it was provided. If, in any instance, the [Annual Information] [Quarterly Information] was not timely provided to the MSRB in accordance with subsection 3(a) or 3(b), as applicable, of the Agreement, please provide a written statement regarding your failure to comply that will be provided to the MSRB with the notice that the undersigned must give of the failure to comply under subsection 4(a) of the Agreement. Any such written evidence or statement must be received by the undersigned not later than 3:00 p.m., ______time, on ______. Regardless of whether the undersigned has received written evidence by that time regarding the making and timeliness of the filing, a notice will be filed promptly thereafter with the MSRB substantially in the form attached as Exhibit C to the Agreement.

[______]

By: ______Dated: ______

E-12

EXHIBIT C

$______HOSPITAL AUTHORITY NO. 2 OF DOUGLAS COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

$______HOSPITAL AUTHORITY NO. 1 OF SARPY COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

NOTICE TO MSRB OF FAILURE TO [TIMELY] FILE [ANNUAL INFORMATION] [QUARTERLY INFORMATION]

TO: MSRB

The undersigned, as the Dissemination Agent under the Continuing Disclosure Agreement dated as of August 1, 2016 (the “Agreement”) between the undersigned and The Nebraska Medical Center, on behalf of itself and the Group as Obligated Group Representative, hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement), that:

[1. The Nebraska Medical Center, as of the date of this notice, has not provided or caused to be provided to the Dissemination Agent the [Annual Information] [Quarterly Information] for its [Fiscal Year] [Quarterly Period] that ended ______, _____, and has not provided any written evidence to the Dissemination Agent concerning the timeliness of its filing of that [Annual Information] [Quarterly Information] with the MSRB. That [Annual Information] [Quarterly Information] was required under the Agreement to be provided to the Dissemination Agent and the MSRB not later than ______.]

[1. The Nebraska Medical Center provided or caused to be provided the [Annual Information] [Quarterly Information] that was required to be provided to the MSRB not later than ______, to [______] on ______.]

[2. The Nebraska Medical Center has provided the attached statement concerning its failure to provide or cause to be provided the [Annual Information] [Quarterly Information] in accordance with the Agreement. The Dissemination Agent does not assume any responsibility for the accuracy or completeness of that statement and has not and will not undertake any investigation to determine its accuracy or completeness.]

[______]

Dated: ______

E-13

By: ______Title: ______cc: Authorized Disclosure Representative The Nebraska Medical Center

E-14

EXHIBIT D

$______HOSPITAL AUTHORITY NO. 2 OF DOUGLAS COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

$______HOSPITAL AUTHORITY NO. 1 OF SARPY COUNTY, NEBRASKA HEALTH FACILITIES REVENUE BONDS (NEBRASKA MEDICINE) SERIES 2016

DESIGNATION OF AUTHORIZED DISCLOSURE REPRESENTATIVE

TO: [______], as Dissemination Agent

The undersigned hereby designates, pursuant to the Continuing Disclosure Agreement between The Nebraska Medical Center, on behalf of itself and the Group as Obligated Group Representative, and [______], as Dissemination Agent, dated as of August 1, 2016, the individuals listed below as Authorized Disclosure Representative and Alternates, respectively, and certifies that the signatures opposite the name of each individual is the true signature of that individual.

AUTHORIZED DISCLOSURE REPRESENTATIVE SIGNATURE

Name and Title

ALTERNATE

Name and Title

ALTERNATE

Name and Title

E-15

THE NEBRASKA MEDICAL CENTER

By: ______Title: ______

Date: ______, 20__

E-16

APPENDIX F

FORM OF OPINION OF BOND COUNSEL

[THIS PAGE INTENTIONALLY LEFT BLANK]

______, 2016

Hospital Authority No. 2 of Douglas County, Nebraska First National Bank of Omaha, as trustee Omaha, Nebraska Omaha, Nebraska

The Nebraska Medical Center Wells Fargo Securities LLC Omaha, Nebraska Denver, Colorado

Barclays Capital Inc. Chicago, Illinois

$______Hospital Authority No. 2 of Douglas County, Nebraska Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by the Hospital Authority No. 2 of Douglas County, Nebraska (the “Authority”) of $______aggregate principal amount of its Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture of Trust dated as of August 1, 2016 (the “Indenture”) between the Authority and First National Bank of Omaha, as trustee (the “Trustee”). Terms not otherwise defined herein shall have the meanings assigned thereto in the Indenture.

The Bonds are dated as of the date of delivery, are issuable in the denominations of $5,000 and integral multiples thereof and mature on the dates and in the amounts and bear interest payable at the rates and on the dates and are subject to mandatory, extraordinary and optional redemption prior to maturity at the times, in the manner and upon the terms provided in the Bonds and in the Indenture. The Bonds are limited obligations of the Authority payable solely from the revenues or moneys pledged therefor pursuant to the Indenture, and do not constitute an indebtedness, liability or general obligation of the State of Nebraska or any political subdivision thereof within the meaning of any constitutional or statutory debt limitation of the laws of the State of Nebraska. Neither the faith and credit nor the taxing power of the State of Nebraska or any political subdivision thereof is pledged to the payment of the principal of or interest on the Bonds.

F-1 August ______, 2016 Page 2

The Bonds are being issued by the Authority, pursuant to the Hospital Authorities Act, Sections 23-3579 to 23-35,120 of the Revised Statutes of Nebraska, as amended (the “Act”), and Bond Resolution No. 1 of 2016 adopted by the Authority on July 20, 2016 (the “Resolution”) for the purpose of providing funds to finance the costs of acquiring, constructing, installing and equipping health care facilities. The proceeds of the Bonds are being loaned by the Authority to The Nebraska Medical Center, a Nebraska nonprofit corporation (the “Borrower”), pursuant to a Loan Agreement dated as of August 1, 2016 (the “Loan Agreement”) between the Authority and the Borrower. The obligations of the Borrower under the Loan Agreement are to be secured by an Obligation No. 1 (the “Obligation No. 1”) issued pursuant to a Master Trust Indenture, dated as of August 1, 2016, as supplemented and amended, including by a Supplemental Master Trust Indenture No. 1, dated as of August 1, 2016 (as supplemented and amended, the “Master Indenture”), among the Borrower, Bellevue Medical Center, LLC, a Nebraska limited liability company, UNMC Physicians, a Nebraska nonprofit corporation, and such other organizations as from time to time are Members of the Obligated Group and First National Bank of Omaha, as master trustee.

In connection with the issuance of the Bonds, we have examined the laws of the State of Nebraska and of the United States of America relevant to the opinions herein, and certified, executed counterparts or copies otherwise identified to our satisfaction of (a) the Resolution and certain proceedings of the Authority in connection therewith, (b) the Indenture, (c) the Loan Agreement, (d) the Master Indenture, (e) the Obligation No. 1, (f) a Tax Compliance Agreement dated as of August 1, 2016 (the “Tax Compliance Agreement”) among the Authority, the Borrower and the Trustee, (g) a copy of an executed Bond and (h) such other documents, records and certifications as we deem relevant and necessary in rendering this opinion.

As to questions of fact material to our opinion, we have relied upon representations and covenants made on behalf of the Authority and the Borrower and certificates of public officials (including certifications as to the use of the proceeds of the Bonds), without undertaking to verify the same by independent investigation.

We have not passed upon any matters relating to the business, properties, affairs or condition, financial or otherwise, of the Authority or the Borrower, and no inference should be drawn that we have expressed an opinion on matters relating to the financial ability of such entities to perform their respective obligations under the Bonds or the agreements described herein. We are not passing upon title to or descriptions of any of the facilities or property of the Borrower or the nature or extent of any liens thereon.

Based upon and subject to the foregoing, we are of the opinion that:

1. The Authority is a public corporation and body politic created and validly existing under the laws of the State of Nebraska. Pursuant to the Act, the Authority is empowered to issue the Bonds and to deposit in trust the proceeds thereof as provided in the Indenture with the Trustee, who shall set aside or pay such proceeds as set forth in the Indenture.

F-2 August ______, 2016 Page 3

2. The Resolution has been duly adopted by the Authority and as of the date hereof is in full force and effect in the form in which adopted.

3. The Bonds have been validly authorized, executed and issued in accordance with the laws of the State of Nebraska now in force and represent valid and binding limited obligations of the Authority. The principal of, premium, if any, and interest on the Bonds shall be payable solely from, and secured by a valid assignment by the Authority to the Trustee of the amounts pledged under, the Indenture.

4. The Indenture has been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the Trustee, represents the valid and binding agreement of the Authority enforceable against the Authority in accordance with its terms.

5. The Loan Agreement and the Tax Compliance Agreement have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, represent the valid and binding agreements of the Authority enforceable against the Authority in accordance with their respective terms.

6. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds (including any original issue discount properly allocable to the owners thereof) is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Interest on the Bonds, however, will be included in the “adjusted current earnings” of certain corporations (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation’s earnings and profits under Subchapter C of the Code), and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of each such corporation’s adjusted current earnings over its alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses). The opinion set forth in the first sentence of this paragraph 6 is subject to continuing compliance by the Authority, the Trustee and the Borrower with the covenants regarding federal tax law in the Indenture, the Loan Agreement and the Tax Compliance Agreement. Failure to comply with such covenants could cause interest on the Bonds to be included in gross income retroactive to the date of issue of the Bonds. The Bonds have been sold and are being issued concurrently with the Hospital Authority No. 1 of Sarpy County, Nebraska’s Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Sarpy Bonds”). The Bonds and the Sarpy Bonds will constitute a single issue of bonds for certain federal income tax purposes relating to the exclusion from gross income of interest on the Bonds. An event associated with either the Bonds or the Sarpy Bonds may cause interest on the Bonds to become subject to federal income tax liability of the recipient.

F-3 August ______, 2016 Page 4

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions or certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit or taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations, are advised to consult their own tax advisors as to the tax consequences of purchasing or owning the Bonds.

7. Under the existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from present Nebraska state income taxation.

The obligations of the parties, and the enforceability thereof, with respect to the Bonds and the other documents described above, are subject, in part, to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally, now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also subject to general equity principles which may limit the specific enforcement of certain remedies, but which do not effect the validity of such documents.

Our engagement as Bond Counsel with respect to the transaction referred to herein terminates upon the date of this letter. We assume no obligation to review or supplement this letter subsequent to its date, whether by reason of a change in the current laws, by legislative or regulatory action, by judicial decision or for any other reason.

Very truly yours,

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______, 2016

Hospital Authority No. 1 of Sarpy County, Nebraska First National Bank of Omaha, as trustee Omaha, Nebraska Omaha, Nebraska

Bellevue Medical Center, LLC Wells Fargo Securities LLC Omaha, Nebraska Denver, Colorado

Barclays Capital Inc. Chicago, Illinois

$______Hospital Authority No. 1 of Sarpy County, Nebraska Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by the Hospital Authority No. 1 of Sarpy County, Nebraska (the “Authority”) of $______aggregate principal amount of its Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture of Trust dated as of August 1, 2016 (the “Indenture”) between the Authority and First National Bank of Omaha, as trustee (the “Trustee”). Terms not otherwise defined herein shall have the meanings assigned thereto in the Indenture.

The Bonds are dated as of the date of delivery, are issuable in the denominations of $5,000 and integral multiples thereof and mature on the dates and in the amounts and bear interest payable at the rates and on the dates and are subject to mandatory, extraordinary and optional redemption prior to maturity at the times, in the manner and upon the terms provided in the Bonds and in the Indenture. The Bonds are limited obligations of the Authority payable solely from the revenues or moneys pledged therefor pursuant to the Indenture, and do not constitute an indebtedness, liability or general obligation of the State of Nebraska or any political subdivision thereof within the meaning of any constitutional or statutory debt limitation of the laws of the State of Nebraska. Neither the faith and credit nor the taxing power of the State of Nebraska or any political subdivision thereof is pledged to the payment of the principal of or interest on the Bonds.

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August ______, 2016 Page 2

The Bonds are being issued by the Authority, pursuant to the Hospital Authorities Act, Sections 23-3579 to 23-35,120 of the Revised Statutes of Nebraska, as amended (the “Act”), and Bond Resolution No. 1 of 2016 adopted by the Authority on July 21, 2016 (the “Resolution”) for the purpose of providing funds to finance the costs of acquiring, constructing, installing and equipping health care facilities. The proceeds of the Bonds are being loaned by the Authority to the Bellevue Medical Center, a Nebraska limited liability company (the “Borrower”), pursuant to a Loan Agreement dated as of August 1, 2016 (the “Loan Agreement”) between the Authority and the Borrower. The obligations of the Borrower under the Loan Agreement are to be secured by an Obligation No. 2 (the “Obligation No. 2”) issued pursuant to a Master Trust Indenture, dated as of August 1, 2016, as supplemented and amended, including by a Supplemental Master Trust Indenture No. 2, dated as of August 1, 2016 (as supplemented and amended, the “Master Indenture”), among the Borrower, The Nebraska Medical Center, a Nebraska nonprofit corporation, UNMC Physicians, a Nebraska nonprofit corporation, and such other organizations as from time to time are Members of the Obligated Group and First National Bank of Omaha, as master trustee.

In connection with the issuance of the Bonds, we have examined the laws of the State of Nebraska and of the United States of America relevant to the opinions herein, and certified, executed counterparts or copies otherwise identified to our satisfaction of (a) the Resolution and certain proceedings of the Authority in connection therewith, (b) the Indenture, (c) the Loan Agreement, (d) the Master Indenture, (e) the Obligation No. 2, (f) a Tax Compliance Agreement dated as of August 1, 2016 (the “Tax Compliance Agreement”) among the Authority, the Borrower and the Trustee, (g) a copy of an executed Bond and (h) such other documents, records and certifications as we deem relevant and necessary in rendering this opinion.

As to questions of fact material to our opinion, we have relied upon representations and covenants made on behalf of the Authority and the Borrower and certificates of public officials (including certifications as to the use of the proceeds of the Bonds), without undertaking to verify the same by independent investigation.

We have not passed upon any matters relating to the business, properties, affairs or condition, financial or otherwise, of the Authority or the Borrower, and no inference should be drawn that we have expressed an opinion on matters relating to the financial ability of such entities to perform their respective obligations under the Bonds or the agreements described herein. We are not passing upon title to or descriptions of any of the facilities or property of the Borrower or the nature or extent of any liens thereon.

Based upon and subject to the foregoing, we are of the opinion that:

1. The Authority is a public corporation and body politic created and validly existing under the laws of the State of Nebraska. Pursuant to the Act, the Authority is empowered to issue the Bonds and to deposit in trust the proceeds thereof as provided in the Indenture with the Trustee, who shall set aside or pay such proceeds as set forth in the Indenture.

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August ______, 2016 Page 3

2. The Resolution has been duly adopted by the Authority and as of the date hereof is in full force and effect in the form in which adopted.

3. The Bonds have been validly authorized, executed and issued in accordance with the laws of the State of Nebraska now in force and represent valid and binding limited obligations of the Authority. The principal of, premium, if any, and interest on the Bonds shall be payable solely from, and secured by a valid assignment by the Authority to the Trustee of the amounts pledged under, the Indenture.

4. The Indenture has been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the Trustee, represents the valid and binding agreement of the Authority enforceable against the Authority in accordance with its terms.

5. The Loan Agreement and the Tax Compliance Agreement have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, represent the valid and binding agreements of the Authority enforceable against the Authority in accordance with their respective terms.

6. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds (including any original issue discount properly allocable to the owners thereof) is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Interest on the Bonds, however, will be included in the “adjusted current earnings” of certain corporations (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation’s earnings and profits under Subchapter C of the Code), and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of each such corporation’s adjusted current earnings over its alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses). The opinion set forth in the first sentence of this paragraph 6 is subject to continuing compliance by the Authority, the Trustee and the Borrower with the covenants regarding federal tax law in the Indenture, the Loan Agreement and the Tax Compliance Agreement. Failure to comply with such covenants could cause interest on the Bonds to be included in gross income retroactive to the date of issue of the Bonds. The Bonds have been sold and are being issued concurrently with the Hospital Authority No. 2 of Douglas County, Nebraska’s Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 (the “Douglas Bonds”). The Bonds and the Douglas Bonds will constitute a single issue of bonds for certain federal income tax purposes relating to the exclusion from gross income of interest on the Bonds. An event associated with either the Bonds or the Douglas Bonds may cause interest on the Bonds to become subject to federal income tax liability of the recipient.

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August ______, 2016 Page 4

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions or certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit or taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations, are advised to consult their own tax advisors as to the tax consequences of purchasing or owning the Bonds.

7. Under the existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from present Nebraska state income taxation.

The obligations of the parties, and the enforceability thereof, with respect to the Bonds and the other documents described above, are subject, in part, to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally, now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also subject to general equity principles which may limit the specific enforcement of certain remedies, but which do not effect the validity of such documents.

Our engagement as Bond Counsel with respect to the transaction referred to herein terminates upon the date of this letter. We assume no obligation to review or supplement this letter subsequent to its date, whether by reason of a change in the current laws, by legislative or regulatory action, by judicial decision or for any other reason.

Very truly yours,

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APPENDIX G

BOOK-ENTRY SYSTEM

Information concerning The Depository Trust Company (“DTC”), New York, New York, and the Book-Entry System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the Authorities, the Underwriters, the Bond Trustee or the Members of the Obligated Group.

BONDS IN BOOK-ENTRY FORM

Beneficial ownership in the Series 2016 Bonds will be available to Beneficial Owners (as described below) only by or through DTC Participants via a book-entry system (the “Book-Entry System”) maintained by DTC. If the Series 2016 Bonds are taken out of the Book-Entry System and delivered to owners in physical form, as contemplated hereinafter under “Discontinuance of DTC Services,” the following discussion will not apply.

DTC AND ITS PARTICIPANTS

DTC will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of the Series 2016 Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among 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 www.dtcc.com.

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Purchases of the Series 2016 Bonds under the DTC System must be made by or through Direct Participants which will receive a credit for the Series 2016 Bonds on DTC’s records. The ownership interest of each actual purchaser of a Series 2016 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 Series 2016 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2016 Bonds, except in the event that use of the book-entry system for the Series 2016 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2016 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 Series 2016 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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 2016 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of the Series 2016 Bonds may wish to ascertain that the nominee holding the Series 2016 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Trustee and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2016 Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2016 Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an omnibus proxy (the “Omnibus Proxy”) to the Authorities 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 2016 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2016 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

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Authorities or the Bond Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Bond Trustee, the Members of the Obligated Group or the Authorities, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DISCONTINUANCE OF DTC SERVICES

DTC may discontinue providing its services as depository with respect to the Series 2016 Bonds at any time by giving reasonable notice to the Authorities or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be authenticated and delivered.

The Authorities or the Bond Trustee may, as provided in the Bond Indentures, decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond certificates will be authenticated and delivered for the Series 2016 Bonds.

DISCLAIMER

The Authorities, the Underwriters, the Bond Trustee and the Members of the Obligated Group have no responsibility or obligation to any Direct Participants or Indirect Participants or the Persons for whom they act with respect to (1) the accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (2) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal or interest on the Series 2016 Bonds; (3) the delivery by any such Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Bond Indentures to be given to Bondholders; (4) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2016 Bonds; or (5) any consent given or other action taken by DTC as Bondholder. The information in this section concerning DTC and DTC’s Book Entry System has been obtained from sources that are believed to be reliable, but the Authorities, the Underwriters, the Bond Trustee and the Members of the Obligated Group take no responsibility for the accuracy thereof. No attempt has been made by the Authorities, the Underwriters, the Bond Trustee or the Members of the Obligated Group to determine whether DTC is or will be financially or otherwise capable of fulfilling its obligations.

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Hospital Authority No. 2 of Douglas County, Nebraska • Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016 Hospital Authority No. 1 of Sarpy County, Nebraska • Health Facilities Revenue Bonds (Nebraska Medicine) Series 2016