Care New England Health System Series 2016C Taxable Notes

Supplement dated September 20, 2016 to Preliminary Offering Memorandum dated September 7, 2016

$20,291,000* Care New England Health System Series 2016C Taxable Notes

This Supplement relates to the Preliminary Offering Memorandum dated September 7, 2016, as supplemented on September 15, 2016 (as so supplemented, the “Preliminary Offering Memorandum”) for the above-referenced notes. This Supplement should be read in conjunction with the Preliminary Offering Memorandum. Capitalized terms not otherwise defined herein have the meanings assigned in the Preliminary Offering Memorandum. Changes to the Master Indenture. The following additions are hereby inserted into the respective section numbers referenced below in “APPENDIX C – “FORM OF THE MASTER INDENTURE.” (1) Explicit Prohibition of Use of Disbursed Line of Credit Proceeds to Meet DCOH Requirement. The definition of “Unrestricted Cash and Investments” contained in the definition of “Days Cash on Hand” in Section 1.1 of the Master Trust Indenture is revised by adding the language shown in bold below: “Unrestricted Cash and Investments” means all cash and marketable securities that the Obligated Group could, in its discretion, apply to the payment of Debt without violating any Lien or other security agreement or applicable law or the restrictions of any grant or gift. Without limiting the generality of the foregoing, Unrestricted Cash and Investments shall not include: (A) trustee-held funds, including debt service funds, debt service reserve funds and construction funds; (B) malpractice funds, self-insurance or captive insurer funds; (C) pension or retirement funds; (D) funds subject to any Permitted Lien, unless such Permitted Lien secures all Obligations; (E) the undisbursed proceeds of any borrowing; and (F) moneys held by any Member of the Obligated Group that represent proceeds disbursed under any line of credit. Marketable securities shall be valued at fair market value as of the date of determination. Unrestricted Cash and Investments shall be reduced by the following: (i) bank overdrafts; (ii) the amount received from the sale or factoring of accounts receivable or inventory; and (iii) cash or investments held as part of litigation reserves or a reserve for any other liability.

(2) Lockbox. Section 7.10 of the Master Trust Indenture is revised by dividing Section 7.10 into subsections (a) and (b) and adding the language in bold below: Section 7.10 Remedies Cumulative and Lockbox. (a) No remedy herein conferred upon or reserved to the Master Trustee or the holders of Notes entitled to the benefits hereof is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by

* Preliminary, subject to change.

1 statute; and the employment of any remedy hereunder, or otherwise, shall not prevent the concurrent employment of any other appropriate remedy or remedies. (b) In the event of a payment default with respect to any Obligation or the failure of the Obligated Group to comply with Section 6.09 or Section 6.14 hereof which constitutes a continuing, unwaived and uncured Event of Default under this Master Indenture, the Master Trustee shall have the right to exercise all remedies of a secured party with respect to the Gross Receipts including requiring, by written notice to the Obligated Group Representative, that from that point forward all moneys, revenues and receipts of the Obligated Group that constitute Gross Receipts be placed upon receipt by the Obligated Group in a special account (the “Lockbox Account”) designated by the Master Trustee and subject to its control. Any withdrawals from such Lockbox Account shall require the written approval or consent of the Master Trustee. Such approval or consent may be subject to the direction, in accordance with the terms of this Master Indenture, by the holders of a majority in principal amount of Obligations then Outstanding hereunder. (3) Continuation of Mortgages and Debt Service Reserve Fund. A new subsection (g) is added to Section 12.1 of the Master Trust Indenture as follows: (g) No Replacement Master Indenture and no Replacement Obligations shall (i) relieve the Obligated Group from its requirement to continue to provide any mortgages granted to, any negative pledges in favor of, or any Gross Receipts pledged to, the Master Trustee unless, at the time such Replacement Master Indenture and Replacement Obligations become effective (or at any time thereafter), such Obligations shall be rated (based on the credit of the Obligated Group under the Replacement Master Indenture and the Replacement Obligations) at least AA- (or the equivalent thereof) by any Rating Agency then rating the Obligations; or (ii) result in the elimination of any Debt Service Reserve Fund previously created with respect to an Obligation. (4) Debt Service Coverage Ratio. Section 6.09(b) of the Master Trust Indenture is amended by changing September 30, 2019 to September 30, 2018.

Changes to the Trust Indenture Regarding Continuing Disclosure. The following new sentence is added after the end of the final paragraph of Section 10.7 of APPENDIX D – “FORM OF THE TRUST INDENTURE”: The holder of any Note shall have the right to require CNE to hold any required investor call under the continuing disclosure agreement as provided in Section 7(e) thereof. Failure by CNE to schedule and hold such a call within ten (10) Business Days following receipt of a written notice from a holder of any Note shall constitute an Event of Default hereunder.

2 Additional Language Providing for Most Favored Nation Clause in the Note. The supplement to the Master Indenture authorizing the Series 2016C Obligation securing the Series 2016C Taxable Notes will contain language substantially similar to the following: During the period from the issuance of this Obligation No. 2 through September 30, 2018, the holder of this Obligation shall be entitled to the benefit of any financial covenant contained in any other Obligation issued under the Master Indenture (or document relating to any such other Obligation) which is in addition to, or more stringent than, the financial covenants contained in Section 6.09 and Section 6.14 of the Master Indenture. Any such covenant shall be incorporated herein by reference as if set forth herein and shall be effective until the earlier of: (i) September 30, 2018; or (ii) the prior expiration of such covenant or termination of the Obligation (or document related to the Obligation) in which it is contained.

3 Supplement dated September 15, 2016 to Preliminary Offering Memorandum dated September 7, 2016

$20,291,000* Care New England Health System Series 2016C Taxable Notes

This Supplement relates to the Preliminary Offering Memorandum dated September 7, 2015 (the “Preliminary Offering Memorandum”) for the above-referenced notes. This Supplement should be read in conjunction with the Preliminary Offering Memorandum. Capitalized terms not otherwise defined herein have the meanings assigned in the Preliminary Offering Memorandum.

Correction to Section Heading “SOURCE OF PAYMENT AND SECURITY - Mortgages Securing All Obligations Issued Under the Master Indenture.” The following paragraphs are hereby inserted at the end of the section entitled “SOURCE OF PAYMENT AND SECURITY - Mortgages Securing All Obligations Issued Under the Master Indenture.”

The examination of title to both these facilities disclosed that the federal government had filed “Notices of Federal Interest” on certain portions of both campuses in connection with grants to the respective hospitals in 2003. The grant to Butler was for $240,000 and the grant to Kent was $295,070. The Notices of Federal Interest prevent the granting of mortgages without the consent of the Department of Health and Human Services (“DHHS”).

The Obligated Group is in the process of working with DHHS to obtain consents and subordinations from DHHS to the mortgages to be granted. Accordingly, the Obligated Group will execute the Mortgages for the Butler and Kent campuses at the closing of the Series 2016C Taxable Notes and deliver the executed Mortgages to the Master Trustee in escrow. If the consent and subordinations are not received by December 30, 2016, the Obligated Group will repay the grants and discharge the liens. The Obligated Group received consents from DHHS for the mortgages filed in connection with the issuance by the Corporation of the Series 2013A Bonds and the Series 2014A Bonds following the closings for those bonds.

* Preliminary, subject to change.

This Preliminary Offering Memorandum and the information contained herein are subject to change, completion and amendment without notice. The Series 2016C Taxable Notes may not be sold nor may an offer to buy be accepted prior to the time the Offering Memorandum is delivered in final form. Under no circumstances shall this Preliminary Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2016C Taxable Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Pricing andPayment Source ofPaymentandSecurity * Preliminary, subject tochange. Dated: September __,2016 U U F I L E F R T N ssuer ofthe egal Counsel inancing orm and ax Status isk nderwriter se ofProceeds xemption from ew I F ssue - actors D D ate of ocuments B N Preliminary Offering ook- otes R E D egistration ntry only elivery T erms

C are S See “ “Source ofPaymentandSecurity.” Master Indenture(assuchtermsaredescribedanddefinedherein).See obligations ofCNEsecuredbyaSeries2016CObligationissuedunderthe The Series 2016C Taxable Notes will be unconditional,full faith and credit The Series2016CTaxable Notes arebeingpurchasedfromCNEby 2016C Taxable Notes, including costs of issuance. See “ pay certainincidentalcostsinconnectionwiththeissuanceofSeries herein). ProceedsoftheSeries2016CTaxableNoteswillalsobeusedto related toTheMemorialHospitalandProvidenceCenter(asdefined debt issuedtofundcapitalprojectsatorrefinanceexistingindebtedness Proceeds of the Series 2016C Taxable Notes will be used to retire certain “Trustee”). and TheBankofNewYorkMellonTrustCompany,N.A.,astrustee(the Indenture datedasofSeptember1,2016(the“Indenture”),betweenCNE The Series2016CTaxableNoteswillbeissuedpursuanttoaTrust Health System,aRhodeIslandnot-for-profitcorporation(“CNE”). The Series 2016C Taxable Notes are being issued by Care New England Taxable NotesareexemptsecuritiesunderSection3(a)(4)ofsuchAct. registration undertheSecuritiesActof1933becauseSeries2016C The Series2016CTaxableNotesandtheirofferingareexemptfrom ______, 2016. (“DTC”). TheSeries2016CTaxableNotesareexpectedtobedeliveredon form under the rules and regulations of The Depository Trust Company $25,000 oranyintegralmultipleof$1,000inexcessthereofbook-entry The Series2016CTaxableNoteswillbeissuedindenominationsof form foundin opinion withrespecttotheSeries2016CTaxableNotes insubstantiallythe Butler Snow LLP has served as note counsel to CNE and will deliver its Series 2016CTaxableNotes, see“ For adescriptionofcertain riskfactorsinvolvedinaninvestmentthe of theInternalRevenueCode1986,asamended. income oftheownersSeries2016CTaxableNotes underSection103 Interest ontheSeries2016CTaxableNotesisnotexcludable fromthegross counsel totheUnderwriter. have servedascounseltoCNE,andBalch&Bingham LLPhasservedas 2016C TaxableNotes,Hinckley,Allen&SnyderLLP andButlerSnowLLP eries N ew B P ricing of 2016CT M E em A $20,291,000* nglad

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PRICING AND PAYMENT TERMS*

Maturities and Interest Rates The Series 2016C Taxable Notes mature on September 1 in years and amounts and bear interest at the applicable rate per annum set forth in the following table.

Maturity Principal Interest CUSIP (September 1) Amount Rate Price Yield Number

Interest Rates Interest rates on the Series 2016C Taxable Notes are fixed rates.

Interest Payment Dates Interest on the Series 2016C Taxable Notes is payable on September 1 and March 1 of each year, beginning March 1, 2017.

Date of Series 2016C The Series 2016C Taxable Notes will be dated as of the date of initial delivery. Taxable Notes

Authorized Denominations The Series 2016C Taxable Notes may be issued in denominations of $25,000 or any integral multiple of $1,000 in excess thereof.

Redemption Prior to The Series 2016C Taxable Notes are subject to redemption prior to maturity. See Maturity “THE SERIES 2016C TAXABLE NOTES – Redemption Prior to Maturity.”

No Optional Tender Rights The Series 2016C Taxable Notes are not subject to purchase at the option of the Noteholders.

* Preliminary, subject to change.

USE OF THIS OFFERING MEMORANDUM

This Offering Memorandum is not to be construed as a contract or agreement between CNE and the purchasers or holders of the Series 2016C Taxable Notes.

No dealer, broker, salesman or other person has been authorized by CNE to give any information or to make any representation other than as contained in this Offering Memorandum, and, if given or made, such other information or representation must not be relied upon as having been authorized by them.

This Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2016C Taxable Notes by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The Series 2016C Taxable Notes have not been registered under The Securities Act of 1933, as amended, or any state securities laws, and neither the Securities and Exchange Commission nor any state regulatory agency will pass upon the accuracy, completeness or adequacy of this Offering Memorandum. The Indenture has not been qualified under the Trust Indenture Act of 1939, as amended.

The information in this Offering Memorandum is provided as of the date of this Offering Memorandum. Nothing contained in this Offering Memorandum shall under any circumstances create an implication that there has been no change in such information after the date of this Offering Memorandum.

The information set forth in this Offering Memorandum has been obtained from CNE and other sources that are deemed to be reliable, but it is not guaranteed as to accuracy or completeness by the Underwriter.

All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized.

Certain statements contained in this Offering Memorandum reflect forecasts and constitute forward-looking statements rather than historical facts. In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions are intended to identify forward-looking statements. All such forward- looking statements are expressly qualified by the cautionary statements set forth in this Offering Memorandum. The achievement of results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including general financial and operating conditions, legal and regulatory matters and other matters affecting higher education and health care.

All quotations from and summaries and explanations of provisions of laws and documents in this Offering Memorandum do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions.

IN CONNECTION WITH THE OFFERING OF THE NOTES THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH TRANSACTIONS MAY INCLUDE PURCHASES OF THE NOTES FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE NOTES. SUCH TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. [THIS PAGE INTENTIONALLY LEFT BLANK]

TABLE OF CONTENTS Page INTRODUCTION ...... 1

THE SERIES 2016C TAXABLE NOTES ...... 2 Pricing and Payment Terms ...... 2 Transfer, Registration, Exchange and Payment Provisions ...... 2 Regular Record Date for Interest Payments ...... 2 Interest on Overdue Payments ...... 2 Authorized Denominations ...... 2 Currency of Payment ...... 2 Redemption Prior to Maturity ...... 2

PLAN OF FINANCING ...... 3 General ...... 3 Retirement of the Prior Debt ...... 4

ESTIMATED SOURCES AND USES OF FUNDS ...... 5

DEBT SERVICE REQUIREMENTS ...... 6

THE OBLIGATED GROUP ...... 8

SOURCE OF PAYMENT AND SECURITY ...... 8 Source of Payment ...... 8 Security ...... 8 The Master Indenture ...... 8 Mortgages Securing All Obligations Issued Under the Master Indenture ...... 8 Negative Pledges...... 9 Financial and Operating Covenants ...... 9 Acceleration ...... 10 Certain Additional Covenants of the Obligated Group ...... 10

RISK FACTORS ...... 10 Introduction ...... 10 Liability of CNE ...... 10 Limitations on Security and Remedies ...... 10 Health Care Industry Factors ...... 13 State-Specific Considerations...... 15 Ratings on the Series 2016C Taxable Notes ...... 15 Feasibility Study ...... 15 Performance Improvement Plan ...... 16 Southcoast Affiliation ...... 16 Other Affiliation, Acquisition and Disposition Transactions ...... 16 Coordination with Series 2016B Bond Financing ...... 16

EXEMPTION FROM REGISTRATION ...... 16

TAX STATUS ...... 17

CONTINUING DISCLOSURE ...... 17

LEGAL MATTERS ...... 17

LITIGATION ...... 17

FINANCIAL ADVISOR ...... 17

RATINGS ...... 18

UNDERWRITING ...... 18

FEASIBILITY STUDY ...... 18

INDEPENDENT ACCOUNTANTS FOR CNE ...... 19

INDEPENDENT ACCOUNTANTS FOR TPC ...... 19

MISCELLANEOUS ...... 19

AUTHORIZATION AND APPROVAL ...... 19

APPENDIX A - INFORMATION CONCERNING THE OBLIGATED GROUP APPENDIX B-1 - CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY CONSOLIDATING INFORMATION OF CARE NEW ENGLAND HEALTH SYSTEM AND AFFILIATES AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014 APPENDIX B-2 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION OF THE PROVIDENCE CENTER FOR THE YEARS ENDED JUNE 30, 2015 AND 2014 APPENDIX B-3 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF CARE NEW ENGLAND HEALTH SYSTEM AND AFFILIATES AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2016 APPENDIX C - FORM OF THE MASTER INDENTURE APPENDIX D - FORM OF THE TRUST INDENTURE APPENDIX E - FORM OF APPROVING OPINION OF NOTE COUNSEL APPENDIX F - THE DTC BOOK-ENTRY ONLY SYSTEM

$20,291,000* CARE NEW ENGLAND HEALTH SYSTEM TAXABLE NOTES, SERIES 2016C

INTRODUCTION

This Offering Memorandum is being delivered in connection with the issuance of the above-referenced Taxable Notes, Series 2016C (the “Series 2016C Taxable Notes”) by Care New England Health System, a Rhode Island not-for-profit corporation (“CNE”). The Series 2016C Taxable Notes will be issued pursuant to a Trust Indenture dated as of September 1, 2016 (an “Indenture”), between CNE and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). CNE is the representative of an obligated group consisting of CNE, Butler Hospital (“Butler”), Kent County Memorial Hospital (“Kent”), Kent County Visiting Nurse Association (“VNA”), Southeastern Healthcare System, Inc. (“SHS”), The Memorial Hospital (“Memorial”), The Providence Center (“TPC”), Women & Infants Corporation (“WIC”) and Women & Infants Hospital of Rhode Island (“WIH,” and together with CNE, Butler, Kent, VNA, SHS, Memorial, TPC and WIC, collectively, the “Obligated Group”).

The proceeds of the Series 2016C Taxable Notes will be used to refund certain outstanding debt of the Obligated Group, including a portion of the bonds issued by the Rhode Island Health and Educational Building Corporation (the “Corporation”) for the benefit of the Obligated Group and certain indebtedness of TPC, as more particularly described under “PLAN OF FINANCING”. The Obligated Group’s refunding program will result in defeasance or retirement of all outstanding debt secured by the Obligated Group’s existing master trust indenture. The Obligated Group would have been in default under certain financial covenants of the existing master indenture as of the end of the current fiscal year. The Obligated Group is entering into a new master trust indenture (the Master Indenture referred to below) that will secure the Series 2016C Taxable Notes. The Corporation is also issuing its $138,710,000* Hospital Financing Revenue Refunding Bonds (Care New England Issue), Series 2016B (the “Series 2016B Bonds” or the “Bonds”) as part of its refunding and debt restructuring program. The Series 2016B Bonds will be secured by the Master Indenture on a parity with the Series 2016C Taxable Notes. For a more complete description of the plan of financing see “PLAN OF FINANCING.”

To secure its payment obligations on the Series 2016C Taxable Notes, CNE will issue and deliver to the Trustee a promissory note (the “Series 2016C Obligation”), in total principal amount equal to the total principal amount of the Series 2016C Taxable Notes. The terms of the Series 2016C Obligation will require payments by the Obligated Group which, together with other moneys available therefor, will be sufficient to provide for the payment of the principal of, premium, if any, and interest on the Series 2016C Taxable Notes. The Series 2016C Obligation will be issued pursuant to a Master Trust Indenture, dated as of September 1, 2016, as supplemented by Supplemental Indenture No. 2 dated as of September 1, 2016 with respect to the Notes (as so supplemented, the “Master Indenture”), between the Obligated Group and The Bank of New York Mellon Trust Company, N.A., as master trustee (the “Master Trustee”). The Series 2016C Obligation will entitle the Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Obligated Group by the Master Indenture. See “SOURCE OF PAYMENT AND SECURITY.”

This Offering Memorandum provides information for prospective investors in the Series 2016C Taxable Notes. The cover page and the inside cover page provide a summary of the terms of the offering of the Series 2016C Taxable Notes. However, the entire Offering Memorandum and the appendices should be read for a complete description of the terms of the offering and for important information about CNE.

The purchase of the Series 2016C Taxable Notes involves a high degree of risk. Prospective purchasers should carefully consider the material under the “RISK FACTORS” section herein. Unless otherwise defined herein, capitalized terms used in this Offering Memorandum shall have the meanings specified in APPENDIX C – “FORM OF

* Preliminary, amount subject to change.

THE MASTER INDENTURE” or APPENDIX D – “FORM OF THE TRUST INDENTURE” attached hereto. Terms not otherwise defined in this Offering Memorandum have the meanings provided in the specific documents.

THE SERIES 2016C TAXABLE NOTES

Pricing and Payment Terms

The inside cover page of this Offering Memorandum contains pricing and payment terms of the Series 2016C Taxable Notes, including maturities, interest rates, and interest payment dates.

Transfer, Registration, Exchange and Payment Provisions

The transfer, registration, exchange and payment of Series 2016C Taxable Notes shall be governed by the Book Entry System administered by DTC until the Book Entry System is terminated pursuant to the terms and conditions of the Indenture. See APPENDIX F for a description of the Book Entry System. If the Book Entry System is terminated, the Indenture provides alternate provisions for the transfer, registration, exchange and payment of Series 2016C Taxable Notes.

Regular Record Date for Interest Payments

If the Book Entry System is in effect, the Trustee will pay interest on the Series 2016C Taxable Notes to DTC, and interest will be distributed to the Noteholders in accordance with the rules and regulations of DTC. If the Book Entry System is terminated, the interest due on any Interest Payment Date with respect to the Series 2016C Taxable Notes will be payable to the Noteholders on the Regular Record Date for such Interest Payment Date, which will be the 15th day (whether or not a Business Day) of the month next preceding each Interest Payment Date.

Interest on Overdue Payments

Interest will be payable on overdue principal on the Series 2016C Taxable Notes and (to the extent legally enforceable) on any overdue installment of interest on the Series 2016C Taxable Notes at the Post-Default Rate specified in the Indenture.

Authorized Denominations

The Series 2016C Taxable Notes will be issued in denominations of $25,000 or any integral multiple of $1,000 in excess thereof.

Currency of Payment

Payment of Debt Service on the Series 2016C Taxable Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

Redemption Prior to Maturity

The Series 2016C Taxable Notes may be redeemed at the option of CNE in whole or in part on any Business Day at a redemption price equal to the Make-Whole Redemption Price, plus accrued interest to the redemption date. The Indenture defines the Make-Whole Redemption Price as the greater of:

(1) 100% of the principal amount of the Series 2016C Taxable Note (or portion thereof) to be redeemed; or

(2) the present value of the remaining scheduled payments of principal and interest to the maturity date of such Series 2016C Taxable Note (or portion thereof), not including interest accrued and unpaid as of the redemption date, discounted to the redemption date at the Adjusted Treasury Rate (as defined below) plus [___]

basis points, such discounting to be on a semiannual basis assuming a 360-day year consisting of twelve 30-day months.

For purposes of determining the Make-Whole Redemption Price for any Series 2016C Taxable Note to be redeemed, the term “Adjusted Treasury Rate” means the yield to maturity of United States Treasury securities (excluding inflation-indexed securities) with a constant maturity most nearly equal to the period from the redemption date to the Maturity Date (as defined in APPENDIX D) of such Series 2016C Taxable Note; provided, however, that if the period from the redemption date to such Maturity Date is less than one year, a constant maturity of one year will be used. The yield to maturity on the United States Treasury securities shall be determined by reference to Federal Reserve Statistical Release H.15, as published on the most recent date that is at least two business days prior to the redemption date, or, if such Release is no longer published, by reference to such publicly available index as the Calculation Agent (as defined in APPENDIX D), in its judgment, shall deem reasonably comparable. The Make-Whole Redemption Price shall be determined and certified to the Trustee by the Calculation Agent.

If less than all Series 2016C Taxable Notes Outstanding are to be redeemed, the principal amount of Series 2016C Taxable Notes of each maturity to be redeemed may be specified by CNE by notice delivered to the Trustee not less than 20 days before the date fixed for redemption (unless a shorter notice is acceptable to the Trustee); provided, however, that the principal amount of Series 2016C Taxable Notes of each maturity to be redeemed may not be larger than the principal amount of Series 2016C Taxable Notes of such maturity then eligible for redemption and may not be smaller than the smallest Authorized Denomination.

If less than all Series 2016C Taxable Notes with the same maturity are to be redeemed, the particular Series 2016C Taxable Notes of such maturity to be redeemed will be selected by the Trustee not less than 15 days prior to the redemption date from the Outstanding Series 2016C Taxable Notes of such maturity then eligible for redemption by lot or by such other method as the Trustee deems fair and appropriate and which may provide for the selection for redemption of portions (in Authorized Denominations) of the principal of Series 2016C Taxable Notes of such maturity of a denomination larger than the smallest Authorized Denomination.

If the affected Series 2016C Taxable Notes are held by one or more of the Financing Participants, notice of optional redemption may be given three Business Days prior to the date fixed for redemption in the manner provided in the Indenture. Notice of any other redemption will be given to affected Noteholders in the manner provided in the Indenture not less than (i) seven days prior to the redemption date or (ii) if longer, the minimum notice period for redemption required by the Book Entry System.

A notice of optional redemption may state that the redemption of Series 2016C Taxable Notes is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, CNE will not be required to redeem the Series 2016C Taxable Notes (or portions thereof) identified in such notice, and any Series 2016C Taxable Notes surrendered on the specified redemption date will be returned to the Noteholders of such Series 2016C Taxable Notes.

If notice of redemption is given and any conditions to such redemption are met, the Series 2016C Taxable Notes to be redeemed will become due and payable on the redemption date at the applicable redemption price, and from and after such date (unless CNE defaults in the payment of the redemption price) such Series 2016C Taxable Notes will cease to bear interest.

PLAN OF FINANCING

General

The Obligated Group is refinancing all of its debt (the “Prior Debt”) secured by its existing master trust indenture (the “Prior Master Indenture”) through the issuance by CNE of its Series 2016C Taxable Notes and by the Corporation of its Series 2016B Bonds described below. When the Series 2016B Bonds and Series 2016C Taxable Notes are issued, all bonds and indebtedness secured by the Prior Master Indenture will be retired or defeased, and the Prior Master Indenture will be satisfied and terminated. The portion of the Prior Debt consisting of bonds issued by the Corporation for the benefit of the Obligated Group is referred to as the “Refunded Bonds.”

If the Prior Master Indenture was to remain in place and certain of the Prior Debt were to remain outstanding, the Obligated Group would have been in violation of certain financial covenants thereunder as of the end of the current fiscal year (ending September 30, 2016). With restructured financial covenants and debt service from this refinancing program, CNE will improve the prospects for expected completion of its current performance improvement plan and will better position itself for the successful completion of its proposed affiliation with Southcoast Health System, Inc. (“Southcoast”), a Massachusetts nonprofit corporation. CNE and Southcoast have entered into an affiliation agreement dated as of May 1, 2016 (the “Affiliation Agreement”). The affiliation is subject to various contingencies, including closing conditions, regulatory approval and the financial condition of CNE. There can be no assurance that the affiliation will be consummated. For a discussion of the Obligated Group’s performance improvement plan, see APPENDIX A – “MANAGEMENT DISCUSSION”. For a discussion of the affiliation plan with Southcoast and the conditions and contingencies for completion of the affiliation plan, see APPENDIX A – “STRATEGIC INITIATIVES – Southcoast Health Affiliation.”

Retirement of the Prior Debt

Series 2016C Taxable Notes. The Series 2016C Taxable Notes are being issued by CNE to retire or defease the following portions of the Refunded Bonds and indebtedness issued by the Obligated Group:

(a) A portion of the Corporation’s outstanding Hospital Financing Revenue Bonds, Care New England Issue, Series 2013A (the “Series 2013A Bonds”) (the portion allocable to facilities of Memorial).

(b) A portion of the Corporation’s outstanding Hospital Financing Revenue Bonds, Care New England Issue, Series 2014A (the “Series 2014A Bonds”) (the portion allocable to facilities of Memorial).

Proceeds of the Series 2016C Taxable Notes will also be used to pay costs of issuing the Series 2016C Taxable Notes.

The Series 2016C Taxable Notes will be secured by the Master Indenture on a parity with the Series 2016B Bonds.

Series 2016B Bonds. When the Series 2016C Taxable Notes are issued, the Corporation will issue its 2016B Bonds in the approximate aggregate principal amount of $138,710,000* to retire the remaining portions of the Prior Debt. The Series 2016B Bonds are being issued to refund the following Refunded Bonds:

(a) All outstanding Hospital Financing Revenue Refunding Bonds, Care New England Issue, Series 2010 (the “Series 2010 Bonds”).

(b) The remaining portion of the Corporation’s outstanding Series 2013A Bonds.

(d) All outstanding Hospital Financing Revenue Refunding Bonds, Care New England Issue, Series 2016A (the “Series 2016A Bonds”).

(e) All outstanding Health Facilities Revenue Bonds, The Providence Center Issue, Series 2013 (the “Providence Center 2013 Bonds”).

* Preliminary, subject to change.

Proceeds of the Series 2016B Bonds will also be used to fund a debt service reserve fund for the Series 2016B Bonds and to pay the costs of issuing the Bonds.

The Series 2016A Bonds are owned by an affiliate of the Underwriter for the Series 2016B Bonds.

Retirement of Prior Debt. When the Series 2016B Bonds and Series 2016C Taxable Notes are issued, the Series 2016A Bonds, the Series 2014A Bonds, the Providence Center Series 2013 Bonds, and the outstanding indebtedness issued by TPC will be retired. The Series 2010 Bonds and Series 2013A Bonds will be retired pursuant to separate refunding trust agreements (collectively, the “Refunding Trust Agreements”) entered into by the Corporation, the Obligated Group and the respective trustees for such bonds. Each Refunding Trust Agreement will establish an irrevocable trust fund (an “Escrow Fund”) to provide for payment and retirement of the Refunded Bonds covered by that Refunding Trust Agreement. Proceeds of the Series 2016B Bonds, proceeds of the Series 2016C Taxable Notes, or funds contributed by CNE, or a combination of such sources, will be deposited by CNE in each Escrow Fund and invested in U.S. Treasury obligations. Cash flow from the escrow securities, together with the initial cash balance remaining in the Escrow Fund after the purchase of the escrow securities, will be used to pay all principal and interest requirements on the related Refunded Bonds until and including the earliest optional redemption date for such Refunded Bonds, when any related Refunded Bonds outstanding will be redeemed. The earliest optional redemption dates for the Refunded Bonds being retired pursuant to the Refunding Trust Agreements are:

Refunded Bonds Earliest Optional to be Redeemed Redemption Date

Series 2010 Bonds December 30, 2017 Series 2013A Bonds September 1, 2023

The establishment of the Escrow Funds will constitute a legal defeasance of the related Refunded Bonds under the terms of the indentures authorizing the issuance of such Refunded Bonds.

ESTIMATED SOURCES AND USES OF FUNDS

The following table sets forth the estimated sources and uses of funds for the Series 2016B Bonds and the Series 2016C Taxable Notes (with all amounts rounded to the nearest dollar):

Series 2016B Series 2016C Sources of Funds Bonds Taxable Notes

Principal amount Net original issue premium Total Sources

Uses of Funds

Refunding of Series 2010 Bonds Refunding of Series 2013A Bonds Refunding of Series 2014A Bonds Refunding of Series 2016A Bonds Refunding of Providence Center 2013 Bonds Refinancing of TPC Taxable Debt Deposit to Debt Service Reserve Fund for the Series 2016B Bonds Costs of Issuance (including underwriting discount) Total Uses

DEBT SERVICE REQUIREMENTS

The following table sets forth estimated debt service requirements on the Series 2016B Bonds and the Series 2016C Taxable Notes. When the Bonds are issued, the Series 2016B Bonds and the Series 2016C Taxable Notes will be the only indebtedness of the Obligated Group outstanding that is secured by the Master Indenture. The only other indebtedness of the Obligated Group will be miscellaneous notes and capital leases with an aggregate principal balance of less than $11 million that will not be secured by the Master Indenture. Debt service on those notes and leases is not included in the following table.

For purposes of the following table, principal amounts of the Series 2016B Bonds subject to scheduled mandatory redemption requirements (sinking fund redemption) are shown as maturing in the fiscal year in which redemption is required. For purposes of this Preliminary Offering Memorandum, interest on the Series 2016B Bonds and Series 2016C Taxable Notes has been estimated based on current market conditions. For purposes of the Debt Service Coverage Ratio test under the Master Indenture, the 2016C Taxable Notes are treated as Balloon Debt and debt service is assumed to be payable in equal annual installments over a 30-year period at the Index Rate.

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Debt Service on Debt Secured by the Master Indenture(1)

Series 2016B Series 2016C Total Debt Fiscal Year Bonds Taxable Service Ending Notes(2) Requirements(3) Sept. 30 Assumed Principal Interest Payments

2017 $0 $6,586,821 $1,288,674 $7,875,495 2018 3,500,000 7,120,888 1,288,517 11,909,405 2019 3,640,000 6,980,888 1,288,660 11,909,547 2020 5,330,000 6,798,888 1,289,031 13,417,918 2021 5,600,000 6,532,388 1,288,582 13,420,970 2022 5,880,000 6,252,388 1,288,314 13,420,702 2023 6,175,000 5,958,388 1,288,179 13,421,567 2024 6,480,000 5,649,638 1,288,128 13,417,765 2025 6,805,000 5,325,638 1,288,113 13,418,750 2026 7,145,000 4,985,388 1,288,085 13,418,473 2027 7,500,000 4,628,138 1,288,997 13,417,135 2028 7,895,000 4,234,388 1,288,753 13,418,140 2029 8,310,000 3,819,900 1,288,351 13,418,251 2030 8,745,000 3,383,625 1,288,745 13,417,370 2031 9,205,000 2,924,513 1,288,837 13,418,350 2032 9,690,000 2,441,250 1,288,580 13,419,830 2033 10,200,000 1,932,525 1,288,925 13,421,450 2034 10,735,000 1,397,025 1,288,775 13,420,800 2035 11,295,000 833,438 1,288,083 13,416,521 2036 4,580,000 240,450 1,288,801 6,109,251 2037 -- -- 1,288,783 1,288,783 2038 -- -- 1,288,982 1,288,982 2039 -- -- 1,288,302 1,288,302 2040 -- -- 1,288,693 1,288,693 2041 -- -- 1,288,011 1,288,011 2042 -- -- 1,288,209 1,288,209 2043 -- -- 1,288,142 1,288,142 2044 -- -- 1,288,712 1,288,712 2045 -- -- 1,288,776 1,288,776 2046 -- -- 1,288,238 1,288,238 Totals $138,710,000 $88,026,565 $38,655,978 $265,392,538

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Note (1): Preliminary, subject to change. The Series 2016C Taxable Notes will be issued at the same time the Series 2016B Bonds are issued. Note (2): Debt service payments calculated according to assumptions provided by Master Indenture definition of Maximum Annual Debt Service. Note (3): As calculated under the Master Indenture definition, Maximum Annual Debt Service, including the miscellaneous debt mentioned above, is expected to be approximately $13.6 million.

THE OBLIGATED GROUP

For a discussion of certain matters regarding the Obligated Group, see APPENDIX A – “INFORMATION CONCERNING THE OBLIGATED GROUP” and the audited financial statements included in APPENDIX B-1 and APPENDIX B-2.

Consummation of the affiliation with Southcoast could result in the substitution of a new master indenture and obligated group. See APPENDIX A – “STRATEGIC INITIATIVES – Southcoast Health Affiliation.” The Master Indenture will permit the substitution of a new master indenture and obligated group under the terms and conditions described under APPENDIX C – “FORM OF MASTER INDENTURE.” Substitution of a new master indenture and obligated group is also subject to approval of the Corporation.

SOURCE OF PAYMENT AND SECURITY

Source of Payment

The Series 2016C Taxable Notes are unconditional, full faith and credit obligations of CNE.

Security

The Series 2016C Taxable Notes are secured by the Series 2016C Obligation. The Series 2016C Obligation will be the joint and several obligation of the Obligated Group secured by (i) a pledge of and security interest in the Gross Receipts of the Obligated Group and (ii) a first mortgage lien on and security interest in certain land, buildings and fixtures of Butler and Kent (collectively, the “Mortgages”).

The Master Indenture

The Series 2016C Obligation will be issued under and secured by the Master Indenture and will entitle the Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Obligated Group members by the Master Indenture. The Series 2016C Obligation is the full and unlimited obligation of the Obligated Group members secured by a pledge of the Gross Receipts of the Obligated Group members. See APPENDIX C – “FORM OF THE MASTER INDENTURE.”

The Master Indenture permits the addition and withdrawal of Obligated Group members, and the withdrawal of the Obligated Group as an Obligated Group member, upon the satisfaction of certain conditions. While not currently planned under the Affiliation Agreement, the contemplated affiliation with Southcoast could add Southcoast and certain affiliates thereof as members of the Obligated Group at some point in the future. See APPENDIX A – “STRATEGIC INITIATIVES – Southcoast Health Affiliation.” The Master Indenture permits the withdrawal of Obligated Group members subject to the satisfaction of certain conditions set forth in the Master Indenture. In addition, Article Twelve of the Master Indenture permits a replacement master trust indenture under the terms and conditions specified in Article Twelve. See APPENDIX C – “FORM OF THE MASTER INDENTURE.”

Mortgages Securing All Obligations Issued Under the Master Indenture

A first mortgage lien on and security interest in certain land, buildings, fixtures and other improvements of Butler and Kent (respectively, the “Mortgages” and the “Mortgaged Property”) will equally and ratably secure all promissory notes issued from time to time under the Master Indenture. Such security may be subject to alteration and release pursuant to the provisions of the Mortgages. The Mortgages are granted to secure Noteholders’ rights against creditors who are not secured under the Master Indenture. In conjunction with the issuance of the Series 2016C Taxable Notes, the Obligated Group will obtain a $10,000,000 title insurance policy in favor of the Master Trustee. No appraisal of the Mortgaged Property has been conducted to determine the value of the Mortgaged Property in connection with the issuance of the Mortgages.

The Mortgaged Property shall be comprised of the Butler core hospital campus (the “Butler Core Hospital Campus”) and the Kent core hospital campus (the “Kent Core Hospital Campus”). The Butler Core Hospital Campus is comprised of 11 buildings on the Butler Hospital campus and the land on which they are sited. These buildings are comprised of inpatient and outpatient facilities, including admissions and the emergency department, as well as the partial hospital facility, certain physician and clinician offices, certain research facilities and the hospital’s administration facility. The Kent Core Hospital Campus is comprised of the main hospital facility and the land on which it is sited but does not include a separate medical office building located on the Kent campus. Although at the time of issuance of the bonds real estate and buildings that are greater than the Butler Core Hospital Campus will be subject to the mortgage provided by Butler in favor of the Master Trustee, under the mortgage Butler will be permitted, upon receipt of any required governmental approvals, to release any other portions of the land and buildings owned by Butler from the Butler mortgage.

Negative Pledges

Restrictions in the conveyancing documents and other real estate documents that pertain to Memorial and WIH prohibit the granting of mortgages or contain other significant limitations on the Memorial and WIH properties. However, in addition to the limitation on liens under the Master Indenture, Memorial and WIH agree that they will not create or suffer to be created or exist any liens in favor of any party on certain, land, buildings and fixtures of Memorial and WIH (the “Negative Pledges” and “Restricted Property”). Accordingly, notices of the Negative Pledges will be recorded with respect to certain of the Memorial and WIH real estate.

Financial and Operating Covenants

The Master Indenture contains various financial and operating covenants, including (i) restrictions as to the creation of certain liens and encumbrances, (ii) restrictions on debts and guarantees of Obligated Group members, (iii) restrictions on transfers and dispositions of assets, (iv) a debt service coverage ratio, and (iv) a days’ cash on hand requirement, subject to the limitations discussed above. See APPENDIX C – “FORM OF THE MASTER INDENTURE.”

The Master Indenture covenants are structured to allow the Obligated Group time for implementation of its performance improvement plan. See “PLAN OF FINANCING” and APPENDIX A – “MANAGEMENT’S DISCUSSION.” Thus, certain covenants have a delayed initial testing date:

Debt service coverage ratio. The debt service coverage ratio will be tested annually, beginning in Fiscal Year 2019. If the debt service coverage ratio is below 110% for Fiscal Year 2019 or any subsequent Fiscal Year, the Obligated Group is required to retain an Independent Consultant. If the debt service coverage ratio is below 100% for Fiscal Year 2019 or any subsequent Fiscal Year, a default will exist under the Master Indenture. See Section 6.9 of the Master Indenture in APPENDIX C.

Days’ Cash on Hand. Days’ Cash on Hand will be tested annually, on the last day of each Fiscal Year, beginning with Fiscal Year 2017. If Days’ Cash on Hand are less than 30 for Fiscal Year 2017 or any subsequent Fiscal Year, the Obligated Group is required to retain an Independent Consultant. If Days’ Cash on Hand are less than 25 for Fiscal Year 2017 or any subsequent Fiscal Year, a default will exist under the Master Indenture. See Section 6.14 of the Master Indenture in APPENDIX C.

The Master Indenture also includes certain provisions to facilitate a restructuring or affiliation. The Obligated Group can dispose of Memorial Hospital or its assets without meeting the provisions otherwise limiting the disposition of assets. See Section 6.10 of the Master Indenture in APPENDIX C. The Master Indenture also permits the substitution of a new master indenture and obligated group under the terms and conditions specified in the Master Indenture. If the substitution is proposed as a result of an affiliation with Southcoast, there is no rating requirement for the resulting obligated group. See Section 12.1 of the Master Indenture in APPENDIX C.

Acceleration

Upon a failure of the Obligated Group (i) to pay when due any payment required to be made under the Series 2016C Obligation, or (ii) an event of default triggering acceleration shall occur under a Related Bond Indenture or Related Bond (as such terms are defined in the Master Indenture), all amounts due under the Series 2016C Obligation shall be declared to be due and payable immediately by the Trustee.

Certain Additional Covenants of the Obligated Group

The Master Indenture contains additional provisions, covenants and restrictions related to disposition of assets, mergers and other matters. See APPENDIX C – “FORM OF THE MASTER INDENTURE.” In addition to the covenants discussed above and set forth in APPENDIX C, the Obligated Group has entered into, and may in the future enter into, additional covenants for the benefit of certain creditors. The enforceability of any such covenants will be at the sole discretion of such creditors.

RISK FACTORS

Introduction

This discussion of risks to the owners of the Series 2016C Taxable Notes is not intended as dispositive, comprehensive or definitive, but rather is to summarize certain matters which could affect payment on the Series 2016C Taxable Notes. Other sections of this Offering Memorandum (including the appendices), as cited herein, should be referred to for a more detailed description of risks described in this section, which descriptions are qualified by reference to any documents discussed therein. Copies of all such documents are available for inspection at the principal office of CNE.

Liability of CNE

The Series 2016C Taxable Notes are unconditional, full faith and credit obligations of CNE. However, no representation or assurance can be given that the Obligated Group will generate sufficient revenues sufficient to pay principal of, redemption price, if any, and interest on the Series 2016C Taxable Notes and to make other payments required by the Indenture. The capabilities of management, future legislation, regulatory actions, economic conditions, changes in demand for health care, or other factors could adversely affect the Obligated Group’s ability to pay its obligations. For a discussion of the financial condition of the Obligated Group, see APPENDIX A.

Limitations on Security and Remedies

Bankruptcy and Equitable Principles. The enforcement of remedies under the financing documents may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases. For example, if a proceeding in bankruptcy is initiated with respect to members of the Obligated Group, the automatic stay provisions of the federal bankruptcy law may delay or restrict the ability of the Master Trustee to apply the proceeds of Gross Receipts as provided in the remedy provisions of the Master Indenture.

Possible Limitations on Joint and Several Liability of Obligated Group Members. The joint and several obligation of members of the Obligated Group is in effect a guaranty by each member of the obligations of all other members of the Obligated Group. The state of insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of such guarantees is unsettled. Thus, the ability of the Master Trustee to enforce the Master Indenture against any member of the Obligated Group that would be rendered insolvent by the required payment could be subject to challenge. For example, these provisions of law might be applied to preclude a member of the Obligated Group from making payment with respect to the Series 2016C Obligation or another obligation issued under the Master Indenture (referred to hereinafter as a “Master Indenture Obligation”) if the proceeds of the related loan were not received by such member and payment on such Master Indenture Obligation would render such member insolvent. Also, these provisions of law might be applied to preclude a member of the Obligated Group from making a payment with respect to a Master Indenture Obligation if the obligation of such member under such Master Indenture Obligation was incurred without “fair”, “valuable” or “fairly equivalent” consideration to such

member and payment under such Master Indenture Obligation would render such member insolvent. The standards for determining the fairness or value of consideration and the manner of determining insolvency are not clear and may vary under the federal bankruptcy code, state fraudulent conveyance statutes and applicable judicial decisions.

Enforceability of Obligations. The obligations described herein of the Obligated Group to pay, or cause to be paid, promptly the principal of, premium, if any, and interest on the Obligations may not be enforceable to the extent that payment on the Obligations would be required to be made from any money or assets that are donor restricted or that are subject to a direct, express or charitable trust which does not permit the use of such monies or assets for payment of the obligation evidenced by the Obligations.

Any Obligation not issued for the benefit of a particular Obligated Group member may not be enforceable against such Obligated Group member if such enforcement would result in the cessation or discontinuance of any material portion of the health care or related services or other charitable services previously provided by such Obligated Group member. It is possible that in an action involving the enforceability of the obligation of one Obligated Group member to make payments on an Obligation issued for the benefit of another Obligated Group member, the obligation may not be enforceable in the event it is determined that sufficient consideration therefor was not received by such Obligated Group member and that the incurrence of such obligation has rendered or will render the Obligated Group member insolvent or will result in the Obligated Group member being undercapitalized.

Limitations on Lien on Gross Receipts. Under the terms of the Trust Indenture, CNE shall make payments to the Note Trustee sufficient to pay the Series 2016C Taxable Notes and the interest thereon as the same become due. The obligation of CNE to make such payments is secured by the Series 2016C Obligation issued under the Master Indenture which, in turn, is secured by a security interest granted to the Master Trustee in the Gross Receipts of the Obligated Group. Such lien is on a parity with the lien on Gross Receipts securing all other Master Indenture Obligations, if any. The lien on Gross Receipts may become subordinate to certain Permitted Liens under the Master Indenture. See “FORM OF THE MASTER INDENTURE” in APPENDIX C hereto.

The effectiveness of the security interest in the Obligated Group members’ Gross Receipts granted in the Master Indenture may be limited by a number of factors, including (a) commingling of such Gross Receipts with other moneys not so pledged or rights of third parties in Gross Receipts not in the possession of the Master Trustee, (b) provisions prohibiting the direct payment of amounts due to health care providers from Medicaid and Medicare programs to persons other than such providers and (c) present or future prohibitions against assignment of such amounts contained in any applicable statutes or regulations.

To the extent that Gross Receipts are derived from payments by the federal or state government under the Medicare or Medicaid program, any right to receive such payments directly may be unenforceable. The Social Security Act and state regulations prohibit anyone other than the individual receiving care or the institution providing service from collecting Medicare and Medicaid payments directly from the federal or state government. In addition, Medicare and Medicaid receivables may be subject to provisions of the Assignment of Claims Act of 1940, which restricts the ability of a secured party to collect accounts directly from government agencies. With respect to receivables and revenues not subject to the lien, or where such lien was unenforceable, the Master Trustee would occupy the position of an unsecured creditor. Counsel to the Obligated Group has not provided an opinion with regard to the enforceability of the lien on Gross Receipts of the Obligated Group, where such Gross Receipts are derived from the Medicare and Medicaid programs.

In the event of bankruptcy of a member of the Obligated Group, transfers of property by the bankrupt entity, including the payment of debt or the transfer of any collateral, including receivables and Gross Receipts on or after the date which is 90 days (or, in some circumstances, one year) prior to the commencement of the case in bankruptcy court may be subject to avoidance or recoupment as preferential transfers. Under certain circumstances a court may have the power to direct the use of Gross Receipts to meet expenses of the member of the Obligated Group before paying debt service on the Series 2016C Taxable Notes.

Pursuant to the Rhode Island Uniform Commercial Code, a security interest in the proceeds of Gross Receipts may not continue to be perfected if such proceeds are not paid over to the Master Trustee by an Obligated Group member under certain circumstances. If any required payment is not made when due, the Obligated Group members must transfer or pay over immediately to the Master Trustee any Gross Receipts with respect to which the security interest remains perfected pursuant to law. Any Gross Receipts thereafter received shall upon receipt by an Obligated Group member be transferred to the Master Trustee without such Gross Receipts being commingled with other funds, in the form received (with necessary endorsements) up to an amount equal to the amount of the missed payment.

The value of the security interest in the Gross Receipts could be diluted by the incurrence of Debt secured equally and ratably with (or in certain cases senior or subordinate to) the Series 2016C Taxable Notes as to the security interest in the Gross Receipts.

Additional Debt. All Master Indenture Obligations are secured on a parity by the lien on Gross Receipts. Subject to the debt coverage and other tests set forth therein, the Master Indenture permits the Obligated Group to incur additional debt, including the issuing of additional bonds secured by Master Indenture Obligations. If the Obligated Group incurs additional debt secured by Master Indenture Obligations, the security interest in Gross Receipts for the benefit of Noteholders will in effect be diluted.

Realization of Value on the Mortgaged Property. The Mortgaged Property is not comprised of general purpose buildings and would not generally be suitable for industrial or commercial use. It could be difficult to find a buyer or lessee for the Mortgaged Property if it were necessary to foreclose on the Mortgaged Property. Thus, upon a default, it may not be possible to realize the amount of indebtedness secured by a lien on the Mortgaged Property from a sale or lease of the Mortgaged Property.

No representation is made regarding the current value of the Mortgaged Property. No appraisal or other estimation of value from a person qualified to render the same has been obtained with respect to the Mortgaged Property. Further, certain risk factors and unknown information may, among other things, significantly reduce the purchase price at a foreclosure sale or the value of the Mortgaged Property that may be realized in the event of a foreclosure. These risk factors include, without limitation:

• No diligence has been undertaken as to whether the Mortgaged Property is in compliance with state and federal statutes, local ordinances, regulations or orders promulgated under any of the foregoing governing the real property encumbered by the Mortgages, the physical improvements thereon, and/or the use thereof (including, without limitation, the Americans with Disabilities Act, zoning and land use laws, building codes and any permits and/or entitlements required for the operation of a hospital in Rhode Island).

• No physical inspection of the structure, exterior, roofing, interior or plumbing, electrical, mechanical and/or other major systems comprising the improvements, or any other aspect of such improvements encumbered by the Mortgages was undertaken in connection with the execution of the Mortgages, and no copies of existing inspections or studies of such physical improvements were requested in connection with the execution of the Mortgages.

• The insurance maintained with respect to the Mortgaged Property may not be sufficient to repair any damage incurred in a casualty.

Hazardous Substances on Mortgaged Property. While governmental taxes, assessments and charges are common claims against the value of property, other less common claims may be relevant. In particular, any claim with regard to hazardous substances, if determined adversely to Butler or Kent, could have a material adverse impact on the value of the Mortgaged Property. Moreover, Butler or Kent may be required by law to remedy conditions on the Mortgaged Property relating to hazardous substances. The federal Comprehensive Environmental Response Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act” is the most well-known and widely applicable of these laws. Rhode Island laws with regard to hazardous substances are stringent and similar to certain federal requirements. Under many of these laws, the owner (or operator), and/or certain other parties holding an interest in the property, may be obligated to remedy a hazardous substance condition of property, whether or not the owner, operator or such other party had or has anything to do with the creation or handling of the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous

substance but from the method of handling the hazardous substance. No environmental studies of the Mortgaged Property have been performed in connection with the execution of the Mortgages, and no copies of any existing environmental studies have been requested in connection with the execution of the Mortgages. If adverse environmental conditions exist at the Mortgaged Property, regardless of whether originated thereon or elsewhere, Butler or Kent, any transferee in foreclosure, any purchaser at a foreclosure sale, or any party holding a security interest in the Mortgaged Property could be liable for the remediation thereof, fines and penalties assessed in connection therewith, or damages suffered by any party injured by such condition. A further effect, should the Mortgaged Property be affected by a hazardous substance, is generally to reduce the marketability and value of the parcel, possibly to the extent that the Mortgaged Property has a negative value. Any of these circumstances could significantly affect the value of the Mortgaged Property and the improvements thereon that would be realized upon a default and foreclosure or deed in lieu thereof.

Other statutory provisions (such as federal bankruptcy laws) may have the effect of delaying enforcement of the liens of the Mortgages in the event of a default by the Obligated Group.

Potential Liens on Assets of the Obligated Group. The Master Indenture permits certain liens or encumbrances, referred to in the Master Indenture as “Permitted Liens”, in favor of other creditors with respect to assets of the Obligated Group. If such a Permitted Lien is created, creditors secured by such liens will have a prior lien with respect to the assets covered by such Permitted Liens. For a description of Permitted Liens, see APPENDIX C.

Health Care Industry Factors

The health care industry is subject to a number of factors that could adversely affect the business prospects of the Obligated Group. For additional discussion of the risks for the health care industry and the Obligated Group, see APPENDIX A – “NOTEHOLDERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY.”

The Health Care Industry is Highly Regulated. The health care industry is highly regulated by the federal and state governments. These regulations relate to areas such as the required delivery of care whether or not patients have the resources for payment, the quality of care and outcomes of health care services provided, excessive readmission of patients, accuracy of billing and collecting for services rendered, privacy of patients and their health care information, and the relationship between providers and physicians who refer patients to the provider’s health care facilities. For providers organized as charitable organizations under Section 501(c)(3) of the Internal Revenue Code there are additional regulations that must be satisfied to preserve tax-exempt status. The cost of compliance with these regulations is significant.

Payment Systems. The Obligated Group derives most of its revenues from Medicare, Medicaid, Blue Cross and other third party payor programs. Such programs may provide payment for services rendered to their beneficiaries in an amount that is less than actual patient charges. These payment systems are complex, subject to periodic change, and require a high degree of accuracy in the billing and collecting process. Failure to submit accurate billing may result in large financial penalties or claims or disqualification from the program. Penalties or claims may be from governmental authorities, such as the Justice Department and the Office of Inspector General, independent auditing firms under contract with the government, or from private litigants under so-called “qui tam actions.”

Alternate Payment Systems. The payment systems for health care services may be expanded to cover capitation or other coverage programs in which the providers assume the risk of health care services for a defined population. The Obligated Group currently does not provide coverage on a capitated basis; however, the Obligated Group plans to begin participation in capitated coverage arrangements with Blue Cross Medicare Advantage and Blue Cross Commercial on January 1, 2017. The development of these and other such coverage programs could force the Obligated Group to assume increased risk for the amount and cost of services it provides.

Health Care Reform. In 2010 Congress adopted extensive health reform legislation commonly referred to as the Affordable Care Act (ACA). This legislation attempts to extend commercial insurance coverage and Medicaid coverage to many patients not previously covered. Rhode Island and Massachusetts, the states where the Obligated Group primarily operates, have expanded Medicaid coverage to take advantage of certain provisions of

the ACA. This legislation also imposes numerous operating and reporting requirements on health care providers. Implementation of the various ACA initiatives will take several years and will require extensive time and expense. Implementation is also uncertain. This legislation has been the subject of litigation before the United States Supreme Court on several occasions. The outcome of future litigation or Congressional action could result in a complete or partial repeal of the ACA. Whether or not the ACA remains in effect, it is expected that governments will continue to consider various reform proposals in the health care industry. If adopted, such proposals may subject health care providers to increased compliance requirements, reduced reimbursement for services, increased costs, or a combination of such results.

Trend Toward Large-Deductible Insurance Policies. Coverage provided by insurance is trending toward large deductibles or self-insurance retention for patients, which reduces the required premiums, but increases out-of- pocket expense for the insured. These large deductible policies can be expected to increase the challenge of collecting for services rendered and may result in an increase of bad debt expense for health care providers.

Budgetary Pressure for Medicare and Medicaid Funding. Medicare and Medicaid are government- sponsored programs. Funding for those programs is subject to the legislative process of federal and state governments. The spending policies or deficit reduction initiatives of those governments have resulted in significant reductions in reimbursement for health care services in the past and can be expected to apply pressure on reimbursement for the foreseeable future.

Competition from Other Providers. The health care industry is highly competitive. Construction of new facilities in the Obligated Group’s market can have an adverse effect on utilization of the Obligated Group’s facilities. Payors for health care services, including private insurers, may form “closed” or “narrow” networks or policies that restrict payment for services only to certain providers in a coverage area. Exclusion of the Obligated Group from such networks can have a significant negative impact on utilization at the Obligate Group’s facilities.

Physician Recruitment. A patient’s physician has an important role in determining where that patient seeks health care services. Thus, it is important that the Obligated Group maintain a high quality medical staff with a mix of primary care and specialty physicians that meets the needs of patients. The medical staff may be comprised of independent physicians or employed physicians. In recent years the Obligated Group has pursued a strategy of employing physicians to enhance the availability of high quality physicians to meet the needs of patients and their insurers. This strategy has increased expenses for the Obligated Group and contributed to the operating deficit, although consolidation of practice groups and other cost-reduction efforts are expected to improve the results of this strategy.

Capital Investment and Technology. The technology for diagnosis and treatment of patients change rapidly and requires large capital investment on an ongoing basis in order for a health system to meet the needs of its patients.

Other Factors Affecting the Health Care Industry. In addition to the factors discussed above, the following additional factors, among others, may adversely affect the operations of health care providers, including the Obligated Group:

• Increased efforts by insurers, private employers and governmental agencies to limit the cost of hospital services, 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.

• Termination of existing agreements between a provider and employed physicians who render services to the provider’s patients, or alteration of referral patterns by independent physicians and physician groups.

• The availability and cost of insurance or self-insurance to protect against malpractice and general liability claims.

• Environmental and hazardous waste disposal regulations.

• Future legislation and regulations affecting the tax-exempt status of 501(c)(3) hospitals or imposing additional requirements on qualification.

• The reduced need for hospitalization or other traditional health care services as a result of medical and other scientific advances.

• Imposition of wage and price controls for the health care industry.

• The availability of or cost of retaining nursing, technical or other health care personnel.

• The spread of any bacteria, virus or infectious disease that is resistant to existing drugs or medical treatment.

• Reduction in population, increased unemployment or other adverse economic conditions in the market.

State-Specific Considerations.

Rhode Island has a substantial matrix of health care laws and regulations that mirror, in many ways, federal provisions. There are anti-kickback provisions, prohibitions on self-referral, and provisions governing false claims and abuse. The Rhode Island Medicaid program has complex provisions relating to admission of providers and standards of conduct for Medicaid providers. In addition, there are whistleblower protections for all reports of alleged health care wrong doing.

Certificates of Need. The State has implemented a Certificate of Need (“CON”) program pursuant to which health care facilities, including acute care hospitals, are required to obtain state approval before expending funds in excess of a specified dollar threshold on capital projects or offering certain innovative services or new technologies. The existence of the CON program has two different implications for providers such as the Obligated Group. First, the program may limit a provider’s ability to respond on a timely basis to competitive programs offered by other providers. The time required for approval of a CON application is sometimes several years. Second, while the existence of the CON program may limit a provider’s ability to expand or add services needed to compete, the program has also, in certain instances, served as a barrier to entry that prevents would-be competitors from entering or expanding operations in a particular field of service.

Future State Legislation. From time to time, the Rhode Island State Legislature considers certain reforms aimed at containing health care costs and increasing coverage. Such reforms often include provisions to (i) provide more affordable coverage through expanded government health care programs, (ii) subsidize low-income residents to enable them to purchase health care coverage and (iii) study and implement payment system reforms. At this time, it is impossible to measure the overall financial impact that current and future legislation (if enacted) will have on the Obligated Group.

Ratings on the Series 2016C Taxable Notes

The Series 2016C Taxable Notes have been rated as indicated in “RATINGS.” No assurance can be given that the current ratings on the Series 2016C Taxable Notes will be maintained. A reduction or withdrawal of such ratings could affect the secondary market price of the Series 2016C Taxable Notes and the liquidity of the investment in the Series 2016C Taxable Notes. The current ratings assigned to the Obligated Group’s debt reflect certain downgrades and outlook changes during 2016.

Feasibility Study

A financial feasibility study (the “Study”) has been prepared by an independent consultant retained by CNE. The Study is available for review on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”). See “FEASIBILITY STUDY.” Investors are encouraged to read the Study in its entirety, together with the information on EMMA preceding the Study that refers to the proper use and understanding of the forecast included in the Study and the limitations inherent in a forecast of this nature.

The forecast included in the Study is the responsibility of CNE’s management. CNE’s management believes that the underlying assumptions are reasonable and that the forecast reflects its best estimate and judgment about the results reflected in the forecast. However, differences between the forecasted and actual results may occur as events and circumstances frequently do not occur as expected. Those differences may be material.

Performance Improvement Plan

CNE is currently engaged in a performance improvement initiative intended to restore profitability after experiencing real operational losses for years. Initiatives developed as part of management’s performance improvement plan had an impact on the results of operations for the current fiscal year, and are reflected in the budget assumptions for fiscal year 2016 and the Study. Implementation of these initiatives has resulted in substantial one-time losses during fiscal year 2016 with the goal and expectation of restoring profitability by fiscal year 2017. However, no assurance can be given that this result will be achieved or that any positive trends reflected in current year results and the financial forecast will continue. See APPENDIX A – “MANAGEMENT DISCUSSION.”

Southcoast Affiliation

The Obligated Group evaluates and pursues potential acquisition, merger and affiliation candidates as part of the overall strategic planning and development process. The Southcoast affiliation currently being pursued is a result of this process. The affiliation plan is subject to various contingencies, including closing conditions, regulatory approval and the financial condition of CNE. There can be no assurance that the affiliation will be consummated. For a discussion of the affiliation plan with Southcoast and the conditions and contingencies for completion of the affiliation plan, see APPENDIX A – “STRATEGIC INITIATIVES – Southcoast Health Affiliation.”

Other Affiliation, Acquisition and Disposition Transactions

In general, the Obligated Group reviews the use, compatibility and business viability of many of the operations of the Obligated Group, and from time to may pursue changes in the use of, or disposition of, the facilities. Likewise, the Obligated Group occasionally receives offers from, or conducts discussions with, third parties about the potential acquisition of operations or properties which may become subsidiaries or affiliates of the Obligated Group members in the future, or about the potential sale of some of the operations and properties which are currently conducted or owned by the Obligated Group. Discussions with respect to affiliation, merger, acquisition, disposition, or change of use of facilities, including those which may affect the Obligated Group, are held from time to time with other parties. These may be conducted with acute care hospital facilities and may relate to potential affiliation with the Obligated Group. As a result, it is possible that the current organizations and assets of the Obligated Group and future members of the Obligated Group may change from time to time.

Under the Affiliation Agreement between CNE and Southcoast, the parties have agreed that their affiliation discussions will be exclusive pending the final outcome of the planned affiliation.

Coordination with Series 2016B Bond Financing

The Series 2016C Taxable Notes are being offered at substantially the same time the Series 2016B Bonds are being offered, and CNE plans to close both transactions at the same time. Failure to consummate both financings would preclude the satisfaction of the existing master indenture of the Obligated Group and would preclude the issuance of the Bonds. See “PLAN OF FINANCING.”

EXEMPTION FROM REGISTRATION

The Obligated Group consists of entities organized exclusively for educational and charitable purposes and not for pecuniary profit, and no part of the net earnings of CNE inures to the benefit of any person, private shareholder or individual. The Series 2016C Taxable Notes are exempt from registration under Section 3(a)(4) of the Securities Act of 1933, as amended.

TAX STATUS

Interest on the Series 2016C Taxable Notes is not excludable from the gross income of the owners of the Series 2016C Taxable Notes under Section 103 of the Internal Revenue Code of 1986, as amended. No information is provided in this Offering Memorandum with respect to federal, foreign, state or local tax laws. Purchasers of the Series 2016C Taxable Notes should consult their own tax advisors as to the federal, foreign, state and local tax considerations affecting the purchase, holding and disposition of the Series 2016C Taxable Notes.

CONTINUING DISCLOSURE

Rule 15c2-12, promulgated by the Securities and Exchange Commission (“Rule 15c2-12” or the “Rule”), does not apply to the issuance of the Series 2016C Taxable Notes. CNE has entered into a continuing disclosure agreement (the “Continuing Disclosure Agreement”) in connection with the Series 2016B Bonds. Holders and prospective purchasers of the Series 2016C Taxable Notes may obtain copies of the information provided by CNE under that Continuing Disclosure Agreement on EMMA. The Continuing Disclosure Agreement shall remain in force so long as any Notes are outstanding.

The Obligated Group is subject to continuing disclosure requirements under existing continuing disclosure agreements. In the past five years, the Obligated Group has complied in all material respects with the existing continuing disclosure agreements.

LEGAL MATTERS

All legal matters incidental to the authorization and issuance of the Series 2016C Taxable Notes are subject to the approval of Butler Snow LLP, Note Counsel, whose approving opinion, substantially in the form attached hereto as APPENDIX E, will be delivered with the Series 2016C Taxable Notes. Note Counsel is not passing upon the accuracy or the adequacy of the statements made in the Offering Memorandum except the Sections entitled: INTRODUCTION,” as such section relates to the Series 2016C Taxable Notes or the security for the Series 2016C Taxable Notes; “THE SERIES 2016C TAXABLE NOTES;” “SOURCE OF PAYMENT AND SECURITY,” insofar as such section relates to the Series 2016C Taxable Notes or the security for the Series 2016C Taxable Notes and excepting therefrom in their entirety the sections entitled “Mortgages Securing All Obligations Issued under the Master Trust Indenture” and “Negative Pledges;” “TAX STATUS;” and APPENDICES C, D, E and F. Balch & Bingham LLP will pass upon certain legal matters on behalf of the Underwriter. Hinckley, Allen & Snyder LLP and Butler Snow LLP will pass upon certain legal matters on behalf of the Obligated Group. Hawkins Delafield & Wood LLP will pass upon certain legal matters on behalf of the Trustee.

LITIGATION

To the knowledge of the Obligated Group, there is not now pending any litigation restraining or enjoining the issuance or delivery of the Series 2016C Taxable Notes or questioning or affecting the validity of the Series 2016C Taxable Notes or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members or other officers of CNE or the members of the Obligated Group to their respective offices is being contested.

The members of the Obligated Group, like other similar hospitals and healthcare providers, are subject to a variety of suits and proceedings arising in the ordinary course of business. In the opinion of the members of the Obligated Group, no litigation, individually or in the aggregate, currently pending or to the knowledge of the members of the Obligated Group, threatened against them will result in a material adverse effect on their financial condition. FINANCIAL ADVISOR

The Obligated Group has retained Kaufman, Hall & Associates, LLC, Skokie, Illinois (“Kaufman Hall”), as financial advisor in connection with the issuance of the Series 2016C Taxable Notes. Although Kaufman Hall has assisted in the preparation of this Offering Memorandum, Kaufman Hall 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 Offering Memorandum.

RATINGS

Fitch Ratings (“Fitch”) and Standard & Poor’s Ratings Services (“S&P”) have assigned their municipal bond ratings of “BBB-, Outlook Negative” and “BB, Outlook Stable,” respectively, to the Series 2016C Taxable Notes. Such ratings reflect only the views of such rating agencies and an explanation of the significance of such ratings may be obtained from the rating agency furnishing such rating. The above ratings are not a recommendation to buy, sell or own the Series 2016C Taxable Notes, and there is no assurance that such ratings will continue for any given period of time or that they will not be revised or withdrawn entirely by either or both of such rating agencies if, in its or their judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2016C Taxable Notes.

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Underwriter”), has entered into a bond purchase agreement dated ______, 2016, in which the Underwriter has agreed to purchase the Series 2016C Taxable Notes at a purchase price of $______(par amount of all of the Series 2016C Taxable Notes, less underwriter’s discount of $______). The Underwriter may offer the Series 2016C Taxable Notes to certain dealers (including dealers depositing the Series 2016C Taxable Notes in unit investment trusts, certain of which may be sponsored or managed by the Underwriter) and others at a price lower than that offered to the public. The initial public offering price may be changed from time to time by the Underwriter. Under the bond purchase agreement, the Obligated Group has agreed to indemnify the Underwriter against certain costs, claims and liabilities, including certain liabilities arising under the Securities Act of 1933.

The Series 2016A Bonds are owned by an affiliate of the Underwriter and will be refunded with the proceeds of the Series 2016B Bonds.

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

In the ordinary course of its various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities, which may include credit default swaps) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Corporation and Obligated Group.

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

FEASIBILITY STUDY

CNE retained an independent firm to prepare a financial feasibility study (the “Study”) in connection with the offering of the Series 2016B Bonds and the Series 2016C Taxable Notes. That Study is not included in and does not form a part of this offering statement. The Study has been filed on EMMA and is available for review at www.emma.org (reference CUSIP No. 7622436N8). Investors are encouraged to read the Study in its entirety, together with the information on EMMA preceding the Study that refers to the proper use and understanding of the forecast included in the Study and the limitations inherent in a forecast of this nature.

INDEPENDENT ACCOUNTANTS FOR CNE

The consolidated financial statements of Care New England Health System and Affiliates as of and for the years ended September 30, 2015 and 2014, included in this offering statement as APPENDIX B-1, have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report appearing in APPENDIX B-1.

PricewaterhouseCoopers LLP has neither examined, compiled nor performed any procedures with respect to the Study and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance on the forecast included in the Study. PricewaterhouseCoopers LLP assumes no responsibility for and denies any association with the Study.

The PricewaterhouseCoopers LLP reports included in this offering document, including the information contained in APPENDIX B-1, refer exclusively to CNE’s historical financial information. PricewaterhouseCoopers LLP reports do not cover any other information in this offering and should not be read to do so.

INDEPENDENT ACCOUNTANTS FOR TPC

The consolidated financial statements of The Providence Center and Affiliates as of and for the years ended June 30, 2015 and 2014, included in this offering statement as APPENDIX B-2, have been audited by Kahn, Litwin, Renza & Co., Ltd., independent accountants, as stated in their report appearing in APPENDIX B-2.

Kahn, Litwin, Renza & Co. has neither examined, compiled nor performed any procedures with respect to the Study and, accordingly, Kahn, Litwin, Renza & Co. does not express an opinion or any other form of assurance on the forecast included in the Study. Kahn, Litwin, Renza & Co. assumes no responsibility for and denies any association with the Study.

The Kahn, Litwin, Renza & Co. reports included in this offering document, including the information contained in APPENDIX B-2, refer exclusively to TPC’s historical financial information. Kahn, Litwin, Renza & Co. reports do not cover any other information in this offering and should not be read to do so.

MISCELLANEOUS

The references herein to the Indenture and the Series 2016C Taxable Notes are brief descriptions of certain provisions thereof. Such descriptions do not purport to be complete, and reference is made to such documents for full and complete statements therein. So far as any statements are made in this Offering Memorandum involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. Copies of the executed Indenture will be on file at the corporate trust office of the Trustee.

The Bank of New York Mellon Trust Company, N.A. has not reviewed and takes no responsibility for any information contained in this Offering Memorandum.

AUTHORIZATION AND APPROVAL

The distribution of this Offering Memorandum has been duly authorized and approved by CNE.

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APPENDIX A

INFORMATION CONCERNING THE OBLIGATED GROUP

[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

OVERVIEW AND BACKGROUND OF THE HEALTH SYSTEM ...... 1 Introduction ...... 1 General ...... 1 The Obligated Group ...... 2 Butler Hospital ...... 3 Kent County Memorial Hospital ...... 3 Southeastern Healthcare System, Inc. and The Memorial Hospital ...... 3 Women & Infants Corporation and Women & Infants Hospital of Rhode Island ...... 3 The Providence Center ...... 4 Kent County Visiting Nurse Association d/b/a VNA of Care New England ...... 4 Forward Looking Statements ...... 4 GOVERNANCE AND MANAGEMENT ...... 4 General ...... 4 Board of Directors ...... 6 CNE Senior Management ...... 6 Executive Officers of Obligated Group Members Providing Healthcare Services ...... 9 STRATEGIC INITIATIVES ...... 10 Southcoast Health Affiliation ...... 10 Regulatory Processes ...... 11 Collaborations ...... 12 Other Strategic Initiatives ...... 13 ACADEMICS AND RESEARCH ...... 14 Affiliation with The Warren Alpert Medical School of Brown University ...... 14 Affiliation with The University of New England College of Osteopathic Medicine ...... 15 Other Educational Affiliations and Programs ...... 15 Research Activities ...... 16 EMPLOYEES ...... 17 LICENSURES, ACCREDITATIONS, MEMBERSHIPS, AND DESIGNATIONS ...... 18 Licensures and Accreditations ...... 18 Memberships and Designations ...... 19 THE PROJECT ...... 20 FACILITIES AND SERVICES ...... 20 Care New England Key Services ...... 23 MEDICAL STAFF INFORMATION ...... 24 Overview ...... 24 Service Area ...... 28 Service Areas by County ...... 28 Demographic Information ...... 29 Competition ...... 30 Care New England Competitors: Location, Members, Size and Market Share ...... 31 HOSPITAL UTILIZATION ...... 33 SOURCES OF PATIENT SERVICE REVENUE ...... 34 Care New England Payor Mix ...... 34 RECENT FINANCIAL INFORMATION ...... 34 STATEMENTS OF OPERATIONS AND CHANGES IN UNRESTRICTED NET ASSETS ...... 35 SUMMARY OF CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 36 HISTORICAL DEBT SERVICE COVERAGE ...... 36 HISTORICAL INDEBTEDNESS RATIO ...... 37 OUTSTANDING INDEBTEDNESS ...... 37 DAYS CASH ON HAND ...... 38 MANAGEMENT DISCUSSION ...... 38 Consolidated Balance Sheet as of June 30, 2016 Compared to the Consolidated Balance Sheet as of September 30, 2015 and June 30, 2015 ...... 40 Utilization ...... 42

A-i The Providence Center, Inc. and Affiliates - Financial Information ...... 42 THE PROVIDENCE CENTER, INC. AND AFFILIATES CONSOLIDATED STATEMENTS OF OPERATIONS ...... 43 THE PROVIDENCE CENTER, INC. AND AFFILIATES SUMMARY OF CONSOLIDATED BALANCE SHEETS ...... 43 FEASIBILITY STUDY ...... 43 INVESTMENTS ...... 44 RETIREMENT PLANS ...... 45 SELF-INSURANCE ...... 45 LITIGATION ...... 46 NOTEHOLDERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY ...... 46 General ...... 46 Risks Affecting the Health Care Industry Generally ...... 47 Significant Risk Areas Summarized ...... 47 Impact of Market Turmoil and General Economic Factors ...... 50 Nonprofit Health Care Environment ...... 50 Health Care Reform ...... 52 Patient Service Revenues ...... 54 Rhode Island Cost Control Initiatives ...... 58 Regulatory Environment ...... 58 Certificate of Need Requirements ...... 63 Business Relationships and Other Business Matters ...... 64 Tax-Exempt Status of the Obligated Group and Other Tax Matters ...... 67 Other Risk Factors ...... 70

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OVERVIEW AND BACKGROUND OF THE HEALTH SYSTEM

Introduction

This Appendix A has been prepared in connection with the issuance by Care New England Health System (“Care New England”, “CNE” or the “Health System”) of its $______Series 2016C Taxable Notes (the “Notes” or “Series 2016C Taxable Notes”) and provides information with respect to CNE, Butler Hospital (“Butler” or “Butler Hospital”), Kent County Memorial Hospital (“Kent” or “Kent Hospital”), Kent County Visiting Nurse Association (“VNA”), Southeastern Healthcare System, Inc. (“SHS”), The Memorial Hospital (“Memorial” or “Memorial Hospital”), The Providence Center, Inc. (“The Providence Center” or “TPC”)1, Women & Infants Corporation (“WIC”) and Women & Infants Hospital of Rhode Island (“WIH”, “Women & Infants” or “Women & Infants Hospital”, and together with Care New England, Butler, Kent, VNA, SHS, Memorial, TPC and WIC, collectively, the “Obligated Group”. Butler, Kent, Memorial and WIH are referred to herein as the “Hospitals”). CNE has a number of affiliates that are not, and will not upon issuance of the Notes be, members of the Obligated Group, including Integra Community Care Network, LLC (“Integra”).

Simultaneously with the issuance of the Notes, the Obligated Group is obtaining additional financing through the issuance by the Rhode Island Health and Educational Building Corporation (the “Corporation”) of its $138,710,000* Hospital Financing Revenue Refunding Bonds, Care New England Issue, Series 2016B (the “Bonds” or the “Series 2016B Bonds”). Proceeds of the Series 2016B Bonds are being loaned to the Obligated Group. Proceeds of the Notes and Bonds will be used to effect the plan of financing described in the Offering Memorandum and this Appendix A.

Unless otherwise indicated, all financial and utilization data for any year refer to the fiscal year ended September 30. Terms defined elsewhere in the Offering Memorandum and not otherwise defined in this Appendix A are used herein with the meanings so defined.

General

The Health System, headquartered in Providence, Rhode Island, was established in November 1995 as the non-profit holding company for the development of an integrated delivery network of health care services. The network includes Butler Hospital, Kent Hospital, Memorial Hospital and Women & Infants Hospital (collectively, the “Hospitals”), TPC and the VNA. Care New England is recognized for its combination of primary care services, distinctive programs and world-class specialty services it has created through its member organizations and its affiliated partnerships.

Care New England has established itself as one of New England’s preeminent health care systems, attracting residents of Rhode Island, southeastern Massachusetts, and eastern Connecticut, and, through several of its specialty services, from across the country. Each of the four member hospitals is affiliated with local higher educational institutions. Butler, Memorial and Women & Infants are major teaching affiliates of The Warren Alpert Medical School of Brown University, and Kent is a teaching affiliate of The University of New England College of Osteopathic Medicine.

The Health System provides care each year to thousands of patients of all ages, from premature infants to senior citizens, and it offers specialized and acute care and preventive classes and programs to encourage people to be, and stay, as healthy as possible.

Critical statistics for the Health System for FY2015 include:

• 7,572 employees • 1,910 medical staff • 963 licensed beds, 80 Neonatal Intensive Care Unit beds, 136 bassinets • 23,058 surgical procedures • 10,091 births

1 The Providence Center will become part of the Obligated Group at the time the Notes are issued. * Preliminary, subject to change

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• 135,093 emergency room visits • 231,962 inpatient days (including normal newborn days) • $21,409,521 total research dollars

The Obligated Group

In addition to the Health System, the Obligated Group consists of the Hospitals, the VNA, SHS, the holding company for Memorial, TPC and WIC, the holding company for WIH. Based on financial statements as of and for the fiscal year ended September 30, 2015, with respect to the Health System’s net patient service revenues, Women & Infants accounted for approximately 42 percent, Kent accounted for approximately 32 percent, Memorial accounted for approximately 13 percent, Butler accounted for 7 percent, the VNA accounted for approximately 2 percent and the remainder of such revenues were attributable to TPC and CNE general corporate operations. With respect to the Health System’s combined assets, Women & Infants accounted for approximately 55 percent, Kent accounted for approximately 22 percent, Butler accounted for approximately 8 percent, Memorial accounted for approximately 6 percent, the VNA accounted for less than one percent and the remainder of such assets were attributable to TPC, Integra and CNE general corporate operations.

TPC was not part of the Obligated Group in FY2015, however, it would have represented approximately 3 percent of net patient service revenues and 3 percent of the combined assets of the Health System. TPC will become part of the Obligated Group as of the date of the issuance of the Notes.

The following table sets forth the organization of the Health System and other Obligated Group members.

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Butler Hospital

Butler, a nonprofit corporation formed under Rhode Island law, opened in 1844, making it the first hospital in Rhode Island. Today, it is the State’s premier teaching, treatment and research hospital for psychiatric and neurologic disorders, serving Rhode Island and southeastern New England. Its mission is to provide treatment of psychiatric illnesses in an atmosphere of dignity and respect, to contribute to knowledge through education and research, and to continuously improve its services to its patients and the community. With the opening of its newest inpatient building in October 2013, the number of Butler’s licensed beds increased by 26 to 143. See “FACILITIES AND SERVICES – Butler Hospital.”

Affiliated with The Warren Alpert Medical School of Brown University, Butler offers acute inpatient and partial hospital services for psychiatric and substance abuse treatment for adults and adolescents, including a state-of-the-art senior treatment center. See “EDUCATIONAL AFFILIATIONS – Affiliation with The Warren Alpert Medical School of Brown University” and “FACILITIES AND SERVICES – Butler Hospital.”

Kent County Memorial Hospital

Kent Hospital, a nonprofit corporation formed under Rhode Island law, and founded in 1946, is a 359-bed not-for-profit general hospital providing a full range of services for the acute care of patients, principally from Kent County, Rhode Island. Kent is located in Warwick, Rhode Island, approximately 12 miles south of Providence. It is the second largest hospital in the State. Kent provides a full complement of inpatient services including: cardiology and extended coronary care, infectious disease, primary care, oncology, orthopedics, obstetrics and gynecology, rehabilitation and surgery. In addition, Kent offers a comprehensive range of outpatient services, including cardiac catheterization, chemotherapy, diagnostic imaging, surgery, and rehabilitation services. Kent also operates a Women’s Diagnostic Imaging Center, the Kent Unit at Butler, a Wound Recovery Center and The Breast Health Center at Kent, a unique collaboration with Women & Infants. Kent also provides laboratory and primary care services at various sites throughout the community. See “FACILITIES AND SERVICES – Kent Hospital.”

Kent is a clinical training center for students attending the University of New England College of Osteopathic Medicine (“UNECOM”) and, in collaboration with UNECOM, operates residency programs in emergency medicine, family medicine, internal medicine and fellowship programs in hyperbaric medicine and gastroenterology. See “EDUCATIONAL AFFILIATIONS - Affiliation with The University of New England College of Osteopathic Medicine” herein.

Southeastern Healthcare System, Inc. and The Memorial Hospital

The mission of SHS, a nonprofit corporation formed under Rhode Island law, is to support Memorial Hospital, a nonprofit corporation formed under Rhode Island law, and its other affiliated organizations. Memorial Hospital is a 294-bed community hospital serving the Blackstone Valley of Rhode Island and southeastern Massachusetts. A teaching affiliate of The Warren Alpert Medical School of Brown University, Memorial is the chief site for the school’s primary care academic program. The hospital’s main campus is located in Pawtucket, Rhode Island. Memorial also provides primary and ambulatory care services in other locations in Pawtucket and Lincoln. The staff provides a full range of medical care as well as specialized programs in primary care, cardiovascular care, cancer care and restorative and rehabilitative care. See “FACILITIES AND SERVICES – Memorial Hospital.”

Women & Infants Corporation and Women & Infants Hospital of Rhode Island

The mission of Women & Infants Corporation, a nonprofit corporation formed under Rhode Island law, is to support Women & Infants Hospital, a nonprofit corporation formed under Rhode Island law, and its other affiliated organizations. Women & Infants opened in 1884 as the Providence Lying-In Hospital, and its initial purpose was limited to the delivery of babies. Women & Infants is the 12th largest stand-alone obstetrical service in the nation and the largest in New England, with approximately 8,500 deliveries each year. Women & Infants has 247 licensed beds, which includes 80 neonatal intensive care unit (“NICU”) beds. It offers a full range of obstetrics and gynecology specialty services for women of all ages, and has one of the nation’s largest single-family room neonatal intensive care units for babies born prematurely or sick. Women & Infants’ services include behavioral health, breast health, cancer care, cardiology, child and family development, diagnostic imaging, emergency care, fertility, gastroenterology,

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high-risk obstetrics, imaging, infectious disease, laboratory services, obstetric and consultative medicine, obstetrics, pediatrics, pelvic floor disorders physical therapy, primary care, reproductive endocrinology, surgical services, and urogynecology. See “FACILITIES AND SERVICES – Women & Infants Hospital.”

Women & Infants is affiliated with The Warren Alpert Medical School of Brown University and serves as the tertiary care center for neonatology, obstetrics, maternal fetal medicine and gynecology for all of Rhode Island and portions of the neighboring states of Massachusetts and Connecticut. See “EDUCATIONAL AFFILIATIONS – Affiliation with The Warren Alpert Medical School of Brown University.” Women & Infants offers educational programs and a wide range of medical, nutritional and support services through the Obstetrics and Gynecology Care Center and its outreach sites in East Greenwich, South Kingstown and Woonsocket, Rhode Island.

The Providence Center

TPC is a nonprofit corporation formed under Rhode Island law. Founded in 1969 as a community mental health center based in Providence, Rhode Island, TPC’s mission is to help people affected by mental health, behavioral health and substance use problems by providing treatment and supportive services within a community setting. In 2015, TPC served over 15,000 adults, children and families with behavioral health needs. More than 80 percent of TPC’s clients have an annual family income of less than $10,000. TPC provides individualized treatment in the community—in homes, in schools, and in neighborhoods – using evidence-based practices that help people overcome barriers to wellness and success. TPC works in partnership with clients and their families to help individuals reach their full potential and lead happy, productive lives in their communities. See “FACILITIES AND SERVICES – The Providence Center.”

Kent County Visiting Nurse Association d/b/a VNA of Care New England

The mission of the VNA, a nonprofit corporation formed under Rhode Island law, is to provide and administer a comprehensive, multi-disciplinary, therapeutic, hospice and public health nursing program. The VNA, founded in 1908, is a not-for-profit corporation with a staff of highly-trained nurses, nurse practitioners, home health aides, physical, occupational and speech therapists, social workers and a chaplain who deliver individualized home and hospice care to thousands of adults each year, helping them to live comfortably, safely and independently. Committed to maintaining healthy communities, the VNA offers bereavement support groups, health screenings and community education sessions at numerous locations. See “FACILITIES AND SERVICES – VNA.”

Forward Looking Statements

This Appendix A contains forward-looking statements that involve risks and uncertainties. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events of performance (often. but not always, through the use of the words or phrases such as “will result,” “expects to,” “will continue,” “anticipates,” “believes,” “plans,” “intends,” “estimated,” “projects” and “outlook”) are not historical and may be forward-looking. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by such forward-looking statements. Although the Obligated Group members believe that the expectations reflected in the forward-looking statements are reasonable, the Obligated Group members cannot guarantee future results, levels of activity, performance or achievements. Moreover, the Obligated Group does not assume responsibility for the accuracy or completeness of these statements. Accordingly, investors should not rely on forward-looking statements in this Appendix A.

GOVERNANCE AND MANAGEMENT

General

Care New England is the sole member of Butler Hospital, Kent Hospital, SHS (which is the sole member of Memorial Hospital), VNA, WIC (which is the sole member of Women & Infants) and TPC. The affairs of CNE are governed by its Board of Directors (the “Board”). The Board traditionally is comprised of between ten and seventeen elected Directors and five ex-officio Directors (the CNE CEO, and the CNE hospital medical staff presidents). However, the Board was temporarily expanded to include up to 19 elected directors for the period from April 23, 2015 until the number returns to 17 or less through resignation or removal. As of September 3, 2013, when CNE became the sole member of SHS, three individuals nominated by Memorial were elected to serve on the CNE Board (the

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“Memorial Directors”). As of January 1, 2015, CNE became the sole member of TPC, and one individual nominated by TPC was elected to serve on the CNE Board (the “TPC Director”). The Memorial Directors will serve as Directors until the 2016 Annual Meeting, and the TPC Director will serve until the 2017 Annual Meeting.1 The remaining elected Directors are serving in staggered three-year terms expiring at the Annual Meetings in each year.

Each member of the Obligated Group, other than TPC, has a Board of Directors that is comprised of the same individuals who serve on the CNE Board. TPC has a separate Board of Trustees (“TPC Board”). The TPC Board has, and may exercise, all of the powers of TPC; provided that certain actions require the approval of both of the TPC Board and the CNE Board (“CNE Reserved Powers”). In addition, CNE as the Member of TPC may act on behalf of TPC without approval of the TPC Board in exigent circumstance if the TPC Board refuses to vote on an action included in the CNE Reserved Powers. The TPC Board is comprised of between eleven and twenty-five Trustees, divided into two classes. The first class is three “Member Trustees” consisting of the CNE CEO, serving ex officio, and two additional individuals appointed by the CNE CEO with approval of the CNE Board, who serve unlimited terms. The second class is the “Corporation Trustees” nominated by TPC and approved by the CNE Board to fill the remaining seats on the TPC Board, who serve staggered terms of three years expiring on September 30 of each year.

1 CNE and Memorial annual meetings are held in December.

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Board of Directors

The following table lists the current members of the CNE Board of Directors, their position, year of initial appointment, year their current term expires, and their profession:

Year Term Name CNE Position Appointed Expires1 Profession Charles R. Reppucci* Chair 1984 2017 COO & Senior Non-Lawyer Law Firm Executive Gary E. Furtado Vice Chair 2013 2016 Finance Executive Douglas L. Jacobs Treasurer 2004 2017 Retired Finance Executive Cynthia B. Patterson Secretary 1982 2018 Community Volunteer Denise Arcand, M.D. Ex officio Director 2015 N/A Medical Staff President, Kent Hospital James A. Botvin Director 2015 2017 Retired Business Owner Mario Y. Bueno Director 2015 2017 Non-Profit Agency Director Allen H. Cicchitelli Director 1999 2018 Real Estate Executive Sharon Conard-Wells Director 2015 2016 Non-Profit Agency Director Esther Emard Director 2010 2016 Retired Healthcare Executive / Consultant Robert G. Flanders, Jr. Director 1997 2016 Former Rhode Island Supreme Court Justice; Attorney John R. Galvin Director 2009 2018 Finance Executive Michele Gange, M.D. Ex officio Director 2014 N/A Medical Staff President, Women & Infants Hospital Kent W. Gladding Director 2009 2017 Finance / Investment Executive Elizabeth Harrison, M.D. Ex officio Director 2016 N/A Medical Staff President, Memorial Hospital William M. Kapos Director 2013 2016 Business Executive Dennis D. Keefe Ex officio Director; 2011 N/A CNE President & CEO President and Chief Executive Officer Diane Lipscombe, PhD Director 2012 2018 Professor & Researcher/Director Research Institute Louis J. Marino, M.D. Ex officio Director 2015 N/A Medical Staff President, Butler Hospital Joseph J. McGair Director 2002 2018 Attorney Patrick J. Murray, Jr. Director 2013 2016 Finance Executive Robert G. Padula Director 2008 2016 Insurance Executive George W. Shuster Director 1996 2017 Business Executive Maribeth Q. Williamson Director 2003 2016 Insurance Executive

1 Terms expire at the Annual Meeting in December * Mr. Reppucci is the Executive Director and Chief Operating Officer of Hinckley, Allen & Snyder LLP, which is serving as counsel to CNE in connection with issuance of the Notes.

The following information identifies the senior management of the Health System as well as the chief executive officers of certain Obligated Group members and describes the qualifications and related areas of responsibility for each individual.

CNE Senior Management

Dennis D. Keefe, age 67, has served as the President & CEO of CNE since August, 2011. Mr. Keefe previously served as the Chief Executive Officer of Cambridge Health Alliance (“CHA”) and the Commissioner of Public Health for the City of Cambridge, Massachusetts, from 2002-2011. Under Mr. Keefe’s leadership, CHA grew significantly, becoming an over-$1 billion integrated healthcare delivery system. Mr. Keefe is currently Co-chair of Governor Raimondo’s Healthcare Leaders’ Workgroup and served as Co-chair of Governor Raimondo’s Reinvent Medicaid Workgroup in 2015. He currently sits on the Boards of Rhode Island Quality Institute, The Hospital Association of Rhode Island, the Narragansett Council of the Boy Scouts of America, and the Greater Providence Chamber of Commerce. He has served as Chair of the Hospital Association of Rhode Island, and on the Board of the Essential Hospitals Institute. He has served as Chair of the Massachusetts Hospital Association (“MHA”). Additionally, he has served on the Executive Committee of the National Association of Public Hospitals and as Board

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Chair of the National Public Health and Hospital Institute. In 2008, Mr. Keefe was honored with a Lifetime Achievement Award from the Massachusetts advocacy organization Health Care for All and, in 2009, received the American College of Healthcare Executives’ Massachusetts Healthcare Executive of the Year Award. He is a highest honors graduate of Northeastern University where he received the Dean’s Citation Award as the top student in the Health Sciences Program. Mr. Keefe also earned a master’s degree in business administration, with a focus in health care administration, from Northeastern University, and was honored as the 2005 Alumnus of the Year by Northeastern University.

Sandra Coletta, age 57, is an Executive Vice President and CNE’s Chief Operating Officer. Most recently she served as President and CEO of Kent Hospital. Before joining Care New England in 2008, she spent 25 years with Lifespan Health System and one of its founding institutions, The Miriam Hospital. She joined the staff of The Miriam Hospital in Providence at an entry level position, and over the course her tenure rose to the position of Chief Operating Officer. In 2008, Ms. Coletta was appointed to the position of Chief Executive Officer at Kent Hospital. Ms. Coletta currently serves as a member of the Board of Trustees for Providence College, The Rhode Island Blood Center, Roger Williams Zoological Society and the Rhode Island Board of Medical Licensure and Discipline. She has served on the board of the Chaplaincy Center, an interfaith organization providing pastoral care services and education. She has also been an active participant in community activities for the American Heart Association, the Leukemia and Lymphoma Society, and the ALS Association. Ms. Coletta earned a Bachelor of Science degree in accounting from Providence College and holds a Master of Business Administration degree from Bryant University.

James Fanale, MD, age 64, is an Executive Vice President who serves as Chief Clinical Integration Officer for CNE and Chief Clinical Officer of Integra Community Care Network, LLC (“Integra”) . He has also served as interim COO/CMO of Memorial Hospital of Rhode Island and is Executive Vice President, Physician Enterprise. Previously, Dr. Fanale served as Senior Vice President for System Development at Jordan Hospital, where he was responsible for the development of one of the nation’s first 27 Medicare Shared Savings Program – Accountable Care Organizations. Dr. Fanale earned his undergraduate degree from Pennsylvania State University and his medical degree from Chicago Medical School. He completed his residency at Worcester Memorial Hospital. He has held faculty appointments at Boston University School of Medicine and the University of Massachusetts Medical School. Dr. Fanale is a fellow in the American College of Physicians and the American Geriatrics Society, a member of numerous professional organizations, and has served as an advisor or consultant to numerous public and private organizations.

Joseph Iannoni, age 64, was named Executive Vice President and Chief Financial Officer of CNE in 2014. He also serves as Assistant Treasurer of CNE. Mr. Iannoni has 35 years of healthcare experience at large academic and research institutions as well as community hospital systems. He came to CNE from the Steward Health Care System where he served as Vice President of Finance and Operations. In addition to his work at Steward, Mr. Iannoni previously served as Vice President for Finance, CFO and COO for the Jordan Health Systems, Chief Financial Officer for the Caritas Christi Hospital Division, Vice President for Business Development for Caritas Christi Corporate Services, and Chief Financial Officer for the Shields Health Care Group. He earned his undergraduate degree in accounting and economics and his master of business administration from Lehigh University in Pennsylvania.

Alyssa V. Boss, Esq., age 49, has served as Senior Vice President and General Counsel of CNE since 2011. She also serves as Assistant Secretary of CNE. Previously, Mr. Boss served as Associate Vice President and General Counsel from 2005 to 2011. Ms. Boss received a Bachelor of Arts degree in Psychology from the University of Rhode Island in 1989, graduating Magna Cum Laude. She was also inducted into the Phi Beta Kappa and Psi Chi honor societies. Ms. Boss received a Master of Arts degree in Philosophy from the University of Rhode Island in 1991, and a Juris Doctor degree from the Roger Williams University School of Law in 1997, graduating as valedictorian. During law school, Ms. Boss was named a Dean’s Scholar and served as Senior Articles Editor of the Law Review. Following law school, Ms. Boss worked for two years at Roberts, Carroll, Feldstein and Peirce in Providence. In 1999, she joined the law firm of Hinckley, Allen & Snyder LLP in Providence where she remained until becoming employed by CNE. Ms. Boss is a member of the Rhode Island and Massachusetts Bars, the Federal District Court Bars for Massachusetts and Rhode Island, and the American Health Lawyers Association. She currently serves as Chair of the Health System’s Corporate Services Council.

Gail E. Costa, age 64, has served as Senior Vice President and Chief Strategy Officer of CNE since its formation in 1996. In this role, she is the senior officer responsible for the strategic development of the Health System and provides leadership on a broad range of strategy, policy and development matters. Throughout her career, Ms. Costa has been active in professional development in health care strategy and planning and has served on the Boards of

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Directors of the American Hospital Association Society for Healthcare Strategy and Market Development and the New England Society for Healthcare Strategy. She also serves on the Harvard School of Public Health Leadership Council. Ms. Costa is a Trustee of The Providence Foundation and was a founding Director of the Providence, Rhode Island Ronald McDonald House. Ms. Costa received a Master of Science degree in Health Policy and Management from the Harvard School of Public Health in 1976 and a Bachelor of Arts degree in Human Biology from Brown University in 1974.

Suma Gaddam, MS, MSHA, age 40, is Senior Vice President and the Chief Information Officer at CNE. Ms. Gaddam started working in health care information technology 16 years ago with the implementation of electronic health records. She most recently served as the Vice President of Enterprise Application Services at Health First in Florida and as the Director of Clinical Information Systems at Honor Health in Arizona. She began working in information technology at the University of Kansas Hospital in Kansas City, Kansas. She has recently been appointed by the Governor as a member of the newly formed Cyber Security Commission of Rhode Island. Ms. Gaddam earned a Bachelor of Science degree from Konkan Krishi Vidyapeeth, India in 1999, a Master of Science degree from Oklahoma State University in 2002 and a Masters in Health Services Administration from the University of Kansas School of Medicine in 2005.

May Kernan, age 63, has served as Senior Vice President for Marketing Communications since 1996. Ms. Kernan also serves as Vice President for Marketing Communications at WIH. Ms. Kernan originally joined WIH in 1979. She left in 1989 to become Press Secretary to the Governor of Rhode Island. Thereafter, she was employed as Vice President and presiding public relations official for an advertising and public relations agency. After serving as a consultant to WIH, Ms. Kernan rejoined the WIH administrative team in 1995. Ms. Kernan earned her Bachelor of Arts degree in journalism from the University of Rhode Island in 1975 and her accreditation from the Public Relations Society of America in 1985. She serves on the Board and Executive Committee of the New England Society of Healthcare Communicators.

Angelleen Peters-Lewis, PhD, RN, age 46, is Senior Vice President and Chief Nursing Officer for CNE. She previously served as Senior Vice President for Patient Care Services and Chief Nursing Officer at Women & Infants Hospital of Rhode Island. Prior to joining CNE Dr. Peters-Lewis was the Associate Chief Nurse of Women and Newborn’s Nursing and Clinical Services at Brigham and Women’s Hospital in Boston. Prior to that she served as a Nurse Director of the Endoscopy Program at Massachusetts General Hospital. She also had prior experience as a nurse scientist, family nurse practitioner, and staff nurse in the hospital, physician office and home settings. Dr. Peters-Lewis earned her undergraduate degree at Simmons College, a master’s degree from Northeastern University and her PhD in nursing from Boston College where she graduated with distinction and received the Dorothy A. Jones Award for Scholarship, Service and Development and the Boston College Connell School of Nursing Diversity Fellowship. She completed post-doctoral education at the Harvard Business School and is part of the Robert Wood Johnson Foundation Executive Nurses Fellows Program. Dr. Peters-Lewis holds current faculty appointments at Cambridge College, the University of Massachusetts - Boston, MGH Institute of Health Professions, Northeastern University Bouve College, and Boston College. She is the author or co-author of several scholarly publications, a frequent presenter at national and international professional meetings and the recipient of numerous awards and honors.

Raymond Powrie, MD, FRCP(C), FACP, age 52, is the Chief of Medicine and Senior Vice President of Population Health at Women & Infants Hospital, where he is also an attending physician in the Division of Obstetric and Consultative Medicine. He has been CNE’s Chief Medical Quality Officer since 2012 after serving as Senior Vice President for Quality and Clinical Effectiveness at WIH beginning in 2007. Dr. Powrie is a Professor of Medicine and Obstetrics and Gynecology at The Warren Alpert Medical School of Brown University. He earned his undergraduate and medical degrees from the University of Alberta, Faculty of Medicine in Edmonton, Canada, where he also completed his residency in internal medicine. He completed his fellowship in obstetric and consultative medicine at Women & Infants Hospital. Board certified in internal medicine, Dr. Powrie is also an Instructor for the Faculty of Medicine at Harvard Medical School. He is a member of the American College of Physicians and the Royal College of Physicians and Surgeons of Canada, as well as a member of the executive committee for the International Society of Obstetric Medicine. Dr. Powrie has published numerous articles and a textbook, has been the recipient of local and national teaching awards, and has an international reputation as a leader in the field of medical illness in pregnancy.

Marilyn J. Walsh, age 67, has served as Senior Vice President and Chief Human Resources Officer at CNE since 2006. From 2003 to 2006, she was the Senior Vice President for Clinical Resource Development at Women & Infants. Ms. Walsh was also the Vice President for Employee and Labor Relations for CNE from 1996 to 2006. She

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began her career at Women & Infants as a registered nurse in 1975, progressing through Nursing Administration positions to become the Associate Vice President for Personnel and Labor Relations and to Vice President for Human Resources in 1985. Ms. Walsh earned a Master of Business Administration degree from Bryant College in 1986 and a Bachelor of Science degree in Nursing from Rhode Island College in 1975. Ms. Walsh has achieved the status of certified Healthcare Executive, Fellow, in the American College of Healthcare Executives. She has served on many boards, including the Urban League of Rhode Island and the South Providence Development Corporation. She currently serves on the New England Healthcare Employees Health and Welfare and Pension Funds as a Management Trustee. Ms. Walsh is a member of the American Arbitration Association, a member of the American Hospital Association, the American Society for Hospital Human Resources Administrators, the Rhode Island Chapter of the American Society for Hospital Human Resources Administrators, the Human Resources Management Association of Rhode Island, the Society of Human Resources Management and the American College of Healthcare Executives.

Florie Munroe, CHC, CHPC, CPA, CIA, age 69, is a Vice President who serves as Chief Compliance and Privacy Officer and Director of Internal Audit at CNE, a position she has held since February 2016. She has more than 25 years of healthcare experience at large health systems in New York and Connecticut, including New York Medical College, Yale New Haven Health System, Health Quest, Saint Raphael Health System, and the Bronx Lebanon Health System. Previously, Ms. Munroe worked for Sutherland Healthcare Solutions as the Associate Vice President for Healthcare Compliance and Privacy. Sutherland Healthcare Solutions led the development of effective compliance programs, and served as Chief Audit Executive. Ms. Munroe has an MBA in Public Accounting from Pace University in New York, and a Bachelor of Arts from Manhattanville College in Purchase, New York. She earned her CPA while at Coopers & Lybrand and subsequently earned a CIA as well as certifications in Healthcare Compliance and Privacy. She has held national roles for the Medical Group Management Association and served as committee member on AICPA and New York Society of CPAs Healthcare committees.

Executive Officers of Obligated Group Members Providing Healthcare Services

Michael J. Dacey, MD, MS, FACP, 52, is President and Chief Operating Officer of Kent and Memorial Hospitals. Dr. Dacey joined Kent Hospital in 2000. He is board-certified by the American Board of Internal Medicine in critical care medicine and is also certified by the American Board of Medical Examiners. He received his medical degree from George Washington University School of Medicine and Health Sciences and his undergraduate degree from Providence College. He completed an internal medicine residency at Walter Reed Army Medical Center in Washington, D.C., as well as a critical care medicine fellowship at the University of Pittsburgh Medical Center. Dr. Dacey also holds a Master’s of Science in health care management from the Harvard School of Public Health.

Dale Klatzker, PhD, age 61, has served as President of The Providence Center since 2004 and as Senior Vice President of Ambulatory Behavioral Health of CNE since 2015. Prior to joining The Providence Center as its President/CEO, he served as President and CEO of Riverbend Community Mental Health (NH); Vice President – Behavioral Health Services at Capital Region Healthcare and Concord Hospital (NH); and President and CEO of Eastern Middlesex Human Services (MA). Dr. Klatzker earned his Bachelor of Arts degree in American Studies from Brandeis University, his Masters of Social Work degree from Boston University, and his PhD in Social Policy, Planning and Administration from Brandeis University’s Heller Graduate School for Advanced Studies in Social Welfare. Under Dr. Klatzker’s leadership, The Providence Center has been recognized both locally and nationally for leadership and innovation in behavioral health. He serves on numerous local and national boards, councils, and commissions.

Mark R. Marcantano, J.D., age 53, has served as President and Chief Operating Officer of Women & Infants since October 2013; prior to that he served as Executive Vice President and Chief Operating Officer of Women & Infants beginning in January 2010. Previously, Mr. Marcantano served as Vice President of Ambulatory and Network Services for Children’s Hospital in Boston. He has also held the positions of Executive Dean, Senior Vice President and Chief Operating Officer of Albany Medical College, affiliated with Albany Medical Center, in Albany, New York. Mr. Marcantano serves as a member of the Board of Meeting Street. He earned a Bachelor of Science degree in Finance from New York University and earned a Juris Doctor degree from Albany Law School of Union University.

Kathleen Peirce, age 55, has served as the Executive Director, Chief Nursing Officer, and Vice President of Operations of the VNA since January 2016. Previously, Ms. Peirce worked in Connecticut for Hartford Health Care as the Chief Operating Officer of VNA HealthCare. Prior to working for Hartford HealthCare, Ms. Peirce was employed at Connecticut VNA/Masonicare Home Health and Hospice for thirteen years. She was Vice President of Clinical

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Operations for both home health and hospice operations. Ms. Peirce earned a Bachelor of Science degree from Saint Anselm College and obtained a Master of Science degree from Rensselaer of Hartford.

Lawrence H. Price, MD, 64, is President and Chief Operating Officer of Butler Hospital and Executive Chief of Care New England’s Brain and Behavioral Health Service Line. Until 2014, he was Senior Vice President and Chief Medical Officer at Butler. Dr. Price joined Butler in 1996 as Clinical Director and Director of Research and at the same time was appointed Professor of psychiatry and human behavior at The Warren Alpert Medical School of Brown University. Prior to that he was an Associate Professor of psychiatry at the Yale University School of Medicine, where he served for 14 years. Dr. Price has published nearly 450 scientific papers and was identified by the Institute for Scientific Information as one of the top ten authors of high-impact papers in psychiatry from 1990 to 1999. He is a distinguished Fellow of the American Psychiatric Association and a fellow of the American College of Neuropsychopharmacology. He has received numerous awards for his teaching, mentoring, and clinical work, and is editor of the Brown University Psychopharmacology Update, an Editor of the scientific journal Psychopharmacology, and editor (with I. Stolerman) of the Encyclopedia of Psychopharmacology, Second Edition. Dr. Price earned a B.S. with high distinction and highest honors in psychology at the University of Michigan, followed by an MD at the same institution. He completed an internship in internal medicine at Norwalk Hospital in affiliation with Yale University, followed by a residency in the Department of Psychiatry at Yale and fellowship at Yale-New Haven Hospital.

STRATEGIC INITIATIVES

Southcoast Health Affiliation

In 2015, CNE chose Southcoast Health System, Inc. (“Southcoast”), a health care system located in southeastern Massachusetts, as a strategic partner.

Southcoast includes three hospitals: St. Luke’s Hospital in New Bedford, Charlton Memorial Hospital in Fall River, and Tobey Hospital in Wareham, and is an owner of Southcoast Behavioral Health, a behavioral health hospital in Dartmouth pursuant to a joint venture with Acadia Healthcare. Southcoast has total operating revenue in excess of $1 billion. The three hospitals have a total complement of 793 licensed beds under the same license. Southcoast operates under a single management team. The Southcoast obligated group is comprised of the three hospitals, Southcoast (the parent entity), Southcoast Visiting Nurse Association and Southcoast Physicians Group Inc. In addition to the Southcoast obligated group members, Southcoast entities include a physician network, a captive insurance corporation, and other smaller entities.

The Southcoast obligated group publicly issued debt currently is rated A3 with a stable outlook from Moody’s Investors Service (rating issued in March 2015) and BBB+ with a negative outlook by Standard & Poor’s (rating issued in August 2016).

The two organizations signed an affiliation agreement in May 2016 (“Affiliation Agreement”) to form a combined health system under a new Delaware not-for-profit parent organization that would be the corporate member of both CNE and Southcoast (the “System Parent”). Under the proposed framework for the System Parent set forth in the Affiliation Agreement, Southcoast President and CEO Keith A. Hovan will serve as the President and CEO of the System Parent; CNE CEO Dennis Keefe will become the President and CEO of Population Health for the combined unified system (the “Unified System”); CNE’s Board will select the new Chair of the System Parent Board, and the Southcoast Board Vice Chair will serve as Vice Chair of the System Parent Board. Southcoast and CNE will each select 10 individuals to serve on the new System Parent Board of Directors.

Among the anticipated benefits of the affiliation are:

• Improved clinical synergies, retention of patients and revenues • Greater quality and improved continuum of care • Preserved affiliations and business relationships with other organizations and providers • Improved operational efficiency • Faster transition from fee-for-service to population health • Opportunity for improvements in financial position and ability to undertake capital projects and investments

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• Achieving a cultural fit and alignment of community benefit and missions • The potential for enhanced patient satisfaction and employee morale

Under the terms of the Affiliation Agreement, the System Parent Board will have certain reserved powers with respect to the entities in the Unified System, which require a vote by a supermajority of the Board (2/3 of the total number of System Board Members who are eligible to vote). Such reserved powers include, but are not limited to, approval of transactions such as acquisitions, mergers, dissolutions and asset transfers, approval of budgets and the incurrence of debt, strategic plans and certain expenditures as well as election of the Boards of CNE, Southcoast and certain other entities.

The affiliation will become effective on a date on which all conditions to closing set forth in the Affiliation Agreement have been met; provided, however, that if the conditions have not been, or cannot be, met by May 1, 2017, the Affiliation Agreement shall terminate absent agreement of the parties to extend it.

Closing on the proposed affiliation is also subject to satisfactory completion of due diligence and other closing conditions, including each party’s determination that there are no material liabilities, no material degradation of either party’s business, assets or financial condition and no circumstances resulting in a material adverse change. CNE has kept, and will continue to keep Southcoast meaningfully informed regarding the CNE financing and Southcoast has advised CNE that the terms, covenants and conditions of the CNE financing are material to Southcoast. Southcoast has confirmed to CNE that if the terms, covenants and conditions of the Notes are substantially the same as those described in this Preliminary Offering Memorandum, Southcoast will not terminate the Affiliation Agreement based on the financing. However, that could change if the terms, covenants and conditions are materially different from what is described.

Upon consummation of the affiliation, Southcoast and CNE will each maintain their separate obligated groups. It is currently contemplated that no Southcoast obligated group members will become members of the Obligated Group or will be liable in any way for CNE indebtedness, and no Obligated Group member will become a member of the Southcoast obligated group or will be liable in any way for Southcoast indebtedness. Upon affiliation, if any, the System Parent will evaluate and determine the most effective and beneficial strategy for integration and future management of the Unified System’s debt and credit structure.

The proposed affiliation is subject to state regulatory approval processes in Rhode Island and Massachusetts, as discussed in detail below. No assurance can be given that all such necessary approvals will be received.

If the affiliation proceeds to closing the new organization will become one of New England’s largest not-for-profit health care systems dedicated to the advancement of population health, the delivery of community-based care and a commitment to academic medicine. It will encompass eight hospitals, an expansive network of ambulatory sites, two established ACOs, more than 1,700 aligned physicians and providers, a continuation of CNE’s and Southcoast’s current academic relationships with The Warren Alpert Medical School of Brown University, and the responsible stewardship of charitable assets.

Regulatory Processes

The proposed affiliation between CNE and Southcoast is subject to both Rhode Island and Massachusetts regulatory approval by applicable state licensing and other regulatory authorities. The following summarizes the state and regulatory review processes in Rhode Island and Massachusetts that are applicable to the proposed affiliation.

1. Rhode Island

The Rhode Island Hospital Conversions Act requires that a Rhode Island licensed hospital obtain prior approval from the Rhode Island Department of Health (“RIDOH”) and the Rhode Island Department of Attorney General (“RIAG”) for any conversion, including a change in ultimate parent entity such as is contemplated by the affiliation. Certain of the Care New England and Southcoast licensed entities will be subject to prior review and approval under the Rhode Island Hospital Conversions Act. The Hospital Conversions Act review is conducted jointly by the RIDOH and the RIAG and consists of an administrative review and public hearing relating to the proposed affiliation. The review by the RIDOH and the RIAG is performed concurrently and each agency issues a separate determination.

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CNE estimates that it will submit the Hospital Conversions Act application by the end of October 2016. Assuming that the application is submitted at that time, the initial application will be reviewed and typically additional questions will be asked of the applicants before the application is deemed complete. This process may take 60-90 days. Once the application is deemed complete, the RIDOH and RIAG will schedule public hearings and a review and decision would be expected within 120 days after the application is deemed complete. Currently CNE estimates that Rhode Island regulatory review will be completed during the second quarter of 2017.

In addition to the Rhode Island Hospital Conversions Act review process, certain Rhode Island licensed entities are subject to a Change in Effective Control (“CEC”) review based on their licensure status under the Licensing of Healthcare Facilities Act. The CEC review is similar to, but separate from, the review undertaken pursuant to the Hospital Conversions Act and typically, the review is concurrently performed by the RIDOH. The time frame for a review and anticipated approval under the CEC application process is similar to the Hospital Conversions Act.

In addition, certain licenses issued to CNE entities by other state regulatory agencies, including the Executive Office of Health and Human Services (“EOHHS”) may be subject to an application process to reissue the licenses to reflect the change in corporate parent.

2. Massachusetts

The proposed affiliation is also subject to certain regulatory approval processes in Massachusetts, including review by the Massachusetts Health Policy Commission, the Department of Public Health Determination of Need and Licensure Programs. Procedures before the Health Policy Commission include the filing of a Notice of Material Change by both Southcoast and CNE with respect to their Massachusetts operations.

Upon review of the Notice of Material Change, the Health Policy Commission will review whether the proposed transaction would be deemed to lead to materially higher prices or market concentration. The Notice of Material Change must be filed at least 60 days before the effective date of the material change. Southcoast and CNE each filed a Notice of Material Change with the Health Policy Commission on August 26, 2016. Once the notice is deemed to be complete by the Health Policy Commission, within 30 days of receipt of the Notice of Material Change, the Commission may notify the parties of any information necessary to complete the Notices. Within 30 days of the receipt of the completed Notice of Material Change, the Health Policy Commission will determine whether to initiate a Cost and Market Impact Review. In the event that the Health Policy Commission does not undertake a Cost and Market Impact Review, the Health Policy Commission will typically take no further action with respect to the filing. In the event a Cost and Market Impact Review is deemed necessary by the Health Policy Commission, the Commission will require additional information and will conduct further review and issue a final report within 185 days from the date that the provider organization filed a completed Notice of Material Change. The Health Policy Commission does not have the authority to approve or reject a proposed transaction, but typically may make recommendations to the Attorney General with respect to a proposed transaction following a Cost and Market Impact Review.

The Department of Public Health has a Determination of Need requirement applicable to the licensed Southcoast hospitals. Upon filing of the Determination of Need application, interested parties have the opportunity to comment at public hearings and ultimately the Department of Public Health Council will review and take action with respect to the Determination of Need application. The Determination of Need process typically takes approximately 90-120 days.

The proposed affiliation is also subject to Department of Public Health licensure review which is conducted concurrently with the Determination of Need application review. The licensure review and approval time frame is similar to the time frame applicable to the Massachusetts Determination of Need process.

Collaborations

CNE recognizes that collaboration and partnership continue to be critical to maintaining its success. To that end, it has organized a number of important new partnerships while fostering instrumental existing relationships. CNE has continued to strengthen its affiliation with Warren Alpert Medical School at Brown University in advancing teaching and research. This included establishing a task force to explore ways for CNE, Brown University, and potentially Lifespan to collaborate in research. Additionally, other “competitor” organizations also collaborate with

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Care New England, including Sturdy Memorial Hospital and Southcoast for utilizing the tertiary care provided at Women & Infants.

Care New England has a clinical affiliation with the Brigham and Women’s Hospital through two of its operating units, Kent and Memorial. In 2008, both hospitals entered into relationships in cardiology and emergency medicine as they developed new programs and increased the quality of existing clinical programs. Brigham and Women’s Hospital was chosen as it has one of the most well respected cardiology programs in the world and one of the finest emergency medicine departments in the country. Currently, Brigham and Women’s Hospital provides the majority of the staffing in cardiology, with Care New England employing 10 Brigham and Women’s cardiologists working at both acute care hospitals. This relationship in cardiology has produced many benefits, including:

1. A system wide electrophysiology program that increased the number of procedures performed at Kent from 55 in 2011 to over 350 in 2015 2. Development of an advanced heart failure service and specialized clinics in valve disease 3. Assistance to Care New England as it started to gain experience in a bundled payment pilot project through the Centers for Medicare and Medicaid (“CMS”) for congestive heart failure 4. Initiation of a coronary angioplasty program at Kent that surpassed budget expectations in its first year 5. Greatly improved publicly reported cardiology quality measures at Kent and WIH

In addition, the system employs two Brigham thoracic surgeons and a vascular surgeon who have expanded the surgical offerings to CNE’s patients.

CNE has entered into a partnership with Blue Cross/Blue Shield of Rhode Island to create innovative models that will improve care in Rhode Island. CNE’s affiliation with Memorial Hospital provides CNE with a primary care base through the hospital’s leadership in patient-centered medical homes and The Warren Alpert Medical School of Brown University family and internal medicine residency training programs.

CNE also entered into an affiliation with Rhode Island Primary Care Physicians Corporation (“RIPCPC”) the largest independent network of primary care physicians and physician practices in Rhode Island in its effort to make primary care a strong and unifying force of its integrated delivery system. Care New England and the RIPCPC were the founding members of Integra. See “Other Strategic Initiatives – Integra Community Care Network, LLC.”

Other Strategic Initiatives

Furthering System Integration. CNE is building a health care delivery system that will serve Rhode Island and southeastern New England. It has moved away from its historic federation model to a truly integrated healthcare system with clinical and operational integration across the continuum of care. To support system integration, changes were made in the senior executive structure, resulting in the addition of key new positions, including executive vice president and chief operating officer for system operations and executive vice president of physician enterprise and chief clinical officer, among others.

Improving Financial Performance. Following the development of a new strategic plan in 2012, the Care New England Board embraced the concept of working toward a national designation which acknowledged that CNE is a high-quality, high-performing organization. The premier framework for performance excellence is the National Baldrige Performance Excellence Program. This was chosen as the CNE model for organizational development and improvement. Care New England formed design teams to improve performance in these key categories, submitted Baldrige applications to help gauge progress and hosted an in-person site visit from Baldrige examiners. Care New England named this process Transforming Together or T2 because all members of the CNE community took part in this integrated process toward performance excellence.

During the last year, Care New England has taken major steps to improve its organizational performance through a series of initiatives designed to advance quality, improve processes, strengthen revenues, and manage expenses. Focused efforts in the areas of compensation, benefits, labor productivity, supply chain, pharmacy, clinical operations, revenue cycle, physician strategy, and laboratory consolidation were supported by discipline specific subject matter experts. This work, named Transforming Together Today or T3, has focused on all operating units, with particular emphasis in establishing system approaches for implementation across all facilities. Based on an independent opportunity assessment, the annualized recurring savings for T3 was predicted to be between $75 and $95

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million implemented over a two- to four-year period. Changes implemented to date have resulted in material productivity gains, efficiencies and operational improvements.

Integra Community Care Network, LLC. Healthcare delivery is undergoing a transformation. Care New England’s view is that the most effective way to navigate this change is to be proactive, adapt strategically and embrace the transition. The new landscape demands that patients be treated in the most appropriate setting, requiring increased care coordination and management across a continuum of care and services. Care New England’s vision, during this time, remains to ensure that its system thrives and continues to provide the highest quality care to the communities of southeastern New England. It is doing this through strategic partnering, prudent investment, clinical integration and strength in leadership. Most significantly, it has set its vision on furthering the Triple Aim (improving quality, providing better access to care, and lowering overall health care costs) by pursuing population health management and payment reform models through Integra.

CNE launched Integra in 2014 as a Medicare Certified Accountable Care Organization, which now has more than 120,000 covered lives. Its participating partners include RIPCPC, CNE and South County Hospital. In January 2016, Integra was also approved by the Rhode Island Executive Office of Health and Human Services as a Medicaid Accountable Entity and assumed responsibility for more than 30,000 RIte Care participants. Integra’s clinical sites include all member hospitals and organizations, as well as South County Health and RIPCPC, the state’s largest independent practice association. Integra’s goals are aligned with the Triple Aim.

As Integra and CNE move into the population health arena, care retention is critically important for two reasons. First, care coordination is essential to successfully manage at risk populations of patients. Second, retaining more patients helps to build an economic model that enhances the clinical and financial performance of CNE. Currently, CNE retains approximately 40% of the Integra primary care physicians’ inpatient volume. Efforts to improve care retention include the creation of Integra and Epic referral directories, a referral hub that guides patients to Integra physicians and hospitals, and vigilant monitoring of physician referral behavior and education at physician meetings. Additional efforts include identifying access gaps to guide physician recruitment and program development and review of all emergency department transfers to retain related admission volume within CNE hospitals.

Care New England Medical Group. To maximize operational efficiency, CNE has been consolidating all physician employment under the Care New England Medical Group (d/b/a name for Affinity Physicians, LLC) and is planning to complete this consolidation on January 1, 2017. The key initiatives are improving the billing and collection process, establishing clinical, academic and teaching goals and guidelines and growing services offered in key areas of need. These include expanding the physician complement in the areas of primary care, pulmonary medicine, neurology, and cardiology. These opportunities are focused on covered lives growth and services that will significantly enhance care retention by decreasing emergency department transfers and expanding access to key outpatient services.

ACADEMICS AND RESEARCH

Affiliation with The Warren Alpert Medical School of Brown University

In 1969, Providence Lying-In Hospital (now Women & Infants), Memorial, Rhode Island Hospital, and Roger Williams hospitals signed formal agreements with Brown University to become teaching hospitals.

The Warren Alpert Medical School of Brown University has enrolled 522 students in undergraduate medical education programs for the 2016-2017 school year and has 868 residents and fellows in 99 Accreditation Council for Graduate Medical Education (“ACGME”) approved graduate medical education training programs. 230 of the residents and fellows are based at Care New England hospitals - Butler, Memorial, and Women & Infants. Care New England provides the principal setting for clinical training in obstetrics and gynecology and related subspecialties, perinatology, neonatology, family medicine, and psychiatry.

81 full-time and clinical faculty from the Department of Psychiatry and Human Behavior in The Warren Alpert Medical School of Brown University are supported directly by Butler Hospital. Butler is the major training site and the administrative base hospital for the more than 42 residents of the Brown University General Residency in Psychiatry, including inpatient, outpatient, and partial hospital programs.

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The Department of Family Medicine at Memorial is the home and teaching site for the Brown University Medical School Family Medicine Residency, with these residents rotating monthly through Women & Infants Hospital for family medicine obstetric training. In addition to the residency, there are two Brown-affiliated fellowship programs, one in maternal child health and one in global health in the program. The Department of Medicine at Memorial is a principal site for the Alpert Medical School’s core clerkship in internal medicine for third year medical students. Memorial also provides a sub-internship in internal medicine for fourth year medical students and a number of medical subspecialty clinical electives. Memorial Hospital conducts a residency in internal medicine that is affiliated with the Warren Alpert Brown University School of Medicine. After extensive consultation with the leadership of the medical school, internal medicine residents from Memorial now rotate on a permanent basis at Kent in general internal medicine inpatient units, the intensive care unit and in several medical-specialty rotations. General internal medicine inpatient, outpatient and certain specialty rotations continue at Memorial. These changes have resulted in improved efficiencies at Memorial and an overall enhanced educational experience for the trainees. Residents at Memorial spend a rotation at Kent Hospital.

Women & Infants and The Warren Alpert Medical School of Brown University offer fellowship programs in gynecologic oncology, maternal-fetal medicine, urogynecology and reconstructive pelvic surgery, neonatal-perinatal medicine, obstetric medicine, women’s mental health, pediatric and perinatal pathology, gynecologic pathology and cytopathology, and reproductive endocrinology and infertility. Women & Infants hosts the residency training program in obstetrics and gynecology for the Warren Alpert Medical School of Brown University and is the training site for their medical students in obstetrics and gynecology. Women & Infants also provides training for emergency medicine residents from Kent and Rhode Island Hospital, for family medicine residents from Memorial Hospital, and for visiting residents and medical students from around the country on an intermittent basis.

The Care New England hospitals provide stipends to residents and fellows while in training. The hospitals do not receive any compensation from The Warren Alpert Medical School of Brown University for providing the clinical setting for medical school training or for graduate medical education training for residents and fellows; however, the hospitals do receive compensation for medical students and reimbursement from Medicare.

Affiliation with The University of New England College of Osteopathic Medicine

Kent is a clinical training center for students attending the University of New England College of Osteopathic Medicine. Since July 1, 2008, in collaboration with UNECOM, Kent has also operated residency programs in emergency medicine, family medicine, internal medicine and fellowship programs in hyperbaric medicine and gastroenterology. Currently there are 50 residents and 6 fellows participating in these programs.

Other Educational Affiliations and Programs

Butler Hospital has formal and informal educational affiliations with many educational institutions and entities, including American International College, Boston University’s Sargent College of Health and Rehabilitation Sciences, Brown University, Columbia University, Howard University, Miriam Hospital, MGH Institute of Health Professions, Ohio State University, Providence College, Quinnipiac University, Rhode Island College, Rhode Island Hospital, Sacred Heart University, Springfield College, State University of New York at Buffalo, State University of New York at Stony Brook, Tufts University, University of New Hampshire, University of Rhode Island, University of Southern California and University of Texas.

Kent Hospital has numerous formal and informal educational affiliations with educational institutions and entities including Brigham and Women’s Hospital, Community College of Rhode Island, Drexel University, Johnson & Wales Co-Op Program, Massachusetts College of Pharmacy & Health Sciences, New England Institute of Technology, Northeastern University, Quinnipiac University, Rhode Island College, Salve Regina University, University of Connecticut, University of Rhode Island and the American Dietetic Association Internship College of Pharmacy.

Memorial Hospital has formal and informal educational affiliations educational institutions and entities including the Community College of Rhode Island, Kaplan University School of Nursing, Kent State University, Michigan State University, Midwestern University, New England Institute of Technology, New York College of Podiatric Medicine, Northeastern University, Rhode Island College, Salve Regina University, Temple University, University of Rhode Island, Western University and the William Scholl College of Podiatric Medicine.

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Women & Infants has many formal and informal educational affiliations with educational institutions and entities including Boston College, Community College of Rhode Island, Drexel University, Frontier School of Midwifery and Family Nursing, Georgetown University, Northeastern University, Providence College, Regis College, Rhode Island College School of Nursing and Graduate School of Social Work, Salve Regina University, Simmons College Nursing Program, Stonybrook University School of Nursing, University of Connecticut School of Nursing, University of Massachusetts - Dartmouth, University of Rhode Island and Yale University School of Nursing.

The Providence Center has formal and informal educational affiliations with the Brown University Psychiatry Residency Training Program, Johnson & Wales University, New England Institute of Technology, Northeastern University, Providence College, Regis College, Rhode Island College School of Nursing, Salve Regina University, Springfield College, Suffolk University, SUNY-Cortland, University of Maine, University of Massachusetts and University of Rhode Island.

Research Activities

Academics and research serve as a foundation for CNE’s ongoing success as a high performing health system. Two recent examples illustrate Care New England’s connection to clinical and translational research. The Rhode Island Center for Clinical Translational Science (RI-CCTS) was awarded a $19.5 million, five-year grant from the National Institute of General Medical Sciences. The grant will allow RI-CCTS to create the educational and technical infrastructure needed to spur Rhode Island researchers to design, conduct and analyze more medical studies, including treatment trials that build on basic research. The center — based at Brown University in full partnership with the University of Rhode Island and the Care New England, Lifespan and Veterans Administration hospitals — will also expand the access that medical and public health researchers have to population health data by working with the Rhode Island Quality Institute. The principal investigator is James F. Padbury, the William and Mary Oh - William and Elsa Zopfi Professor of Pediatrics for Perinatal Research at Brown’s Alpert Medical School and pediatrician-in-chief at Care New England’s Women & Infants Hospital. In June 2015, Women & Infants received a nearly $5 million grant from the National Institutes of Health to support an Institutional Development Award (“IDeA”) Center of Biomedical Research Excellence (“COBRE”) for Perinatal Biology. The IDeA program builds research capacities in states that historically have had low levels of NIH funding by supporting basic, clinical and translational research, faculty development and infrastructure improvements.

Butler, Kent, Memorial and WIH actively support research initiatives by members of their staff, many of which relate to federal awards. The following table reflects the activities of the Research and Development cluster subject to the audit on federal awards in accordance with OMB Circular A-133 for fiscal years 2013-2015:

FY 2013 FY 2014 FY 2015 Direct Programs Butler $6,948,202 $7,598,916 $8,115,668 Memorial¹ $3,434,397 $2,436,462 $661,175 Women and Infants $9,478,736 $7,039,406 $6,576,242 Kent $192,074 $0 $0

Pass-Through Programs Butler $2,230,173 $2,092,328 $1,588,019 Memorial¹ $1,037,942 $590,740 $675,473 Women and Infants $1,822,935 $2,114,906 $1,500,899 Kent $54,549 $0 $0 Total Butler $9,178,375 $9,691,244 $9,703,687 Memorial¹ $4,472,339 $3,027,202 $1,336,648 Women and Infants $11,301,671 $9,154,312 8,077,141 Kent $246,623 $0 $0 Overall Total $25,199,008 $21,872,758 $19,117,476 ¹ As of September 3, 2013, Southeastern Healthcare System, Inc. ("Memorial") became a subsidiary of Care New England. Three years are presented for comparative purposes.

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EMPLOYEES

Care New England. Care New England and its affiliates constitute the second largest non-governmental employer in Rhode Island. The following chart shows, as of July 31, 2016, the employment across the Health System representing total employees, full-time equivalent positions and turnover rates.

Non-Union Turnover Non-Mgmt Union Management Physicians Total Rate

Butler Employees 453 418 66 56 993 13% FTEs 325.9 281.7 49.0 48.6 705.2

CNE Corporate Employees 602 0 164 0 766 11% FTEs 557.2 0 163.3 0 720.5

Kent Employees 1124 844 81 160 2209 9% FTEs 807.9 639.5 80.5 132.2 1660.1

MHRI Employees 631 178 58 3 870 16% FTEs 436.7 151.7 55.6 1.9 645.9

VNA Employees 84 118 26 0 228 13% FTEs 47.8 105.8 21.3 0 174.9

WIH Employees 648 1666 103 141 2558 9% FTEs 522.3 1270.8 99.6 127.4 2020.1

TPC Employees 670 0 102 11 783 19% FTEs 545.2 0 100.8 9.9 655.9

Total Employees 4212 3224 600 391 8407 FTEs 3243.0 2449.5 570.1 320.0 6582.6

CNE and its affiliates provide employees with a comprehensive program of salaries, wages, and benefits that is competitive with the industry and the local market. Full-time employees and part-time employees regularly scheduled for 20 or more hours per week are eligible for medical insurance, dental insurance, employee and dependent life insurance, disability insurance, supplemental tax sheltered annuity products with a match component, flexible spending accounts, retirement benefits, tuition reimbursement and an employee assistance program.

As reflected in the table above, approximately 1,666 employees of WIH are represented for the purpose of collective bargaining by the New England Health Care Employees Union District 1199 of the Service International Employees Union and are organized into four bargaining units: Service and Maintenance Employees and Nurses’ Aides; Registered Nurse and Licensed Practical Nurse; Clerical Unit; and Technical Unit. The term of the current collective bargaining agreement expires on November 30, 2016. Negotiations are in the early stages of development.

Approximately 844 employees of Kent are represented for collective bargaining by the United Nurses and Allied Professional, Local 5008, and are organized into three separate bargaining units: Registered Nurses; Environmental Services Staff; and Operating Room Technicians, Orderlies, Endoscopy Technicians, Anesthesia Assistants, Certified Nursing Assistants and Emergency Department Technicians. The term of the current collective bargaining agreement expires on June 30, 2018.

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Approximately 418 employees of Butler are represented for collective bargaining purposes by the New England Health Care Employees Union District 1199 of the Service International Employees Union and are organized into three bargaining units: Mental Health Workers Technicians; Registered Nurses Unit; and Clinical Information Services/Housekeeping Unit. The term of the current collective bargaining agreement expires on March 31, 2017. Negotiations will begin later this year.

Approximately 178 employees of Memorial Hospital are represented for the purpose of collective bargaining by the United Nurses and Allied Professionals Local 5082. There is a single bargaining unit comprised of Registered Nurses, Nurse Practitioners, Medical Technologists, Pharmacists, Sleep and Nuclear Medicine Technologists, Rehab Therapists and Social Workers. The term of the most recent collective bargaining agreement initially expired on January 31, 2016, but have been extended from meeting to meeting while negotiations for new contract terms continue.

Approximately 118 employees of the VNA are represented for the purpose of collective bargaining by the Federation of Visiting Nurses and Health Professionals, Local 5022 RIFT/AFL-CIO and are organized into two bargaining units; Registered Nurses and Home Health Aides/Clerical. The terms of the current collective bargaining agreement expired on May 31, 2016, but have been extended from meeting to meeting while negotiations for new contract terms continue.

LICENSURES, ACCREDITATIONS, MEMBERSHIPS, AND DESIGNATIONS

Licensures and Accreditations

Butler Hospital is licensed by the RIDOH to operate 143 beds. It is accredited by The Joint Commission and was most recently accredited in December 2014 for Behavioral Health and in July 2015 for Psychiatry. Butler has also been granted “facility status” by the Rhode Island Department of Behavioral Health Developmental Disabilities and Hospitals. With “facility status”, psychiatric hospitals are able to admit clients on an involuntary basis to their inpatient psychiatric units.

Kent Hospital is licensed by the RIDOH to operate 359 beds. It is accredited by The Joint Commission and was most recently accredited in December 2015. Kent is also accredited by the American Association of Blood Banks, the American College of Radiology, the American Academy of Sleep Medicine, the American College of Surgeons Commission on Cancer, the American Osteopathic Association for Family Medicine, Internal Medicine, and Hyperbaric Medicine Fellowships, the College of American Pathologists (Laboratories), the Commission on Accreditation of Rehabilitation Facilities, the Intersocietal Commission for Echocardiography Laboratories, the Intersocietal Commission for Nuclear Medicine Laboratories and the Undersea and Hyperbaric Medical Society, the Metabolic and Bariatric Surgery Accreditation and Quality Improvement Program, and the National Accreditation Program for Breast Centers. Kent’s Mammography Facility is also certified by the United States Food and Drug Administration.

Memorial Hospital is licensed by the RIDOH to operate 294 beds. It is accredited by The Joint Commission and was most recently accredited in December 2014. Memorial is also accredited by the Commission on Accreditation for Rehabilitation Facilities, with the most recent accreditation occurring in April 2015.

Women & Infants is licensed by the RIDOH to operate 167 adult beds, consisting of 45 medical/surgical beds and 122 obstetric beds. It also is licensed for 80 Neonatal Intensive Care unit beds and 60 bassinets. It is accredited by The Joint Commission and was most recently accredited in June 2014. Women & Infants is also accredited by AABB (formerly the American Association of Blood Banks) and the College of American Pathologists (Laboratories).

VNA is licensed by the RIDOH for Home Nursing Care and Hospice and Rhode Department of Health for Home Nursing Care and Nursing Service Agency under its subsidiary, Health Touch, Inc. It is accredited by The Joint Commission and was most recently accredited in March, 2015.

The Providence Center is licensed by the Department of Behavioral Healthcare, Developmental Disabilities and Hospitals. It is accredited by the Commission for the Accreditation of Rehabilitation Facilities International (“CARF”) and was most recently accredited in February 2014.

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Butler was honored in 2015 by the American Hospital Association for advancing the health of CNE’s community and received the Guardian of Excellence Award from Press Ganey for Physician Engagement.

Kent has been designated by The Joint Commission as a Primary Stroke Center since 2008 and has received the AHA/ASA Get with the Guidelines Gold Plus Achievement Award for quality outcomes since 2010-2015, In 2015 Kent received Target Stroke Honor Roll Elite status. Kent holds the designation of Wound Recovery Hyperbaric Medicine Center - Level One With Distinction by the Undersea and Hyperbaric Medical Society. In 2015 Kent was recognized with distinction as a NICHE Hospital focused on elder care excellence and Baby Friendly status by Baby Friendly USA.

Memorial has been designated by The Joint Commission as a Primary Stroke Center since 2009, receiving a Certificate of Distinction, the AHA/ASA Get with the Guidelines Gold Achievement Award for quality outcomes in 2012-2014 and the Gold Plus Achievement Award for 2015-2016. Memorial has been recognized by the Quality Oncology Practice Initiative (“QOPI”) Certification Program, an affiliate of the American Society of Clinical Oncology (“ASCO”). The QOPI Certification Program provides a three-year certification for outpatient hematology-oncology practices that meet the highest standards for quality cancer care.

The Providence Center received the Governor’s Award for Wellness Innovation in 2009. In 2016, TPC received the Excellence in Behavioral Healthcare Management Award from the National Council for Behavioral Health. In 2016 it also received the Scattergood Foundation Annual Innovation Award.

Women & Infants has been designated a Breast Center of Excellence by the American College of Radiography, a Center of Biomedical Research Excellence by the National Institutes of Health, a Center of Excellence for Reproductive Health Resources by Optum Health, a Center of Excellence in Minimally Invasive Gynecology (“COEMIG”) by the Surgical Review Corporation of the American Association of Gynecologic Laparoscopists (AAGL) and a Neonatal Resource Services Center of Excellence. In 2015 WIH was designated as a Baby-Friendly USA Hospital. In 2003, Women & Infants was designated a National Center of Excellence in Women’s Health by the United States Department of Health and Human Services. Women & Infants was named a U.S. News “Best Hospital” in gynecology in 2000, 2001 and 2010 and a “Best Children’s Hospital” in neonatology in 2011 and 2014. In 2014 it was named a Top Hospital by The Leapfrog Group. In 2015 and 2016 WIH received Women’s Choice Award, America’s Best Hospitals for Obstetrics and Cancer Care and Breast Center. In 2012 and 2013, U.S. News recognized Women & Infants as high-performing in both cancer and gynecology. WIH was also acknowledged by Becker’s Hospital Review as one of the 100 Hospitals with Great Women’s Health Programs in 2012.

Memberships and Designations

The Hospitals, VNA and/or TPC, as applicable, are also members of the following professional associations: American Association of Blood Banks, American Hospital Association, American Academy of Sleep Medicine, American College of Cardiology, American College of Emergency Physicians, American College of Family Practice, American College of Internists, American College of Osteopathic Emergency Physicians, American College of Osteopathic Family Physicians, American College of Radiology, Association of Recovery Schools, Center to Advance Palliative Care, College of American Pathologists, Community Cancer Centers, Council of Teaching Hospitals/Association of American Medical Colleges, Council of Women’s and Infants Specialty Hospitals, Harbor Performance Initiative, Hospital Association of Rhode Island, Institute for Healthcare Improvement Conversation Project, Ivy League Network of Hospital Systems, Mental Health Corporations of America, National Association for Home Care and Hospice, National Association of County Behavioral Health & Developmental Disability Directors, National Association of Psychiatric Health Systems, National Cancer Institute’s Gynecologic Oncology Group, National Council for Behavioral Healthcare, National Hospice and Palliative Care Organization, National Institutes of Health’s Pelvic Floor Disorders Network, National Perinatal Information Center, Northeast Osteopathic Medical Education Network, Rhode Island Coalition for the Homeless, Rhode Island Health Center Association, RI Health Sciences Libraries and the American Osteopathic Association, Rhode Island Partnership for Home Care, Society of Academic Emergency Medicine, The Substance Use and Mental Health Leadership Council, Visiting Nurse Associations of America and Voluntary Hospitals of America.

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THE PROJECT

The proceeds of the Series 2016B Bonds and the Notes will be used to complete the plan of financing described in this Offering Memorandum under “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF FUNDS.”

FACILITIES AND SERVICES

Butler Hospital is the premier psychiatric treatment, teaching, and research hospital serving Rhode Island and southeastern New England. It is Rhode Island’s only hospital dedicated to psychiatric and behavioral treatment of adults and adolescents. It provides specialized assessments and innovative treatments for all major psychiatric illnesses and substance abuse. Butler’s neurology department is staffed by a team of national and international experts in neurology, neuroimaging, and neuropsychology. It offers programs focusing on the needs of seniors, with a center specializing in Alzheimer’s and other memory disorders. The hospital offers a partial hospital day program that enables patients to receive psychiatric and substance abuse treatment during the day and return to their own homes overnight. Butler is the major affiliated teaching hospital for psychiatry and behavioral health The Warren Alpert Medical School of the Brown University Medical School.

Butler’s campus is comprised of approximately 110 acres of land on the East Side of Providence. It includes 37 buildings totaling approximately 578,300 square feet. Butler serves over 10,000 patients annually in outpatient, partial hospital, and acute inpatient settings. Butler rents approximately 100,000 square feet of its buildings to researchers and other not-for-profit tenants. Butler has made major upgrades to its campus over the past 10 years, including the following:

• In 2006, the second floor to the new Lippitt building was built out to accommodate the hospital’s intensive treatment unit. • In 2007, the carriage house on the hospital property was expanded to 35,000 square feet built to suit the tenant, the University Orthopedic Group. • In 2013, a new 48,000 square foot building - the Riverview Building - opened in October 2013. The first floor accommodates the Patient Assessment/Admissions area and emergency entrance. The Riverview Building also serves as the new Main Entrance for visitors and admissions. The third floor accommodates a second intensive treatment unit while the second floor remains a shell for future build out.

Kent Hospital is Rhode Island’s second largest hospital, offering a full cadre of services to patients of all ages. Kent has achieved recognition for programs such as its wound recovery center and as Rhode Island’s largest hyperbaric medicine facility - the only facility in the region, offering 24-hour emergency hyperbaric oxygen therapy. Its certified stroke center received the Gold Seal of Approval from The Joint Commission and is a member of the honor roll of the American Stroke Association. The Breast Health Center at Kent, a collaborative program with Women & Infants, was designated a Breast Imaging Center of Excellence by the American College of Radiology. Through its clinical affiliation with Brigham and Women’s Hospital, Kent offers advanced care for patients with complex cardiovascular illness. Its Rapid Assessment emergency department (“ED”) design has decreased wait times and has improved patient satisfaction. Kent’s ED ranks in the top 10 percent nationally for volume. Kent also has a state-of-the Ambulatory Services Pavilion with the region’s most advanced outpatient surgery center and a new medical office facility providing patients with an integrated approach to primary care medicine and specialties.

Kent’s campus includes 57 acres of land with the main hospital and two other buildings located along Toll Gate Road in Warwick, Rhode Island. The main hospital complex of over 564,000 square feet is comprised of multiple buildings and additions that were built between 1948 and 2005. It includes an Emergency Department that experiences over 70,000 patient visits annually as well as four levels of inpatient floors, supporting psychiatric, maternity, newborn nursery, intensive and intermediate coronary care, medical/surgical units and rehabilitation services.

Recent additions and improvements include:

• In 2013 a new two story 60,000 square foot Ambulatory Care Building opened on the Kent campus. The second floor functions as a 30,000 square foot Ambulatory Surgical Center equipped with eight surgical suites designed specifically for the Hospital’s growing outpatient surgery. The surgery center is

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connected directly to the Hospital’s full service acute care facilities in the event a patient needs to be moved into the main hospital for further care. • In 2016 the 30,000 square foot first floor opened as a 55 patient exam room medical mall that offers outpatient primary care, cardiology, surgical and specialty services. • Recent 2016 improvements include two new Phillips Cardiac Catheterization Labs and one Siemens Intervention Radiology Lab.

Memorial Hospital, founded in 1901, is a community-based, acute care teaching and research hospital that provides an array of medical, surgical, laboratory, rehabilitative, primary, emergency, and ambulatory care services to the Blackstone Valley of Rhode Island and southeastern Massachusetts. The hospital is the major teaching affiliate of The Warren Alpert Medical School of Brown University for family and internal medicine.

Memorial is a state leader in the development of patient-centered medical homes. Memorial currently operates its main campus on a 13-acre property located in Pawtucket, Rhode Island. The main campus is comprised of 13 buildings totaling 437,937 square feet. Memorial’s affiliates provide primary and ambulatory care services in Pawtucket and Central Falls, Rhode Island and, during 2016, in Lincoln Rhode Island. Memorial owns or leases four satellite facilities in the surrounding area totaling an additional 145,002 square feet. Memorial’s 555 Prospect Street facility in Pawtucket offers Pediatric Neuro developmental and PET Scan Services, in addition to serving as a base for the hospital’s Home Care Program. Boulevard Medical Center offers women’s health services and a diagnostic lab.

Recent facility improvements include:

• In 2010 Memorial constructed and opened a state-of-the-art Cardiac Catheterization Lab in conjunction with Brigham and Women’s Hospital of Boston, Massachusetts. • 2012 upgrades to the Ambulatory Care Center’s Diagnostic Imaging Department provided the capability to perform digital mammography and bone density screenings. • In 2013 the kitchen was overhauled and a new call center was put into service. • In 2015, new wireless ICU and Telemetry patient monitors were installed. • The entire campus boiler system was replaced in 2016.

Women & Infants specializes in the health needs of women and newborns, including preeminent programs in oncology, breast health, urogynecology, high-risk pregnancy, gastroenterology and behavioral health. As a major teaching and research facility affiliated with The Warren Alpert Medical School of Brown University, Women & Infants conducts cutting-edge research on a wide variety of health care issues, including pre-term delivery, gynecologic cancers, infertility, neonatology, postpartum depression and uterine prolapse. It is one of the largest and most prestigious research facilities in high risk and normal obstetrics, gynecology and newborn pediatrics in the nation.

WIH operates its main facility, consisting of approximately 700,000 square feet, on property leased from Rhode Island Hospital in Providence, Rhode Island. The lease extends through the year 2085 with an option to renew for an additional 99 years. WIH also owns and leases a number of other facilities surrounding the existing campus as well as other facilities a short distance away in Providence. In addition, WIH operates an extensive outreach program with sites throughout Rhode Island and in southeastern Massachusetts and eastern Connecticut.

Recent facility improvements at WIH include:

• In 2006, major renovations to the main building lobby were completed as was the addition of an MRI at the zero level with associated support space. • In 2009, the five-story 150,000 square foot building addition, known as the South Pavilion, opened, which includes two floors with 80 NICU bassinets in private individual rooms and one floor with 30 obstetrical beds in private rooms to provide antenatal care for high-risk mothers. • In 2010, a new ambulatory Center for Reproduction and Infertility, which features a state-of-the-art embryology laboratory, opened.

WIH’s long range facility plans include consolidating CNE hospital labs into WIH’s current laboratory, continuing to develop and renovate ambulatory services, making enhancements in the areas of research and education

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and the development of new regional outreach sites. Design plans to renovate the labor and delivery rooms and the operating suites continue.

The Providence Center is the largest community-based behavioral healthcare organization in Rhode Island. In addition to its counseling and treatment services, TPC offers a wide array of other services, including recovery supports and centers, integrated primary care, permanent supportive housing, medication-assisted treatment, educational and vocational counseling, and wellness services. TPC provides its services in a variety of community-based locations in Providence, Burrillville, Cranston, North Kingstown, Pawtucket, Richmond and Warwick. TPC’s administrative offices are located at 528-530 North Main Street, Providence, where adult outpatient services are also provided. TPC operates child and family outpatient services, a special education school, and a preschool in 43,500 square feet of leased space at 520 Hope Street, Providence. Thirteen of TPC’s 31 locations provide supportive and subsidized housing for its clients.

VNA of Care New England provides a broad spectrum of home health, hospice and private duty nursing services for adults and the elderly. It also offers a comprehensive line of cardiac, pulmonary, rehabilitation and end-of-life home health care services, including hospice care, providing smooth transition through the continuum. In the community, the VNA provides health screenings, influenza and pneumonia clinics, bereavement support groups and community education sessions at various locations throughout Rhode Island. The VNA offices are located at 51 Health Lane in Warwick.

Integra Community Care Network was created in 2014 and is a CMS certified ACO with more than 120,000 covered lives. Its participating provider network includes RIPCP, Care New England hospitals and South County Hospital as well as employed and affiliated physicians. Integra has been designated as an Accountable Entity by the Rhode Island Executive Office of HHS and assumed responsibility for more than 30,000 RIte Care participants. Integra enables CNE and its physicians to be prepared for the accountable care environment as the network contracting entity. Integra has shared savings/risk contracts with several payers. Currently, the over 120,000 covered lives include the CMS Medicare Shared Savings Program (“MSSP”) (18,000), Blue Cross Medicare Advantage (14,000), Blue Cross Commercial (55,000) and two Medicaid programs (28,000). In addition, Integra also manages the full risk of the self-insurance CNE employee and dependents population (14,000). Integra has approximately 20 nurse care managers who manage the most complex patients as well as staff the area emergency departments and commonly used skilled nursing facilities. Integra’s staff also includes nurse practitioners, social workers, pharmacists, data analysts, medical directors and other staff dedicated to managing the contracted populations.

Care New England Medical Group (d/b/a name for Affinity Physicians, LLC) will, as of January 1, 2017, be the CNE-wide medical group into which all CNE employed physicians will migrate. Historically, CNE has employed physicians through all of its hospitals as well as through community based groups affiliated through CNEMG and Women & Infants Healthcare Alliance, LLC. CNEMG will be comprised of over 400 physicians in a multispecialty group practice. The group has developed a new consistent contract, management structure and governance model. CNEMG is implementing a compensation program that sets salary expectations linked to clinical productivity. Each physician will have an individualized productivity target that will reward each physician for increased work effort while setting risk corridors for future base salary determinations. This expanded clinical productivity model will enhance the performance of CNEMG while also lending support to the teaching and academic mission of CNE.

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Care New England Key Services

Butler Kent WIH Memorial TPC VNA Primary Care Family Medicine X X X Internal Medicine X X X Women’s Health Obstetrics/Gynecology X X X Maternal Fetal Medicine X Reproductive Endocrinology X Urogynecology X X OB Medicine X X Women’s Oncology X X X Gynecologic Oncology X X X Breast Cancer X X X Pediatrics Newborn Care X X X Neonatal Intensive Care X Pediatrics X Behavioral Health Psychiatry X X X X X Substance Abuse X X X X Cardiovascular Cardiology X X X Services Cardiac EP X Cardiac Cath X Vascular Surgery X Postacute Care X Oncology Colorectal Cancer X X Lung Cancer X X Prostate Cancer X X Palliative Care X Surgical Services ENT Surgery X X General Surgery X X X Urologic Surgery X X Thoracic Surgery X Neuroscience Stroke X X Neuro Disease Management X X X Neuropsychology X X X Sleep Studies X X Movement Disorders X X X Memory and Aging X Electroconvulsive therapy (ECT) X Transcranial Magnetic Stimulation X (TMS) Orthopedics Total Joint Replacement X X Spine/Back X X Sports Medicine X X Physical Therapy/Rehabilitation X X X Medicine Gastroenterology X X X Pulmonary Medicine X X X Wound Care X Care Management Continuum Care Management X X X X X Home Health X Hospice/Palliative Care X X Wellness and Prevention X X X X X X

Source: CNE Records

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MEDICAL STAFF INFORMATION

Overview

As of September 30, 2015, the numbers of physicians and allied health providers on medical staffs of the hospitals are: 713 at WIH1, 675 at Kent, 151 at Butler and 371 at Memorial. Members of the medical staff are appointed to one of the following categories: Active, Consulting, Courtesy and Supplemental2. The physicians on each hospital’s medical staff are either employed or community-based. Hospital-based physicians are employed by one or more of the Hospitals, or by a group with an exclusive contractual arrangement for the provision of medical services.

Care New England Medical Group focuses its recruitment efforts on hiring physicians who most directly influence care retention. CNE and CNEMG recognize that access to primary care physicians is essential to grow the number of covered lives who seek their care in the CNE system as well as part of the Integra ACO. CNE continues to broaden its relationships with its community physicians, both in private practice as well as its prime ACO partner, Rhode Island Primary Care PC. All 150+ physicians in RIPCPC as well as the majority of primary care providers in the Kent and Memorial hospital areas are members of Integra. The link between this RIPCPC and CNE is strong with collaborative efforts focusing on care coordination, care retention and improved quality and management of care. Specifically, Integra participation by RIPCPC and other physician members, affords these participating providers eligibility for quality outcome incentive awards and shared savings.

Care New England, like other health care organizations, is seeing an increase in the number of employed physicians. CNEMG is recruiting approximately ten primary care providers, both physicians and nurse practitioners. This recruitment is targeted to existing practices that are mature and ready to expand access to more patients.

In addition, there is a significant focus on specialty recruitment in areas to strengthen care retention and access. These specialty areas include Pulmonology and Sleep Medicine (two), Cardiology (two), Interventional Cardiology for CNE’s expanding program (one), Orthopedics (three), General Surgery (one) and Obstetrics/Gynecology (three). CNEMG also continues to recruit hospitalists, intensivists and ED physicians as dictated by staffing needs.

The following chart depicts the distribution of the Hospitals’ medical staff members by employed versus community based.

Care New England Medical Staff3

2015 Butler Kent WIH Memorial Total Percent Hospital Employed 58 271 153 72 554 29% Community-Based 93 404 560 299 1356 71% Total 151 675 713 371 1,910 100%

The table below represents the members of CNE’s 2015 medical staff that were categorized as active.

2015 Butler Kent WIH Memorial Total Number of Active Staff 98 213 676 269 1,256

Source: CNE Records

1 WIH includes only Active, Courtesy and Consulting physicians. 2 Kent and Butler hospitals also include Supplemental physicians. 3 Data Source: Hospital MSC’s.

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The table below illustrates the Care New England medical staff composition as of July, 2016.

Care New England Medical Staff

2016 Butler Kent WIH Memorial Total Percent Employed 58 268 169 79 574 28% Community-Based 77 458 596 362 1493 72% Total 135 726 765 441 2067 100%

The table below represents the number of members of CNE’s 2016 medical staff who are categorized as active.

2016 Butler Kent WIH Memorial Total Number of Active Staff 92 200 719 333 1344

Source: CNE and Memorial Records

The average age of physicians on the medical staff at Butler, Kent, Memorial and Women & Infants was 53, 52, 48 and 50 years, respectively, as of September 30, 2015. The percentages of physicians who are board certified are 95%, 92%, 99% and 94% at Butler, Kent, Memorial and WIH, respectively.

The following tables summarize by specialty, members of the staffs of Butler, Kent and Women & Infants as of September 30, 2015. The tables also include available admission data for FY2015 and fiscal 2016 year to date through June 2016.

Medical Staff Membership Admissions by Specialty

Butler

Fiscal Year 2015 Fiscal Year 2016 YTD** % of Total % of Total Number of Average Total Butler Total Butler Specialty/Dept Physicians Age* Admissions Admissions Admissions Admissions Internal Medicine 12 56 0 0 0 0 Neurology 8 53 0 0 0 0 Psychiatry 86 52 5949 93.7 4784 93 Other/Unknown 29 52 397 6.3 356 7 Total All 135 53 6346 100% 5140 100%

Excludes Kent Unit at Butler. *Age data excludes honorary physicians. **As of June 30, 2016.

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Kent

Fiscal Year 2015 Fiscal Year 2016 YTD* % of Total % of Total Number of Average Total Kent Total Kent Specialty/Dept Physicians Age Admissions Admissions Admissions Admissions Anesthesiology 40 49 0 0 0 0 Cardiology 39 52 34 0.22 30 0.27 Diagnostic Imaging 24 51 6 0.04 4 0.04 Emergency Services 48 42 10 0.06 10 0.09 Family Practice 46 48 665 4.38 532 4.81 Gastroenterolgy 11 51 4 0.03 2 0.01 Hematology/ Oncology 11 50 245 1.62 136 1.23 Hospitalists/ Residents* 46 41 2549 16.81 2034 18.39 Internal Medicine 78 50 5286 34.85 3803 34.38 Medicine (Other) 21 881 5.81 488 4.41 Obstetrics & Gynecology 24 49 913 6.02 663 5.99 Orthopedics 20 48 516 3.40 381 3.43 Path & Lab 7 55 0 0 0 0 Pediatrics 35 56 828 5.46 605 5.47 Psychiatry & Neurology 84 48 1864 12.29 1456 13.16 Surgery (Other) 95 50 1151 7.59 802 7.25 Urology 12 48 214 1.41 115 1.04 Other 34 Total All 675 44 15,166 100% 11,061 100%

Resident data included in Admissions. Includes data from the Kent Unit at Butler (majority of psych discharges) Source: Volume Data from CNE Decision Support. Count and Age Kent MSO. *As of June 30, 2016.

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Memorial

Fiscal Year 2015 Fiscal Year YTD* % of Total % of Total Number of Average Total MHRI Total MHRI Specialty/Dept Physicians Age Admissions Admissions Admissions Admissions Anesthesia /Pain 11 49 0 0 0 0 Cardiology 11 53 20 0.62 1 0.08 Diagnostic Imaging 16 47 0 0 0 0 Emergency Services 29 44 3 0.09 0 0 Family Medicine 61 43 576 17.93 429 13.61 Gastroenterology 11 61 4 0.12 0 0 Hematology/ Oncology 6 53 8 0.25 6 0.19 Internal Medicine 26 44 975 30.34 1016 32.23 Medicine (Other) 58 54 805 25.05 968 30.71 Obstetrics & Gynecology 17 53 194 6.04 144 4.57 Orthopedics 14 49 106 3.30 115 3.65 Path & Lab 4 49 0 0 0 0 Pediatrics 17 54 194 6.04 162 5.14 Psychiatry & Neurology 20 50 3 0.09 4 0.13 Surgery(other) 52 49 310 9.65 292 9.26 Urology 19 47 15 0.47 15 0.48 Other/Unknown 8 Total All 381 50 3231 100% 3152 100%

Data: Physician counts/age Memorial MSO *As of June 30, 2016.

Women & Infants

Fiscal Year 2015-2016 Fiscal Year 2016 YTD* % Total % of Total Number of Average Total W&I Total W&I Specialty/Dept Physicians Age Admissions Admissions Admissions Admissions Anesthesiology 13 60 0 0 0 0 Cardiology 13 51 0 0 0 0 Dermatology 2 68 0 0 0 0 Diagnostic Imaging 66 50 0 0 4 0.03 Endocrinology 7 46 0 0 0 0 Family Medicine 26 48 63 0.32 151 0.96 Gastroenterology 25 50 2 0.01 1 0.06 Hospital Medicine 6 48 0 0 0 0 Medicine 59 49 77 0.39 56 0.36 Obstetrics & Gynecology 157 49 10449 53.18 8376 53.30 Path & Lab 20 57 0 0 0 0 Pediatrics 192 53 8936 45.48 7025 44.71 Psychiatry & Neurology 32 48 0 0 0 0 Nephrology 5 50 0 0 0 0 Surgery 56 43 122 0.62 101 0.64 Urology 21 50 0 0 0 0 Other 69 47 Total All 769 50.96 19,649 100% 15,714 100%

*As of June 30, 2016

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COMPETITIVE ENVIRONMENT

Service Area

The primary and secondary service areas for one or more of the CNE hospitals include the entire State of Rhode Island and Bristol County, Massachusetts. CNE considers its tertiary service area to extend to Barnstable, Norfolk, Plymouth and Worcester Counties in Massachusetts and New London and Windham Counties in Connecticut.

Service Areas by County

The following is a map of the combined service area of Butler, Kent, Memorial and Women & Infants by county.

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Demographic Information

CNE’s service area population is projected to remain relatively flat while experiencing some aging by 2021. Almost 21 percent of CNE’s service area population is under 18 years old, 63 percent are between 18 and 64, and 16 percent are 65 and older. There are slightly more women (approximately 52 percent) than men (approximately 48 percent). The majority of the population (77 percent) is Caucasian, more than 4 percent of the population is African American, and 12 percent identify as being of Hispanic or Latino origin. Approximately 3 percent of the population is Asian, and 4 percent fall into other categories.

The mean annual household income for the service area is approximately $77,000. Additionally, in Rhode Island, nearly 5.5% of the workforce is unemployed, which is greater than the national average. However, this rate has been declining over the past three years. Certain demographics of the service areas are set forth in the chart below:

Service Area US Population Current 2016 Projected 2021 Current 2016 Total Population 1,613,751 1,631,737 322,431,073 Population 65+ 16.4% 18.7% 15.1%

Income Average Household Income $77,976 $77,135 Less than 15K per year 13.0% 12.3%

Over $100K per year 26.4% 24.3%

Education Level (25+) Less than high school degree 7.2% 5.8% High school degree 28.1% 27.9% Bachelor’s Degree or higher 29.6% 29.4%

Unemployment Rate* 5.5% 4.9%

Race/Ethnicity Caucasian 76.7% 61.3% African-American 4.5% 12.3% Hispanic 12.1% 17.8% Asian & Pacific Is. 3.0% 5.4% All Others 3.8% 3.1%

Sources: Population Data- Truven (Claritas Demographics) * Bureau of Labor Statistics June 2016

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Competition

Rhode Island’s acute health care system consists mainly of healthcare systems, the two largest being Care New England and Lifespan. Recently two for-profit systems - Prospect CharterCare and Prime Healthcare - have entered the market by acquiring existing health systems. CNE’s current competition is primarily from Lifespan, Prospect CharterCare, Prime Healthcare and the one remaining independent Rhode Island hospital (South County Hospital) and, to a lesser degree, Massachusetts-based Southcoast Health System, Sturdy Memorial Hospital and Connecticut-based Lawrence + Memorial Healthcare. In addition, Massachusetts-based Southcoast Health System is located in Bristol County, Massachusetts, where CNE provides sub-specialty tertiary services not offered by Southcoast.

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Care New England Competitors: Location, Members, Size and Market Share

Lifespan Corporation (Based in Providence, RI) Hospital Name Location Licensed Beds RI Hospital / Hasbro Children’s Hospital Providence, RI 719 Miriam Hospital Providence, RI 247 Newport Hospital Newport, RI 129 Bradley Hospital E. Providence, RI 70

Prospect CharterCare (Based in Providence, RI) Hospital Name Location Licensed Beds Our Lady of Fatima Hospital North Providence, RI 359 Roger Williams Medical Center Providence, RI 220

Prime Healthcare (Based in Woonsocket, RI) Hospital Name Location Licensed Beds Landmark Medical Center Woonsocket, RI 214

Lawrence + Memorial Healthcare (Based in New London, CT) Hospital Name Location Licensed Beds Westerly Hospital Westerly, RI 125

Southcoast Health System (Based in New Bedford, MA) Hospital Name Location Licensed Beds* St. Luke’s Hospital New Bedford, MA 391 Charlton Memorial Fall River, MA 328 Tobey Hospital Wareham, MA 74 Southcoast Behavioral Health (Joint venture between Acadia Dartmouth, MA 120 Healthcare and Southcoast Health)

Independent Hospitals Hospital Name Location Licensed Beds South County Hospital South Kingstown, RI 100 Sturdy Memorial Hospital Attleboro, MA 128*

Sources: Rhode Island Department of Health 2015 Hospital License Renewal Applications * Massachusetts EOHHS Department of Public Health Licensed or Certified Health Care Facility Listing July 12, 2016

[Remainder of Page Intentionally Left Blank]

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Fiscal Year 2015 Occupancy Rates (using Available Beds) and Market Share

Market CNE CNE Share of Service Service CNE Available Total Total Area*** Area*** Service Hospital/System Beds* Disch. Days Occ % Discharges Days Area***

Butler**** 143 6,375 52,757 101.1% 6,143 51,292 5.4% Kent 339 14,541 79,310 64.1% 14,268 77,775 12.6% Memorial 127 4,515 21,476 46.3% 3,900 18,415 3.4% Women & Infants 247 11,572 54,238 60.2% 11,138 51,404 9.8% CNE Subtotal* 856 37,003 207,781 66.5% 35,449 198,886 31.3%

Newport 129 4,582 22,266 47.3% 4,366 21,298 3.9% Bradley 70 1,265 18,445 72.2% 1,063 13,728 0.9% Rhode Island Hospital 666 35,109 186,775 76.8% 30,747 162,472 27.1% Miriam 247 16,592 67,003 74.3% 15,556 63,668 13.7% Lifespan Subtotal 1,112 57,548 294,489 72.6% 51,732 261,166 45.7%

Roger Williams 176 7,386 30,946 48.2% 7,152 30,025 6.3% Our Lady of Fatima 224 5,879 37,346 45.7% 5,751 36,602 5.1% Prospect CharterCare Subtotal 400 13,265 68,292 46.8% 12,903 66,627 11.4%

Landmark 140 6,731 31,721 62.1% 6,370 29,723 5.6% Prime Healthcare** 140 6,731 31,721 62.1% 6,370 29,723 5.6%

Westerly 75 2,894 12,990 47.5% 1,855 8,522 1.6% Lawrence + Memorial Healthcare Subtotal 75 2,894 12,990 47.5% 1,855 8,522 1.6%

South County 83 5,147 16,274 53.7% 5,004 15,426 4.4% Non-affiliated Subtotal 83 5,147 16,274 53.7% 5,004 15,426 4.4%

Total Hospitals in RI 2,666 122,588 6,631,547 64.9% 113,313 580,350 100%

Note: Data excludes normal newborns *Available beds for WIH includes 80 NICU beds and for Kent includes the Kent Unit at Butler of 29 beds ** Data excludes Prime Healthcare’s Rehab Hospital of RI ***Service area discharges includes all Rhode Island and Bristol County, Massachusetts residents discharged from a hospital in RI **** Butler maintains a fully staffed overflow unit based on community needs, which is why the occupancy rate may exceed 100% at times.

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HOSPITAL UTILIZATION

A summary of significant utilization data of Butler, Kent, Memorial (excluding 2013), and Women & Infants for the three fiscal years ended September 30, 2013, 2014 and 2015 and the nine-month periods ended June 30, 2016 and 2015 is contained in the following table:

Butler, Kent, Memorial & Women & Infants Combined Utilization Data Fiscal Year Ended 9 mos. 9 mos. Ended Ended

30-Sep June 30 June 30 2013 2014 2015 2015 2016 Inpatient Statistics: Total Licensed Beds 1017 1043 1043 1,043 1043 Total Staffed Beds 795 821 856 856 856

Discharges: Total 45,815 45,701 46,920 34,781 34,446 Patient Days: Total 225,294 229,549 231,962 174,589 166,354

Average Length of Stay: Total 4.92 5.02 4.94 5.02 4.83

Observation Patients: Total 10,320 11,262 11,538 9,121 8,756

Percent of Total Occupancy of Beds in Service: Total 78% 77% 74% 56% 71%

Medicare Case Mix Index 1.36 1.37 1.39 1.39 1.51

Surgeries: Inpatient 4,776 4,472 4,277 3,308 3,177 Outpatient 18,297 18,402 18,781 12,767 12,318 Total 23,073 22,874 23,058 16,075 15,495

Deliveries Total 9,892 9,812 10,091 7,380 7,416

Emergency Room Visits 129,995 129,430 135,093 99,806 101,518 Home Care Visits 112,132 76,398 60,442 84,425 70,599 Hospice Days 16,337 14,341 20,182 14,443 22,021 Residential Bed Days n/a n/a 57,562 42,695 42,190

Source: CNE Records (includes normal newborns)

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SOURCES OF PATIENT SERVICE REVENUE

Care New England Payor Mix

The majority of revenue received by Care New England’s operating units is derived from third-party payors. The Hospitals are providers under the Medicare and Medicaid programs and also receive payments from Blue Cross/Blue Shield of Rhode Island, United Health Care and other commercial insurance companies and health maintenance organizations. The following table shows the percentage distribution of gross patient service revenue by payor source for the three fiscal years ended September 30, 2013, 2014 and 2015 and for the nine-month period ended June 30, 2016 for Care New England.

FY 2013 FY 2014 FY 2015 FY 2016 YTD* Medicare and Medicare Managed Care 34% 34% 33% 32% Blue Cross 23 22 21 21 Medicaid and Medicaid Managed Care 20 24 28 28 Managed Care 11 11 10 11 Self-Pay 5 3 2 2 Other third-party payors 7 6 6 6 Total 100% 100% 100% 100%

*FY2016 YTD through June 30, 2016 Source: CNE Records

RECENT FINANCIAL INFORMATION

Appendix B-1 to the Offering Memorandum contains audited consolidated financial statements of Care New England Health System and Affiliates as of September 30, 2014 and 2015 and for the years then ended with the independent auditors’ report thereon. Management’s discussion and analysis of the Health System’s financial performance during the fiscal year ended September 30, 2015 and the nine months ended June 30, 2016 should be read in conjunction with the Health System’s audited financial statements and accompanying footnotes. Appendix B-3 of the Offering Memorandum contains the unaudited interim consolidated financial statements of Care New England Health System and Affiliates as of and for the nine months ended June 30, 2016.

The following consolidated balance sheets as of September 30, 2013, 2014 and 2015 as well as the consolidated statements of operations and changes in unrestricted net assets for CNE for the nine-month period ended June 30, 2015 and 2016 have been prepared by management and are derived from the financial records of Care New England. The unaudited financial statements include all adjustments, consisting of normal accruals that management considers necessary for a fair presentation of financial position and results of operations for these periods, with the exception of (1) an estimate associated with the impact of the cash balance defined benefit plan which is subject to significant volatility under current pension accounting rules and cannot be determined until the actuaries get final interest rate and actual market values of investments at September 30th each year, (2) adjustments to goodwill and intangibles that have an indefinite useful life and are subject to annual evaluation for impairment, (3) self-insurance reserves that rely on sound funding practices and actuarial assessments that are determined at September 30th each year and (4) elimination entries for all related party activity. Unaudited results for the nine months ended June 30, 2016 are not conclusively indicative of the results for the remainder of the year.

The presentation of the following CNE financial information, including, but not limited to, the ratios, pro-forma calculations and management discussion, includes financial information relating to TPC as of January 1, 2015, the date of acquisition, which will become a member of the Obligated Group as of the date of issuance of the Notes.

Set forth below is an historical, comparative summary of the consolidated results of operations of Care New England Health System (including its controlled affiliates) for its past three fiscal years and for the nine-month periods ended June 30, 2015 and 2016. The information in the following table has been extracted from the audited consolidated financial statements of Care New England Health System (including its controlled affiliates) for the years ended September 30, 2013 through 2015 and from unaudited interim consolidated financial statements of Care New England Health System (including its controlled affiliates) for the nine-month periods ended June 30, 2015 and 2016. The interim amounts set forth below have been prepared by management of the System without audit and, in the

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opinion of management, present a fair statement of the consolidated results of operations of Care New England Health System (including its controlled affiliates) for such interim periods. The interim amounts reflected below are not necessarily indicative of the financial results that will be achieved for the full fiscal year.

The consolidated financial statements from which the information in the following table has been extracted includes TPC, a controlled affiliate of Care New England Health System that will become a member of the Obligated Group upon the date of the issuance of the Notes. For the year ended 2015 and the nine-month periods ended June 30, 2015 and 2016, TPC contributed less than 4.25% of the consolidated revenues reported on the consolidated financial statements of Care New England Health System (including its controlled affiliates) for such period. TPC is included in the following for the period January 1, 2015 through September 30, 2015 with respect to the Fiscal Year ending September 30, 2015 and for the nine month periods ended September 30, 2015 and 2016.

STATEMENTS OF OPERATIONS AND CHANGES IN UNRESTRICTED NET ASSETS

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Net patient service revenue (see note) $805,715,435 $983,007,026 $1,023,112,177 $781,590,534 $808,855,850 Other unrestricted revenue and gains 87,442,491 85,003,668 114,827,316 67,173,156 66,325,076 Total unrestricted revenue and gains $893,157,926 $1,068,010,694 $1,137,939,493 $848,763,690 $875,180,926

Salaries, wages and fringe benefits 569,461,047 675,473,104 715,127,055 533,834,801 542,955,351 Supplies and other expenses 190,588,600 249,593,140 284,550,504 214,555,273 229,579,719 Research expenses 23,851,525 25,146,652 23,482,879 17,178,578 18,096,298 Licensure fees 32,840,235 41,052,257 43,534,709 32,730,603 35,844,475 Insurances 26,890,188 26,706,819 26,698,480 23,992,686 22,498,167 Depreciation and amortization 28,296,075 34,495,543 36,581,327 28,502,329 29,907,401 Interest 3,626,488 6,527,788 6,838,716 5,098,988 4,922,387 Loss on Refinancing - 509,587 - - 889,074 Restructuring costs - - 2,911,571 - 20,747,540 Total operating expenses $875,554,158 $1,059,504,890 $1,139,725,241 $855,893,258 $905,440,412

Net Income (Loss) from operations 17,603,768 8,505,804 (1,785,748) (7,129,568) (30,259,486) Net non-operating gains / (losses) 6,968,898 2,634,471 (26,049,563) (10,552,383) 7,428,843

Excess (Deficiency)of revenues and gains over expenses $24,572,666 $11,140,275 $(27,835,311) $(17,681,951) $(22,830,643)

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SUMMARY OF CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Cash and current investments $85,624,217 $77,609,133 $75,967,496 $77,499,015 $69,269,078 Net Patient Receivables 136,431,290 125,108,931 139,822,039 121,229,973 118,705,469 Other Receivables 17,776,982 15,153,122 21,404,988 48,719,400 49,029,296 Other current assets 21,799,623 23,535,974 18,232,873 23,981,912 14,809,757 Assets limited as to use, non-current 323,734,890 367,215,523 336,204,938 357,434,227 329,707,419 Property & equipment, net 307,417,682 311,986,509 313,868,493 317,210,544 306,790,896 Other non-current assets 35,815,973 38,419,854 40,231,241 40,175,382 39,604,097 Total assets $928,600,657 $959,029,046 $945,732,068 $986,250,453 $927,916,012

Current liabilities $190,499,579 $164,922,937 $189,339,474 $191,343,563 $214,634,816 Self-insurance reserves 133,173,731 137,475,561 138,931,970 145,582,501 132,619,539 Long-term debt & capital leases 110,327,300 157,756,641 154,747,534 161,527,681 142,082,974 Net pension liability 66,603,584 83,407,618 115,941,758 74,825,394 115,254,496 Other non-current liabilities 41,367,015 37,614,830 34,704,686 37,295,192 30,240,916 Net assets 386,629,448 377,851,459 312,066,646 375,676,122 293,083,271 Total liabilities and net assets $928,600,657 $959,029,046 $945,732,068 $986,250,453 $927,916,012

HISTORICAL DEBT SERVICE COVERAGE

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Excess of revenues and gains over expenses $24,572,666 $11,140,275 $(27,835,311) $(17,681,951) $(22,830,643) Add back: Depreciation and Amortization 28,296,075 34,495,543 36,581,327 28,502,329 29,907,401 Interest Expense 3,626,488 6,527,788 6,838,716 5,098,988 4,922,387 Income Available For Debt Service $56,495,229 $52,163,606 $15,584,732 $15,919,366 $11,999,145

2013 2014 2015

Annual Debt Service $9,964,163 $15,160,664 $13,283,064 Coverage of Annual Debt Service 5.67x 3.44x 1.17x Pro-forma Maximum Annual Debt Service * $13,617,190 $13,617,190 13,617,190 Pro-forma Coverage of Maximum Annual Debt Service * 4.15x 3.83x 1.14x * Preliminary and subject to change

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HISTORICAL INDEBTEDNESS RATIO

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Long-Term Indebtedness ( Current & Long Term) $117,913,811 $165,011,036 $164,379,400 $168,404,780 $164,122,463 Unrestricted Net Assets 315,391,278 309,539,402 241,150,258 301,313,954 223,780,484 Total Capitalization $433,305,089 $474,550,438 $405,529,658 $469,718,734 $387,902,947 Ratio of Long-Term Indebtedness to Capitalization 0.27 0.35 0.41 0.36 0.42

Pro-forma Long-Term Indebtedness ( Current & Long Term) $169,263,232 Unrestricted Net Assets as of June 30th 2016 223,780,484 Pro-forma Total Capitalization $393,043,716 Pro-forma Ratio of Long-Term Indebtedness to Capitalization 0.43

OUTSTANDING INDEBTEDNESS

As of June 30, 2016, CNE’s total outstanding long-term indebtedness was $164,122,463. The table below reflects CNE’s indebtedness as of June 30, 2016 and pro-forma indebtedness upon the issuance of the Series 2016B Bonds and the Series 2016C Taxable Notes.

Historic Debt June 30, 2016 Pro-Forma Series 2016A Bonds $14,156,000 - Series 2014A Bonds 42,810,000 - Series 2013A Bonds 82,170,924 - Series 2010 Bonds 9,511,649 - RIHEBC & Other Capital Leases (1) 6,816,399 6,816,399 Time Mortgage Note (1) 3,187,497 3,187,497 The Providence Center Debt (2) 5,469,994 258,336

Series 2016B Bonds (3)(4) - 138,710,000 Series 2016C Taxable Notes (4) - 20,291,000 Total $164,122,463 $169,263,232

Note (1): The Capital Leases and Time Mortgage Note are not, and will not be, secured by the Master Trust Indenture and are not being refinanced. Note (2): TPC debt is comprised of a HUD mortgage and certain capital leases. Note (3): Assumes an original issue premium of $14,321,143. Note (4): Preliminary; subject to change.

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DAYS CASH ON HAND

The table below sets forth the liquidity position of CNE as of the dates indicated.

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Cash and Cash Equivalents $85,624,217 $77,609,133 $75,967,496 $77,499,015 $69,269,078 Unrestricted Board-Designated Funds 80,313,506 104,024,393 90,980,227 104,697,188 95,393,610 Total $165,937,723 $181,633,526 $166,947,723 $182,196,203 $164,662,688

Operating Expenses $875,554,158 $1,059,504,890 $1,139,725,241 $855,893,258 $905,440,412 LESS: Depreciation and Amortization Expense 28,296,075 34,495,543 36,581,327 28,502,329 29,907,401 Daily Operating Expense 2,321,255 2,808,245 3,022,312 3,030,736 3,195,376

Days Cash on Hand 71.5 64.7 55.2 60.1 51.5

MANAGEMENT DISCUSSION

Fiscal Years 2014 and 2015. Financial Matters. During this period Care New England transitioned to become a more tightly integrated, physician-led health care delivery system. In recent years, this has included the acquisition of Memorial Hospital and its primary care capabilities, TPC (January 1, 2015) and its ambulatory behavioral health and substance abuse capabilities, investment in information technology (EPIC Ambulatory), and the development of accountable care capabilities (Integra ACO). These investments have positioned CNE for the future but have put a strain on short-term operating performance.

Care New England has experienced a decline in income from operations over the last several years. Negative pressures on the revenue side have increased over this time period. An already competitive market became more competitive with the entry of two for-profit hospital organizations. Another significant driver of negative pressure has been the compression of commercial and managed care rates due to a Rhode Island state law passed in 2013 limiting annual rate increases. The implementation of the Rhode Island healthcare exchange on January 1, 2015 pursuant to the Accountable Care Act (“ACA”) has had both a positive and negative impact. The ACA decreased the number of uninsured in Rhode Island; however, the Healthcare Exchange has negatively impacted payment rates for certain of the system’s business line. Finally, during this period both government and commercial payors have been aggressively moving payment models from volume to value.

Care New England’s operating results have been enhanced by investment gains, favorable settlements associated with prior year reserves and contribution revenue from acquisitions. Management recognized that the underlying operating performance was declining due to the revenue pressures discussed above and the needed investments being made for the future. The integration of Memorial Hospital has been a greater challenge than originally anticipated, placing a significant strain on overall performance.

In FY2015, CNE implemented (as part of the budget) a multi-faceted plan to improve operating performance that included System-wide cost reductions, revenue cycle improvements and growth initiatives. Based on the six-month financial results through March 31, 2015, management prepared a financial projection of FY2015 annual results which was presented to the Finance Committee of the Board in May 2015 together with a high level corrective action plan. The projection made clear that not only would the targeted cost savings not be achieved in full but that the target itself was inadequate to maintain viable financial strength. A key action item was engaging a third party consultant to assess opportunities to improve operational and financial performance for CNE and to assist with the implementation of recommendations based on that assessment. Huron Healthcare was chosen and began the assessment phase in June 2015. This project was labeled “Transforming Together Today (T3)” and was expected to take 12 to 18 months.

Care New England’s day’s cash on hand declined from 2013 to 2015. The primary factors causing this trend are operating results, especially those of Memorial Hospital, pension funding commitments, a substantial increase in

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accounts receivable ($18 million in FY2015 Quarter 4) due to the implementation of ICD-10, and the information system conversions at Memorial Hospital.

Utilization. Care New England’s inpatient volumes were stable but mixed from 2014 to 2015. Total discharges in 2015 were 45,920, up from 45,701 in 2014. NICU days decreased by 3.5% to 23,651 and inpatient surgeries also decreased by 4.5% to 4,277. However, deliveries increased 3% to 23,651 and observation cases increased by 2.5% to 11,538. Overall length of stay declined to 4.9 days from 5.0 due to improved patient flow.

Outpatient volumes were also mixed during this period. Outpatient surgeries increased by 2% to 18,781 and emergency department visits increased by 4.3% to 135,013. Other services that grew year over year were ambulatory visits, radiology exams and hospital days. Areas that declined were laboratory tests and endoscopy procedures.

Fiscal Year 2016 through June 30, 2016. Financial Matters. The primary focus of FY2016 was implementing the margin improvement initiatives from the T3 plan. The annual budget for the year calls for a $37 million loss, which includes $27 million of restructuring costs and $32 million of T3 operating margin improvements. The effects of the T3 program implementation are expected to be between $75–$95 million of annualized improvement. The FY16 budget and all of CNE’s financial planning is based on an annualized target improvement of $75 million phased in over 24 to 36 months. Financial projections reflecting these targeted improvements are included in the financial feasibility study discussed under the heading “FEASIBILITY STUDY” below.

Memorial Hospital has continued to be the most significant challenge through June 30, 2016. The information systems investments made in 2015 have not produced the increase in business that was budgeted for 2016. An aggressive cost management focus has been imposed on Memorial to reduce the monthly losses. A high level strategic task force is developing a long term plan for Memorial Hospital. All options are under consideration, including healthcare services, as well as mixed use. The plan is scheduled to be completed by December 15, 2016 with implementation beginning post-affiliation.

At June 30, 2016, CNE had an operating loss of $30.3 million against a budgeted loss of $31.2 million. The impact of the T3 initiatives can be seen in the progressive improvement in operating results by quarter. Included within the operating results is $20.7 million of one-time restructuring costs; these costs include Huron T3 consulting fees and accrued severance agreements. Operating results by quarter, with and without restructuring costs, through June 30, 2016 are: in'000s QTD Net Income/(Loss) from Operations Before QTD Net (Loss) Restructuring Restructuring from Operations Costs Costs December 31 (Q1) $ (14,186) (5,208) $ (8,978) March 31 (Q2) (11,544) (6,441) (5,103) June 30 (Q3) (4,529) (9,099) 4,570 FY16 Year-to-Date $ (30,259) (20,748) $ (9,511)

Net patient revenues were $11.7 million or 1.4% lower than budget for the first nine months and $27 million or 3.5% greater than the same period of fiscal 2015. Women & Infants and TPC account for the increase. The health care exchange continues to impact the Health System. The shift toward more Medicaid and Medicaid-based insurers continued and these new coverage options continue to result in fewer charity care write offs.

Inpatient volume for the Health System through the third quarter of FY2016 fell short of budget by 2% and was 1% less than in 2015. Outpatient volume was mixed. Most notably, outpatient surgeries continue to fall short of budget.

CNE records investment income, as well as realized gains and losses on Indemnity investments, as other revenue. $491,392 in net investment losses was included in other revenue through the third quarter. CNE’s operating results were positively impacted by Indemnity operations. Total Indemnity operating income of $5.2 million was $2.1

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million favorable to budget. Actual underwriting experience versus expected actuarial losses was substantially favorable through the third quarter. In the second quarter, W&I Indemnity paid a $12.5 million dividend to Women & Infants.

Total expenses for the Health System were under budget by $14.2 million or 1.5%. Excluding restructuring cost and the loss on refinancing, the positive expense variance was $20.1 million. The System reported a favorable expense variance in salaries of $16.5 million or 3.8%, attributable to the management of vacancies, the deferral of annual salary increases and the implementation of multiple T3 labor initiatives to reduce labor costs. These included adjustments in span of control, focused improvements in labor productivity and management, reduced reliance on premium labor, adjustments in paid time off policies and restructuring of the position review process. Year-to-date through June 30, 2016, FTEs per Adjusted Occupied Bed were better than budget at 4.10. Favorable variances in health insurance and FICA resulted in a favorable variance of $8.3 million or 6% in fringe benefits. Medical supplies and drugs were over budget by $2.2 million or 2.7%. Year-to-date through June 30, 2016, cost per adjusted discharge was favorable to budget by 2.8% and cost per adjusted day was favorable by 1.4%. The unfavorable variance in restructuring costs of $5 million or 31.9% is due to budget timing differences related to Huron’s fees and CNE severance agreements.

The Health System’s cash position remains a significant concern. Overall days cash on hand (CNE, including TPC) was 51.5 days, compared to 55.2 at September 30, 2015. The change in the cash position since September 30, 2015 is comprised of the negative operating results at Memorial and the funding of annual commitments including pension and workers compensation being partially offset by an increase in accounts payable balances, a decrease in patient receivables due to a reduction in uncoded accounts coupled with increased billing and follow-up efforts resulting from T3 initiatives and the receipt of a $12.5 million dividend from W&I Indemnity. The System’s average payment period increased to 66.1 days, compared to 60.6 at September, 30, 2015. The Health System’s days in gross accounts receivable decreased to 50 days, compared to 61 days at September 30, 2015. In March 2016, CNE’s line of credit with TD Bank expired and was not renewed.

In June 2016, CNE issued the Series 2016A Bonds to refund the outstanding balance on the System’s Series 2011 Bonds. The amount of the Series 2016A Bonds was $14,156,000 which included $13.9 million for the refunding of the Series 2011 Bonds and $263,000 of issuance costs. A loss on refinancing of $889,000 was recorded as a result of the transaction. The bonds have a maturity date of June 17, 2017. Consequently, the entire outstanding balance of the Series 2016A Bonds is included in current installments of long-term debt on the System’s balance sheet. The Series 2016A Bonds are expected to be refunded in connection with the issuance of the Series 2016B Bonds and Series 2016C Taxable Notes.

CNE expects an operating loss of approximately $59.8M for FY 2016, consisting of a $1.8M gain from normal operations and non-recurring losses of approximately $61.6M, including a $20.3M loss on refinancing, restructuring costs of $31.2M, merger costs of $4.7M, and a write-off of Memorial intangible of $5.4M.

The preliminary financial data included above has been prepared by, and is the responsibility of, CNE management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to the preliminary financial data. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.

Consolidated Balance Sheet as of June 30, 2016 Compared to the Consolidated Balance Sheet as of September 30, 2015 and June 30, 2015

Financial Matters - As of June 30, 2016, the System had $69.3 million in Cash and Cash Equivalents and Short Term Investments, compared to $76.0 million at September 30, 2015. The change in cash position since September 30, 2015 is primarily due to negative operating results at Memorial, the cost of commitments (including pension and workers compensation). These negative results have been partially offset by a decrease in patient receivables due to a reduction in uncoded accounts coupled with increased billing and follow-up efforts resulting from T3 initiatives, an increase in accounts payable balances, and as previously noted, the receipt of a $12.5 million dividend from W&I Indemnity.

Patient Accounts Receivables were $18.8 million lower than September 30, 2015. Days in Gross Accounts Receivable were 50 days at June 30, 2016, compared to 61 days at September 30, 2015.

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The Allowance for Estimated Uncollectible Accounts increased by $2.3 million or 5.5%, since September 30, 2015. The allowance for uncollectible accounts as a percentage of patient accounts receivables increased 4.0% from September 30, 2015, to 27.2% at June 30, 2016. The allowance for estimated uncollectible accounts as a percentage of patient accounts receivables was 25.2% at June 30, 2015.

Other Receivables include grants receivable, Disproportionate Share (“DSH”) and Upper Payment Limit (“UPL”) monies, indemnity programs’ premiums receivable and other miscellaneous receivables. The increase of $27.6 million or 129.1% since September 30, 2015 related primarily to the timing of receipts, most notably the accrual of the Disproportionate Share income that was not received until July 2016, consistent with prior years.

Assets Limited as to Use decreased $605 million or 1.9% since September 30, 2015 and $27.7 million or 7.8% since June 30, 2015. The components of the changes in FY2016 were a net result of the following:

Board Designated Funds increased $4.9 million, or 4%, since September 30, 2015, but decreased $8.8 million, or 6.6%, since June 30, 2015. The current year increase is reflective of positive market performance. The decrease from the same period in 2015 is primarily related to a reclassification of certain funds from Board Designated Funds to Cash and Cash Equivalents at Kent and Memorial. These funds include cash received with donor-imposed restrictions that are available for current use. The reclassification resulted in a consistent methodology for donor-restricted funds, and is being applied across the Health System.

Self-Insurance Trust Funds decreased $15 million, or 10%, since September 30, 2015 and $17.1 million, or 11.3%, since June 30, 2015. The changes reflect the net of investment performance, contributions, settlement payments, and routine payments. The most notable factor for the decreases since September 30, 2015 and June 30, 2015, occurred in the second quarter of fiscal 2016: a $12.5 million dividend payment was transferred to Women & Infants Hospital by W&I Indemnity. CNE and its operating units self-insure extensive amounts of risk due to either unavailable or uneconomical commercial coverage. CNE relies on sound funding practices and actuarial assessments to provide reasonable assurance of adequate reserves. Among the self-insured programs are:

• W&I Indemnity (hospital primary, excess and physician malpractice) • Toll Gate Indemnity (hospital primary, excess and physician malpractice & general liability) • W&I trust (primary professional & general and malpractice tail exposures prior to 10/1/11) • Butler trust (primary professional & general liability) • Memorial Hospital trust (malpractice tail exposures prior to 7/1/04) • Workers Compensation • Health Insurance • Unemployment Insurance

Trustee Held Funds have increased $2.2 million, or 15.9%, since September 30, 2015 and decreased $1.7 million, or 11.9%, since June 30, 2015. CNE reimbursed operating cash with bond proceeds by $3.3 million since June 2015 to support capital spending. Increases, which offset this reimbursement, are the result of the hospitals making deposits into Debt Service funds.

Goodwill was $24.5 million at June 30, 2016 and September 30, 2015 and is attributable to the acquisition of Memorial Hospital ($24.3 million) in FY2013 and the TPC acquisition ($143,611) in FY2015.

Intangibles were $6.5 million at June 30, 2016 and $6.5 million at September 30, 2015. The intangibles are attributable to trade name valuations of Memorial Hospital and TPC. As a result of the valuation analysis on the acquisition date, TPC recorded approximately $1 million related to the trade name valuation. The goodwill and intangibles have an indefinite useful life, subject to annual evaluation for impairment. CNE anticipates that it may write off the trade name valuation of Memorial Hospital in FY2016.

Current Pension Payable of $10.8 million decreased $5.3 million, or 32.9%, since September 30, 2015 and increased $732,319, or 7.3%, since June 30, 2015. These results reflect the funding of the annual defined contribution liability during the week of April 4, 2016 into the CNE plan. The defined contribution plan expense is being ratably accrued throughout FY2016.

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Accounts Payable and Accrued Expenses increased $18.4 million, or 13%, since September 30, 2015 and increased $8.1 million, or 5.4%, since June 30, 2015. The changes in these accounts are driven primarily by the timing of outflows for both vendor and employee payments and State of Rhode Island licensing fees.

The funded status of CNE’s frozen defined benefit pension plans are reflected on its balance sheet and are adjusted annually during the year-end audit as part of the year-end actuarial evaluation of the pension plans. The Net Pension Liability of $115.9 million reflects the under-funded status of the plans at September 30, 2015, which has been adjusted for current year activity, and will be updated at September 30, 2016.

Self-Insurance Reserves (Current and Long-Term) decreased by $7.5 million, or 5.1%. since September 30, 2015 and $15.3 million, or 9.8%, since June 30, 2015. The change in reserves relates to the current year activity of all the operating units for workers compensation, professional liability and health insurance, offset by actual claims and expenses paid. The majority of large professional payments have settled at less than the amounts reserved.

Total Long Term Debt, including current portion decreased $256,937, or .2% ,since September 30, 2015 and $4.3 million, or 2.6%, since June 30, 2015, due to payments made on CNE’s debt during the last quarter of FY2015 and the first three quarters of FY2016. In addition, as previously described, in June 2016, RIHEBC issued its Series 2016A Bonds on behalf of CNE to refund the outstanding balance on the RIHEBC Series 2011 Bonds. The par amount of the Series 2016A Bonds was $14,156,000, which included $13.9 million for the payoff of the Series 2011 Bonds and $263,000 of issuance costs. The bonds have a maturity date of June 17, 2017. Consequently, the entire outstanding balance of the Series 2016A Bonds are included in current installments of long-term debt on the System’s balance sheet.

Total Net Assets of $293.1 million at June 30, 2016 decreased $19 million since September 30, 2015, which included a decrease in unrestricted net assets of $17.4 million, a decrease of $2.1 million in temporarily restricted net assets, and an increase of $471,191 in permanently restricted net assets.

Utilization

Patient volumes through the first three quarters of 2016 ending June 30, 2016 have been mixed on the inpatient side. Compared to the same period in FY2015, total discharges are down 1%, medical/surgical is down 7.5%, psychiatry is up 9.3% and all other services were fairly flat.

Total patient days and total average length of stay decreased by approximately 5% year over year. However, NICU days increased by 10.8%, which is an important driver of revenue. Both inpatient and outpatient surgeries are down but deliveries, emergency department visits, and partial hospital days are trending up.

The focus across the country as well as in Rhode Island is the appropriate reduction of utilization of services. Accountable care is transitioning the payment system to value based rather than volume based. Care New England has developed its own accountable care organization (Integra) which not only stresses care management but, more importantly, has created a network of providers (primary care physicians and specialists) to keep care within the CNE system. These efforts are underway. See ‘FACILITIES AND SERVICES – Integra Community Care Network.”

The Providence Center, Inc. and Affiliates - Financial Information

The following consolidated financial information for the years ended June 30, 2013, 2014 and 2015, is derived from the audited consolidated financial statements of The Providence Center, Inc. and Affiliates. The consolidated financial information for the nine months ended June 30, 2015 and 2016 is derived from The Providence Center, Inc. and Affiliates unaudited interim consolidated financial statements. The unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring accruals, which The Providence Center, Inc. and Affiliates considers necessary for a fair presentation of the results for those periods. Results for the nine months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 2016. The financial information for the years ended September 30, 2014 and 2015 should be read in conjunction with the Audited Consolidated Financial Statements and Supplementary Financial Information included in Appendix B-2 of the Offering Memorandum.

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THE PROVIDENCE CENTER, INC. AND AFFILIATES CONSOLIDATED STATEMENTS OF OPERATIONS

2013 2014 2015 Public support $19,039,650 $16,291,160 $10,998,533 Revenues 24,509,489 29,062,355 36,509,256 Total operating public support and revenues 43,549,139 45,353,515 47,507,789

Program services 37,988,719 39,420,863 41,713,067 Management and general 4,868,417 5,260,959 5,469,418 Fundraising 332,406 347,034 327,048 Total operating expenses 43,189,542 45,028,856 47,509,533

Income (Loss) from operations 359,597 324,659 (1,744)

Non-operating support and revenue 1,003,555 410,852 4,760,584 Change in unrestricted net assets $1,363,152 $735,511 $4,758,840

On January 1, 2015, TPC became a subsidiary of Care New England Health System. As a result of the acquisition, The Providence Center has changed its accounting year end from June 30th to September 30th. In the years 2013-2015 above reflect 12 months of audited financial data for The Providence Center based on the fiscal year periods of July 1st through June 30th each year.

October 1, 2015 through June 30, 2016 financial information is included in CNE consolidated financial statements and is therefore not provided on a stand-alone basis.

THE PROVIDENCE CENTER, INC. AND AFFILIATES SUMMARY OF CONSOLIDATED BALANCE SHEETS

Nine-Month Period Ended June 30th 2015 2016 2013 2014 2015 (Unaudited) (Unaudited)

Cash and current investments $1,816,154 $2,065,897 $2,087,697 $1,216,641 $154,449 Net grants, contracts and accounts receivable 4,752,455 5,179,820 5,246,652 5,711,106 8,369,554 Other current assets 368,358 553,454 465,452 446,518 138,953 Property & equipment, net 11,868,221 13,224,248 16,255,090 12,961,529 16,152,273 Other non-current assets 849,762 1,005,316 2,328,372 1,479,889 2,566,826 Total assets $19,654,950 $22,028,735 $26,383,263 $21,815,683 $27,382,055

Current liabilities $3,232,434 $3,575,392 $3,083,158 $2,769,132 $5,225,528 Long-term debt & capital leases 4,011,769 5,248,347 5,375,853 5,386,809 4,512,888 Other non-current liabilities 131,211 - - - 224,207 Net assets (deficits) $12,279,536 $13,204,996 $17,924,252 13,659,742 17,419,432 Total liabilities and net assets $19,654,950 $22,028,735 $26,383,263 $21,815,683 $27,382,055

FEASIBILITY STUDY

CNE retained an independent firm to prepare a financial feasibility study (the “Study”) in connection with the offering of the Series 2016B Bonds and Series 2016C Taxable Notes. That Study is not included in and does not form a part of this offering statement. The Study has been filed on EMMA and is available for review at www.emma.org (reference CUSIP No. 7622436N8). Investors are encouraged to read the Study in its entirety, together with the information on EMMA preceding the Study that refers to the proper use and understanding of the forecast included in the Study and the limitations inherent in a forecast of this nature.

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INVESTMENTS

Management of the Board-Designated and Endowment investments is overseen by the Investment Committee at Care New England. The committee is comprised primarily of voluntary trustees experienced in the investment community and specifically with non-profit organization portfolios. Investment allocation strategies among equities, fixed income and alternative investment classes are employed with considerable discipline by the committee. As of June, 2016, the Care New England investment committee employs Fiduciary Investment Advisors as an investment advisor to assist it with bond allocation strategies and investment manager selection. Prior to June, 2016, the Care New England investment committee employed New England Pension Consultants as an investment advisor. In addition, the committee also oversees all the investments of the three Defined Benefit Pension Plans’ assets and the committee makes recommendations to the respective boards of trustees for both Tollgate Indemnity and W&I Indemnity investments.

The trustee-held funds which are included in assets whose use is limited or restricted as to use are primarily made up of a combination of both on-shore self-insurance trusts and off-shore captive insurance companies based in the Cayman Islands. These assets are more conservatively invested with a higher percentage of assets allocated to fixed income securities. With respect to the assets at the off-shore captives, in addition to being monitored by the companies and input from the investment advisors and investment committee, the asset allocations are subject to specific approvals of the Cayman Island Monetary Authority. See ‘SELF-INSURANCE.”

The investments in current assets and deferred compensation accounts are invested primarily in fixed income securities.

Further details regarding the System’s investments can be obtained from the audited consolidated financial statements included in Appendix B.

Below is a summary of Care New England’s investments at September 30, 2013, 2014 and 2015.

Care New England

September 30, 2013 September 30, 2014 September 30, 2015

Fixed Income securities $70,051,191 $52,595,450 $8,363,498 Equity securities 56,336,592 57,705,216 35,073,871 Cash and cash equivalents 32,053,685 60,711,202 42,190,026 Mutual funds 73,206,442 80,702,985 89,710,371 Alternative investments 76,315,520 94,235,702 141,327,768 Other 1,216,813 - - Held under split-interest agreements 18,823,609 19,165,203 17,679,265 Cash surrender value of life insurance 29,166,502 29,674,392 29,470,657 Total $357,170,354 $394,790,150 $363,815,456

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The securities noted above are found on the balance sheet under the following headings:

September 30, 2013 September 30, 2014 September 30, 2015 Investments – current assets $29,724,606 $25,219,578 $27,163,691 Endowment funds 52,403,854 54,523,410 50,819,449 Board-designated funds, including CSV of life insurance 109,480,008 133,698,785 120,450,884 Trustee-held funds 160,951,184 178,811,354 163,469,410 Deferred compensation funds 4,610,702 2,537,023 1,912,022 Total $357,170,354 $394,790,150 $363,815,456

RETIREMENT PLANS

CNE sponsors three separate non-contributory pension plans. One plan covers the employees of CNE and the Hospitals, with the exception of the unionized employees of WIH (who are covered under a multiemployer union plan). The second plan covers the employees of the VNA and the third plan covers substantially all of the employees of Memorial with the exception of its physicians.

The Care New England Defined Benefit Pension Plan assets were valued at $182 million at September 30, 2015 and approximately $183.9 million at June 30, 2016. The Memorial Hospital Defined Benefit Pension Plan assets were valued at $91.9 million at September 30, 2015 and approximately $97.3 million at June 30, 2016. The Kent County Visiting Nurse Association Defined Benefit Pension Plan assets were valued at $6.3 million at September 30, 2015 and approximately $6.5 million at June 30, 2016.

The Hospitals incur and fund their respective pension plan expenses within the guidelines established by the Employee Retirement Income Security Act of 1974. The FY2016 funded status of the plans will be determined based upon market conditions in effect when the annual evaluation as of and for the year ending September 30, 2016 is performed. The actuaries estimated as of July 2016 that the funded status of the CNE plan will be liabilities of $249 million offset by assets of $181 million, for a net underfunding of $68 million, using a current discount rate of 3.53%. By contrast, if the discount rate were 5.00%, liabilities would be $216 million for a net underfunding of $35 million. Memorial’s actuaries estimated as of July 2016 that the funded status will be liabilities of $173 million offset by assets of $96 million, for a net underfunding of $77 million, using a current discount rate of 3.77%. By contrast, if the discount rate were 5.00%, liabilities would be $146 million for a net underfunding of $50 million. VNA’s actuaries estimated as of July 2016 that the funded status will be liabilities of $11 million offset by assets of $6 million, for a net underfunding of $5 million, using a current discount rate of 3.76%. By contrast, if the discount rate were 5.00%, liabilities would be $9 million for a net underfunding of $3 million.

CNE, Memorial and the VNA also have a defined contribution/403(b) plans.

The Providence Center maintains a profit sharing retirement plan to which TPC may make discretionary contributions. TPC did not contribute to the retirement plan for the nine months ended September 30, 2015.

WIH makes payments to a multiemployer pension plan that covers the unionized employees at WIH.

Further details regarding the System’s pension plans can be obtained from the audited consolidated financial statements included in Appendix B.

SELF-INSURANCE

The Health System self-insures a significant component of its loss potential – particularly with respect to professional liability. In addition, due to the economic pressures on its community medical staff, the Health System has structured programs which allow members of the medical staff at WIH and Kent the opportunity to purchase indemnification agreements through these two institutions at rates actuarially determined to be reasonable. The Health System’s self-insurance programs include off-shore captives based in the Cayman Islands, subject to regulation by the Cayman Island Monetary Authority. In accordance with the business plan of the captives, as approved by the Cayman Islands Monetary Authority, funding levels are to be maintained at or above the 70th percentile actuarial confidence level. As of September 30, 2015, these programs retained more than $30 million of funds in excess of the 70th

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percentile requirement. These funds are reported as trustee-held funds within the “assets limited as to use” on the Health System’s financial statements. Subject to indemnity board and Cayman regulatory approval, neither of which would be expected to be difficult to obtain, these funds may be returned at any time to the Hospitals through dividend payments.

LITIGATION

CNE and the Hospitals have been individually named as codefendants in several lawsuits and actions. It is the opinion of the Health System’s Management that the liability, if any, to CNE and the Hospitals in excess of insurance coverage will have no material adverse effect on the combined financial position of Care New England.

The Hospitals and medical practices are subject to numerous federal and state regulations in the normal course of business. These regulations cover clinical operations as well as hospital billing practices which are periodically audited with resulting enforcement actions. The System is proactive with respect to compliance matters, and, in the event an issue is discovered, will self-report or otherwise cooperate with the relevant regulatory authorities to resolve the issue in question. It is the opinion of the System’s Management that the liability, if any, to CNE and the Hospitals resulting from any compliance failures will have no material adverse effect on the combined financial position of Care New England.

NOTEHOLDERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY

Purchase of the Notes involves a degree of risk. In order to identify risk factors and make an informed investment decision, potential investors should be thoroughly familiar with this entire Offering Memorandum, including the Appendices hereto, in order to make a judgment as to whether the Notes are an appropriate investment. Certain risks associated with the purchase of the Notes are described below. Such lists of possible factors, while not setting forth all the factors which must be considered, contain some of the factors which should be considered prior to purchasing the Notes. THE DISCUSSION OF RISK FACTORS IS NOT, AND IS NOT INTENDED TO BE, COMPREHENSIVE OR EXHAUSTIVE. Prospective purchasers of the Notes should give careful consideration to the matters referred to in the following summary. Such summary should not be considered exhaustive, but rather informational only.

The revenue and expenses of the Obligated Group are affected by the rapidly changing health care environment. These changes are a result of the implementation of national health reform and efforts by the federal and state governments, MCOs, private insurance companies and business coalitions to reduce and contain health care costs, including, but not limited to, the costs of inpatient and outpatient care, physician fees, capital expenditures and the costs of graduate medical education. In addition to matters discussed elsewhere herein, the following factors may have a material effect on the operations of the Obligated Group to an extent that cannot be determined at this time.

General

The receipt of future revenues by the Obligated Group is subject to, among other factors, federal and state regulations and policies affecting the health care industry, the policies and practices of MCOs, private insurers and other third-party payors, and private purchasers of health care services. The effect on the Obligated Group of future changes in federal, state and private policies cannot be determined at this time.

Future revenues and expenses of the Obligated Group may be affected by events and economic conditions, which may include an inability to control expenses in periods of inflation, as well as other conditions such as demand for health care services; the capability of the management of the Obligated Group; the receipt of grants and contributions; referring physicians’ and self-referred patients’ confidence in the Obligated Group; and increased use of discounted or risk-based contracts with MCOs and other payors. Other factors that may affect revenues and expenses include the ability of the Obligated Group to provide services required by patients; the relationship of the Obligated Group with physicians; the success of the Obligated Group’s strategic plans; the degree of cooperation among and competition with other providers in the Obligated Group’s area; changes in levels of private philanthropy; malpractice claims and other litigation; economic and demographic developments in the United States and in the service areas in which facilities of the Obligated Group are located; competition; changes in interest rates that affect investment results; and changes in rates, costs, third-party payments (including, without limitation, Medicare and Medicaid program payment) and governmental regulations concerning payment. All of the above referred-to factors could affect

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the Obligated Group’s ability to make payments with respect to the Series 2016C Obligation and CNE’s ability to make payments with respect to the Notes.

Risks Affecting the Health Care Industry Generally

Future revenues and expenses of the Obligated Group will be affected by events and conditions relating generally to, among other things, demand for the services of the Obligated Group, the ability of the Obligated Group to provide the services required by patients, physicians’ relationships with the Obligated Group, reimbursement rates under agreements with third party payors as well as the Medicare and Medicaid programs, research grant funding, management capabilities, the correctness of the design and success of the Obligated Group’s strategic plans, the degree of cooperation among and competition with other hospitals in the Obligated Group’s area, changes in private philanthropy, malpractice claims and other litigation, economic developments in the Obligated Group’s service area, the Obligated Group’s ability to control expenses and maintain relationships with HMOs, sponsors of research, and other managed health care organizations and third-party payors, rates, costs, third-party reimbursement, legislation and government regulation. While the Obligated Group reasonably expects to generate sufficient revenues in the future to cover its expenses, third-party payments, regulation and unanticipated events and circumstances may occur that cause variations from this expectation, and the variations may be material.

Accordingly, there can be no assurance that the financial condition of the Obligated Group and/or utilization of the Obligated Group’s facilities will not be adversely affected, and there can be no guarantee that there will be sufficient revenues to allow CNE to make its required payments with respect to the Notes. The following general factors, among others, could affect the level of revenues to the Obligated Group or its financial condition or otherwise result in risks for Noteholders.

Significant Risk Areas Summarized

Certain of the primary risks associated with the operations of the Members of the Obligated Group are briefly summarized in general terms below and are explained in greater detail in subsequent sections. The occurrence of one or more of these risks could have a material adverse effect on the financial condition and results of operations of the Obligated Group and, in turn, the ability of the Obligated Group to make payments under the Series 2016C Obligation and of CNE to make payments of principal of and interest on the Notes.

General Economic Conditions, Bad Debt, Indigent Care and Investment Performance. Health care providers are affected by the economic environment in which they operate. To the extent that employers reduce their workforces or budgets for employee health care coverage or private and public insurers seek to reduce payments to health care providers or curb utilization of health care services, health care providers may experience decreases in insured patient volume and reductions in payments for services. In addition, to the extent that state, county or city governments are unable to provide a safety net of medical services, pressure is applied to local health care providers to increase free care. Furthermore, economic downturns, increased employee health insurance cost share obligations, and lower funding of Medicare and state Medicaid and other state health care programs may increase the number of patients who are unable to pay for their medical and hospital services. These conditions may give rise to increases in health care providers’ uncollectible accounts, or “bad debt,” and, consequently, to reductions in operating income. Declines in investment portfolio values may reduce or eliminate non-operating revenues. Losses in pension and benefit funds may result in increased funding requirements. Potential failure of lenders, insurers or vendors may negatively affect the results of operations and the overall financial condition of health care providers. Philanthropic support may also decrease or be delayed. For a discussion of these risks with regard to the Obligated Group, see “FINANCIAL INFORMATION.”

Dependence on 340B Drug Pricing. Hospitals that serve a high percentage of low income patients are eligible for reduced pricing on drugs through the 340B program (the “340B Program”). This program contributed materially to the Obligated Group’s operating income in 2015. The DBMS Health Resources and Services Administration (“HRSA”), the federal agency that oversees the program, has been increasing audits of hospitals participating in the 340B Program. In August 2015, HRSA issued draft Omnibus Guidance that would limit hospitals’ ability to use, and bill for, 340B discounted drugs. The comment period for the draft guidance has closed and there is no deadline for the issuance of final guidance. In October 2015, the federal district court for the District of Columbia issued a ruling restricting hospitals’ ability to access 340B discount pricing for orphan drugs. The regulatory environment for the 340B Program is uncertain and any reduction in eligibility for, or changes to, the 340B Program generally could have a materially adverse effect on the Obligated Group.

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Nonprofit Health Care Environment. The significant tax benefits received by nonprofit, tax-exempt hospitals may cause the business practices of such hospitals to be subject to scrutiny of public officials and the press, and to legal challenges of the ongoing qualification of such organizations for tax-exempt status. Practices that have been examined, criticized or challenged have included pricing practices, billing and collection practices, charitable care and executive compensation. Challenges to entitlement to exemption of property from real property taxation have succeeded from time to time. Multiple governmental authorities, including state attorneys general, the Internal Revenue Service (the “IRS”), the United States Congress and state legislatures have held hearings and carried out audits regarding the conduct of tax-exempt organizations, including tax-exempt hospitals. These efforts will likely continue in the future. Citizen organizations, such as labor unions and patient advocates, have also focused public attention on the activities of tax-exempt hospitals and raised questions about their practices. Proposals to increase the regulatory requirements for nonprofit hospitals’ retention of tax-exempt status, such as by establishing a minimum level of charity care, have also been introduced repeatedly in Congress. Significant changes in the obligations of nonprofit, tax-exempt hospitals and challenges to or loss of the tax-exempt status of non-profit hospitals generally or the Hospitals in particular could have a material adverse effect on the Obligated Group.

Federal Health Care Reform. As a result of the Patient Protection and Affordable Care Act, enacted in March 2010 and amended by the Health Care and Education Reconciliation Act (the “ACA”), substantial changes are anticipated in the United States health care system. Some of the provisions of the ACA took effect immediately, while others are being phased in over time. Such legislation has been intended by its supporters to be transformative and includes numerous provisions affecting the delivery of health care services, the financing of health care costs, reimbursement of health care providers and the legal obligations of health insurers, providers, employers and consumers. These provisions are slated to take effect at specified times over approximately the next decade, and, therefore, the full consequences of the ACA on the health care industry are still being realized. In addition, due to the complexity of the ACA, the ramifications of federal health care reform legislation may also become apparent only following implementation or through later regulatory and judicial interpretations. While key provisions of the ACA have withstood recent legal challenges, portions of the ACA may still be limited or nullified as a result of legislative amendments or future judicial actions. In addition, the uncertainties regarding the implementation of the ACA create unpredictability for the strategic and business planning efforts of health care providers, which in itself creates risk. See “Health Care Reform” below.

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

In Rhode Island, the Office of the Health Commissioner (“OHIC”) reviews, on an annual basis, prices proposed by insurance carriers and may approve, disapprove, or modify the proposed rates. OHIC approved lower rates for 2016 than those requested by most health insurers.

Capital Needs vs. Capital Capacity. Hospital and other health care operations are capital intensive. Regulation, technology and expectations of physicians and patients require constant and often significant capital investment. Total capital needs may exceed capital capacity.

Reliance on Medicare. Inpatient hospitals rely to a high degree on payment from the federal Medicare program. Recent changes in the underlying law and regulations, as well as in payment policy and timing, create uncertainty and could have a material adverse impact on hospitals’ payment stream from Medicare. With health care and hospital spending reported to be increasing faster than the rate of general inflation, Congress or CMS is expected to take action in the future to decrease or restrain Medicare outlays for hospitals.

State Medicaid Programs. State Medicaid programs constitute an important payor source for many hospitals, but these programs often pay hospitals and other health care providers at levels that are substantially below the actual cost of the care provided. As Medicaid is partially funded by states, the financial condition of such states is likely to result

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in lower funding levels or payment delays. This could have a material adverse impact on hospitals and other health care providers.

Increasing Consumer Choice. As many consumers are confronted with increased health insurance cost-sharing obligations, hospitals and other health care providers face increased pressure to be transparent and provide information about cost and quality of services, which may lead to a loss of business as consumers and others make choices about where to receive health care services based upon reports about cost and quality.

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

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

Violations, and actions that may be perceived as violations may be deliberate, but also frequently occur in circumstances where management is unaware of the conduct in question, as a result of mistake, or where the individual participants do not know that their conduct is in violation of law. Violations may occur and enforcement actions may arise in circumstances that do not have the traditional elements of fraud, and enforcement actions may extend to conduct that occurred in the past. Violations may carry significant sanctions. The government periodically conducts widespread investigations covering categories of services or certain accounting or billing practices.

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

Personnel Shortage. From time to time, shortages of physicians and nursing and other professional as well as technical personnel occur, which may have its primary impact on hospitals and health care systems. Various studies have predicted that physician and nurse shortages will become more acute over time, as practitioners retire and patient volume exceeds the growth in new professionals. Shortages of other professional and technical staff such as pharmacists, therapists, laboratory technicians and others may occur. Hospital operations, patient and physician satisfaction, financial condition and future growth could be negatively affected by personnel shortages, resulting in a material adverse impact on hospitals and health care systems.

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

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Proliferation of Competition. Hospitals face competition from providers of specialty care and ambulatory care facilities. This competition may cause hospitals to lose essential inpatient or outpatient market share. Competition may be focused on services or payor classifications where hospitals realize their highest margins, thus negatively affecting programs that are economically important to hospitals. Specialty hospitals may attract specialists as investors and may seek to treat only profitable classifications of patients, leaving full-service hospitals with higher acuity and lower paying patient populations. These new sources of competition may have a material adverse impact on hospitals, particularly where principal physician admitters may curtail their use of a hospital service in favor of a competitor’s facilities.

Labor Costs and Disruption. The delivery of health care services is labor intensive. Labor costs, including salary, benefits and other liabilities associated with the workforce, have a significant impact on hospital and health care provider operations and financial condition. Many hospital and health care employees are organized in collective bargaining units and may be involved in work actions of various kinds, including work stoppages and strikes. Overall costs of the hospital workforce and turnover are high. Pressure to recruit, train and retain qualified employees is expected to accelerate. These factors may materially increase hospital costs of operation. Workforce disruption may negatively affect hospital revenues and reputation.

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

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

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

Impact of Market Turmoil and General Economic Factors

The disruption of the credit and financial markets since 2008 resulted in volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business bankruptcies. In response to this disruption of the credit and financial markets, federal legislation was enacted, including the ARRA and the Dodd-Frank Act (defined below).

In February 2009, the American Recovery and Reinvestment Act of 2009 (the “ARRA”) was enacted and included several provisions intended to provide financial relief to the health care sector by providing approximately $150 billion in new funds. The funds were used to, among other things, provide a temporary increase in Federal payments to fund state Medicaid programs and provided subsidies to the recently unemployed for health insurance premium costs. The ARRA and resulting regulations established a framework for the implementation of a nationally-based health information technology program. For more information regarding this program, see “—Regulatory Environment—The HITECH Act” below.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted in an effort to stabilize the credit and financial markets. Regulatory action has been taken by various federal agencies and the Federal Reserve Board and foreign governments to increase the regulation of financial institutions and domestic and global credit and securities markets. The effects of these legislative, regulatory and other governmental actions, including the Dodd-Frank Act, upon the Obligated Group and, in particular upon its access to capital markets and its investment portfolios, cannot be predicted.

Nonprofit Health Care Environment

Each Member of the Obligated Group is a nonprofit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Internal Revenue Code (the “Code”). As a nonprofit, tax-exempt

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organization, each Member of the Obligated Group is subject to federal, state and local laws, regulations, rulings and court decisions relating to its organization and operation, including its operation for charitable purposes. At the same time, the Obligated Group conducts large-scale, complex business transactions and is a major employer in the Providence area. 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.

The operations and practices of nonprofit, tax-exempt hospitals are routinely challenged or criticized for inconsistency or inadequate compliance with the regulatory requirements for, and societal expectations of, nonprofit, tax-exempt organizations. These challenges are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are examinations of core business practices of the health care organizations. Areas that have come under examination include pricing practices, billing and collection practices, charitable care, methods of providing and reporting community benefit, executive compensation, exemption of property from real property taxation, private use of facilities financed with tax-exempt bonds and others. These challenges and questions have come from a variety of sources, including state attorneys general, the IRS, labor unions, Congress, state legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. The challenges and examinations, and any resulting legislation, regulations, judgments or penalties, could have a material adverse effect on the Obligated Group. These challenges or examinations include the following, among others:

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 “—IRS Examination of Compensation Practices,” “—IRS Community Benefit Initiative” and “—Challenges to Real Property Tax Exemption” below.

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

IRS Examination of Compensation Practices. In 2004, the IRS began a new program to measure compliance by tax-exempt organizations with requirements that they not pay excessive compensation and benefits to their officers and other insiders. In 2009, the IRS issued its Hospital Compliance Project Final Report (the “IRS Final Report”) that examined tax-exempt hospitals’ practices and procedures with regard to compensation and benefits paid to their officers and other defined “insiders.” The IRS Final Report indicated that the IRS will continue to heavily scrutinize executive compensation arrangements, practices and procedures of tax-exempt hospitals and other tax-exempt organizations and, in certain circumstances, may conduct further investigations or impose fines on tax-exempt organizations.

IRS Community Benefit Initiative. The IRS has undertaken a community benefit initiative directed at hospitals. An IRS report on this initiative determined that a lack of uniformity in definitions of community benefit used by reporting hospitals, including those regarding uncompensated care and various types of community benefit, make it difficult for the IRS to assess whether any particular hospital is in compliance with current law. The revised Form 990 includes a new schedule, Schedule H, which hospitals and health systems must use to report their community benefit activities, including the cost of providing charity care and other tax-exemption related information.

New ACA Requirements for Tax-Exempt Status. As part of the ACA, Congress enacted Section 501(r) of the Code which imposes additional requirements for hospitals and other designated health care organizations to be treated as tax-exempt organizations. See discussion below under “ACA Tax Exemption Requirements.” The hospitals are subject to these new rules, and failure to comply can result in fines and the loss of a hospital’s tax-exempt status. There have been no challenges to the tax-exempt status of the Hospitals, but there can be no assurance that a challenge will not occur in the future.

Challenges to Real Property Tax Exemption. Recently, the real property tax exemptions afforded to certain nonprofit health care providers by state and local taxing authorities have been challenged on the grounds that the health care providers were not engaged in sufficient charitable activities as to warrant exemption from taxation as a

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charitable institution. For example, the Illinois Supreme Court upheld a decision relating to a local taxing authority’s decision to deny a request for property tax exemption for a nonprofit hospital on the basis that the hospital had not proven with clear and convincing evidence that it was operating within a charitable purpose under applicable Illinois law. Additionally, similar challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. Several of these disputes have been determined in favor of the taxing authorities or have resulted in settlements. For example, in 2015 Morristown Medical Center was ordered by the Tax Court of New Jersey to pay millions of dollars in real estate property taxes to the based on a finding that it did not qualify as a charity under state law. That ruling was followed by a settlement between Atlantic Health System (the parent of Morristown Medical Center) and the Town of Morristown, in which the hospital agreed to pay $15.5 million in back taxes and penalties, plus annual property taxes on 24 percent of the hospital’s property from 2016 to 2025. Subsequent New Jersey legislation that would have required hospitals to pay some level of taxes to their communities was vetoed by the Governor, but legislative efforts to impose some form of taxation continue. See “—Tax-Exempt Status and Other Tax Matters—Real Property Tax Exemption” below.

Indigent Care. Tax-exempt health care providers often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, urban, inner-city hospitals and other health care providers may treat significant numbers of indigents. These hospitals and health care providers may be susceptible to economic and political changes that could increase the number of indigents or their responsibility for caring for this population. General economic conditions affect the number of employed individuals who have health coverage and the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, county, state and federal health care programs (including Medicare and Medicaid) may increase the frequency and net cost of indigent treatment by such hospitals and other providers. It also is possible that future legislation could require that tax-exempt hospitals and other providers maintain minimum levels of indigent care as a condition to federal income tax exemption or exemption from certain state or local taxes.

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

The foregoing are some examples of the challenges and examinations facing nonprofit health care organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations and may indicate an increasingly difficult operating environment for health care organizations, including the Members of the Obligated Group. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on hospitals and health care providers, including the Obligated Group, and, in turn, its ability to make payments under the Series 2016C Obligation and CNE’s ability to make payments under the Notes.

Health Care Reform

The changes in the health care industry brought about by the ACA will likely have both positive and negative effects, directly and indirectly, on the nation’s hospitals and other health care providers, including the Obligated Group. For example, the projected increase in the number of individuals with health care insurance occurring as a consequence of Medicaid expansion, creation of health insurance exchanges, subsidies for insurance purchase and the mandate for individuals to purchase insurance, could result in lower levels of bad debt and increased utilization or profitable shifts in utilization patterns for hospitals. A significant negative impact to the hospital industry overall will likely result from substantial reductions in the rate of increase of Medicare "market basket" adjustments and in actual reductions in Medicare payments. The legislation’s cost-cutting provisions to the Medicare program include reduction in Medicare market basket updates to hospital reimbursement rates under the inpatient prospective payment system, as well as reductions to or elimination of Medicare reimbursement for certain patient readmissions and hospital acquired conditions.

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The ACA likely will affect some health care organizations differently than others, depending, in part, on how each organization adapts to the legislation’s emphasis on directing more federal health care dollars to integrated provider organizations and providers with demonstrable achievements in quality care. The ACA proposes a value-based purchasing system for hospitals under which a percentage of payments will be contingent on satisfaction of specified performance measures related to common and high-cost medical conditions, such as cardiac, surgical and pneumonia care. The legislation also funds various demonstration programs and pilot projects and other voluntary programs to evaluate and encourage new provider delivery models and payment structures, including ACOs and bundled provider payments. The outcomes of these projects and programs, including the likelihood of their being made permanent or expanded or their effect on health care organizations’ revenues or financial performance cannot be predicted. See also "—Patient Service Revenues—The Medicare Program" below.

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

Some of the specific provisions of the ACA that may affect the Obligated Group’s operations, financial performance or financial condition are described below. This listing is not intended to be, nor should be considered by the reader as comprehensive. The ACA is complex and includes myriad new programs and initiatives and changes to existing programs, policies, practices and laws. The reader is encouraged to review the ACA, itself and/or more comprehensive summaries and analyses of the ACA available in the public media.

Market Basket Reductions. Generally, Medicare payment rates to hospitals are adjusted annually based on a “market basket” update of estimated cost increases, which have averaged approximately 2-4% annually in recent years. The ACA provides for three types of annual reductions in the market basket. The first is a general reduction of a specified percentage in each federal fiscal year (“FFY”) which began in 2010 and extends through 2019, increasing from 0.10% to 0.75% each year.

The second type of reduction is a “productivity adjustment” based on national economic productivity statistics. This adjustment resulted in a 1% reduction in the market basket update for FFY 2012 and a 0.7% reduction in the market basket update for FFY 2013. CMS instituted a 0.5% reduction in each of FFY 2014, 2015 and 2016. It is anticipated that similar reductions may be imposed in future years.

The third type of reduction is in connection with Medicare’s value-based purchasing program. Beginning in FFY 2013, Medicare inpatient payments to hospitals were reduced by 1%. For FFY 2015 and 2016 the payments were reduced by 1.5% and 1.75% respectively, and reductions are scheduled to reach 2% in FFY 2017. For each FFY, the total amount collected from these reductions is pooled and used to fund payments to hospitals that meet “value-based purchasing” standards for treatment of certain conditions. While the reductions may be partially offset or recovered in full if a hospital satisfies the specified quality metrics, the recovery amounts may be delayed.

Hospital Acquired Conditions Penalty. Beginning in FFY 2015, Medicare inpatient payments to hospitals that are in the top quartile nationally for frequency of certain HACs were reduced by 1% for all discharges for the applicable FFY. In addition, the ACA provides that, as of July 1, 2011, CMS will no longer provide federal funding to states for any amounts expended by providers in treating so-called provider-preventable conditions. CMS has also directed states to submit amendments to their Medicaid state plans to require payment denials for the cost of treating such conditions, consistent with the prohibition on federal reimbursement.

Readmission Rate Penalty. Beginning in FFY 2012, Medicare inpatient payments to each hospital were reduced based on the dollar value of that hospital’s percentage of preventable Medicare readmissions for certain medical conditions. For FFY 2016, a hospital’s payments can be reduced by a maximum of 3%. In addition, the ACA allowed for expansion of the conditions measured for readmission rate penalties beginning in FFY 2015.

DSH Payments. Beginning in FFY 2014, hospitals receiving supplemental DSH payments from Medicare (i.e., those hospitals that care for a disproportionate share of Medicare beneficiaries) are slated to have their DSH payments reduced by 75%. This reduction will be adjusted to add back payments based on the volume of uninsured and uncompensated care provided by each such hospital, and is also anticipated to be offset by a higher proportion of

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covered patients as other provisions of the ACA go into effect. Separately, beginning in FFY 2018, Medicaid DSH allotments to each state also will be reduced, based on a methodology to be determined by DHHS, accounting for statewide reductions in uninsured and uncompensated care.

Payments to Medicare Advantage Plans. Hospitals also receive payments from health plans under the Medicare Advantage program. The ACA includes significant changes to federal payments to Medicare Advantage plans. Beginning in FFY 2012, federal payments to Medicare Advantage plans have been tied to the level of fee-for-service spending in the applicable county, resulting in a reduction below the FFY 2011 level for certain Medicare Advantage plans. The revised payment methodology is being phased in through FFY 2016 and will be in full effect in all counties as of FFY 2017. Payment to plans also will be based on achievement of quality indicators. Medicare’s new payment methodology could result in lower payments to plans, which could impact the plans’ scope of coverage or cause plan sponsors to negotiate lower payment rates to providers.

ACA Tax Exemption Requirements. The ACA also contains new requirements for tax-exempt hospitals. Under the ACA, each tax-exempt hospital facility is required to (i) conduct a community health needs assessment at least every three years and adopt an implementation strategy to meet the identified community needs, (ii) adopt, implement and widely publicize a written financial assistance policy and a policy to provide emergency medical treatment without discrimination, (iii) limit charges to individuals who qualify for financial assistance under such tax-exempt hospital’s financial assistance policy to no more than the amounts generally billed to individuals who have insurance covering such care and refrain from using “gross charges” when billing such individuals, and (iv) refrain from taking extraordinary collection actions without first making reasonable efforts to determine whether the individual is eligible for assistance under such tax-exempt hospital’s financial assistance policy. In addition, the Treasury Department is required to review information about each tax-exempt hospital’s community benefit activities at least once every three years, as well as to submit an annual report to Congress with information regarding the levels of charity care, bad debt expenses, unreimbursed costs of government programs, and costs incurred by tax-exempt hospitals for community benefit activities. The periodic reviews and reports to Congress regarding the community benefits provided by 501(c)(3) hospitals may increase the likelihood that Congress will require such hospitals to provide a minimum level of charity care in order to retain tax-exempt status and may increase IRS scrutiny of particular 501(c)(3) hospital organizations.

The ACA has been subject to opposition in the political and judicial arenas. Multiple challenges to the constitutionality of the ACA have been filed by private and state parties in federal courts, of which the most significant for the Obligated Group was the Supreme Court’s upholding the validity of the individual mandate in its decision of June 28, 2012. Although the Supreme Court’s ruling removed a significant source of uncertainty surrounding the implementation of federal health care reform, legislative repeal under a future Congress or Presidential administration remains a possibility. As the ACA’s reductions in reimbursement to health care providers continue to take effect, the practical consequences of the ACA, as well as of other future federal and state actions to cut costs and change the health care delivery system cannot be foreseen.

Management of the Obligated Group has analyzed the ACA and will continue to do so in order to assess the effects of the legislation and evolving regulations on current and projected operations, financial performance and financial condition. However, management of the Obligated Group cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation.

Patient Service Revenues

Medicare Program. Medicare is a federal health care program created by Title XVIII of the Social Security Act. Medicare covers both hospital and physician services for eligible individuals who are elderly, disabled or subject to certain chronic conditions. Medicare is administered by CMS, which delegates to the states the process for certifying hospitals to which CMS will make payment. In order to achieve and maintain Medicare certification, hospitals must meet CMS’s “Conditions of Participation” on an ongoing basis, as determined by the states and The Joint Commission. 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. As the population ages, more people will become eligible for the Medicare program. Current projections indicate that demographic changes and continuation of current cost trends will exert significant and negative forces on the overall federal budget.

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For the fiscal years ended September 30, 2014 and September 30, 2015, Medicare payments represented approximately 34% and 33%, respectively, of the Obligated Group’s gross patient service revenue. Through June 30, 2016, Medicare payments represented approximately 32% of the Obligated Group’s gross patient service revenue. See “SOURCES OF PATIENT CARE REVENUE — Care New England Payor Mix” herein.

Hospital Inpatient Reimbursement. Hospitals are generally paid for inpatient services provided to Medicare beneficiaries based on established categories of treatments or conditions known as DRGs. The actual cost of care, including capital costs, may be more or less than the DRG rate. DRG rates are subject to adjustment by CMS 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.

Hospital Outpatient Reimbursement. Hospitals are generally paid for outpatient services provided to Medicare beneficiaries based on established categories of treatments or conditions known as ambulatory payment classifications (“APC”). The actual cost of care, including capital costs, may be more or less than the reimbursements. There is no guarantee that APC rates, as they change from time to time, will cover actual costs of providing services to Medicare patients.

Physician Reimbursement. Medicare pays for certain physician services based on a national fee schedule called the “resource-based-relative-value scale” (“RB-RVS”). The RB-RVS fee schedule establishes payment amounts for all physician services, including services of provider-based physicians, and is subject to annual updates. Effective with enactment of the Medicare Access and CHIP Reauthorization Act of 2015 in April 2015, the physician fee schedule will receive a fixed 0.5% annual adjustment through calendar year 2019. For years 2020-2025, the base rates will be maintained and physician compensation will be subject to adjustment under the Merit-Based Incentive Payment System (“MIPS”). Beginning in 2026, physicians who receive a significant portion of revenues through alternative payment models (that is, payments not fee-for-service based) will receive a 0.75% increase, while physicians who do not participate in these alternatives will receive an increase of 0.25%.

Under MIPS, physicians will be assigned a composite performance score based on measures of quality, resource use, meaningful use of electronic health records, and clinical practice improvement activities. A threshold performance score will be set annually by DIMS at the mean or median of all composite scores for a prior annual performance period. Performance exceeding the threshold will result in a positive adjustment, performance below the threshold will result in a negative adjustment, and performance at the threshold will result in no adjustment.

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

Reimbursement of Hospital Capital Costs. Hospital capital costs 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 the hospital. There can be no assurance that future capital-related payments will be sufficient to cover the actual capital-related costs of facilities applicable to Medicare patient stays or will provide flexibility for hospitals to meet changing capital needs.

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

Medicaid Program. Medicaid is a program of 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 affect Medicaid and other state health care program spending.

Historically Medicaid has reimbursed at rates below the cost of care. Therefore, increases in the overall proportion of Medicaid patients pose a risk. It is uncertain to what extent this risk may be mitigated if the increased Medicaid utilization replaces previously uncompensated patients.

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Certain states selectively contract with general acute care hospitals to provide services to participants in the Medicaid program of the state and may not provide payment to hospitals that do not have such a contract. Payment under the contracts may not cover the cost of providing services or may be reduced by the states. Reductions in payments by state Medicaid programs or loss of such contracts could materially adversely affect the financial condition of the Obligated Group.

In June 2015, the Rhode Island General Assembly passed the Reinventing Medicaid Act. As a result of the Act’s passage, the Executive Office of Health and Human Services has begun implementation of a performance-based payment program for hospitals and nursing homes. The payments will reward providers for meeting certain quality standards that shift Medicaid to a value-based delivery system focused on quality patient care and outcomes. The payments will also support development of accountable entities.

For both the fiscal years ended September 30, 2014 and September 30, 2015, the Obligated Group received approximately 24% and 28%, respectively of gross patient service revenues from state Medicaid programs. Through June 30, 2016 the Obligated Group received approximately 28% of gross patient revenues from state Medicaid programs. See “SOURCES OF PATIENT CARE REVENUES — Care New England Payor Mix” herein.

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

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

Authorized by HIPAA (as defined below), the Medicare Integrity Program (“MIP”) was established to deter fraud and abuse in the Medicare program. Funded separately from the general administrative contractor program, MIP allows CMS to enter into contracts with outside entities and insure the “integrity” of the Medicare program. These outside entities, Medicare zone program integrity contractors (“ZPICs”) are contracted by CMS to review claims and medical charts, both on a prepayment and post-payment basis, conduct cost report audits and identify cases of suspected fraud. ZPICs have the authority to deny and recover payments as well as to refer cases to the Office of Inspector General of the DHHS (the “OIG”). CMS is also planning to enable ZPICs to compile claims data from multiple sources in order to analyze the complete claims histories of Medicare beneficiaries for inconsistencies.

CMS also enlists RACs to conduct periodic annual audits of Medicare payments to search for potentially improper Medicare payments from prior years that were not detected through CMS’s routine program integrity efforts. The RACs are private contractors, paid on a contingency fee basis, and use their own software and review processes. Although required to identify both overpayments and underpayments, RACs have in practice collected significantly more in overpayments from health care providers in proportion to the underpayments to the providers. Under the ACA, recovery audits were expanded to include Medicaid by requiring states to contract with RACs to conduct those audits.

In addition, CMS has instituted a Medicaid Integrity Program, modeled on MIP. Medicaid Integrity Program contractors assist state Medicaid agencies by analyzing Medicaid claims data to identify high-risk areas and potential vulnerabilities and conducting post-payment field audits and desk reviews audits of Medicaid provider payments.

Audits may result in reduced reimbursement or repayment obligations related to past alleged overpayments and may also delay Medicare or Medicaid payments to health care providers pending resolution of the appeals process. The ACA explicitly gives DHHS the authority to suspend Medicare and Medicaid payments to a health care provider or supplier during a pending investigation of fraud. The ACA also amended certain provisions of the FCA (as defined below) to include retention of overpayments as a violation. It also added provisions respecting the timing of the

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obligation to identify, report and reimburse overpayments. See “—False Claims Act” below. The effect of these changes on existing programs and systems of the Obligated Group cannot be predicted.

Disproportionate Share Hospitals. The federal Medicare and state Medicaid programs each provide additional payment to “disproportionate share hospitals,” which are hospitals that serve a disproportionate share of certain low income patients. Each of the Hospitals qualifies as a DSH. See also “—Health Care Reform—DSH Payments” above. There can be no assurance that payments to the Hospitals will continue to qualify for DSH status.

State and Local Budgets. The State of Rhode Island (the “State”) may incur financial challenges, including erosion of general fund tax revenues, falling real estate values, slowing economic growth, and higher unemployment, each of which may worsen or resist improvement over the coming years.

These financial challenges could negatively affect hospitals in a number of ways, including elimination or reduction of health care safety net programs (causing a greater number of indigent, uninsured or underinsured patients) and reductions in Medicaid reimbursement rates. Such financial challenges could also result in a greater number of indigent, uninsured or underinsured patients who are unable to pay for their care or gain access to primary care facilities and a greater number of individuals who qualify for Medicaid.

On June 24, 2016, the Governor of Rhode Island (the “Governor”) approved the state budget for state FY2017, which began July 1, 2016. The Governor’s approved budget includes a reduction in medical assistance expenditures to hospitals by nearly $19 million from the revised state budget for state FY2016. Based on current projections, management believes that the budget decrease will have an overall negative financial effect on the Hospitals of approximately $5 million for 2017. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to this estimate and does not express any opinion with respect thereto.

Health Plans and Managed Care. Most private health insurance coverage is provided by various types of “managed care” plans, including HMOs and 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.

In many markets, 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.

Many HMOs and PPOs currently pay providers on a negotiated fee-for-service basis or, for institutional care, on a fixed rate per day of care, which, in each case, usually is discounted from the usual and customary charges for the care provided. As a result, 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 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 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, regardless of whether the HMO is able to pay the hospital. State law requires that hospitals hold enrollees harmless in the event the HMO is not able to pay the hospital. Members of the Obligated Group from time to time may have disputes with HMOs, PPOs and other managed care payors concerning payment and contract interpretation issues. Such disputes may result in mediation, arbitration or litigation. Management of the Obligated Group expects that these types of issues ultimately will be resolved.

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Defined broadly, for the fiscal year ended September 30, 2015, managed care payments (excluding capitated Medicare and Medicaid contracts) constituted approximately 67% of the gross patient service revenues of the Obligated Group, but there is no assurance that the Obligated Group will maintain managed care contracts or obtain other similar contracts in the future. See "SOURCES OF PATIENT SERVICE REVENUE — Health Plans and Managed Care Organizations" herein.

Failure to maintain contracts could have the effect of reducing the Obligated Group’s market share and net patient services revenues. Conversely, participation may result in lower net income to the Obligated Group if it is unable to contain adequately its costs. Thus, managed care poses one of the most significant business risks (and opportunities) the Obligated Group faces.

Medicaid Managed Care. The Rhode Island Medicaid managed care program known as RIte Care provides coverage to qualifying low-income pregnant women, children, and their parents. Individuals who receive assistance under the Family Independence Program and individuals with disabilities or special needs are also eligible for RIte Care coverage. There are two participating health plans in the program: Neighborhood Health Plan of Rhode Island and United Healthcare of New England.

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

Rhode Island Cost Control Initiatives

On July 20, 2015, the Governor established a working group to provide recommendations to control the rate of health care cost increases. The Working Group recommended the creation of a new state agency, the Office of Health Policy (“OHP”) to monitor quality, access, and community health outcomes. As proposed, OHP would hold annual cost trend hearings to understand the growth in health expenditures from year to year. As part of the cost trend hearings, the OHP would establish a non-binding annual target on the growth rate in total medical expenditures, which would apply to all healthcare services provided to Rhode Islanders within the state that are reimbursed through insurance companies. There would be no penalty for exceeding the target either for any individual player or for the system as a whole. The executive order also asked the Working Group to consider tying healthcare payments to quality by moving to value-based systems of payment. The Rhode Island Medicaid program, in collaboration with the Office of the Health Insurance Commissioner is currently examining opportunities for payment reform across the delivery system.

If created, the OHP, acting in concert with other state agencies and officials, may put pressure on health insurers and health care providers to restrain the growth of health care costs, especially if the growth in total medical expenditures exceeds the growth rate of the state economy. Various legislative proposals are filed in the legislature each year to further regulate the health care system and some of these proposals could, if enacted, have an adverse impact on Rhode Island hospitals.

Regulatory Environment

Enforcement Activity. Enforcement activity against health care providers has increased, and enforcement authorities are adopting more aggressive approaches. In the current regulatory climate, it is anticipated that many hospitals and physician groups will be subject to an investigation, audit or inquiry regarding billing practices or false claims. Management believes that it has properly complied with the laws concerning billing practices and the submission of claims. Nevertheless, because of the complexity of these laws, the instances in which an alleged violation may arise to trigger such investigations, audits or inquiries are increasing and could result in enforcement action against the Obligated Group.

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Enforcement authorities are sometimes in a position to compel settlements by providers charged with, or being investigated for, false claims violations by withholding or threatening to withhold Medicare, Medicaid or by threatening the possibility of a criminal action. In addition, the cost of defending such an action, the time and management attention consumed thereby, and the facts of a particular case may dictate settlement. Therefore, regardless of the merits of a particular case or cases, the Obligated Group could experience materially adverse settlement costs, as well as materially adverse costs associated with the implementation of any settlement agreement. Prolonged and publicized investigations could be damaging to the reputation, business, and credit of the Obligated Group, regardless of the outcome, and could have material adverse consequences on the financial condition of the Obligated Group.

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

“Fraud” and “False Claims.” Health care “fraud and abuse” laws have been enacted at the federal and state levels to regulate broadly the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under these laws, hospitals and others can be penalized for a wide variety of conduct, including: submitting claims for services that are not provided; billing in a manner that does not comply with government requirements or includes inaccurate billing information; billing for services deemed to be medically unnecessary; or billing accompanied by an illegal inducement to utilize or refrain from utilizing a service or product.

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

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

The Secretary of DIMS may exclude a provider’s participation in Medicare and Medicaid, as well as suspend payments to a provider pending an investigation or prosecution of a credible allegation of fraud against the provider.

False Claims Act. The federal False Claims Act (“FCA”) makes it illegal to submit or present a false, fictitious or fraudulent claim for payment or approval for payment for which the federal government provides, or reimburses at least some portion of, the requested money or property. Pursuant to the ACA, failure to report and return to a federal health care program a known overpayment within 60 days of having identified the overpayment or, for cost-reporting entities, the date (if later) on which a hospital cost report is due can give rise to an FCA claim. FCA investigations and cases have become common in the health care field and may cover a range of activity from intentionally inflated billings, to highly technical billing infractions, to allegations of inadequate care. Violation or alleged violation of the FCA most often results in settlements that require multimillion dollar payments and compliance agreements. The FCA also permits individuals to initiate civil actions on behalf of the government in lawsuits called “qui tam” actions. Qui tam plaintiffs, or “whistleblowers,” can share in the damages recovered by the government or recover independently if the government does not participate. The FCA has become one of the government’s primary weapons against health care fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion or reputation damage that could have a material adverse impact on a hospital.

Anti-Kickback Law. The federal “Anti-Kickback Law” is a criminal statute that prohibits anyone from soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral (or to induce a referral) for any item or service that is paid by any federal or state health care program. The Anti-Kickback Law applies to many common health care transactions between persons and entities with which a hospital does business, including hospital-physician joint ventures, medical director agreements, physician

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recruitment agreements, physician office leases and other transactions. The ACA amended the Anti-Kickback Law to provide that a claim that includes items or services resulting from a violation of the Anti-Kickback Law now constitutes a false or fraudulent claim for purposes of the FCA.

Violation or alleged violation of the Anti-Kickback Law most often results in settlements that require multimillion dollar payments and mandatory compliance agreements that typically include costly audit requirements. The Anti-Kickback Law can be imposed either criminally or civilly. Violation is a felony, subject to a fine of up to $25,000 for each act (which may be each item or each bill sent to a federal program), imprisonment and exclusion from the Medicare and Medicaid programs. In addition, civil monetary penalties of $10,000 per item or service in noncompliance (which may be each item or each bill sent to a federal program) or an "assessment" of three times the amount claimed may be imposed. The IRS has taken the position that hospitals which are in violation of Anti-Kickback Law may also be subject to revocation of their tax-exempt status.

Stark Referral Law. The federal “Stark” statute prohibits the referral by a physician of Medicare and Medicaid patients for certain designated health services (including inpatient and outpatient hospital services, clinical laboratory services, and radiation and other imaging services) to entities with which the referring physician has a direct or indirect financial relationship. It also prohibits a hospital furnishing the designated services from billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited referral. The government does not need to prove that the entity knew that the referral was prohibited to establish a Stark violation. If certain substantive and technical requirements are not met, many ordinary business practices and economically desirable arrangements between hospitals and physicians will likely constitute “financial relationships” within the meaning of the Stark statute, thus triggering the prohibition on referrals and billing. Most providers of designated health services with physician relationships have some exposure to liability under the Stark statute.

Medicare may deny payment for all services related to a prohibited referral, and a hospital that has billed for prohibited services is obligated to notify and refund the amounts collected from the Medicare program. For example, if an office lease between a hospital and a large group of heart surgeons is found to violate Stark, the hospital could be obligated to repay CMS for the payments received from Medicare for all of the heart surgeries performed by all of the physicians in the group for the duration of the lease; a potentially significant amount. The government may also seek substantial civil monetary penalties, and in some cases, a hospital may be liable for fines up to three times the amount of any monetary penalty, and be excluded from the Medicare and Medicaid programs. Potential repayments to CMS, settlements, fines or exclusion for a Stark violation or alleged violation could have a material adverse impact on a hospital.

Civil Monetary Penalties Law. The federal Civil Monetary Penalties Law (“CMPL”) provides for administrative sanctions, including civil money penalties and treble damages, against health care providers for a broad range of billing and other financial abuses. For example, a health care provider is liable under the CMPL if it knowingly presents, or causes to be presented, improper claims for reimbursement under Medicare, Medicaid and other federal health care programs or if it gives benefits or other inducements to Medicare or Medicaid beneficiaries that the provider knows or should know are likely to induce the beneficiaries to choose the provider for their care. In addition, a hospital that participates in arrangements (known as “gainsharing”) under which a physician is paid to limit or reduce services to Medicare fee-for-service beneficiaries would be subject to CMPL penalties. The ACA added new exceptions to the CMPL permitting, among other things, arrangements that promote access to care and pose a low risk of harm to patients and the federal health care programs.

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

Exclusions from Medicare or Medicaid Participation. The government may exclude a hospital from Medicare/Medicaid program participation if it is convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state health care program, any criminal offense relating to patient neglect or abuse in connection with the delivery of health care, fraud against any federal, state or locally financed health care program or an offense relating to the illegal manufacture, distribution, prescription, or dispensing of a controlled substance. The government also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, or other financial misconduct relating either to the delivery of health care in general or to participation in a federal, state or local government program. Exclusion from the Medicare/Medicaid program

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means that a hospital would be decertified and no program payments could be made. Any hospital exclusion could be a materially adverse event. In addition, exclusion of hospital employees may be another source of potential liability for hospitals or health systems.

Administrative Enforcement. Administrative regulations may require less proof of a violation than do criminal laws, and, thus, health care providers may have a higher risk of imposition of monetary penalties as a result of administrative enforcement actions.

OIG Compliance Guidance. The OIG has encouraged all health care providers to adopt and implement programs to promote compliance with federal and state laws, including the False Claims Acts, the Anti-Kickback Law and the Stark Law. The OIG’s Compliance Program Guidance (“CPG”) and Supplemental Compliance Program Guidance provide recommendations to hospitals for adopting and implementing effective programs to promote compliance with applicable federal and state law and health plan program requirements. The CPG also discusses significant risk areas for hospitals. The ACA requires the establishment of a compliance program as a condition of enrollment under the Medicare and Medicaid programs. In implementing the ACA, the OIG solicited comments from the industry regarding the core elements of industry-specific compliance programs and is expected to do further rulemaking on compliance plan requirements. The OIG will consider the existence of an effective compliance program that pre-dated any governmental investigation when considering the imposition of administrative penalties. However, the presence of a compliance program is not an assurance that a health care provider will not be investigated by one or more federal or state agencies that enforce health care fraud and abuse laws or that it will not be required to make repayments to various health care insurers (including the Medicare and/or Medicaid programs). Hospitals are also required to create a Medicaid Compliance Plan and to educate staff, agents and contractors about state and federal anti-fraud and abuse laws.

State “Fraud” and “False Claims” Laws. Hospital providers in the State also are subject to Rhode Island state laws related to false claims (similar to the FCA or that are generally applicable false claims laws), anti-kickback (similar to the federal Anti-Kickback Law or that are generally applicable anti-kickback or fraud laws), and physician referral (similar to Stark). These laws are similar in public policy and scope to the federal laws and pose the possibility of a material adverse impact on a hospital for the same reasons as the federal statutes. See “—False Claims Act,” “—Anti-Kickback Law” and “—Stark Referral Law” above.

Antitrust. Antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, payor contracting, physician relations, joint ventures, merger, affiliation and acquisition activities, certain pricing or salary setting activities, as well as other areas of activity. The application of the federal and state antitrust laws to health care is evolving (especially as the ACA is implemented), and therefore not always clear. Currently, the most common areas of potential liability are joint action among providers with respect to payor contracting and medical staff credentialing disputes. From time to time, the Obligated Group is or may be involved with all of the types of activities that may theoretically give rise to antitrust liability, and the Obligated Group cannot predict when or to what extent liability, if any, may arise. Liability in any of these or other trade regulation areas may be substantial, depending upon the facts and circumstances of each case.

Violation of the antitrust laws could result in criminal and/or civil enforcement proceedings by federal and state agencies, as well as actions by private litigants. In certain actions, private litigants may be entitled to treble damages, and in others, governmental entities may be able to assess substantial monetary fines.

HIPAA. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the HITECH Act described below, established criminal sanctions for health care fraud and applies to all health care benefit programs, whether public or private. HIPAA also provides for punishment of a health care provider for knowingly and willfully embezzling, stealing, converting or intentionally misapplying any money, funds, securities, premiums, credits, property, or other assets of a health care benefit program. A health care provider convicted of health care fraud would be subject to mandatory exclusion from the Medicare program.

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

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HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using PHI. The penalties range from $50,000 to $250,000 and/or imprisonment for up to 10 years if the information was obtained or used with the intent to sell, transfer or use for commercial advantage, personal gain or malicious harm.

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

The HITECH Act also established programs under Medicare and Medicaid to provide incentive payments for demonstrating the “Meaningful Use” of certified EHR technology. Health care providers demonstrate their meaningful use of EHR technology by meeting objectives specified by CMS for using health information technology and by reporting on specified clinical quality measures. Beginning in 2015, hospitals and physicians who have not satisfied the performance and reporting criteria for demonstrating meaningful use have had their Medicare payments significantly reduced.

State Health Privacy Laws. The Confidentiality of Health Care Communications and Information Act (the “Rhode Island Confidentiality Act”) prohibits, with certain exceptions, the release or transfer of a patient’s confidential health care information without the patient’s written consent. In some instances, the Rhode Island Confidentiality Act is more stringent than federal health privacy laws. Any person who knowingly and intentionally violates the Rhode Island Confidentiality Act may be liable for fines up to $5,000 per violation, as well as compensatory and punitive damages.

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

Specifically, Rhode Island has state laws relating to the privacy and security of personal information. The Rhode Island Identity Theft Protection Act of 2015 (“Identity Theft Act”) requires businesses to notify the affected individual or individuals and, in some circumstances, the State Attorney General in the event of a data breach. Businesses, including hospitals, must implement and document compliance with certain security standards such as vendor contracting provisions and employ certain safeguards when disposing of or destroying personal information. The penalties for violation of the Identity Theft Act include a maximum of $100 per record for reckless violations and $200 per violation for willful violations.

International Classification of Diseases, 10th Revision Coding System. In 2009, CMS published the final rule adopting the International Classification of Disease, 10th Revision coding system (“ICD-10”). 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. In order to implement ICD-10, staff needed to be retrained, processes redesigned, and computer applications modified as the available codes and digit size dramatically increased. Additionally, there is a potential for temporary coding and payment backlog, as well as potential increases in claims errors. Products and services have been developed by outside software vendors, clearinghouses and third-party billing companies to support and enable timely, complete and successful implementation of ICD-10. Health care organizations were required to implement ICD-10 no later than October 1, 2015. The hospitals have met the October 1, 2015 deadline for ICD-10 implementation.

Enforcement Affecting Academic Research. In addition to increasing enforcement of laws governing payment and reimbursement, the federal government has also stepped up enforcement of laws and regulations governing the

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conduct of clinical trials at hospitals. DBMS elevated and strengthened its Office of Human Research Protection, one of the agencies with responsibility for monitoring federally funded research. In addition, the National Institutes of Health (“NIH”) significantly increased the number of facility inspections that these agencies perform. The Food and Drug Administration (“FDA”) also has authority over the conduct of clinical trials performed in hospitals when these trials are conducted on behalf of sponsors seeking FDA approval to market the drug or device that is the subject of the research. Moreover, the OIG has included several enforcement initiatives related to reimbursement for experimental drugs and devices (including kickback concerns) and has issued compliance program guidance directed at recipients of extramural research awards from the NIH and other agencies of the U.S. Public Health Service. These agencies’ enforcement powers range from substantial fines and penalties to exclusion of researchers and suspension or termination of entire research programs, and errors in billing of the Medicare program for care provided to patients enrolled in clinical trials that is not eligible for Medicare reimbursement can subject hospitals to sanctions as well as repayment obligations.

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

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

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

Health facilities may be subject to requirements related to investigating and remedying hazardous substances located on their property, including substances that may have migrated off the property. Typical hospital operations include the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants and contaminants. As such, hospital operations are particularly susceptible to the practical, financial and legal risks associated with the environmental laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations and 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.

Certificate of Need Requirements

The State has implemented a Certificate of Need (“CON”) program pursuant to which health care facilities, including acute care hospitals, are required to obtain state approval before expending funds in excess of a specified dollar threshold on capital projects or offering certain innovative services or new technologies. Without CON approval, acute care hospitals may not offer new technologies or innovative services including, but not limited to, open heart surgery, neonatal intensive care, cardiac catheterization services, magnetic resonance imaging, free standing ambulatory surgery or certain non-acute services. The capital expenditure threshold for acute hospitals is adjusted annually. From July 1, 2016 through June 30, 2017, the capital expenditure threshold is $5,720,877 for construction or renovation of health care facilities and $2,451,805 for health care equipment. If a provider fails to obtain required approvals, such provider will be subject to sanctions that may include, without limitation, civil fines and injunctions to restrain or prevent violations of the CON law. As a result of these sanctions, Medicare and Medicaid certification could be affected. The CON program may limit or delay a provider’s ability to respond to competitive initiatives or implement a provider’s strategic plan.

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Management of the Health System is aware of no proceeding or investigation in which a violation of the CON law of Rhode Island by any member of the Health System is alleged or suspected by any governmental agency.

Business Relationships and Other Business Matters

Affiliation, Merger, Acquisition and Divestiture. As part of its ongoing planning and property management functions, the Members of the Obligated Group review the use, compatibility and financial viability of many of their operations, and from time to time, may pursue changes in the use, or disposition, of their facilities. Likewise, any Member of the Obligated may receive offers from, or conduct discussions with, third parties about the potential acquisition of operations or properties that may become part of one or more of the Members of the Obligated Group in the future, or about the potential sale of some of the operations and properties of the Members of the Obligated Group. Discussions with respect to affiliation, merger, acquisition, disposition, or change of use, including those that may affect the Members of the Obligated Group, are held on an intermittent, and usually confidential, basis. As a result, it is possible that the assets currently owned by the Members of the Obligated Group may change from time to time, subject to the provisions in the financing documents that apply to merger, sale, disposition or purchase of assets. The Members of the Obligated Group evaluate affiliation opportunities as they arise. Any affiliation or similar transaction, including the proposed affiliation with Southcoast, would be completed in compliance with any applicable covenants in the documents relating to the Notes.

Integrated Delivery Systems. Health facilities and health care systems often own, control or have affiliations with physician groups and independent practice associations. Generally, the sponsoring health care facility or health care system is the primary capital and funding source for the alliances and may have an ongoing financial commitment to provide growth capital and support operating deficits. As separate operating units, integrated physician practices and medical foundations sometimes operate at a loss and require subsidy from the related hospital or health system.

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

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

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

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

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 may file legal actions against hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of the hospital governing body to adequately credential and 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. CMS annually reviews overall physician reimbursement formulas for Medicare and Medicaid. Changes to physician compensation under these programs could lead to physicians ceasing to accept Medicare or Medicaid patients. Regional differences in reimbursement by commercial and governmental payors, along with variations in the costs of living, may cause physicians to avoid locating their practices in communities with low reimbursement or high living costs. Hospitals may be required to invest additional resources in recruiting and retaining physicians, or may be compelled to affiliate with, and provide support to, physicians in order to continue serving the growing population base and maintain market share.

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

Specialty facilities or ventures that attract an important segment of an existing hospital’s admitting specialists and services that generate significant revenue may be particularly damaging. For example, some large hospitals may have significant dependence on heart surgery or orthopedic programs producing revenue streams that cover significant fixed overhead costs. If a significant component of such a hospital’s heart surgeons or orthopedists develop their own specialty hospital or surgery center (alone or in conjunction with a growing number of specialty hospital operators and promoters), taking with them their patient base, the hospital could experience a rapid and dramatic decline in net revenues that is not proportionate to the number of patient admissions or patient days lost. It is also possible that the competing specialty entity, as a for-profit venture, would not accept indigent patients or other payors and government programs, leaving low-pay patient populations in the full-service hospital. In certain cases, such an event could be materially adverse to the hospital. A variety of proposals has been advanced recently to permanently prohibit such investments. Nonetheless, specialty hospitals continue to represent a significant competitive challenge for full-service hospitals.

Freestanding ambulatory surgery centers may attract away significant commercial outpatient services traditionally performed at hospitals. Commercial outpatient services, currently among the most profitable for hospitals, may be lost to competitors who can provide these services in an alternative, less costly setting. Full-service hospitals rely upon the revenues generated from commercial outpatient services to fund other less profitable services, and the decline of such business may result in a decline in operating income. Competing ambulatory surgery centers, more likely a for-profit business, may not accept indigent patients or low paying programs and would leave these populations to receive services in the full-service hospital setting. Consequently, hospitals are vulnerable to competition from ambulatory surgery centers.

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 to new avenues of competition. In some cases, hospital investment in facilities and equipment for capital-intensive services may be lost as a result of rapid changes in diagnosis, treatment or clinical practice brought about by new technology or new pharmacology.

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

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

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, such class actions can involve multi-million dollar claims, judgments and settlements. A major class action decided or settled adversely to the Obligated Group could have a material adverse impact on its financial condition and results of operations.

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

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

Staffing. From time to time, the health care industry suffers from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. In addition, aging medical staffs and difficulties in recruiting individuals to the medical profession are predicted to result in physician shortages. A significant factor underlying this trend includes a decrease in the number of persons entering those professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital-specific shortages. Competition for physicians and other health care professionals, coupled with increased recruiting and retention costs may increase hospital operating costs, possibly significantly. This trend could have a material adverse impact on the financial conditions and results of operations of hospitals. This scarcity may further be intensified if utilization of health care services increases as a consequence of the ACA’s expansion of the number of insured consumers.

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

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

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

The Members of the Obligated Group currently carry malpractice, directors’ and officers’ liability and general liability insurance, which management considers adequate, but no assurance can be given that the Members of the Obligated Group will maintain coverage amounts currently in place in the future, that the coverage will be sufficient to cover all malpractice judgments rendered against the Members of the Obligated Group or settlements of any such claims or that such coverage will be available at a reasonable cost in the future. For a discussion of the insurance coverage of the Members of the Obligated Group, including coverage by a captive insurer, see “SELF-INSURANCE” herein.

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

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

Cybersecurity Risks. Despite the implementation of network security measures by the Obligated Group, its information technology systems may be vulnerable to breaches, hacker attacks, computer viruses, physical or electronic break-ins and other similar events or issues. Such events or issues could lead to the inadvertent disclosure of protected health information or other confidential information or could have an adverse effect on the ability of the Obligated Group to provide health care services.

Tax-Exempt Status of the Obligated Group and Other Tax Matters

Maintenance of the Tax-Exempt Status of Benefiting Affiliates. The tax-exempt status of the Series 2016B Bonds depends upon maintenance by each Member of the Obligated Group of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of that status is contingent on compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable and other permissible purposes and their avoidance of transactions that may cause their earnings or assets to inure to the benefit of private individuals. As these general principles were developed primarily for public charities that do not conduct large-scale technical operations and business activities, they often do not adequately address the myriad operations and transactions entered into by a modem health care organization. Although traditional activities of health care providers, such as medical office building leases, have been the subject of

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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 ACA also contains new requirements for tax-exempt hospitals. Under the ACA, each tax-exempt hospital facility is required to (i) conduct a community health needs assessment at least every three years and adopt an implementation strategy to meet the identified community needs, (ii) adopt, implement and widely publicize a written financial assistance policy and a policy to provide emergency medical treatment without discrimination, (iii) limit charges to individuals who qualify for financial assistance under the tax-exempt hospital’s financial assistance policy to no more than the amounts generally billed to individuals who have insurance covering that care and refrain from using "gross charges" when billing those individuals, and (iv) refrain from taking extraordinary collection actions without first making reasonable efforts to determine whether the individual is eligible for assistance under the tax-exempt hospital’s financial assistance policy. In addition, the Treasury Department is required to review information about each tax-exempt hospital’s community benefit activities at least once every three years, as well as to submit an annual report to Congress with information regarding the levels of charity care, bad debt expenses, unreimbursed costs of government programs, and costs incurred by tax-exempt hospitals for community benefit activities. The periodic reviews and reports to Congress regarding the community benefits provided by 501(c)(3) hospitals may increase the likelihood that Congress will require 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 Obligated Group participates in a variety of transactions with physicians either directly or indirectly. Management believes that the transactions to which the Obligated Group is 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.

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

In some cases, the IRS has imposed substantial monetary penalties on tax-exempt hospitals in lieu of revoking their tax-exempt status. In those cases, the IRS and the tax- exempt hospitals entered into settlement agreements requiring the hospital to make substantial payments to the IRS.

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

Real Property Tax Exemption. State, county and local taxing authorities undertake audits and reviews of the operations of tax-exempt health care providers with respect to their real property tax exemptions. In some cases, particularly where authorities are dissatisfied with the level of charitable activity provided by a nonprofit organization, the real property tax-exempt status of the health care providers has been questioned. The majority of the Obligated Group’s real property is currently treated as exempt from real property taxation. Although the Obligated Group’s real property tax exemptions with respect to its core hospital facilities have not, to the knowledge of management, been under challenge or investigation, an audit could lead to a challenge that could adversely affect the Obligated Group’s real property tax exemptions.

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It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of nonprofit corporations. There can be no assurance that future changes in the laws and regulations of state or local governments will not materially adversely affect the financial condition of the Obligated Group by requiring payment of income, local property or other taxes. See also “—Nonprofit Health Care Environment—IRS Community Benefit Initiative” and “—Challenges to Real Property Tax Exemption” above.

Maintenance of Tax-Exempt Status of Interest on the Series 2016B Bonds.

As indicated above, the Series 2016B Bonds are being issued simultaneously with the Notes and are part of an integrated plan of finance. Should the Series 2016B Bonds lose their tax-exempt status, the financial consequences to the Obligated Group would be materially adverse. Accordingly, prospective investors in the Notes should understand the circumstances in which the Series 2016B Bonds might lose their tax-exempt status.

The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States Treasury, and a requirement that issuers file an information report with the IRS. The Obligated Group has covenanted in certain of the documents relating to the Series 2016B Bonds that it will comply with such requirements. Future failure by the Obligated Group to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series 2016B Bonds as taxable, retroactively to the date of issuance.

IRS officials have indicated that more resources will be invested in audits of tax-exempt bonds, including the use of bond proceeds, in the charitable organization sector, with specific reviews of private use.

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

Effective with the 2009 tax year, tax-exempt organizations must also complete new schedules to IRS Form 990-Return of Organizations Exempt From Income Tax, which create additional reporting responsibilities. On Schedule H, hospitals and health systems must report how they provide community benefit and specify certain billing and collection practices. Schedule K requires detailed information related to all outstanding bond issues of tax-exempt borrowers, including information regarding operating, management and research contracts as well as private use compliance. Tax-exempt organizations must also complete Schedule J, which requires reporting of compensation information for the organizations’ officers, directors, trustees, key employees, and other highly compensated employees.

There can be no assurance that responses by the Obligated Group to a questionnaire or Form 990 will not lead to an IRS review that could adversely affect the tax-exempt status of the Series 2016B Bonds or of other outstanding tax-exempt indebtedness issued for the benefit of the Obligated Group. Additionally, the Series 2016B Bonds or such other tax-exempt obligations may, from time to time, be subject to examinations or audits by the IRS.

No ruling with respect to the Series 2016B Bonds has been or will be sought from the IRS. There can be no assurance that an examination of the Bonds will not adversely affect the tax-exempt status of the Series 2016B Bonds.

Proposed Legislation Regarding Limitations or Elimination of Tax-Exempt Status of Interest on the Bonds. Tax legislation (either proposed or future), administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Series 2016B Bonds under federal or state law.

Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code. As a tax-exempt organization, each Member of the Obligated Group is limited with respect to its use of practice income guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other means of recruiting and

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retaining physicians. Uncertainty in this area has been reduced somewhat by the issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and has issued a detailed audit guide suggesting that field agents scrutinize numerous activities of the hospitals in an effort to determine whether any action should be taken with respect to limitations on or revocation of their tax-exempt status or assessment of additional tax. Any suspension, limitation, or revocation of a Member of the Obligated Group’s tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Obligated Group and might lead to loss of tax exemption of interest on the Series 2016B Bonds.

Other Risk Factors

Investments. The Obligated Group has significant holdings in a broad range of investments. Market fluctuations may affect the value of those investments and those fluctuations may be and historically have been at times material. For a discussion of these investments, see “INVESTMENTS” herein.

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

Adoption of legislation or implementation of regulations that would modify national or state health programs or that would establish national, statewide or otherwise regulated rates applicable to hospitals and other health care providers;

Reduced demand for the services of the Obligated Group that might result from decreases in population or loss of market share to competitors;

Bankruptcy of an indemnity/commercial insurer, managed care plan or other payor; Efforts by insurers and governmental agencies to limit the cost of hospital services, to reduce the number of hospital beds and to reduce the utilization of hospital facilities by such means such as improved occupational health and safety and outpatient care, or comparable regulations or attempts by third-party payors to control or restrict the operations of certain health care facilities;

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

The occurrence of a natural or man-made disaster, a pandemic or an epidemic that could damage Obligated Group’s facilities, interrupt utility service to such facilities, result in an abnormally high demand for health care services or otherwise impair the Obligated Group’s operations and the generation of revenues from such facilities. The Obligated Group’s facilities are covered by general property insurance in an amount that management considers generally sufficient to provide for the replacement of such facilities in the event of most natural disasters; and

Limitations on the availability of, and increased compensation necessary to secure and retain, nursing, technical and other professional personnel.

[Remainder of Page Intentionally Left Blank]

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APPENDIX B-1

Consolidated Financial Statements with Supplementary Consolidating Information of Care New England Health System and Affiliates as of and for the Years Ended September 30, 2015 and 2014 [THIS PAGE INTENTIONALLY LEFT BLANK] Care New England Health System and Affiliates Consolidated Financial Statements with Supplementary Consolidating Information September 30, 2015 and 2014 Care New England Health System and Affiliates Index September 30, 2015 and 2014

Page(s)

Independent Auditor’s Report...... 1–2

Consolidated Financial Statements

Balance Sheets ...... 3

Statements of Operations ...... 4

Statements of Changes in Net Assets...... 5

Statements of Cash Flows ...... 6

Notes to Financial Statements ...... 7–46

Supplementary Consolidating Financial Statements

2015 Balance Sheet ...... 47–48

2015 Statement of Operations and Changes in Net Assets ...... 49–50

2014 Balance Sheet ...... 51–52

2014 Statement of Operations and Changes in Net Assets ...... 53–54 Independent Auditor’s Report

To the Board of Directors Care New England Health System

We have audited the accompanying consolidated financial statements of Care New England Health System and Affiliates (“Care New England”), which comprise the consolidated balance sheets as of September 30, 2015 and 2014, and the related consolidated statements of operations, changes in net assets and cash flows for the years then ended.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’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 Company’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.

PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Care New England at September 30, 2015 and 2014, and the results of their operations, changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The consolidating 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 consolidating information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated, in all material respects, in relation to the consolidated financial statements taken as a whole. The consolidating information is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual affiliates and is not a required part of the consolidated financial statements. Accordingly, we do not express an opinion on the financial position and results of operations of the individual affiliates.

Boston, Massachusetts January 22, 2016

2 Care New England Health System and Affiliates Consolidated Balance Sheets Years Ended September 30, 2015 and 2014

2015 2014

Assets Current Cash and cash equivalents $ 48,803,805 $ 52,389,555 Investments 27,163,691 25,219,578 Patient accounts receivable, net of allowance for doubtful accounts of $42,255,993 in 2015 and $35,971,784 in 2014 139,822,039 125,108,931 Other receivables 21,404,988 15,153,122 Pledges receivable, net 1,022,395 1,325,725 Other current assets 16,763,651 19,855,200 Current portion of assets whose use is limited 446,827 2,355,049 Total current assets 255,427,396 241,407,160 Assets whose use is limited or restricted as to use Endowment funds 50,819,449 54,523,410 Board-designated funds 120,450,884 133,698,785 Trustee-held funds 163,469,410 178,811,354 Deferred compensation funds 1,912,022 2,537,023 Total assets limited as to use 336,651,765 369,570,572 Less: Amounts required to meet current obligations (446,827) (2,355,049) Noncurrent assets limited as to use 336,204,938 367,215,523

Goodwill 24,488,975 24,345,364 Intangibles 6,482,500 5,400,000 Property, plant and equipment, net 313,868,493 311,986,509 Pledges receivable, net 930,114 1,275,798 Insurance receivable 1,643,788 1,831,200 Other assets 6,685,864 5,567,492 Total assets $9945,732,068 $ 59,029,046

Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $1141,212,885 $ 19,457,709 Current portion of estimated third-party payor settlements and advances 598,072 6,198,878 Current portion of long-term debt and capital leases 9,631,866 7,254,395 Self-insurance reserves 8,689,509 7,802,674 Pension liability 16,090,538 13,380,543 Other current liabilities 13,116,604 10,828,738 Total current liabilities 189,339,474 164,922,937 Long-term liabilities Self-insurance reserves 138,931,970 137,475,561 Long-term portion of estimated third-party payor settlements and advances 30,128,278 32,575,832 Long-term debt and capital leases 154,747,534 157,756,641 Pension liability 115,941,758 83,407,618 Postretirement liability 1,447,283 1,462,614 Other liabilities 3,129,125 3,576,384 Total long-term liabilities 444,325,948 416,254,650 Net assets Unrestricted 241,150,258 309,539,402 Temporarily restricted 40,884,249 37,856,284 Permanently restricted 30,032,139 30,455,773 Total net assets 312,066,646 377,851,459 Total liabilities and net assets $9945,732,068 $ 59,029,046

The accompanying notes are an integral part of these financial statements.

3 Care New England Health System and Affiliates Consolidated Statements of Operations Years Ended September 30, 2015 and 2014

2015 2014

Revenues and gains Patient service revenue (net of contractual allowances and discounts) $ 1,061,792,820 $ 1,023,075,993 Provision for bad debts (38,680,643) (40,068,967) Net patient service revenue less provision for bad debts 1,023,112,177 983,007,026 Net assets released from restrictions and used for operations 2,589,805 3,126,281 Research revenue 23,382,036 25,936,818 Contribution revenue from acquisition 13,439,012 - Other revenue 75,416,463 55,940,569 Total revenues and gains 1,137,939,493 1,068,010,694 Operating expenses Salaries and benefits 715,127,055 675,473,104 Supplies and other expenses 284,550,504 249,593,140 Research expenses 23,482,879 25,146,652 Depreciation and amortization 36,581,327 34,495,543 Insurance 26,698,480 26,706,819 Licensure fee 43,534,709 41,052,257 Interest 6,838,716 6,527,788 Restructuring costs 2,911,571 - Loss on debt refinancing - 509,587 Total operating expenses 1,139,725,241 1,059,504,890 (Loss)/income from operations (1,785,748) 8,505,804 Nonoperating (losses)/gains Investment income/gains on assets limited as to use 7,077,581 2,822,990 Unrestricted gifts and bequests 1,033,483 1,044,993 Change in net unrealized (losses)/gains on investments (32,287,448) 1,232,951 Nonoperating expenditures (1,873,179) (2,466,463) Net nonoperating (losses)/gains (26,049,563) 2,634,471 (Deficiency)/Excess of revenue and gains over expenses and losses (27,835,311) 11,140,275 Other changes in unrestricted net assets Pension and postretirement adjustment (40,968,090) (27,334,588) Net assets released from restrictions used for purchase of property, plant and equipment 893,818 10,294,707 Transfer from deferred revenue 302,009 - Transfer (to)/from temporarily restricted (781,570) 47,728 Decrease in unrestricted net assets $ (68,389,144) $ (5,851,878)

The accompanying notes are an integral part of these financial statements.

4 Care New England Health System and Affiliates Consolidated Statements of Changes in Net Assets Years Ended September 30, 2015 and 2014

2015 2014

Unrestricted net assets (Deficiency)/Excess of revenues and gains over expenses and losses$ (27,835,311) $ 11,140,275 Other changes in unrestricted net assets Pension and postretirement adjustment (40,968,090) (27,334,588) Net assets released from restrictions used for purchase of property, plant and equipment 893,818 10,294,707 Transfer from deferred revenue 302,009 - Transfer (to)/from temporarily restricted (781,570) 47,728 Decrease in unrestricted net assets (68,389,144) (5,851,878) Temporarily restricted net assets Contributions 4,704,247 7,735,780 Contribution of temporarily restricted net assets from acquisition 3,795,867 - Income from investments 530,596 669,757 Net realized and unrealized (losses)/gains from investments (1,913,133) 1,812,273 Net assets released from restrictions (3,311,841) (13,420,988) Transfer to deferred revenue (662,715) - Transfer from/(to) unrestricted net assets 781,570 (47,728) Transfer to permanently restricted net assets (896,626) - Increase/(decrease) in temporarily restricted net assets 3,027,965 (3,250,906) Permanently restricted net assets Net realized and unrealized (losses)/gains from investments (1,454,092) 309,747 Contribution of permanently restricted net assets from acquisition 100,000 - Contributions 33,832 15,048 Transfers from temporarily restricted net assets 896,626 - (Decrease)/increase in permanently restricted net assets (423,634) 324,795 Decrease in net assets (65,784,813) (8,777,989) Net assets Beginning of year 377,851,459 386,629,448 End of year $ 312,066,646 $ 377,851,459

The accompanying notes are an integral part of these financial statements.

5 Care New England Health System and Affiliates Consolidated Statements of Cash Flows Years Ended September 30, 2015 and 2014

2015 2014

Operating activities Change in net assets $ (65,784,813) $ (8,777,989) Adjustments to reconcile change in net assets to net cash provided by operating activities Contribution revenue from acquisition, net of cash (16,996,425) - Gain on extinguishment of interest rate swaps - (81,747) Loss on sale of property and equipment 3,917,102 - Pension and postretirement adjustment 40,968,090 27,334,588 Depreciation and amortization 36,581,327 34,495,543 Loss of redemption of debt - 509,587 Bond premium - 1,178,760 Provision for bad debt 38,680,643 40,068,967 Payments to terminate swaps - (8,279,506) Income and gains on assets limited as to use (7,077,581) (2,822,990) Net unrealized (gains) losses on investments 32,287,448 (1,232,951) Restricted contributions and investment income (841,316) (300,806) Changes in Patient accounts receivable (48,023,476) (28,746,608) Investments 11,877,788 (23,835,355) Other current and long-term assets (1,621,170) (1,319,324) Accounts payable and accrued expenses 19,090,245 (11,908,765) Estimated third-party payor settlements (8,048,360) (6,458,404) Deferred revenue and other liabilities 883,040 (3,209,981) Net pension liability (5,739,286) (10,140,470) Self-insurance reserves 2,530,656 4,848,439 Net cash provided by operating activities 32,683,912 1,320,988 Investing activities Purchase of property and equipment (28,693,295) (39,064,370) Proceeds from the sale of property and equipment 3,054,161 - Purchase of investments (197,814,633) (127,718,207) Proceeds from the sale of investments 192,681,752 117,989,707 Net cash used in investing activities (30,772,015) (48,792,870) Financing activities Proceeds from the issuance of debt and capital leases 105,385 130,315,468 Debt repayments - (76,273,714) Payments on long-term debt and capital leases (6,444,348) (8,632,876) Payment of long-term debt issuance costs - (1,747,858) Restricted contributions to be used for long-term investments and investment income 841,316 300,806 Net cash (used in) provided by financing activities (5,497,647) 43,961,826 Net decrease in cash and cash equivalents (3,585,750) (3,510,056) Cash and cash equivalents Beginning of year 52,389,555 55,899,611 End of year $ 48,803,805 $ 52,389,555 Supplemental disclosures of cash flow information Cash paid for interest $ 5,670,261 $ 6,425,327 Purchases of property and equipment included in accounts payable and accrued expenses $-2,381,704 $

The accompanying notes are an integral part of these financial statements.

6 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

1. Description of Organization

Corporate Structure Care New England Health System (“CNE”, “Care New England”, or the “Health System”), a not-for-profit corporation, was established in November 1995 as the holding company for the development of an integrated delivery network. Prior to September 3, 2013, it consisted of Butler Hospital, Kent County Memorial Hospital, and Women & Infants Hospital of Rhode Island (collectively, the “Hospitals”), and the Kent County Visiting Nurse Association, d/b/a VNA of Care New England (the “Agency”).

As of September 3, 2013, Southeastern Healthcare System, Inc. (“SHS”) , a not-for-profit corporation located in Rhode Island and southeastern Massachusetts, became a subsidiary of the Health System. CNE became the parent organization and sole member as a result of this acquisition.

In May 2014, Integra Community Care Network, LLC, (“Integra”), an ACO, was legally established. Care New England is the sole corporate member. Integra was certified to participate in the Medicare shared savings program effective January 1, 2015.

As of January 1, 2015, The Providence Center, Inc. (“the “Center” or “TPC”), a not-for-profit corporation located in Rhode Island, became a subsidiary of the Health System. CNE became the parent organization and sole member as a result of this acquisition. CNE and TPC agreed that the acquisition will greatly improve their ability to provide comprehensive healthcare services.

The accompanying consolidated financial statements include the accounts of Care New England and its affiliates, over which Care New England has corporate governance:

Butler Hospital (“Butler”) and its affiliates, Butler Hospital Foundation, Carriage House, LLC (“Carriage”), and Butler Hospital Allied Medical Services, LLC.

Kent County Memorial Hospital (“Kent”) and its affiliates, Kent Hospital Foundation, Kent Ancillary Services, LLC, Affinity Physicians, LLC, and Toll Gate Indemnity, Ltd. (“Toll Gate”).

Women & Infants Corporation (“WIC”) and its affiliates, Women & Infants Development Foundation, Women & Infants Hospital of Rhode Island (“WIH”), WIH Faculty Physicians, Inc., Women & Infants Ancillary Services, LLC, Women & Infants Health Care Alliance, LLC, and W&I Indemnity, Ltd. (“W&I Indemnity”).

Kent County Visiting Nurse Association and its affiliates, Healthtouch, Inc. and VNA of Care New England Foundation (together, the “Agency”).

Integra Community Care Network, LLC.

SHS and its affiliates, Memorial Hospital of Rhode Island (“Memorial”), Primary Care Centers of New England, Inc. (“PCCNE”), Blackstone Health, Inc. (“BHI”), MHRI Ancillary Services, LLC, and The Memorial Hospital Foundation. Memorial is the sole corporate member of SHS Ventures, Inc. (“Ventures”).

7 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

TPC and its affiliates, Grandview Realty Corporation (“Grandview Realty”), Grandview Second Corporation (“Grandview Second”), Nashua Street Corporation (“Nashua”), Wilson Street Apartments, Inc. (“Wilson”), Standard Realty, Inc. (“Standard”), TPC Social Ventures, Inc. (“TPC Social”), and Continuum Behavioral Health, Inc. (“Continuum”).

Intercompany accounts have been eliminated in consolidation.

Mission and Nature of Business Care New England is dedicated to building an exemplary health care system. Care New England oversees the four Hospitals, the Agency, the Center and other affiliated organizations.

The mission of Butler Hospital is to provide treatment of psychiatric illness in an atmosphere of dignity and respect, and to contribute to knowledge through education and research, while continuously improving the ways Butler serves its patients and the community. Butler is a 117-bed, not-for-profit psychiatric teaching hospital, affiliated with The Warren Alpert Medical School of Brown University, providing services for the care of patients from Rhode Island and nearby Massachusetts. As a complement to its role in service and education, Butler actively supports research by members of its staff. Butler is accredited by The Joint Commission (“TJC”).

The mission of Kent County Memorial Hospital is to continually improve the health and well-being of the people and communities it serves, offering its essential services without regard for the ability to pay. Kent is a 359-bed, not-for-profit general hospital providing a full range of services for the acute care of patients principally from Kent County, Rhode Island. Kent is affiliated with, and provides clinical training to, the students of the University of New England College of Osteopathic Medicine, and currently operates American Osteopathic Association approved residency programs in emergency medicine, family practice, internal medicine, and a fellowship program in hyperbaric medicine. Kent is accredited by TJC and the Commission on Accreditation of Rehabilitation Facilities. Toll Gate, a wholly owned subsidiary of Kent insures primary and excess hospital professional and general liability risks for the Hospital and its employees on an occurrence basis, as well as primary professional and general liability risks for the VNA and the Care New England Health System. Toll Gate insures the Hospital’s contractual liability (pursuant to certain Indemnification Agreements) arising from employed physicians’ professional liability on both a claims-made and occurrence basis. Toll Gate also insures the Hospital’s contractual liability (pursuant to certain Indemnification Agreements) arising from community physicians’ professional liability on both a claims-made and occurrence basis.

The mission of Women & Infants Corporation is to support Women & Infants Hospital of Rhode Island and all other affiliated organizations. The mission of Women & Infants Hospital of Rhode Island is to improve the health and well-being of women and infants, and to provide essential services regardless of ability to pay. WIH is a 247-bed, not-for-profit regional center for women and infants’ care in Rhode Island and southern New England. Among other university affiliations, Women & Infants is the primary teaching affiliate of the Warren Alpert Medical School of Brown University in obstetrics, gynecology and newborn pediatrics along with related sub-specialty and internal medicine services. As a complement to its role in service and education, WIH actively supports research by members of its staff. WIH is accredited by TJC. W&I Indemnity is a wholly owned subsidiary of WIH. W&I Indemnity insures primary and excess hospital professional liability risks for the Hospital and its employees on an occurrence basis, and excess hospital professional liability risks for Butler. W&I Indemnity insures the Hospital’s contractual liability (pursuant to certain Indemnification Agreements) arising from employed physicians’ and residents’ medical malpractice liability on an occurrence basis. W&I Indemnity also insures the Hospital’s contractual

8 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

liability (pursuant to certain Indemnification Agreements) arising from community physicians’ medical malpractice liability on both a claims-made and occurrence basis.

The mission of Kent County Visiting Nurse Association is to provide and administer a comprehensive, multidisciplinary, therapeutic, hospice, and public health nursing program. The Agency is a not-for-profit corporation, providing home care services to the residents of Rhode Island and nearby Massachusetts. Healthtouch, Inc. is a not-for-profit corporation providing private duty nursing and personal care services, primarily to residents of Rhode Island.

The mission of Memorial Hospital is primary care and preventive medicine providing advanced diagnosis and treatment with a focus on teaching and research. Memorial is a 294-bed, acute care, not-for-profit community teaching and research hospital located in Pawtucket, RI, and is affiliated with Warren Alpert School of Medicine at Brown University. PCCNE provides staffing to Memorial. BHI receives and administers certain grant funds, and provides services to elderly and disabled residents in the local area.

Integra, a partnership of CNE and its employed physicians, participating affiliated independent community physicians, Rhode Island Primary Care Physician Corporation and South County Health System, is a certified Medicare Accountable Care Organization which has been operational since 2014.

The Providence Center, Inc. is the largest mental health center in Rhode Island, providing a continuum of counseling and supportive services to meet community mental health and substance use disorder needs since 1969. These services include, but are not limited to, preschool intervention for children with serious emotional disorders; treatment for the elderly; residential treatment for the chronically mentally ill and/or substance addicted; brief outpatient counseling for children and adults; and, treatment to individuals involved in the justice system. The following corporations - Grandview Realty, Grandview Second, Nashua, and Wilson own and operate rental apartments for individuals with mental illness. TPC Social provides Center clients with on-the-job training opportunities in supported employment environments. Continuum provides therapy and psychiatry services to youth and adults.

The change in control of The Center was accounted for under the acquisition method. The consolidated statement of operations for the year ended September 30, 2015 reflects the activity of The Center from the date of acquisition to year end. No consideration was exchanged for the acquisition.

9 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The fair value of assets acquired, liabilities assumed and net assets of The Center at January 1, 2015 were as follows:

January 1, 2015

Cash and cash equivalents $ 338,454 Patient accounts receivable, net 5,370,275 Other receivables 992,811 Assets whose use is limited or restricted as to use 980,080 Inventory 20,092 Prepaid expenses 620,165 Other assets 375,437 Property, plant and equipment, net 16,733,779 Intangibles 1,090,000 Goodwill 143,611 Total assets $ 26,664,704 Accounts payable and accrued expenses $ 2,664,931 Long-term debt and capital leases 6,368,968 Other liabilities 295,926 Total liabilities 9,329,825 Unrestricted 13,439,012 Temporarily restricted 3,795,867 Permanently restricted 100,000 Total net assets 17,334,879 Total liabilities and net assets $ 26,664,704

Intangible assets of $1,090,000 at September 30, 2015 are included in the consolidated balance sheets. Of this balance, $1,080,000 is attributable to trade name valuation with an indefinite useful life and $10,000 is attributable to below market leases with a useful life of one year.

A summary of the financial results of The Center included in the consolidated statement of operations for the period January 1, 2015 through September 30, 2015 are as follows:

Total revenues and gains $ 34,851,139 Total operating expenses 35,411,592 Loss from operations (560,453) Net nonoperating gains 148,591 Excess of expenses and losses over revenues and gains (411,862) Net assets released from restrictions used for purchase of property, plant and equipment 49,299 Transfers 500,000 Increase in unrestricted net assets $ 137,437

10 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The changes in net assets of The Center included in the consolidated statement of changes in net assets for the period January 1, 2015 through September 30, 2015 are as follows:

Temporarily Permanently Unrestricted Restricted Restricted Total

Net assets, January 1, 2015 $ 13,439,012 $ 3,795,867 $ 100,000 $ 17,334,879 Deficiency of revenues over expenses (411,862) - - (411,862) Net assets released from restrictions used for purchase of property, plant and equipment 49,299 - - 49,299 Transfers 500,000 - - 500,000 Contributions - 312,231 - 312,231 Income from investments - 3,139 - 3,139 Net realized and unrealized gains from investments - 2,416 - 2,416 Net assets released from restrictions - (318,852) - (318,852) Increase (decrease) in net assets 137,437 (1,066) - 136,371

Net assets, September 30, 2015 $ 13,576,449 $ 3,794,801 $ 100,000 $ 17,471,250

A summary of the unaudited pro forma financial results of CNE and The Center for the year ended September 30, 2015 as if the acquisition had occurred on October 1, 2014 are as follows:

2015 (Unaudited) CNE The Center Total

Total revenues and gains $ 1,090,239,252 $ 45,400,571 $ 1,135,639,823 Total operating expenses 1,104,903,559 46,639,316 1,151,542,875 Loss from operations (14,664,307) (1,238,745) (15,903,052) Other (losses)/gains (26,198,154) 334,476 (25,863,678) Deficiency of revenue over expenses (40,862,461) (904,269) (41,766,730) Other changes in unrestricted net assets (41,103,132) 582,556 (40,520,576) Total decrease in unrestricted net assets$ (81,965,593) $ (321,713) $ (82,287,306)

2. Significant Accounting Policies

Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the reporting principles of not-for-profit accounting as defined by Not-for-Profit Entities and the American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide for Health Care Organizations.

Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Significant estimates are made in the areas of patient accounts receivable, accruals for settlements with third-party payors, incurred but not reported liabilities for medical, workers’ compensation, and medical malpractice insurance, and other accrued expenses. Actual results could differ from those estimates.

11 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

CashandCashEquivalents Care New England considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents, excluding amounts whose use is limited by the Boards of Trustees (the “Boards”) designation or other arrangements under trust agreements. $12,140,631 and $7,974,292 at September 30, 2015 and 2014, respectively, of cash received with donor- imposed restrictions, that is available for current use, is included in cash and cash equivalents.

Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the consolidated balance sheets. Investment income or loss (including realized and unrealized gains and losses on investments, other-than-temporary impairments in the value of securities, interest, and dividends) is included in the excess of revenues and gains over expenses unless the income or loss is restricted by donor or law.

Butler, Kent, WIH, SHS and the Agency follow the practice of pooling resources of unrestricted and restricted assets for long-term investment purposes. The investment pool is operated on the market value method whereby each participating fund is assigned a number of units based on the percentage of the pool it owns at the time of entry. Income, gains, and losses of the pool are allocated to the funds based on their respective participation in the pool.

Alternative investments (nontraditional, not readily marketable holdings) include limited partnership interests, private equity funds, commingled funds, and hedge funds. Alternative investments generally are structured such that the Health System holds an interest in the respective fund. The Health System’s ownership structure does not provide for control over the related investees, and the Health System’s financial risk is limited to the carrying amount reported for each investee, in addition to any unfunded capital commitment. There was an outstanding unfunded commitment for alternative investments of $10,709,793 at September 30, 2015.

Individual investment holdings within the alternative investments include nonmarketable and market-traded debt and equity securities, and interests in other alternative investments. The Health System may be exposed indirectly to securities lending, short sales of securities, and trading in futures and forward contracts, options, private equity holdings, and other derivative products. Alternative investments often have liquidity restrictions under which the Health System’s capital may be divested only at specified times. Liquidity restrictions may apply to all or portions of a particular invested amount.

Financial information used by the Health System to evaluate its alternative investments is provided by the investment manager or general partner, and includes fair value valuations (quoted market prices and values determined through other means) of underlying securities and other financial instruments held by the investee, and estimates that require varying degrees of judgment. The financial statements of the investee companies are audited annually by independent auditors, although the timing for reporting the results of such audits does not always coincide with the Health System’s annual financial statement reporting.

There is uncertainty in the valuation for alternative investments arising from factors such as lack of active markets (primary and secondary), lack of transparency into underlying holdings, and time lags associated with reporting by investee companies. As a result, there is at least a reasonable possibility that estimates will change in the near term.

12 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Income and realized net gains (losses) on investments of endowments and specific purpose funds are reported as follows:

Increases (decreases) in permanently restricted net assets if the terms of the gift require that they be added to the principal of permanently restricted net assets;

Increases (decreases) in temporarily restricted net assets if the terms of the gift impose restrictions on the use of the income or the income has not yet been appropriated; or

Increases (decreases) in the unrestricted net assets in all other cases.

At September 30, 2015, $1,621,564 of funds received with donor-imposed restrictions, that is available for current use, is included in investments.

Assets Limited as to Use Assets limited as to use primarily include endowment funds, assets held by trustees under indenture agreements and insurance programs, deferred compensation arrangements, a representative payee account maintained by the Center for clients receiving social security income, and designated assets set aside by one or more of the Boards, over which the Boards retain control and may, at their discretion, subsequently use for other purposes. Amounts required to meet current obligations have been reclassified to current assets.

Inventories Inventories of drugs and supplies are stated at the lower of cost (first-in, first-out) or market. Inventories of $8,945,236 and $7,921,695 at September 30, 2015 and 2014, respectively, are included in other current assets in the consolidated balance sheets.

Property and Equipment Property and equipment acquisitions are recorded at cost. Donated property and equipment is recorded at fair value at the date of receipt. 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. Depreciation is recorded using the straight-line method based on the estimated useful life of each class of depreciable asset, as recommended by the American Hospital Association as follows:

Buildings and improvements 5 – 40 Years Fixed and moveable equipment 3 – 20 Years

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

Assets recorded under capital leases are amortized on the straight-line method over the shorter period of the lease term or the estimated useful life of the asset. Such amortization is included with depreciation and amortization expense in the consolidated statements of operations.

13 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Upon retirement or sale of assets, the cost of assets disposed of and the related accumulated depreciation are eliminated and the related gains or losses are recognized in other revenue in the consolidated statements of operations.

Care New England evaluates the potential impairment of property, plant and equipment whenever events or changes in circumstances indicate that the carrying value of a group of assets may not be recoverable.

Pledges Pledges, less an allowance for uncollectible amounts, are recorded as receivables in the year made. Pledges receivable over a period greater than one year are stated at net present value. Pledges are recorded as additions to the appropriate net asset classification.

Deferred Financing Costs Expenses related to issuance of bonds are deferred and amortized on a straight-line basis over the period during which the bonds are expected to be outstanding.

Self-Insurance Reserves The reserves for self-insured programs are estimated based on actuarial studies and the Hospitals’ and industry experience. The reserves include estimates of the ultimate cost for both reported claims and claims incurred but not yet reported. The Hospitals have established separate indemnification companies and trust funds for payment of certain self-insured claims including medical malpractice.

CNE, Butler, Kent, WIC, Memorial, and the Agency is self-insured for losses arising from workers’ compensation claims. Loss reserves are estimated based on actuarial studies, and the Health System’s and industry experience. The Center purchases a commercial insurance policy annually to insure workers’ compensation risks.

For the employees of CNE, Butler, Kent, WIC, and the Agency, Care New England is self-insured for losses arising from health insurance claims. This program covers the health insurance claims for all CNE’s, Butler’s, Kent’s, WIC’s, and the Agency’s employees, with the exception of the unionized employees at WIH. Self-insured losses for both reported claims and claims incurred but not yet reported are estimated based on actuarial studies and the Health System’s actual experience.

The Center has entered into a self-insurance program for health insurance risks. This program covers health insurance claims for substantially all of the Center’s full-time employees. The Center limits it losses through the use of stop-loss policies from re-insurers. The provisions for health insurance losses are based on actuarial assumptions and actual claims experience.

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

14 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Excess of Revenues Over Expenses The consolidated statements of operations and changes in net assets include excess of revenues and gains over expenses. Changes in unrestricted net assets, which are excluded from excess of revenues and gains over expenses, consistent with industry practice, include permanent transfers of assets to and from affiliates for other than goods and services, contributions of long-lived assets (including assets acquired using contributions which by donor restriction were to be used for the purposes of acquiring such assets), and changes in the pension and postretirement liability.

Net Patient Service Revenue The Hospitals, the Agency, and the Center have individual agreements with many third-party payors that provide payments at amounts different from their established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, per-diem, and fee for service payments.

Net patient service revenue is reported at estimated net realizable amounts from patients, third-party payors, and others for services rendered, and includes estimated retroactive revenue adjustments due to such things as future audits and reviews. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and such amounts are adjusted in future periods as adjustments become known, or as years are no longer subject to such adjustments.

Research Revenue Research revenue includes revenue from federal, state, institutional and other sources for the purposes of funding research activities.

Other Revenue Other revenue includes underwriting income, rental income, cafeteria sales, laboratory services provided to nonpatients, sales of home medical equipment, vendor rebates and discounts, various services provided to physicians and other organizations, federal grants including housing subsidies, and gains or losses upon the retirement or sale of assets.

Charity Care The Health System provides care to patients who meet certain criteria under their charity care policies without charge or at amounts less than established rates. Because the Health System does not pursue collection of amounts determined to qualify as charity care, they are not reported as net patient revenue.

Contributions and 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 at the date when the condition is satisfied. Gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations and changes in net assets as net assets released from restrictions.

Unrestricted contributions are reported net of direct fundraising expenses in the consolidated statements of operations.

15 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Income Tax Status Care New England, Butler, Kent, WIH, the Agency, Women & Infants Faculty Physicians, Inc., Women & Infants Corporation, Women & Infants Development Foundation, Butler Hospital Foundation, Kent Hospital Foundation, The Memorial Hospital Foundation, SHS, Memorial, Ventures, BHI, the Center, Grandview Realty, Grandview Second, Nashua, Wilson, Standard, and TPC Social are not-for-profit corporations, and have been recognized as tax exempt on related income pursuant to Section 501(c)(3) of the Internal Revenue Code (the Code). Those organizations are, therefore, exempt from federal taxes on related income pursuant to Section 501(a) of the Code. W&I Indemnity, Ltd. and Toll Gate Indemnity, Ltd. are foreign corporations with no material tax liability. PCCNE and Continuum are organized as a for-profit corporation and are, therefore, subject to tax. The provision for income taxes on the earnings of PCCNE and Continuum is immaterial to the consolidated financial statements. Other affiliates are single-member limited liability companies which are treated as part of their sole member for tax purposes.

Recently Adopted Accounting Standards On October 1, 2014, the Health System early adopted new guidance about Fair Value Measurement and Disclosures for Investments in certain entities that calculate net asset value per share (or its equivalent). This guidance requires the Health System to show investments that use net asset value (“NAV”) as a practical expedient for valuation purposes, separately from other investments categorized in the fair value hierarchy described in Note 22. This disclosure change, which was applied retrospectively, can be seen in the investment leveling table shown in Note 22 for both years 2015 and 2014.

3. Uncompensated Care and Community Services

The Health System maintains records to identify and monitor the level of charity care and community services it provides, including the amount of charges forgone for services and the estimated cost incurred to provide those services. The revenues forgone and estimated costs and expenses incurred to provide charity care for the years ended September 30 are as follows:

2015 2014

Revenues forgone, based on established rates $ 18,406,964 $ 43,939,667 Expenses and costs incurred 8,174,692 17,435,479

Of the Health System’s total expenses reported ($1,139,725,241 and $1,058,995,303 in 2015 and 2014, respectively), an estimated $8,174,692 and $17,435,479 arose during 2015 and 2014, respectively, from providing services to charity patients. The estimated costs of providing charity services are based on a calculation which applies a ratio of costs to charges to the gross uncompensated charges associated with providing care to patients who qualify for charity care. The ratio of cost to charges is calculated based on total expenses (less bad debt expense) divided by gross patient service revenue. The Health System did not receive significant contributions that were restricted for the care of indigent patients during 2015 and 2014.

16 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

In addition to the above-mentioned medical care rendered, the Health System provides numerous other services free of charge to the community. These services include such things as transporting patients to the healthcare facilities, interpretation of medical information to various languages, volunteer services to other not-for-profit agencies, emergency and disaster relief services, various health, educational, research and teaching programs, healthcare screening services, therapeutic patient services, and provision of direct services to patients with multiple psychosocial needs.

2015 2014

Approximated revenues forgone, or cost of the services provided to the community $ 42,548,113 $ 38,695,710

The Health System also provides services to other indigent patients under the Medicaid/Rite Care Program, which reimburses healthcare providers at amounts which are less than the cost of services provided to the recipients.

In addition to the cost of charity care and other community service programs, the Health System provided $38,680,643 and $40,068,967 for uncollectible patient accounts during the years ended September 30, 2015 and 2014, respectively.

4. Allowance for Doubtful Accounts

Accounts receivable are reduced by an allowance for doubtful accounts. In evaluating the collectability of accounts receivable, the Health System analyzes its past history and identifies trends for each of its major payor sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payor sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts. For receivables associated with services provided to patients who have third-party coverage, the Health System analyzes contractually due amounts and provides an allowance for doubtful accounts and a provision for bad debts, if necessary (for example, for expected uncollectible deductibles and copayments on accounts for which the third-party payor has not yet paid, or for payors who are known to be having financial difficulties that make the realization of amounts due unlikely). For receivables associated with self-pay patients (which includes both patients without insurance and patients with deductible and copayment balances due for which third-party coverage exists for part of the bill), the Health System records a significant provision for bad debts in the period of service on the basis of its past experience, which indicates that many patients are unable or unwilling to pay a portion of their bill for which they are financially responsible. The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted is charged off against the allowance for doubtful accounts.

The Health System’s allowance for doubtful accounts for self-pay patients increased from 22.3% of net accounts receivable at September 30, 2014, to 23.2% of net accounts receivable at September 30, 2015. The Health System’s self-pay charity and bad debt write-offs decreased $32,252,544 from fiscal year 2014 to $57,087,607 for fiscal year 2015. The decrease in write-offs was the result of expanded coverage under the Affordable Care Act. The Health System has not changed its charity care or uninsured discount policies during fiscal years 2014 or 2015.

17 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

5. Pledges Receivable

Unconditional promises to give are recorded at present value as current and long-term assets based on expected time of collection. Future expected collections of these pledges as of September 30 are as follows:

2015 2014

Within one year $11,178,878 $ ,431,665 One to five years 1,042,718 1,326,773 Beyond five years - - 2,221,596 2,758,438 Less: Allowance for uncollectibles (269,087) (156,915) Pledges receivable, net $21,952,509 $ ,601,523

6. Summary of Investments

Investments at September 30 are summarized as follows:

2015 2014

Securities Cash and cash equivalents $ 42,190,026 $ 60,711,202 Fixed income securities 8,363,498 52,595,450 Equity securities 35,073,871 57,705,216 Mutual funds 89,710,371 80,702,985 Alternative investments 141,327,768 94,235,702 Assets held under split - interest agreements 17,679,265 19,165,203 Cash surrender value of life insurance 29,470,657 29,674,392 $ 363,815,456 $ 394,790,150

The cash surrender value of life insurance is included in Board-designated funds.

Unrestricted investment return for the years ended September 30 consisted of the following:

2015 2014

Interest and dividend income $23,208,235 $ ,762,026 Net realized gains on sales of investments 21,660,093 9,768,920 Net change in unrealized (losses) gains (32,287,448) 1,232,951 $ (7,419,120) $ 13,763,897

Included in operating revenue $917,790,747 $ ,707,956 Included in nonoperating revenue (25,209,867) 4,055,941 $ (7,419,120) $ 13,763,897

18 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Care New England, Butler, Kent, Memorial, WIC, Integra, and the Agency routinely invest their surplus operating funds in various overnight repurchase agreements, money market funds, and fixed income U.S. agency bonds, which are classified as cash and cash equivalents.

7. Property, Plant and Equipment

A summary of property, plant and equipment at September 30 follows:

2015 2014

Land and land improvements $ 17,934,854 $ 17,603,479 Buildings and improvements 438,827,178 412,526,302 Moveable equipment 297,800,488 285,700,896 Total property, plant and equipment 754,562,520 715,830,677 Less: Accumulated depreciation and amortization (449,859,247) (423,591,539) 304,703,273 292,239,138 Construction and projects in progress 9,165,220 19,747,371 Property, plant and equipment, net $3313,868,493 $ 11,986,509

Depreciation expense of property, plant and equipment amounted to $36,388,346 and $34,330,419 for the years ended September 30, 2015 and 2014, respectively.

Care New England had property, plant and equipment disposals of $9,052,058 and $678,461 with accumulated depreciation of $2,000,136 and $588,217 for the years ended September 30, 2015 and 2014, respectively.

During April 2015, Kent received a Certificate of Need approval from the Rhode Island Department of Health to provide primary and elective coronary angioplasty. The Certificate of Need also included the construction of a second cardiac catheterization laboratory to support the service. The project will be funded through tax-exempt debt and equity. Total estimated cost of the project is approximately $4.5 million, including construction and equipment costs. Kent began performing elective angioplasty procedures in July 2015 and expects to perform primary angioplasty procedures in March 2016 upon completion of the second cardiac catheterization laboratory.

During May 2010, Kent received a Certificate of Need approval from the Rhode Island Department of Health to construct and relocate its outpatient surgical suites on one floor of a two-story medical building; built on its campus by a private developer. The Certificate of Need also included lobby renovations, the construction of a connector to the main hospital building, and the construction of a 10-bed short stay nursing unit in the vacated outpatient surgery space. The project was funded through tax-exempt debt and philanthropic donations. Total cost of the project was approximately $15,800,000. The ambulatory surgical center opened in August 2013 and the remainder of the project was substantially completed in fiscal 2014.

As of September 30, 2015, the Health System estimated the total cost of completion of construction and projects in progress to be approximately $17,600,000. The funding to complete these projects will come from trustee-held funds, philanthropic donations and operating cash.

WIH leases land for its facility from Rhode Island Hospital (“RIH”), for a nominal annual payment, under a 99-year lease agreement which expires December 31, 2085.

19 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Butler owns approximately 110 acres of land, which was purchased with donated funds in the mid-19th century. This land has a book value of one dollar.

In the late 1940s, Kent acquired 57 acres of land, which is recorded at the acquisition price of $90,165.

Conditional asset retirement obligations are recorded at $1,814,193 and $1,817,089 as of September 30, 2015 and 2014, respectively. These obligations are recorded in other noncurrent liabilities in the consolidated balance sheets. There are no assets that are legally restricted for purposes of settling asset retirement obligations. During 2015 and 2014, there were no significant retirement obligations incurred or settled. Accretion expense of $117,767 and $74,515 was recorded during the years ended September 30, 2015 and 2014, respectively.

8. Long-Term Debt and Capital Leases

A summary of long-term debt at September 30 is as follows:

2015 2014

Variable rate $42,810,000 RIHEBC 2014 Series A Bonds, final maturity in 2043 $ 42,810,000 $ 42,810,000 Fixed rate $87,385,000 RIHEBC 2013 Series A Bonds, final maturity in 2033 82,217,526 84,288,761 Fixed rate $12,000,000 RIHEBC 2010 Series bonds, final maturity in 2031 10,001,655 10,474,255 Fixed rate $16,000,000 RIHEBC 2011 Series bonds, final maturity in 2031 13,829,138 14,149,854 Variable rate $2,725,000 RIHEBC 2013 Series bonds, final maturity in 2023 2,609,416 - Term, $1,400,000 Bank RI note, final maturity in 2023 1,347,975 - Term, $216,000 Bank RI note, final maturity in 2024 210,805 - Term, $536,000 Washington Trust mortgage note, final maturity in 2016 383,446 - Term, $480,000 Washington Trust mortgage note, final maturity in 2016 342,471 - Term, $445,400 U.S. Dept of Housing and Urban Development (HUD) mortgage note, final maturity in 2023 239,939 - Term, $200,000 Bank RI note, final maturity in 2019 159,818 - Various vehicle loans payable, final maturity date in 2019 181,552 - Term, $3,750,000 Bank of America mortgage note, final maturity in 2015 - 2,031,251 Term, $4,000,000 Time Insurance Company mortgage note, final maturity in 2027 3,264,858 3,375,456 Capital lease obligations 6,780,801 7,881,459 Total long-term debt and capital lease obligations 164,379,400 165,011,036 Less: Current portion of long-term debt and capital lease obligations 9,631,866 7,254,395 Long-term debt and capital lease obligations, excluding current portion $ 154,747,534 $ 157,756,641

20 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Rhode Island Health and Educational Building Corporation (RIHEBC) Bonds In 2014, the Health System issued RIHEBC 2013 Series A fixed rate bonds of $87,385,000. The bonds have mandatory sinking fund redemptions ranging from $2,915,000 in 2019 to $8,230,000 in 2033. Unspent bond proceeds of $4,232,056 are included in the trustee-held funds in the consolidated balance sheet at September 30, 2015. The Health System is required to comply with certain debt covenants under the bond agreements, including a minimum debt service coverage ratio of 1.2 to 1 and days cash on hand of 45. The Health System has been, and remains, compliant with these terms.

The proceeds from the CNE 2013 Series A Bonds were used to (i) refund the outstanding CNE 2008 Series A Bonds, and (ii) refund the outstanding Memorial 2003 Series bonds and accrued interest, and (iii) establish a debt service reserve fund, and (iv) terminate the interest rate swap agreement with Deutsche Bank, and (v) fund a portion of routine capital expenditures/improvements, and (vi) pay certain expenses related to the issuance of the 2013 Series A Bonds.

The CNE 2008 Series A Bonds were defeased by depositing a portion of the proceeds of the CNE 2013 Series A bond proceeds and money contributed by the Obligated Group members, Butler, Kent, WIC, WIH, and Memorial in an account held by the trustee for the CNE 2008 Series A Bonds to provide funds as and when necessary to pay the principal and interest on the CNE 2008 Series A Bonds. The CNE 2008 Series A Bonds were redeemed in full on January 2, 2014.

In 2014, the Health System issued RIHEBC 2014 Series A variable rate bonds of $42,810,000. The bonds have mandatory sinking fund redemptions ranging from $20,000 in 2029 to $5,150,000 in 2033 with final payment of $3,350,000 in 2042. The Health System is required to comply with certain debt covenants under the bond agreements, including a minimum debt service coverage ratio of 1.2 to 1 and days cash on hand of 45. The Health System has been, and remains, compliant with these terms.

The proceeds from the CNE 2014 Series A Bonds were used to (i) refund the outstanding CNE 2008 Series B Bonds, and (ii) terminate the interest rate swap agreement with Morgan Stanley, (iii) fund a portion of routine capital expenditures/improvements, and (iv) pay certain expenses related to the issuance of the 2014 Series A Bonds.

The 2008 Series B Bonds were defeased by depositing the proceeds of the CNE Series 2014 bonds in an account held by the Trustee to provide funds as and when necessary to pay the principal and interest of the CNE 2008 Series B bonds. The CNE 2008 Series B Bonds were redeemed in full on June 2, 2014.

In 2010, the Health System issued RIHEBC 2010 Series fixed rate bonds of $12,000,000. The bonds have mandatory sinking fund redemptions ranging from $490,006 in 2016 to $813,065 in 2030, with a final payment of $417,695 in 2031. These bonds were issued as Direct Purchase Tax Exempt Bank qualified bonds. The bonds bear a fixed interest rate of 3.65% through December, 2017 with 3 year optional tenders through December, 2030. The bonds bear interest on a per annum basis with semi-annual payments based on a 20 year amortization. The proceeds from the bonds were used by Kent to finance (i) the renovation, equipping and furnishing of existing hospital space to house a ten (10) bed short stay unit: (ii) the construction, equipping and furnishing of a 30,000 square foot ambulatory surgical center with a connection to Kent’s existing hospital building

21 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

and (iii) cost of issuance. CNE, Butler, Kent, WIC and WIH are jointly and severable liable for repayment. The Health System is required to comply with certain debt covenants under the bond agreements, including a minimum debt service coverage ratio of 1.25 to 1 and a liquidity ratio of 1 to 1. The Health System has been, and remains, compliant with these terms.

In 2011, the Health System issued RIHEBC 2011 Series fixed rate bonds of $16,000,000. The bonds have mandatory sinking fund redemptions ranging from $997,117 in 2016 to $1,044,574 in 2031. These bonds were issued as unrated private placement tax exempt bonds. The bonds bear a fixed interest rate of 2.99% through July 31, 2018. The bonds bear interest on a per annum basis with semi-annual payments based on a 20 year amortization. The proceeds from the bonds were used to finance (i) the construction, equipping and furnishing of a 32,000 square foot addition of Butler’s existing hospital facility; (ii) refinancing of the Bank of Rhode Island mortgage held by WIC; (iii) refinancing of certain capital leases; (iv) purchase of capital equipment; (v) capitalized interest and (vi) cost of issuance. CNE, Butler, Kent, WIC and WIH are jointly and severable liable for repayment. The Health System is required to comply with certain debt covenants under the bond agreements, including a minimum debt service coverage ratio of 1.25 to 1 and a liquidity ratio of 1 to 1. The Health System has been, and remains, compliant with these terms.

In 2012, the Center issued RIHEBC 2012 Series variable rate bonds of $2,600,000. The proceeds from the bonds were used to finance (i) the renovation of a 72,000 square foot office building located in Providence, Rhode Island and (ii) cost of issuance. In 2013, the RIHEBC 2012 Series bonds were refinanced in the aggregate amount of $2,725,000 in variable rate bonds. These bonds, RIHEBC 2013 Series, were issued as direct placement tax-exempt bonds. The bonds bear interest at the Federal Home Loan Bank Amortizing rate (twenty years), plus 2.00% discounted to 65% of the all in rate. Interest and principal installments of $13,052 on November 1, 2013 to September 1, 2023 are due monthly, with a final balloon payment of $2,025,934 due on October 1, 2023. The Center is required to comply with certain debt covenants under the bond agreements, includingaminimumdebtservicecoverageratioof1.15to1andaliquidityratioof1.5to1.The Center has been, and remains, compliant with these terms.

Bank Mortgage Notes In 2005, the Health System entered into a $3,750,000 mortgage note with Bank of America due August 2005 through July 2015. Interest and principal installments of $33,837 on August 1, 2005 to $24,883 on June 1, 2015 were due monthly, with a final balloon payment of $1,890,885 made August 2015, at a fixed interest rate of 5.64%.

In 2007, the Health System entered into a $4,000,000 mortgage note with Time Insurance Company due October 2007 through September 2027. Interest and principal installments of $25,261 are due monthly, with a final payment of $1,338,527 due September 2027, at a fixed interest rate of 5.79%. The note is collateralized by the real estate purchased.

In 2013, the Center entered into a $1,400,000 mortgage note with Bank RI due October 1, 2013 through October 1, 2023. Interest and principal installments of $8,614 are due monthly, at a fixed interest rate of 5.52%. The note is collateralized by the real estate.

22 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Scheduled principal repayments on long-term debt are as follows for the years ended September 30:

2016 $ 7,356,719 2017 6,428,957 2018 6,540,687 2019 5,703,288 2020 5,682,314 Thereafter 124,769,108 156,481,073 Plus unamortized premium on bonds 1,117,526 $ 157,598,599

Care New England had available $15,000,000 from December 29, 2011 through September 30, 2015 through a line of credit with a financial institution. There were no outstanding balances on the line of credit as of September 30, 2015 and 2014.

The Center had available $2,500,000 from October 1, 2013 through September 30, 2015 through a line of credit with a financial institution. There were no outstanding balances on the line of credit as of September 30, 2015.

The Hospitals and the Center classify certain noncancelable leases as capital leases, and include the property under lease in their property and equipment. Amortization expense for these assets is included in depreciation and amortization expenses in the consolidated statements of operations and changes in net assets. Ownership of the leased property converts to the Hospitals or the Center, respectively, at the end of the lease term. Assets and related accumulated depreciation under the capital leases are included in property, plant and equipment (Note 7).

Future minimum lease payments due under capital lease arrangements are as follows:

2016 $ 2,356,808 2017 1,586,986 2018 1,570,942 2019 1,542,047 Total minimum lease payments 7,056,783 Less: Amount representing interest 275,982 Capital lease obligations at September 30, 2015 $ 6,780,801

23 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

9. Temporarily and Permanently Restricted Net Assets

Temporarily restricted net assets are available for the following purposes or periods at September 30:

2015 2014

Healthcare services $ 5,908,916 $ 5,162,436 Healthcare research 1,702,960 3,255,103 General purposes 8,137,291 9,799,743 Indigent care 4,843,451 3,250,994 Health education 3,281,915 2,493,238 Plant replacement and expansion 12,125,260 5,474,107 Other 4,884,456 8,420,663 Total temporarily restricted net assets $ 40,884,249 $ 37,856,284

Permanently restricted net assets at September 30 are restricted investments to be held in perpetuity.

2015 2014

Plant replacement and expansion $ 17,679,257 $ 19,133,350 Indigent care 1,311,835 1,311,835 General purposes 4,019,732 4,019,732 Research 1,273,435 577,748 Healthcare services 2,042,372 4,362,102 Health education 1,054,150 1,051,006 Other 2,651,358 - Total permanently restricted net assets $ 30,032,139 $ 30,455,773

The Health System follows the requirements of the Rhode Island enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 as they relate to its permanently restricted endowments. The Health System’s endowments consist of numerous individual funds established for a variety of purposes. Its endowments consist solely of donor-restricted endowment funds. As required by U.S. generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

The Health System classifies restricted donor funds in accordance with the laws of the State of Rhode Island and generally accepted accounting principles. The Health System classifies as permanently restricted net assets (1) the original value of gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment funds that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure. The Health System considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the fund, (2) the purpose of the Health System and the donor-restricted endowment fund, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected

24 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

total return from income and the appreciation of investments, and (6) the investment policies of the Health System.

For the year ended September 30, 2015, the Health System had the following changes in the endowment net assets:

Temporarily Permanently Restricted Restricted Total

Endowment net assets at beginning of year $ 24,028,457 $ 11,322,423 $ 35,350,880 Acquired endowment net assets 31,070 100,000 131,070 Investment return Investment income 523,128 - 523,128 Net appreciation (realized and unrealized) (2,526,838) - (2,526,838) Total investment return (2,003,710) - (2,003,710) Contributions 68,786 31,837 100,623 Transfer to permanently restricted net assets - 896,626 896,626 Appropriation of endowment assets for expenditure (1,263,251) - (1,263,251) Endowment net assets at end of year $ 20,861,352 $ 12,350,886 $ 33,212,238

For the year ended September 30, 2014, the Health System had the following changes in the endowment net assets:

Temporarily Permanently Restricted Restricted Total

Endowment net assets at beginning of year $ 22,741,119 $ 11,289,604 $ 34,030,723 Investment return Investment income 139,119 - 139,119 Net appreciation (realized and unrealized) 1,729,730 - 1,729,730 Total investment return 1,868,849 - 1,868,849 Contributions - 15,048 15,048 Transfer to unrestricted net assets (47,728) - (47,728) Transfer to permanently restricted net assets - 17,771 17,771 Appropriation of endowment assets for expenditure (533,783) - (533,783) Endowment net assets at end of year $ 24,028,457 $ 11,322,423 $ 35,350,880

In addition to permanently restricted endowments, Kent and Memorial are income beneficiaries of various trusts. On September 30, 2015 and 2014, the market value of the trust assets, which are recorded as permanently restricted net assets, totaled $17,679,265 and $19,133,350, respectively. Distributions of income are made at the discretion of the trustees.

It is the policy of the Health System that any appropriations from the appreciation in endowment funds are periodically requested of and approved by the Board of Trustees.

25 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Board has responsibility for formulating investment policy. The investment policy is to invest in a conservative asset portfolio with minimal investment risk. Certain funds are included in a consolidated long term investment pool and invested in accordance with the investment strategy, authorized by the Board.

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the Health System to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets are immaterial as of September 30, 2015 and 2014. These deficiencies resulted from unfavorable market fluctuations. The individual donor-restricted endowment funds with deficiencies will retain future income and appreciation to restore the required fair value of the assets.

During fiscal 2015 and 2014, net assets were released from donor restrictions by incurring expenses satisfying the following restricted purposes:

2015 2014

Healthcare services $ 1,034,448 $ 1,421,285 Healthcare research 321,977 159,467 Plant replacement and expansion 893,818 10,294,706 Other 1,131,516 1,132,728 Health education 222,318 196,440 Indigent care 230,050 216,362 Total net assets released from restrictions $ 3,834,127 $ 13,420,988

U.S. Department of Housing and Urban Development Wilson received funding from HUD of $1,152,335 for the renovation of Wilson Street apartments. The agreement states that repayment is not required provided that the property funded remains available only to qualified clients for a period of not less than 40 years, maturing in 2047. If at any time during the restricted use period Wilson is unable to meet the provisions of the agreement, at the option of the funding source, the entire amount of the above noted funding shall become due and payable upon default.

Grandview Second received funding from HUD of $1,173,200 for the renovation of Grandview Second apartments. The agreement states that repayment is not required provided that the property funded remains available only to qualified clients for a period of not less than 40 years, maturing in 2035. If at any time during the restricted use period Grandview Second is unable to meet the provisions of the agreement, at the option of the funding source, the entire amount of the above noted funding shall become due and payable upon default.

Nashua received funding from HUD of $834,200 for the renovation of Nashua Street apartments. The agreement states that repayment is not required provided that the property funded remains available only to qualified clients for a period of not less than 40 years, maturing in 2040. If at any time during the restricted use period Nashua is unable to meet the provisions of the agreement, at the option of the funding source, the entire amount of the above noted funding shall become due and payable upon default.

26 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

State Bond Funds Wilson has two agreements with the State of Rhode Island whereby Wilson obtained bond funds in the amount of $818,738 for the renovation of the Wilson Street apartments. Under the terms of the agreements, if Wilson Street apartments should cease to be utilized as a facility to be rented by qualified clients before 2047 (40 years after the first rental unit to a client or two years from the date of the grant), the State of Rhode Island would be entitled to recover either the amount expended under the agreement or a prorated portion of the fair market value of the building, whichever is greater. Management intends to use the facility for the stated purpose and duration of the agreement.

10. Retirement Plans

The Health System has three separate Defined Benefit pension plans. One plan covers the employees of CNE, Butler, Kent and WIC, with the exception of the unionized employees of WIH (who are covered under a multiemployer union plan), and certain WIH-employed physicians. The second plan covers the employees of the Agency, and the third plan covers substantially all of the employees of Memorial.

Care New England Pension Plan The Care New England Pension Plan (the “Plan”), established on October 1, 1998, is a defined benefit cash balance plan that covers all of the employees of CNE, and all of the employees of Butler, Kent and WIC, with the exception of the unionized employees and certain employed physicians at WIH. The benefits for the unionized employees at Butler are computed under a separate formula that was in effect when the Butler plan was a standalone noncontributory defined benefit plan. Butler, Kent and WIC incur and fund their respective pension plan expenses within the guidelines established by the Employee Retirement Income Security Act of 1974.

The Care New England Board of Trustees voted, on September 23, 2010, to freeze the Plan effective December 31, 2010 for all employees with the exception of the Butler unionized employees. Effective December 31, 2010, compensation paid to a participant shall be disregarded for plan purposes, except for purposes related to determining benefits for the unionized employees at Butler. In addition, a participant’s cash balance account will only increase annually for interest credit. In connection with the Plan freeze, the Health System enhanced contributions to the Care New England 403(b) Match and Savings Plan.

Included in cumulative changes in unrestricted net assets at September 30, 2015 that has not yet been recognized in net periodic pension cost is an actuarial loss of $91,994,222. Included in cumulative changes in unrestricted net assets at September 30, 2014 that has not yet been recognized in net periodic pension cost is an actuarial loss of $67,337,612.

The actuarial loss included as cumulative changes in unrestricted net assets and expected to be recognized in net periodic pension cost during the fiscal year ended September 30, 2016 is $2,038,064.

27 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Net periodic pension cost includes the following components at September 30:

2015 2014

Service cost $22,514,262 $ ,068,226 Interest cost 9,223,909 9,895,828 Expected return on plan assets (13,236,052) (13,317,915) Amortization of loss 1,381,414 1,011,097 Net periodic pension (income)/expense $ (116,467) $ (342,764)

The assumptions used to determine net periodic benefit cost for the years ended September 30 are as follows:

2015 2014

Discount rate 4.17 % 4.75 % Expected return on assets 6.75 7.00 Rate of compensation increase 3.00 3.00

The following table presents a reconciliation of the beginning and ending balances of the plan projected benefit obligations, fair value of plan assets, funded status, and accumulated other comprehensive income (AOCI) of the plan as of September 30:

2015 2014

Changes in benefit obligations Projected benefit obligations at beginning of year $ 229,225,651 $ 215,615,120 Service cost 2,514,262 2,068,226 Interest cost 9,223,909 9,895,828 Actuarial (gain) loss 3,484,951 14,317,282 Benefits and expenses paid (13,650,049) (12,670,805) Projected benefit obligations at end of year $ 230,798,724 $ 229,225,651

28 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Changes in plan assets Fair value of plan assets at beginning of year $ 201,187,902 $ 192,848,939 Actual return on plan assets (9,317,020) 13,009,769 Employer contributions 3,750,000 8,000,000 Benefits and expenses paid (13,650,049) (12,670,806) Fair value of plan assets at end of year $ 181,970,833 $ 201,187,902 Funded status Total pension liability $ (48,827,891) $ (28,037,748) Accumulated benefit obligation 228,710,517 227,351,007 Amounts recognized in unrestricted net assets Unrestricted net assets at beginning of year $ 67,337,612 $ 53,723,281 Less amounts amortized during the year Net loss 1,381,414 1,011,097 Plus amounts occurring during the year Net loss 26,038,024 14,625,428 Unrestricted net assets at end of year $ 91,994,222 $ 67,337,612

The assumptions used to develop the projected benefit obligation as of September 30 are as follows:

2015 2014

Discount rate 4.22 % 4.17 % Rate of compensation increase 3.00 % 3.00 %

Plan Assets The Plan’s investment objectives are to achieve long-term growth in excess of inflation, and to provide a rate of return that meets or exceeds the actuarial expected long-term rate of return on plan assets. In order to minimize risk, the Plan attempts to minimize the variability in yearly returns. The Plan diversifies its holdings among sectors, industries, and companies. No more than 6% of the Plan’s portfolio (measured on market value) may be held in an individual company’s stocks or bonds.

To develop the expected long-term rate of return on plan assets assumption, the Health System considered the historical return and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

29 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Health System’s pension plan asset allocations (based on market value) at September 30, by asset category, are as follows:

Target Actual Actual Allocation 2015 2014

Asset category Alternative investments 16 % 12 % 16 % Fixed income securities 31 34 31 Equity securities 53 54 53 100 % 100 % 100 %

Refer to Note 22 for details on assets held by the Plan.

Contributions The Health System contributed $3,750,000 and $8,000,000 to the Plan in 2015 and 2014, respectively. The Health System expects to contribute $3,750,000 to the Plan in 2016.

Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Pension Fiscal Year Benefits

2016 $ 17,272,463 2017 16,181,532 2018 16,856,580 2019 16,400,035 2020 16,934,723 Years 2021–2025 81,327,428

Care New England 403(b) Match and Savings Plan Effective January 1, 2009, the Pension Plan Protection legislation resulted in regulatory changes which discontinued the matching credits to the participants that were previously recorded in the CNE Pension Plan. As a result, CNE established the Care New England 403(b) Plan to account for future matching credits. The plan covers employees that meet certain eligibility requirements. Additionally, effective January 1, 2011, in connection with the freeze of the Care New England Pension Plan, the Health System also provides a nonelective contribution to participant accounts, as defined in the Plan document. Nonelective contributions are allocated to each eligible participant based on a percentage of salary, a combination of the recipients age and years of service, and are credited to each such participant as of the first day of the Plan year, as further described in the Plan document.

30 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Health System recorded an expense of $16,412,827 and $14,741,274 for the nonelective contribution to participant accounts for the fiscal years that ended September 30, 2015 and 2014, respectively. In addition, the Health System recorded an expense of $4,470,337 and $3,660,075 for matching credits for fiscal years ended September 30, 2015 and 2014, respectively. The Health System will fund the 2015 expense in calendar year 2016 and funded the 2014 expense in calendar year 2015.

Kent County Visiting Nurse Association Pension Plan The Agency has a noncontributory defined benefit pension plan covering all employees who have satisfied certain eligibility requirements that was frozen effective December 31, 2007, and replaced with a contributory retirement savings plan. Benefits under the defined benefit plan were based on years of service and employee’s compensation levels.

Included in the charge to net assets at September 30, 2015 and 2014 is an unrecognized actuarial loss of $4,330,178 and $2,905,785, respectively. The actuarial loss expected to be recognized in net periodic pension cost during the fiscal year ended September 30, 2016 is $113,541.

The Agency’s pension expense was $182,333 in 2015 and $150,433 in 2014.

The assumptions used to determine net periodic benefit cost for the years ended September 30 are as follows:

2015 2014

Discount rate 4.32 % 4.92 % Expected return on assets 6.50 % 6.50 % Rate of compensation increase N/A N/A

The assumptions used to develop the projected benefit obligation as of September 30 are as follows:

2015 2014

Discount rate 4.50 % 4.32 % Rate of compensation increase N/A N/A

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

Plan assets, valued at fair value, consist of 99% mutual funds and 1% cash and cash equivalents. The fair value of the Plan assets were $6,322,672 and $7,045,572 at September 30, 2015 and 2014, respectively.

The funded status of the Agency’s defined benefit plan was a total pension liability of $3,590,301 and $2,221,403 as of September 30, 2015 and 2014, respectively.

31 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Agency made required contributions to the Plan of $237,828 and $231,427 in 2015 and 2014, respectively. The Agency is expected to make $331,416 in contributions to the Plan during 2016. Benefit payments are expected to be paid as follows:

Pension Fiscal Year Benefits

2016 $ 343,465 2017 405,206 2018 508,380 2019 542,538 2020 556,777 Years 2021–2025 3,017,649

Effective January 1, 2008, the Agency established a 403(b) Retirement Savings Plan that covers employees who have met certain eligibility requirements. Discretionary contributions to the plan are based on years of service and compensation levels. For the fiscal years that ended September 30, 2015 and 2014, respectively, the Agency recorded an expense of $391,850 and $390,331.

Memorial Retirement Plan As part of the acquisition of SHS, CNE acquired the assets and assumed the liabilities for Memorial’s defined benefit pension plan (“the Plan”), which was frozen for non-union participants as of May 31, 2012 and union employees as of June 1, 2013 and was replaced by the Memorial 403(b) Match and Savings Plan. Benefits under the defined benefit plan were based on years of service and employees’ compensation during the last five years of covered employment. Memorial makes annual contributions to the Plan, which approximate the amount of net periodic pension cost.

Included in cumulative changes in unrestricted net assets at September 30, 2015 that has not yet been recognized in net periodic pension cost is an actuarial loss of $28,162,363. Included in cumulative changes in unrestricted net assets at September 30, 2014 that has not yet been recognized in net periodic pension cost is an actuarial loss of $13,274,745.

The actuarial loss included as cumulative changes in unrestricted net assets and expected to be recognized in net periodic pension cost during the fiscal year ended September 30, 2016 is $436,006.

Net periodic pension cost includes the following components at September 30:

2015 2014

Service cost $-- $ Interest cost 6,647,404 6,900,857 Expected return on plan assets (5,909,928) (5,715,707) Amortization of loss - - Net periodic pension expense $ 737,476 $ 1,185,150

32 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The assumptions used to determine net periodic benefit cost for the years ended September 30 are as follows:

2015 2014

Discount rate 4.43 % 5.11 % Expected rate of return on plan assets 6.00 % 6.00 % Rate of compensation increase N/A N/A

The following tables represent a reconciliation of the beginning and ending balances of the plan projected benefit obligations, fair value of plan assets, funded status, and accumulated other comprehensive income (AOCI) of the plan as of September 30:

2015 2014

Changes in benefit obligations Projected benefit obligations at beginning of year $ 153,072,709 $ 137,879,874 Service cost - - Interest cost 6,647,404 6,900,857 Actuarial (gain) loss 7,449,980 13,223,730 Benefits and expenses paid (11,764,120) (4,931,752) Projected benefit obligations at end of year $ 155,405,973 $ 153,072,709

Changesinplanassets Fair value of plan assets at beginning of year $ 99,583,256 $ 95,763,486 Actual return on plan assets (1,527,710) 5,323,711 Employer contributions 5,250,000 3,427,811 Benefits and expenses paid (11,423,139) (4,931,752) Fair value of plan assets at end of year $ 91,882,407 $ 99,583,256 Funded status Total pension liability $ (63,523,566) $ (53,148,472) Accumulated benefit obligation 155,405,973 153,072,709 Amounts recognized in unrestricted net assets Unrestricted net assets at beginning of year $ (13,274,745) $ (36,275,726) Less Impact of purchase accounting - 36,275,726 Less amounts occurring during the year Net (gain) loss (14,887,618) (13,274,745) Unrestricted net assets at end of year $ (28,162,363) $ (13,274,745)

The assumptions used to develop the projected benefit obligations as of September 30, 2015 are as follows:

2015 2014

Discount rate 4.51 % 4.43 % Rate of compensation increase N/A N/A

33 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Plan Assets The goals of the Plan are to provide a secure retirement benefit for plan participants and to manage plan assets for the exclusive benefit of the participants. The invested assets will be managed on a long-term total return basis and measured against established benchmarks for each asset class. Risk management is achieved by limiting the size of asset class and individual security positions to achieve adequate diversification. The Plan will maintain a funded level sufficienttoensurebenefitsecurity.

The pension plan asset allocations (based on market value) at September 30, by asset category, are as follows:

Target Actual Actual Allocation 2015 2014

Asset category Cash and cash equivalents 0 % 1 % 0 % Alternative investments 0 0 2 Fixedincomesecurities 69 69 76 Equity securities 31 30 22 100 % 100 % 100 %

Refer to Note 22 for details on assets held by the Plan.

Contributions Memorial contributed $5,250,000 to the Plan in 2015 and expects to contribute $5,250,000 to the Plan in 2016.

Estimated Future Benefit Payments Benefit payments, are expected to be paid as follows:

Fiscal year Pension Benefits

2016 $ 6,421,537 2017 6,851,500 2018 7,330,000 2019 7,733,680 2020 8,238,968 Years 2021–2025 46,434,442

WIH Union Plan WIH contributes to a multi-employer defined benefit pension plan under the terms of the collective bargaining agreements that cover its union-represented employees. The risks of participating in multiemployer plans are different from single-employer plans in the following aspects:

a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

34 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

c. If WIH chooses to stop participating in the plan, WIH may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

WIH’s participation in the plan for the annual period ended December 31, 2014, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification Number (EIN) and the three-digit plan number. The most recent Pension Protection Act (PPA) zone status available in 2014 and 2013 is for the plan’s year-end at December 31, 2014, and December 31, 2013, respectively. The zone status is based on information that WIH received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date of the collective- bargaining agreements to which the plan is subject.

Expiration Date Pension Protection Act FIP/RP Status of Collective- Pension EIN/Pension Zone Status Pending/ Contributions of WIH Surcharge Bargaining Fund Plan Number 2014 2013 Implemented 2014 2013 Imposed Agreement

New England Health Care Employees Pension Fund 22-3071963 - 001 Green Green No $ 8,306,710 $ 8,575,472 No 11/30/2016

WIH was listed in the plan’s Form 5500 as providing more than 5 percent of the total contributions for the plan years ending December 31, 2014 and December 31, 2013.

At the date the financial statements were issued, Form 5500 was not available for the plan year ending December 31, 2015.

Payments to the plan for the years ended September 30, 2015 and 2014 were $8,644,537 and $8,308,637, respectively.

The Center Retirement Benefit Plan The Center maintains a profit sharing retirement plan to which The Center may make discretionary contributions. The retirement plan covers all employees of the Center over the age of 21 who have worked for a minimum of 975 hours during the plan year. Participants are vested over a number of years of continuous service. Participants became 100% vested after six years unless the age of 65 is attained, upon which the participant also becomes 100% vested. The Center did not contribute to the retirement plan for the nine months ended September 30, 2015.

11. Postretirement Plans

Kent sponsors an unfunded noncontributory defined benefit postretirement plan that provides medical and dental benefits to certain salaried and nonsalaried employees. In 1996, Kent amended the plans to eliminate benefits for all employees, except for certain employees with at least 25 years of service at that date.

Included in the charge to net assets are the following amounts that have not yet been recognized in net periodic postretirement benefit cost as of September 30, 2015 and 2014, respectively: unrecognized net transition obligation of $0 and $63,750 and unrecognized actuarial loss of $145,258 and $82,039. The unrecognized actuarial loss expected to be recognized in net periodic postretirement costs during the fiscal year ended September 30, 2016 is $49.

35 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The postretirement benefit cost for these plans was $119,610 in 2015 and $161,649 in 2014.

12. Patient Service Revenue

For the majority of the System’s revenue, the Hospitals, the Agency, and the Center have agreements with third-party payors that provide for payments to the Hospitals, the Agency, and the Center at amounts different from their established rates. At the time of rendering service to the patients, the Hospitals, the Agency, and the Center obtain assignment of benefits payable under the patient’s health insurance program, plan, or policy (e.g., Medicaid, Blue Cross, health maintenance organizations, commercial insurance, Medicare, and others). The following is a breakdown of gross patient service revenue by payor type for the years ended September 30:

2015 2014

Medicare and Medicare Managed Care 33 % 34 % Medicaid and Medicaid Managed Care 28 24 Blue Cross 21 22 Managed care 10 11 Self-pay 2 3 Other third-party payors 6 6 100 % 100 %

Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there will always be a possibility that the recorded estimates of net revenue could change by a significant amount in the future. The Hospitals, the Agency, and the Center believe they are in compliance with all applicable laws and regulations. Cost reports filed annually with third-party payors are subject to audit prior to final settlement. The Health System is compliant with all reimbursement filings. A summary of cost report activity as of September 30, 2015 is as follows:

Medicare Cost reports for the Hospitals and the Agency have been filed through 2014, and settled through 2014 for the Agency, 2012 for Butler, Kent, WIH, and Memorial.

State of Rhode Island (Medicaid) Cost reports have been filed and settled through 2010 for Butler, Kent, WIH, and Memorial. The implementation of a prospective payment system eliminated the need for Medicaid settlements after fiscal year 2010.

The filing of these cost reports and associated settlements require the use of estimates. Net patient service revenue was increased by approximately $6,000,000 and $6,900,000 in 2015 and 2014, respectively, to reflect the changes in the estimated settlements for certain prior years.

36 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Health System recognizes patient service revenue associated with services provided to patients who have third-party payor coverage on the basis of contractual rates for the services rendered. For uninsured patients that do not qualify for charity care, the Health System recognizes revenue on the basis of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). On the basis of historical experience, a significant portion of the Health System’s uninsured patients will be unable or unwilling to pay for the services provided. Thus, the Health System records a significant provision for bad debts related to uninsured patients in the period the services are provided. Patient service revenue, net of contractual allowances and discounts (but before the provision for bad debts), for the years ended September 30, 2015 and 2014 is summarized as follows:

2015 2014

Patient service revenue (net of contractual allowances and discounts) Third-party payors $ 1,033,942,838 $ 998,003,727 Self-pay 27,849,982 25,072,266 Total All Payors $ 1,061,792,820 $ 1,023,075,993

13. Disproportionate Share

The government has long recognized the financial burdens which are borne by hospitals which serve an unusually large number, or “disproportionate share”, of low-income patients. Kent, WIH, and Memorial received payments under the disproportionate share program of $50,483,921 and $47,925,810 from the State of Rhode Island’s Medicaid program for the years ended September 30, 2015 and 2014, respectively. Kent, WIH, and Memorial also recorded disproportionate share payments of $1,949,220 and $2,056,222 from Medicare during 2015 and 2014, respectively. Additional payments of $12,366,948 and 15,718,164 were received during 2015 and 2014, respectively, from Medicare as part of new provisions under the Accountable Care Act to offset hospital costs for uncompensated care.

14. Licensure Fees

The State of Rhode Island assesses hospitals an annual licensure fee calculated as a percentage of the hospital’s net patient revenue. The Care New England hospitals were assessed $43,534,709 and $41,052,257 for the years ended September 30, 2015 and 2014, respectively.

15. Restructuring Costs

During 2015, the System engaged Huron Healthcare, a nationally recognized healthcare performance improvement consulting firm. Huron began its assessment of the System’s issues in June 2015. Following a 90-day assessment of CNE strategy and clinical and financial operations, Huron identified restructuring opportunities in multiple areas. Specific recommendations and action plan support the achievement of these targeted benefits and are organized for implementation through functional teams.

Working in partnership with Huron, CNE has started, and will continue to, implement these improvements over the course of this next 12 to 18 months.

37 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

During fiscal year 2015, the System incurred $2.9 million in expenses relating to the System’s restructuring activities, all related to the costs associated with the retention of Huron Healthcare.

16. Concentration of Credit Risk

As of September 30, 2015 and 2014, Care New England, the Hospitals, the Agency, and the Center had cash and cash equivalents in excess of Federal Depository Insurance limits at major financial institutions. These financial institutions have a strong credit rating, and management believes that credit risks related to these deposits are minimal.

The Hospitals, the Agency, and the Center receive a significant portion of its payment for services rendered from a limited number of governmental and commercial third-party payors, including Medicare, Medicaid, and Blue Cross. The organization has not historically incurred any significant concentrated credit losses in the normal course of business.

In addition, the organizations routinely grant credit to patients without requiring collateral or other security. The mix of receivables, net of contractual allowances, from patients and third-party payors at September 30, 2015 and 2014, was as follows:

2015 2014

Medicare and Medicare Managed Care 19 % 17 % Medicaid and Medicaid Managed Care 22 18 Blue Cross 18 20 Managed care 16 15 Self-pay 14 19 Other third-party payors 11 11 100 % 100 %

The Health System provides an allowance for doubtful accounts to address the risks of nonpayment of accounts receivable.

17. Commitments and Contingencies

Operating Leases Care New England, the Hospitals, the Agency, and the Center have entered into operating lease agreements with several vendors for the lease of certain equipment and office space. Future minimum lease payments under noncancelable operating leases as of September 30, 2015 are:

2016 $ 9,337,901 2017 8,952,897 2018 8,365,215 2019 7,154,520 2020 6,295,875 Later years 48,518,053 Total minimum lease payments $ 88,624,461

Total rent expense for operating leases for the years ended September 30, 2015 and 2014 amounted to $6,988,541 and $8,064,246, respectively.

38 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Butler has entered into several agreements with various parties, mostly non-profit organizations, to lease space on the Butler campus. Rental income in the amount of $2,690,521 and $3,272,788 for the fiscal years ending September 30, 2015 and 2014, respectively, is included in other operating revenues in the consolidated statements of operations.

Litigation CNE, the Affiliates, the Agency and the Center have been individually named as codefendants in several complaints. It is the opinion of management that the liability, if any, to CNE, the Affiliates, the Agency, and the Center, in excess of insurance coverage will have no material adverse effect on the consolidated financial position of Care New England.

Collective Bargaining Agreements At September 30, 2015, approximately 41% of the Health System’s employees were covered by collective bargaining agreements. All bargaining agreements will be in effect through fiscal 2016.

18. Professional and General Liability Claims

Due to strategic and economic issues, as well as the potential for limited availability of commercial insurance policies, the Care New England entities have moved over time to covering the majority of their professional and general liability insurance to self-insured approaches. The adequacy of the coverage provided, reserves, and the funding levels are evaluated annually by independent actuaries who review the soundness of the programs and recommend future funding levels. Potential losses are estimated based on industry as well as entity experience, and a provision for these losses is recorded.

Butler annually contributes to its self-insurance trust fund to provide for risks relating to its existing actuarially calculated primary level of professional and general liabilities, as well as the tail liability related to prior claims-made coverage. Butler’s professional liability coverage for claims in excess of its primary coverage limits is provided by W&I Indemnity.

Kent Hospital established Toll Gate Indemnity in 2004, as an off-shore captive insurance entity to insure primary and excess hospital professional and general liability risks, as well as to supply indemnification coverage for certain eligible medical staff.

WIH established W&I Indemnity in 1994, as an off-shore captive insurance entity to provide coverage for claims in excess of its underlying policy, as well as to insure the contractual liability arising from indemnification agreements with certain eligible medical staff. In addition, WIH has a self-insurance trust fund for risks relating to prior tail liabilities. As of October 1, 2011, the primary coverage for professional and general liabilities was moved under the off-shore captive.

Effective July 1, 2004, professional liability insurance coverage for Memorial was provided on an occurrence basis. Such coverage was provided on a claims-made basis through June 30, 2004. The claims-made policies cover only claims made during the terms of the policies, and not those occurrences for which claims may be made after expiration of the policies. Memorial is self-insured with respect to incurred but not reported (IBNR) claims incurred prior to July 1, 2004. Memorial purchases annually commercial insurance policies to insure professional and general liability risks.

The provisions for anticipated losses were based upon expected undiscounted values. Trust fund and captive assets are available for the payment of claims.

The Agency purchases general and professional liability insurance from Toll Gate Indemnity.

39 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Center purchases, annually, commercial insurance policies to insure professional and general liability risks.

19. Other Self-Insurance Reserves

Care New England has established a workers’ compensation trust fund to cover all past and future self-insured claims of workers’ compensation activity for CNE, Butler, Kent, WIC, Memorial, and the Agency. The reserve for workers’ compensation losses is based on an actuarial study and actual experience. At September 30, 2015 and 2014, the amounts accrued for estimated self-insurance costs have not been discounted. The Center purchases a commercial insurance policy annually to insure workers’ compensation risks.

CNE, on behalf of itself, Butler, Kent, WIC, and the Agency, has entered into a self-insurance program for health insurance risks. This program covers the health insurance claims for all of CNE’s, Butler’s, Kent’s, WIC’s, and the Agency’s employees, with the exception of the unionized employees at WIH. The provisions for health insurance losses are based on actuarial assumptions and actual claims experience.

20. Affiliation With Rhode Island Hospital

In 1981, RIH and WIH approved an agreement providing for the affiliation of the two Hospitals. The affiliation agreement provides for a program of shared medical services, thereby greatly increasing the scope of comprehensive acute-care services available to WIH in maternal, gynecological, and neonatal care. In accordance with the agreement, the Hospital relocated to the property of RIH.

21. Affiliation With Accredited Medical Schools

Butler, WIH, and Memorial are affiliated with the Warren Alpert Medical School of Brown University. The affiliation agreements provide that Butler, Memorial and WIH are the Major Affiliated Teaching Hospitals of the Medical School for psychiatry and behavioral, primary care medicine, and activities unique to women and newborns, respectively. Kent is affiliated with the University of New England College of Osteopathic Medicine.

22. Functional Expenses

CNE provides healthcare services to residents within their geographic service areas. Expenses related to providing these services for the years ended September 30 are as follows:

2015 2014

Healthcare services $ 936,372,671 $ 834,168,320 General and administrative 203,352,570 225,336,570 $ 1,139,725,241 $ 1,059,504,890

40 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

23. Fair Value of Financial Instruments

The Health System values it financial assets and liabilities at fair value in accordance with GAAP. GAAP defines fair value, establishes a framework for measuring fair value, and delineates the disclosures required about fair value measurements. Financial assets consist primarily of the endowment, Board designated funds, trustee-held funds, and other investments. Additionally, GAAP allows the Health System the use of estimates to fair value alternative investments at the measurement date using net asset values (“NAV”) reported by the investment managers without further adjustment, provided that the Health System does not expect to sell the alternative investments at a value other than the NAV.

GAAP clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing as asset or liability. As a basis for considering assumptions, this standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 Valuations using quoted prices in active markets for identical assets or liabilities. Valuations of these products do not require a significant degree of judgment.

Level 2 Valuations using observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; broker or dealer quotations; or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.

Level 3 Valuations using unobservable inputs that are supported by little or no market activity that are significant to the fair value of the assets or liabilities.

The Health System’s ownership in alternative investments is limited partnership interests, private equity funds, commingled funds, and hedge funds. The value of certain alternative investments represents the ownership interest in the NAV of the respective fund. The NAV of the securities held that do not have readily determinable fair values are determined by the investment manager or general partner and are based on appraisals or other estimates that require varying degrees of judgment. If no public market exists for the investment securities, the fair value is determined by the investment manager or general partner taking into consideration, among other things, the cost of the securities, prices of recent significant placements of securities of the same issuer, and subsequent developments concerning the companies to which the securities related. The Health System has performed due diligence around these investments to ensure NAV is an appropriate measure of fair value as of September 30.

41 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Financial instruments carried at fair value for the System’s nonpension plan assets as of September 30, 2015 are classified in the table below in one of the three categories described above:

2015 Level 1 Level 2 Level 3

Assets Cash and cash equivalents $ 42,190,026 $242,189,780 $-46$ Fixed income securities 8,363,498 4,474,568 3,888,930 - Equity securities 35,073,871 35,073,871 - - Mutual funds 89,710,371 89,647,204 63,167 - Assets held under split-interest agreements 17,679,265 - - 17,679,265 Subtotal $ 193,017,031 $ 171,385,423 $ 3,952,343 $ 17,679,265 Alternative investments at NAV (a) 141,327,768 Total assets $ 334,344,799

Financial instruments carried at fair value for the System’s nonpension plan assets as of September 30, 2014 are classified in the table below in one of the three categories described above:

2014 Level 1 Level 2 Level 3

Assets Cash and cash equivalents $ 60,711,202 $860,711,115 $-7$ Fixed income securities 52,595,450 30,908,714 21,686,736 - Equity securities 57,705,216 57,705,216 - - Mutual funds 80,702,986 21,003,509 59,699,477 - Assets held under split-interest agreements 19,165,203 31,848 - 19,133,355 Subtotal $ 270,880,057 $ 170,360,402 $ 81,386,300 $ 19,133,355 Alternative investments at NAV (a) 94,235,702 Total assets $ 365,115,759

(a) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Excluded from the fair value hierarchy are $141,327,768 of alternative investments at September 30, 2015 and $94,235,702 of alternative investments at September 30, 2014 for which fair value is measured at NAV per share using the practical expedient.

The amounts reported in the financial instruments table exclude the values of life insurance policies valued at $29,470,657 as of September 30, 2015 and $29,674,392 as of September 30, 2014, which are valued at the lesser of discounted value or cash surrender value.

All financial instruments are valued using a market approach involving identical or comparable assets.

42 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Financial instruments carried at fair value for assets invested in the CNE Defined Benefit Pension Plan as of September 30, 2015 are classified in the table below in one of the three categories described above:

2015 Level 1 Level 2 Level 3

Assets Cash and cash equivalents $ 2,050,351 $-2,050,351 $-$ Fixed income securities - - - - Equity securities 17,774,545 17,774,545 -- Mutual funds 30,554,870 30,554,870 -- Subtotal $ 50,379,766 $-50,379,766 $-$ Alternative investments at NAV (b) 131,591,067 Total assets $ 181,970,833

Financial instruments carried at fair value for assets invested in the CNE Defined Benefit Pension Plan as of September 30, 2014 are classified in the table below in one of the three categories described above:

2014 Level 1 Level 2 Level 3

Assets Cash and cash equivalents $ 2,409,741 $-2,409,741 $-$ Fixed income securities 10,762,222 10,762,222 - - Equity securities 16,590,343 16,590,343 -- Mutual funds 29,793,735 29,793,735 - - $559,556,041 $-9,556,041$-$ Alternative investments at NAV (b) 141,631,861 $ 201,187,902

(b) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented in Note 10 Retirement Plans.

Excluded from the fair value hierarchy are $131,591,067 of alternative investments at September 30, 2015 and $141,631,861 of alternative investments at September 30, 2014 for which fair value is measured at NAV per share using the practical expedient.

All financial instruments are valued using a market approach involving identical or comparable assets.

43 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Financial instruments carried at fair value for assets invested in Memorial’s Defined Benefit Pension Plan as of September 30, 2015 are classified in the table below in one of the three categories described above:

2015 Level 1 Level 2 Level 3

Assets Cash and cash equivalents$ 837,414 $-837,414 $-$ Fixed income securities - - - - Equity securities 17,026,483 16,898,899 - 127,584 Mutual funds 10,993,199 10,993,199 -- Guaranteed annuity contracts 63,025,311 - - 63,025,311 $ 91,882,407 $-28,729,512 $ $ 63,152,895

Financial instruments carried at fair value for assets invested in Memorial’s Defined Benefit Pension Plan as of September 30, 2014 are classified in the table below in one of the three categories described above:

2014 Level 1 Level 2 Level 3

Assets Cash and cash equivalents$ 2,017,166 $-2,017,166 $-$ Fixed income securities 8,891,012 8,891,012 - - Equity securities 16,593,683 16,593,683 -- Mutual funds 6,720,241 6,720,241 -- Guaranteed annuity contracts 65,361,154 - - 65,361,154 $ 99,583,256 $-34,222,102 $ $ 65,361,154

All financial instruments are valued using a market approach involving identical or comparable assets.

During the years ended September 30, 2015 and 2014, respectively, the changes in the fair value for the System’s financial instruments in the nonpension plan assets measured using significant unobservable inputs (Level 3) were comprised of the following:

2015 2014

Fair value at October 1 $ 19,133,355 $ 18,823,609 Total gains (losses) Dividends and interest income 118,620 - Net realized gains on investments 143,370 309,746 Change in net unrealized appreciation on investments (1,193,795) - Transfers in and/or out of Level 3 (522,285) - Fair value at September 30 $ 17,679,265 $ 19,133,355

44 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

The Health System uses NAV to determine the fair value of its investments which do not have a readily determinable fair market value. The following table summarizes the key provisions for the Health System’s nonpension plan investments as of September 30, 2015, which are valued at NAV. There was an outstanding unfunded commitment of $10,709,793 at September 30, 2015.

Net Asset Value Redemption Terms

Comingled Funds US Debt $ 32,247,936 Daily upon 1 day prior written notice Comingled Funds US Debt 15,631,931 Monthly upon 5 day prior written notice Comingled Funds US Equity 22,671,446 Daily Comingled Funds US Equity 9,703,329 Weekly upon 5 day prior written notice Comingled Funds US Equity 12,291,148 Daily upon 1 day prior written notice Commingled Funds Emerging Markets Equity 4,215,266 Daily upon 5 day prior written notice Commingled Funds Emerging Markets Equity 2,314,377 Monthly upon 7 day prior written notice Commingled Funds Emerging Markets Equity 1,261,320 Daily upon 5 day prior written notice No redemptions available, fund has a 12 year Distressed Debt Limited Partnership 760,049 term with a three year extension Fixed Income - LP 6,611,365 Bi-monthly upon 30 day prior written notice Hedge Fund 10,806,897 Monthly upon 8 day prior written notice Hedge Fund 6,711,958 Quarterly with 90 day prior written notice Venture Capital Limited Partnership 10,253,796 Daily upon 5 day prior written notice Venture Capital Limited Partnership 2,193,343 Monthly upon 15 day prior written notice No redemptions available, fund has a 6 year Venture Capital Limited Partnership 2,155,993 term with a one year extension No redemptions available, fund has a 10 year Venture Capital Limited Partnership 642,682 term with 4 one year extensions No redemptions available, fund has a 10 year Venture Capital Limited Partnership 579,709 term with 2 one year extensions No redemptions available, fund has a 10 year Venture Capital Limited Partnership 275,223 term with 3 one year extensions $ 141,327,768

The following methods and assumptions were used in estimating the fair value of financial instruments other than investments:

Accounts Payable and Accrued Expenses The carrying amount reported in the consolidated balance sheets for accounts payable and accrued expenses approximates its fair value.

Estimated Third-Party Payor Settlements The carrying amount reported in the consolidated balance sheets for estimated third-party payor settlements approximates its fair value.

45 Care New England Health System and Affiliates Notes to Consolidated Financial Statements September 30, 2015 and 2014

Long-Term Debt The Health System’s long-term debt obligations are reported in the accompanying statements of financial position at principal value less unamortized discount or premium, which totaled approximately $157.6 million at September 30, 2015, excluding capital leases. The estimated fair value of the Health System’s long-term debt as of September 30, 2015 approximated $162.7 million. It is classified as Level 2 under the valuation hierarchy described in the beginning of Note 22.

24. Subsequent Event

In November 2015, Care New England Health System and Southcoast Health System, Inc. (“Southcoast”) signed a letter of intent to engage in exclusive discussions and to work toward the goal of forming a new non-profit parent organization that would oversee both systems. Southcoast is a provider of health care services in southeastern Massachusetts. It includes four hospitals (Charlton Memorial Hospital in Fall River, MA, St. Luke’s Hospital in New Bedford, MA, Tobey Hospital in Wareham, MA and Southcoast Behavioral Health in Dartmouth, MA), 50 ambulatory sites, over 600 physicians and advanced care clinicians, and the Southcoast Health ACO.

Care New England and its affiliated hospitals are committed to demonstrating, in all of its activities, the reliability, honesty, trustworthiness, and high degree of integrity expected of a leading healthcare organization and participant in federal health care programs. Care New England maintains an active and effective corporate compliance program designed to prevent problems from occurring, and to identify and resolve problems that do occur (the “Compliance Program”). Substantive areas of emphasis under the Compliance Program include the federal Physician Self-Referral Law, 42 U.S.C. § 1395nn and the regulations promulgated thereunder at 42 C.F.R. §411.350et seq. (collectively known as the “Stark Law”). Consistent with the goals of the Compliance Program, Care New England recently conducted an audit of its compensation arrangements with physicians at Butler Hospital, Kent Hospital and Women and Infants Hospital. As a result of this audit, each of Butler Hospital, Kent Hospital and Women and Infants Hospital will make a voluntary disclosure of certain technical Stark Law violations to the Centers for Medicare and Medicaid Services via the Self-Referral Disclosure Protocol by December 31, 2015. Care New England does not anticipate that the settlement amounts related to such disclosures will materially impact its operations.

Care New England Health System has assessed the impact of subsequent events through January 22, 2016, the date the audited financial statements were issued and has concluded that there were no such events other than noted above requiring adjustments to the audited financial statements or disclosure in the notes to the audited financial statements.

46 Supplementary Consolidating Financial Statements Care New England Health System and Affiliates Consolidating Balance Sheet September 30, 2015

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and The and Affiliates and Affiliates and Affiliates England Agency Affiliates Integra Center Eliminations Total

Assets Current assets Cash and cash equivalents $ 8,098,326 $ 18,004,986 $ 90,313,057 $ (15,028,462) $ (7,858,324) $ (46,651,151) $ (121,924) $-2,047,297 $ $ 48,803,805 Investments - 1,621,564 - 25,542,127 - - - 27,163,691 Patient accounts receivable 9,683,721 51,886,900 76,243,383 76,282 6,007,180 32,054,347 - 6,126,219 - 182,078,032 Less: Allowance for doubtful accounts (3,224,425) (15,741,533) (12,647,128) - (311,092) (8,963,723) - (1,368,092) - (42,255,993) Net patient accounts receivable 6,459,296 36,145,367 63,596,255 76,282 5,696,088 23,090,624 - 4,758,127 - 139,822,039 Other receivables 4,245,065 2,857,146 11,616,152 300,717 257,616 1,871,152 - 832,158 (575,018) 21,404,988 Pledges receivable, net 135,067 656,701 230,627 ------1,022,395 Other current assets 584,993 5,189,448 5,677,515 2,437,273 50,643 2,190,025 - 633,754 - 16,763,651 Current portion of assets whose use is limited - 194,499 2,842 249,486 - - - - - 446,827 Due from affiliates–other 173,093 813,246 164,507 259,151 - - - - (1,409,997) - Due from affiliates–debt - - - 119,431,068 - - - - (119,431,068) - Total current assets 19,695,840 65,482,957 171,600,955 133,267,642 (1,853,977) (19,499,350) (121,924) 8,271,336 (121,416,083) 255,427,396 Assets whose use is limited or restricted as to use Endowment funds 15,968,996 15,490,950 8,263,487 - - 10,960,725 - 135,291 - 50,819,449 Board-designated funds 5,498,595 21,778,283 88,040,307 - 696,477 4,437,222 - - - 120,450,884 Trustee-held funds 2,814,511 30,790,997 113,451,348 15,617,033 - 36,421 - 759,100 - 163,469,410 Deferred compensation funds 226,719 369,239 540,423 611,434 - - - 164,207 - 1,912,022 Total assets limited as to use 24,508,821 68,429,469 210,295,565 16,228,467 696,477 15,434,368 - 1,058,598 - 336,651,765 Less: Amounts required to meet current obligations - (194,499) (2,842) (249,486) - - - - - (446,827) Noncurrent assets limited as to use 24,508,821 68,234,970 210,292,723 15,978,981 696,477 15,434,368 - 1,058,598 - 336,204,938 Goodwill - - - - - 24,345,364 - 143,611 - 24,488,975 Intangibles - - - - - 5,400,000 - 1,082,500 - 6,482,500 Property, plant and equipment, net 29,717,391 69,810,907 138,899,561 31,622,090 467,132 27,050,897 - 16,300,515 - 313,868,493 Pledges receivable, net 250,787 420,471 77,849 - - - - 181,007 - 930,114 Insurance receivable - - - 1,049,250 - 594,538 - - - 1,643,788 Other assets 47,651 697,306 52,978 5,707,018 - - - 180,911 - 6,685,864 Total assets $ 74,220,490 $ 204,646,611 $ 520,924,066 $ 187,624,981 $ (690,368) $ 53,325,817 $ (121,924) $ 27,218,478 $ (121,416,083) $ 945,732,068

The accompanying notes are an integral part of these financial statements.

47 Care New England Health System and Affiliates Consolidating Balance Sheet September 30, 2015

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and The and Affiliates and Affiliates and Affiliates England Agency Affiliates Integra Center Eliminations Total

Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 10,482,098 $ 35,870,109 $ 43,885,775 $ 29,957,913 $ 2,612,911 $215,006,151 $ 36,627$ 3,746,214 $ (584,913) $ 141,212,885 Current portion of estimated third-party payor settlements andadvances 598,072------598,072 Current portion of long-term debt and capital leases 150,909 - - 8,507,425 - - - 973,532 - 9,631,866 Current portion of long-term debt, due to parent 1,233,503 2,385,639 2,566,872 - 560 616,456 - - (6,803,030) - Self-insurancereserves ---8,689,509- ----8,689,509 Pension liability 1,664,548 6,513,053 3,601,017 2,844,814 137,879 1,329,227 - - - 16,090,538 Other current liabilities 2,969,106 2,209,473 4,925,359 249,486 621,745 1,587,575 150,000 403,860 - 13,116,604 Due to affiliates - - - - 547,422 135,820 716,860 - (1,400,102) - Total current liabilities 17,098,236 46,978,274 54,979,023 50,249,147 3,920,517 18,675,229 1,103,487 5,123,606 (8,788,045) 189,339,474 Long term liabilities Self-insurance reserves 2,345,060 33,117,220 93,832,831 8,968,999 - 667,860 - - - 138,931,970 Long-term portion of estimated third-party payor settlements and advances 2,317,638 4,458,350 16,855,380 - 243,802 6,253,108 - - - 30,128,278 Long-term debt and capital leases 3,226,563 - - 146,897,349 - - - 4,623,622 - 154,747,534 Pension liability 10,096,632 21,579,974 11,131,294 6,019,991 3,590,301 63,523,566 - - - 115,941,758 Postretirementliability -1,447,283------1,447,283 Other liabilities 1,059,236 1,042,500 556,140 423,386 - 47,863 - - - 3,129,125 Due to parent, long-term debt 14,502,504 27,590,989 59,262,137 - 8,846 11,263,562 - - (112,628,038) - Total long-term liabilities 33,547,633 89,236,316 181,637,782 162,309,725 3,842,949 81,755,959 - 4,623,622 (112,628,038) 444,325,948 Net assets Unrestricted 3,354,911 49,923,737 268,738,862 (24,933,891) (8,453,834) (59,830,565) (1,225,411) 13,576,449 - 241,150,258 Temporarily restricted 17,084,638 6,149,782 11,318,907 - - 2,536,121 - 3,794,801 - 40,884,249 Permanently restricted 3,135,072 12,358,502 4,249,492 - - 10,189,073 - 100,000 - 30,032,139 Total net assets 23,574,621 68,432,021 284,307,261 (24,933,891) (8,453,834) (47,105,371) (1,225,411) 17,471,250 - 312,066,646 Total liabilities and net assets $ 74,220,490 $ 204,646,611 $ 520,924,066 $ 187,624,981 $ (690,368) $ 53,325,817 $ (121,924) $ 27,218,478 $ (121,416,083) $ 945,732,068

The accompanying notes are an integral part of these financial statements.

48 Care New England Health System and Affiliates Consolidating Statement of Operations Year Ended September 30, 2015

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and The and Affiliates and Affiliates and Affiliates England Agency Affiliates Integra Center Eliminations Total

Revenues and gains Patient service revenue (net of contractual allowances and discounts)$ 76,752,480 $ 346,697,713 $1437,673,643 $ 58,762$ 23,119,797 $-146,730,167 $ $ 31,933,427 $ (1,273,169) $ 1,061,792,820 Provision for bad debts (2,360,585) (15,689,378) (8,111,427) - (603,970) (11,915,283) - - - (38,680,643) Net patient service revenue less provision for bad debts 74,391,895 331,008,335 429,562,216 158,762 22,515,827 134,814,884 - 31,933,427 (1,273,169) 1,023,112,177 Net assets released from restrictions and used for operations 560,312 427,727 975,863 - 66,662 289,688 - 269,553 - 2,589,805 Research revenue 11,438,074 94,491 10,021,374 - - 1,828,097 - - - 23,382,036 Contribution revenue from acquisition ------13,439,012 - 13,439,012 Other revenue 19,418,455 16,183,864 54,565,740 126,718,669 652,778 3,148,186 436,066 2,648,159 (148,355,454) 75,416,463 Total revenues and gains 105,808,736 347,714,417 495,125,193 126,877,431 23,235,267 140,080,855 436,066 48,290,151 (149,628,623) 1,137,939,493 Operating expenses Salaries and benefits 71,842,098 178,854,018 255,006,218 74,387,375 18,402,217 88,496,500 923,630 27,578,189 (363,190) 715,127,055 Supplies and other expenses 21,080,558 126,025,120 162,665,586 48,055,187 4,891,580 63,882,124 698,327 6,396,060 (149,144,038) 284,550,504 Research expenses 11,567,179 92,096 9,975,999 - - 1,847,605 - - - 23,482,879 Depreciation and amortization 4,103,616 9,365,128 13,847,895 3,227,297 136,244 5,077,797 - 823,350 - 36,581,327 Insurance 2,448,271 6,682,986 14,906,996 268,558 238,382 1,835,977 39,520 399,185 (121,395) 26,698,480 Licensure fee - 15,973,092 21,552,806 - - 6,008,811 - - - 43,534,709 Interest 801,733 1,408,313 2,281,430 1,559,475 527 572,430 - 214,808 - 6,838,716 Restructuring costs 2,911,571 2,911,571 Total operating expenses 111,843,455 338,400,753 480,236,930 130,409,463 23,668,950 167,721,244 1,661,477 35,411,592 (149,628,623) 1,139,725,241 Income (loss) from operations (6,034,719) 9,313,664 14,888,263 (3,532,032) (433,683) (27,640,389) (1,225,411) 12,878,559 - (1,785,748) Nonoperating gains (losses) Investment income on assets limited as to use 1,048,117 1,116,142 4,348,324 267,015 (1,547) 285,229 - 14,301 - 7,077,581 Unrestricted gifts and bequests 32,267 - 392,411 - 55,923 376,067 - 176,815 - 1,033,483 Change in net unrealized gains (losses) on investments (934,531) (5,799,103) (24,268,258) 112,632 (88,599) (1,309,589) - - - (32,287,448) Nonoperating expenditures - - - (1,835,748) 5,094 - - (42,525) (1,873,179) Net nonoperating gains (losses) 145,853 (4,682,961) (19,527,523) (1,456,101) (29,129) (648,293) - 148,591 - (26,049,563) Excess (deficiency) of revenues and gains over expenses and losses $ (5,888,866) $ 4,630,703 $ (4,639,260) $ (4,988,133) $ (462,812) $ (28,288,682) $ (1,225,411) $-13,027,150 $ $ (27,835,311)

The accompanying notes are an integral part of these financial statements.

49 Care New England Health System and Affiliates Consolidating Statement of Changes in Net Assets Year Ended September 30, 2015

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and The and Affiliates and Affiliates and Affiliates England Agency Affiliates Integra Center Eliminations Total

Unrestricted net assets Excess (deficiency) of revenues and gains over expenses and losses $ (5,888,866) $ 4,630,703 $ (4,639,260) $ (4,988,133) $ (462,812) $ (28,288,682) $ (1,225,411) $-13,027,150 $ $ (27,835,311) Pension and postretirement adjustment (4,600,072) (11,201,158) (5,608,284) (3,246,565) (1,424,393) (14,887,618) - - - (40,968,090) Net assets released from restrictions used for purchase of property, plant and equipment - 586,343 258,176 - - - - 49,299 - 893,818 Transfer from deferred revenue - - 302,009 ------302,009 Transfer (to) from temporarily restricted net assets 71,181 - (377,751) - - (475,000) - - - (781,570) Transfers - - - (500,000) - - - 500,000 - - (Decrease) increase in unrestricted net assets (10,417,757) (5,984,112) (10,065,110) (8,734,698) (1,887,205) (43,651,300) (1,225,411) 13,576,449 - (68,389,144) Temporarily restricted net assets Contributions 650,971 731,762 2,790,052 - - 219,231 - 312,231 4,704,247 Contribution of temporarily restricted net assets from acquisition ------3,795,867 - 3,795,867 Income from investments 275,445 77,987 142,378 - - 31,647 - 3,139 - 530,596 Net realized and unrealized gains (losses) from investments (1,212,832) (350,466) (656,810) - - 304,559 - 2,416 - (1,913,133) Net assets released from restrictions (968,312) (500,950) (1,234,039) - - (289,688) - (318,852) - (3,311,841) Transfer to deferred revenue - - (662,715) ------(662,715) Transfer (to) from unrestricted net assets (71,181) - 377,751 - - 475,000 - - - 781,570 Transfer to permanently restricted net assets (695,687) (200,939) ------(896,626) (Decrease) increase in temporarily restricted net assets (2,021,596) (242,606) 756,617 - - 740,749 - 3,794,801 - 3,027,965 Permanently restricted net assets Contribution of permanently restricted net assets from acquisition ------100,000 - 100,000 Net realized and unrealized gains (losses) from investments - (988,719) - - - (465,373) - - - (1,454,092) Contributions - 33,832 ------33,832 Transfer from temporarily restricted net assets 695,687 200,939 ------896,626 Increase (decrease) in permanently restricted net assets 695,687 (753,948) - - - (465,373) - 100,000 - (423,634) (Decrease) increase in net assets (11,743,666) (6,980,666) (9,308,493) (8,734,698) (1,887,205) (43,375,924) (1,225,411) 17,471,250 - (65,784,813) Net assets at beginning of year 35,318,287 75,412,687 293,615,754 (16,199,193) (6,566,629) (3,729,447) - - - 377,851,459 Net assets at end of year $ 23,574,621 $ 68,432,021 $ 284,307,261 $ (24,933,891) $ (8,453,834) $ (47,105,371) $ (1,225,411) $-17,471,250 $ $ 312,066,646

The accompanying notes are an integral part of these financial statements.

50 Care New England Health System and Affiliates Consolidating Balance Sheet September 30, 2014

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and and Affiliates and Affiliates and Affiliates England Agency Affiliates Eliminations Total

Assets Current assets Cash and cash equivalents $ 12,937,966 $ 14,000,020 $ 77,100,621 $ (28,819,218) $ (6,237,020) $-(16,592,814) $ $ 52,389,555 Investments - - - 25,219,578 - - - 25,219,578 Patient accounts receivable 10,898,287 49,864,861 66,851,616 - 5,396,806 28,069,145 - 161,080,715 Less: Allowance for doubtful accounts (2,879,390) (13,949,085) (11,945,641) - (162,372) (7,035,296) - (35,971,784) Net patient accounts receivable 8,018,897 35,915,776 54,905,975 - 5,234,434 21,033,849 - 125,108,931 Other receivables 2,475,974 2,873,331 6,985,114 54,396 233,162 2,644,856 (113,711) 15,153,122 Pledges receivable, net 301,139 733,299 291,287 - - - - 1,325,725 Other current assets 852,627 5,407,436 6,736,297 2,849,185 79,915 3,929,740 - 19,855,200 Current portion of assets whose use is limited 203,713 507,939 667,262 620,807 - 355,328 - 2,355,049 Due from affiliates–other 3,307,650 1,655,525 15,773,390 17,907,946 6,186 35 (38,650,732) - Due from affiliates–debt - - - 115,086,663 - - (115,086,663) - Total current assets 28,097,966 61,093,326 162,459,946 132,919,357 (683,323) 11,370,994 (153,851,106) 241,407,160 Assets whose use is limited or restricted as to use Endowment funds 17,942,013 16,807,015 9,119,930 - - 10,654,452 - 54,523,410 Board-designated funds 5,517,861 25,612,900 89,341,885 - 739,577 12,486,562 - 133,698,785 Trustee-held funds 2,860,107 27,840,848 117,904,990 30,163,691 - 41,718 - 178,811,354 Deferred compensation funds 357,759 655,541 556,862 872,196 94,665 - - 2,537,023 Total assets limited as to use 26,677,740 70,916,304 216,923,667 31,035,887 834,242 23,182,732 - 369,570,572 Less: Amounts required to meet current obligations (203,713) (507,939) (667,262) (620,807) - (355,328) - (2,355,049) Noncurrent assets limited as to use 26,474,027 70,408,365 216,256,405 30,415,080 834,242 22,827,404 - 367,215,523 Goodwill - - - - - 24,345,364 - 24,345,364 Intangibles - - - - - 5,400,000 - 5,400,000 Property, plant and equipment, net 32,542,442 74,720,164 148,891,143 25,633,243 674,787 29,524,730 - 311,986,509 Pledges receivable, net 254,895 905,376 115,527 - - - - 1,275,798 Insurance receivable - - - 752,354 - 1,078,846 - 1,831,200 Other assets 51,443 1,067,523 84,143 4,364,383 - - - 5,567,492 Total assets $ 87,420,773 $ 208,194,754 $ 527,807,164 $ 194,084,417 $ 825,706 $ 94,547,338 $ (153,851,106) $ 959,029,046

The accompanying notes are an integral part of these financial statements.

51 Care New England Health System and Affiliates Consolidating Balance Sheet September 30, 2014

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and and Affiliates and Affiliates and Affiliates England Agency Affiliates Eliminations Total

Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 9,879,543 $ 29,993,502 $ 38,105,564 $ 22,315,342 $ 2,463,215 $ 16,814,254 $ (113,711) $ 119,457,709 Current portion of estimated third-party payor settlements and advances 742,545 (133,476) 4,388,711 - 243,802 957,296 - 6,198,878 Current portion of long-term debt and capital leases 141,271 481,323 2,031,251 4,600,550 - - - 7,254,395 Current portion of long-term debt, due to parent 693,436 1,377,987 1,139,020 - - 220,844 (3,431,287) - Self-insurance reserves - - - 7,802,674 - - - 7,802,674 Pension liability 1,715,000 5,858,714 2,970,866 2,677,755 158,208 - 13,380,543 Other current liabilities 1,873,598 2,512,020 5,209,562 620,807 612,751 - - 10,828,738 Due to affiliates 7,513,241 10,494,089 4,386,209 5,902,305 1,584,700 8,770,188 (38,650,732) - Total current liabilities 22,558,634 50,584,159 58,231,183 43,919,433 5,062,676 26,762,582 (42,195,730) 164,922,937 Long term liabilities Self-insurance reserves 2,411,409 33,070,436 91,964,864 8,026,562 - 2,002,290 - 137,475,561 Long-term portion of estimated third-party payor settlements and advances 2,384,292 5,766,063 17,359,764 - - 7,065,713 - 32,575,832 Long-term debt and capital leases 3,386,936 - - 154,369,705 - - - 157,756,641 Pension liability 5,646,968 12,442,464 6,621,681 3,326,630 2,221,403 53,148,472 - 83,407,618 Postretirement liability - 1,462,614 - - - - - 1,462,614 Other liabilities 1,029,588 1,235,324 718,853 641,280 108,256 (156,917) - 3,576,384 Due to parent, long-term debt 14,684,658 28,221,007 59,295,065 - - 9,454,646 (111,655,376) - Total long-term liabilities 29,543,851 82,197,908 175,960,227 166,364,177 2,329,659 71,514,204 (111,655,376) 416,254,650 Net assets Unrestricted 13,772,668 55,907,849 278,803,972 (16,199,193) (6,566,629) (16,179,265) - 309,539,402 Temporarily restricted 19,106,234 6,392,388 10,562,290 - - 1,795,372 - 37,856,284 Permanently restricted 2,439,385 13,112,450 4,249,492 - - 10,654,446 - 30,455,773 Total net assets 35,318,287 75,412,687 293,615,754 (16,199,193) (6,566,629) (3,729,447) - 377,851,459 Total liabilities and net assets $ 87,420,772 $ 208,194,754 $ 527,807,164 $8194,084,417 $ 25,706$ 94,547,339 $ (153,851,106) $ 959,029,046

The accompanying notes are an integral part of these financial statements.

52 Care New England Health System and Affiliates Consolidating Statement of Operations Year Ended September 30, 2014

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and and Affiliates and Affiliates and Affiliates England Agency Affiliates Eliminations Total

Revenues and gains Patient service revenue (net of contractual allowances and discounts)$ 77,293,666 $ 323,606,104 $ 447,301,338 $ 491,430 $ 20,070,564 $ 155,356,301 $ (1,043,410) $ 1,023,075,993 Provision for bad debts (3,330,269) (14,148,112) (9,056,936) - (152,854) (13,380,796) - (40,068,967) Net patient service revenue less provision for bad debts 73,963,397 309,457,992 438,244,402 491,430 19,917,710 141,975,505 (1,043,410) 983,007,026 Net assets released from restrictions and used for operations 537,469 706,879 1,676,717 - - 205,216 - 3,126,281 Research revenue 11,652,522 - 10,917,279 - - 3,367,017 - 25,936,818 Other revenue 17,951,840 10,058,705 38,013,364 114,829,793 926,244 4,012,139 (129,851,516) 55,940,569 Total revenues and gains 104,105,228 320,223,576 488,851,762 115,321,223 20,843,954 149,559,877 (130,894,926) 1,068,010,694 Operating expenses Salaries and benefits 69,724,362 175,817,207 254,857,990 69,754,544 17,118,695 92,950,410 (4,750,104) 675,473,104 Supplies and other expenses 19,130,276 104,535,650 156,766,725 43,782,561 3,808,894 47,600,145 (126,031,111) 249,593,140 Research expenses 11,336,422 - 10,443,213 - - 3,367,017 - 25,146,652 Depreciation and amortization 3,761,280 9,944,176 14,952,321 843,687 175,465 4,818,614 - 34,495,543 Insurance 2,596,898 10,935,191 10,263,328 212,502 141,617 2,670,994 (113,711) 26,706,819 Licensure fee - 14,583,914 19,483,539 - - 6,984,804 - 41,052,257 Interest 729,422 1,215,363 1,920,156 2,070,102 1,390 591,355 - 6,527,788 Loss on debt refinancing 12,169 33,405 202,082 237,914 - 24,017 - 509,587 Total operating expenses 107,290,829 317,064,906 468,889,354 116,901,310 21,246,061 159,007,356 (130,894,926) 1,059,504,890 Income (loss) from operations (3,185,601) 3,158,670 19,962,408 (1,580,087) (402,107) (9,447,479) - 8,505,804 Nonoperating gains (losses) Investment income on assets limited as to use 842,690 398,231 1,342,035 (181,885) 17,456 404,463 - 2,822,990 Unrestricted gifts and bequests 28,718 1,214 311,157 - 43,860 660,044 - 1,044,993 Change in net unrealized gains on investments 186,267 792,150 96,630 36,551 30,088 91,265 - 1,232,951 Nonoperating expenditures - (2,089) - (2,459,280) (5,094) - - (2,466,463) Net nonoperating gains (losses) 1,057,675 1,189,506 1,749,822 (2,604,614) 86,310 1,155,772 - 2,634,471 Excess (deficiency) of revenues and gains over expenses and losses $ (2,127,926) $ 4,348,176 $ 21,712,230 $ (4,184,701) $ (315,797) $-(8,291,707) $ $ 11,140,275

The accompanying notes are an integral part of these financial statements.

53 Care New England Health System and Affiliates Consolidating Statement of Changes in Net Assets Year Ended September 30, 2014

Southeastern Healthcare Butler Kent WIC Care New The System, Inc. and and Affiliates and Affiliates and Affiliates England Agency Affiliates Eliminations Total

Unrestricted net assets Excess (deficiency) of revenues and gains over expenses and losses $ (2,127,926) $ 4,348,176 $ 21,712,230 $ (4,184,701) $ (315,797) $-(8,291,707) $ $ 11,140,275 Pension and postretirement adjustment (2,929,993) (5,741,845) (3,273,822) (1,562,102) (581,376) (13,245,450) - (27,334,588) Net assets released from restrictions used for purchase of property, plant and equipment 206,110 4,674,933 5,413,664 - - - - 10,294,707 Transfers - - 47,728 11,509 - (11,509) - 47,728 Increase (decrease) in unrestricted net assets (4,851,809) 3,281,264 23,899,800 (5,735,294) (897,173) (21,548,666) - (5,851,878) Temporarily restricted net assets Contributions 1,261,150 782,922 5,623,394 - - 68,314 - 7,735,780 Income from investments (197,103) 742,650 98,993 - - 25,217 - 669,757 Net realized and unrealized gains from investments 907,971 413,504 490,798 - - - - 1,812,273 Net assets released from restrictions (743,579) (5,381,812) (7,090,381) - - (205,216) - (13,420,988) Transfer to unrestricted net assets - - (47,728) - - - - (47,728) Increase in temporarily restricted net assets 1,228,439 (3,442,736) (924,924) - - (111,685) - (3,250,906) Permanently restricted net assets Net realized and unrealized gains from investments - 39,889 - - - 269,858 - 309,747 Contributions 773 14,275 - - - - - 15,048 Increase in permanently restricted net assets 773 54,164 - - - 269,858 - 324,795 (Decrease) increase in net assets (3,622,597) (107,308) 22,974,876 (5,735,294) (897,173) (21,390,493) - (8,777,989) Net assets at beginning of year 38,940,884 75,519,995 270,640,878 (10,463,899) (5,669,456) 17,661,046 - 386,629,448 Net assets at end of year $ 35,318,287 $ 75,412,687 $ 293,615,754 $ (16,199,193) $ (6,566,629) $-(3,729,447) $ $ 377,851,459

The accompanying notes are an integral part of these financial statements.

54 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B-2

Consolidated Financial Statements and Supplementary Financial Information of The Providence Center for the Years Ended June 30, 2015 and 2014 [THIS PAGE INTENTIONALLY LEFT BLANK] THE PROVIDENCE CENTER, INC. AND AFFILIATES

Consolidating Financial Statements and Supplementary Information

Year Ended June 30, 2015

(With Independent Auditors' Report Thereon) KahnKahn,, Litwin,Litwin, Renza & Co.Co.,, Ltd. Boston·Boston • NewportNewport· • ProvidenceProvidence. • WalthamWaJtham KIR 951 No1 th Main Street, Providence, Rhode lsland 02904 Phone: 401-274-2001 • Fax: 401-8}1-401R Email: ']'rustcdAdvisors01KahnLitwin.com • www.KahnLitwin.com CrrrijirdCertified Public AccountantsAccountlllW andlind BUJin(!!Business Crmsu/rIl1JtJConsultants

THE PROVIDENCE CENTER, INC. AND AFFILIATES

CONSOLIDATING FINANCIAL STATEMENTS AND SUPPLEMENTARYSUPPLEMENTARV INFORMATION

Year Ended June 30, 2015

INDEPENDENT AUDITORS' REPORT 1

FINAFINANCIALNCIAL STATEMENTS: Consolidating Statement of Financial Position 4 (With Comparative Totals at June 30, 2014) Consolidating Statement of ActivitiesActivities 5 (With Comparative TotalsTotals for the Year Ended June 30, 2014) Consolidating Statement of Cash Flows 6 (With Comparative Totals for the Year Ended June 30, 2014) Notes to the Consolidating Financial Statements 7

SUPPLEMENTARY INFORMATION: Consolidated Statement of Functional Expenses 29 (With Comparative Totals for the Year Ended June 30, 2014)

REPORTS REQUIRED BY GOVERNMENT AUDITINGA UDITING STANDARDS AND OMB CIRCULAR AA·I33 -133 -AUDITS- AUDITS OF STATES, LOCAL GOVERNMENTS AND NON-PROFITNON-PROFIT ORGANIZATIONS: Consolidated Schedule of Expenditures of FederalFederal Awards 30 Notes to the Consolidated ScheduSchedulele ofofExpenditures Expenditures of Federal Awards 32 Independent Auditors' Report on IntInternalernal Control over FinancialFinancial Reporting and on Compliance and Other Matters Based on an AudAuditit of Financial StatementsStatements Performed in Accordance with Government Auditing Standards 33 Independent Auditors' Report on CompComplianceliance for Each Major Program and on Internal ControControll over Compliance Required by OMSOMB Circular A-133A-I33 35 Schedule of Findings and Questioned Costs 38

MemberMmdur ofofThr The Leadingf.Md1llg EdgeHdgt AffianceAlfianre Kahn,Kahn , Litwin,Litwin, Renza & Co., Ltd. BostonBoston' • NewportNewport· • ProvidenceProvidence' • Waltham KIRKIR 9)1 No!lh Main Sneer, Providence," '11, Rhode Island 02904 I'll. " • f: I I~ Lmai I: .l.rusteLlAdvisot sCc~l\ah nl it win.com • www.l(ah 11l.i twin.com CatifidCertified PublicP"blic AUOUn!flllliAccountants andfwd BusinessB:JsinfSS COIlIU/Ul1ItiConsultants

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees of The Providence CenterCenter,, Inc.Inc. and AffiliateAffiliates:s:

Report on the Financial Statements

We hhaveave audited the accompanyingaccompanying consolidating financial statements of The Providence Center, Inc. and Affiliates (co(collectively,ll ectively, the Organization)Organization),, which comprise the consolidating statement of financial position as of JuneJunc 30, 2015, and the relatedrelatcd consolidating stastatementstements of activities andElnd cash flows for the year then ended, and the relatedrelated notesnotes to the consolidatingconsolidating financial sstatements.tatements.

Management's Responsibility for the Financial Statements Management is responsibleresponsible forfor the preparation and fair presentation of these consolidating financialfinancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design,design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidating financial statements that are free from material misstatement, whether due to fraud or errOr.error.

Auditors'Auditors' Responsibility Our responsibility is to express an opinion on these consolidating financial statements based on our audit. We conducted our audit in accordance with auditing standardsstandards generagenerallylly accepted in the UnitedUnited States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards requirerequire that we plan and perform the audit to obtain reasonable aassurancessurance about whether the consolidating financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consoconsolidatinglidating financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidating financialfinancial statements,statements, whether due to fraud or error. In making those risk assessments,assessments, thethe auditor considers internal control relevant to the Organization'sOrganization's preparation and fair presentation of the consolidatconsolidatinging financial statements in order to design audit procedures thatthat are appropriate in the circumstancescircumstances,, but not for the purpose of expexpressingressing an opinion on the effectiveness of the Organization's internal control. AccordiAccordingly,ngly, we express no such opopinion.inion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as wellwell as evaluatingevaluating the overall presentation of the consolidatingconsolidating financialfinancial statements.statements.

MemberMtmbu o/11Jeof The LeadingL(I1dilll EdgeFdr,r Allil/IlltAlliance KIRKill

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

Opinion In ourour opinion, the consolidaticonsolidatingng financial statements referred to above present fairly,fairly, in all material respects, the consolidating financial position of ththee Organization as of June 30, 2015, and the coconsolidatingnsolidating changes in its net assets and its cash flows for the year thenthen ended IIIin accordance with accounting principles generally accepted in the United StatesStates of America.

Report 011on Summarized Comparative Information We have previously audited the Organization's June 30, 2014 consolidatingconsolidating financial statements,statements, and we expressed an unmodified opinion on those audauditedited coconsolidatingnsolidating financial statements in our report dated NovembeNovemberr 20, 2014. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2014, is consistent,consistent, in allall material respects, with the audited consolidatingconsolidating financial statementsstatements and related notes to the the consolidatingconsolidating financial statements from whichwhich it has been derived.

OtherOllter Matters Our audit was conducted for the purpose of formingfonning an opopinioninion on the consolidating financial statements as a whole.wholc. The accompanying schedule of expenditures of federal awards, as required by thethe Office of ManageManagementment and Budget CircularCircular A-133, Audits ojof States,Stales, Local Governments, and Non-profit OrganizationsOrganizations,, is presented for purposes of additadditionalional analysis and is not a required part of the consoconsolidatinglidating financial statements. Such informationinfonnation is the responsibilityresponsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidating financial statemestatements.nts. The information hashas been subjected to the auditing procedures applied in the audit of the consolidating financial statementsstatements and cecertainrtain additional procedures, including comparingcomparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidatingconsolidating financial statements or to the consolidatingconsolidating financial statemenstatementsts themselves, and other additadditionalional procedures in accordance with auditing standards generally accepted in the United StatesStates of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to thethe coconsolidatingnsolidating financial statemenstatementsts as a whole.

The supplemensupplementaltal information on page 29 is presented for the purpose of additadditionalional analysis and isis not a required part of the consolidating financial statements. Such information is the responsibility of management and was derived from and relates directly toto the underlying accounting and other records usedused to prepare the consolconsolidatingidating financial statements.statements. The informationinfonnation has not been subjected to the auditingauditing procedures applied in the audit of the consolidating financial statements and, accordingly, we express no opinion on it.

2 KIR-

OtllerOther Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated DecDecemberember 3, 2015 on our consideration of the Organization's internal contro controll over financialfinancial reporting and on our tests of its compcomplianceliance with certaincertain provisions of laws, regulations,regulations, concontracts,tracts, and grantgrant agagreementsreements and other mattmatters.ers. The purpose of that report is to describe the scope of our testingtesting of internalinternal control over financial reporting and compliance and the results of thathatt testing, and not to provide an opinion on internal control over financial reporting or on compliance. The report is an integral part of an audit performed in accordance with Government Auditing Standards in considerconsideringing the Organization'SOrganization's internal control over financial reportinreportingg and compliance.compli ance.

December 3, 201520 15

3 TIlETHE PRPROVIDENCEOV!OEI"CE CENTCENTER,ER, INC.I~C. ANDA 1<1J AFFILIATESA fFll..lATI;S C0CONSOLIDATING1<$OLlIJATI1

(Wi(With.h C.Comparativemp.... " ... TTotals ... ,•• at• J.June". JO.30, 2014)101) ~

2015101! 101'2014 CContinuum... "w'" GranclviewRooityGrandview Realty Grandview ...... Second NosI>uoS"",Nashua Street WtlsonW,l<... StreetS...... TPCTPCSoo:.oI Social BRepresentative...... " .. p>y«payee ...... account , 19\.60J191,603 19\.60J191,603 146.111146,221 Grants and contracts receivable,rI< e,... net , '.191.1904,591 ,890 1,29I.l'l'66 18,294.294 l.lIi'3,261 1,4021.401 98,84991.'49 61<.14\674,545 1(1 I .)7].026),573,026) 3,806,511H06.111 l.II'.lll3,5 14,313 PledgesPI";~...... receivable b., .«.net, " ..asset: WI. Ifadorwnotradename 1,080,000I,OW,ooo 1.010.0001,080,000 Good"';1Goodwill1 143,611"1,611 "'.6"143,611 Esuow,_Escrow reserve 147,146IHI" 11707!217,075 1<1!6!141,562 .m36,73 2 542,5151<1111 <91498,594 !94 TTotal ... '. other'.,., assets.... " 14,523,29614,.s13,zM JO302,425l,0415 933,476U 3,o47. ''',.s'J944,573 1,534,298lP"191 164,736IU,l)

Liabilities,1.d~;li';"'. Stockholders'$' _16 ..... ' Deficito.~

CurrCurrent .. ,v.b,'i Liabilities .... CurrentCurren'_of,~\aI ponion of capitaJ.....lease ~obligations ..... 19)619,263) 23,5922U91 l.m3,255 46.11046,110 00.12140,525 CurrCurrent .... portionpon;onO'''''''·I of long-term .. mdtt>/ond_poy.ot>l< debt and bonds payable 188,908IU.'lOI 20.46120,461 38n.1I7,187 247,556:1-<7.156 tll.au213,044 AccountsA

Total current,.,....' liabilitiesl!a 2,803,702 228,435 186,390 50,423 44,176 50,197 1,311,76211 (1,!91J1(1,591,927)~1) 3,083,158,I~ l.575.Jl113,575,392 T ... ' ... b";~.. UOl .7(i2 ,.'" «.176 SO,I" , ,) ." 2 M U ""'" ~'" In"",,,,,Investment .... ",4fflh>1bonds payable,poyiblc. leuless cu"..,,'current portionponian •4,933,03j 913 0)) 21""224,418 131,037lJ( 017 125,288,488.. «. 1'021105,142,3 50 TotalT ... ,liab;,i liabilities .... 1.lt1.!1!t8.197.969 "'...,452,853 11186,3909 90 50,423SO.. 2) ",44,176I" 101,852IIIIM I 1,448,3692,"136 9 IU(2,123,021)lJ.OlI! 8.#'08,459,01122 8,823,739Unl },)

Stockholders'SIoo:l«1.1,000 shares authorized, ...issued ...0 ond"""and outstanding ... dillJ 10 (10) MditionaIpo;.i-ioUpi\alAdditional paid-in capital 90~'" I~l(90) (531,194) (II0~91(120,569) "Accumulated ...... ,,1«1 deficitdc~ ... ())II9-Il(531,194) !11119-l! T ot...:d , ..stockholders ""I

NNet.. AAssets..... (Cu",.'",,,(Cumulative Cd",,,)Deficit): Un,"",,<"'"Unrestricted 0.609.62913,609,629 ("247.111,(247,215) «9.ln)(49.198) ..9,699~ (('1,9.900)00) 302,612302.682 )10.091550,095 ".173,79214,173,792 9.004.1279,004.327 TemporanlyT._.""" restricted.... ;,;I«I 74748,3191,lI' 147,1<6147,146 11.1.166835,166 911.10]93 1,103 1,519,9201.119.910 <.111,6\44,181,654 4,221,238<.121.211 l''''''''''''tI)o,.,rn

TTotal •.., UabilitiesI.dbi1iMs,, Stockholders'S,K kIIokl . ....• Deficito. ro6' 22,028,735 and Net1< Assets (Cumulative Deficit) 1,562,1961 196 404,534 917,275 (1,573,026) 26,383,263 Zz,oll,735 • ..1 ~ " ..... (C.m "b.~~D

SSee... accompanying".,"'p""l'.... -..notes to.. theoheco:wol.....",lf""""'ol._ consolidating financial statements .... and .d'"~ independent .."._ auditors'· '-" report

II~ THE PROVIDENCE CENTER, INC. AND AFFILIATES 8 • £ 5 c • c • ~ ~~~ ~i~ ~H :s~3 ~:o: ,w. CONSOLIDATING STATEMENT OF , ACTIVITIES< Year Ended June 30,2015 ! l £ ~ (With Comparative Totals ror the Yea.- Ended June 30, ~ 2014) ,I 'I 2015 ii' o jj~ I.' q1 ~ Grandview CorHinuum , II h • :i ];1 . £ lu t 10 !, I~ ~ u 0 , Providence Grandview! Realty Second Nashua Street Wilson Street TPC Social Behavioral Intercompany Consolidated I ! ~

Corporation ration C9II!or~ion Center Co~ Aoanments. Inc Ventures. Inc Health' , Inc ElimJnatlons Tot.al.s Totals Fo Wi~Lo 'l

Cities and towns 3,227,203 " 3,227,203 3.264,529 ......

Fundraising and contributions I"l 322 799 I~ 322.799 307.582 'I; - .. lq~ l _ jl g Total public support 10,669,267 96,026 ------85,575 60,641 36,556 50 468 ------10,998,533 __ 1_6,291,160~I : 1

Revenue· : ;:ebi.L .. ~i~iI~ Ill, ~ ~~~~ ~ !II~I;I~' Medicaid 17,604,243 . 17.604,243 16.616,348 1 .1 i " . J "I L. W! ~,. ' ;} ... ;I~I, ~. H~ Client activities, fees and residential renLalincome 856.022 35,027 30.674 27.673 18,356 967,752 977,275 .. t ~~ ..:~~ ~ , Third-party reimbursements 10,577,208 . ' 10,577 ,20& 7,107.915 1 ~ ...... Consultation and other income 5,821,077 .. 37,794 (2,830,63 t) 3,02&,240 2,464,798 ",~ Sales . 1,086,372 2,9t2,154 3,998.526 1,38(,,828 Hi EM~ ;~ ;'1'1 "'j"1 ...... ·.i !Ii :;:~_ ~j~I~, .~~ 'I~' ~'~

Satisfaction of restrictions 223 598 25 029 24.965 59.695 I~~ 333.287 509.191 " ~. ;lir; Total1·evenue 35,082,148"~" 35,027 55,703 52,638 78 051 1,086,372 2,949,948 !2,830,631! 36,509,256 29,062,355 ~ ~ i :! . i

Total operatinc public support and revenue 45,751,415 131,053_ 141,278 113,2]2._ II4,60i !,136,840 2,949,948 (2,830,631) 47,507,789I 45,353,515 , Expenses! : • £ . • Program~~"'o;;;;. : il;!l". ~]~~g ~!~H !iiRii •.. " ""'1' -". ~ ~''' §g~i'~ ~5§~~ ~:u.:~~ ~ ,.t" li" ,? ,? Adull behavioral Services 17,420,646 ' 3,368,566 (2.693.973} 1&.095.239 14.703. 129 " • :! ii ~~ ~ ~ ~ - Residenlial Services 8,500,013 103,458 168,033 110.541 I t6,429 . (20,160) 8,978,314 8,299,466 ! . Ch1ld & Family Services 8,425,915 " 8,425,915 8, 114,6&9 ~ "- ; . ·

Acute Care Services 4,124,912 '::l 4,124,912 6,398,420 ;3 OJ, -j ~~ ii .1 · "~

Vocational Services 1 ; 984 Ill I~ I~ 1.184.576 !&0,000! 2.088 687 1.905.159 t . 1 " , ? ? ;- % i ~ ~ ~ " Total program~ ser'Vices 39,455,597 103,458 168,033 110,541 116,429 1,184,576 3,368,566 (2,794,133} 41,713,067 39,420,863 Supponing(::0 services: ;1, - - '. t '- i~1 ~~"' ~ ~ "!I .; $"t ~I~ "[~ 'I~

Management and general 5,480.418 5,940 12,540 7,080 7,200: (43,760) 5.469,418 5.260,959 I 1 ... '1~ ": ';:J

Fundraising 327048 I", 327.048 347 034 '~ I~ t _~ - - 'I " Total openting expenses -~,263,063 ~98 180,S73_ ll7,621 123,629 1,184,576 3,368,566 (2,837,893) 47,509,533 45,028,856 • ~ ,. " , i i! , Change in ~ unrestricted net assets .. , ; , , " • ii 2 ~ ~ ~ ~ ~ ~ ~ ~ jj i from operations2 488,352 21,655 (39,295) (4,342} (9,022) (47,736) (418,618} 7,262 (1,744} 719,306 . . I!' . '. """1' ! ,_ Non-operating,~.:r.§~~l §r~!~ supportuj and revenue: , , .1 - ~ Investment income '1··'1~ 14,301 t4,301 11.440 ~ ~ ,· >! Equity in net loss of affiliate (410.625) 410,625 · . ;. ~ · I ,n· Loss on derivative~ instrument (14,289) •. , ;-l 15 'll, .... '1 ~~Il .~11! ~ ~I~ I 1-" Gain (lo!'ls) on disposal of (ixed assets (1,193) 14,654) . (445) " (6,292) 19,054 ~ - Valuation income~1e (loss) 4,630.419 (2,060) 7,993 4,636,352 ~'I"I 'I~ •• I E ] E I ~ ~ ~ 'I '! ii i' 2 . ~.

Iii, 394.647 Satisfaction of restrictions related to capital projects 116 223 Isl 116 223 "1 .f . -; I • , , ~ i Change in non-opera tine, unrestricted net assets 4,349,125 !4,654! . !2,505! 7,993 410,625 4,760,584 410,852 1 I l ~ , :1 .; ~I I 'I • , - . 0 ·i" ~§ ~ ~ ~I ~ ~! ~~ i II ;: i i Chanse.ein total unrestritted net assets/( net loss) 4,837,477 lb~SS (39Jill _(8,996} (9,022) (50,241) (410,625) 417,887 4,758,840 735,511 l 'I I t ,i "i"!"" 110 r ; ' P Change in temporarily~'] restricted net assets: .; "-"~i!' -"' . g ~i:'gl ,"m}~. i ,...... J · ~ !~, I 11 ~Li!'.~~f h . Client aclivities,j fees and residential rentnl income 15,859 14,660 8,713 4,689 43.92t 43.653 Contributions 361,783 361,783 GtM,228 - i"n I"'" Investment income'" 1,806 1,806 t,447 Ifill .... g t . H d Contribution of restricted property · 415,499 .C~~ 5111 ·I'~ d Unrealized gain on i:":a investments 2,416 2,416 14,960 '~'~'l 'i'i' OJ,,, Salisfaction of restrictions (223,598) ~ (25·~~'I· ,029) ~ (24,965) (59,695) (333.287) (509,t91) i i '1 -,' Satisfaction of restrictions related to capitalt. projects !116,223! (116.223! (394.647) ' 'I; ; -I 1 .• o ~I j i r

Change in temporarily restricted net assets 26184 15 859 (10,369! (16,252! !55,006) l !39,584! 189,949 I ~ ~ i • H ~ ~ i g I ~! ~ .s~~~! ~ ~ ~ i !! ii Total c:hance~ in net assets/( net toss) 4,863,661 37,514 (49,664) (25,248) (64,028) (50,241) (410,625) 411,881 4,719,256 925,460 ' I ' , I " - i , 1 , " ] ~l ~} ~ ~ h h iI t Net assets (cumulative deficit) ! /retained . earnings, (accumulated deficit) , ~ l l ~ ~j ~I ~I i "I ij al ~ ~ ~ iI at besinning of year~ 9.594,287 (137,583) 835,632 966.050 1.582.04& 352,923 (120,569) 132,208 t3.204.996 12.279.536 1 I Ii . f ~ ~ ~ ~ j. Net iI assets (cumulative delicil)/relained earnings (accumulated deficit) :1 : ;' ;' I 3, . i' , N ~ :1 ~j ~ $ 550,095 t 7,924.252 13,204,996 · $ $ (531.194) I at end of year 14 457.948 $ (100.069) s . 785.968 s 940,802 t 5t&,020 s 302.682 s s s KLR , l i 1 i i ! i s ~ [ M See accompanyingr notes to the consolidating financial statemeniS and independent auditors' report

511~ THE PROVIDENCE CENTER, INC. AND AFFILIATES CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended June 30, 2015 ! ! l '! • , l ,; (With Compantive Totals ror~ the ~ Year Ended~ June 30, 2014)~ ,I 2015 • 2014 Irl g · n" u" o· jijl ,i Grandview Grandview TPC Social Continuumill 11 .0 II ]1 n j > .§'" !] 11 Providence Realty Second Nashua Street Wilson Street Ventures Inc, Behavioral Intercompanyq Consolidated ! !I < ~ Center Corooration Co!Boration Co!]aration AEartments. Inc Etc Health Eliminations Total ______!.2ta\ a If £~t Jr!;h~ ~ 'IH ~ g~ei , Cash Flows from Operating Activities_ : _ . 3.g I I ~ ,'. g , c ~ II ~ ~ ~ ~ ; ! g ~

Total change in net assets/net Joss $ 4,863,661 $ 37,514 s (49,664) $ (25,248) $ (64,028) $ (50,241) s (410,625) $ 417,887 $ 4,. 719,256 $ 925,460 .. " j ;e II Ii " 11 ~ l~ Adjustments to reconcile total change ~j in net assets/net loss to .§ "" ~ t·! net cash provided (used) by operating activities:!! -~ I" ; i B' ~ ~.! ; .. ,;; Depreciation 708,031 3,696 31,986 25,975 60,094~. 50,534~.. 8,451 888,767~q;l;q 681,249~i '" 'ti ",~n~ ! l § ~ "

(Gain) Joss on sale of fixed assets 1,193 4,654. 445 6,292 (19,054) .! . Valuation ~-~~!_i income II!-··I! .s", §W§§~ ~~~~, H!'I" ii'QlI!._;~ ~1]~ . Intangible asset: tradename (1,080,000) . (1,080,000) ~ i- Valuation of below0 market leases included in other assets (10,000) (10,000) _ . 1 j!;ji ~ ~ ¥ Amortization of below market rents. included in other assets 5,000 5,000 =>_ . · lj1 ,og H~ Unrealizedi~ gain on investments (2,416) (2,416) (14,960) ;, " (Gain) loss from interest rate swap;; 14,289 O!> 1 ~. ~ :. t f ~ $ g- Grants and contracts restricted for property and equipment (126,576) . (126,576) (224 ,365) , " Equity in net loss of affiliate 410,625 (410,625)~. 111I1111II111I l ~ Pi"' !"o Decrease (increase)~!l;! in5bJ~~ assets · III"!" I ~~~.~. 0.""'8. ~~~;~~. i*~~is: ;;~~~ Representative-~~t! payee account (45,382) (45,382) 24,201 :X §'J:: ti: " q . 'I ';'~ ' Grants and contracts receivable 227,616 (2,250) ,~ 225,366 1,030,664 .... :l; i - • g: i'! ~

Accounts and fees receivable (500,528) - 6,477- 2,483 2,595 494 52,459 (416,839) 560,661 (292,198) (1,461,331) Pledges receivable 17,425 , 17,425 (17\,292) i eo ~ , i 1:. ~ ~E " Prepaid expenses and other~ currenl assets 110,179 (64) (131) (71) (71) (7,624) 3,091 105,309 (86,500) , Prepaid rent 1,171 '~ I, 171 50,004 ,!<,«, ~ Goodwill (143,611)~ (143~ ,611) i' ~i~&·i ,:;i~~~ - ~'F lncrease (decrease)!Ma~~~ in liabilities: • III~I ;' •• I' I' 2. £::i ! lil~1 ~;I~I ~ ~ Accounts payable (295,843) (7,338) 6,961 5,892 453 (12,383) 611,692. (567,923) (258,489) 185,318 1. ; t ~ ... 6' p~e ~ ' Accrued payroll and employer payroll taxes (40,716) 2,559 ' (38,1 57) 468,257 • I' • I' ::. Accrued expenses (205,194) (143) I (18,801)~ (224, I 38) (2 17,949) E ~ ,E. - . ' ' l I l I Accrual for unemployment claims '; I (11,547) I' 1m (11 ,547) (IO, IJ7) ;. • 'E ~ .~ ~ , ~ ~ ~ ~ , I- Net cash provided (used) by~ operating activities 486,280 - _1_7~92' (8,365) 13,797 (3,058) 37,809 (374,635) 189,720 1,173,854 ~ g i ' t ~ ! ij Cash Flows from Investing Activities= il· lill il : II.: .. . Purchase of investments (84,011) . (84,011) (216,445) . ., i1 !:!"'I ~ ~" - i! , ~ 1 ' Purchase of property~~ and equipment~. (297, 176) (5 ,600) (27,371) (18,531) (348,678) (1 ,90\ ,172) ii mm ~~ ~~ '~ ~~ " .

Net deposits to escrow reserve (15,859) (14,660) (8,713) (4,689) (43,921) Ii (43,653) 1 ~ Net cash used by investing activities (381,187) (15,859) (14,660) (14,313) (4,689) (27,371) (18,531)~ (476,610) (2,161,270) J.::h:(l ~ ,glJ-l!~ ~!.J:j ~~~ ~~ . i'd III ~¥. Cash Flows from Financing Activities:~ 1 1111. . ! •• h .. .- C IIII~ i;~i!l~ ~)~~ ~ t ! ~ ~ Principal payments on obligations under capitaJ lease (19,882) . (20,970) (3,066) (43,918) (41 ,531) ~ E Proceeds from loans 250,636 ' 200,000 450,636 I ,373,950 i...i! ; ~ ! ~ Ilt-; Principal loan paymentsp (220,550) (18,660) (30,776) (269,986) (295,424) . 11 . 1.~ H g~ ~ ~ 1; t.",,; ; n ·1 . Contributions/grants restricted for property and equipment 126,576 ' 126,576 224,365 ] 1 m" "I z ~. ~I .f ~ _ i ~ Net cash ~ provided (used) by financing activities 136,780 (18,660) (20,970) 166,!58 263,308 1,261,360 I I • ! i, I , ;;; .3 1 v ~ ~ /!l [ i t .c • • • c =- ~ ~ ~ ; Net Increase~ (Decrease)~ in Cash and Cash Equivalents 241,873 3,373 (23,025) (516) (7,747) (10,532) (227,008) (23,582) 273,944 a ;5 :; ': .c . 1I Cash and Cash Equivalents~ , : ~I ~ ! . a a ;: ~ ~I at beginning of year ~I 1,356,472~ 42,983 53,482~ ~ 43,836 ~ 34,172 110,761 277,970 1,919,676 1,645,732 5 ! • 1 8 Cash and Ouh Equivalents, , ;} , I ~ ~ i ; ~ ~ ~l ~ ~l ~, 1,896,094 $ 1,919,676

$ I at end of year s 1,598,345 s 46,356 s 30,457 s 43,320 $ 26,425 s 100,229 s 50,962 s I KLR 1 1 , Ji . , i • ! i , I I ~ See accompanying notes to the consolidating financial statements and independent auditors' ~ report 611~ THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,30,2015 2015

1.t. Nature of Operations

The Providence Center, Inc.Inc. (the Center) is the largestlargest mental health center in Rhode IslIsland,and, providing a continuum of counseling and supportive services to meet community mental health and substance abuse needs since 1969. These services include,include, but are not limited to,to, preschool intervention for childrenchildren with serious emotional disordersdisorders;; treatment for the elderly; residential treatment for the chronically mentally ill and/orand/or substance addicted; brief outpatient counseling for children and adults; and, treatment to individualsindividuals involved in the justice system.

The followingfollowin g eentitiesntities (collectively,(collectively, the Affiliates) are included in the consolidating financial statements of TheThe Providence Center, Inc. and AffiliatesAffiliates (collectively,(collectively, the Organization):

• Grandview Realty Corporation • Grandview SecoSecondnd Corporation • Nashua Street CorporatCorporationion • Wilson Street Apartments, Inc.Inc. • TPC Social Ventures, Inc. • ContinuumContinuum Behavioral Health,Health, Inc.

Grandview Realty Corporation, Grandview Second Corporation, Nashua Street Corporation and Wilson Street Apartments,Apru1ments, Inc.Inc. (the Housing Affiliates) are IRS Code Section 501(c)(3) non-profit corporations organized to own and operate rental apartments for individuals with mental illness. TPC Social VenturesVentures,, Inc.Inc. is an IRS Code Section 501(c)(3) non-profit corporation organized to provide individuals with mental health disabilities with on-the-job training opportunities m supported employment environments.

Continuum Behavioral Health,Health, Inc. (the Company), incorporated in May 2013 as a C C Corporation, is locatedlocated in Providence, Rhode Island. The Company is whollywholly owned by The Providence Center, Inc.Inc. The Company'sCompany's independentlyindependently licensed professionals provide therapy and psychiatry servicesservices to youth and adults.

Effective July 31, 2014, the Board of Trustees of the Center voted to authorize its chief executive officer to execute an affiliation agagreementreement that would resultresult in the Organization becoming a part of thethe Care New England Health System (CNE). Effective September 2, 2014, the chief executive officers of the Center and CNE signed an affiaffiliationliation agreement that makes CNE the Sole Corporate Member (the Member) of the OrganiOrganizationzation with certain reserve powers. The Organization will continue to exist as a corporation.corporation. The Organization'SOrganization's Board will continue to exist with all existing powers, except those reserved to the Member.

7 THE PROVIDENCE CENTER, INC. AND AFFILIATES KIRKLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

2. Summary of Significant Accounting Policies

This summary of significasignificantnt accounting policiepoliciess of ThThee Providence Center, Inc.Inc. and AAffiliatesffiliates is presented to assist the reader in understandingunderstanding the Organization's consolidating financial statements. The consolidating financial sstatementstatements and notes are representations of the OrganizationOrganization's's management, who is responsible for their integrity and objectivity. TheThesese accounting policiespolicies conform to accountaccountinging principles generally accepted in the United States of America and have been consistently appappliedlied in the preparation of ththee consoliconsolidatingdating financialfinanc ial statements.

Principles of Consolidation The consoliconsolidatingdating financial statementsstatements include the accounts of The Providence Center, Inc. and the Affiliates listed in Note 1.I. The Organization has the ability to appoint and elect a votivotingng majoritymajority of the Board of Directors of the Affiliates. AAllll significantsignificant intintercompanyercompany balances and transactionstransactions have been eliminated.

Financial Statement Presentation The Organization prepares its consolidating financial statementsstatements on the accrual basis of accounting and, in accordance with authoritative guguidance,idance, reportsrep0l1s informationinfonnation regarding itsits financialfinancial positionposition and activities according to three clclassesasses of net assets: unrestrictedunrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.

Cash and Cash Equivalents For the purposes of the consolidatingconsolidating statementstatement of of cash flows,flows, cash and cash equivalentsequivalents includincludee all cash balancesbalances and highly liquid investments with a maturity of three months or leless,ss, except those funds which the Board has designated for investment.investment.

Representative Payee Account The Center maintains a representative payee account for clients receiving socsocialial security income. As the representative payee,payee, the Center has the ability to assist the primary beneficiaries with ththee daily managementmanagement and budgeting of their finances. The represrepresentativeentative payeepayee account is recorded as both a restricted asset and a current liability in the consolidating sstatementtatement of financial position.

Grants and Contracts, Accounts and Fees, and Pledges Receivable The Organization carries itsits receivables at net rrealizableealizable value. On a periodic basis,basis, ththee Organization evaluates ititss receivables and establishes an allowance for doubtful accounts, based on the historyhi story of past bad debt expense, collections and current credit conditions. At year-endyear-end the allowance for doubtful accountsaccounts was apapproximatelyproximately $1,358,800.

8 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,30,2015 2015

TheThe Organization does not accrue interest on its receivable::;.receivables. A receivablereceivable is considered past due ifjf payment has not been received within the statedstaled terms. The Organization wiwillll then exhaust all methods to collect the receivable. Once all practical resources to collect the receivable have been utilized without success, the receivable is deemed uncollectible and charged agaagainstinst the allowance.

Unconditional promises to give that are expected to be collected within one year are recorrecordedded at net realizable value.value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of the estiestimatedmated future cacashsh flowsfl ows oftheof the promises to give.

Investments FairFai r ValuValuee MethodMethod The Center has funds designated for long-tennlong-term purposes. These investmentsinvestments are recordedrecorded at their fair value. The funds are referred to as ""investment,investment, fair value" in the accompanying consolidating statement of financial position.

EguityEquity Method The Center has a 33.3% interest in a related partyparty,, About Families,Families, LLC.LLC. The interest is referredreferred to as "investment,"investment, equity method" in the accompanying consolidating statement of financial position.

The Center accounts for this investmentinvestment in the related party under the equity method of accounting. Under thisthis method, the initial investmentinvestment was recorded at cost. Subsequently, the carrying amount of the investment has been adjusted toto reflect the Organization's share of the net income or loss of About Families, LLC.

Fair Value Measurement InvestmentInvestmentss that have a readily readily detenninabledeterminable market value are carrcarriedied at fair value, with thethe unrealized gains and losseslosses reported as unrealized gain (loss) on investmentsinvestments in the consolidating statement of activities. Realized gagainsins and losseslosses and declines in value judged to be other-than-temporary on available-for-sale securities are included as investment gaigainn (loss) in the consolidating statement of activities.

9 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

Authoritative guidanceguidance defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuationval uation techniques. Fair value is thethe price that would hebe received to sellseJl an asset or paid to transfer a liability in an orderly transactiontransaction between market participants at the measurement date. A fair value measurement assumes that the transaction toto sellsell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market,market, thethe most advantageous market. Valuation techniquestechniques that are consistent with the market, income or cost approach, as specifiespecifiedd by authoritative guidance, are used to measure fair valuevalue..

ThThee fair value hierarchy prioritizes the inputs to valuation techniquesteclmiques used to measuremeasure fair value into three broad levels:

LLevelevel 1I inputs areare quoted prices (unadjusted) in active markets for identical assetsassets or liabilities which thethe Center has the ability to access.

LeveLevell 2 2 inputsinputs (othe(otherr than quoted pricpriceses included within LevelLevell) 1) are observable for the asset or liability,liability, either directly or indirectlyindirectly..

LevelLevel 3 inputs are unobservable for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. TheThe unobservableunobservable inputs are developed based on the best information available in the circumstances and may include the Center's own data.

The CenteCenter'sr's fair value hierarchy for itsits securities, measured at fair value on a recurring basis includes level 1I mutual funds valued at the quoted price as of the financial statement reporting date.

The Center reports the investments' net realized and unrealized gains and lolossessses at each reporting date in the CeCenternter''s s statement of activities as a component of investment income. Dividends are recorecordedrded on the exex-dividend -di vidend date and interestinterest is recorded on the accrual basis of accounting. Purchases and sasalesles of securities are recorded on the trade date. In detenniningdetermining the gains (losses)(losses) realized on the sasalesles of securities,securities, the cost of secsecuritiesurities ssoldold hahass been detennineddetermined on a specific identification basis. ItIl is the Center's policy to deduct its investmentinvestment management fees from the investmentinvestment returnreturn..

The FinanceFinance ComCommitteemittee evaluates the Center's investmentinvestment performanceperfonnance on a regular basis. The Center focuses on the overall return on investments, including interest,inlerest, dividends, net change in value of the investments and ensures permanently restricted net assets are preserved and enhanced over time.

10 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year EnEndedded June 30, 2015

Property and Equipment Property and equipment is recorded at cost if purchased and at fair value if donated. Depreciation is cacalculatedlculated using the sstraight-linetraight-line method over their estimatedestimated useful liveslives rangingranging from three to forty years.

Buildings 20-4020 - 40 years Building improvements 10-10 - 40 yearsyears Leasehold improvements 39 years Office equipmentequipment and furniturefurniture 55--10y10 yearsears Motor vehicles 5-75 - 7 years Computer equipment 3 years

The Organization follows the policy of capitalizing fixedfix ed assets as follows:follows:

Buildings $ 25,000 Building and leasehold improvementsimprovements 5,000 Office equipment,equipment, furniture, motor vehicles, and compcomputeruter equipment 3,000

Intangibleintangible Asset: Tradename As part of thethe affiliation agreement with CNE described in Note 1,I, thethe Organization elected to useuse pushdown accounting (see Note 5), which resultedresulted in the creatiocreationn of an intangibleintangible assetasset: tradename. IntangibleIntangible asset: tradename is the net effect of the increase in net book valuevalue of various assets revalued subsequent to the affiliation agreement. IntangibleIntangible asset: tradename is not amortized but is reviewed at least annuaannuallylly for impairment or earlieearlier,r, if an indicationindication of impairment exists.

Goodwill Goodwill is the excess of the purchase price paid over the fair value of the net tangible assets acquiredacquired.. Goodwill is not amortized but is reviewed at leastleast annually for impairmentimpainnent or earlier, if an indiindicationcation of impairmentimpainnent exists.

Escrow Reserve As required by several funding sources, temporarily restrictedrestricted replacement reserve accounts have been established to provide for the future replacement of fixed assets and certain other non-capitalizablenon-capitalizable repairs. Temporarily restricted residual receipts accounts have also been esestablished,tablished, as required by funding sources,sources, to be uusedsed for otheotherr operating expenses as needed and approved by the funding sources.sources.

11 THE PROVIDENCE CENTER, INC.INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,30,2015 2015

AccrualAccrual/or for Unemployment ClaimsClaims The Organization does not participate in the state and federal unemployment insurance plans, and therefore, self-insuself-insuresres againstagainst unemployment payments to formerfonner employees. The Organization has reserved an amount which it believes would cover unemploymentunemployment payments for all claims outstanding as of June 30,30, 2015.

Income Recognition IncomeIncome from fees for serviceservice is recognized as it is earned with one exception; incomeincome from fees charged directly to individual patients is rrecognizedecognized only as it is collected. This policy was adopted because of the significasignificantnt uncertainty of collecting direct patient fees. There is no material distortion of income as a result of reporting the fees in this manner. Income from grants and contracts is recognized when thethe grant or contract is expended.

The Organization recognizes contributionscontributions and unconditional promises to gigiveve in the fiscalfi scal year in which the contribution and unconditionalunconditional promisespromises to give is received or when the promise is made. Contributions are rrecordedecorded either as, unrestricted, temporarily restricted,restricted, or permanently restrictedrestricted depending on the existence andand/orlor nature of aanyny donor imposed restrictions.

Interest Income Interest income is consideredconsidered to be unrestricted with the exception of the interest earned by the Housing AffiliatesAffiliates Escrow Reserves which are temporarily restricted.

Income Taxes The Center, Housing Affiliates and TPC Social Ventures, Inc. are exempt from income taxestaxes as public charities under secsectiontion 501(c)(3) of thethe Internal Revenue CodeCode.. Management believes that these organizations operate in a manner consistent with their tax-exempttax~exempt status at both the state and federal levels.

The Organization annually files IRS Form 990 --ReturnReturn of Organization Exempt from Income Tax, reporting various information that the IRS uses to monitor the activities of tax exempt entities. These tax returns for 202012,12, 2013 and 2014 are subject to review by the taxingtaxing aauthoritiesuthorities and are subject to examination by the taxing authorities, generallygenerally for three years after they were filed.

Continuum Behavioral Health, Inc. has elected to record deferred tax assets and liabilities as temporary differences between the financial reporting and tax bases of assets aandnd liabilitiesliabilities using the current enacted tax rate expected to be in effect when the taxes are actually paid or recovered. ThereThere werewere no deferred tax assets or liabilities at JuneJune 30, 2015.

12 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLRKIR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,201530, 2015

The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company's tax retumsreturns to determine whether the tax positions are "more"more•• likely-than-not" of being sustained by the applicable tax authority. Tax provisions not deemed to meet the more-likely-than-not thresholdthreshold are not recorded as a tax benefit or expense in the current year.

The Organization and the Company currently have no tax examinations in progress.

Advertising Expenses The Organization follows the policy of charging the costs of advertising to expense as incurred.incurred. Advertising expense for the year ended June 30,201530, 20 15 was $8,897.

Allocation of Expenses The costs of providingproviding benefit to various programs and support servservicesices have been summarized on a functional basis in the consolidating statement of activities. Expenses that can be identified with a specific program and support service are allocated directly to the program or support service that benefited. Other expenses that are common to several functions are allocated by various other methods.

Report on Summarized Comparative InformationIn/ormation We have previously audited the Organizations' June 30, 2014 consolidating and consolidated financial statementsstatements,, and we expressed an unmodified opinion on those audited consolidating and consolidated financial statements in our report dated November 2020,, 2014. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2014, is consistent, in all material respects, with the audited consoconsolidatinglidating and consolidated financial statements from which it has been derived.

Estimates and Assumptions The preparation of consolidating financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilitiesliabilities and disclosure of contingent assets and liabilities at the date of the consolidating financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actuaactuall results coucouldld differ from those estimates.

Reclassifications Certain amounts in the 2014 consolidating financial statements have been reclassified to conform to the 2015 consolidating financial statement presentation.

Subsequent Events Management has evaluated subsequent events through December 3, 2015, which is the date these consolidating financial statements were issued. 13 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 3030,, 2015

J.3. Pledges Receivable

At June 30, 2015,2015, contributors to the Center have promised to give $272,206 over the nnextext several years.

The present value of pledges receivablereceivable has beb en en cca alculatedlculated using an interest rate of 5% which approximates the Center's internal borborrowingrowing rate.

PromisedPromised contributions are due as follows:

Within one year $ 140,833140,833 One to five years 131,373131 ,373 272,206 Less: allowance for doubtful accounts 33,745 Less: present value component 19,29419,294 Total pledgespledges rereceivable,ceivable, net 219,167219, 167

Less:Less: current portion 124124 ,266

PledgesPledges receivable, net $ 94,901

4. Property and Equipment

The components of property and equipment at year-end are as follows :

Land $ 2,208,068 Building and improvementsimprovements 15,431,91015,431,910 Leasehold improvements 472,725 Motor vehiclesvehicles 270,500 Office equipment and furniture 694,582694,582 Projects-in-process 46,845 19,124,63019,124,630 Less accumulated depreciation 2,869,540

Property and equipment, net $ 16,255,09016,255,090

5.S. Valuation of Certain Tangible and Identified Intangible Assets

Effective September 2, 2014, the Organization eenteredntered into an affiliation agreement with the Care New England Health System (CNE), which constituted a change-of-control event (see Note 1). As a result of this eventevent,, the Organization elects toto value its consolidated net assets usingusing pushpush down accounting as ofDecemberof December 31,3 J, 2014.

14 THE PROVIDENCEPROVIDENCE CENTER, INC. AND AFFILIATESAFFILIATES KLR NOTES TO THE CONSOLIDATING - FINANCIALFINANCIAL STATEMENTS Year EndedEnded June 3030,, 2015

The effects of the electelectionion on consolidatedconsolidated net assets are as follows:

Consolidated Original Net Effects of push Net BookBook Book VaValuelue down method ValueValue AssetAsset class

Property and equipmentequipment,, net $ 13,187,42613, 187,426 $ 3,546,352 $ 16,733,778 IntangibleIntangible asset: tradename 1,080,0001,080,000 1,080,0001,080,000 BelowBelow market leasesleases included in other assets 10,000 10,00010,000

6. GoodwGoodwillill

On JJulyuly 31, 3 1, 202014,14, Continuum Behavioral Health,Health, Inc. entered into an asset purchase agreement to purchase Meadows Edge RecovRecoveryery CenteCenterr (Meadows(Meadows Edge), a licensedice l nsed medical center located in Rhode IslandIsland for $150,000 paidpaid in cash. The results of Meadows Edge's operations have been includedincluded in thethe consolidatingconsolidating financial statementsstatements beginning AugustAugust 1, I , 2012014.4. The purchasepurchase price was allocaallocatedted to the tangibletangible and and intangible assets acquiredacquired based on their estimated fair valuesval ues on the acquisition date. TheTh e excess of the purchase price over the estimated fair values of the tangible assets acquired was recorded as googoodwill.dwill.

Following is the allocation oftheof the purchase price:price:

Property and equipmenequipment,t, net $ 6,389 GoodwiGoodwillll 143,611143,61 1

Purchase Price $ 150,000

7. Line of Credit

The Center refinanced their line of creditcredit withwith a a localoca l l bank on October 1,I, 2013. The revolving lineline of credit is $2,500,000. InterestInterest on the outstanding borrowings is at the one-month LIBOR rate (.16% at June 30, 2015) plus 2.15% withwith availableavailable borrowing of the lesser of $2,500,000 or 80% of eligibeligiblele accounts receivable,receivable, as defined in the agagreement,reement, lessless than 9090-days-days from their invoice date. The line of credicreditt is i s securedsecured byhy substantially allall of the assets of the Center and is due on demanddemand..

ThiThiss creditcredit facility includesincludes certaincertain restrictive covenantscovenants,, including the maintenance of a combicombinedned operatoperatinging cash flowfl ow and minimum lleverageeverage ratio. There were no borrowings uundernder the lineline of credcreditit as of June 30, 2015.

15 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING - FINANCIAL STATEMENTS Year Ended June 30, 2015

8. Obligations under Capital Lease

TPC SocSocialial Ventures,Ventures, Inc.Inc. leases equipment under capital leases that expire at various dates through August 2019. Monthly payments on these leases total approximately $2,500 withwith interest rates ranging from 2.45% to 110.3%.0.3%.

The Center leases equipment under capital leasesleases that expire at various dates through February 2019. Monthly payments on these leases total approximately $2,300 with interest ratesrales ranging from 2.0% to 8.0%.

ContContinuuminuum Behavioral HHealth,ealth, Inc. leases equipmeequipmentnt under a capital lease thatthat expiresexpires February 2018. Monthly payments on thisthis lease are approximately $300 withwith interestinterest at a raterale of6%.

The leased equipment has been recorded at the present value of the future minimwnminimum lease payments and is depreciated over the estimated useful lives of the related assets. Depreciation of the lealeasedsed eqequipmentuipment is included in depreciation expense.

Future minimum paymentspayments under the capital leases are as follows:

Year Ending

201620 16 $ 55,052 2017 4040,929,929 2018 34,732 2019 19,591 2020 2,2 595

Total minimum lease payments 152,899

Less amount representing interest 19,424

Total capital lease obligations 133,475

Less current portion of capitalcapital leaselease obligations 4646,110,110

Capital lease obligations, llessess current portion $ 87,365

16 KLR THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

9. Long-term Debt

A sununarysummary of long-termlong-tenn debt at year-end is as follows:

Mortgage payable to U.S. Department of Housing and Urban Development (HUD), due in monthly installments of $3,522, including interest at a rate of 9.2% through November 2023; secured by land and building. $ 244 ,879

Mortgage payable to a bank, due in monthly installmentsinstallments of $3,789,$3 ,789, including interest at a rate of 7.7.1%1% through July 31, 20162016;; secsecuredured by land and building.building. 347,538

Mortgage payablepayable to a bank,bank, due in monthly installments of $4$4,262,,262, including interest at a rate of 7.2% through July 9, 2016;20 16; secsecuredured by land and building. 389389,085,085

Term note payable to a bank, due in monthly installments of $8,6$8,614,14, including interest at a raterale of 5.52% through October 1,1,2023; 2023; secured by land and building.building. 1,354,9371,354,937

Term note payable to a lending institution, due in monthly installments of $1,314, includingincluding interest at a rate of 5.40% through June 19,19, 2024; secured by land and building. 211,828

TTermerm note payable to a lending institution,institution, due in monthly installmentsinstallments of $3,652,$3 ,652, including interest at a rate of 3.65% through September 8, 2019; 169,224

Various loans payable to a lending lending institution, due inIII monthly installments of$4,826,of $4,826, including interest at a rate of 4.74% through September 5, 2019;20 19; secsecuredured by vehicles. 193,780 2,911,271

Less current portion 184,752

Long-termLong.term debt, llessess current portion $ 2,726,519

17 KLRKlR THE PROVIDENCE CENTER, INC. AND AFFILIATES - NOTES TO THE CONSOLIDATING - FINANCIAL STATEMENTS Year Ended June 30, 2015

Maturities of long-termlong-term debt are as follows:

Year Ending

June 30, 2016 $ 184,752 June 30, 2017 839,956 June 30,30,2018 20 18 151,318 June 30, 2019 147,385147,385 June 30, 2020 86,719 Thereafter 1,501,1411,50 1,141

Total $ 2,911 ,271

10.J O. Bonds Payable

On February 1,1,2012, 2012, thethe Rhode IslandIsland HHealthealth and Educational Building Corporation (RJHEBC) issuedissued an aggaggregateregate $2,600,000 in variabvariablele rate rate bonds. The proceeds from this issue were used to plan and renovate a susubstantialbstantial portion of a 72,000 square foot office building locatedlocated in Providence,Providence, Rl,RI, and payment of certain bond issuance costs. Interest on ththee bonds was at a rate of0[2.90%, 2.90%, with installments duedue eaceachh successsuccessiveive month through the maturity date.

EffecEffectivetive October 1, 2013, the RJHEBCRlHEBC bonds were refinanced with a new financialfinancial institution in the aggregate amount of $2,725,000 in variable rate bonds. The bonds bear interestinterest at the Federal Home Loan Bank Amortizing rate (twenty years), plus 2.00%2.00% didiscountedscounted to 65% of thethe all in rate,rate. with a mandatory purchase on October 1,I, 2023, as defined in the agreement.

The bonds are secsecuredured by buildings located at 528 and 530 North Main Street, Providence Rhode Island and an interestinterest in all futurefuture gross receiptreceiptss of the Center. In conjunction withwith the credit agreement and term loan, the Center agreed to certain financial, transactionaltransactional and conditional debt covenancovenants.ts.

18 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING - FINANCIAL STATEMENTS Year Ended June 30, 2015

The scheduled annual maturities of the Organization's bonds payable through the year ended February 1, 2041 are as follows:follows:

Year Ending

June 30,201630, 2016 $ 6262,804,804 June 30,30, 2017 65,388 June 3030,, 2018 6767,809,809 June 30,201930, 2019 70,318 June 30, 2020 72,688 Thereafter 2,285,766

Total $ 2, 2 662424 ,773

11. Mortgage Payable to the Department of Housing and Urban Development

The mortgage payable to HUD,HUD, as stated in Note 9 and related agreements, require thethe Housing Affiliates to make monthly deposits for taxes, insurance and replacement of project assets. Cash surplussurplus,, if any, is required to be deposited into a residual receipts reserve to be used for future operations of thethe project,project, with the approval ofofHUD. HUD.

12. Temporarily Restricted Net Assets

U.S. Department 0/of Housing and Urban DevelopmentDell e/opmenl WilsonWilson Street ApartmentsApartments,, Inc. received fundingfunding from HUD of $1,152,335 for the renovation of Wilson Street Apartments. The agreement states that repayment is not required provided that the property funded remains available onlyonly to qualified clients for a period of not less than 40 years, maturing in 2042047. 7. If at any time during the restricted use period Wilson StreeStreett Apartments, Inc.Inc. isis unable to meet the provisions of thethe agreement, at the optoptionion of the funding source, the entire amount of the above-noted funding shall become due and payable upon default.

Grandview Second Corporation received funding from HUD of $1,173,200 for thethe renovation of Grandview Second Apartments. The agreement states that repayment isis not required provided that the property funded remains available only to qualified clients for a period of not less than 40 years,years, maturing in 2035. If at any time during the restricted use period Grandview Second Corporation isis unable to meet the provisions of the agreement,agreement, at the option of the funding source,source, the entireentire amount of the above-noted funding shallshall become due and payable upon default.

19 THE PROVIDENCE CENTER, INC. AND AFFILIATES KIRKLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS YearYear Ended June 30, 2015

Nashua Street CorporationCorporation received funding from HUDHUn of $834,200 for thethe renovation of Nashua Street Apartments.Apartments. ThThee agreement statesstates thatthat rrepaymentepayment is not required providedprovided that the property funded remains available only to qualified clients for a period of not lessless than 40 years, maturing in 2040. If at any time duringduring the restricted useuse period Nashua Nashua StStreetreet CorporaCorporationtion is ununableable to meetmeet thethe provisions of the agreement, at the option of the funding source, the entire amount of the above-noted funding shallshall become duedue and payable upon default.

StaleState Bond Funds WilsonWilson Street Apartments, Inc. has two agreements with the State of Rhode IslandIsland whereby WiWilsonlson Street Apartments, Inc.Inc. obtained bond funds in the amount of $818,738 for the renovation renovation of the Wilson StStreetreet Apartments, Inc.Inc. Under the terms of the agreements, if Wilson Street Apartments, Inc.Inc. shoushouldld cease to be utilized as a a facility to be rented by qualified clientsclients before 2047204 7 (40 (40 yearsyears afterafter the firstfirst rental of a unit to a clclientient or two years fromi'rom the date of the grant), the State of Rhode IslandIsland wouldwould be eentitledntitled to recover either the amount expended underunder the agreement or a prorated portionportion of the fair market value of thethe buildingbuilding,, whichever is greater. Management intends to use the facilityfac ility for the stated purpose and dudurationration of the agreement; as such, the revenuerevenue was recorded in the year in whwhichich thethe funds were received.

ThThee temporarily restricted net asset balancesbalances at year-end are as follows:

Staff InnovativeInnovative Fund $ 14,160 ProgProgramram eqequipmentuipment and other programprogram related expeexpendituresndi tures 295,578 Community facility location 403,290 Unrealized gains on permanently restricted endowments (note 14)14) 35,2935,2911 Reserve for Replacements and Residual Receipts - GrandvGrandviewiew RealtyRealty Corporation 147,146147,146 Reserve for ReplacementsReplacements and Residual Receipts-Receipts - Grandview Second Corporation 217,0752 17,075 Reserve for ReplacementsReplacements and ResidualResidual Receipts --NashuaNashua Street Corporation 141,562141 ,562 ReserveReserve for ReplacementsReplacements and Residual Receipts -W- Wilsonil son Street Apartments, Inc.Inc. 36,732 Rental apartmentsapartments - - Grandview Second Corporation 6618,09118,091 Rental apartmentsapartments- - NashuaNashua StreetStreet CorporationCorporation 789,541 Rental apartments - Wilson StStreetreet Apartments, Inc. 1,483,1881,483, 188

TotaTotall temporarily restricted net assets $ 4,181,6544,181,654

20 THE PROVIDENCE CENTER, INC. AND AFFILIATES KIRKLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,30,2015 2015

13. Permanently Restricted Net Assets

The Center's permanentlypennanently restricted net assets at year-end consistedconsisted of a Coping with Crisis Endowment Fund from which the income may be used for program expenses of the Center. As requiredrequired by generally accepted accounting principles, net assets associated with endowment funds are claclassifiedssified and reported based upon the existence or absence of donor-imposed restrictions.

14. Endowment

InterpretInterpretaation of RelReleV8nlevant Law - The Rhode IslandIsland UUniformniform Prudent Management of Institutional Funds Act (RIUPMIF(RJUPMIFA) A) requires the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowmentendowment funds absent explicit donor stipulations to the contrary. As a result, the Center classifies as permanentlypennanently restrictedrestricted (a) the original value of the gigiftft donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanentpennanent endowment made in accordance with the direction of the applicable donor gift instrument at the time accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restrictedrestricted net assets is classified as temporarilytemporarily restricted net assets until those amounts are appropriated for expenditure by the Center in a mannermanner consisteconsistentnt with the standard of prudence prescribed by RIUPMIFRlUPMIFA. A.

In accordance with RlUPMIFARIUPMIFA,, thethe Center considers the longlong and short-teshort-termrm needs ofofthe the Center in carrying out its mission, the problems peculiar to the Center, the Center's present and anticipated financial requirements,requirements, expected total returns on the Center's investments, price level trends,trends, and general economic conditions in making a determination to appropriate or accumulate donor-restricted endowment funds.

Endowment net asset composition by type of fund as of June 30, 2015 is as follows:

Temporarily PermanentlyPennanentiy Total Restricted Restricted Restricted

Coping with Crisis program $ 35,2935,2911 $ 100,000I 00,000 ,;::$ _ ..:135,2911,;;;3 5"",2:,;;9,:".1 ======

21 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR-KLR NOTES TO THE CONSOLIDATING - FINANCIAL STATEMENTS Year EndedEnded June 30, 2015

Change in endowment net assets for the year eendednd ed June 30, 201520 J 5 is as fofollows:llows:

TemporarilyTemporarily PermPermanentlyanently RestrictedRestricted Restricted Total EndowmentEndowment net asseassets,ts, beginning of year $ 31 ,070 $ 100100,,000000 $ 131,070

InvestmentInvestment return: InvestmentInvestment incomeincome 3,1393, 139 3,139 NeNett realized and unrealized gainsgains 2,2,441616 2,4162,416 Total investmentinvestment return 5,555 5,555

AppropriationsAppropriations (1,334) (1,(1 ,334334))

EndowmentEndowment net asseassets,ts, end ofafyear year $ 35,291 $ 100100,000,000 $ 135135,29,2911

Funds with Deficiencies - From timetime to time,time, the fair valuevalue of o f assets associated with individualindividual donordonor-restricted-restricted endowment funds maymay fallfa ll below the level level that the donor or RlUPMIFRlUPMIFA A requires thethe CeCenternter to retainretain as a fund of perpetual duration. There were no suchsuch deficienciesdeficiencies at June 30, 2015.

ReReturnturn ObjObjectectivive.e, Risk PammeParamettersers anandd SpendSpendiing IPolic olicyy - - The Center has adadoptedopted investmentinvestment and sspendingpending policipolicieses for endowmentendowment aassetsssets thatthat attempt attempt to provideprovide a predictable ststreamream of funding to programs ssupportedupported by its endowment while seeseekingking to maintain thethe purpurchasingchasing power of the eendowmentndowment assetsassets.. Endowment assets include those assetsassets of donor-restricted funds that the CenterCenter must hold in perpetuity as well as board designated funds, if any. Given the relationrelationshipship between riskri sk and return,return, a a fundamental stestepp in determiningdetermining the investmentinvestment policy for Endowment FundsFunds is the determination of an aappropriateppropriate riskrisk tolerance. After takingtaking into into consideration such factorsfactors as corpcorporateorate financial stability,stability, uncertainty of cashcash flows in and outout of of the EndowmentEndowment Funds over thethe long term,term, and capital mamarketrket volavolatility,til ity, management believes a moderate ririsksk strastrategytegy is prudent.prudent. UnderUnder ththisis policy, ththee goal is to have stablestable returns over the long-termlong-term,, with a reduced potential of negative negative returns in any givengiven year.year. The spespendingnding policypolicy sspecifiespecifies that didisbursementssbursements sshallhall reflect sstandardstandards for endowendowmentsments recognized by RlUPMIFRlUPMIF A, and are allocated accordaccordinging to to the agreementagreement with thethe donor. In the case where thethe endowment purpose is broad,broad, the SeniorSeni or Leadership Team willwill make a recommendationrecommendation to the Board Executive ComCommitteemittee regregardingarding the use andand allocation allocation of the didisbursement.sbursement.

The Board ExecutiveExecutive CommitteeCommittee will make a final decisiondecision on ththee use use and allocation of thethe disbursementdisbursement and thethe decidecisionsion willwill be communicated to the Board of Trustees.

22 THE PROVIDENCE CENTER, INC. AND AFFILIATES KIRKLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

Strategies Employedmployed for AchiAchieevingvin g Objectives - To satisfy its long-term rate of return objectives, the Center will rely on a total return strategy in which investment returns are achieved through both capital appreciation (r(realizedealized and unrealized) and current yield (interest and dividends). ThThee Center will targettarget a a diversified asset allocation to achieve its long-termlong-terrn return objectives with prudent risk constraints.

15.15. Guarantees

The Center is contingently liable as a guarantor on the continuing operationsoperations of the Affiliates stated in Note 1. The Center's guaranty is expecteexpectedd to continue indefinitely or until an amendment of the guaranty occurs.occurs. In the event that one or more of the Affiliates experiences hardship, the Center will financially support the Affiliate'sAffiliate's operations. As of June 30, 2015,20 15, three of the housing affiliates have unrestrictedunrestricted cumulative ddeficitseficits totaling approximately $298,300$298,3 00 and Continuum Behavioral Health,Health, Inc.Inc. has an accumulated deficit of approximately $531,200.

16.] 6. Lease Commitments

The Center leasesleases office sspacepace at 520 Hope StreetStreet,, Providence,Providence, R1 from the State of Rhode Island for $1 per lease term through September 202015.15. The Center is responsible for maintenance and repair of these facilities.

ThThee CeCenternter leasesleases residential service sites from the State of Rhode Island for $1 per lease tennterm (Note 21) at the following locations:

• 96 Atwood Street, expiring September 202015 IS • 859 Broad Street, expiring September 2015 • 424-426 Eaton StreetStreet,, expiring September 2015 • 2198 Wallum Lake Road, expiring November 2015 • 111 Howard Avenue,Avenue, expiring February 2023

ThThee Center is responsible for maintenance and minor repair of the above listed residential service sites.

The Center also leasesleases space at 249 Main Street in PawtucketPawtucket,, Rhode Island. The monthly lease payments range from approximately $4,600 to $5,000 through December 2017. The Center is responsible for "tenant share" operating expenses for thesethese properties.

23 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30,30,2015 2015

ThThee Center entered into a monthly lease agreement for sspacepace at 360 Duncan Drive in Providence,Providence, Rhode Island to use as a Crisis Stabilization Unit at Butler Hospital.Hospital. The Center leasesleases the space on a month to month basis.basis. As of the date of the audit report, the Center is in the process of entering into a formalfonnal lease agreement. Monthly rent payments are approximately $11,700.

ThThee Center enters into one-year lease lease agreements on behalf of their clients enrolled in two of the Center'sCenter's programs. Monthly rent payments range from approximately $500 to $900 and expiexpirere at various datedatess through June 2016.

The Center leases space at 1380 Broad Street in Providence, Rhode Island.Island. The monthly lease payments are approximately $1,200$1 ,200 through February 202016 16 with an option to renew for one additional three-yearthree-year term.

The Center leasesleases space at 200 Butler Drive in Providence,Providence, Rhode Island to use for the Symmetry program. The monthly lease paymentspayments are approximatapproximatelyely $12,500 through April 20201515 with an automatic renewal period for one additional year. Other payments under thethe lease commitment include monthly support fees for physician, housekeepinghousekeeping and dietary services through April 2015.

The Center leasesleases a a vehicle for approximately $500 per month through NovemberNovember 2017.

TPC Social Ventures, Inc. leasesleases space at 50 Houghton Street in Providence,Providence, Rhode Island. The monthly lease payment is approximately $4,400 through June 2019.

The Company lealeasesses space at 1I Randall Square in Providence, Rhode Island. Monthly lease payments under this agreement range from approximately $3,040 to $3$3,160,160 through JulyJuly2016. 2016.

The Company leasesleases space at 75 Sockanossett Crossroads in Cranston, Rhode Island. Monthly lealeasese payments under this agreement range from approximately $6,500 to $7,030 through May 202019. 19.

The Company leases space at 580 Ten Rod Road in North Kingstown,Kingstown, Rhode Island. Monthly lease payments under this agreement are $5,000 through May 2019.

Additionally, the Center hashas various equipment lease agreements with monthly paymentspayments of$90of $90 through April 2018.

RentRent expense under the operating leasesleases was approximately $1,412,500 for the year ended June 30,30,2015. 2015.

24 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

ApproximateApprox imate annual minimum lease payments under all non-cancelablenon~cancelable operatingoperating leasesleases as of JuneJune 30, 2015 are as follows:follows:

Year Ending

2016 $ 442,442,300300 2017 266,800 2018 233,700 2019 184,500184,500

Total $ 1,127,3001,127,300

17. Commitments and CoContingenciesntingencies

Legal Proceedings The OrganiOrganizationzation is from time to time subject to legal proceedings and claims that arise in the course of carrying out the Organization's mission. In ththee opinion of management, the amount of ultimate liability with respect to actions outstanding as of June 30, 2015 will not have a material adverse effect on the Organization'sOrganization's financial position or itsits reresultssults of opoperationserations..

Medicare and Medicaid Programs Laws aandnd regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Compliance with laws and regulations can be subject to future goverrunentgovernment reviewreview and interpretation as well as significant regulatory actionaction;; failure to comply with such laws and regulations can result in fines, penalties and exclusionexclusion from the MedicareMedicare and Medicaid programs.

25 THE PROVIDENCE CENTER, INC. AND AFFILIATES KLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

HealthPathHealtltPalh Behavioral Health Pilot Program CoContinuumntinuum Behavioral Health,Health, Inc. entered into an agreement with a Rhode Island nonprofit medical aandnd hospitalhospital seservicesrvices corporation, a Rhode IIslandsland nonprofit corporation and the Center to start a person-centered, recovery-focused and flexiblefl exible systemsystem of carc.care. The pilot program providesprovides HealthPath services sucsuchh as general assessmentassessment,, psychiatric evaluatevaluation,ion, medication evaluation and management, treatment,treatment, therapy, education, job and recovery coaching and emergency services for a period of twenty-four months cocommencingmmencing February 10,10,2014. 2014. Each party has obligationsobligations of services and financial commitments to the program as set forth in thethe agreeagreement.ment. In additaddition,ion, therethere is a a program cash flow start up period for the first twelve months of activity where the Center must fund twenty percent (20%) of any negative program cash flowfl ow based on the aggregate maximum cash flow funding amount of $625,000. After November 2014, the CenteCenterr must remit a total ofor eighty percent (80%) of any positivepositive program cash flow to the Rhode Island nonprofit medical and hospital servicesservices corporationcorporation and the Rhode Island nonprofit corporacorporation.tion.

18. Concentration of Credit Risk

Financial instruments which potentially subject the Organization to concentrations of credit risk arcare cash and cash equivaequivalents,lents, receivables, public support and revenue. Occasionally, due to the payment termstemlS on contracts with its funding sources, the Organization'Organization'ss cascashh and cash equivalents balance in itsits savings account is in excess of the amount covered by the Federal Deposit InsuranceInsurance Corporation (FDIC). Management does not believe that significantsignificant credcreditit risk exists at year-end.

Most of the OrganizationOrganization's's public support, revenue and outstanding receivables at June 330, 0, 201520 15 were from the federal and state govegovernment.rnment. According to the contract provisions, eithereither party may terminatetenninate the contract upon 60 days written notice. At year•year• end, management believes minimal ririsksk exists with respect to both the co continuationntinuation of these contracts into the foreseeable future and the collection of the outstanoutstandingding receivables.

19. Employee Retirement Benefit Plans

The Organization maintains a profit sharing retirement plan to which the Organization may make discretionary contributions. The retirementret irement plan covers all employees of the Organization oveoverr the age of21of 21 who have worked for a minimum ofof975 975 hours during the plan year. Participants are vested over a number of years of continuoucontinuouss service.service. Participants become 100%100% vested after ssixix years unless the age of 65 is attained,attained, upon which the participant alalsoso becomes 100% vested. The Organization did not contribute to the retirement plan for the year ended JuneJune 30, 2015.20 J 5.

26 KLR THE PROVIDENCE CENTER, INC.INC. AND AFFILIATES - NOTES TO THE THE CONSOLCONSOLIDATINGIDATING - FINANCIALFINANCIAL STATEMENTS Year Ended June 30, 2015

ThThee OrganizatOrganizationion offers to aallll of itsits employees the optoptionion of participating in a voluntaryvoluntary payroll reduction tax sheltered annuity plan underunder Section 403(b) of the Internal Revenue Code. The exexistenceistence of thisthis plan has no effect on the accompanying consolidating financial statements of the Organization ssinceince thethe amounts paid into the planplan are voluntary contributionscontributions made by thethe participating employees.employees.

The Organization has tax defcITcddeferred savings plans underunder sectionssections 457(b) and 457(f) for a membermember of senior management. management. The Organization contributed $60,000 to the savingssavings plans for thethe year ended June 3030,2015., 2015.

2020.. SSupplementaryupplementary DisclosuresDisclosures Regarding CasCashh Flows Flows

Net cashcash flows from investinginvesting and financingfi nancing activitiesactivities for thethe year ended June 30,30, 2015 as reportedreported in the accompanying consolidating statementstatement of cash flows exexcludecl ude the effects of non-cash transactions related to acquisition of propertyproperty aandnd equequipment.ipment. Equipment oblobligationsigations incurredincurred totaled approximately $30$30,900.,900.

Cash paid for interestinterest for the year endendeded JuneJune 30,30, 20201515 was approximately $292$292,000.,000.

21. In-kind Contributions

The CenterCenter uses seveseveralral buildingsbuildings owned by the State of Rhode Island,Island, located at 520 Hope Street, Providence; IllIII HowardHoward A venue,venue, Cranston;Cranston; 96 AtwoodAtwood Street, Providence; 424-426 EatoEatonn Street, Providence; 859 Broad Street, Providence; and 2198 Wallum Lake Road, Pascoag. The annual fair value rental of these buildings has been determined to be aapproximatelypproximately $$1,109,000 1,109,000 in 2015.2015. This amount has been recognized in the accompanying consoconsolidatinglidating statement of activitiesactivities as an in-kind contribution andand an in• in• kind occupancy cost in the consolidated sstatementtatement of functional expenses.

The Center activelyactively solicits and receives supportsupport from the cocommunitymmunity in the form of contributed goods and servservicesices related to efforts to fulfill itsits mission. Donated materials are recorded at theirtheir fair value at the date of the gift.gift.

No amounts have been reflected in these statements for donated services (such as Board of Trustees and vavariousri ous committees) in as muchmuch as no obobjectivejective basis is availableavailable to measuremeasure the vavaluelue of thesethese services.

27 THE PROVIDENCE CENTER, INC. AND AFFILIATES KlRKLR NOTES TO THE CONSOLIDATING FINANCIAL STATEMENTS Year Ended June 30, 2015

22. AssetsAsset.s Held by Rhode IslandIslam] FoundationFoundation

In April 2003, the Governing Board of the Center established a fundraising campaign to build an endowment fund in the name of Charles E. Maynard (the Fund). The Center's Governing Board signed an agreement establishing a fund at the Rhode Island Foundation (the Foundation) and agreed that the funds would not be used until the endowment fund reached $1,000,000. Approximately $52,400 of the surplus funds were used during the fiscal year ended June 30, 2015. The Center solicits gifts on behalf of the Fund and the balance at June 30, 2015 was approximately $1,45$1,451,500.1,500. The Center is the beneficiary of the Fund earnings subject to the Foundation's policies and variance authority.

23. Charity Care

The Center provides care to certain patients who are uninsured,uninsured, without charge or at amoamountsunts less than its estabestablishedlished rates. Because the Center is sometimes unable to pursue collection of amounts determined to qualify as charity care, the amounts are not quantified or reported as revenue.

24. Self-insurance Program

The Center has a self-insurance plan covering medical benefits for substantially allall of iitsts full-timefull -time employees.employees. The Center limits its losseslosses through the use of stop-loss policiespolicies from re-insurers. Specific individual losses for claims are limited to $135,000 per year. The Center's aggregate annual1ossannual loss limitation is based on a formulafonnula that considers, among other things, the total number of employees, but cannot be more than $5,335,000 based on the number of empemployeesloyees at July 1,I, 202014.14. For the year ended June 30, 2015, the Center incurred approximately $3,761,200 in claims and administrative fees for this program.

28 KTRKLR

SUPPLSUPPLEMENTARYEMENTARY INFORMATIONINFORMATION Sch«l"leSchedule I

THE PROVIDENCEPROVIDE NCE CECENTER,NTER. INC. ....ANDr-;n AffAFFILIATESiLIATES CONSOLIDATECONSOLIDATEDD STSTATEMENT ....TEME1'iT OfOF fUNCTIONALFUNCTIONAL EXPENSESEXPE NSES

YeYearn EndedE~d«l June 30,201530, 201S

(With ComparativeComparative TotalsTotll. for theth. YurYear EndEndeded JuneJun~ 30, 2014)201 ~l

2015 2014 Ad"'tAdult ManagementManacement BehavioralBebavioral ResidentialR."identi3J Child & Family AcmeC",.Acute Care VocationVocationalal and~d CousohdatedConsolidated CousolidatedConsolidated ServicesSe""ic." """=Services S«Vi~sServices S.Mce$Services Services General Fundraisingfur.dr.i~inE_ Total T01.1Total

Salaries s 1212,265,930,265,930 s 44,369,396,369,396 s 5,296,2185,2%,218 $ 2,427,294 $ 796,497 $ 3,817,666 $ 144,549144,549 $ 29,117,55029,111,550 $ 25,659,62915,659.629 FnnbFringe"t benefitsbenefit. 2,8820,83620,836 1,164,1031,164,11)3 1,219,6161,219 616 471,363 197,415 795.553795,553 27,402 6,696,288 6,621,9536621,953 ToTotaltal salaries aandnd fringe benefits 11.086,76615.086.766 5,533,5,533.499499 6,5158346,515,834 2,898,6572,898,651 993,912 4,4,6\3,219613.219 171,951171 951 358\3,83835,813,838 32.281,58232,281,582

Boob,Books, publicatiONpublications and dues 4040,944,944 21,898 24,78624,7&6 6.5136,573 3,308 49,450 1,8471.847 148148,806,806 125,841 Client Ictivitieactivities,s, food, servicesservites and supplies 141,804 537.537,955955 195.499195,499 9494,208,208 62,62,497497 1,1.4M406 J232 1,033,4011,033,401 1,0311,03!,702,702 Conferences and ffiliningtraining programs 443,3483,348 16,759 24,751 6,160 4,074 127,044 2,192,1988 224,334 201,438201.438 ConsultBf'ts,Consultants, physicians and iMerp

Employee travel eexpenses ~~nses 136,453 34,17934,]79 47,93147,937 17,622 4,5794,579 1,969 104 242,843 195195,905,905 InsuranceIMurancc 212,657 141,929\41,929 92,889 35,21535,2)5 30,523 45,281 1,265),265". 559,759 425425,789,789 Interest 89,657 116,493lJ6,493 16,377 24,63724,617 15,56615,566 28,668 912 292292,310,3 10 259,568 Maintenance and renlalrental of equipment 20,21120,277 9,489 11,144 1,725 1212,162,162 9,880 '"31 64,70864,708 59,459,44242 MiscellaneousMi$«l1ancous 11,211,25050 8,4778,477 1,405 5,7725.772 7,372 22,12722.127 21" 56,424 72n,SH,5 11 OcwpancyOccupancy costScosts 805,605g05,6OS 1,440,308 301,652 232,240232,240 140,585 120120,918,9 18 3,425" 3,3,04044,7334.733 2,640,249 OecllpancyOccupancy cMIJcosts ('n--kind)(in-kind) 388,995 720,000 1,108,9951,I08,99S 1,108,995I ,108,995 Office supplies and tx~nexpensessu 262,965262,%5 88,580 113,977 31,12431,124 193,,460 84,792 9,1459.145 784,043 700,460700,460 Payroll processing servicessemces 48,163 21,957 22,894 9,661 6,921 12,71112,717 m382 122,695 87,114 PO$l8gePostage 11,784 1,1971,197 5,393 1,073 454,517 1111,720,720 24,381 510,065 461,040 PrintingPrinting 24,430 3,067 6,967 11,719,7 19 14,620\4,620 5,6545.654 10,137I 0,137 66,594 57,011 Profess,onalProfessional services 112,686 71,528 37,4937,4988 1515,977.977 12,634 48,27,2799 6"643 299,245 303303,923,923 Pro!:"amProgram (in,k,nd)(in-kind) 2,536 ,944.. 733m 167II>' 220 6,392 1010,992,992 1111,332,332 Public ,.I.,ioos,relations, madmarketing. ling and advertisingad""o1ising 6,2046,204 904 655 In277 17,73317.733'" 2424)94,394 76,76,090090 126126,257,257 172172,285,285 RecruitmentR.ecnoirmcnt eexpenses xpenscs "" 1,530'" 13,586 15,11615,1 16 4747,096,096 State tax >0,500 '00500 500'00 Telep!1oneTelephone and communicacommunicationstions 145,950 62,81862,878 46,562 41,79141,791 23,604 33,73133,731 2,329 356,845356,845 329329,389,389 Tempot"Temporaryary help 33,47633,416 2,031 4477,782,782 83,28983,289 33,101 104,752 VehiclesVchicle, 18,36S18,365 2929~12,512 1414,396,396 3,483 1212,143.243 12,273n ,n3 136!)6 90,408 I 04.752 3,0083,008,473,473 3,444,8153,444.815 1,910,081 1.221,226,2556.255 1,094,775 856,199856.199 155155,097.09 7 1111,695,695,695,695 12.74712,147,274.274

$ 8 425,915 $ 4,124,912 $ 2,088,687 $ 5,469,4185,469,418 $ 327,048 $ 447,509,5337.509,5:n $ 45.028,85645,028,856 TTotalot.l uponexpenses ... $ 18,095,23918.095,ZJ9 $ 8,8,978,314978,314 8,425,915t

SecSee accompany,ngaccompanying indeindependentpendent auditors'oudiro.. ' repa"report " 2911~

II~ KLR

THE PROVIDENCEPROV/I)ENCE CENTER, INC. AND AFFILIATES

Reports Required by Government Auditing Standards and OMB Circular A-133-A-i33 - Audits of States, LocalLocal Governments and Non-profitNon-profit OrganizationsOrganizations

Year Ended June 30, 20152015 KLRKLR

TilETHE PROVIDENCEI 'ROVID~:NCE CENTER, INC.INC. AND AFFILIATESAFFILIATES CCONSOLIDATEDONSOLIDATED SCHEDULESCIIEDULE OF EXf'EEXPENDITURESNI)fTURES OF FEDERAL AWARDSAWARDS YearVur EndedEnd~d JuneJun~ 30,30 , 2015

Federal CFDA Pass-throughPass· through EntityEntIty Total Federal I'FED£I)I'RAIJ;Ri\1. CRANIORI!'ASS·DIROUGIIoRANTORIPASS-THROUGII CKANGRANTT !'ROOBAMPROGRAM OR ClIISTERCLUSTER TTIT!ITL Ee NumberNumber Idcmldcmifyl!):_mging Number ExExpenditureseenditures

US . DEPAKTMENTOFDEPARTMENT OF AGRJCULTUREAGRICUI.TURE PPassedassed ThmughThrough from ththee State of Rhode Island DepanmentDepartment of EducationEducation:: School Breakfast !'ro{lrlmProgram and NationalNatIOnal School I.unchLunch ProgramPtllgram I10 0 553/10.555553/10 555 28823 $ 2020.806,806 Child and Adult Care Food Program 10 558SSg 28823 • 2323.655,655 10laiTotal USU S. DepartmentDepanment of AgrlcuhUleAgriculture 44.461

USU S. DEPARTMENT OF HOUSfNG AND URBAN DEVELOPMENT:: DireclDirect FundingFunding:: SectionSecllon 8 Housing Assistance PaymentsPayments:: ProgramProgram SpeCIalSpecial Allocations 14.19514.195 016110026016HD026 60,,641 Program Special Allocations 1414195.195 016HOOO9016HD009 8585,S15,575 SupportiveSupponive HoHousingusin{l for PersonPersonss withWIth DIsabilitiesDisabilities 1414181 181 016HD047 36,.556 182IS2,712,772

Passed Through flOmfrom Rhode Island Housing SSectionection 8 110uslII&Housing AssistAssistan.::cance PaymPaymentsents:, ProgramProgrntn Special Allocations 14 195 016EHOO7016EH007 96%.026,026 Shelter Plus Care 1414238.238 RlOO50CRJ0050C I TOOO9OOT000900 64,84764.847 Continuum ofofCarc Care 14.267 RJ0031RlOO31 L1 TOOTOO1205 1205 124,480124.480 ContinuumCOlltlnuum ofIIfCare Care 1426714 267 RI0031RlOO)1 LlLlTOOI306 TOO 1306 226226,006,006 Continuum ofIIfCare Care 1414267.267 RJ0062LR1OO62LITOO1200 !TOO 1200 2323,890,890 Continuum of Care 14.261.267 RJ0062L1TRl0062L!TOOOO1301 130 I 18,31218,3!2 Continuum ..,fCareof Care 14.26714261 RJOO661.1TQOI300RJ0066LI TOO 1300 4,7214,121 Continuum ofofCa,c Care 1414261 267 RJ0021RI0021 L!TOOLlToo 1306 26,441 HousingHousing ChoiceChOice VoucherVOI.!cher Program 1414511 571 N/ANIA 4.8414,841 589,564589,564

TotalTot~1 USU S Depan,"cntDepartment IIfof HousingIIl1using and Urban DevelupmentDevelopment 772.,336

USU.S DEPARTMENT OF EDUCATION:EDUCATION' Passed Through from the State of Rhode Island DepartmentDepanment of HumanHuman ServicesServices:: Rehabilitation ServicesSC!Viccs Vocational RRehabilitationehabilitation Grants to States 84.126A84.126/\ Not supplied 15,50075,500 Race II)to the Top·Top- Early Learning Challenge (R(RTT-ELC)TI·ELC) 84.4I284.412 Not supplied 1212666 666 Total U.SU S DepartmentDepartmcnt of EducallonEducation 8888166,166

UUS. S. DEPARTMENT DEPARTMENT OF HEALTHHEALTII AND HUMAN SERVICES: Direct FundingFu~ding : SubstanceSubstsnce AbuseAbuse and MentalMenta! Health Services Administrati..,nAdministration SAMHSA ProjectsProjects of RegionalRegional and National Significance : WholeWhole Person PartnershipPartnelship (P(PBHCI)OBC!) 9324393 243 5H79SM059755-04S1179SM059155-04 101,822 Health ConnectionC(lnneclion (PBHC(PBHCI-11)1·!I) 9393243 243 IlH79SM06!013·112 H79SM061 013-02 590590,543,543 HorneHome Base (CABHI) 9324393 243 5UDI5UDIT1023558·03 TI023558-03 Ill1)1,555 ,555 80380J,92{l920

Passed lllToughThrough from the StateSlate ofRhodcof Rhode Island Department of BehavioralOehavioral HealthcareHcallhcare,, DevelopmentDcvdoplJlem Disabilities & Hospitals:' Block Grants for PreventionPrevenllon and Treatment (lfSubstMcof Substancee AbusAbuse:e: ResidentialResident ial Substance AbuAbusese 93.959 3342850 707,570707,510 TransitionTransition from !Prison'rison to Community 9395993.959 3066661 6262,489,489 InpatientInpatient and Medical DetOXificationDetoxification (RESPEC(RESPECT)T ) 9395993.959 3261151 I1,009540 ,009,540 !Inpatientnpa(ienl and Medical Detoxification (RESPECT) Anchor ED 93.959 )2821093282109 232232,0)2,032 2,011 ,631631

30 See accompanying notes to the consolidated scheduschedulele of expeexpendituresnditures offedcrnlof federal awards KLR-

TlH:THE PROVIDENCEI'ROVIDENCE CENTER, INC. AND AFFILIAAFFILIATEST ES CONSOCONSOLIDATEDLIIlA TED SCHEDULE SC! IEDULE OF EXPENDITURES[XPI!:NOJTURES OF'OF FEDERAL AWARDSA WARDS YearYur Ended[ od.d JJuneune 30, 2015

FEDERAlFEDERAL GRMTORl1'A$SGRANTOI3/PASS-·TI!RQIIGI-!TIIROUGI-I GRANGRANTT I'RPROGRAMOURAM OROft CLUSTEq liSTERR roLETITLE Federal CFDA PaSHhr(lughPass-through Entity Total Federal Number hlcnt'ft1oldcn!ifyingg Number E)[pendi\uresExpenditures

Passed Through from the StaleState o(Rhodeof Rhode IslandIsland DcpanmenlDepartment of Health: Affordable Care Act (ACA) MaternalMalemal, Infant,Infant , and EarlyEarl~ Childhood Home VisitingVisi ting Program 9350593.505 3385561 132,111132,111 Maternal and Child HealthHealth Services Block Grant 10to StatStateses 93.,994 3307354 90,09390 093 222.104222.204

PassedPISSed Through from Pacific Institute for Research & Evaluation:Evaluation" National InstitutesInstitutes ofHeahhofHea1th- . Drug Abuse and AddictionAddiction Research Programs 93.21993.279 0642 750

PassedPasseonAssoc1at10n Medical Assistance Program 93..778 N/ANIA 55,997

Total USU S Department ofHeahhof Health and Human Services 3,094,5023,()94,502

US DEPARTMENT OF JUSTICE;: Passed Through [rOlllfrom the StState,te of Rhode IslandIs land Department ofCorr~tionsof Corrections Edward Byrne Memorial Justice Assistance GrantGrallt ProgramP!ogram 16.13816.738 3203555 3939,219,219

PassedPasstd ThThroughrough from the State of Rhode IsIslandland Department of Justice: Residential Substance Abuse TreatmentTreatment for StateSlate PrisonersPrISoners 16.593 3250861 37,302 Second Chance Act Prisoner Reentry IniInitiativetiative 1616.812.812 3380012 72J723 nms38.025

Total UU. SS. . DepartmenDepartmentt of Justice 77,24477.244

DEPARTMENTDEPARTMENT OF VETERANS AFFAIRSAFFAIRS:' DirectDicect fundingFunding: Homeless ProvidersPeoviders Grant and per Diem ProgramPeogram: Per DiemDiem 64.024 10-997-RIlo.997-RJ 152,078

TOialTotal Department of Veterans Affairs 152078152,078

TOTAL FEDERAL AAWARDS, WARDS, EXCLUDING I-IUDHUD LOANS : 44,228,787,2287S7

UU..S.S. DepartmentDepartment of HousingHousing and Urban Development Direct Funding:Funding: Supportive Housing for the Elderly (Section 202) 14.15714.1.57 Not supplied 244,879

Supporting Housing for Persons with Disability 14.18114.]81 016016HD047HOO47 (renovation)(Tenovationj 1,152,335 016016HD047HD047 14.18114,181 (replacement(replacement reserve) 18,465 14.181\4.18\ 016HD026Ol6HD026 834,200834,200 14.181\4,(8) 016HD009OI6HD009 1,173,2001,173200 3178,2003,178,200

$ 7,651,866 TotTotalal EJpendituExpendituresres of FederalFederal AWArdsAwards , 7165 1,866

See accompaaccompanyingnying nnotesotes to theIhe consolidaconsolidatedted schedule of expendiexpenditurestures of federalfedera l awards . 31 THE PROVIDENCE CENTER, INC. AND AFFILIATES KIRKLR NOTES TO THE CONSOLIDATED SCHEDULE OF EXPENDITURES OF FEDERAL AAWARDSWARDS Year Ended June 30,30,2015 2015

1. Basis of Presentation

The accompanying schedule of expenditures of federal awards (the Schedule) includesincludes the federal grant activity of The Providence CenterCenter,, Inc.rnc. and Affiliates (the Organization) under programs of the federal government for the year ended June 30, 202015.15. The information in this ScSchedulehedule is presented in accordance with the requirements of OMB CircuCircularlar A-133,A-B3, Audits of SlatesStates,, Local Governments and Non-profit Organizations. Because the Schedule presents only a selectedselected portion of the operations of the OrganizationOrganization,, it is not intended to and does not present the financial position, statement of activities or the cash flows of The Providence Center,Center, Inc.Inc. and Affiliates.

2. Summary of Significant Accounting Policies

ExpendituresExpenditures reported on the Schedule are reported on the accrual basis of accounting. Such expendituresexpenditures are recognized following the cost principles contained in OMB Circular A-I22,A-122, Cost Principles for Non-profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement.

3. Federal Programs

The Organization received funding from the U.S. Department of Housing and Urban Development in both the current and prior years. The funding has been included in the accompanying consolidated schedule of expenditures of federal awards in consideration of the fact that the federal programs from which the funding originates imposes continuing compliance requirements on the use of the properties acquired and rehabilitated for specified periods ranging from 1100 to 40 years.

32 Kahn, Litwin,tiMin, RenzaRcnza & Co.,Co. , Ltd.Ltd. BostonBoston· • Newport ·• Providence ·• WalthamWa1tham _KLRKIR "I951 North:--'"rlil Main\j.,in Strtcl,'lllt"l-I.I'r"\"Id,lle, Providence, lU10dcRj,uJ,·I, Island Iml 0290+"J" Phot1c:I'h"t1~ +Ot-27+-2001[- \._ x: • bx:I'.w: 401-~_11-4018_1')[_ l' -I')'~

1-1l1.[il:r:m:1il: Tr1", ustedAdvisots~''KahnLitwin.com'M~dA,h ''oil 'iCt"Klill,l.ilwin. _."n • www.KahnLitwin.comw\"l-'\\ ./l.:.dlllIIlWtll_lfl1l1 CutifidCertified Public kcormflll/trAccountants alldand Business8milim Consultants

INDEPENDENT AUDITORS' REPORT ON INTERNALINTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FFINANCIALINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of TrusTrusteestees of The Providence Center, Inc. and Affiliates:Affiliates:

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial auditsaudits containedcontained in Government Auditing Standards,Standards, issued by the ComptrolleComptrollerr General of the United States, the consolidating financial statementsstatements of The Providence Center, InInc.c. and Affiliates (the Organization), which comprise the consolidating statement of financialfinancial positionposition as of June 30, 202015,15, and the related consolidatingconsolidating statements of activities and cash flows for the year then ended, and the related notes to the consolidating financial statements,statements, and have issued our report thereon dated December 3, 2015.

Internal Control over Financial Reporting

In planning and performing our audit of the consolidating financial sstatements,tatements, we considered The Providence CenCenter,ter, InInc.c. and Affiliates'Affiliates' internal controcontroll over financial reporting (internal control) to detenninedetermine the audit audit procedures that are approprappropriateiate in the circumstances for the purpose of expressing our opinionopinion on the consolidating financial statements, but not for the purpose of expressing an opinion on the effectiveness of The Providence Center, Inc.Inc. and Affiliates' internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization'sOrganization'S internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, inin the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency,deficiency, or a combination of deficiencies, in internal control, such that there is a reasonablereasonable possibility thatthat a a material misstatement of the OrganizationOrganization's's financial sstatementstatements will not be prevented, or detected and corrected on a timely basis. A Significantsignificant deficiency is a deficiency, or a combinatiocombinationn of deficiencies, in internal control that is less severe than a material weakness,weakness, yet important enough to merit attention by those charged with governance.

Member of The Leading Edge Alliance KLR

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, (Continued)

OOurUT consideration of internal control was for the limited purpose described in the firstfirst paragraph of this section and was not designed to identifYidentify all deficienciesdeficiencies in internalinternal control that might be material weaknesses or significant deficiencies. Given these limitations,limitations, during our audit we did not identifYidentify any deficiencies in internal control that we considerconsider to be material weaknesses. However,However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether ththee Organization's consolidating finanfinancialcial stastatementstements are free fromfTom material misstatement, we performed tests of its compliancecompliance with certain provisions of laws,laws, regulations, contracts and grant agreements, noncompliance with which could havehave a a direct and material effect on the determination of financial sstatementtatement amounts. However,However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an oopinion.pinion. The results of our tests disclosed no instanceinstancess of noncompliance or other matters that are required to be reported under Government Auditing StandardsStandards

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing,testing, and not to provide an opinion on the effectiveness of the organization's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization's internal control and compliance. Accordingly, this communication is not susuitableitable for any other purpose.

DecemberDecember 3, 2015

34 Kahn,Kahn , LitwinLitwin,. RenzaRen'Za & Co.Co.,, Ltd. BostonBosron • NewportNewport· • ProvidenceProvidence •· Waltham _ KLRKlR 951 Nortn Main Sneer, Providence, Rhode Island 02')04 Phon~:'h"l]<

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULARCIRCULARA-133 A-J33

To the Board of Trustees of The Providence Center, Inc.Inc. and Affiliates:Affi liates:

Report on Compliance foforr Each Major Federal Program

We have audited The Providence Center,Center, Inc.rnc. and Affiliates' compliancecompliance with the types of compliance requirements dedescribedscribed in the OMB Circular A-133A-J 33 Compliance Supplement that could havehave a direct and material effect on each of The ProvidenceProvidence Center, Inc.Inc. and Affiliates' major federal programsprograms for the year ended June 30, 2015. The ProvidenceProvidence Center, IncInc.. and AffiAffiliates'liates' major federal programsprograms are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility Management is responsible for cocompliancempliance with the requirementrequirementss of laws,laws. regulations,regulations, contracts,contracts, and grants applicable to its federal programs.

Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of The Providence Center, Inc. and Affiliate's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicabapplicablele to financialfinancial audits contacontainedined in Government Auditing Standards, issued by thethe CoComptrollermptroller General of the United States; and OMB Circular A-133,A·133, Audits of States, Local GovernmentsGovernments,. and Non• profit Organizations. Those standards and OMB Circular A-133A·133 require that we planplan and perform thethe audit to obtain reasonable assuranceassurance ababoutout whether noncompliancenoncompliance withwith the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidenceevidence about The Providence Center, Inc.Inc. and Affiliates' compliance with thosethose requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audauditit provides a reasonabreasonablele basis for our opinion on compliance for each major federalfederal program. However, our audit does not provide a legallegal determination determination of The Providence Center, Inc. and Affiliates compliance.

MemberMtlllblr ofofTh The.. Leading, ~{/{llIIg EdXtEdge AllianceIWiallC{ KIRKLR

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJORMA.JOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133, (Continued)

Opinion of Each Major Federal Program In our opinion, The Providence Center, Inc. and Affiliates compliedcomplied,, in all materialmaterial respects, respects, with thethe types of compliance requirementsrequirements referred to above that could have a direct and material effect on each of its major federalfed eral programs for the year ended June 30, 2015.

Report on Internal Control over Compliance

Management of The Providence Center, Inc. and Affiliates is responsible for establestablishingishing and maintaining effective internal control over compliance with the typestypes of compliance requirementsrequirements referred to above. In planning and performing our audit of compliance, we considered The Providence Center, Inc.Inc. and Affiliates'Affiliates' internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing proceduresprocedures that are appropriate in the circumstances for the purposepurpose of expressing an opinion on compliancecompliance for each major federal program and toto test and report on internalinternal control over compliance in accordance with OMB CircuCircularlar A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control oveoverr compliance.

Accordingly, we do not express an opinion on the effectiveness of the OrganiOrganization'szation's internal control over compliance.

A deficiency in internal control over compliance exists when the design or opoperationeration of a control over compliance does not allow management or employeeemployees,s, in the normal course of performingperfo rming their assigned functfunctions,ions, to prevent,prevent, or detect and correct, noncompliance with a typetype of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency,deficiency, or combination of deficiencies, in internal control over compliance,compliance, such that there is a reasonable possibility that a material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A Significantsignificant deficiency in internal control over compliance is a deficiency,deficiency, or a combination of deficiencies,deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is lessless severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies.deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However,However, we did note a significant deficiency as described in the accompanying schedule of findings and questioned costs as item 2015-01.

36 -KIRKLR INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133,A-I33, (Continued)

The purpose of this report on internal control over compliance is solely to describe the scope of OUfour testing of internal controlcontro l over compliance and the results of that testing based on the requirements of OMB CircularCircular A-133.A-l33. Accordingly, this report is not suitable for any otherother purpose.

December 3, 2015

37 KIRKLR

THE PROVIDENCE CENTER, INC. AND AFFILIATES SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year EndedEnded June 30,30,2015 2015

SECTION I-I - SUMMARY OF AUDITOR RESULTS

Financial Statements: Type of auditors' report issuedissued:: unmodified

Internal control over financial reporting:reporting: • Material weaknesses identified? Yes X No

• Significant deficiencies identified that are not considered to be material weaknesses? Yes X No

• NoNoncompliancencompliance material to financial statemenstatementsts noted? Yes X None reported

Federal Awards Internal controcontroll over major programs: • Material weaknesses identified? YesYes X None reported

• Significant deficiencies identified that are not coconsiderednsidered to be material weaknesses? X Yes None reportedreported

Type of auditors' report issued on compliance for major programs: unmodified

Any audit findings didisclosedsclosed that arcare required to be reported in accordance with Section 510(a)51 O(a) of Circular A-133?A·133? Yes X No

Identification of major programs: CFDANumber Name o[Fedeof Federalral ProProgramgram 14.157 Supportive Housing for the Elderly (Section 202) 14.18114.181 Supportive Housing for Persons with Disabilities 93.243 Substance Abuse and Menth Health Services 93.505 AffordableAffordable CareCare Act (ACA) Maternal, Infant and Early Childhood Home Visiting

Dollar thresholdthreshold used to distinguish between typetype A and type B programs: $$300,000 300,000 Auditee qualified as low-risk auditeeauditee X Yes No

38 KLRKIR

THE PROVIDENCE CENTER, INC. AND AFFILIATES SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2015

SECTION II-II - FINANCIAL STATEMENT FINDINGS

CURRENT YEAR FINDINGS:

None noted.

FOLLOW-UP ON PRIORPRlOR YEAR FINDINGS:

None noted.

SECTION III-III - FEDERAL AAWARD WARD FINDINGS AND QUESTIONED COSTS

CURRENT YEAR FINDINGSFINDINGS:: "Corrective Action CompCompleted"leted"

2015-012015-0 I ThThee Required DDococumeentatntationion with ReRegardgard to EliEligibilitgibilityy was Not MMaaintaintained and Filed for Tenants Receivinivingg Rent Supplements

Statement of CCondition:ondition: Our review of certain tenant files revealedrevealed mimissingssing and unsignedunsigned documentation. The Organization was not maintaining proper documentation in the individual tenant files and various documentation was missingmissing appropriateappropriate ssignatures.ignatures.

Criteria: A written policy governing the initiation, documentation, and review of tcnanttenant case files should be in place in order to ensureensure proper control over each file. The Organization is also responsible for maintaining the required documentation in each tenant file in accordance with the Housing Urban Development (HUD) regulations.

Cause:Cause: Due to staffing constraints thetbe OrganizationOrganization did notnot provide adequate oversight to ensure that staff responsible for reviewing tenant files verified that documents were maintained in accordance with HUD regulations.

Effect: Tenant files lacked documentation to ssupportupport tenant eligibility and mismtssmgsing documentation went undetected for a period of time.

39 KLR

THE PROVIDENCEPROVIDENCE CENTER,CENTER, INC. AND AFFILIATES SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year EndedEnded June 30, 2015

Recommendation: We recommendrecommend that the Organization develop a formal written policy for tenant filefil e documentation and review. TheThe file shshouldould include include a document notingnoting all required reports and schedules inin the file and identificationidentification of individuals updatingupdating and reviewing the tenant files.fil es.

ManagementManagement Response:esponse: When ththee documentation issue was brought to management's attentionattention all filesfiles were reviewedreviewed and proper documentationdocumentation was acacquired.quired. ManagementManagement hashas also also put proper controls in place to ensure timely file documentation completioncompletion and review going forward.

FOLLOW-UPFOLLOW·UP ON PRIOR YEAR FINDINGSFfNDfNGS:

None noted.noted.

APPENDIX B-3

Unaudited Interim Consolidated Financial Statements of Care New England Health System and Affiliates as of and for the Nine Months Ended June 30, 2016 [THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX C

Form of the Master Indenture [THIS PAGE INTENTIONALLY LEFT BLANK]

______

MASTER TRUST INDENTURE

Dated as of September 1, 2016

among

CARE NEW ENGLAND HEALTH SYSTEM BUTLER HOSPITAL KENT COUNTY MEMORIAL HOSPITAL KENT COUNTY VISITING NURSE ASSOCIATION SOUTHEASTERN HEALTHCARE SYSTEM, INC. THE MEMORIAL HOSPITAL THE PROVIDENCE CENTER, INC. WOMEN & INFANTS CORPORATION WOMEN & INFANTS HOSPITAL OF RHODE ISLAND

and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Master Trustee ______

[THIS PAGE INTENTIONALLY LEFT BLANK]

ARTICLE ONE DEFINITION OF TERMS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS

SECTION 1.1 Definition of Terms...... 10 SECTION 1.2 Construction ...... 21 SECTION 1.3 Date of Master Trust Indenture ...... 21 SECTION 1.4 Severability Clause ...... 21

ARTICLE TWO ISSUE, EXECUTION, AUTHENTICATION, FORM AND PAYMENT OF NOTES

SECTION 2.1 Series and Amount of Notes ...... 21 SECTION 2.2 Designation of Notes ...... 22 SECTION 2.3 Execution and Authentication of Notes ...... 22 SECTION 2.4 Provision as to Signing Officers ...... 22 SECTION 2.5 Compliance with Master Trust Indenture ...... 22 SECTION 2.6 Forms of Note ...... 22 SECTION 2.7 Payment of Notes ...... 23

ARTICLE THREE REGISTRATION, TRANSFER, EXCHANGE, CANCELLATION AND OWNERSHIP OF NOTES

SECTION 3.1 Office for Registration, Transfer and Exchange of Notes ...... 23 SECTION 3.2 Registration and Transfer of Notes ...... 23 SECTION 3.3 Exchange of Notes ...... 24 SECTION 3.4 Charges for Exchange or Transfer ...... 24 SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Notes...... 24 SECTION 3.6 Cancellation of Surrendered Notes ...... 24 SECTION 3.7 Persons Deemed Owners of Notes ...... 25 SECTION 3.8 List of Noteholders ...... 25 SECTION 3.9 Paying Agents ...... 25

ARTICLE FOUR REDEMPTION OF NOTES

SECTION 4.1 Right to Redeem ...... 25 SECTION 4.2 Notice of Redemption, Contents of Notice ...... 25

ARTICLE FIVE INTENTIONALLY OMITTED

ARTICLE SIX COVENANTS OF THE OBLIGATED GROUP MEMBERS

SECTION 6.1 Payment of Principal, Premium and Interest ...... 27

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SECTION 6.2 Due Authorization of Master Trust Indenture and Notes ...... 27 SECTION 6.3 Covenants as to Tax Exempt Status and Accreditation ...... 27 SECTION 6.4 Insurance ...... 28 SECTION 6.5 Self Insurance...... 28 SECTION 6.6 Restrictions as to Creation of Liens; Permitted Liens ...... 29 SECTION 6.7 Restriction on Debts and Guaranties...... 31 SECTION 6.8 Authorized Obligated Group Representative ...... 33 SECTION 6.9 Debt Service Coverage Ratio ...... 33 SECTION 6.10 Sale, Lease or Other Disposition of Assets» ...... 33 SECTION 6.11 Consolidation, Merger, Sale or Conveyance ...... 35 SECTION 6.12 Filing of Financial Statements, Certificate of No Default, Other Information ...... 36 SECTION 6.13 Insurance and Condemnation Proceeds ...... 37 SECTION 6.14 Liquidity Covenant...... 38

ARTICLE SEVEN REMEDIES OF THE MASTER TRUSTEE AND NOTEHOLDERS IN EVENT OF DEFAULT

SECTION 7.1 Events of Default ...... 38 SECTION 7.2 Payment of Notes on Default ...... 40 SECTION 7.3 Suit to Enforce Rights or for Moneys Due ...... 40 SECTION 7.4 Proceedings in Bankruptcy ...... 41 SECTION 7.5 Suit by Master Trustee ...... 41 SECTION 7.6 Application of Moneys Collected ...... 41 SECTION 7.7 Suit by Noteholders...... 42 SECTION 7.8 Direction of Proceedings and Waiver of Defaults by Noteholders ...... 43 SECTION 7.9 Delay or Omission of Master Trustee ...... 43 SECTION 7.10 Remedies Cumulative ...... 43 SECTION 7.11 Notice of Default ...... 44

ARTICLE EIGHT CONCERNING THE MASTER TRUSTEE

SECTION 8.1 Duties and Liabilities of Master Trustee ...... 44 SECTION 8.2 Reliance on Documents, Indemnification, Etc ...... 45 SECTION 8.3 Responsibility for Recitals, Validity of Indenture, Proceeds of Notes ...... 46 SECTION 8.4 Master Trustee, Paying Agent or Registrar May Own Notes ...... 47 SECTION 8.5 Moneys to be Held in Trust ...... 47 SECTION 8.6 Compensation and Expenses of Master Trustee ...... 47 SECTION 8.7 Officer’s Certificate as Evidence ...... 47 SECTION 8.8 Resignation, Removal and Successor Master Trustee ...... 48 SECTION 8.9 Acceptance by Successor Master Trustee ...... 48 SECTION 8.10 Qualifications of Successor Master Trustee ...... 48 SECTION 8.11 Successor by Merger ...... 48 SECTION 8.12 Co-Master Trustees ...... 49

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ARTICLE NINE CONCERNING THE NOTEHOLDERS

SECTION 9.1 Evidence of Action by Noteholders; Related Bondholders Deemed Noteholders ...... 49 SECTION 9.2 Proof of Execution of Instruments and of Ownership of Notes and Related Bonds ...... 50 SECTION 9.3 Who May Be Deemed Owners of Notes ...... 51 SECTION 9.4 Notes or Related Bonds Owned by Obligated Group Members ...... 51 SECTION 9.5 Instruments Executed by Noteholders and Related Bondholders Binding Future Noteholders and Related Bondholders ...... 51

ARTICLE TEN SUPPLEMENTS AND AMENDMENTS NOT CREATING A NEW SERIES OF NOTES

SECTION 10.1 Supplemental Indentures without Consent of Noteholders ...... 52 SECTION 10.2 Modification of Master Trust Indenture with Consent of Noteholders ...... 53 SECTION 10.3 Effect of Supplemental Indenture ...... 54 SECTION 10.4 Notes May Bear Notation of Changes ...... 55

ARTICLE ELEVEN SUPPLEMENTAL INDENTURES CREATING SERIES OF NOTES

SECTION 11.1 Supplemental Indentures Creating Series of Notes ...... 55 SECTION 11.2 Conditions to Issue of Notes ...... 55

ARTICLE TWELVE REPLACEMENT MASTER TRUST INDENTURE

SECTION 12.1 Replacement Master Trust Indenture ...... 56

ARTICLE THIRTEEN PERSONS BECOMING OBLIGATED GROUP MEMBERS; WITHDRAWAL FROM OBLIGATED GROUP

SECTION 13.1 Persons Becoming Obligated Group Members ...... 57 SECTION 13.2 Effects of Becoming an Obligated Group Member ...... 58 SECTION 13.3 Withdrawal from the Obligated Group ...... 58

ARTICLE FOURTEEN SATISFACTION AND DISCHARGE OF MASTER TRUST INDENTURE; UNCLAIMED MONEYS

SECTION 14.1 Satisfaction and Discharge of Master Trust Indenture ...... 60

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SECTION 14.2 Repayment of Moneys held by Paying Agent ...... 61 SECTION 14.3 Repayment of Moneys held by Master Trustee ...... 61

ARTICLE FIFTEEN IMMUNITY OF INCORPORATORS, OFFICERS AND MEMBERS OF GOVERNING BODY

SECTION 15.1 Incorporators, Officers and Members of Governing Body of any Obligated Group Member Exempt from Individual Liability ...... 62

ARTICLE SIXTEEN MISCELLANEOUS PROVISIONS

SECTION 16.1 Successors and Assigns of the Obligated Group Members Bound by Master Trust Indenture ...... 62 SECTION 16.2 Official Acts by Successor Corporation ...... 62 SECTION 16.3 Service of Notice or Demand ...... 62 SECTION 16.4 Rhode Island Contract...... 63 SECTION 16.5 Legal Holidays ...... 63 SECTION 16.6 Master Trustee as Paying Agent and Registrar ...... 64 SECTION 16.7 Benefits of Provisions of Master Trust Indenture and Notes ...... 64 SECTION 16.8 Execution in Counterparts ...... 64 SECTION 16.9 Obligated Group Representative ...... 64

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MASTER TRUST INDENTURE

THIS MASTER TRUST INDENTURE, dated as of September 1, 2016 (the “Master Trust Indenture”), among Care New England Health System, Butler Hospital, Kent County Memorial Hospital, Kent County Visiting Nurse Association, Southeastern Healthcare System, Inc., The Memorial Hospital, The Providence Center, Inc., Women & Infants Corporation and Women & Infants Hospital of Rhode Island (collectively, the “Obligated Group”), each a Rhode Island non-profit corporation, and The Bank of New York Mellon Trust Company, N.A., a national banking association, organized and existing under the laws of the United States of America, as Master Trustee (the “Master Trustee”).

W I T N E S S E T H:

WHEREAS, the Obligated Group is authorized by law, and deems it necessary and desirable, to issue Notes (hereinafter defined) of several series in order to secure the financing or refinancing of health care or related facilities and for other lawful and proper corporate purposes; and

WHEREAS, all acts and things necessary to make Notes of each series, when executed by the Obligated Group Members (hereinafter defined) and authenticated and delivered by the Master Trustee as in this Master Trust Indenture provided, the valid, binding and legal joint and several obligations of the Obligated Group Members, respectively, and to constitute these presents a valid Master Trust Indenture and agreement according to its terms, have been done and performed and the execution of this Master Trust Indenture and the issue hereunder of Notes of each series have in all respects been duly authorized, and the Obligated Group Members, in the exercise of the legal right and power vested in them, execute this Master Trust Indenture and propose to make, execute, issue and deliver one or more Notes of each series; and

WHEREAS, the Obligated Group Members have determined that the Notes may be issued in registered form and that the forms of such Notes and of the certificate of authentication by the Master Trustee shall be substantially as follows, with such modifications, insertions, omissions and changes as are required or permitted by this Master Trust Indenture or any indenture supplemental hereto hereafter entered into under the provisions of this Master Trust Indenture:

[Form of Registered Notes Without Coupons] [THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933]

No. $

Series ______Note

( ) ______, a Rhode Island non-profit corporation ([collectively,] the “Obligated Group”), for value received, hereby promises to pay to ______or registered assigns, on ______the principal sum of $______and to pay to the registered owner hereof interest on the unpaid principal balance hereof from the date hereof to maturity or the date fixed for redemption and payment of the principal or redemption price hereof shall have been made or provided for in accordance with the provisions of the Master Trust Indenture, as herein defined, at the rate of ______per centum (______%) per annum, payable semiannually on the first days of ______and ______in each year, commencing ______.

______, [each] a non-profit corporation organized under the laws of ______([collectively,] the “Obligated Group”), for value received, hereby promise[s] to pay to ______or registered assigns, the principal sum of $______and to pay interest on the unpaid balance thereof at the rate of ______% per annum, from the date of this Note, until paid. The principal hereof and interest hereon shall be payable in installments on ______in each year commencing ______and ending ______. The amount of each installment shall be as set forth on the Loan Schedule attached hereto, subject to adjustment as provided in the Master Trust Indenture and the Supplemental Indenture, as herein defined. The last such installment shall be in an amount sufficient to discharge all unpaid principal of, premium, if any, and accrued interest on this Note in full.

______, [each] a non-profit corporation organized under the laws of ______([collectively,] the “Obligated Group”), for value received, hereby promise[s] to pay to ______or registered assigns, the principal sum of $______in installments on ______of each of the years set forth, below, and to pay interest thereon in installments on ______and ______of each of the years set forth below as follows:

Payment Date Principal Payment Interest Payment Total Payment

The amount of each installment shall be subject to adjustment as provided in the Master Trust Indenture and the Supplemental Indenture, as herein defined.]

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Principal of, premium, if any, and interest on this Note are payable in any coin or currency of the United States of America which, at the respective times of payment, is legal tender for the payment of public and private debts.

[The Obligated Group shall receive a cash credit against its interest obligations on Notes of this series on any interest payment date equal to the difference between amounts required to be paid on any interest payment date and amounts on deposit in the Series ____ Accounts of the Bond Fund pursuant to the Related Bond Indenture.]

[The principal hereof and the premium, if any, hereon shall be payable at the principal office of ______, upon the presentation hereof as the same shall become due and payable. The interest hereon shall be paid by the Master Trustee, as herein defined, on each interest payment date by check mailed to the registered owner hereof at his address as it last appears on the register maintained by the Obligated Group at the Principal Office of the Master Trustee pursuant to the Master Trust Indenture.]

[The principal hereof, premium, if any, and interest hereon shall be payable by depositing the same with the Bond Trustee, as herein defined, at or prior to the opening of business on the date the same shall become due and payable, and giving notice of payment to the Master Trustee as provided in the Master Trust Indenture.]

[To the extent permitted by applicable law, this Note shall bear interest, at the rate of ______% per annum, on any part of the principal hereof, or premium, if any, or interest hereon not paid when due for any period when the same shall be overdue.]

This Note is one of a duly authorized issue of Notes of the Obligated Group, aggregating ______in principal amount, designated as “______, Series______Note” (the “Series ______Note,” and together with all other Notes issued under the Indenture, as hereinafter defined, the “Notes”) issued under and pursuant to the Supplemental Indenture No. ______dated as of ______(the “Supplemental Indenture”) supplementing and amending the Master Trust Indenture, dated as of September 1, 2016 (the “Master Trust Indenture”), among the Obligated Group Members and [ ], as Master Trustee (the “Master Trustee”), [and delivered pursuant to the Loan Agreement between ______(the “Issuer”) and the Obligated Group dated as of ______(the “Loan Agreement”).] The Master Trust Indenture, as so supplemented and amended, is hereinafter called the “Indenture”. All defined terms not otherwise defined herein shall have the meanings set forth in the Indenture.

[This Note is issued for the purpose of evidencing the loan by the ______to the Obligated Group of the proceeds of issuance and sale of revenue bonds of the ______, aggregating ______in principal amount, designated “______(______Project)” (the “Series ______Bonds”), and issued by ______(the “Issuer”) under and pursuant to the laws of the State, particularly ______, and an Indenture of Trust and Pledge by the ______to ______, as Trustee (the “Bond Trustee”), dated as of ______(the “Bond Indenture”), for the purpose of financing the construction, renovation or refinancing of certain health care or related facilities at ______in ______.]

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Copies of the Indenture, the Bond Indenture [and the Loan Agreement] are on file at the Principal Office of the Master Trustee and reference is hereby made to the Master Trust Indenture, the Bond Indenture [and the Loan Agreement] for the provisions, among others, with respect to the nature and extent of the rights of the holders of the Series ______Notes, the terms and conditions on which, and the purposes for which, the Series ______Notes are issued and the rights, duties and obligations of the Obligated Group and the Master Trustee under the Master Trust Indenture and the Bond Indenture [and the Loan Agreement] to all of which the holder hereof, by acceptance of this Series ______Note, assents.

To the extent permitted by and as provided in the Indenture, modifications or changes of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Obligated Group and of the holders of the Notes may be made by the execution and delivery of an indenture or indentures supplemental to the Indenture or any supplemental indenture, but any modification or change which shall adversely affect the rights of the holders of this Series ______Note may be made only with the consent of the holders of not less than a majority of the aggregate principal amount of the Notes then Outstanding under the Indenture. No such modification or change shall be made which will reduce the percentage of Notes the consent of the holders of which is required to consent to such supplemental indenture, or permit a preference or priority of any Note or Notes over any other Note or Notes, or which will effect a change in the times, amount or currency of payment of the principal of, and premium, if any, or interest on any Note or a reduction in the principal amount or redemption price of any Note or the rate of interest thereon, without the consent of the holder of such Note. Any such consent by the holder of this Note shall be conclusive and binding upon such holder and all future holders and owners hereof irrespective of whether or not any notation of such consent is made upon this Note.

In the manner and with the effect provided in the Related Bond Indenture, the Series ______Notes will be subject to redemption prior to maturity, as follows:

[(a) The Series ______Notes shall be subject to redemption, in whole at any time, or in part from time to time, on or after ______, at the option of the Obligated Group, on any interest payment date, upon payment in each case of the applicable redemption price, expressed as a percentage of the principal amount of Series ______Notes to be redeemed, set forth in the table below, together with interest accrued to the date fixed for redemption:

Optional Redemption Period Redemption Price

[(b) The Series ______Notes shall be subject to redemption by operation of a sinking fund, in an amount equal to the Sinking Fund Requirement (the “Sinking Fund Requirement”) for each Sinking Fund Payment Date (the “Sinking Fund Payment Date”), as set forth in the table below, upon payment of a redemption price of 100% of the principal amount thereof, together, in each case, with interest accrued to the date fixed for redemption.

The Sinking Fund Requirements and the Sinking Fund Payment Dates shall be as follows:

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Sinking Fund Payment Date Sinking Fund Requirements]

[If the Obligated Group (i) shall have elected to apply a Series ______Bond or Bonds that have been redeemed or otherwise acquired by the Obligated Group or the Issuer and delivered to the Related Bond Trustee for cancellation by the Related Bond Trustee, in payment of all or a part of a sinking fund requirement under the Bond Indenture and (ii) shall have delivered written notice to the Issuer and a copy thereof to the Bond Trustee in accordance with the provisions of the Related Bond Indenture, and the Issuer shall have received a credit against such sinking fund requirement in the amount of 100% of the principal amount of the Bond or Bonds thus applied, then the Related Bond Trustee shall immediately notify the Master Trustee whereupon the Obligated Group shall receive a credit, equal to the credit received by the Issuer, in respect of the Sinking Fund Requirement for the same Sinking Fund Payment Date as the sinking fund payment date under the Related Bond Indenture for the sinking fund requirement in payment of which the Series ______Bond or Bonds have been applied, and the principal amount of the Series ______Notes to be redeemed by operation of the Sinking Fund Requirement on the Sinking Fund Payment Date of such Sinking Fund Requirement will be reduced accordingly.]

If less than all the Series ______Notes shall be called for redemption, the particular Series ______Notes or portions of Notes to be redeemed as a whole or in part shall be selected by lot by the Master Trustee in any manner it may deem fair, or as provided in the Supplemental Indenture. Any redemption, either in whole or in part, shall be made upon at least thirty (30) days’ notice in the manner and upon the terms and conditions provided in the Indenture. If this Series _____ Note shall have been duly called for redemption and payment of the redemption price, together with interest accrued thereon to the date fixed for redemption, shall have been made or provided for, as more fully set forth in the Indenture, interest on this Note shall cease to accrue from the date fixed for redemption, and from and after such date this Note shall be deemed not to be Outstanding, as defined in the Indenture, and shall no longer be entitled to the benefits of the Indenture, and the holder hereof shall have no rights in respect of this Note other than payment of the redemption price, together with accrued interest to the date fixed for redemption.

Upon the occurrence of certain “Events of Default”, as defined in the Indenture, the principal of all outstanding Notes may be declared, and thereupon shall become, due and payable as provided in the Indenture.

The holder of this Series ______Note shall have no right to enforce the provisions of the Indenture, or to institute any action to enforce the covenants therein, or to take any action with respect to any default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture.

The Notes are issuable as registered Notes.

This Series ______Note shall be registered on the register to be maintained by the Obligated Group for that purpose at the Principal Office of the Master Trustee and this Series ______Note shall be transferable only upon said register at said Principal Office by the registered owner or by his duly authorized attorney. Such transfer shall be without charge to the

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holder hereof, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the holder requesting such transfer as a condition precedent to the exercise of such privilege. Upon any such transfer, the Obligated Group Members shall execute and the Master Trustee shall authenticate and deliver in exchange for this Note a new Note, registered in the name of the transferee.

The Obligated Group, the Master Trustee, any paying agent and any Note registrar may deem and treat the person in whose name this Series _____ Note is registered as the absolute owner hereof for all purposes; and neither the Obligated Group Members, any paying agent, the Master Trustee nor any Note registrar shall be affected by any notice to the contrary, All payments made to the registered owner thereof shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable on this Series _____ Note.

No covenant or agreement contained in this Series _____ Note or the Indenture shall be deemed to be a covenant or agreement of any officer, agent or employee of the Obligated Group Members or of the Master Trustee in his individual capacity, and neither any member of the Board of Directors of the Obligated Group Members nor any officer executing this Series Note shall be liable personally on this Series _____ Note or be subject to any personal liability or accountability by reason of the issuance of this Series _____ Note.

This Series _____ Note shall not be entitled to any benefit under the Indenture or be valid or become obligatory for any purpose, until this Series _____ Note shall have been authenticated by execution by the Master Trustee, or its successor as Master Trustee, of the Certificate of Authentication inscribed hereon.

IN WITNESS WHEREOF, ______has caused this Series _____ Note to be executed in its name and on its behalf by the manual signature of an Authorized Obligated Group Representative as of ______.

______[ ], President Attest:

______[ ], Secretary

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[Form of Master Trustee’s Certificate of Authentication] (To be Endorsed on All Notes)

This Series _____ Note is one of the Notes described in the within-mentioned Indenture.

[ ]

By______Authorized Officer

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[Form of Loan Schedule Referred to in Form of Note]

Payment Date Principal Payment Interest Payment Total Payment

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That in order to declare the terms and conditions upon which Notes of each series are authenticated, issued and delivered, and in consideration of the premises, of the purchase and acceptance of Notes of each series by the holders thereof and of the sum of One Dollar to it duly paid by the Master Trustee at the execution of these presents, the receipt whereof is hereby acknowledged, the Obligated Group Members covenant and agree with the Master Trustee, for the equal and proportionate benefit of the respective holders from time to time of Notes of each series, as follows:

GRANTING CLAUSES GRANTING CLAUSE FIRST

All revenue and Gross Receipts of the Obligated Group Members, including without limitation rights to receive payments from patients, but except and excluding all such items, whether now owned or hereafter acquired by the grantor, which by their terms or by reason of applicable law would become void or voidable if granted, assigned, or pledged hereunder by the Obligated Group Members or which cannot be granted, pledged, or assigned under this Master Indenture without the consent of other parties whose consent is not secured, or without subjecting the Master Trustee to a liability not otherwise contemplated by the provisions of this Master Indenture, or which otherwise may not be, or are not, hereby lawfully and effectively granted, pledged, and assigned by the grantor, provided that the Obligated Group Members may subject to the lien of this Master Indenture any such excepted property, whereupon the same shall cease to be excepted property; and

GRANTING CLAUSE SECOND

Any and all property that may, from time to time hereinafter, by delivery or by writing of any kind, be subjected to the lien and security interest hereof by the Obligated Group Members or by anyone in their behalf (and the Master Trustee is hereby authorized to receive the same at any time as additional security hereunder), which subjection to the lien and security interest hereof of any such property as additional security may be made subject to any reservations, limitations, or conditions which shall be set forth in a written instrument executed by the Obligated Group Members or the person so acting in their behalf or by the Master Trustee respecting the use and disposition of such property or the proceeds thereof;

TO HAVE AND TO HOLD all said property, rights, privileges, and franchises of every kind and description, real, personal, or mixed, hereby and hereafter (by supplemental indenture or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over, or confirmed as aforesaid, or intended, agreed, or covenanted so to be, together with all the appurtenances thereto appertaining (said

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properties, rights, privileges, and franchises including any cash and securities hereafter deposited or required to be deposited with the Master Trustee, other than any such cash which is specifically stated herein not to be deemed part of the Trust Estate, being herein collectively referred to as the “Trust Estate”) unto the Master Trustee and its successors and assigns forever;

SUBJECT AND SUBORDINATE, HOWEVER, in the case of Granting Clause First, to Permitted Liens as defined herein as to the property covered thereby and all revenues and receipts derived from such property;

BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all the outstanding Notes without any priority of any such Notes over any other such Notes except as herein otherwise expressly provided;

UPON CONDITION that, if the Obligated Group, or their successors or assigns shall well and truly pay, or cause to be paid, the principal of (and premium, if any) and interest on the Notes according to the true intent and meaning thereof, or there shall be deposited with the Master Trustee such amounts in such form in order that none of the Notes shall remain Outstanding as herein defined and provided, and shall pay or cause to be paid to the Master Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon the full and final payment of all such sums and amounts secured hereby or upon such deposit, this Master Indenture and the rights, titles, liens, security interests and assignments herein granted shall cease, determine, and be void and this Master Indenture shall be released by the Master Trustee in due form at the expense of the Obligated Group, except only as herein provided; otherwise this Master Indenture to be and remain in full force and effect.

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ARTICLE ONE

DEFINITION OF TERMS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS

SECTION 1.1 Definition of Terms. Unless otherwise apparent from the context, the terms defined in this Article One shall for all purposes of this Master Trust Indenture have the meanings herein specified. Except where otherwise indicated or provided, words in the singular number include the plural as well as the singular number and vice versa.

Affiliate of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities or membership interests, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Audited Financial Statements or audited financial statements of the Obligated Group shall include consolidated or consolidating audited financial statements of entities in addition to Members of the Obligated Group so long as all information and data with regard to the Obligated Group required to compute compliance with all covenants in this Master Trust Indenture are separately stated and identified in such consolidated or consolidating audited financial statements.

Authorized Newspaper shall mean (i) a newspaper of general circulation in Providence, Rhode Island, printed in the English language, customarily published on each business day, whether or not published on Saturdays, Sundays or holidays and (ii) The Bond Buyer, published in New York, New York, if then being published.

Authorized Obligated Group Representative shall mean the President, any Vice President, Secretary or Assistant Secretary, chief executive officer or chief financial officer of CNE or any other person at the time designated to act on behalf of the Obligated Group by written certificate furnished to the Master Trustee containing the specimen signature of such person and signed on behalf of each of the Obligated Group Members by its President or Chief Financial Officer.

Balloon Debt shall mean any Long-Term Debt, more than 25% of the principal amount (at time of issuance) of which is payable in the same Fiscal Year (after taking into account all scheduled mandatory redemptions or prepayments payable over the life of the Debt).

Book Value when used in connection with an asset of the Obligated Group, means the value of such asset as shown on the balance sheet of the Obligated Group. For depreciable assets Book Value shall be net of accumulated depreciation.

Cash and Investments means cash, cash equivalents, securities and other investment property; provided, however, that “Cash and Investments” does not include accounts receivable or contract rights with respect to payment or reimbursement for services provided.

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CNE shall mean Care New England Health System, a Rhode Island non-profit corporation, its successors and assigns.

Completion Debt means Debt incurred by the Obligated Group for the purpose of financing the completion of facilities for which the Obligated Group has already incurred Debt (the “original Debt”) if the Obligated Group expected in good faith when the original Debt was incurred that the proceeds of such original Debt, together with any funds of the Obligated Group dedicated to the completion of such facilities, would be sufficient for the completion of such facilities. The expectations of the Obligated Group may be established by a certificate of an Authorized Obligated Group Representative.

Credit Facility means a bond or financial guaranty insurance policy, letter of credit, standby bond purchase agreement, a line of credit or similar credit enhancement or liquidity facility established to provide credit or liquidity support for Debt.

Credit Facility Provider means the issuer of a Credit Facility.

Current Assets shall mean cash and cash equivalent deposits, marketable securities, accounts receivable, accrued interest receivables, inventories, prepaid expenses and any other assets of the Obligated Group Members ordinarily considered current assets under generally accepted accounting principles as then in effect, except that regardless of such generally accepted accounting principles, Current Assets (a) shall not include Operating Assets as defined herein and (b) shall include cash and cash equivalent deposits and marketable securities (“Board Designated Assets”) that have been designated by a Board of Directors of an Obligated Group Member (the “Board”), except to the extent that Board Designated Assets have been committed by action of the Board to pay part of the costs of a particular capital project with respect to which Debt has been incurred and the completion of which capital project has not been abandoned by action of the Board.

“Days’ Cash on Hand” means

Unrestricted Cash and Investments Average Daily Operating Expenses

For purposes of this calculation:

“Unrestricted Cash and Investments” means all cash and marketable securities that the Obligated Group could, in its discretion, apply to the payment of Debt without violating any Lien or other security agreement or applicable law or the restrictions of any grant or gift. Without limiting the generality of the foregoing, Unrestricted Cash and Investments shall not include: (A) trustee-held funds, including debt service funds, debt service reserve funds and construction funds; (B) malpractice funds, self-insurance or captive insurer funds; (C) pension or retirement funds; (D) funds subject to any Permitted Lien, unless such Permitted Lien secures all Obligations; (E) the undisbursed proceeds of any borrowing. Marketable securities shall be valued at fair market value as of the date of determination. Unrestricted Cash and Investments shall be reduced by the following: (i) bank overdrafts; (ii) the amount received from the sale or factoring

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of accounts receivable or inventory; and (iii) cash or investments held as part of litigation reserves or a reserve for any other liability.

“Annual Operating Expenses” means the Obligated Group’s operating expenses for the last Fiscal Year for which audited financial statements are available or, at the option of the Obligated Group, for the last 12 months for which unaudited financial statements of the Obligated Group are available, in each case (i) including interest expense and (ii) excluding (A) depreciation, (B) amortization, (C) unrealized gain or loss on investments and hedges (including without limitation Derivative Agreements), (D) any gain or loss from the disposition of assets not in the ordinary course of business, (E) restructuring or merger costs incurred through Fiscal Year 2018, up to a maximum exclusion of $4,000,000 per Fiscal Year, (F) components of net periodic cost for the retirement plans related to settlements and curtailments requiring recognition of a portion of the net balance that has been recognized as a change in unrestricted net assets arising from a defined benefit plan but not yet reclassified as components of net periodic cost, and (G) other non-cash items that may be included on such financial statements as operating expenses.

“Average Daily Operating Expenses” means Annual Operating Expenses for the Fiscal Year or 12-month period in question divided by 365.

Debt means (i) all indebtedness, whether or not represented by Obligations, notes or other securities, for the repayment of borrowed money and (ii) all capitalized leases, installment sale agreements and other similar obligations for the payment of the purchase price of property or assets purchased; provided however, that any operating lease on the books of the Obligated Group on the date any changes to generally accepted accounting principles would convert such operating lease to Debt shall be excluded from the calculation of Debt.

Debt Service Coverage Ratio shall mean the ratio (expressed as a percentage) of Net Income Available for Debt Service for the Fiscal Year in question to Maximum Annual Debt Service as of the date of computation.

Derivative Agreement means, without limitation, (i) any and all swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, cap transactions, floor transactions, collar transactions, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement; (ii) any contract providing for payments based on levels of, or changes or differences in, interest rates, currency exchange rates, or stock or other indices; (iii) any contract to exchange cash flows or payments or series of payments; (iv) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc.; and (v) any other type of contract or arrangement that the Member of the Obligated Group entering into such contract or arrangement determines is to be used, or is intended to be used, to manage or reduce the cost of

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Debt, to convert any element of Debt from one form to another, to maximize or increase investment return, to minimize investment return risk or to protect against any type of financial risk or uncertainty.

Derivative Debt means Debt or the portion of any Debt with respect to which a Member of the Obligated Group shall have entered into a Derivative Agreement.

Derivative Obligations means the payment obligations of a Member of the Obligated Group under a Derivative Agreement that hedges Debt, including but not limited to regularly scheduled payments and termination payments. For purposes of any financial covenant, Derivative Obligations shall be valued based on a netting of payments (Debt Service Coverage Ratio and Days Cash on Hand) for the period in question.

Derivative Period means the period during which a Derivative Agreement is in effect.

Disposition means a conveyance, gift, transfer, sale, lease or other disposition of assets.

Event of Default shall have the meaning set forth in Article Seven hereof.

Federal Securities shall mean and include any of the following securities, if and to the extent the same are at the time legal for investment of Obligated Group Member funds:

(i) direct obligations of, or obligations the principal of, and interest on which, are unconditionally guaranteed by, the United States of America;

(ii) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any of the Federal agencies to the extent unconditionally guaranteed by the United States of America and any certificates or any other evidences of a proportionate ownership interest in obligations or in specified portions thereof (which may consist of specified portions of the principal thereof or the interest thereon) of the character described in this clause (ii).

Fiduciary or Fiduciaries shall mean the Master Trustee any Related Bond Trustee, any paying agents, any depositary, or any or all of them, as may be appropriate.

Fiscal Year shall mean, with respect to each Member of the Obligated Group, that period of twelve complete, consecutive calendar months selected by the Authorized Obligated Group Representative (which determination shall be made by delivery of written notice thereof to the Master Trustee) as the fiscal year of the Members of the Obligated Group for purposes of this Master Trust Indenture and for which period the financial statements of the Obligated Group shall have been reported on by an independent certified public accountant.

Fitch shall mean Fitch, Inc. d/b/a Fitch Ratings, its successors and assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized

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securities rating agency designated by the Issuer, with the approval of the Obligated Group, by written notice to the Master Trustee.

Fixed Assets means assets included in property, plant and equipment under generally accepted accounting principles.

Governing Body shall mean, with respect to each Obligated Group Member, the board of directors or board of trustees of such Obligated Group Member, or if there shall be no board of directors or board of trustees, then such person or body which pursuant to law or the organizational documents of the Obligated Group Member is vested with powers similar to those vested in a board of directors or a board of trustees.

Gross Receipts shall mean all receipts, revenues, income and other moneys received by or on behalf of the Obligated Group Members (except if received from another Obligated Group Member or pursuant to a borrowing), including, without limitation, contributions, donations and pledges whether in the form of cash, securities or other personal property, revenues derived from the operation of all facilities of the Obligated Group Members, and all rights to receive the same, whether in the form of accounts receivable, contract rights, chattel paper, instruments or other rights, and the proceeds thereof, and any insurance thereon, whether now existing or hereafter coming to existence and whether now owned or held or hereafter acquired by the Obligated Group Members calculated in accordance with generally accepted accounting practices as then in effect; provided, however, that gifts, grants, bequests, donations and contributions made to any Obligated Group Member designated at the time of making thereof by the donor or maker as being for certain specific purposes, and the income derived therefrom, to the extent required by such designation, shall be excluded from Gross Receipts and provided further, that all rents, income and profits from properties subject to Permitted Liens shall be excluded from Gross Receipts whether or not designated to the extent required by such Permitted Liens.

Guaranteed Debt shall mean Debt subject to a Guaranty from a Member of the Obligated Group.

Guaranty shall mean any obligation under the terms of which any Obligated Group Member guarantees in any manner, whether directly or indirectly, any obligation for the payment of money of any Person.

Indenture Default shall have the meaning set forth in Section 6.9(b) hereof.

Independent Consultant shall mean a firm that does not include an employee or officer of the Obligated Group Members or an employee or member of any issuer which has issued a series of Related Bonds, appointed by the Authorized Obligated Group Representative, qualified to pass upon questions relating to the financial affairs of hospitals and having a favorable reputation for skill and experience in the financial affairs of hospitals.

Independent Insurance Consultant shall mean a person or firm who is not an employee or officer of the Obligated Group Members or an employee or member of any Issuer which has issued a series of Related Bonds, appointed by the Authorized Obligated Group Representative, qualified to survey risks and to recommend insurance coverage for hospital facilities and services and organizations engaged in like operations and having a favorable -14-

reputation for skill and experience in such surveys and such recommendations, and who may be a broker or agent with whom the Obligated Group Members transact business and with respect to Section 6.5 hereof, such person shall be nationally recognized as an actuary.

Index Rate shall mean (i) for tax-exempt Debt, the “Bond Buyer Revenue Bond Index” rate for 30-year tax-exempt revenue bonds, as published by The Bond Buyer on any date selected by the Obligated Group that is within 30 days prior to the date of any determination made with respect to the Index Rate; provided, however, that if The Bond Buyer (or a successor publication) ceases to publish such rate, the Index Rate shall be the rate specified in an index in general use in the financial industry and reasonably comparable to the “Bond Buyer Revenue Bond Index” rate for 30-year tax-exempt revenue bonds, such alternative index to be selected by the Obligated Group Representative; and (ii) for taxable Debt, the interest rate or interest index as may be certified to the Master Trustee as appropriate to the situation by a firm of nationally recognized investment bankers or a financial advisory firm experienced in such field.

Issuer shall mean the respective issuer of Related Bonds.

Liabilities shall mean Debt, Guaranties, and all other liabilities (within the meaning of generally accepted accounting principles) that may be incurred by the Obligated Group, including without limitation the obligation to make payments or post collateral under a Dervative Agreement.

Lien means and includes a mortgage, deed of trust, pledge, encumbrance, security interest, assignment or other charge of any kind, including without limitation any conditional sale agreement or other title retention agreement.

Long-Term, when used in connection with Debt (including Notes), shall mean Debt having an original maturity greater than one year or renewable at the option of the Obligated Group Members for a period greater than one year from the date of original issuance thereof.

Master Indenture Note, Series 1 means the Note issued pursuant to Related Supplement No. 1.

Master Indenture Note, Series 2 means the Note issued pursuant to Related Supplement No. 2.

Master Trust Indenture shall mean this Master Trust Indenture, dated as of September 1, 2016, between the Obligated Group and The Bank of New York Mellon Trust Company, N.A., as Master Trustee, as amended and supplemented pursuant to the terms hereof.

Master Trustee shall mean The Bank of New York Mellon Trust Company, N.A., acting in its capacity as Master Trustee under this Master Trust Indenture, or any successor hereunder.

Maximum Annual Debt Service means the projected maximum amount payable in any Fiscal Year for principal and interest on all Long-Term Debt and Guaranteed Debt of the Obligated Group (including Subordinated Debt, but excluding Short-Term Debt) outstanding on

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the date of determination, with the amount payable during each fiscal year being projected as follows:

(1) The interest payable on any Debt incurred to finance the acquisition or construction of operating assets shall be excluded from interest payable until such operating assets are placed in service, if and to the extent that funds dedicated to the payment of such interest are held by or under the control of a person other than a Member of the Obligated Group or an Affiliate of the Obligated Group.

(2) The principal amount of Debt required to be redeemed in any Fiscal Year shall be deemed to be payable in such Fiscal Year rather than the Fiscal Year of its stated maturity.

(3) With respect to Debt bearing interest at a variable rate, the amount of interest payable during any period for which the actual rate cannot be determined shall (except as otherwise provided below with respect to Put Debt and Balloon Debt) be projected using the Index Rate; provided, however, that if a Derivative Agreement is entered into that in effect provides for payment of a fixed rate for any portion of such Debt, the Obligated Group may project the interest payments on the related portion of such Debt for the term of the Derivative Agreement by using the fixed rate payable as a result of the Derivative Agreement.

(4) With respect to Put Debt, debt service payable on such Debt shall be projected assuming (i) that the principal balance of such Debt on the date of determination is refinanced on the date of determination over a term equal to 30 years (or any number of years less than 30 selected by the Obligated Group at its option), (ii) that such principal balance will bear interest at the Index Rate, and (iii) that debt service on such Debt after the date of determination will be payable in equal annual installments sufficient to pay both principal and interest.

(5) With respect to Balloon Debt, debt service payable on such Debt shall be projected assuming (i) that the principal balance of such Debt on the date of determination is refinanced on the date of determination over a term equal to 30 years (or any number of years less than 30 selected by the Obligated Group at its option), (ii) that such principal balance will bear interest at the Index Rate, and (iii) that debt service on such Debt after the date of determination will be payable in equal annual installments sufficient to pay both principal and interest.

(6) With respect to Guaranteed Debt, the amount of principal and interest payable during each Fiscal Year (the “annual debt service requirements”) on such Debt shall be projected using the assumptions contained in this definition (treating such Debt as Debt of the Obligated Group). After projecting the annual debt service requirements on such Guaranteed Debt, the percentage of the annual debt service requirements on such Debt included in annual debt service requirements of the Obligated Group shall be as follows:

(A) If the Obligated Group has paid, directly or indirectly, any principal or interest on such Guaranteed Debt at any time during the 24-month period next preceding such determination, 100% of the annual debt service requirements on such Guaranteed Debt shall be included.

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(B) If the Obligated Group has not paid, directly or indirectly, any principal or interest on such Guaranteed Debt at any time during the 24-month period next preceding such determination, 20% of the annual debt service requirements on such Guaranteed Debt shall be included.

(7) If cash or Federal Securities have been deposited in escrow or trust in an amount that, together with earnings thereon (but without reinvestment), is sufficient to pay the principal of or interest on Debt (or any portion thereof) as it comes due, such principal or interest (or portion thereof), as the case may be, shall not be included in the calculation of Maximum Annual Debt Service.

Member shall mean a Member of the Obligated Group.

Moody’s shall mean Moody’s Investors Service, Inc. its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer, with the approval of the Obligated Group, by written notice to the Master Trustee.

Net Income Available for Debt Service means the excess of (i) revenues (after adjustments, discounts or contractual allowances) and gains over (ii) expenses and losses other than depreciation, amortization and interest; provided, however, that the following items shall be excluded from the computation of “Net Income Available for Debt Service”: (A) extraordinary items of income or loss; (B) gain or loss from the extinguishment of Debt; (C) unrealized gains and losses on investments or Derivative Agreements; (D) any gain or loss from the disposition of assets or business units not in the ordinary course of business; (E) any loss from impairment of the value of assets; (F) financing costs that are treated as a current expense, rather than amortized; (G) restructuring or merger costs incurred through the fiscal year ending September 30, 2018, up to a maximum exclusion of $4,000,000 per fiscal year; (H) components of net periodic cost for the retirement plans related to settlements and curtailments requiring recognition of a portion of the net balance that has been recognized as a change in unrestricted net assets arising from a defined benefit plan but not yet reclassified as components of net periodic pension cost; (I) termination payments on Derivate Obligations; and (J) any other item that is non-recurring and also a non-cash item.

Note shall mean any note issued, authenticated and delivered under this Master Trust Indenture. References to Notes of a series or such series shall mean the Notes or series issued pursuant to a single Supplemental Indenture.

Noteholder shall mean the Registered Owner of a Note.

Obligations shall mean Notes issued hereunder.

Obligated Group shall mean all Obligated Group Members.

Obligated Group Members or Members of the Obligated Group or Member shall mean each of the entities that are a party hereto as an Obligated Group Member and any other Person who becomes an Obligated Group Member hereunder, subject to the right of any such entity to withdraw from the Obligated Group pursuant to Section 13.3 hereof.

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Obligated Group Representative shall mean, initially, Care New England Health System and, if Care New England Health System shall no longer be the Obligated Group representative, the party appointed to such position in accordance with the terms of this Master Trust Indenture.

Officer’s Certificate shall mean a certificate signed by the President or any Vice President of an Obligated Group Member which, without limiting the generality of the foregoing, may be based upon unaudited financial statements of the Obligated Group Member absent a specific requirement of audited financial statements.

Operating Assets shall mean any or all land, leasehold interests, buildings, machinery, equipment and hardware of the Obligated Group Members, whether separate or together with other such assets, and all stock in a Subsidiary owned by an Obligated Group Member which owns land, leasehold interests, buildings, machinery, equipment or hardware.

Operating Revenues shall mean, for any Fiscal Year, all revenues from operations of the entire Obligated Group for such period or, if the context so requires, of any one or more Obligated Group Members, before deduction of operating expenses, but after deduction of (a) contractual allowances and discounts and (b) provisions for free care and doubtful accounts.

Opinion of Bond Counsel shall mean an opinion in writing signed by an attorney or firm of attorneys experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds which attorney or firm may be legal counsel to an Obligated Group Member.

Opinion of Counsel shall mean an opinion in writing signed by legal counsel who may be an employee of or counsel to the Obligated Group Members.

Outstanding, when used in connection with Debt (including Notes) shall mean, as of any time, Debt issued or incurred and not paid or for which payment has not been provided by deposit of money or securities with the Master Trustee and shall not include Notes surrendered for exchange pursuant to Sections 3.2 and 3.3 hereof or Notes, if any, for which replacement Notes have been issued pursuant to Section 3.5 hereof.

Permitted Liens shall have the meaning assigned to such term in Section 6.6 of this Master Trust Indenture.

Person shall mean an individual, a corporation, a partnership, an association, a joint stock corporation, a joint venture, a trust, an unincorporated organization, or a government or any agency or political subdivision thereof, other than an Obligated Group Member.

Principal Office of the Master Trustee shall mean the principal office of the Master Trustee at Global Corporate Trust, One Financial Plaza, Suite 1435, Providence, Rhode Island 02903, at which at any particular time its corporate trust business shall be administered.

Property shall mean any and all rights, titles and interests of the Obligated Group Members in and to any and all property (including, but not limited to contract rights, accounts receivable, revenues and cash on hand) whether real or personal, tangible or intangible, and

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wherever situated including, without limiting the generality of the foregoing, interests of the Obligated Group Members under any lease agreement and any installment sale agreement.

Purchase Money Mortgage shall mean a Lien held by any person (whether or not the seller of the assets subject to such Lien) on Fixed Assets acquired or constructed by a Member after the date of delivery of this instrument and granted contemporaneously with such acquisition or construction, which Lien secures all or a portion of the related purchase price or construction costs of such assets.

Put Debt shall mean Debt that must be purchased by the obligor prior to its stated maturity date, including Debt subject to mandatory tender for purchase and Debt that may be tendered for purchase at the option of the holder.

Record Date shall mean, except as otherwise provided in a Supplemental Indenture, a date fifteen days before any interest payment date.

Refunding Debt means any Debt issued for the purpose of refunding or refinancing outstanding Debt.

Refunding Notes shall mean any additional Notes that constitute Refunding Debt.

Registered Owner shall mean the person or persons in whose name or names a particular Note shall be registered on the register maintained for that purpose pursuant to Section 3.1 of this Indenture.

Reimbursement Obligation means an obligation on the part of a Member to reimburse the obligor under a Credit Facility for amounts paid by such obligor with respect to any Debt or Guaranty of such Member.

Related Bonds shall mean the revenue bonds or other obligations issued by any state 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 single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to the Obligated Group Members in consideration of the execution, authentication and delivery of a Note or Notes to such governmental issuer.

Related Bond Indenture shall mean any indenture, ordinance, resolution or trust agreement pursuant to which a series of Related Bonds is issued.

Related Bond Trustee shall mean the trustee and its successors in the trusts created under any Related Bond Indenture.

Related Supplement No. 1 means the Supplemental Indenture No. 1 between the Obligated Group and The Bank of New York Mellon Trust Company, N.A., as Master Trustee, dated as of [ ], 2016.

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Related Supplement No. 2 means the Supplemental Indenture No. 2 between the Obligated Group and The Bank of New York Mellon Trust Company, N.A., as Master Trustee, dated as of [ ], 2016.

Responsible Officer of the Master Trustee shall mean the chairman and vice- chairman of the governing body of the Master Trustee, the president, the chairman and vice- chairman of the standing committee of the governing body of the Master Trustee, the chairman of the trust committee, the cashier, if the Master Trustee is not a national bank, every vice president or officer senior thereto, every assistant vice president, the secretary, every assistant secretary, the treasurer, every assistant treasurer, every corporate trust officer, every assistant corporate trust officer, and every other officer and assistant officer of the Master Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of, and familiarity with, a particular subject.

S&P shall mean S&P Global Ratings, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer-perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer with the approval of the Obligated Group by written notice to the Master Trustee.

Short-Term, when used in connection with Debt (including Notes), shall mean Debt having an original maturity less than or equal to one year and not renewable at the option of an Obligated Group Member for a term greater than one year beyond the date of original issuance.

State shall mean the State of Rhode Island and Providence Plantations.

Subordinated Debt means Debt payment of which is, by the terms of such Debt and any instrument evidencing or securing the same, effectively subordinated in right of payment to the Obligations as follows:

(1) If no Indenture Default exists, regularly scheduled payments of principal and interest on such Subordinated Debt shall be permitted.

(2) If an Indenture Default exists (including without limitation an Act of Bankruptcy with respect to any Member), all payments of principal and interest on such Subordinated Debt shall be deferred until payment in full of all amounts due on the Obligations.

Subsidiary shall mean a corporation organized under the laws of any state of which an Obligated Group Member is the controlling voting member or owner of stock with a controlling interest,

Supplemental Indenture shall mean an indenture supplemental to, and authorized and executed pursuant to the terms of, this Master Trust Indenture for the purpose of issuing a particular series of Notes,

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Tax Exempt Organization means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxation under Section 501(a) of the Code, and which is not a “private foundation” within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

Unrestricted Net Assets means Unrestricted Net Assets of the Obligated Group Members as shown on the most recent audited financial statements of the Obligated Group Members.

SECTION 1.2 Construction. References by number in this Indenture to any Article or Section shall be construed as referring to the Articles and Sections contained in this Master Trust Indenture, unless otherwise stated, The words “hereby”, “herein”, “hereof”, “hereto”, and “hereunder” and any compounds thereof shall be construed as referring to this Master Trust Indenture generally, and not merely to the particular Article, Section or subdivision in which they occur, unless otherwise required by the context.

The term “this Master Trust Indenture”, means this instrument as originally executed, as it may from time to time be supplemented and amended by one or more indentures supplemental hereto pursuant to the provisions hereof.

Accounting terms used but not otherwise defined in this Master Trust Indenture shall have the meanings given to such terms in accordance with generally accepted accounting principles as then in effect.

SECTION 1.3 Date of Master Trust Indenture. The date of this Master Trust Indenture, to wit, September 1, 2016, is intended as and for a date for the convenient identification of this Master Trust Indenture and is not intended to indicate that this Master Trust Indenture was executed and delivered on said date, this Master Trust Indenture being executed on the dates of the respective acknowledgments hereto attached.

SECTION 1.4 Severability Clause. If any provision of this Master Trust Indenture shall be held or deemed to be, or shall in fact be, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflicting of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy.

ARTICLE TWO

ISSUE, EXECUTION, AUTHENTICATION, FORM AND PAYMENT OF NOTES

SECTION 2.1 Series and Amount of Notes. The number of series of Notes that may be created under this Master Trust Indenture is not limited. The aggregate principal amount of Notes of each series that may be issued, authenticated and, delivered under this Master Trust -21-

Indenture is not limited except as may be set forth in any Supplemental Indenture and as restricted by the provisions of this Master Trust Indenture.

SECTION 2.2 Designation of Notes. Notes issuable under this Master Trust Indenture shall be issued in such series as may from time to time be created by Supplemental Indentures authorized by this Master Trust Indenture. Each such series shall be authorized by a different Supplemental Indenture and shall be designated to differentiate the Notes of such series from the Notes of any other series.

SECTION 2.3 Execution and Authentication of Notes. Notes shall be signed (manually or, to the extent permitted by law, in facsimile) in the name and on behalf of each Obligated Member by the Chairman or Vice-Chairman of its Governing Body or its President or one of its Vice-Presidents. Only such Notes as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Master Trustee, shall be entitled to the benefits of this Master Trust Indenture or be valid or obligatory for any purpose. Such certificate by the Master Trustee upon any Note executed by the Obligated Group Members shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder. The holder of any Note so executed and authenticated is entitled to the benefits of this Master Trust Indenture.

SECTION 2.4 Provision as to Signing Officers. In case any officer of an Obligated Group Member which shall have signed any of the Notes shall cease to be such an officer before the Notes so signed shall have been authenticated and delivered by the Master Trustee, or disposed of by the Obligated Group, such Notes nevertheless may be authenticated and delivered or disposed of as though the person who signed such Notes had not ceased to be such an officer of an Obligated Group Member; and any Notes may be signed on behalf of an Obligated Group Member by such persons as, at the actual date of the execution of such Note, shall be proper officers of an Obligated Group Member although at the date of the execution of this Master Trust Indenture or of the Supplemental Indenture any such person was not such an officer.

SECTION 2.5 Compliance with Master Trust Indenture. Upon satisfaction of and compliance with the requirements and conditions set forth in this Master Trust Indenture and any Supplemental Indenture, Notes may be executed by the Obligated Group Members and delivered to the Master Trustee for authentication following the execution and delivery of the Supplemental Indenture authorizing such series of Notes or from time to time thereafter, and the Master Trustee shall authenticate and deliver Notes upon the written order of the Obligated Group Members, stating, in effect, that the requirements and conditions set forth in this Master Trust Indenture and the Supplemental Indenture authorizing such series of Notes have been satisfied and complied with and signed by authorized Officers of the Obligated Group Members without further action on the part of the Obligated Group Members. All Notes issued hereunder shall be the joint and several obligations of the Obligated Group Members.

SECTION 2.6 Forms of Note. Notes shall be dated, shall be payable as to principal, premium, if any, and interest on such date or dates and in such manner, as registered Notes and shall contain other terms and provisions, as shall be established in this Master Trust Indenture and in any Supplemental Indenture. Unless Notes of a series have been registered under the Securities Act of 1933, as amended, each such Note shall be endorsed with a legend which shall read substantially as follows: “This Note has not been registered under the Securities Act of

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1933.” The form of note for Notes of each series shall be substantially in the form as heretofore recited in this Master Trust Indenture or as set forth in any Supplemental Indenture.

SECTION 2.7 Payment of Notes. Unless other arrangements for payment are provided for in any Supplemental Indenture, the principal of and premium, if any, on the Notes shall be paid by the Master Trustee by check mailed to the Registered Owner thereof at his address as it last appears on the register.

Notwithstanding the foregoing, in the case of Notes held by a Related Bond Trustee, all amounts (other than final payment) payable on such Notes to such Related Bond Trustee may be paid by the Obligated Group or the Master Trustee if it has received all amounts payable on such Notes from the Obligated Group by depositing such amounts directly with such Related Bond Trustee at or prior to the opening of business on the date such amounts are due and payable on such Notes and giving the Master Trustee (if paid by the Obligated Group) notice of such Payment, specifying the amount paid and identifying the Note or Notes on which payment was made by number, series and Registered Owner.

ARTICLE THREE

REGISTRATION, TRANSFER, EXCHANGE, CANCELLATION AND OWNERSHIP OF NOTES

SECTION 3.1 Office for Registration, Transfer and Exchange of Notes. So long as Notes are Outstanding, the Obligated Group shall cause to be maintained, at the Principal Office of the Master Trustee, an office or agency where Notes may be presented for payment and an office or agency for the registration of Notes and for the exchange and registration or transfer of Notes in accordance with their terms.

SECTION 3.2 Registration and Transfer of Notes.

(a) The Obligated Group will cause to be kept at the office or agency maintained as provided in Section 3.1 a register or registers, in which, subject to such reasonable regulations as it may prescribe, it will register Notes and will register the transfer of Notes as provided in this Article,

(b) Upon due presentment for registration of transfer of any Note at such office or agency, the Obligated Group Members shall execute and the Master Trustee shall authenticate and deliver in the name of the transferee or transferees a new Note of the same series for a like aggregate principal amount.

(c) Notes presented for registration of transfer or for exchange, redemption or payment shall (if so required by the Obligated Group or the Master Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Master Trustee duly executed by, the Registered Owner or by his duly authorized attorney.

The Obligated Group shall not be required (a) to issue, register the transfer of, or exchange Notes after the Record Date or any other date as shall be provided in any Supplemental Indenture, (b) to issue, register the transfer of, or exchange Notes for a period of fifteen (15) days next preceding any designation of Notes to be redeemed or any other date as shall be provided in

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any Supplemental Indenture, or (c) to register the transfer of, or exchange any Notes or portions thereof designated or called for redemption.

SECTION 3.3 Exchange of Notes. [Reserved].

SECTION 3.4 Charges for Exchange or Transfer. Upon every exchange or registration of transfer of Notes, the Obligated Group or the Master Trustee may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge in respect thereof required to be paid by the Obligated Group, and said charge shall be paid by the holder requesting such exchange or registration of transfer as a condition precedent to the exercise of the privilege of making same.

SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Notes. If any Note shall become mutilated, the Obligated Group shall, and if any Note shall be destroyed, lost or stolen, the Obligated Group in its discretion may, upon the written request of the Registered Owner, execute, and the Master Trustee shall thereupon authenticate and deliver in replacement thereof, a new Note of the same series, bearing a number not contemporaneously outstanding, payable in the same principal amount and dated the same date as the Note so mutilated, destroyed, lost or stolen.

In each case the applicant for a new Note shall furnish to the Obligated Group and the Master Trustee such security or indemnity as may be required by them to hold each of them harmless. Also, in each case of loss, theft or destruction, the applicant shall furnish to the Obligated Group and the Master Trustee evidence to their satisfaction of the loss, theft or destruction of such Note and of the ownership thereof.

Every new Note issued pursuant to the provisions of this Section by virtue of the fact that any Note is destroyed, lost or stolen, shall constitute an additional contractual obligation of the Obligated Group, whether or not the lost, stolen or destroyed note shall be at any time enforceable, and shall be entitled to all the benefits of this Master Trust Indenture equally and proportionately with all other Notes duly issued hereunder. All Notes shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of destroyed, lost or stolen Notes, and shall preclude any and all other rights or remedies, notwithstanding any law or statute now existing or hereafter enacted, other than any supplemental indentures of the Obligated Group hereafter entered into, to the contrary with respect to replacement or payment of negotiable instruments or other securities without their surrender.

SECTION 3.6 Cancellation of Surrendered Notes. All Notes surrendered for the purpose of payment, redemption or exchange, and all registered Notes surrendered for transfer, shall be canceled by or under the direction of the Master Trustee and no notes shall be issued in lieu thereof, except as expressly required or permitted by any of the provisions of this Master Trust Indenture. Upon written request of the Obligated Group, such canceled Notes shall be delivered by the Master Trustee to an officer designated by the Obligated Group or upon similar request shall be destroyed by the Master Trustee, which shall thereupon furnish the Obligated Group Members with a proper affidavit or certificate as to such destruction.

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SECTION 3.7 Persons Deemed Owners of Notes. As to any registered Note, the person in whose name the same shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of interest on any registered Note shall be made only to or upon the written order of the Registered Owner thereof or his legal representative duly authorized in writing, as herein provided, 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 Note to the extent of the sum or sums so paid.

SECTION 3.8 List of Noteholders. [Reserved].

SECTION 3.9 Paying Agents. The Obligated Group may appoint a paying agent other than the Master Trustee, and covenants and agrees that upon such appointment it will cause such paying agent to execute and deliver to the Master Trustee an instrument in which it shall agree with the Master Trustee, subject to the provisions of this Section,

(1) that such paying agent shall hold in trust for the benefit of the Noteholders or of the Master Trustee all sums held by such paying agent for the payment of the principal of and premium, if any, or interest on the Notes.

(2) that such paying agent will give the Master Trustee notice of any payment by an Obligated Group Member of the principal of and premium, if any, and interest on a Note, specifying the amount paid and identifying each Note on which any payment was made by number, series and the name of the holder, if any, and

(3) that at any time during the continuance of any default under Section 7.1 hereof, upon the written request of the Master Trustee, such paying agent will forthwith pay to the Master Trustee all sums so held in trust by such paying agent.

Anything in this Section to the contrary notwithstanding, the Obligated Group may at any time, for the purpose of obtaining the satisfaction and discharge of this Master Trust Indenture or for any other purpose, cause to be paid to the Master Trustee all sums held in trust by any, paying agent as required by this Section, such sums to be held by the Master Trustee upon the trusts herein contained.

ARTICLE FOUR

REDEMPTION OF NOTES

SECTION 4.1 Right to Redeem. Notes shall be subject to redemption prior to maturity at such times, to the extent and in the manner provided in this Master Trust Indenture and the Supplemental Indenture pertaining to the series of Notes to be redeemed, but not otherwise.

SECTION 4.2 Notice of Redemption, Contents of Notice. Unless waived by the holders of all Notes then Outstanding of a series to be redeemed pursuant to this Article and any Supplemental Indenture, in order to exercise any option to redeem all Outstanding Notes or Notes of a Series in whole or in part pursuant to this Article and any Supplemental Indenture, the Master Trustee shall give notice of such redemption to holders of such Notes to be redeemed as

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hereinafter in this Section provided, except as otherwise provided in such Supplemental Indenture.

Notice of redemption shall be given to the holders of the series of Notes to be redeemed as a whole or in part by first class mail, postage paid, at least thirty (30) days prior to the date fixed for redemption to the holders of registered Notes at their last addresses as they shall appear upon the register maintained as provided in Section 3.1. but any defect therein, shall not affect the validity of the proceedings for the redemption of such Notes.

Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which such Notes of a series or portions thereof are to be redeemed, what if any conditions the redemption is subject to, and shall state that payment of the redemption price of such Notes or portions thereof to be redeemed will be made in the manner provided in the Supplemental Indenture upon presentation and surrender of such Notes maturing after the date fixed for redemption, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon will cease to accrue. If less than all Notes of a series are to be redeemed, the notice of redemption shall specify the numbers of the Notes to be so redeemed as a whole or in part. In case any such Note is to be redeemed in part only, the notice that relates to such Note shall state the portion of the principal amount thereof to be redeemed (which shall be $5,000 or a whole multiple of $5,000), and shall state that on and after the redemption date, upon surrender of such Note, the holder will receive the redemption price in respect of the principal amount thereof called for redemption and, without charge, a new Note or Notes of the same series of authorized denominations in the principal amount thereof remaining unredeemed. After the date fixed for redemption, all Notes of a series or portions thereof so called for redemption shall cease to bear interest thereon (unless the Obligated Group shall default in the payment of such Notes at the redemption price, together with accrued interest thereon to the date fixed for redemption), shall not be deemed to be Outstanding hereunder and shall not be entitled to the benefits of the Supplemental Indenture, other than payment of the redemption price, together with accrued interest to the date fixed for redemption.

The Obligated Group shall give the Master Trustee notice of the aggregate principal amount of Notes to be redeemed at least forty-five (45) days in advance of the date fixed for redemption, and, if less than all Notes of a series are to be redeemed, thereupon the Master Trustee shall select by lot, in any manner it shall deem fair or as provided in the Supplemental Indenture, the Notes to be redeemed as a whole or in part and shall thereafter promptly notify the Obligated Group in writing of the particular Notes or portions thereof to be redeemed.

In any case where the Related Bonds have been called for redemption, the Master Trustee shall cause the Notes securing such Related Bonds to be redeemed at the time and in the amounts contained in the Notice of Redemption of the Related Bonds from the Bond Trustee to the Master Trustee.

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ARTICLE FIVE

INTENTIONALLY OMITTED

ARTICLE SIX

COVENANTS OF THE OBLIGATED GROUP MEMBERS

The Obligated Group Members hereby jointly and severally covenant, so long as any Note is Outstanding, as follows:

SECTION 6.1 Payment of Principal, Premium and Interest. Each Obligated Group Member agrees that it will duly and punctually pay the principal of, the premium, if any, and the interest on each Note on the dates, at the times, at the place and in the manner provided in such Note and this Master Trust Indenture when and as the same become payable, whether at maturity, upon redemption, by acceleration of maturity or otherwise, according to the true intent and meaning hereof.

SECTION 6.2 Due Authorization of Master Trust Indenture and Notes. The Obligated Group Members are duly authorized under the laws of the state of their incorporation and all other applicable provisions of law to create and issue the Notes of each series and to execute this Master Trust Indenture; and all corporate action on the part of the Obligated Group Members required by their charter documents and by-laws and by the laws of the state of their incorporation for the execution and delivery of this Master Trust Indenture has been taken and for the authorization and issuance hereunder of the Notes of each series shall, prior to the issuance thereof, have been duly and effectively taken.

SECTION 6.3 Covenants as to Tax Exempt Status and Accreditation. Each Obligated Group Member agrees that it will:

(a) procure and maintain all necessary licenses and permits and maintain accreditation of its health care facilities (other than those not accredited as of the later of the date of this Master Indenture or the date a Person becomes a Member hereunder) by the Joint Commission (or any State agency or other entity which is authorized to accredit the Obligated Group’s hospital facilities in order to permit their participation in the Medicare program) and the status of its health care facilities (other than those not currently having such status or not having such status on the date a Person becomes a Member hereunder) as providers of health care services eligible for payment under those third-party payment programs which its Governing Body determines are appropriate;

(b) in the case of any Obligated Group Member which is a Tax-Exempt Organization at the time it becomes a Obligated Group Member, so long as this Master Indenture shall remain in force and effect and so long as all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or provision for such payment has not been made, to take no action or suffer any action to be taken by others, including any action which would result in the alteration or loss of its status as a Tax-Exempt Organization, which could result in any such Related Bond being declared invalid or result in the interest on any Related

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Bond, which is otherwise not included in the gross income of the holders of such Related Bonds for federal income tax purposes, to be so included in gross income;

(c) in the case of each Obligated Group Member which is a Tax-Exempt Organization at the time it becomes an Obligated Group Member, not distribute any of its revenues, income or profits, whether realized or unrealized, to any of its members, directors or officers or allow the same to inure to the benefit of any private person, association or corporation, other than for the lawful corporate purposes of such Obligated Group Member; provided, further, that no such distribution shall be made which is prohibited by the legislation pursuant to which such Member is governed or which would result in the loss or alteration of its status as a Tax-Exempt Organization.

The foregoing notwithstanding, any Obligated Group Member may (i) cease to be a not for profit corporation, (ii) take actions which could result in the alteration or loss of its status as a Tax-Exempt Organization or (iii) distribute its revenues, income or profits to any of its members, directors or officers or allow the same to inure to the benefit of a private person, association or corporation if (1) prior thereto there is delivered to the Master Trustee an opinion of nationally recognized municipal bond counsel (which counsel and opinion, including without limitation the scope, form and other aspects thereof, are acceptable to the Master Trustee) to the effect that such actions would not adversely affect the validity of any Related Bond, or would result in the interest on any Related Bond not included in the gross income of the holders of such Related Bonds for federal income tax purposes, to be so included in gross income or adversely affect the enforceability in accordance with its terms of this Master Indenture against any Member, (2) prior thereto there is delivered to the Master Trustee either (i) an Opinion of Counsel for such Member (which opinion, including without limitation the scope, form and other aspects thereof, are acceptable to the Master Trustee) to the effect that such actions would not subject the offer or sale of any Related Bond or Note to registration under the Securities Act of 1933, as amended, or require the qualification of any Bond Indenture, Related Loan Document or this Master Indenture or any Supplemental Indenture under the Trust Indenture Act of 1939, as amended or (ii) evidence satisfactory to the Master Trustee that such Bond or Note has been so registered and such Bond Indenture, Related Loan Document or Master Indenture or Supplemental Indenture has been so qualified.

SECTION 6.4 Insurance. Each Obligated Group Member will (i) maintain insurance covering such risks of an insurable nature and of the character usually insured by Persons operating similar properties and engaged in similar operations in such amounts as are customarily carried in such circumstances, against loss or damage from such causes as are customarily insured against by commercially reasonable insurance carriers, and/or (ii) maintain a qualified self-insurance program as provided in Section 6.5 hereof. The insurance required to be maintained pursuant hereto shall be subject to review every two years, and the approval and recommendations, if any, of an Independent Insurance Consultant (except that self-insurance shall be subject to the annual review and approval of such Independent Insurance Consultant), and the Obligated Group Member shall, to the extent feasible, follow the recommendations of the Independent Insurance Consultant.

SECTION 6.5 Self Insurance. Before the Obligated Group Member may adopt, modify or amend a self-insurance plan, it must secure the concurrence of an Independent Insurance Consultant. In making its decision whether to concur in such adoption, modification or

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amendment, the Independent Insurance Consultant shall make an estimate of the added financial risk, if any, assumed by the Obligated Group Member as a result of the lower or amended coverage; it shall consider the availability of commercial insurance, the terms upon which such insurance is available and the cost of such available insurance, and the effect of such terms and such cost upon the Obligated Group Member’s costs and charges for its services; and it shall determine whether the additional financial risk, if any, being assumed by the Obligated Group Member is prudent in light of the savings to be realized from lowered insurance premiums or in light of the general availability of such coverage.

In addition to the foregoing, before the Obligated Group Member may enter into a program of self-insurance, as permitted herein, against any particular risk for which it is not on the date thereof self-insuring, it must receive a certificate from an Independent Insurance Consultant to the effect that adequate reserves created by the Obligated Group Member for such self-insurance program are funded annually with the actuarially required deposit as determined by an Independent Insurance Consultant. If any coverage is self-insured, annual review by the Independent Insurance Consultant shall be required, as provided in Section 6.4 hereof.

All programs of self-insurance of the Obligated Group Members existing on the date of execution hereof are hereby deemed to satisfy the requirements of this section for establishing such a program, but such programs are subject to the reporting and monitoring requirements of this section.

SECTION 6.6 Restrictions as to Creation of Liens; Permitted Liens. No Obligated Group Member shall create or suffer to be created or to exist any Lien upon Property now owned or hereafter acquired other than Permitted Liens, without effective provision being made, in each instance, whereby each series of Notes is directly secured thereby equally and ratably with the Debt to be issued under and secured by such Lien.

Permitted Liens shall consist of the following:

(a) a Lien on an asset arising in the ordinary course of business, including without limitation (i) a Lien for taxes, assessments, or other governmental charges, provided that payment of such charge is not delinquent or payment is being contested in good faith by appropriate proceedings, (ii) pledges or deposits to secure obligations under workmen’s compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable, (iii) pledges or deposits to secure performance by a Member in connection with bids, tenders or service contracts, or leases to which a Member is a party as lessee, (iv) pledges or deposits to secure public or statutory obligations of a Member, (v) materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s, or other similar Liens, or deposits to obtain the release of such Liens, provided that payment of the amount secured by such Lien is not delinquent or payment is being contested in good faith by appropriate proceedings, (vi) a Lien resulting from any judgment that is being contested in good faith by appropriate proceedings if execution on such judgment is effectively stayed, and pledges or deposits to secure, or provided in lieu of, any surety, stay or appeal bond with respect to any such judgment, (vii) statutory landlords’ Liens under leases in which a Member is a lessee, (viii) zoning restrictions, easements, licenses, restrictions on the use of real property or minor irregularities in title thereto, which do not, in the opinion of the affected Member, materially impair the use of such property in the operation of the business of such Member or the value of

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such property for the purpose of such business, (ix) pledges or deposits to enable a Member to maintain self-insurance or to participate in any self-insurance pools or trusts, (x) a Lien on money deposited by patients or others with a Member as security for, or as prepayment of, the cost of services to be rendered by a Member, and (xi) a Lien in favor of Medicare, Medicaid, Blue Cross and similar programs to secure the repayment by a Member of reimbursement payments in excess of contractual limitations, provided that the repayment secured by such Lien is not delinquent or repayment is being contested in good faith by appropriate proceedings. For purposes of this Section 6.6(a), Liens created or incurred in connection with the incurrence of a Debt or Guaranty and Liens created or incurred in connection with Derivative Agreements are not considered incurred in the ordinary course of business.;

(b) any Lien or other encumbrances in existence as of the date hereof, as listed in Exhibit B hereto;

(c) a Lien on Fixed Assets of any Obligated Group Member securing a liability of such Member, if on the date such Lien is created, (i) no Indenture Default exists and (ii) the amount of the liability to be secured by such Lien, together with the outstanding amount of all other Liabilities secured by a Lien created pursuant to this Section 6.6(c), does not exceed 7.5% of the aggregate amount of Book Value of all Fixed Assets of the Obligated Group as of the end of the most recent Fiscal Year of the Obligated Group Representative for which audited financial statements of the Obligated Group Representative are available;

(d) any Lien on the Property of any Person who becomes an Obligated Group Member or who merges with an Obligated Group Member, as provided herein, but only if (i) such Lien was created prior to such Person’s decision to become an Obligated Group Member, (ii) such lien was not created in order to avoid the limitations of this Master Trust Indenture, (iii) such Lien is not increased, extended, renewed or modified to apply to additional Property or Debt (unless otherwise permitted hereunder), and (iv) no Note is given to secure any Debt secured by such Lien unless the requirements of Section 6.7 herein are met;

(e) any Lien on Property, if such Lien equally and ratably secures all Notes hereunder;

(f) a Purchase Money Mortgage with respect to Fixed Assets of any Obligated Group Member if, after giving effect thereto and to any concurrent transactions, such Purchase Money Mortgage secures an amount not in excess of the cost of the particular Fixed Assets to which it relates and any related financing charges;

(g) rights of the Bond Trustee and bondholders of Related Bonds in any depreciation reserve, debt service reserve, debt service or similar fund established pursuant to the terms of any Supplemental Indenture, Related Bond Indenture or related document in favor of the Master Trustee, a Related Bond Trustee or the holder of the Debt issued pursuant to such Supplemental Indenture, Related Bond Indenture or related document;

(h) a Lien on Cash and Investments of a Member securing a liability of such Member (including collateral posting under a Derivative Agreement), if on the date such Lien is created (i) no Indenture Default exists and (ii) after giving effect to the creation of such Lien, the Obligated Group’s Days’ Cash on Hand as of the date such Lien is created are not less than 60;

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(i) any Lien on Related Bonds and the earnings and proceeds therefrom in favor of the provider of a Credit Facility for such Related Bonds arising from such provider’s purchase of any of the Related Bonds pursuant to the term of such Credit Facility;

(j) Liens incurred by Butler Hospital with respect to any portion of its real property;

(k) Liens or encumbrances consented to by the holders of a majority in principal amount of the Notes; and

(l) Liens incurred in creation of additional Notes pursuant to Article XI hereof.

SECTION 6.7 Restriction on Debts and Guaranties.

(a) Prohibition Against Debt Other Than Permitted Debt. Members of the Obligated Group will not incur, or otherwise become liable in respect of, any Debt other than Debt existing on the date of delivery of this Indenture and Debt that meets the requirements of one or more of the following paragraphs (each such Debt being referred to as a “Permitted Debt”) (including Master Indenture Note, Series 1 and Master Indenture Note, Series 2):

(1) Historical Pro Forma Test. A Member may incur Long-Term Debt if the Debt Service Coverage Ratio of the Obligated Group (taking into account the Long-Term Debt to be incurred) for the preceding Fiscal Year was not less than 120%.

(2) Historical Test and Forecast. A Member may incur Long-Term Debt if both of the following tests are met:

(A) The Debt Service Coverage Ratio of the Obligated Group (without taking into account the Long-Term Debt to be incurred) for the most recently completed Fiscal Year was not less than 120%.

(B) The Debt Service Coverage Ratio of the Obligated Group (taking into account the Long-Term Debt to be incurred) for each of the two Fiscal Years immediately following the Fiscal Year in which such Debt is incurred (or, if the acquisition or construction of facilities is being financed by such Debt, in each of the two Fiscal Years following the Fiscal Year in which such facilities are expected to be placed in service) is expected to be not less than 135% according to a forecast prepared by the Obligated Group. Such forecast must contain a certificate of Authorized Obligated Group Representative stating that, to the best of such officer’s knowledge, the assumptions contained in the forecast are reasonable. If an Independent Consultant delivers a report stating in effect that the assumptions in the forecast are reasonable, the minimum Debt Service Coverage Ratio required by this Section 6.7(a)(2)(B) shall be reduced to 120%.

If the Obligated Group shall deliver to the Master Trustee a report of an Independent Consultant expressing the opinion (accompanied by the Opinion of Independent Counsel as to any conclusion of law supporting such opinion) that applicable laws or

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governmental regulations have prevented or will prevent the Obligated Group from complying with the Debt Service Coverage Ratios specified in this Section 6.7(a)(2) and that the Obligated Group has implemented, or is in the process of implementing with reasonable diligence, to the extent feasible and lawful, the recommendations (if any) made by such Independent Consultant pursuant to Section 6.9 hereof, then the Debt Service Coverage Ratios referred to in this Section 6.7(a)(2) need only be equal to or greater than 100%.

(3) Completion Debt. A Member may incur Completion Debt.

(4) Refunding Debt. A Member may incur Refunding Debt.

(5) Subordinated Debt. A Member may incur Subordinated Debt.

(6) Reimbursement Obligations. A Member may undertake Reimbursement Obligations with respect to Debt incurred pursuant to a separate exception.

(7) Debt Owed to Other Members. A Member may incur Debt owed to another Member.

(8) Basket for Debt Based on Percentage of Operating Revenue. A Member may incur Debt (including without limitation Short-Term Debt, Long-Term Debt, and Debt evidenced by capitalized leases, installment sale agreements and other similar obligations for the payment of the purchase price of property or assets) if the amount of Debt to be incurred pursuant to this exception, together with the outstanding principal amount of all other Debt incurred by the Obligated Group pursuant to this exception, does not exceed 7.5% of the Obligated Group’s Operating Revenue for the most recently completed Fiscal Year for which audited financial statements are available; provided, however, that for a period of not less than 30 days during each Fiscal Year the amount of Short-Term Debt outstanding pursuant to this paragraph (8) may not exceed 5% of the Obligated Group’s Operating Revenue for the most recently completed Fiscal Year for which audited financial statements are available.

(b) Reclassification of Additional Debt. The Obligated Group may elect to have Debt issued pursuant to one exception contained in Section 6.7(a) reclassified as having been incurred under another exception of Section 6.7(a) by demonstrating compliance with such other exception on the assumption that such Debt is being reissued or incurred on the date of such reclassification; provided, however, that prior to any such reclassification the Obligated Group must deliver to the Master Trustee the documents and opinions, if any, required by the relevant exception of Section 6.7(a) and a certificate of and Authorized Obligated Group Representative stating in effect that as of the date of such reclassification all other facts or conditions exist that are necessary for such Debt to be so reclassified.

(c) Prohibition Against Guarantees Other Than Permitted Guarantees. A Member of the Obligated Group will not enter into, or otherwise become liable in respect of, any Guaranty other than a Guaranty that meets the requirements of one or more of the following paragraphs (each such Guaranty being referred to as a “Permitted Guaranty”):

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(1) Guaranty of Debt of Another Member. A Member may enter into a Guaranty with respect to Debt of another Member.

(2) Historical Pro Forma Test. A Member may enter into a Guaranty if the Debt Service Coverage Ratio of the Obligated Group (taking into account the Guaranty being made) for the preceding Fiscal Year was not less than 120%. For purposes of this Section 6.7(c)(2), on the date such Guaranty is made or incurred 20% of the Guaranteed Debt shall be included in the calculation of the Maximum Annual Debt Service (as if a Member was required to make payments on such Guaranteed Debt as of the date of incurrence).

(d) Liabilities Other Than Debt or a Guaranty. This Section does not restrict or preclude the Obligated Group Members from incurring Liabilities that do not constitute a Debt or Guaranty.

SECTION 6.8 Authorized Obligated Group Representative. Each Obligated Group Member covenants and agrees that any action taken by the Master Trustee pursuant to a certificate of the Authorized Obligated Group Representative shall be binding upon such Member as if it had authorized and undertaken such action on its own.

SECTION 6.9 Debt Service Coverage Ratio. The Debt Service Coverage Ratio shall be calculated for each Fiscal Year beginning with the Fiscal Year ending September 30, 2019.

(a) Consultant Call In. If the Debt Service Coverage Ratio of the Obligated Group for the Fiscal Year ending September 30, 2019 or any Fiscal Year thereafter is less than 110%, the Obligated Group shall retain an Independent Consultant to make recommendations to increase such Debt Service Coverage Ratio to at least 110%, or, if applicable laws and governmental regulations will not permit the Obligated Group to maintain such Debt Service Coverage Ratio, to the highest level permitted by such laws and regulations. The Obligated Group will, to the extent feasible and lawful, follow the recommendations of the Independent Consultant. Notwithstanding the foregoing, if the Debt Service Coverage Ratio has been subject to applicable laws and governmental regulations, a Consultant shall be required to be called in only if the level establish by such laws and regulations is not met for any Fiscal Year.

(b) Default. An Indenture Default shall exist if the Debt Service Coverage Ratio of the Obligated Group is less than 100% for the Fiscal Year ending September 30, 2019, or for any Fiscal Year thereafter.

SECTION 6.10 Sale, Lease or Other Disposition of Assets.

(a) Prohibition Against Dispositions Other Than Permitted Dispositions. Members of the Obligated Group will not directly or indirectly make or permit a Disposition of assets of Members of the Obligated Group, whether now owned or hereafter acquired, unless such Disposition meets the requirements of one or more of the following paragraphs (each such Disposition being referred to as a “Permitted Disposition”):

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(1) Merger or Transfer of Substantially All Assets. The Disposition constitutes a merger or transfer of substantially all the assets of a Member permitted by the provisions of Section 6.11.

(2) Obsolete Assets. The Disposition constitutes the disposal of assets that are obsolete, worn out, or no longer useful in the operations of a Member, as determined in good faith by the Obligated Group Representative.

(3) Dispositions With Respect to Permitted Liens. The Disposition constitutes a Permitted Lien under the terms of Section 6.6 or results from the exercise of rights by the holder of such Permitted Lien.

(4) Payment of Debts or Liabilities. The Disposition constitutes payment of amounts due on any Debt or other liability of a Member.

(5) Transactions in the Ordinary Course of Business. The Disposition is a transaction conducted in the ordinary course of business, including without limitation (i) the purchase or sale of goods and services in the ordinary course of business and (ii) passive investment activity in accordance with the established investment policy of the Member making such Disposition.

(6) Fair Market Value Transactions. The Disposition is made for consideration in an amount not less than fair market value, as determined in good faith by the Member making such Disposition, including without limitation a purchase or sale of assets that is not made in the ordinary course of business; provided, however, that an Investment in Operating Entities may qualify as a Permitted Disposition only under Section 6.10(a)(7).

(7) Investment in Operating Entities. The Disposition constitutes a direct or indirect investment in, or a loan or advance to, another person whose results of operations are included, in whole or in part, in the income statement of the Obligated Group through consolidation of accounts, the equity method of accounting, or other generally accepted accounting principles (an “Investment in Operating Entities”), and such Disposition meets one of the following tests:

(A) The Disposition is to another Obligated Group Member.

(B) The Disposition (i) meets the requirements of Section 6.10(a)(9) to the extent that Cash and Investments are included in the Disposition and (ii) meets the requirements of Section 6.10(a)(10) to the extent that assets other than Cash and Investments are included in the Disposition.

(C) After giving effect to the Disposition, (i) no default exists under Section 6.14 (treating the date of such Disposition as a testing date under Section 6.14) and (ii) the Debt Service Coverage Ratio of the Obligated Group for each of the two Fiscal Years immediately following the Fiscal Year in which such Disposition occurs is expected to be not less than 175% according to a forecast prepared by the Obligated Group. The forecast must contain a certificate of an -34-

Authorized Obligated Group Representative stating that, to the best of such officer’s knowledge, the assumptions contained in the forecast are reasonable. If an Independent Consultant delivers a report stating in effect that the assumptions in the forecast are reasonable, the minimum Debt Service Coverage Ratio required by this Section 6.10(a)(8)(C) shall be reduced to 150%.

(8) Dispositions to Another Obligated Group Member. The Disposition is made by one Member of the Obligated Group to another Member of the Obligated Group.

(9) Basket for Cash and Investments. The Disposition is made with respect to Cash and Investments and, on the date such Disposition is made, (i) no Indenture Default exists; (ii) the amount of Cash and Investments subject to such Disposition, together with the amount of all other Cash and Investments subject to a Disposition pursuant to this Section 6.10(a)(9) in the same Fiscal Year, is not greater than 5% of unrestricted Cash and Investments as of the beginning of such Fiscal Year; and (iii) after giving effect to such Disposition, the Obligated Group’s Days’ Cash on Hand as of the date such Disposition is made are not less than 60.

(10) Basket for Assets Other Than Cash or Investments. The Disposition is made with respect to assets other than Cash and Investments and, on the date such Disposition is made, (i) no Indenture Default exists and (ii) the aggregate Book Value of the assets subject to such Disposition, together with the aggregate Book Value of all other assets subject to a Disposition pursuant to this Section 6.10(a)(10) in the same Fiscal Year, is not more than 5% of the Book Value of the Fixed Assets of the Obligated Group at the end of the Fiscal Year immediately prior to such Disposition.

(b) Disposition of Gross Receipts. Notwithstanding the provisions of Section 6.10(a), the Obligated Group will not sell, factor or otherwise dispose of accounts receivable or similar contract rights constituting part of the Gross Receipts. Cash and Investments that do not constitute part of the Gross Receipts under the definition of Gross Receipts in this Master Trust Indenture may be transferred or disposed of pursuant to a Permitted Disposition.

(c) Sale or Disposition of Memorial Hospital. The Obligated Group may sell, transfer or otherwise dispose of Memorial Hospital or its assets without meeting any of the tests set forth in this Section 6.10.

SECTION 6.11 Consolidation, Merger, Sale or Conveyance. Each Obligated Group Member covenants that it will not merge or consolidate with any other corporation not a Member of the Obligated Group or sell or convey all or substantially all of its assets unless (i) either the Obligated Group Member shall be the continuing corporation, or the successor corporation (if other than a Member of the Obligated Group) shall be a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation shall expressly assume the due and punctual payment of the principal of and premium, if any, and interest on all Notes according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Master Trust Indenture to be performed and observed by the Obligated Group Member by a supplemental indenture acceptable to the Master Trustee which

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acceptance shall not be unreasonably withheld, executed and delivered to the Master Trustee by such corporation; (ii) the Obligated Group Member or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance or observance of any such covenant or condition; and (iii) subject to reduction to not less than 1.00 if applicable laws or regulations prevent the Obligated Group from generating sufficient Net Income Available for Debt Service upon satisfaction of the requirements of Section 6.9(b) and (c) hereof, the Obligated Group shall furnish to the Master Trustee (A) an Officer’s Certificate of the Authorized Obligated Group Representative to the effect that the Debt Service Coverage Ratio of the Obligated Group for the immediately preceding Fiscal Year for which the audited financial statements are available is at least 1.10, and (B) the requirements to incur one dollar of additional debt set forth in Section 6.A(l)(i) or 6.(A)(1)(ii) hereinabove are met.

In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Obligated Group Member, with the same effect as if it had been named herein as the Obligated Group Member. Such successor corporation thereupon may cause to be signed, and may issue in its own name Notes issuable hereunder; and upon the order of such successor corporation, instead of the Obligated Group Member, and subject to all the terms, conditions and limitations in this Master Trust Indenture prescribed, the Master Trustee shall authenticate and shall deliver Notes that such successor corporation shall have caused to be signed and delivered to the Master Trustee. The Notes so issued shall in all respects have the same legal rank and benefit under this Master Trust Indenture as Notes theretofore or thereafter issued in accordance with the terms of this Master Trust Indenture as though all of such Notes had been issued at the date of the execution hereof.

In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Notes thereafter to be issued as may be appropriate.

Notwithstanding the foregoing, (a) the change in control of any member of the Obligated Group, or (b) the consolidation of any shell corporation into an operating unit of the Obligated Group or (c) the sale or conveyance of Memorial Hospital shall not constitute a consolidation, merger, sale or conveyance subject to the provisions of this Section 6.11.

SECTION 6.12 Filing of Financial Statements, Certificate of No Default, Other Information. Obligated Group covenants that it will:

(a) as soon as practicable but in no event later than one hundred fifty (150) days after the end of each Fiscal Year of the Obligated Group, file with the Master Trustee, with each Noteholder who may have so requested or in whose behalf the Master Trustee may have so requested and with each of Moody’s, S&P and Fitch then rating the Notes, if any, or Related Bonds, audited financial statements of the Obligated Group for such Fiscal Year accompanied by the certificate or opinion of independent public accountants;

(b) as soon as practicable but in no event later than one hundred fifty (150) days after the end of each Fiscal Year, file with the Master Trustee, with each Noteholder who may have so requested or in whose behalf the Master Trustee may have so requested, an

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Officer’s Certificate and, so long as the same can be obtained by the Obligated Group, a certificate of independent public accountants stating that in the course of their audit of the Obligated Group’s financial statements, nothing came to their attention which would lead them to believe that the Obligated Group is in default in the performance of any covenant contained in this Master Trust Indenture, and, if a default has come to their attention, so specifying such default; and

(i) file with the Master Trustee such other financial statements and information concerning the operations and financial affairs of the Obligated 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 the Obligated 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.

SECTION 6.13 Insurance and Condemnation Proceeds.

(a) Notwithstanding the provisions of subsection (b) of this Section, any Obligated Group Member may make agreements and covenants with the holder of Debt which is incurred in compliance with the provisions hereof and which is secured by a Permitted Encumbrance with respect to the application or use to be made of insurance proceeds or condemnation awards which may be received in connection with Property which is subject to such Permitted Encumbrance and may cause or permit such proceeds or awards to be so applied or used.

(b) Amounts received by an Obligated Group Member as insurance proceeds with respect to any casualty loss or as condemnation awards may be used in such manner as the recipient may determine, including, without limitation, applying such moneys to the payment or redemption of any Note or Notes in accordance with the terms thereof and of the related Supplemental Indenture, subject to compliance with the provisions hereof; provided that if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds twenty-five percent (25%) of the Book Value of the Fixed Assets, each Obligated Group Member, respectively, agrees that it will immediately notify the Master Trustee and that it will, within twelve (12) months after the casualty loss or taking, deliver to the Master Trustee:

(i) An Officer’s Certificate certifying the expected ratio of Net Income Available for Debt Service to Maximum Annual Debt Service for each of the two Fiscal Years following the date on which such proceeds or awards are expected to have been fully applied, which ratio for each such period is not less than 1.10 as shown by a projection thereof as set forth in the written report of an Independent Consultant thereon delivered to the Master Trustee along with the Officer’s Certificate confirming such certification; or

(ii) A written report of an Independent Consultant stating the Independent Consultant’s recommendations, including recommendations as to the use of such proceeds or awards, to cause the ratio for each of the Fiscal Years

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described in subsection (i) of this section (b) to be not less than 1.10 or, if in the opinion of the Independent Consultant the attainment of such level is impracticable, to the highest practicable level.

Each Obligated Group Member, respectively, agrees that it will, subject to the provisions of any agreements described in subsection (a) of this Section and to the extent permitted by law, use such proceeds or awards only in accordance with the assumptions in the report of the Independent Consultant described in subsection (i) or the recommendations described in subsection (ii) of this subsection (b).

SECTION 6.14 Liquidity Covenant.

Days’ Cash on Hand for the Obligated Group shall be calculated for each Fiscal Year beginning with the Fiscal Year ending September 30, 2017.

(a) Consultant Call In. If the Days’ Cash on Hand of the Obligated Group for the last day of the Fiscal Year ending September 30, 2017 or the last day of any Fiscal Year thereafter are less than 30, the Obligated Group shall retain an Independent Consultant to make recommendations to increase the Days’ Cash on Hand to at least 30. The Obligated Group will, to the extent feasible and lawful, follow the recommendations of the Independent Consultant.

(b) Default. An Indenture Default shall exist if the Days’ Cash on Hand of the Obligated Group for the last day of the Fiscal Year ending September 30, 2017 or the last day of any Fiscal Year thereafter are less than 25.

ARTICLE SEVEN

REMEDIES OF THE MASTER TRUSTEE AND NOTEHOLDERS IN EVENT OF DEFAULT

SECTION 7.1 Events of Default. Event of Default, as used herein, shall mean any of the following events, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:

(a) Failure to pay principal, premium or interest. The Obligated Group Members shall fail to make any payment of the principal of, the premium, if any, and interest on any Notes when and as the same shall become due and payable, whether at maturity, upon redemption, by acceleration or otherwise, in accordance with the terms thereof, of this Master Trust Indenture and any Supplemental Indenture;

(b) Failure to observe and perform covenants. Failure of any Obligated Group Member duly to observe or perform any covenant or agreement on the part of the Obligated Group Member contained in this Master Trust Indenture for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Obligated Group Member by the Master Trustee, or to the Obligated Group Member and the Master Trustee by the holders of at least twenty-five percent (25%) in aggregate principal amount of Notes then Outstanding; provided, however, that such failure shall not constitute an

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Event of Default if such remedy cannot be achieved within such thirty (30) day period so long as the Obligated Group is diligently pursuing such remedy.

(c) Failure to pay any Debt. Any Obligated Group Member shall default in the payment of any Debt for borrowed moneys (other than Notes), whether such Debt now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, or an event of default as defined in any Lien, indenture or instrument, under which there may be issued, or by which there may be secured or evidenced, any Debt, whether such Debt now exists or shall hereafter be created, shall occur, which default in payment or event of default shall be in respect of an Debt in an aggregate original principal amount of at least $5,000,000 or shall result in such Debt becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; provided, however that such default shall not constitute an Event of Default within the meaning of this Section 7.1 if within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the Debt under the laws of the State or other laws governing such proceeding (i) such Obligated Group Member in good faith commences proceedings to contest the existence or payment of such Debt, and (ii) the Obligated Group has sufficient moneys available for the payment of such Debt;

(d) Involuntary bankruptcy, receivership and liquidation. A decree or order by a court having jurisdiction in the premises shall have been entered adjudging any Obligated Group Member a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization or arrangement of any Obligated Group Member under applicable bankruptcy, reorganization, insolvency, moratorium or other similar Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of ninety (90) days, or a decree or order of a court having jurisdiction for the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of the Obligated Group Member or of its Property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed for a period of ninety (90) days; provided, however, that it shall not be an Event of Default under this subsection if such Obligated Group Member can be, and is, removed from the Obligated Group during such ninety (90) day period without such removal resulting in an Event of Default under this Master Indenture.

(e) Voluntary bankruptcy, reorganization, receivership and assignment for benefit of creditors. Any Obligated Group Member shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the institution of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under applicable bankruptcy, reorganization, insolvency, moratorium or other similar Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of it or of its Property, or shall make assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by any Obligated Group Member in furtherance of any of the aforesaid purposes; or

(f) an event of default shall occur under a Related Bond Indenture or upon a Related Bond.

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Upon the occurrence of an Event of Default, then and in each and every such case, unless the principal of Notes shall have already become due and payable, the Master Trustee may, and if requested by the holders of not less than twenty-five percent (25%) in aggregate principal amount of all Notes then Outstanding, the Master Trustee shall, by notice in writing to the Obligated Group declare the principal of all such Notes to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Master Trust Indenture or in such Notes contained to the contrary notwithstanding. This provision, however, is subject to the condition that if at any time after the principal of all Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Obligated Group shall pay or shall deposit with the Master Trustee a sum sufficient to pay all matured installments of interest upon all such Notes and the principal and premium, if any, of all such Notes that shall have become due otherwise than by acceleration (with interest on overdue installments of interest and on such principal and premium, if any, at the rate borne by such Notes to the date of such payment or deposit) and the expenses of the Master Trustee, and any and all Events of Default under this Master Trust Indenture, other than the nonpayment of principal of, and accrued interest on, such Notes that shall have become due by acceleration, shall have been remedied — then and in every such case the holders of a majority in aggregate principal amount of all Notes then Outstanding, by written notice to the Obligated Group and to the Master Trustee, may waive all Events of Default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or affect any subsequent Event of Default, or shall impair any right consequent thereon.

SECTION 7.2 Payment of Notes on Default. The Obligated Group Members jointly and severally covenant that upon the occurrence of an Event of Default as described in Section 7.1 hereof, then, upon demand of the Master Trustee, the Obligated Group will pay to the Master Trustee, for the benefit of the holders of such Notes, the whole amount that then shall have become due and payable on all such Notes for principal or interest, or both, as the case may be, with interest upon the overdue principal and installments of interest (to the extent permitted by law) at the rate of interest borne by such Notes or as provided in the applicable Supplemental Indenture; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Master Trustee, its agents, attorneys and counsel, and any expenses incurred by the Master Trustee other than as a result of its gross negligence or bad faith.

SECTION 7.3 Suit to Enforce Rights or for Moneys Due. In case the Obligated Group Members shall fail forthwith to pay the amounts due under Section 7.2 upon such demand, the Master Trustee, in its own name and as trustee of an express trust shall be entitled and empowered to institute any actions or proceedings at law or in equity for the enforcement of the rights of the Noteholders or the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Obligated Group Members, and collect in the manner provided by law out of the property of the Obligated Group Members wherever situated any moneys adjudged or decreed to be payable. The Master Trustee, upon the bringing of any action or proceeding at law or in equity under this Section 7.3, as a matter of right, without notice and without giving bond to the Obligated Group Members, may to the extent permitted by law, have a receiver appointed of all of the property of the Obligated Group Members pending such action or proceeding, with such powers as the court making such appointment shall confer.

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SECTION 7.4 Proceedings in Bankruptcy. In case there shall be pending proceedings for the bankruptcy or for the reorganization or arrangement of any Obligated Group Member under applicable bankruptcy, reorganization, insolvency, moratorium or any other applicable law relative to an Obligated Group Member, its creditors or its Property, or in case a receiver or trustee shall have been appointed for its Property, the Master Trustee, irrespective of whether the principal of Notes of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Master Trustee shall have made any demand pursuant to the provisions of Section 7.2, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of Notes of all series, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Master Trustee and of the holders of the Notes allowed in such judicial proceedings relative to the Obligated Group Member, its creditors or its property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of such holders to make such payments to the Master Trustee, and, in the event that the Master Trustee shall consent to the making of such payments directly to such holders, to pay to the Master Trustee any amount due it for compensation and expenses, including counsel fees incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses and counsel fees out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, moneys, securities and other property which the holders of the Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.

SECTION 7.5 Suit by Master Trustee. All rights of action and rights to assert claims under any Note may be enforced by the Master Trustee, without the possession of such Note on any trial or other proceedings instituted by the Master Trustees. In any proceedings brought by the Master Trustee (and also any proceedings involving the interpretation of any provision of this Master Trust Indenture to which the Master Trustee shall be a party) the Master Trustee shall be held to represent all the holders of Notes, and it shall not be necessary to make any holders of Notes parties to such proceedings.

SECTION 7.6 Application of Moneys Collected. Any amounts collected by the Master Trustee pursuant to Sections 7.2, 7.3 and 7.4 shall be applied, for the equal and ratable benefit of the holders of Notes of all series in the order following, at the date or dates fixed by the Master Trustee for the distribution of such moneys, upon presentation of such Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

(a) To the payment of costs and expenses of collection, including reasonable attorneys’ fees, and of all amounts payable to the Master Trustee;

(b) In case the principal of none of such Notes shall have become due and be unpaid, to the payment of interest on such Notes in the order of the maturity of the installments of such interest, with interest upon the overdue installments of interest (so far as permitted by law and to the extent that such interest has been collected by the Master Trustee) at the rate of

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interest borne by such Notes, such payments to be made ratably to the persons entitled thereto, without discrimination or preference;

(c) In case the principal of any such Notes shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon such Notes for principal and interest, with interest on the overdue principal and installments of interest (so far as permitted by law and to the extent that such interest has been collected by the Master Trustee) at the rate of interest borne by such Notes; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon such Notes, then to the payment of such principal and interest, 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, ratably to the aggregate of such principal and accrued and unpaid interest; and

(d) To the payment of the remainder, if any, to the Obligated Group Members, their successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

Notwithstanding any provision of this Section to the contrary, for purposes of this Section, “interest” on Notes that evidence and secure Derivative Obligations shall mean regularly scheduled payments under the applicable Derivative Agreement and “principal” of such Notes shall mean termination payments and any other payments except regularly scheduled payments under the applicable Derivative Agreement. Unless otherwise provided in the Supplement creating a Note that evidences and secures Derivative Obligations, payment of the portion of such Notes that evidences and secures termination payments and any other payments except regularly scheduled payments under a Derivative Agreement shall be subordinate to payment of other Notes.

SECTION 7.7 Suit by Noteholders. No holder of a Note shall have any right by virtue or by availing of any provision of this Master Trust Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Master Trust Indenture or for the appointment of a receiver or trustee, or any other remedy hereunder, unless such holder previously shall have given to the Master Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the holders of not less than twenty-five percent in aggregate principal amount of Notes then Outstanding shall have made written request upon the Master Trustee to institute such action, suit or proceeding in its own name as Master Trustee hereunder and shall have offered to the Master Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Master Trustee, for thirty (30) days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request shall have been given to the Master Trustee pursuant to Section 7.8; it being understood and intended, and being expressly covenanted by the taker and holder of a Note with every other taker and holder of a Note and the Master Trustee, that no one or more holders of Notes shall have any right in any manner whatever by virtue or by availing of any provision of this Master Trust Indenture to affect, disturb or prejudice the rights of any other holder of a Note or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Master Trust Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Notes. For the

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protection and enforcement of the provisions of this Section, each and every holder of a Note and the Master Trustee shall be entitled to such relief as can be given either at law or in equity.

Notwithstanding any other provisions in this Master Trust Indenture the right of a holder of a Note to receive payment of the principal of and interest on such Note, on or after the respective due dates expressed in such Note, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such holder.

SECTION 7.8 Direction of Proceedings and Waiver of Defaults by Noteholders. Subject to the next succeeding paragraph, the holders of a majority in aggregate principal amount of Notes then Outstanding shall have the right, after furnishing indemnity satisfactory to the Trustee, to direct the time, method, and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred on the Master Trustee; provided, however, that the Master Trustee shall have the right to decline to follow any such direction if the Master Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken, or if the Master Trustee in good faith shall, by a responsible officer or officers of the Master Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability, and provided further that nothing in this Master Trust Indenture shall impair the right of the Master Trustee in its discretion to take any action deemed proper by the Master Trustee and which is not inconsistent with such direction by the Noteholders. Prior to the declaration of the maturity of Notes as provided in Section 7.1, the holders of a majority in aggregate principal amount of Notes then Outstanding may on behalf of the holders of all Notes waive any past Event of Default and its consequences, except a default in the payment of the principal of or interest on such Notes or in respect of a covenant or provision hereof which under Article Ten cannot be modified or amended without the consent of all the holders of such Notes then Outstanding. In the case of any such waiver the Obligated Group, the Master Trustee and the holders of Notes of all series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 7.9 Delay or Omission of Master Trustee. No delay or omission of the Master Trustee, or of any holder of a Note, to exercise any right or power accruing upon an Event of Default occurring and continuing as aforesaid, shall impair any such right or power, or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, nor shall the action of the Master Trustee or of the holders of Notes in case of any Event of Default, or in case of any Event of Default and the subsequent waiver of such Event of Default, affect or impair the rights of the Master Trustee or of such holders in respect of any subsequent Event of Default on the part of the Obligated Group or impair any right resulting therefrom; and every power and remedy given by this Indenture to the Master Trustee or to such holders may be exercised from time to time and as often as may be deemed expedient by it or by them.

SECTION 7.10 Remedies Cumulative. No remedy herein conferred upon or reserved to the Master Trustee or the holders of Notes entitled to the benefits hereof is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute; and the employment of any remedy hereunder, or otherwise, shall not prevent the concurrent employment of any other appropriate remedy or remedies.

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SECTION 7.11 Notice of Default. The Master Trustee shall not be required to take notice, or be deemed to have notice of any Event of Default under this Indenture other than an Event of Default under Section 7.l(a) hereof unless specifically notified in writing of such Event of Default by the holders of at least twenty-five per cent (25%) aggregate principal amount of the Notes then Outstanding or the issuer of the Related Bonds. The Master Trustee shall, within ten days after the occurrence of an Event of Default known to the Master Trustee, mail to all holders of Notes as the names and addresses of such holders appear upon the list maintained pursuant to Section 3.8, notice of such Event of Default known to the Master Trustee, unless such Event of Default shall have been cured before the giving of such notice; and provided that, except in the case of default in the payment of the principal of or premium, if any, or interest on any of the Notes and the Events of Default specified in clauses (d) and (e) of Section 7.1, the Master Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Master Trustee in good faith determine that the withholding of such notice is in the interests of the holders of Notes.

ARTICLE EIGHT

CONCERNING THE MASTER TRUSTEE

SECTION 8.1 Duties and Liabilities of Master Trustee. The Master Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Master Trust Indenture, and no implied covenants or obligations shall be read into this Master Trust Indenture against the Master Trustee. In case such an Event of Default has occurred (which has not been cured or waived) the Master Trustee shall exercise such of the rights and powers vested in it by this Master Trust Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. A permissive right or power to act shall not be construed as a requirement to act. The Trustee shall in no event be liable for the application or misapplication of funds, or for other acts or defaults of any person other than its own directors, officers, agents and employees.

No provision of this Master Trust Indenture shall be construed to relieve the Master Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, provided, however, that:

The duties and obligations of the Master Trustee shall be determined solely by the express provisions of this Master Trust Indenture and the Master Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Master Trust Indenture.

In the absence of bad faith on the part of the Master Trustee, the Master Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Master Trustee and conforming to the requirements of this Master Trust Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Master Trustee, the Master Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Master Trust Indenture.

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The Master Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Master Trustee, unless it shall be proved that the Master Trustee was negligent in ascertaining the pertinent facts.

No recourse shall be had by any Obligated Group Member, any Related Bond Trustee, or any holder of a note for any claim based on this Indenture or the Notes, against any director, officer, agent or employee of the Master Trustee unless such claim is based upon the negligence, bad faith, fraud or deceit of such person, For the purposes of this Indenture, matters shall not be considered known to the Master Trustee unless they are known to an officer in its corporate trust department.

The Master Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in aggregate principal amount of Notes then Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred upon the Master Trustee, under this Master Trust Indenture.

None of the provisions contained in this Master Trust Indenture shall require the Master Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

The Master Trustee shall not be answerable for the exercise of any discretion or power under this Master Trust Indenture or for anything whatever in connection with the trusts hereby created except only for its own willful misconduct or negligence.

SECTION 8.2 Reliance on Documents, Indemnification, Etc.

(a) The Master Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond debenture or other paper or document believed by it to be genuine;

(b) Any request, direction, order or demand of an Obligated Group Member mentioned herein shall be sufficiently evidenced by an Officer’s Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors of the Obligated Group Member may be evidenced to the Master Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Obligated Group Member;

(c) The Master Trustee may consult with counsel and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice;

(d) The Master Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Master Trust Indenture at the request, order or direction of any of the holders of Notes pursuant to the provisions of this Master Trust Indenture, unless such holders shall have offered to the Master Trustee security or indemnity, reasonably satisfactory to the Master Trustee, with respect to such additional compensation as the Master Trustee may reasonably require for complying with such request, order or direction and against the costs,

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expenses (including, without limitation, fees of counsel) and liabilities which may be incurred therein or thereby;

(e) The Master Trustee shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be within the discretion or rights or powers conferred upon it by this Indenture or taken by it pursuant to any direction or instruction by which it is governed under this Master Trust Indenture;

(f) The Master Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture or other paper or document, unless requested in writing so to do by the holders of not less than a majority in aggregate principal amount of Notes then Outstanding; provided, however, that if the payment within a reasonable time to the Master Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Master Trustee, not reasonably assured to the Master Trustee by the security afforded to it by the terms of this Master Trust Indenture, the Master Trustee may require indemnity, reasonably satisfactory to the Master Trustee, with respect to such additional compensation as the Master Trustee may require for complying with such request and against such costs, expenses (including, without limitation, fees of counsel) or liabilities as a condition to so proceeding; and provided further, that nothing in this subparagraph (f) shall require the Master Trustee to give such holders any notice other than that required by Section 7.11. The reasonable expense of every such examination shall be paid by the Obligated Group Member or, if paid by the Master Trustee, shall be repaid by the Obligated Group Member upon demand;

(g) The Master Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and shall not be responsible for the supervision, misconduct or negligence of any agent or attorney appointed with due care;

(h) The Master Trustee shall have no responsibility for the approval by it in good faith of any expert for any of the purposes expressed in this Master Trust Indenture;

(i) The Master Trustee shall not be required to give any bond or surety in respect of the execution of said trusts and powers or otherwise in respect of the premises; and

(j) The rights, privileges, protections, immunities and benefits given to the Master Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Master Trustee in each of its capacities hereunder including, without limitation, as paying agent and Note registrar, and to each agent, co-Master Trustee, custodian and other Person employed to act hereunder by the Master Trustee.

SECTION 8.3 Responsibility for Recitals, Validity of Indenture, Proceeds of Notes. The recitals contained herein, in each Supplemental Indenture, in any disclosure document describing this Master Trust Indenture and in the Notes (other than the certificate of authentication on such Notes) shall be taken as the statements of the Obligated Group, and the Master Trustee assumes no responsibility for the correctness of the same. The Master Trustee makes no representations as to the validity or sufficiency of this Master Trust Indenture or of the

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Notes. The Master Trustee shall not be accountable for the use or application by the Obligated Group of any of such Notes or of the proceeds of such Notes, or for the use or application of any moneys paid over by the Master Trustee in accordance with any provision of this Master Trust Indenture, or for use or application of any moneys received by any paying agent other than the Master Trustee. The Master Trustee shall have no obligation or duty to review any financial statements (audited or otherwise) filed with it and shall not be deemed to have notice of the content of such statements or a default based on such content and shall have no obligation or duty to verify the accuracy of such statements.

SECTION 8.4 Master Trustee, Paying Agent or Registrar May Own Notes. The Master Trustee or any paying agent, or Note registrar, in its individual or any other capacity, may become the owner or pledgee of Notes and may act as trustee under a Related Bond Indenture with the same rights it would have if it were not Master Trustee, paying agent, or Note registrar.

SECTION 8.5 Moneys to be Held in Trust. All moneys received by the Master Trustee shall, until used or applied as herein provided be held in trust for the purposes for which they were received and segregated from other funds of the Master Trustee. The Master Trustee shall be under no liability for interest on any moneys received by it hereunder.

SECTION 8.6 Compensation and Expenses of Master Trustee. Each Obligated Group Member covenants and agrees to pay to the Master Trustee from time to time, and the Master Trustee shall be entitled to, reasonable compensation, and the Obligated Group Members will pay or reimburse the Master Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Master Trustee in connection with the acceptance or administration of its trust under this Master Trust Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. Each Obligated Group Member also covenants to indemnify the Master Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Master Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses (including, without limitation, reasonable compensation to its attorneys) of defending itself against any claim of liability in the premises. The obligations of the Obligated Group Members under this Section to compensate the Master Trustee, to pay or reimburse the Master Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Master Trustee shall survive the satisfaction and discharge of this Master Trust Indenture,

SECTION 8.7 Officer’s Certificate as Evidence. Except where a certificate of an Independent Consultant or Independent Insurance Consultant is specifically required, whenever in the administration of the provisions of this Indenture the Master Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Master Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate delivered to the Master Trustee, and such Certificate, in the absence of negligence or bad faith on the part of the Master Trustee, shall be full warrant to the Master Trustee for any action taken, suffered or omitted by it under the provisions of this Master Trust Indenture upon the faith thereof.

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SECTION 8.8 Resignation, Removal and Successor Master Trustee. The Master Trustee may resign at any time without cause by giving at least 30 days’ prior written notice to the Obligated Group and to each holder of a Note, as the names and addresses of such holders appear on the list maintained pursuant to Section 3.8; provided, however, that no such resignation shall be effective until a successor shall have been appointed as hereinafter provided. In addition, the Master Trustee may be removed, upon thirty (30) days written notice, without cause at the direction of the holders of not less than a majority in aggregate principal amount of Notes, delivered to the Obligated Group and the Master Trustee, or by the Obligated Group at any time that the Obligated Group shall not be in default hereunder, and the Master Trustee shall promptly give notice thereof in writing to each holder of a Note as provided above. In the case of the resignation or removal of the Master Trustee, a successor trustee may be appointed at the direction of the holders of not less than a majority in aggregate principal amount of Notes or, if the Master Trustee has been removed by the Obligated Group, at the direction of the Obligated Group. If a successor trustee shall not have been appointed within thirty (30) days after such notice of resignation or removal, the Master Trustee, any Obligated Group Member or any holder of a Note may apply to any court of competent jurisdiction to appoint a successor to act until such time, if any, as a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided.

SECTION 8.9 Acceptance by Successor Master Trustee. Any successor trustee, however appointed, shall execute and deliver to its predecessor and to each Obligated Group Member an instrument accepting such appointment, and thereupon such successor, without further act, shall become vested with all the estates, properties, rights, powers and duties of its predecessor hereunder in the trusts under this Master Trust Indenture applicable to it with like effect as if originally named the Master Trustee; but, nevertheless, upon the written request of such successor trustee, its predecessor shall execute and deliver an instrument transferring to such successor trustee, upon the trusts herein expressed applicable to it, all the estates, properties, rights and powers of such predecessor under this Master Trust Indenture, and such predecessor shall duly assign, transfer, deliver and pay over to such successor trustee all moneys or other property then held by such predecessor under this Master Trust Indenture.

SECTION 8.10 Qualifications of Successor Master Trustee. Any successor trustee, however appointed, shall be a bank or trust company having a combined capital and surplus of at least $30,000,000, if there be such an institution willing, able and legally qualified to perform the duties of the Master Trustee hereunder upon reasonable or customary terms.

SECTION 8.11 Successor by Merger. Any corporation into which the Master Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Master Trustee shall be a party, or any corporation to which substantially all the corporate trust business of the Master Trustee may be transferred, shall, subject to the terms of Section 8.10, be the Master Trustee under this Master Trust Indenture without further act. In such event, the Master Trustee shall give prompt notice thereof to the Obligated Group.

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SECTION 8.12 Co-Master Trustees.

(a) At any time, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Master Trustee shall have power to appoint one or more persons to act as co-master trustee under this Indenture, with such powers as may be provided in the instrument of appointment, and to vest in such person or persons any property, title, right or power deemed necessary or desirable, subject to the remaining provisions of this Section 8.12.

(b) Each co-master trustee shall, to the extent permitted by applicable law, be appointed subject to the following terms:

(i) The rights, powers, duties and obligations conferred or imposed upon any such trustee shall not be greater than those conferred or imposed upon the Master Trustee, and such rights and powers shall be exercisable only jointly with the Master Trustee, except to the extent that, under any law of any jurisdiction in which any particular act or acts are to be performed, the Master Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights and powers shall be exercised by such co-master trustee subject to the provisions of subsection (b) (iv) of this Section 8.12.

(ii) The Master Trustee may at any time, by an instrument in writing executed by it, accept the resignation of or remove any co-master trustee appointed under this Section 8.12.

(iii) No co-master trustee under this Master Trust Indenture shall be liable by reason of any act or omission of any other co-master trustee appointed under this Master Trust Indenture.

(iv) No power given to such co-master trustee shall be separately exercised hereunder by such co-master trustee except with the consent in writing of the Master Trustee, anything herein contained to the contrary notwithstanding.

ARTICLE NINE

CONCERNING THE NOTEHOLDERS

SECTION 9.1 Evidence of Action by Noteholders; Related Bondholders Deemed Noteholders. Whenever in this Master Trust Indenture it is provided that the holders of a specified percentage in aggregate principal amount of Notes may take any action (including the making of any demand or request, the giving of any notice, consent, or waiver or the taking of any other action), (a) the fact that at the time of taking any such action the holders of such specified percentage have joined therein shall be evidenced by any instrument or any number of instruments of similar tenor executed by such holders in person or by agent or proxy appointed in writing and (b) in determining whether the holders of the requisite aggregate principal amount of Notes have concurred in taking any such action, Notes owned or held by an Obligated Group Member or a Related Bond Trustee as security for the payment of Related Bonds shall be disregarded and deemed not Outstanding for the purposes of such determination and each holder of such Related Bonds then outstanding under the Related Bond Indenture shall, for the purposes

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of such determination, be deemed to hold a Note then Outstanding in a principal amount equal to the aggregate principal amount of such Related Bonds held by such holder.

Notwithstanding the foregoing if the Related Bond Indenture so provides, if at any time a Credit Facility secures payment of the principal of and interest on such Related Bonds, then the Credit Facility Provider shall be deemed to be the owner of such Related Bonds except during any period when such the Credit Facility Provider has failed to honor its obligations under such Credit Facility, and the principal amount of any Note that evidences and secures Derivative Notes shall be deemed to be zero and such Note shall be disregarded for purposes of any request, direction or consent of the Noteholders requested or permitted hereunder unless the related Derivative Agreement has terminated, in which case the principal amount of such Note shall be deemed to be the amount of any termination payment owed to the Noteholder of such Note; provided, however, that no Supplement that would alter the priority of such Note with respect to the Property pledged to secure such Note or application of moneys under Section 7.6 of this Master Trust Indenture shall be permitted without the consent of the Noteholder of such Note.

SECTION 9.2 Proof of Execution of Instruments and of Ownership of Notes and Related Bonds. Proof of the execution of any instrument by a Noteholder, or a holder of a Related Bond for the purposes of Section 9.1 (a “Related Bondholder”), or his agent or proxy and proof of the holding by any person of Notes or Related Bonds shall be sufficient if made in the following manner:

The fact and date of the execution by any such person of any instrument may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in any state within the United States, that the person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officers. If such execution is by an officer of a corporation, association or trust, trustee of a trust or a member of a partnership on behalf of such corporation, association, trust or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.

The fact of the holding by any Noteholder of Notes transferable by delivery or the holding by a Related Bondholder of Related Bonds, and the amounts and numbers of such Notes or Related Bonds and the date of the holding of the same, may be proved by the production of such Notes or Related Bonds or by a certificate executed by any trust company, bank or bankers satisfactory to the Master Trustee wherever situated, if such certificate shall be deemed by the Master Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Note or Related Bond bearing a specified serial number was deposited with or exhibited to such trust company, bank or bankers by the person named in such certificate. Any such certificate may be issued in respect of one or more Notes or Related Bonds specified therein. The holding by the person named in any such certificate of any Note or Related Bond specified therein shall be presumed to continue for a period of one year (or for such shorter period as such presumption is permitted to continue under applicable law) unless (1) another certificate bearing a later date issued in respect of the same Note or Related Bond shall be produced, or (2) the Note or Related Bond specified in such certificate shall be produced by some other person, or (3) the Note or Related Bond specified in such certificate shall then be

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registered as to principal or shall have been surrendered in exchange for a registered Note or a registered Related Bond.

The Master Trustee shall not be bound to recognize any person as a Noteholder or Related Bondholder unless and until his title to the Notes, or the Related Bonds, as the case may be, held by him is proved in the manner in this Article Nine provided.

The Master Trustee may accept such other proof or require such additional proof of any matter referred to in this Section as it shall deem reasonable.

SECTION 9.3 Who May Be Deemed Owners of Notes.

The Obligated Group Members, the Master Trustee, any paying agent and any Note registrar may deem and treat the person in whose name any registered Note shall be registered upon the books of the Obligated Group Member as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Obligated Group Member or any Note registrar) for the purpose of receiving payment thereof or on account thereof and of interest thereon and for all other purposes and neither the Obligated Group Member nor the Master Trustee nor any paying agent nor any Note registrar shall be affected by any notice to the contrary. All such payments so made to any such registered holder shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Note.

SECTION 9.4 Notes or Related Bonds Owned by Obligated Group Members. In determining whether the holders of the requisite aggregate principal amount of Notes have concurred in any demand, direction, request, notice, consent, waiver or other action under this Master Trust Indenture, such Notes or Related Bonds that are owned by any Obligated Group Member or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Obligated Group Member shall be disregarded and deemed not to be Outstanding or outstanding under the Related Bond Indenture, as the case may be, for the purpose of any such determination, provided that for the purposes of determining whether the Master Trustee shall be protected in relying on any such direction, consent or waiver, only such Notes or Related Bonds which the Master Trustee has written notice are so owned shall be so disregarded. Notes or Related Bonds so owned that have been pledged in good faith may be regarded as Outstanding or outstanding under the Related Bond Indenture, as the case may be, for the purposes of this Section, if the pledgee shall establish to the satisfaction of the Master Trustee the pledgee’s right to vote such Notes or Related Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Obligated Group Member. In case of a dispute as to such right, any decision by the Master Trustee taken upon the advice of counsel shall be full protection to the Master Trustee.

SECTION 9.5 Instruments Executed by Noteholders and Related Bondholders Binding Future Noteholders and Related Bondholders. At any time prior to (but not after) the time at which the Master Trustee shall act in reliance upon the evidencing to the Master Trustee, as provided in Section 9.1, of the taking of any action by the holders of the percentage in aggregate principal amount of Notes specified in this Master Trust Indenture in connection with such

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action, any holder of such a Note or Related Bond that is shown by the evidence to be included in such Notes the holders of which have consented to such action may, by filing written notice with the Master Trustee at its Principal Office and upon proof of holding as provided in Section 9.2, revoke such action so far as concerns such Note or Related Bond. Except as aforesaid any such action taken by the holder of a Note or Related Bond and any direction, demand, request, waiver, consent, vote or other action of the holder of such Note or Related Bond which by any provisions of this Master Trust Indenture is required or permitted to be given shall be conclusive and binding upon such holder and upon all future holders and owners of such Note or Related Bond, and of any Note or Related Bond issued in lieu thereof, irrespective of whether or not any notation in regard thereto is made upon such Note or Related Bond. Any action taken by the holders of the percentage in aggregate principal amount of such Notes specified in this Master Trust Indenture in connection with such action shall be conclusively binding upon the Obligated Group Members, the Master Trustee and the holders of all of such Notes or Related Bonds subject, however, to the provisions of Section 9.1.

ARTICLE TEN

SUPPLEMENTS AND AMENDMENTS NOT CREATING A NEW SERIES OF NOTES

SECTION 10.1 Supplemental Indentures without Consent of Noteholders. All of the Obligated Group Members, when authorized by a resolution by each of their Boards of Directors, and the Master Trustee may from time to time and at any time enter into an indenture or indentures supplemental or amendatory hereto for one or more of the following purposes:

(a) to evidence the succession of another corporation to an Obligated Group Member, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of an Obligated Group Member pursuant to this Indenture;

(b) to add to the covenants of the Obligated Group such further covenants, restrictions or conditions as the Authorized Obligated Group Representative and the Master Trustee shall consider to be for the protection of the holders of Notes, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Master Trust Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Master Trustee upon such default;

(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Master Trust Indenture or any supplemental indenture supplemental hereto and shall not impair the security of this Master Trust Indenture or adversely affect the interests of the holders of Notes of any series;

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(d) to modify or supplement this Master Trust Indenture in such manner as may be necessary or appropriate to qualify this Master Trust Indenture under the Trust Indenture Act of 1939 as then amended, or under any similar federal statute hereafter enacted, including provisions whereby the Master Trustee accepts such powers, duties, conditions and restrictions hereunder and the Obligated Group undertakes such covenants, conditions or restrictions additional to those contained in this Master Trust Indenture as would be necessary or appropriate so to qualify this Master Trust Indenture;

(e) to evidence additions to, or withdrawals from, membership in the Obligated Group in accordance with the provisions of Article XIII hereof;

(f) to substitute Master Trustees pursuant to Section 8.8 hereof or to add a co- Master Trustee pursuant to Section 8.12 hereof;

(g) in connection with any other change therein which, in the judgment of an Independent Consultant, a copy of whose report shall be sent to the Master Trustee, (1) is in the best interest of the Obligated Group and (2) does not materially adversely affect the owners of the Notes; provided that no such change shall be made if, within thirty (30) days of its receipt of such Independent Consultant’s report, the Master Trustee shall have received a report from another Independent Consultant indicating that in its opinion either clause (1) or clause (2) of this subsection (i) is not satisfied; provided further, that the Master Trustee shall be under no duty to retain another such Independent Consultant; and

(h) in connection with any other change therein which, in the judgment of the Master Trustee does not impair the security for the Notes, which determination shall be binding and conclusive on the Obligated Group and owner of the Notes.

The Master Trustee may receive an Opinion of Counsel, including counsel to the Obligated Group, as conclusive evidence as to whether any change would impact the security for the Notes or adversely affect the interests of the holders of any Notes.

The Master Trustee is hereby authorized to join with the Obligated Group in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, mortgage, pledge or assignment of any property thereunder, but the Master Trustee shall not be obligated to enter into any such supplemental indenture that affects the Master Trustee’s own rights, duties or immunities under this Master Trust Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section may be executed by the Obligated Group Members and the Master Trustee without the consent of the holders of Notes then Outstanding, notwithstanding any of the provisions of Section 10.2.

SECTION 10.2 Modification of Master Trust Indenture with Consent of Noteholders. With the consent (evidenced as provided in Section 9.1) of the holders of not less than a majority in aggregate principal amount of Notes then Outstanding, the Obligated Group Members, when authorized by resolutions of their respective Governing Bodies, and the Master Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Master Trust indenture or of any supplemental indenture or of modifying in -53-

any manner adversely affecting the rights of the holders of Notes; provided, however, that no such supplemental indenture shall (i) effect a change in the times, amounts or currency of payment of the principal of, premium, if any, or interest on any Note or a reduction in the principal amount or redemption price of any Note or the rate of interest thereon, (ii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture or (iii) permit the preference or priority of any Note or Notes over any other Note or Notes as to payment from and source of security for payment thereof from the trust estate (except in accordance with the provisions hereof), without the consent of the holders of all Notes then Outstanding; provided, further, however, that the consent of the holders of not less than seventy-five percent (75%) in aggregate principal amount of Notes then Outstanding shall be required so as to modify Section 6.6 hereof.

Upon the request of all of the Obligated Group Members, accompanied by a copy of a resolution of their respective Governing Bodies certified by the Secretary or an Assistant Secretary of each Obligated Group Member authorizing the execution of any such supplemental indenture, and upon the filing with the Master Trustee of evidence of the consent of Noteholders as aforesaid, the Master Trustee shall join with the Obligated Group in the execution of such supplemental indenture unless such supplemental indenture affects the Master Trustee’s own rights, duties or immunities under this Master Trust Indenture or otherwise, in which case the Master Trustee may in its discretion, but shall not be obligated to enter into such supplemental indenture.

It shall not be necessary for the consent of the Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall be given after notice of such proposed supplemental indenture has been mailed to the Noteholders. Such notice shall set forth briefly the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the Principal Office of the Master Trustee for inspection by the Noteholder. Any failure of the Obligated Group to publish said notice, or any defect therein, shall not affect the validity of the consent to the proposed supplemental indenture.

Promptly after the execution by the Obligated Group and the Master Trustee of any supplemental indenture pursuant to the provisions of this Section, the Obligated Group shall mail notice to such Noteholders by first class prepaid mail. Any failure of the Obligated Group to receive such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 10.3 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to the provisions of this Article, this Master Trust Indenture shall, with respect to each series of Notes, be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Master Trust Indenture of the Master Trustee, the Obligated Group Members and the holders of Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Master Trust Indenture.

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The Master Trustee may receive an Opinion of Counsel as conclusive evidence that any such supplemental indenture is as authorized or permitted by the Master Trust Indenture and complies with the provisions of this Article.

SECTION 10.4 Notes May Bear Notation of Changes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Ten may bear a notation in form approved by the Master Trustee as to any matter provided for in such supplemental indenture. If the Obligated Group or the Master Trustee shall so determine, new Notes of a series so modified as to conform, in the opinion of the Master Trustee and the Obligated Group, to any modification of this Master Trust Indenture contained in any such supplemental indenture may be executed by the Obligated Group, authenticated by the Master Trustee and delivered in exchange for Notes of the same series then Outstanding.

ARTICLE ELEVEN

SUPPLEMENTAL INDENTURES CREATING SERIES OF NOTES

SECTION 11.1 Supplemental Indentures Creating Series of Notes. All of the Obligated Group Members, when authorized by a resolution by each of their governing bodies, and the Master Trustee may from time to time enter into a Supplemental Indenture in order to create a series of Notes. No consent of existing Noteholders is required if the conditions of Section 11.2 are satisfied. Such Supplemental Indenture shall, with respect to the series of Notes created thereby, set forth the date thereof, and the date or dates upon which principal of and premium, if any, and interest on such Notes shall be payable, and shall contain such other terms and provisions as shall be established in the Supplemental Indenture.

SECTION 11.2 Conditions to Issue of Notes. With respect to each series of Notes, simultaneously with or prior to the execution, authentication and delivery of such Notes pursuant to this Master Trust Indenture:

(a) No Event of Default hereunder shall have occurred and be continuing.

(b) all requirements and conditions to the issuance of such Notes, if any, set forth in the Supplemental Indenture shall have been complied with and satisfied;

(c) the Obligated Group shall have delivered to the Master Trustee an Opinion of Counsel to the effect that registration of such Notes under the Securities Act of 1933, as amended, is not required, or, if such registration is required, that the Obligated Group has complied with all applicable provisions of said Acts and that no qualification of the Master Trust Indenture or such Supplemental Indenture under the Trust Indenture Act of 1939, as amended, is required in connection with the offer and sale of such Notes, or if such qualification is required, that the Obligated Group has complied with all applicable provisions of said Act;

(d) each Obligated Group Member shall have delivered to the Master Trustee an Officer’s Certificate from each member stating that, to the best of the knowledge of the signer thereof, each of the persons in whose name such a Note is to be registered upon the original issuance thereof and each of the persons who is to hold such a Note upon the original issuance thereof is not acquiring the interest represented by such a Note directly or indirectly with the -55-

assets of, or in connection with any arrangement or understanding by it in any way involving, any employee benefit plan with respect to which (i) any employee of an Obligated Group Member or the Master Trustee, in its individual capacity, is a participant or (ii) the Obligated Group Member or the Master Trustee, in its individual capacity, or any of their affiliates is otherwise a party in interest, all within the meaning of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE TWELVE

REPLACEMENT MASTER TRUST INDENTURE

SECTION 12.1 Replacement Master Trust Indenture. Each Noteholder of a Note shall surrender such Note to the Master Trustee upon presentation to the Noteholder of all of the following:

(a) a Request of the Obligated Group Representative requesting such surrender and delivery and stating that the Obligated Group Representative has become a member of an obligated group under a master indenture (other than the Master Indenture) (or an entity which, directly or indirectly, controls the Obligated Group Representative has become a member of such an obligated group and the Obligated Group Representative is obligated, by its articles of incorporation, bylaws or by contract or otherwise, to make payments to such controlling entity in amounts sufficient to enable the entity to make payments with respect to obligations issued under such master indenture) and that an obligation is being issued to the Bond Trustee under such replacement master indenture (the “Replacement Master Indenture”);

(b) an executed obligation (the “Replacement Obligation”) issued under the Replacement Master Indenture and registered in the name of the Bond Trustee with the same tenor and effect as the Notes (in a principal amount equal to the then Outstanding principal amount of Related Bonds), authenticated by the master trustee under the Replacement Master Indenture;

(c) an Opinion of Counsel selected by the Obligated Group Representative to the effect that the Replacement Obligation has been validly issued under the Replacement Master Indenture and constitutes a valid and binding obligation of the Obligated Group Representative (or the entity which directly or indirectly controls the Obligated Group Representative, if applicable) and each other Obligated Group Member (if any) which is jointly and severally liable under the Replacement Master Indenture;

(d) a copy of the Replacement Master Indenture, certified as a true and accurate copy by the master trustee under the Replacement Master Indenture;

(e) written confirmation from each rating agency then rating the Related Bonds that the replacement of the Notes will not, by itself, result in a reduction in the then- current ratings on the Bonds; provided, however, that no confirmation from any rating agency shall be required with respect to any substitute or replacement master indenture resulting from an affiliation pursuant to that certain Affiliation Agreement dated May 1, 2016 between Southcoast Health System, Inc. and Care New England Health System; and

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(f) a Favorable Opinion of Bond Counsel with respect to the replacement of the Notes.

Upon satisfaction of such conditions, all references herein and in the Loan Agreement to the Notes shall be deemed to be references to the Replacement Obligation, all references to the Master Indenture shall be deemed to be references to the Replacement Master Indenture, all references to the Master Trustee shall be deemed to be references to the master trustee under the Replacement Master Indenture, all references to the Obligated Group and the Obligated Group Members shall be deemed to be references to the obligated group and the obligated group members under the Replacement Master Indenture and all references to Supplemental Master Indenture for the Notes shall be deemed to be references to the supplemental master indenture pursuant to which the Replacement Obligation is issued.

ARTICLE THIRTEEN

PERSONS BECOMING OBLIGATED GROUP MEMBERS; WITHDRAWAL FROM OBLIGATED GROUP

SECTION 13.1 Persons Becoming Obligated Group Members.

(a) If at any time the Obligated Group and any other Person shall determine that such Person should become an Obligated Group Member under this Master Trust Indenture, the Obligated Group and such new Obligated Group Member may execute and deliver to the Master Trustee an instrument, containing the agreement of such new Obligated Group Member (i) to become an Obligated Group Member under this Master Trust Indenture and thereby subject to compliance with all provisions of this Master Trust Indenture pertaining to an Obligated Group Member hereunder, including the performance of the obligations of an Obligated Group Member hereunder, (ii) agreeing with the Master Trustee and each other Member of the Obligated Group that it shall be jointly and severally obligated to pay all Debt evidenced by Notes theretofore or thereafter issued and at any time Outstanding hereunder in accordance with the terms thereof and of this Master Trust Indenture, when due, and (iii) agreeing to execute and deliver to the Master Trustee all amendments to and supplements of the Indenture as the Master Trustee may require an Obligated Group Member to deliver from time to time pursuant to this Master Trust Indenture.

(b) Each instrument executed and delivered to the Master Trustee in accordance with Section 13.1(a) hereof shall be accompanied by an Opinion of Counsel (i) to the effect that each such instrument has been duly authorized, executed and delivered by the Obligated Group and such new Obligated Group Member and constitutes a valid and binding obligation enforceable in accordance with its terms, except as limited by applicable fraudulent conveyance law or statutes (the potential effects of which shall be set forth in reasonable detail), bankruptcy laws, insolvency laws and other laws and equitable principles affecting creditors’ rights generally, and (ii) as to such matters incidental to the transactions contemplated by Section 13.1(a) as the Master Trustee deems reasonably necessary.

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Obligated Group would not be in default in the performance or observance of a covenant or condition hereunder and (ii) subject to the provisions of Section 6.9(b) hereof, the Obligated Group shall furnish to the Master Trustee (A) an Officer’s Certificate of an Authorized Obligated Group Representative based on audited financial statements to the effect that the Debt Service Coverage Ratio for the immediately preceding Fiscal Year for which the audited financial statements are available is not less than 1.10, and (B) either an Officer’s Certificate of an Authorized Obligated Group Representative based on audited financial statements (based on historic pro forma income assuming the Person had been an Obligated Group Member) or a report of an Independent Consultant (based on projected income) which demonstrates that the tests for incurrence of one dollar of additional debt as set forth in Section 6.7(i)(a)(i) and 6.7(l)(a)(ii) hereinabove are met.

(d) Notwithstanding the foregoing, Memorial Hospital may withdraw from the Obligated Group at any time without meeting any of the requirements of this Section 13.1.

SECTION 13.2 Effects of Becoming an Obligated Group Member. Upon any Person becoming a Obligated Group Member pursuant to Section 13.1 hereof:

(a) such Obligated Group Member may execute and deliver Obligations thereafter issued and any Supplemental Indenture thereafter entered into;

(b) the computations provided for in any provision of this Master Trust Indenture shall be made on a consolidated or combined basis for the Obligated Group and each Obligated Group Member including any Person becoming an Obligated Group Member pursuant to Section 13.1 hereof in accordance with generally accepted accounting principles as then in effect consistently applied, with the elimination of material intercompany balances and transactions; and

(c) any covenant contained herein obligating any Obligated Group Member to perform any matter with respect to its Property or its operations shall be deemed to obligate such Obligated Group Member to perform such matter with respect to Property owned by it or its operations.

SECTION 13.3 Withdrawal from the Obligated Group.

(a) Any Obligated Group Member may, upon thirty (30) days prior written notice to the Master Trustee, withdraw from the Obligated Group under this Master Trust Indenture, and the Master Trustee, if so requested by such Obligated Group Member and at such Obligated Group Member’s expense, shall execute and deliver an appropriate instrument releasing such Obligated Group Member from any liability or obligation under the provisions of this Master Trust Indenture provided that the Obligated Group and such Obligated Group Member shall execute and deliver to the Master Trustee an instrument, containing the agreement of the Obligated Group (i) that such Obligated Group Member may withdraw from the Obligated Group under this Master Trust Indenture and thereby no longer be subject to compliance with all provisions of this Master Trust Indenture pertaining to an Obligated Group Member hereunder and (ii) guaranteeing to the Master Trustee and each other Member of the Obligated Group that all Notes issued and then outstanding hereunder for the benefit of such Person have been repaid or economically or legally defeased in accordance with the terms thereof and of this Master Trust

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Indenture, unless the remaining Members of the Obligated Group consent in writing to a waiver of such repayment requirement.

(b) Each instrument executed and delivered to the Master Trustee in accordance with Section 13.3(a) hereof shall be accompanied by (i) a certified copy of the resolution of the Governing Body of such Obligated Group Member requesting such withdrawal and release and (ii) an Officer’s Certificate of such Obligated Group Member approving such withdrawal and release.

(c) It shall be a condition precedent to the consummation of any transaction involving an instrument to be executed and delivered by the Master Trustee in accordance with Section 13.3(a) that subject to reduction of the Debt Service Coverage Ratio to not less than 1.00 if applicable laws or regulations prevent the Obligated Group from generating sufficient Net Income Available for Debt Service upon satisfaction of the requirements of Section 6.9(b) and (c), the withdrawing Obligated Group Member shall furnish to the Master Trustee both (A) an Officer’s Certificate of the Authorized Obligated Group Representative based on audited financial statements to the effect that the Debt Service Coverage Ratio for all remaining Obligated Group Members for the immediately preceding Fiscal Year for which the audited financial statements of such Obligated Group Members are available is at least 1.10, and (B) either an Officer’s Certificate of the Authorized Obligated Group Representative based on audited financial statements (based on historic pro forma income assuming the proposed withdrawal had taken place) or a report of an Independent Consultant (based on projected income) which demonstrates a Debt Service Coverage Ratio for all remaining Obligated Group Members, for each of the two Fiscal Years immediately succeeding the proposed date of withdrawal from the Obligated Group, of either (1) not less than 1.50, or (2) not less than 1.25 and not less than seventy-five percent (75%) of the expected Debt Service Coverage Ratio if the proposed withdrawal were not to occur, or (3) not less than 1.10 and greater than the expected Debt Service Coverage Ratio if the proposed withdrawal were not to occur provided, that, if such Obligated Member proposing to withdraw from the Obligated Group shall have executed as a maker any Outstanding Note, one or more of the remaining members of the Obligated Group shall execute one or more Notes in substitution and deliver the same to the Master Trustee for authentication, which Notes shall be authenticated by the Master Trustee and delivered to the Noteholders upon surrender of the Notes they replace; and provided further that after giving effect to the withdrawal and release, no Event of Default or event which with the giving of notice or lapse of time or both shall constitute an Event of Default shall have occurred and be continuing, and a certificate of the Authorized Obligated Group Representative so stating is filed with the Master Trustee. Notwithstanding the foregoing, in the event Women & Infants Corporation is merged or consolidated with or into Women & Infants Hospital of Rhode Island or otherwise ceases its existence and, as part of such merger, consolidation or cessation of existence, any assets of Women & Infants Corporation are transferred to Women & Infants Hospital of Rhode Island, Women & Infants Corporation may withdraw from the Obligated Group without being required to meet the conditions of this Section 13.3(c).

(d) Promptly after any such withdrawal and release, the Master Trustee shall give written notice thereof by mail to each Related Bond Trustee and to all other registered owners of Notes at their last known address as they appear on the register maintained as provided in Section 3.2 hereof.

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(e) Any Person that has withdrawn from the Obligated Group may again become an Obligated Group Member in accordance with the provisions of Section 13.1 hereof.

ARTICLE FOURTEEN

SATISFACTION AND DISCHARGE OF MASTER TRUST INDENTURE; UNCLAIMED MONEYS

SECTION 14.1 Satisfaction and Discharge of Master Trust Indenture. If, when the Notes secured hereby shall become due and payable in accordance with their terms or otherwise as provided in this Master Trust Indenture and the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Notes shall be paid, or provision shall have been made for the payment of the same, together with all other sums payable hereunder, then all covenants, agreements and other obligations of the members of the Obligated Group to the Noteholders shall thereupon cease, terminate and become void and become discharged and satisfied.

All or portions of Outstanding Notes of any one or more series shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in this Section if (a) in case said Notes are to be redeemed on any date prior to their maturity, the Authorized Obligated Group Representative shall have given to the Master Trustee in form satisfactory to it irrevocable instructions to give on a date in accordance with the provisions of Article III hereof notice of redemption of such Notes on said redemption date, such notice to be given in accordance with the provisions of Article III hereof, (b) there shall have been deposited with the Master Trustee either moneys in an amount which shall be sufficient, or the same Federal Securities required by the Related Bond Indenture to defease the Related Bonds, which shall not contain provisions permitting the redemption thereof at the option of the issuer, or any other person other than the Registered owner thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal of, premium, if any, and interest due and to become due on said Notes on and prior to the redemption date or maturity date thereof, as the case may be, and (c) in the event said Notes are not by their terms subject to redemption within the next forty-five (45) days, the Members of the Obligated Group shall have given the Master Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to Article III hereof, a notice to the Registered Owners of such Notes that the deposit required by (b) above has been made with the Master Trustee and that said Notes are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of, premium, if any, and interest on said Notes. The Master Trustee shall create a separate escrow account for the payment or redemption of each series of Notes and shall deposit all moneys received pursuant to this Section 14.1 for the payment or redemption of such Notes in such escrow account pending the investment of such moneys in Federal Securities pursuant hereto. Federal Securities deposited with the Master Trustee, or purchased by the Master Trustee pending such payment or redemption, shall be held in separate custodial accounts by the Master Trustee as security for its obligations to effect such payment or redemption. Neither the Federal Securities nor moneys deposited with the Master Trustee pursuant to this Section nor principal or interest payment on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of,

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premium, if any, and interest on said Notes of such series provided any cash received from such principal or interest payments on such Federal Securities deposited with the Master Trustee, if not then needed for such purpose, shall, at the written direction of the Authorized Obligated Group Representative, either (i) be reinvested in Federal Securities of the type described in clause (b) of this paragraph maturing at the times and in amounts sufficient to pay when due the principal of, premium, if any, and interest to become due on said Notes on or prior to such redemption date or maturity date thereof, as the case may be, (ii) be used to pay principal or interest on such other Debt of the Members of the Obligated Group issued to pay or provide for the payment of the principal of, premium, if any, and interest on one or more series of the Notes as the Authorized Obligated Group Representative shall direct in writing, or (iii) shall be remitted to the Member of the Obligated Group which deposited such amount or Federal Securities. At such time as any Note shall be deemed paid as aforesaid, it shall no longer be secured by or entitled to the benefits of this Master Trust Indenture, except for the purpose of any payment from such moneys or Federal Securities deposited with the Master Trustee and the purpose of transfer pursuant to Article III hereof.

The release of the obligations of the Members of the Obligated Group under this Section shall be without prejudice to the rights of the Master Trustee to be paid reasonable compensation for all services rendered by it hereunder and all its reasonable expenses, charges and other disbursements incurred on or about the administration of the trust hereby created and the performance of its powers and duties hereunder.

Any Note which secures a series of Related Bonds shall not be deemed to be satisfied and discharged under the terms of this Master Trust Indenture unless such Related Bonds are deemed to have been paid in full under the terms of the Related Bond Indenture.

Upon the defeasance of any of the Notes pursuant to an advance refunding, the Master Trustee upon request shall be entitled to receive and to rely upon a verification report and an opinion of counsel.

SECTION 14.2 Repayment of Moneys held by Paying Agent. In connection with the satisfaction and discharge of this Master Trust Indenture as it relates to Notes, upon demand of the Obligated Group all moneys then held by any paying agent under the provisions of this Master Trust Indenture as it relates to Notes shall, to the extent permitted by applicable law, be paid to the Master Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys.

SECTION 14.3 Repayment of Moneys held by Master Trustee. Any moneys deposited with the Master Trustee or any paying agent for the payment of the principal of or interest on Notes and not applied but remaining unclaimed by the holders of such Notes for three years after the date upon which such payment shall have become due, shall, to the extent permitted by applicable law, be repaid to the Obligated Group by the Master Trustee or by such paying agent on demand; and, upon such repayment, the holder of any of such Notes entitled to receive such payment shall thereafter look only to the Obligated Group for the payment thereof; provided, however, that the Master Trustee or such paying agent, before being required to make any such repayment, may at the expense of the Obligated Group cause to be published once a week for two successive weeks (in each case on any day of the week) in an Authorized Newspaper, a

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notice that said moneys have not been so applied and that after a date named therein any unclaimed balance of said moneys then remaining will be returned to the Obligated Group.

ARTICLE FIFTEEN

IMMUNITY OF INCORPORATORS, OFFICERS AND MEMBERS OF GOVERNING BODY

SECTION 15.1 Incorporators, Officers and Members of Governing Body of any Obligated Group Member Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement of this Master Trust Indenture, or of any Obligations, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, member, officer or member of the governing body, as such, past, present or future, of any Obligated Group Member or of any successor corporation, either directly or through the Obligated Group Member, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Master Trust Indenture and the Obligations issued hereunder are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, members, officers or members of the board of directors, as such, of any Obligated Group Member or any successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Master Trust Indenture or in any obligations or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, member, officer or trustee, as such, because of the creation of the indebtedness hereby authorized, for under or by reason of the obligations, covenants or agreements contained in this Master Trust Indenture or in any Obligations or implied therefrom are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Master Trust Indenture and the issue of such Obligations.

ARTICLE SIXTEEN

MISCELLANEOUS PROVISIONS

SECTION 16.1 Successors and Assigns of the Obligated Group Members Bound by Master Trust Indenture. All the covenants, stipulations, promises and agreements in this Master Trust Indenture contained by or on behalf of the Obligated Group Members or the Master Trustee shall inure to the benefit of and shall bind their respective successors and assigns, whether so expressed or not.

SECTION 16.2 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Master Trust Indenture authorized or required to be done or performed by any board, committee or officer of the Obligated Group Member shall and may be done and performed with like force and effect by any like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Obligated Group Members.

SECTION 16.3 Service of Notice or Demand. With respect to each series of Notes, unless otherwise expressly specified or permitted by the terms hereof, all notices shall be in

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writing, mailed by first-class mail, postage prepaid or delivered by overnight delivery service or by courier, and (i) if to the Obligated Group, addressed to it at Care New England Health System, 45 Willard Avenue, Providence, Rhode Island 02905, Attention: Chief Financial Officer; (ii) if to the Master Trustee, addressed to it at Corporate Trust, 135 Santilli Highway, AIM 026-0018, Everett, Massachusetts 02149; and (iii) if to any registered owner of a Note, addressed to such registered owner at the address set forth in the register kept pursuant to Section 3.1 of this Master Trust Indenture; or to such other address as the Obligated Group Member or the Master Trustee shall from time to time designate by notice in writing to the others and the registered owners of the Notes. Whenever any notice in writing is required to be given by any Obligated Group Member, the Master Trustee or any registered owner of a Note to any of the other of them, such notice shall be deemed given and such requirement satisfied if such notice is delivered or mailed by first-class mail, postage prepaid, addressed as provided above. All notices given hereunder shall be effective upon receipt. The Obligated Group Members and the Master Trustee shall provide to each other copies of all notices provided by either of them hereunder.

The Master Trustee shall have the right to accept and act upon instructions or directions pursuant to this Master Trust Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Obligated Group Member shall provide to the Master Trustee an incumbency certificate listing designated persons with the authority to provide such instructions and containing specimen signatures of such designated persons, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the Obligated Group Member elects to give the Master Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Master Trustee in its discretion elects to act upon such instructions, the Master Trustee’s understanding of such instructions shall be deemed controlling. The Master Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Master Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Obligated Group agrees: (i) to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Master Trustee, including without limitation the risk of the Master Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting instructions to the Master Trustee and that there may be more secure methods of transmitting instructions than the method(s) selected by the Obligated Group Member; and (iii) that the security procedures (if any) to be followed in connection with its transmission of instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances.

SECTION 16.4 Rhode Island Contract. This Master Trust Indenture and the Obligations shall be deemed to be a contract made under the laws of the State of Rhode Island, and for all purposes shall be construed in accordance with the laws of said State.

SECTION 16.5 Legal Holidays. In any case where the date of maturity of interest or premium on or principal of Notes or the date fixed for redemption of any such Note shall be on a day on which banking institutions are authorized by law to remain closed, then payment of such interest, premium or principal need not be made on such date but may be made on the next succeeding day not a day on which banking institutions are authorized by law to remain closed

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with the same force and effect as if made on the date of maturity or the date fixed for redemption, and, in the case of such payment, no interest shall accrue for the period from and after such date.

SECTION 16.6 Master Trustee as Paying Agent and Registrar. The Master Trustee is hereby designated and agrees to act as paying agent and Note registrar for and in respect to the Notes.

SECTION 16.7 Benefits of Provisions of Master Trust Indenture and Notes. Nothing in this Master Trust Indenture or in the Notes, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the parties hereto, and the holders of such Notes (which holder may be a fiduciary, i.e., the Related Bond Trustee), any legal or equitable right, remedy or claim under or in respect of this Master Trust Indenture, or under any covenant, condition and provision herein contained; all its covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of such Notes.

SECTION 16.8 Execution in Counterparts. This Master Trust Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

SECTION 16.9 Obligated Group Representative

(a) Care New England Health System shall serve as the Obligated Group Representative for purposes of this Master Indenture.

(b) As Obligated Group Representative, Care New England Health System shall, on behalf of all Obligated Group Members, perform the following functions for the Obligated Group for purposes of this Master Indenture:

(1) Execute and deliver Obligations under this Master Indenture.

(2) Execute and deliver supplements and amendments to this Master Indenture; provided, however, that any supplement or amendment to this Master Indenture that purports to add or remove any Member of the Obligated Group shall also be executed by the Member being added or removed.

(3) Execute and deliver notices, directions, elections and consents on behalf of the Obligated Group.

(c) Except as otherwise expressly provided in this Indenture, no further authorization or approval by any Member shall be required for actions by the Obligated Group Representative under this Master Indenture.

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IN WITNESS WHEREOF, the parties hereto have caused this Master Trust Indenture to be duly executed by persons thereunto duly authorized, as of the day and year first written above.

OBLIGATED GROUP:

CARE NEW ENGLAND HEALTH SYSTEM BUTLER HOSPITAL KENT COUNTY MEMORIAL HOSPITAL KENT COUNTY VISITING NURSE ASSOCIATION SOUTHEASTERN HEALTH SYSTEM, INC. THE MEMORIAL HOSPITAL THE PROVIDENCE CENTER, INC. WOMEN & INFANTS CORPORATION WOMEN & INFANTS HOSPITAL OF RHODE ISLAND

By:______Name: Title:

MASTER TRUSTEE:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS MASTER TRUSTEE

By:______Name: Title:

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EXHIBIT A

SECTION 6.6(b) Permitted Liens List of Liens or other Encumbrances

The UCC Financing Statements referred to in this Schedule are available at the offices of the Obligated Group.

[ADD LIENS FROM TITLE POLICY]

APPENDIX D

Form of the Trust Indenture [THIS PAGE INTENTIONALLY LEFT BLANK]

TRUST INDENTURE

Dated as of September 1, 2016

Between

CARE NEW ENGLAND HEALTH SYSTEM

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

Relating to the issuance of

$[______] Series 2016C Taxable Notes

Care New England Health System

TABLE OF CONTENTS

PAGE

Parties ...... 1 Recitals ...... 1

ARTICLE 1 Definitions and Other Provisions of General Application ...... 2 SECTION 1.1 Definitions ...... 2 SECTION 1.2 General Rules of Construction ...... 7 SECTION 1.3 Effect of Action by Noteholders ...... 8 SECTION 1.4 Effect of Headings and Table of Contents ...... 8 SECTION 1.5 Date of Indenture ...... 8 SECTION 1.6 Separability Clause ...... 8 SECTION 1.7 Governing Law ...... 8 SECTION 1.8 Counterparts ...... 8 SECTION 1.9 Designation of Time for Performance ...... 8

ARTICLE 2 Source of Payment ...... 9 SECTION 2.1 Source of Payment of Notes and Other Obligations ...... 9 SECTION 2.2 [Reserved] ...... 9 SECTION 2.3 Incorporators, Officers and Directors of the Corporation Exempt from Individual Liability .. 9

ARTICLE 3 Security for Payment...... 9 SECTION 3.1 Pledge and Assignment ...... 9

ARTICLE 4 Registration, Transfer, Exchange and Payment of the Notes ...... 10 SECTION 4.1 The Book Entry System ...... 10 SECTION 4.2 Alternate Provisions Regarding Payment, Registration, Transfer and Exchange of Notes ... 11 SECTION 4.3 Persons Deemed Owners ...... 13 SECTION 4.4 Trustee as Paying Agent ...... 13 SECTION 4.5 Payments Due on Non-Business Days ...... 13

ARTICLE 5 Terms for Series 2016C Notes and Disposition of Proceeds ...... 13 SECTION 5.1 Title and Terms ...... 13 SECTION 5.2 Proceeds From Sale of Notes ...... 14

ARTICLE 6 Purchase and Remarketing of Notes ...... 15

ARTICLE 7 Redemption of Notes ...... 15 SECTION 7.1 Optional Redemption Provisions ...... 15 SECTION 7.2 Election to Redeem ...... 15 SECTION 7.3 Selection by Trustee of Notes to be Redeemed ...... 15 SECTION 7.4 Notice of Redemption ...... 16 SECTION 7.5 Deposit of Redemption Price ...... 16 SECTION 7.6 Notes Payable on Redemption Date ...... 17 SECTION 7.7 Notes Redeemed in Part ...... 17

ARTICLE 8 No Additional Notes ...... 17

ARTICLE 9 Indenture Funds ...... 17 SECTION 9.1 Debt Service Fund ...... 17 SECTION 9.2 Costs of Issuance Fund ...... 18 SECTION 9.3 Investment of Indenture Funds ...... 19 SECTION 9.4 Application of Funds After Indenture Indebtedness Defeased ...... 19

ARTICLE 10 Representations and Covenants ...... 19 SECTION 10.1 General Representations ...... 19 SECTION 10.2 Encumbrances on Trust Estate ...... 20 SECTION 10.3 Payment of Notes ...... 20 SECTION 10.4 Inspection of Records ...... 20 SECTION 10.5 Advances by Trustee ...... 20 SECTION 10.6 Corporate Existence; Merger, Consolidation, Etc...... 20 SECTION 10.7 Continuing Disclosure ...... 21

ARTICLE 11 Defaults and Remedies ...... 21 SECTION 11.1 Events of Default ...... 21 SECTION 11.2 Remedies ...... 22 SECTION 11.3 Application of Money Collected ...... 23 SECTION 11.4 Trustee May Enforce Claims without Possession of Notes ...... 23 SECTION 11.5 Limitation on Suits ...... 23 SECTION 11.6 Unconditional Right of Noteholders to Receive Principal, Premium and Interest ...... 24 SECTION 11.7 Restoration of Positions ...... 24 SECTION 11.8 Delay or Omission Not Waiver ...... 24 SECTION 11.9 Control by Noteholders ...... 24 SECTION 11.10 Waiver of Past Defaults ...... 25 SECTION 11.11 Suits to Protect the Trust Estate ...... 25

ARTICLE 12 The Trustee ...... 25 SECTION 12.1 Certain Duties and Responsibilities of Trustee ...... 25 SECTION 12.2 Notice of Defaults ...... 26 SECTION 12.3 Certain Rights of Trustee ...... 27 SECTION 12.4 Not Responsible for Recitals ...... 2 9 SECTION 12.5 May Hold Notes ...... 29 SECTION 12.6 Money Held in Trust ...... 29 SECTION 12.7 Indemnification, Compensation and Reimbursement ...... 29 SECTION 12.8 Corporate Trustee Required; Eligibility ...... 30 SECTION 12.9 Resignation and Removal; Appointment of Successor ...... 30 SECTION 12.10 Acceptance of Appointment by Successor ...... 31 SECTION 12.11 Merger, Conversion, Consolidation or Succession to Business...... 31

ARTICLE 13 Amendment of Note Documents ...... 31 SECTION 13.1 General Requirements for Amendments ...... 31 SECTION 13.2 Amendments Without Consent of Noteholders ...... 32 SECTION 13.3 Amendments Requiring Consent of All Affected Noteholders ...... 32 SECTION 13.4 Amendments Requiring Majority Consent of Noteholders ...... 33 SECTION 13.5 Discretion of Trustee ...... 33 SECTION 13.6 Trustee Protected by Opinion of Counsel ...... 33 SECTION 13.7 Amendments Affecting Trustee’s Personal Rights ...... 33 SECTION 13.8 Effect on Noteholders ...... 33 SECTION 13.9 Reference in Notes to Amendments ...... 34

ARTICLE 14 Defeasance ...... 34 SECTION 14.1 Payment of Indenture Indebtedness; Satisfaction and Discharge of Indenture ...... 34 SECTION 14.2 Trust for Payment of Debt Service ...... 34

ARTICLE 15 Miscellaneous ...... 35 SECTION 15.1 Notices to Financing Participants ...... 35 SECTION 15.2 Notices to Noteholders ...... 36 SECTION 15.3 Successors and Assigns ...... 36 SECTION 15.4 Benefits of Indenture ...... 36 SECTION 15.5 Notice to Rating Agencies ...... 36

EXHIBIT 5.1(c) ...... Form of Notes EXHIBIT 5.2(b) ...... Description of Refunded Obligations EXHIBIT 15.1(b)...... Notices

TRUST INDENTURE

THIS TRUST INDENTURE dated as of September 1, 2016 is entered into by CARE NEW ENGLAND HEALTH SYSTEM, a Rhode Island non-profit corporation (the “Corporation”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association (the “Trustee”).

Recitals

A. The Corporation has duly authorized the issuance of its $[______] aggregate principal amount of Series 2016C Taxable Notes (the “Notes”) pursuant to this Indenture.

B. The Notes are being issued for the purpose of (i) refunding the outstanding bonds and other indebtedness described on Exhibit 5.2(b) (the “Refunded Obligations”) and (ii) paying costs of issuing the Notes.

C. As security for the Notes, the Corporation has issued its Master Indenture Note (the “Series 2016C Obligation”) in the aggregate principal amount of $[______] pursuant to the Master Indenture (as herein defined), as supplemented, including pursuant to Supplemental Master Indenture No. 2 dated September 1, 2016 (the “Second Supplemental Indenture”).

D. The Series 2016C Obligation and the other obligations issued under the Master Indenture (“Master Indenture Obligations”) are secured by a pledge of the Gross Receipts (as defined in the Master Indenture) of the Corporation (collectively, with any other obligors under the Master Indenture, the “Obligated Group”) and the other Obligated Group members. At the time of issuance of the Notes, the members of the Obligated Group, in addition to the Corporation, are Butler Hospital (“Butler”), Kent County Memorial Hospital (“Kent”), Kent County Visiting Nurse Association (“VNA”), Southeastern Healthcare System, Inc. (“SHS”), The Memorial Hospital (“Memorial”) The Providence Center, Inc. (“TPC”), Women & Infants Corporation (“WIC”) and Women & Infants Hospital of Rhode Island (“WIH” and, with the Corporation, Butler, Kent VNA, SHS, Memorial, TPC and WIC, collectively, the “Obligated Group”), all of which are Rhode Island non-profit corporations. As additional security for the Master Indenture Obligations, Butler and Kent have executed Mortgages dated September __, 2016 (the “Mortgages”), in favor of the Master Trustee, whereby the Master Trustee has been granted mortgages on the property and interests in property described therein. In addition to the Mortgages, Memorial and WIH have executed negative pledges (the “Negative Pledges”) with respect to certain of their real property

E. The Notes and all other payment obligations under this Indenture shall be general obligations of the Corporation secured by the Trust Estate, which includes payments by the Obligated Group pursuant to the Series 2016C Obligation.

F. All things have been done which are necessary to make the Notes, when executed by the Corporation and authenticated and delivered by the Trustee hereunder, the valid obligations of the Corporation, and to constitute this Indenture a valid trust indenture for the security of the Notes, in accordance with the terms of the Notes and this Indenture.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

It is hereby covenanted and declared that all the Notes are to be authenticated and delivered and the property subject to this Indenture is to be held and applied by the Trustee, subject to the covenants, conditions and trusts hereinafter set forth, and the Corporation does hereby covenant and agree to and

with the Trustee, for the equal and proportionate benefit (except as otherwise expressly provided herein) of all Noteholders as follows:

ARTICLE 1

Definitions and Other Provisions of General Application

SECTION 1.1 Definitions

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meaning indicated:

“Act of Bankruptcy” means the filing of a petition in bankruptcy (or the other commencement of a bankruptcy or similar proceeding) by or against a person under any applicable bankruptcy, insolvency, reorganization, or similar law, now or hereafter in effect.

“Affiliate” of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Authorized Denominations” means $25,000 or any larger amount that is an integral multiple of $1,000 in excess thereof.

“Authorized Representative of the Corporation” means the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer of the Corporation, or any other officer or agent of the Corporation authorized by the governing body of the Corporation to act as “Authorized Representative of the Corporation” for purposes of the Note Documents.

“Book Entry System” means the book entry system maintained by DTC for the ownership, transfer, exchange and payment of debt obligations.

“Business Day” means any day other than a Saturday, a Sunday, or a day on which the Trustee is authorized to be closed under general law or regulation applicable in the place where the Trustee performs its business with respect to the Indenture.

“Calculation Agent” means an Independent person retained by the Corporation to determine the Make-Whole Redemption Price pursuant to Section 7.1. The Calculation Agent shall have experience in making the computations required to determine the Make-Whole Redemption Price.

“Continuing Disclosure Agreement” means the Continuing Disclosure Agreement referred to in Section 10.7.

“Corporation” means Care New England Health System, a Rhode Island non-profit corporation, until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Corporation” means such successor corporation.

“Costs of Issuance” means the expenses incurred in connection with the issuance of the Notes, including legal, consulting, accounting and underwriting fees and expenses.

“Costs of Issuance Fund” means the fund established pursuant to Section 9.2.

“Debt Service” means the principal, redemption premium (if any) and interest payable on the Notes.

“Debt Service Fund” means the fund established pursuant to Section 9.1.

“Defaulted Interest” has the meaning assigned in Section 4.2(l).

“Defeased”, when used with respect to Indenture Indebtedness, shall have the meaning assigned in Section 14.1.

“DTC” means The Depository Trust Company, and its successors and assigns.

“Federal Securities” means noncallable, nonprepayable, direct obligations of, or obligations the full and timely payment of which is guaranteed by, the United States of America.

“Financing Participants” means the Corporation and the Trustee.

“Fitch” means Fitch Ratings, Inc.

“Holder” or “Noteholder”, when used with respect to any Note, means (i) if the Book Entry System is not in effect, the person in whose name such Note is registered on the Note Register maintained by the Trustee and (ii) if the Book Entry System is in effect, the beneficial owner of such Note on the records maintained pursuant to the Book Entry System.

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented, modified or amended by one or more indentures or other instruments supplemental hereto entered into pursuant to the applicable provisions hereof.

“Indenture Default” shall have the meaning assigned in Section 11.1. An Indenture Default shall “exist” if an Indenture Default shall have occurred and be continuing.

“Indenture Funds” means any fund or account established pursuant to this Indenture.

“Indenture Indebtedness” means all indebtedness of the Corporation at the time secured by this Indenture, including without limitation (a) all Debt Service on the Notes and (b) all reasonable fees, charges and disbursements of the Trustee for services performed and disbursements made under this Indenture.

“Independent”, when used with respect to any person, means a person who (i) does not have any direct financial interest or any material indirect financial interest in any Financing Participant or any Affiliate of a Financing Participant, (ii) does not serve as a member of the governing body of any Financing Participant or any Affiliate of a Financing Participant, and (iii) is not employed by any Financing Participant or any Affiliate of a Financing Participant.

“Interest Payment Date”, when used with respect to any installment of interest on a Note, means the date specified in this Indenture as the date on which such installment of interest is due and payable.

“Make-Whole Redemption Price”, when used with respect to any Note (or the portion thereof) to be redeemed, means the greater of the following:

(1) 100% of the principal amount of the Note (or portion thereof) to be redeemed; or

(2) the present value of the remaining scheduled payments of principal and interest to the Maturity Date of such Note (or portion thereof), not including interest accrued and unpaid as of the redemption date, discounted to the redemption date at the Adjusted Treasury Rate (as defined below) plus [___] basis points, such discounting to be on a semiannual basis assuming a 360-day year consisting of twelve 30-day months.

For purposes of determining the Make-Whole Redemption Price for any Note to be redeemed, the term “Adjusted Treasury Rate” means the yield to maturity of United States Treasury securities (excluding inflation-indexed securities) with a constant maturity most nearly equal to the period from the redemption date to the Maturity Date of such Note; provided, however, that if the period from the redemption date to such Maturity Date is less than one year, a constant maturity of one year will be used. The yield to maturity on the United States Treasury securities shall be determined by reference to Federal Reserve Statistical Release H.15, as published on the most recent date that is at least two Business Days prior to the redemption date, or, if such Release is no longer published, by reference to such publicly available index as the Calculation Agent, in its judgment, shall deem reasonably comparable. The Make- Whole Redemption Price shall be determined and certified to the Trustee by the Calculation Agent.]

“Master Indenture” shall mean the Master Trust Indenture dated September 1, 2016, as amended and supplemented, among the Corporation, the other members of the Obligated Group and the Master Trustee.

“Master Indenture Obligations” means all obligations issued under the Master Indenture.

“Master Indenture Supplement” means the Second Supplement to Master Indenture dated September 1, 2016 between the Corporation and the Master Trustee authorizing the issuance of the Series 2016C Obligation.

“Master Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking association, and its successors and assigns, in its capacity as trustee under the Master Indenture.

“Maturity Date”, when used with respect to any Note, means the date specified in this Indenture as the date on which principal of such Note is due and payable.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgages” means the Mortgages dated September 1, 2016, executed by Butler and Kent in favor of the Master Trustee.

“Mortgaged Property” means the property and interests in property mortgaged and assigned to the Master Trustee pursuant to the Mortgages.

“Note Documents” means the Notes, the Indenture and the Series 2016C Obligation.

“Note Payment Date” means each date on which Debt Service is payable on the Notes, including any date fixed for redemption of Notes.

“Note Register” means the register or registers for the registration and transfer of Notes maintained by the Corporation pursuant to Section 4.2(c).

“Noteholder” when used with respect to any Note means the Holder of such Note.

“Notes” means the Notes issued pursuant to this Indenture.

“Obligated Group” means the Corporation and the other entities that presently are, and may from time to time, be members of the Obligated Group under the terms of the Master Indenture.

“Obligor Notes” means Notes registered in the name of (or in the name of a nominee for) the Corporation or any Affiliate of the Corporation. The Trustee may assume that no Notes are Obligor Notes unless it has actual notice to the contrary.

“Office of the Trustee” means the office of the Trustee for hand delivery of notices, as specified pursuant to Section 15.1.

“Opinion of Counsel” means an opinion from an attorney or firm of attorneys with experience in the matters to be covered in the opinion. Except as otherwise expressly provided in this Indenture, the attorney or attorneys rendering such opinion may be counsel for one or more of the Financing Participants, including counsel in the full-time employment of a Financing Participant.

“Outstanding”, when used with respect to Notes means, as of the date of determination, all Notes authenticated and delivered under this Indenture, except:

(a) Notes cancelled by the Trustee or delivered to the Trustee for cancellation;

(b) Notes for whose payment or redemption money in the necessary amount has been deposited with the Trustee in trust for the Holders of such Notes, provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and

(c) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered under this Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Notes Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Obligor Notes shall be disregarded and deemed not to be Outstanding. Obligor Notes which have been pledged in good faith may be regarded as Outstanding for such purposes if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that Notes registered in the name of such pledgee as beneficial owner would not be considered Obligor Notes.

“Post-Default Rate” means (a) when used with respect to any payment of Debt Service on any Note, the interest rate applicable to such Note on the date such Debt Service became due plus [2.0% (200 basis points)], and (b) when used with respect to all other payments due under this Indenture, a variable

rate equal to the Trustee’s prime or base rate plus [2.0% (200 basis points]), in each case computed on the basis of a 365 or 366-day year, as the case may be, for actual days elapsed.

“Qualified Investments” means:

(a) direct obligations of, or obligations the full and timely payment of which is guaranteed by, the United States of America, including unit investment trusts and mutual funds that invest solely in such obligations,

(b) Notes, debentures, notes or other obligations issued or guaranteed by any federal agency if such obligations are (i) backed by the full faith and credit of the United States of America or (ii) rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency,

(c) money market funds rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency,

(d) certificates of deposit or other bank deposits that are described in one of the following clauses: (i) certificates of deposit or bank deposits issued by, or made with, a bank whose unsecured, long-term obligations are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency, or (ii) certificates of deposit or bank deposits secured at all times by collateral described in paragraphs (a) and (b) above that is held by the Trustee or by a third party custodian acceptable to the Corporation and the Trustee with a perfected first security interest in the collateral,

(e) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the FDIC,

(f) investment agreements, including guaranteed investment contracts, repurchase agreements and forward purchase agreements, provided that (i) any securities purchased or held pursuant to such agreement are otherwise Qualified Investments under this Indenture, (ii) the counterparty’s long-term debt obligations are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency, and (iii) the securities, if purchased, are owned by the Corporation or the Trustee and are held by the Trustee or by a third party custodian acceptable to the Corporation and the Trustee or, if held as collateral, are held by the Trustee or a third party custodian acceptable to the Corporation and the Trustee with a perfected first security interest in such collateral,

(g) commercial paper rated, at the time of purchase, not less than “Prime-1” by Moody’s or not less than “A-1” by S & P, and

(h) Notes or notes issued by any state, county or municipality which are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency.

For purposes of this definition, rating categories are determined without regard to qualifiers, such as “+” or “1” (for example, ratings of “A-1”, “A-2”, “A-“ and “A+” are considered part of the same rating category).

“Rating Agency” means Moody’s, S & P, Fitch and any other nationally recognized securities rating agency.

“Refunded Obligations” means the bonds and other indebtedness of members of the Obligated Group that are being refunded through the issuance of the Notes. The Refunded Obligations are more particularly described in Exhibit 5.2(b).

“Regular Record Date”, when used with respect to the payment of interest on the Notes, means the 15th day (whether or not a Business Day) prior to each Interest Payment Date for such Note.

“S & P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies.

“Series 2016C Obligation” means the Master Indenture Obligation issued by the Obligated Group to evidence and secure the obligations of the Corporation under this Indenture and the Notes.

“Special Record Date” for the payment of any Defaulted Interest on the Notes means a date fixed by the Trustee pursuant to Section 4.2(l).

“Trust Estate” shall have the meaning assigned in Section 3.1.

“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking association, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” means such successor.

SECTION 1.2 General Rules of Construction

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) Defined terms in the singular shall include the plural as well as the singular, and vice versa.

(b) The definitions in the recitals to this instrument are for convenience only and shall not affect the construction of this instrument.

(c) All accounting terms not otherwise defined herein have the meaning assigned to them, and all computations herein provided for shall be made, in accordance with generally accepted accounting principles. All references herein to “generally accepted accounting principles” refer to such principles as they exist at the date of application thereof.

(d) All references in this instrument to designated “Articles”, “Sections” and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed.

(e) The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

(f) All references in this instrument to a separate instrument are to such separate instrument as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

(g) The term “person” shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization and any government or any agency or political subdivision thereof.

(h) The term “including” means “including without limitation” and “including, but not limited to”.

SECTION 1.3 Effect of Action by Noteholders

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Corporation in reliance thereon, whether or not notation of such action is made upon such Note.

SECTION 1.4 Effect of Headings and Table of Contents

The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.5 Date of Indenture

The date of this Indenture is intended as and for a date for the convenient identification of this Indenture and is not intended to indicate that this Indenture was executed and delivered on said date.

SECTION 1.6 Separability Clause

If any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 1.7 Governing Law

This Indenture shall be construed in accordance with and governed by the laws of the State of Rhode Island, without regard to conflict of law principles.

SECTION 1.8 Counterparts

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 1.9 Designation of Time for Performance

Except as otherwise expressly provided herein, any reference in this Indenture to the time of day means (i) if the Book Entry System is in effect, the time of day in the city where DTC maintains its place of business for the performance of its obligations under the Book Entry System or (ii) if the Book Entry System is no longer in effect, the time of day in the city where the Trustee maintains its place of business for the performance of its obligations under this Indenture.

ARTICLE 2

Source of Payment

SECTION 2.1 Source of Payment of Notes and Other Obligations

(a) The Notes and all other payment obligations under this Indenture are general obligations of the Corporation for the payment of which its general credit is hereby pledged.

(b) This Indenture shall not constitute or effect a pledge or assignment of, or any other type of security interest in, the property or revenues of the Corporation other than the property specifically identified by this Indenture as part of the Trust Estate.

SECTION 2.2 [Reserved]

SECTION 2.3 Incorporators, Officers and Directors of the Corporation Exempt from Individual Liability

No recourse under or upon any covenant or agreement of this Indenture, or of any Notes, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future incorporator, officer or director of the Corporation, or of any successor, either directly or through the Corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the Notes issued hereunder are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer or director of the Corporation or any successor, or any of them, because of the issuance of the Notes, or under or by reason of the covenants or agreements contained in this Indenture or in any Notes or implied therefrom.

ARTICLE 3

Security for Payment

SECTION 3.1 Pledge and Assignment

To secure the payment of Debt Service on the Notes and all other Indenture Indebtedness and the performance of the covenants contained in this Indenture and the Notes, and to declare the terms and conditions on which the Notes are secured, and in consideration of the premises and of the purchase of the Notes by the Holders thereof, the Corporation hereby pledges and assigns to the Trustee, and grants to the Trustee a security interest in, the following property:

(a) Indenture Funds. Money and investments from time to time on deposit in, or forming a part of, the Indenture Funds.

(b) Series 2016C Obligation. All right, title and interest of the Corporation in and to the Series 2016C Obligation, including all payments by the Obligated Group pursuant to the Series 2016C Obligation and all distributions to the holder of the Series 2016C Obligation of proceeds from the exercise of remedies under the Master Indenture or the Mortgages.

(c) Other Property. Any and all property of every kind or description which may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien of this Indenture as additional security by the Corporation or anyone on its part or with its consent, or

which pursuant to any of the provisions hereof may come into the possession or control of the Trustee or a receiver appointed pursuant to this Indenture; and the Trustee is hereby authorized to receive any and all such property as and for additional security for the obligations secured hereby and to hold and apply all such property subject to the terms hereof.

TO HAVE AND TO HOLD all such property, rights and privileges (collectively called the “Trust Estate”) unto the Trustee and its successors and assigns;

BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of the Notes (without any priority of any such Note over any other such Note).

PROVIDED, HOWEVER, that money and investments in the Indenture Funds may be applied for the purposes and on the terms and conditions set forth in this Indenture.

ARTICLE 4

Registration, Transfer, Exchange and Payment of the Notes

SECTION 4.1 The Book Entry System

(a) The ownership, transfer, exchange and payment of Notes shall be governed by the Book Entry System administered by DTC until the Book Entry System is terminated pursuant to Section 4.1(c).

(b) Except as otherwise expressly provided in this Indenture, while Notes are in the Book Entry System the following provisions shall apply:

(1) In order to facilitate the Book Entry System, a physical certificate or physical certificates for the Notes shall be executed and authenticated, registered in the name of DTC or its nominee, and delivered to DTC for safekeeping (including safekeeping by the Trustee pursuant to the “FAST” system or other procedures of the Book Entry System).

(2) The term “Note” means each separate security credited to a beneficial owner (or entitlement holder) pursuant to the Book Entry System, and the term “Holder” means the person identified pursuant to the Book Entry System as the beneficial owner of the related security.

(3) The terms and limitations of this Indenture with respect to each separate Note shall be applicable to each separate security credited to a beneficial owner under the Book Entry System.

(4) All payments of Debt Service on the Notes shall be made by the Trustee through the Book Entry System, and payments by such method shall be valid and effective fully to satisfy and discharge the Corporation’s obligations with respect to such payments.

(5) A tender of a Note shall be made by the Holder to the Trustee through the Book Entry System.

(c) The Trustee shall discontinue the Book Entry System at the request of the Corporation. Notice of termination of the Book Entry System shall be given to Holders not less than 20 days before such termination is effective.

(d) If the Book Entry System is discontinued, (i) a physical certificate or physical certificates shall be executed, authenticated and delivered to each beneficial owner, or entitlement holder, under the Book Entry System in accordance with such holder’s ownership of Notes, (ii) such certificates shall be registered in the Note Register maintained by the Trustee, and (iii) the remaining provisions of this Article shall govern the registration, transfer, exchange and payment of Notes.

SECTION 4.2 Alternate Provisions Regarding Payment, Registration, Transfer and Exchange of Notes

(a) If the Book Entry System is discontinued, the provisions of this Section shall control the registration, transfer, exchange and payment of Notes.

(b) Payment of Debt Service on the Notes shall be made as follows:

(1) Payment of interest on the Notes which is due on any Interest Payment Date shall be made by check or draft mailed by the Trustee to the persons entitled thereto at their addresses appearing in the Note Register. Such payments of interest shall be deemed timely made if so mailed on the Interest Payment Date (or, if such Interest Payment Date is not a Business Day, on the Business Day next following such Interest Payment Date).

(2) Payment of the principal of (and premium, if any, on) the Notes and payment of accrued interest on the Notes due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender thereof at the Office of the Trustee.

(3) Upon the written request of any Noteholder, the Trustee shall make payments of Debt Service by wire transfer, provided that (i) such request contains adequate instructions for the method of payment, and (ii) payment of the principal of (and redemption premium, if any, on) such Notes and payment of the accrued interest on such Notes due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender of such Notes to the Trustee.

(c) The Corporation shall cause to be kept at the Office of the Trustee a register (herein sometimes referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide for the registration of Notes and registration of transfers of Notes entitled to be registered or transferred as herein provided. The Trustee is hereby appointed as agent of the Corporation for the purpose of registering Notes and transfers of Notes as herein provided.

(d) Upon surrender for transfer of any Note at the Office of the Trustee, the Corporation shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of the same series and maturity, of any Authorized Denominations and of a like aggregate principal amount.

(e) At the option of the Holder, Notes may be exchanged for other Notes of the same series and maturity, of any Authorized Denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at the Office of the Trustee. Whenever any Notes are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive.

(f) All Notes surrendered upon any exchange or transfer provided for in this Indenture shall be promptly cancelled by the Trustee.

(g) All Notes issued upon any transfer or exchange of Notes shall be the valid obligations of the Corporation and entitled to the same security and benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

(h) Every Note presented or surrendered for transfer or exchange shall contain, or be accompanied by, all necessary endorsements for transfer.

(i) No service charge shall be made for any transfer or exchange of Notes, but the Corporation 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 Notes.

(j) The Corporation shall not be required (i) to transfer or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, or (ii) to transfer or exchange any Note so selected for redemption in whole or in part.

(k) Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Note is registered at the close of business on the Regular Record Date for such Interest Payment Date.

(l) Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder on the relevant Regular Record Date solely by virtue of such Holder having been such Holder; and such Defaulted Interest shall be paid by the Corporation to the persons in whose names such Notes are registered at the close of business on a special record date (herein called a “Special Record Date”) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Corporation shall notify the Trustee of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which date shall be such as will enable the Trustee to comply with the next sentence hereof), and at the same time the Corporation shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this subsection provided and not to be deemed part of the Trust Estate. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Corporation of such Special Record Date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Noteholder at his address as it appears in the Note Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Notes are registered on such Special Record Date.

(m) Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Note shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note and each such Note shall bear interest from such date that neither gain nor loss in interest shall result from such transfer, exchange or substitution.

(n) All Notes surrendered for payment, redemption, transfer or exchange, shall be promptly cancelled by the Trustee. The Trustee may destroy cancelled certificates. No Note shall be authenticated in lieu of or in exchange for any Note cancelled as provided in this Section, except as expressly provided by this Indenture.

SECTION 4.3 Persons Deemed Owners

(a) If the Book Entry System is in effect, the ownership of Notes shall be determined pursuant to the rules and regulations of the Book Entry System.

(b) If the Book Entry System is terminated, the registered Holder of each Note shall be treated as the owner for purposes of this Indenture.

SECTION 4.4 Trustee as Paying Agent

Debt Service on the Notes shall be payable on behalf of the Corporation by the Trustee, which has been designated as the paying agent of the Corporation for purposes of this Indenture.

SECTION 4.5 Payments Due on Non-Business Days

Except as otherwise expressly provided by this Indenture, if any payment on the Notes is due on a day which is not a Business Day, such payment may be made on the first succeeding day which is a Business Day with the same effect as if made on the day such payment was due.

ARTICLE 5

Terms for Series 2016C Notes and Disposition of Proceeds

SECTION 5.1 Title and Terms

(a) Title and Amount. The Notes shall be entitled “Series 2016C Taxable Notes”. The aggregate principal amount of the Notes which may be Outstanding is limited to $[______].

(b) Authorized Denominations. The Notes shall be in Authorized Denominations.

(c) Form and Number. The Notes shall be issuable as registered Notes without coupons in Authorized Denominations. The Notes shall be numbered separately from 1 upward. In order to facilitate the Book Entry System, a single Note certificate for all Notes of the same series and maturity shall be delivered to the Trustee. The Notes and the certificate of authentication shall be substantially as set forth in Exhibit 5.1(c), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture.

(d) Maturity Date and Interest Rate. The Notes shall mature on September 1, 20__. The Notes shall bear interest at the rate of [____]% per annum.

(e) Date. The Notes shall be dated as of the date of initial delivery of the Notes.

(f) Interest Payment Dates. Interest on the Notes shall be payable in arrears on March 1 and September 1 in each year, beginning March 1, 2017.

(g) Person to Whom Interest Payable. If the Book Entry System is in effect, the Trustee shall pay interest to DTC, and interest payments shall be distributed by DTC in accordance with the rules and regulations of DTC. If the Book Entry System is terminated, the interest due on any Interest Payment Date for the Notes shall be payable to the Noteholders as of the Regular Record Date for such Interest Payment Date.

(h) Computation of Interest Accrual. The Notes shall bear interest from their date, or the most recent date to which interest has been paid or duly provided for, at the applicable rate per annum set forth above. Interest shall be computed on the basis of a 360-day year with 12 months of 30 days each.

(i) Interest on Overdue Payments. Interest shall be payable on overdue principal on the Notes and (to the extent legally enforceable) on any overdue installment of interest on the Notes at the Post-Default Rate.

(j) Execution and Authentication. The Notes shall be executed on behalf of the Corporation by its President and Chief Executive Officer or its Executive Vice President and Chief Financial Officer under its corporate seal reproduced thereon and attested by its Secretary. The signature of any of these officers on the Notes may be manual or, to the extent permitted by law, facsimile. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Corporation shall bind the Corporation, notwithstanding that such individuals or any of them shall have ceased to hold such offices prior to the authentication and delivery of such Notes or shall not have held such offices at the date of such Notes. No Note shall be secured by, or be entitled to any lien, right or benefit under, this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein, executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

(k) Currency for Payment. Payment of Debt Service on the Notes shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

SECTION 5.2 Proceeds From Sale of Notes

(a) The proceeds from the sale of the Notes to the original purchaser or purchasers thereof shall be applied as follows:

(1) The amount to be used for the retirement of the Refunded Obligations shall be paid to the trustees for the Refunded Obligations or the holders of such Refunded Obligations, as appropriate.

(2) The amount to be used for (i) Costs of Issuance with respect to the Notes and (ii) costs of issuance or refunding of debt in connection with other financing transactions of the Corporation shall be deposited in the Costs of Issuance Fund.

(3) The balance of the proceeds, if any, shall be deposited in the Debt Service Fund.

The amount of Note proceeds to be applied to each purpose identified in this Section 5.2(a) shall be specified by directions from an Authorized Representative of the Corporation delivered to the Trustee.

(b) The Refunded Obligations are more particularly described in Exhibit 5.2(b).

ARTICLE 6

Purchase and Remarketing of Notes

The Notes are not subject to optional or mandatory tender for purchase by the Holders. The principal of each Note is due and payable only on the Maturity Date for such Note. Neither the Corporation nor any other Financing Participant has any obligation to purchase Notes from the Holders prior to the Maturity Date.

ARTICLE 7

Redemption of Notes

SECTION 7.1 Optional Redemption Provisions

(a) The Notes may be redeemed at the option of the Corporation in whole or in part on any Business Day at the Make-Whole Redemption Price plus accrued interest to the redemption date.

(b) Simultaneously with the exercise by the Corporation of its option to redeem any of the Notes, the Corporation shall appoint the Calculation Agent. The Corporation shall pay all fees and expenses of the Calculation Agent.

SECTION 7.2 Election to Redeem

The election of the Corporation to exercise any right of optional redemption shall be evidenced by notice from an Authorized Representative of the Corporation to the Trustee and the other Financing Participants. If all affected Notes are held by one or more of the Financing Participants, the election to redeem may be given three Business Days prior to the date fixed for redemption. Notice of any other election to redeem must be given at least 5 days prior to the date the Trustee is required to give notice of such redemption (unless a shorter notice is acceptable to the Trustee). An election to redeem shall specify (i) the principal amount of Notes to be redeemed (if less than all Notes Outstanding are to be redeemed pursuant to such option), (ii) the series and maturity of Notes to be redeemed, (iii) the redemption date, and (iv) any conditions to such redemption specified in accordance with the provisions of Section 7.4(d).

SECTION 7.3 Selection by Trustee of Notes to be Redeemed

(a) Except as otherwise provided in the specific redemption provisions for the Notes, if less than all Notes Outstanding are to be redeemed, the principal amount of Notes of each series and maturity to be redeemed may be specified by the Corporation by notice delivered to the Trustee not less than 5 days before the date the Trustee is required to give notice of such redemption (unless a shorter notice is acceptable to the Trustee); provided, however, that the principal amount of Notes of each maturity to be redeemed may not be larger than the principal amount of Notes of such maturity then eligible for redemption and may not be smaller than the smallest Authorized Denomination.

(b) Except as otherwise provided in the specific redemption provisions for the Notes, if less than all Notes with the same series and maturity are to be redeemed, the particular Notes of such series and maturity to be redeemed shall be selected by the Trustee prior to sending the notice of redemption from the Outstanding Notes of such series and maturity then eligible for redemption by lot or by such other method as the Trustee shall deem fair and appropriate and which may provide for the selection for

redemption of portions (in Authorized Denominations) of the principal of Notes of such series and maturity of a denomination larger than the smallest Authorized Denomination.

(c) The Trustee shall promptly notify the Corporation of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed.

(d) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal of such Note which has been or is to be redeemed.

SECTION 7.4 Notice of Redemption

(a) If the affected Notes are held by one or more of the Financing Participants, notice of optional redemption may be given one Business Day prior to the date fixed for redemption. Notice of any other redemption shall be given to affected Noteholders not less than (i) 20 days prior to the redemption date, or (ii) if longer, the minimum notice period for redemption required by the Book Entry System. If the Book Entry System is in effect, such notice shall be given to DTC by such method as shall be specified in the rules and regulations of the Book Entry System. If the Book Entry System has been terminated, such notice shall be given by registered mail.

(b) All notices of redemption shall state:

(1) the redemption date,

(2) the redemption price,

(3) the principal amount of Notes to be redeemed, and, if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Notes to be redeemed,

(4) that on the redemption date the redemption price of each of the Notes to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said date, and

(5) any conditions to such redemption specified in accordance with the provisions of Section 7.4(d).

(c) Notice of redemption of Notes to be redeemed at the option of the Corporation shall be given by the Corporation or, at the Corporation’s request, by the Trustee on behalf of the Corporation.

(d) A notice of optional redemption may state that the redemption of Notes is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, the Corporation shall not be required to redeem the Notes (or portions thereof) identified in such notice, and any Notes surrendered on the specified redemption date shall be returned to the Holders of such Notes.

SECTION 7.5 Deposit of Redemption Price

of redemption specified contingencies that were not met on the redemption date. Such money shall be held in trust for the benefit of the persons entitled to such redemption price and shall not be deemed to be part of the Trust Estate.

SECTION 7.6 Notes Payable on Redemption Date

If notice of redemption is given and any conditions to such redemption specified pursuant to Section 7.4(d) are met, the Notes to be redeemed shall become due and payable on the redemption date at the applicable redemption price and from and after such date (unless the Corporation shall default in the payment of the redemption price) such Notes shall cease to bear interest.

SECTION 7.7 Notes Redeemed in Part

(a) If the Book Entry System is in effect, partial redemption of any Note shall be effected in accordance with the Book Entry System.

(b) If the Book Entry System has been terminated, any Note which is to be redeemed only in part shall be surrendered at the Office of the Trustee with all necessary endorsements for transfer, and the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes of the same series and maturity and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note surrendered.

ARTICLE 8

No Additional Notes

This Indenture authorizes the issuance of Notes described in Article 5. No additional Notes may be issued pursuant to this Indenture.

ARTICLE 9

Indenture Funds

SECTION 9.1 Debt Service Fund

(a) There is hereby established a special trust fund which shall be designated the “Debt Service Fund”. The Trustee shall be the depository, custodian and disbursing agent for the Debt Service Fund.

(b) On or before 11:00 AM on each Note Payment Date, until the principal of and interest on, the Notes shall have been fully paid or provision for such payment shall have been made as provided in this Indenture, the Corporation shall pay to the Trustee a sum equal to the amount payable on such Note Payment Date as principal of and interest on the Note, less the amount, if any, in the Debt Service Fund and available therefor. Such payments shall be made in federal funds or other funds immediately available at the Designated Office of the Trustee and shall be promptly deposited by the Trustee upon receipt thereof in the Debt Service Fund.

Each payment made pursuant to this Section 9.1, together with amounts, if any, in the Debt Service Fund, shall at all times be sufficient to pay the total amount of interest and principal (whether at maturity or upon acceleration) becoming due and payable on the Notes on such Note Payment Date. If on

any Note Payment Date the amounts held by the Trustee in the Debt Service Fund are insufficient to make any required payments of principal of (whether at maturity or upon acceleration) and interest on the Notes as such payments become due, the Corporation shall forthwith pay such deficiency to the Trustee.

The obligations of the Corporation to make the payments required this Section 9.1 and to perform and observe the other agreements on its part contained herein shall be a general obligation of the Corporation, absolute and unconditional, irrespective of any defense or any rights of set-off, recoupment or counterclaim it might otherwise have against the Trustee, and during the term of this Indenture, the Corporation shall pay all payments required to be made under this Section 9.1 (which payments shall be net of any other obligations of the Corporation) as prescribed therein and all other payments required hereunder, free of any deductions and without abatement, diminution or set-off. Until such time as the principal of and interest on, the Notes shall have been fully paid, or provision for the payment thereof shall have been made as required by this Indenture, the Corporation (i) will not suspend or discontinue any payments provided for in this Section 9.1; (ii) will perform and observe all of its other covenants contained in this Indenture; and (iii) except as otherwise provided in this Indenture, will not terminate this Indenture for any cause, including, without limitation, the occurrence of any act or circumstances that may constitute failure of consideration, destruction of or damage to all or a portion of the projects financed or refinanced with the proceeds of the Notes, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of Rhode Island or any political subdivision of either of these, or any failure of the Trustee to perform and observe any covenant, whether express or implied, or any duty, liability or obligation arising out of or connected with this Indenture, except to the extent permitted by this Indenture. . (c) On each Note Payment Date money in the Debt Service Fund shall be applied by the Trustee to pay Debt Service on the Notes.

(d) If money is on deposit in the Debt Service Fund on any Note Payment Date sufficient to pay Debt Service on the Notes due and payable on such Date, but the Holder of any Note that matures on such Date or that is subject to redemption on such Date fails to surrender such Note to the Trustee for payment of Debt Service due and payable on such Date, the Trustee shall segregate and hold in trust for the benefit of the person entitled thereto money sufficient to pay the Debt Service due and payable on such Note on such Date. Money so segregated and held in trust shall not be a part of the Trust Estate and shall not be invested, but shall constitute a separate trust fund for the benefit of the persons entitled to such Debt Service.

(e) Any money that remains in the Debt Service Fund on any Note Payment Date after all Debt Service due on such Note Payment Date has been paid (or money for such payment has been set aside by the Trustee as provided in Section 9.1(d)), shall, at the written request of the Corporation, be returned to the Corporation.

SECTION 9.2 Costs of Issuance Fund

(a) There is hereby established with the Trustee a trust fund which shall be designated the “Costs of Issuance Fund”. A deposit to the Costs of Issuance Fund is to be made pursuant to Section 5.2.

(b) Money in the Costs of Issuance Fund shall be paid out by the Trustee from time to time for the purpose of paying (i) Costs of Issuance with respect to the Notes and (ii) costs of issuance or refunding of debt in connection with other financing transactions of the Corporation, upon delivery to the Trustee of a requisition substantially in the form attached as Exhibit 9.2(b), executed by an Authorized Representative of the Corporation.

(c) After an Authorized Representative of the Corporation certifies to the Trustee that money remaining in the Costs of Issuance Fund is not needed for the purposes set forth in subsection (b) of this Section, any balance remaining in the Costs of Issuance Fund shall be transferred to the Debt Service Fund.

SECTION 9.3 Investment of Indenture Funds

(a) Except as otherwise expressly provided in this Indenture, any money held as part of an Indenture Fund shall be invested or reinvested in Qualified Investments by the Trustee in accordance with the written instructions of the Corporation. Any investment made with money on deposit in an Indenture Fund shall be held by or under control of the Fund custodian and shall be deemed at all times a part of the Indenture Fund where such money was on deposit, and the interest and profits realized from such investment shall be credited to such Fund and any loss resulting from such investment shall be charged to such Fund.

(b) Any investment of money in the Indenture Funds may be made by the Trustee through its own bond department, investment department, other commercial banking department providing investment services or affiliated securities dealer, and may charge its ordinary and customary fees for such transactions.

(c) The Trustee shall follow the written instructions of the Corporation with respect to investments of the Indenture Funds as provided in this Section. The Trustee may conclusively rely upon the Corporation’s written instructions as to both the suitability and legality of all investments directed hereunder. Ratings of investments shall be determined at the time of purchase of such investments and without regard to ratings subcategories. The Trustee shall have no responsibility to monitor the ratings of investments after the initial purchase of such investments. In the absence of written investment instructions from the Corporation, the Trustee shall not be responsible or liable for keeping the moneys held by it hereunder fully invested. The Trustee shall not be liable for any losses from any investments directed by the Corporation. Confirmations of investments are not required to be issued by the Trustee for each month in which a monthly statement is rendered.

SECTION 9.4 Application of Funds After Indenture Indebtedness Defeased

After all Indenture Indebtedness has been Defeased, any money or investments remaining in the Indenture Funds or otherwise constituting part of the Trust Estate shall be paid to the Corporation if no Indenture Default exists.

ARTICLE 10

Representations and Covenants

SECTION 10.1 General Representations

The Corporation makes the following representations and warranties as the basis for the undertakings on its part herein contained:

(a) Under the provisions of its organization documents, and the laws of the state in which it is organized, it has the power to consummate the transactions described in the Note Documents to which it is a party.

(b) The Note Documents to which it is a party constitute legal, valid and binding obligations of the Corporation and are enforceable against it in accordance with the terms of such Documents, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases.

SECTION 10.2 Encumbrances on Trust Estate

The Corporation will not create or permit the creation of any pledge, lien, charge or encumbrance of any kind on the Trust Estate or any part thereof prior to or on a parity of lien with this Indenture.

SECTION 10.3 Payment of Notes

(a) The Corporation will, from funds constituting part of the Trust Estate, duly and punctually pay, or cause to be paid, the Debt Service on the Notes as and when the same shall become due and will duly and punctually deposit, or cause to be deposited, in the Indenture Funds the amounts required to be deposited therein, all in accordance with the terms of the Notes and this Indenture.

(b) The Corporation will not extend or consent to the extension of the time for payment of Debt Service on the Notes, unless such extension is consented to by the Holder of the Note affected.

SECTION 10.4 Inspection of Records

The Corporation will at any and all times, upon the request of the Trustee, afford and procure a reasonable opportunity for the Trustee by its representatives to inspect any books, records, reports and other papers of the Corporation relating to the performance by the Corporation of its covenants in this Indenture, and the Corporation will furnish to the Trustee any and all information as the Trustee may reasonably request with respect to the performance by the Corporation of its covenants in this Indenture.

SECTION 10.5 Advances by Trustee

If the Corporation shall fail to perform any of its covenants in this Indenture, the Trustee may, but shall not be required, at any time and from time to time, to make advances to effect performance of any such covenant on behalf of the Corporation. Any money so advanced by the Trustee, together with interest at the Post-Default Rate, shall be repaid upon demand and such advances shall be secured under this Indenture prior to the Notes.

SECTION 10.6 Corporate Existence; Merger, Consolidation, Etc.

(a) The Corporation will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

(b) The Corporation may consolidate with or merge into any other corporation or transfer its property substantially as an entirety to another person if the corporation formed by such consolidation or into which the Corporation is merged or the person which acquires by conveyance or transfer the Corporation’s property substantially as an entirety (the “Successor”) shall execute and deliver to the Trustee an instrument in form recordable and acceptable to the Trustee containing an assumption by such Successor of the due and punctual payment of the Debt Service on the Notes and the performance and observance of every covenant and condition of the Note Documents to be performed or observed by the Corporation.

(c) Upon any consolidation or merger or any conveyance or transfer of the Corporation’s property substantially as an entirety in accordance with this Section, the Successor shall succeed to, and be substituted for, and may exercise every right and power of, the Corporation under this Indenture with the same effect as if such Successor had been named as the Corporation herein.

SECTION 10.7 Continuing Disclosure

The Corporation has entered into a continuing disclosure agreement (the “Continuing Disclosure Agreement”) in connection with tax-exempt revenue bonds issued for the benefit of the Corporation known as the Rhode Island Health and Educational Building Corporation Hospital Financing Revenue Refunding Bonds, Care New England Issue, Series 2016B. Holders and prospective purchasers of the Notes may obtain copies of the information provided by the Corporation under that Continuing Disclosure Agreement on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”). The Continuing Disclosure Agreement shall remain in force so long as any Notes are outstanding.

ARTICLE 11

Defaults and Remedies

SECTION 11.1 Events of Default

Any one or more of the following shall constitute an event of default (an “Indenture Default”) under this Indenture (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) failure to pay (i) the interest on any Note when such interest becomes due and payable, or (ii) the principal of (or premium, if any, on) any Note when such principal (or premium, if any) becomes due and payable, whether at its stated maturity, by declaration of acceleration or call for redemption or otherwise; or

(b) an Act of Bankruptcy with respect to the Corporation; or

(c) default in the performance, or breach, of any covenant or warranty of the Corporation in this Indenture (other than a covenant or warranty a default in the performance or breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 30 days after notice of such default or breach, stating that such notice is a “notice of default” hereunder, has been given to the Corporation by the Trustee, or to the Corporation and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Notes, unless, in the case of a default or breach that cannot be cured by the payment of money, the Corporation initiates efforts to correct such default or breach within 30 days from the receipt of such notice and diligently pursues such action until the default or breach is corrected; or

(d) the occurrence of an event of default, as therein defined, under the Master Indenture and the expiration of the applicable notice period or grace period, if any.

SECTION 11.2 Remedies

(a) Acceleration of Maturity. If an Indenture Default exists, the Trustee or the Holders of not less than 25% in principal amount of the Notes Outstanding may declare the principal of all the Notes and the interest accrued thereon to be due and payable immediately, by notice to the Corporation (and to the Trustee, if given by Noteholders), and upon any such declaration such Debt Service shall become immediately due and payable. At any time after such a declaration of acceleration has been made pursuant to this Section, the Holders of a majority in principal amount of the Notes Outstanding may, by notice to the Corporation and the Trustee, rescind and annul such declaration and its consequences if

(1) the Corporation has deposited with the Trustee a sum sufficient to pay

(A) all overdue installments of interest on all Notes,

(B) the principal of (and premium, if any, on) any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Notes,

(C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates prescribed therefor in the Notes, and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

(2) all Indenture Defaults, other than the non-payment of the principal of Notes which has become due solely by such declaration of acceleration, have been cured or have been waived as provided in Section 11.10.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

(b) Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

(c) Remedies Subject to Applicable Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the premises, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the premises and to be limited to the extent necessary so that they will not render this Indenture invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law.

(d) Costs and Expenses. When the Trustee incurs costs or expenses (including legal fees, costs and expenses) or renders services after the occurrence of an Indenture Default, such costs and expenses and the compensation for such services are intended to constitute expenses of administration

under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

SECTION 11.3 Application of Money Collected

Any money collected by the Trustee pursuant to this Article and any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

(a) First: To the payment of all undeducted amounts due the Trustee under Section 12.7;

(b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Notes 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 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 Notes) 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 Notes, then to the payment of such principal (and premium, if any) and interest, without any preference or priority, ratably according to the aggregate amount so due; provided, however, that payments with respect to Obligor Notes shall be made only after all other Notes have been paid or Defeased; and

(c) Third: To the payment of the remainder, if any, to the Corporation or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

SECTION 11.4 Trustee May Enforce Claims without Possession of Notes

All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the 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 Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.

SECTION 11.5 Limitation on Suits

No Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, under or with respect to this Indenture, or for the appointment of a receiver or trustee or for any other remedy hereunder, unless

(a) such Holder has previously given notice to the Trustee of a continuing Indenture Default;

(b) the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made request to the Trustee to institute proceedings in respect of such Indenture Default in its own name as Trustee hereunder;

(c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the 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 request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the lien of this Indenture or the rights of any other Holders of Notes, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Outstanding Notes.

SECTION 11.6 Unconditional Right of Noteholders to Receive Principal, Premium and Interest

Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and interest on such Note on the Maturity Date expressed in such Note (or, in the case of redemption, on the redemption date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

SECTION 11.7 Restoration of Positions

If the Trustee or any Noteholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Trustee or to such Noteholder, then and in every such case the Corporation, the Trustee and the Noteholders shall, subject to any determination in such proceeding, be restored to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such proceeding had been instituted.

SECTION 11.8 Delay or Omission Not Waiver

No delay or omission of the Trustee or of any Noteholder to exercise any right or remedy accruing upon an Indenture Default shall impair any such right or remedy or constitute a waiver of any such Indenture Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be.

SECTION 11.9 Control by Noteholders

The Holders of a majority in principal amount of the Outstanding Notes shall have the right, during the continuance of an Indenture Default,

(a) to require the Trustee to proceed to enforce this Indenture, either by judicial proceedings for the enforcement of the payment of the Notes or otherwise, and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee hereunder, including the power to direct or withhold directions for acceleration of the maturity of the Notes pursuant to Section 11.2(a); provided that

(1) such direction shall not be in conflict with any rule of law or this Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

(3) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Noteholders not taking part in such direction.

SECTION 11.10 Waiver of Past Defaults

(a) Before any judgment or decree for payment of money due has been obtained by the Trustee, the Holders of not less than a majority in principal amount of the Outstanding Notes may, by notice to the Trustee and the Corporation, on behalf of all Noteholders waive any past default hereunder or under any other Note Document and its consequences, except a default

(1) in the payment of Debt Service on any Note, or

(2) in respect of a covenant or provision hereof which under Article 13 cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

(b) Upon any such waiver, such default shall cease to exist, and any Indenture Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 11.11 Suits to Protect the Trust Estate

The 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 this Indenture and to protect its interests and the interests of the Noteholders in the Trust Estate and in the rents, issues, profits, revenues and other income arising therefrom, 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 hereunder or be prejudicial to the interests of the Noteholders or the Trustee.

ARTICLE 12

The Trustee

SECTION 12.1 Certain Duties and Responsibilities of Trustee

(a) Except during the continuance of an Indenture Default,

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) so long as it is acting in good faith, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.

(b) If an Indenture Default exists, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

(1) this subsection shall not be construed to limit the effect of Section 12.1(a);

(2) the Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

SECTION 12.2 Notice of Defaults

(a) If a notice event described in Section 12.2(b) exists, the Trustee shall notify Noteholders of such event within 30 days after the Trustee becomes aware of its existence; provided, however, that the Trustee shall be protected in withholding such notice if (1) the notice event has been cured or waived or otherwise ceases to exist before such notice is given; or (2) the Trustee determines in good faith that the withholding of such notice is in the interest of Noteholders.

(b) For purposes of this Section, the following shall constitute “notice events”:

(1) the occurrence of an Indenture Default; and

(2) any event which is, or after notice or lapse of time or both would become, an Indenture Default.

SECTION 12.3 Certain Rights of Trustee

Except as otherwise provided in Section 12.1:

(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request or direction of the Corporation mentioned herein shall be sufficiently evidenced by a certificate or order executed by an Authorized Representative of the Corporation;

(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate executed by an Authorized Representative of the Corporation;

(d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in good faith and in reliance thereon;

(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that the Trustee may not require security or indemnity before, or as a condition to, applying funds in accordance with the provisions of this Indenture;

(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books and records of the Corporation, personally or by agent or attorney;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h) the permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty;

(i) notwithstanding the effective date of this Indenture or anything to the contrary in this Indenture, the Trustee shall have no liability or responsibility for any act or event relating to

this Indenture which occurs prior to the date the Trustee formally executes this Indenture and commences acting as Trustee hereunder;

(j) the Trustee shall have no responsibility for compliance with any state or federal securities laws in connection with the Notes and shall have no responsibility with respect to any information, statement or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Notes;

(k) the Trustee shall not be accountable for the use or application by the Corporation of any of the Notes or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture;

(l) the Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; hurricanes or other storms; wars; terrorism; similar military disturbances; sabotage; epidemic; pandemic; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that the Trustee shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances;

(m) the Trustee may act upon instructions or directions pursuant to this Indenture or any other document reasonably relating to the Notes sent by the Corporation by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Corporation shall provide to the Trustee an incumbency certificate listing designated persons with the authority to provide such instructions, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the Corporation elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs, or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Corporation agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties;

(o) the Trustee shall have no obligation to file initial financing statements relating to this Indenture but shall be responsible for the filing of any required continuation statements; and

(p) the Trustee's immunities and protections from liability and its right to indemnification in connection with the performance of its duties under this Indenture shall extend to the Trustee's officers, directors, agents, attorneys and employees. Such immunities and protections and rights to indemnification, together with the Trustee's right to compensation, shall survive the Trustee's resignation or removal, the discharge of this Indenture, and final payment of the Notes.

SECTION 12.4 Not Responsible for Recitals

The recitals contained herein and in the Notes, except the certificate of authentication on the Notes, shall be taken as the statements of the Corporation, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title of the Corporation thereto or as to the security afforded thereby or hereby, or as to the validity or sufficiency of this Indenture or of the Notes.

SECTION 12.5 May Hold Notes

The Trustee in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Corporation with the same rights it would have if it were not Trustee.

SECTION 12.6 Money Held in Trust

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent expressly provided in this Indenture or required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise provided in Article 9.

SECTION 12.7 Indemnification, Compensation and Reimbursement

(a) The Corporation agrees to indemnify the Trustee, to pay to the Trustee, or to reimburse the Trustee for:

(1) reasonable compensation for all services rendered by the Trustee hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(2) all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee’s negligence, willful misconduct or bad faith.

(b) The Corporation also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of the trusts created hereunder, including the costs and expenses (including, without limitation, reasonable compensation to its attorneys) of defending itself against any claim of liability in the premises. The obligations of the Corporation under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall survive the satisfaction and discharge of this Indenture.

(c) As security for the performance of the obligations of the Corporation under this Section, the Trustee shall be secured under this Indenture by a lien prior to the Notes, and for the payment of such compensation, expenses, reimbursements and indemnity the Trustee shall have the right to use and apply any money held by it as a part of the Trust Estate.

SECTION 12.8 Corporate Trustee Required; Eligibility

(a) There shall at all times be a Trustee hereunder which shall (1) be a commercial bank or trust company organized and doing business under the laws of the United States of America or of any state, (2) be authorized under such laws to exercise corporate trust powers, and (3) be subject to supervision or examination by federal or state authority.

(b) Any successor Trustee must have an investment grade rating for its long-term deposits from each Rating Agency that provides a rating on the Notes unless each Rating Agency without such a rating of the Trustee’s deposits confirms in writing that the Trustee’s long-term deposit rating will not result in a reduction or withdrawal of the rating then assigned to the Notes.

SECTION 12.9 Resignation and Removal; Appointment of Successor

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 12.10.

(b) The Trustee may resign at any time by giving notice thereof to the Corporation. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c) Subject to the provisions of Article 15, (i) the Trustee may, upon 30 days written notice, be removed at any time by the Holders of a majority in principal amount of the Outstanding Notes by notice delivered to the Trustee and the Corporation, and (ii) if no Indenture Default exists, the Trustee may, upon 30 days written notice, be removed at any time by the Corporation by notice delivered to the Trustee.

(d) Subject to the provisions of Article 15, if at any time:

(1) the Trustee shall cease to be eligible under Section 12.8 and shall fail to resign after request therefor by the Corporation or by any Noteholder who has been a bona fide Holder of a Note for at least 6 months, or

(2) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case (i) the Corporation may remove the Trustee, or (ii) any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of himself, herself or itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the foregoing such Noteholder shall only be authorized to act hereunder to the extent the Corporation fails to do so within a reasonable time following written notice from such Noteholder.

(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, a successor Trustee shall be appointed by the Corporation. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or

trustee lawfully appointed, such receiver or trustee may similarly appoint a successor to fill such vacancy until a new Trustee shall be so appointed by the Noteholders. If no successor Trustee shall have been so appointed by the Corporation and accepted appointment in the manner hereinafter provided with in a reasonable time following written notice from a bond fide Holder of a Note for at least 6 months, any Noteholder who has been a bona fide Holder of a Note for at least 6 months may, on behalf of himself, herself or itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(f) The Corporation shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee, to the Noteholders.

SECTION 12.10 Acceptance of Appointment by Successor

(a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Corporation and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the estates, properties, rights, powers, trusts and duties of the retiring Trustee; but, on request of the Corporation or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Trustee upon the trusts herein expressed all the estates, properties, rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 12.7. Upon request of any such successor Trustee, the Corporation shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such estates, properties, rights, powers and trusts.

(b) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article, to the extent operative.

SECTION 12.11 Merger, Conversion, Consolidation or Succession to Business

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes.

ARTICLE 13

Amendment of Note Documents

SECTION 13.1 General Requirements for Amendments

The Trustee may, on behalf of the Noteholders, from time to time enter into, or consent to, an amendment of any Note Document only as permitted by this Article.

SECTION 13.2 Amendments Without Consent of Noteholders

An amendment of the Note Documents for any of the following purposes may be made, or consented to, by the Trustee without the consent of the Holders of any Notes:

(a) to correct or amplify the description of any property at any time subject to the lien of any Note Document, or better to assure, convey and confirm unto any secured party any property subject or required to be subjected to the lien of any Note Document, or to subject to the lien of any Note Document, additional property; or

(b) to evidence the succession of another person to any Financing Participant and the assumption by any such successor of the covenants of such Financing Participant (provided that the requirements of the related Note Document for such succession and assumption are otherwise satisfied); or

(c) to add to the covenants of any Financing Participant for the benefit of Noteholders and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants an event of default under the specified Note Documents permitting the enforcement of all or any of the several remedies provided therein; provided, however, that with respect to any such covenant, such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available upon such default; or

(d) to surrender any right or power conferred upon any Financing Participant other than rights or powers for the benefit of Noteholders; or

(e) to cure any ambiguity or to correct any inconsistency, provided such action shall not adversely affect the interests of the Noteholders; or

(f) to appoint a separate agent of the Corporation or the Trustee to perform any one or more of the following functions: (i) registration of transfers and exchanges of Notes, or (ii) payment of Debt Service on the Notes; provided, however, that any such agent must be a bank or trust company with long-term obligations, at the time such appointment is made, in one of the three highest rating categories of at least one Rating Agency.

SECTION 13.3 Amendments Requiring Consent of All Affected Noteholders

An amendment of the Note Documents for any of the following purposes may be entered into, or consented to, by the Trustee only with the consent of the Holder of each Note affected:

(a) to change the stated Maturity Date of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which, any Note, 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 Date thereof (or, in the case of redemption, on or after the redemption date); or

(b) to reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Holders is required for any amendment of the Note Documents, or the consent of whose Holders is required for any waiver provided for in the Note Documents; or

(d) to modify any of the provisions of this Section or Section 11.10, except to increase any percentage provided thereby or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Note affected thereby; or

(e) to permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any of the Trust Estate or terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security afforded by the lien of this Indenture; or

(f) to eliminate, reduce or delay the obligation of the Corporation to make payments at times and in amounts sufficient to pay Debt Service on the Notes.

SECTION 13.4 Amendments Requiring Majority Consent of Noteholders

An amendment of the Note Documents for any purpose not described in Sections 13.2 or 13.3 may be entered into, or consented to, by the Trustee only with the consent of the Holders of a majority in principal amount of Notes Outstanding.

SECTION 13.5 Discretion of Trustee

The Trustee may in its discretion determine whether or not any Notes would be affected by any amendment of the Note Documents and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith.

SECTION 13.6 Trustee Protected by Opinion of Counsel

In executing or consenting to any amendment permitted by this Article, the Trustee shall be entitled to receive, and, subject to Section 12.1, shall be fully protected in relying in good faith upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Indenture.

SECTION 13.7 Amendments Affecting Trustee’s Personal Rights

The Trustee may, but shall not be obligated to, enter into any amendment that affects the Trustee’s own rights, duties or immunities under the Note Documents.

SECTION 13.8 Effect on Noteholders

Upon the execution of any amendment under this Article, every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 13.9 Reference in Notes to Amendments

Notes authenticated and delivered after the execution of any amendment under this Article shall, if required by such amendment or by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such amendment. New Notes so modified as to conform to any such amendment shall, if required by such amendment or by the Trustee, be prepared and executed by the Corporation and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

ARTICLE 14

Defeasance

SECTION 14.1 Payment of Indenture Indebtedness; Satisfaction and Discharge of Indenture

(a) Whenever all Indenture Indebtedness has been Defeased, then (i) this Indenture and the lien, rights and interests created hereby shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of Notes herein or therein provided for), and (ii) the Trustee shall, upon the request of the Corporation, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, assign, transfer and deliver to the Corporation or upon the order of the Corporation, all cash and securities then held by it hereunder as a part of the Trust Estate.

(b) A Note shall be deemed “Defeased” if

(1) such Note has been cancelled by the Trustee or delivered to the Trustee for cancellation, or

(2) such Note shall have matured or been called for redemption and, on such Maturity Date or redemption date, money for the payment of Debt Service on such Note is held by the Trustee in trust for the benefit of the person entitled thereto, or

(3) a trust for the payment of such Note has been established in accordance with Section 14.2.

(c) Indenture Indebtedness other than Debt Service on the Notes shall be deemed “Defeased” whenever the Corporation has paid, or made provisions satisfactory to the Trustee for payment of, all such Indenture Indebtedness.

SECTION 14.2 Trust for Payment of Debt Service

(a) The Corporation may provide for the payment of any Note by establishing a trust for such purpose with the Trustee and depositing therein cash and/or Federal Securities which (assuming the due and punctual payment of the principal of and interest on such Federal Securities, but without reinvestment) will provide funds sufficient to pay the Debt Service on such Note as the same becomes due and payable until the Maturity Date or redemption of such Note; provided, however, that:

(1) Such Federal Securities must not be subject to redemption prior to their respective maturities at the option of the issuer of such Securities.

(2) If such Note is to be redeemed prior to its Maturity Date, either (i) the Trustee shall receive evidence that notice of such redemption has been given in accordance with the provisions of this Indenture and such Note or (ii) the Corporation shall confer on the Trustee irrevocable authority for the giving of such notice.

(3) Prior to the establishment of such trust, the Trustee must receive a defeasance opinion and verification satisfactory to the Trustee demonstrating that the principal and interest payments on the Federal Securities in such trust, without reinvestment, together with the cash balance in such trust remaining after purchase of such Securities, will be sufficient to make the required payments from such trust.

(b) Any trust established pursuant to this Section may provide for payment of less than all Notes outstanding or less than all Notes of any remaining maturity.

(c) If any trust provides for payment of less than all Notes of the same series and maturity, the Notes of such series and maturity to be paid from the trust shall be selected by the Trustee by lot by such method as shall provide for the selection of portions (in Authorized Denominations) of the principal of Notes of such series and maturity of a denomination larger than the smallest Authorized Denomination. Such selection shall be made within 7 days after such trust is established. This selection process shall be in lieu of the selection process otherwise provided with respect to redemption of Notes. After such selection is made, Notes that are to be paid from such trust (including Notes issued in exchange for such Notes pursuant to the transfer or exchange provisions of this Indenture) shall be identified by a separate CUSIP number or other designation satisfactory to the Trustee. The Trustee shall notify Holders whose Notes (or portions thereof) have been selected for payment from such trust and shall direct such Noteholders to surrender their Notes to the Trustee in exchange for Notes with the appropriate designation. The selection of Notes for payment from such trust pursuant to this Section shall be conclusive and binding on the Financing Participants.

(d) Cash and/or Federal Securities deposited with the Trustee pursuant to this Section shall not be a part of the Trust Estate but shall constitute a separate, irrevocable trust fund for the benefit of the Holder(s) of the Note(s) to be paid from such fund.

ARTICLE 15

Miscellaneous

SECTION 15.1 Notices to Financing Participants

(a) Notices and other communications to Financing Participants pursuant to this Indenture must be in writing except as otherwise expressly provided in this Indenture. Any specific reference in this Indenture to “written notice” shall not be construed to mean that any other notice may be oral, unless such oral notice is specifically permitted by this Indenture under the circumstances.

(b) Notices and other communications pursuant to this Indenture may be delivered by any method provided in the directions for notices attached as Exhibit 15.1(b). A Financing Participant may change its directions for notices by giving notice to the other Financing Participants.

(c) Any notice shall be deemed given when actually received by the Financing Participant to whom the notice is addressed.

(d) Notice to any Financing Participant required by this Indenture may be waived in writing by such Financing Participant, either before or after the event, and such waiver shall be the equivalent of such notice.

SECTION 15.2 Notices to Noteholders

(a) Notices and other communications to Noteholders pursuant to this Indenture must be in writing except as otherwise expressly provided in this Indenture. Any specific reference in this Indenture to “written notice” shall not be construed to mean that any other notice may be oral, unless such oral notice is specifically permitted by this Indenture under the circumstances.

(b) If the Book Entry System is in effect, notices and other communications to Noteholders may be delivered to DTC. If the Book Entry System is terminated, notices and other communications to Noteholders may be delivered to such Holders at their address as it appears in the Note Register.

(c) Any notice to Noteholders shall be deemed given when sent by registered mail, addressed as provided in the Note Register.

(d) In any case where notice to Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders.

(e) Notice to any Noteholder required by this Indenture may be waived in writing by such Noteholder, either before or after the event, and such waiver shall be the equivalent of such notice.

SECTION 15.3 Successors and Assigns

All covenants and agreements in this Indenture by the Corporation shall bind its successors and assigns, whether so expressed or not.

SECTION 15.4 Benefits of Indenture

Nothing in this Indenture or in the Notes, express or implied, shall give to any person, other than (i) the parties hereto and their successors hereunder and (ii) the Holders of the Outstanding Notes.

SECTION 15.5 Notice to Rating Agencies

The Trustee shall give prior notice, where applicable, of the following events to each Rating Agency that maintains a rating with respect to the Notes: (i) any change of the Trustee; (ii) any change or amendment of the Note Documents; (iii) acceleration of the payment date for Notes; (iv) the redemption of all Notes prior to maturity; and (v) the establishment of a trust for the payment of Notes in accordance with Article 14 of this Indenture.

[Signature Page Follows]

36 IN WITNESS WHEREOF, the Corporation and the Trustee have caused this instrument to be duly executed by their duly authorized officers.

CARE NEW ENGLAND HEALTH SYSTEM

By:

Title:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

By:

Title:

37 STATE OF RHODE ISLAND ______COUNTY

I, ______, a Notary Public in and for said County in said State, do hereby certify that ______, whose name as ______of Care New England Health System, a Rhode Island non-profit corporation, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he/she, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation.

Given under my hand this the ______day of September, 2016.

Notary Public

NOTARIAL SEAL

My commission expires:______

STATE OF RHODE ISLAND ______COUNTY

I, ______, a Notary Public in and for said County, in said State, hereby certify that ______, whose name as ______of The Bank of New York Mellon Trust Company, N.A., a national banking association, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he/she, as such officer and with full authority, executed the same voluntarily for and as the act of said banking corporation.

Given under my hand this the ______day of September, 2016.

Notary Public

NOTARIAL SEAL

My commission expires:______

EXHIBIT 5.1(c)

Form of Notes

Care New England Health System

Series 2016C Taxable Notes

Number:

Maturity Date: September 1, 20__

Interest Rate: _____%

CUSIP: ______

Care New England Health System, a Rhode Island non-profit corporation (the “Corporation”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to

______, or registered assigns, the principal sum of

______DOLLARS on the Maturity Date specified above and to pay interest hereon from the date of initial delivery of this Note, or the most recent date to which interest has been paid or duly provided for, until the principal hereof shall become due and payable at the applicable interest rate specified above.

Authorizing Document

This Note is issued pursuant to a Trust Indenture dated as of September 1, 2016 (the “Indenture”), between the Corporation and The Bank of New York Mellon Trust Company, N.A., a national banking association (the “Trustee”, which term includes any successor trustee under the Indenture). The Notes issued pursuant to the Indenture are referred to herein as the “Notes”. Capitalized terms not otherwise defined herein shall have the meaning assigned in the Indenture. The provisions of the Indenture are hereby incorporated by reference as if fully set forth in this Note.

Source of Payment

The Notes and all other payment obligations under the Indenture are general obligations of the Corporation for the payment of which its general credit is hereby pledged.

Security for Payment

Payment of the Notes is secured by the Trust Estate established under the Indenture, which includes (i) all right, title and interest of the Corporation in and to the Series 2016C Obligation, and (ii) money and investments in the funds and accounts established under the Indenture.

Exhibit 5.1(c), Page 1 of 7

Note Documents

Copies of the Note Documents are on file at the Office of the Trustee, and reference is hereby made to such instruments for a description of the properties pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Holders of the Notes and the Financing Participants, and the terms upon which the Notes are, and are to be, authenticated and delivered.

Transfer, Registration, Exchange and Payment Provisions

The ownership, transfer, exchange and payment of Notes shall be governed by the Book Entry System administered by DTC until the Book Entry System is terminated pursuant to the terms and conditions of the Indenture. If the Book Entry System is terminated, the Indenture provides alternate provisions for the transfer, registration, exchange and payment of Notes.

Computation of Interest Accrual

Interest on this Note shall be computed on the basis of a 360-day year with 12 months of 30 days each.

Interest Payment Dates

Interest on this Note is payable in arrears on March 1 and September 1 in each year, beginning March 1, 2017.

Regular Record Date for Interest Payments

If the Book Entry System is in effect, the Trustee shall pay interest on this Note to DTC, and interest shall be distributed to the Holder of this Note in accordance with the rules and regulations of DTC. If the Book Entry System is terminated, the interest due on any Interest Payment Date with respect to this Note shall be payable to the Holder of this Note on the Regular Record Date for such Interest Payment Date, which shall be the 15th day (whether or not a Business Day) prior to each Interest Payment Date for such Note..

Interest on Overdue Payments

Interest shall be payable on overdue principal on this Note and (to the extent legally enforceable) on any overdue installment of interest on this Note at the Post-Default Rate specified in the Indenture.

Authorized Denominations

Notes may be in denominations of $25,000 or any integral multiple of $1,000 in excess thereof.

Currency of Payment

Payment of Debt Service on this Note shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

Exhibit 5.1(c), Page 2 of 7

Redemption Prior to Maturity

The Notes may be redeemed at the option of the Corporation in whole or in part on any Business Day at the Make-Whole Redemption Price plus accrued interest to the redemption date.

The “Make-Whole Redemption Price”, when used with respect to any Note (or the portion thereof) to be redeemed, means the greater of the following:

(1) 100% of the principal amount of the Note (or portion thereof) to be redeemed; or

If less than all Notes outstanding are being redeemed, the Indenture provides procedures for selection of Notes to be redeemed.

If the affected Notes are held by one or more of the Financing Participants, notice of optional redemption may be given three Business Days prior to the date fixed for redemption in the manner provided in the Indenture. Notice of any other redemption shall be given to affected Noteholders not less than (i) 20 days prior to the redemption date, or (ii) if longer, the minimum notice period for redemption required by the Book Entry System, in the manner provided in the Indenture.

A notice of optional redemption may state that the redemption of Notes is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, the Corporation shall not be required to redeem the Notes (or portions thereof) identified in such notice, and any Notes surrendered on the specified redemption date shall be returned to the Holders of such Notes.

On the applicable redemption date, an amount of money sufficient to pay the redemption price of all the Notes which are to be redeemed on that date shall be deposited with the Trustee, unless the notice of redemption specified contingencies that were not met on the redemption date. Such money shall be held in trust for the benefit of the persons entitled to such redemption price and shall not be deemed to be part of the Trust Estate.

If notice of redemption is given and any conditions to such redemption are met, the Notes to be redeemed shall become due and payable on the redemption date at the applicable redemption price, and

Exhibit 5.1(c), Page 3 of 7

from and after such date (unless the Corporation shall default in the payment of the redemption price) such Notes shall cease to bear interest.

If the Book Entry System is in effect, partial redemption of any Note shall be effected in accordance with the Book Entry System. If the Book Entry System has been terminated, any Note which is to be redeemed only in part shall be surrendered at the Office of the Trustee with all necessary endorsements for transfer, and the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes of the same series and maturity and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note surrendered.

Remedies

If an “Indenture Default”, as defined in the Indenture, shall occur, the principal of all Notes then Outstanding may become or be declared due and payable in the manner and with the effect provided in the Indenture.

The Holder of this Note shall have no right to enforce the provisions of the Indenture, or to institute any action to enforce the covenants therein, or to take any action with respect to any default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture.

Amendments

The Indenture permits the amendment of the Note Documents and waivers of past defaults under such Documents and the consequences of such defaults, in certain circumstances without consent of Noteholders and in other circumstances with the consent of all Noteholders or a specified percentage of Noteholders. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

Exoneration of Incorporators, Directors and Officers of the Corporation

No recourse under or upon any covenant or agreement of the Indenture, or of any Notes, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future incorporator, officer or director of the Corporation, or of any successor, either directly or through the Corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that the Indenture and the Notes are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer or director of the Corporation or any successor, or any of them, because of the issuance of the Notes, or under or by reason of the covenants or agreements contained in the Indenture or in any Notes or implied therefrom.

It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and issuance of this Note do exist, have happened and have been performed in due time, form and manner as required by law.

Exhibit 5.1(c), Page 4 of 7

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

Exhibit 5.1(c), Page 5 of 7

IN WITNESS WHEREOF, the Corporation has caused this Note to be duly executed under its corporate seal.

Dated: Date of initial delivery of this Note identified above.

CARE NEW ENGLAND HEALTH SYSTEM

By:

[SEAL]

Attest:

(Assistant) Secretary

Certificate of Authentication

This is one of the Notes referred to in the within-mentioned Indenture.

Date of authentication:______

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee

By Authorized Officer

Assignment

For value received, ______hereby sell(s), assign(s) and transfer(s) unto [Please insert name and taxpayer identification number] ______this note and hereby irrevocably constitute(s) and appoint(s) ______attorney to transfer this note on the books of the within named Corporation at the office of the within named Trustee, with full power of substitution in the premises.

Exhibit 5.1(c), Page 6 of 7

Dated: ______

NOTE: The name signed to this assignment must correspond with the name of the payee written on the face of the within note in all respects, without alteration, enlargement or change whatsoever.

Signature Guaranteed:

(Bank or Trust Company)

By (Authorized Officer)

*Signature(s) must be guaranteed by an eligible guarantor institution which is a member of the recognized signature guarantee program, i.e., Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP).

Exhibit 5.1(c), Page 7 of 7

EXHIBIT 5.2(b)

Description of Refunded Obligations

Refunded Obligations

The Refunded Obligations include the following bonds or other indebtedness issued by, or on behalf of, the Corporation or other members of the Obligated Group:

Title and Date of Refunded Obligations Principal Amount Refunded

Exhibit 5.2(b), Page 1 of 1

EXHIBIT 15.1(b)

Directions for Notices

Care New England Health System

Care New England Health System 45 Willard Avenue Providence, Rhode Island 02905 Attention: Chief Financial Officer

Email address: [email protected]

Facsimile transmissions: (401) ___ - ____

The Bank of New York Mellon Trust Company, N.A.

The Bank of New York Mellon Trust Company, N.A. 135 Santilli Highway AIM 026-0018 Everett, Massachusetts 02149 Attention: Corporate Trust Department

Email address:

Facsimile transmissions:

Exhibit 15.1(b), Page 1 of 1 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX E

Form of Approving Opinion of Note Counsel [THIS PAGE INTENTIONALLY LEFT BLANK]

September __, 2016

Holders of the Series 2016C Taxable Notes referred to below

Re: $[______] Series 2016C Taxable Notes issued by Care New England Health System

This opinion is being delivered in connection with the issuance of the above-referenced notes (the “Series 2016C Notes”) by Care New England Health System, a non-profit corporation organized under the laws of the State of Rhode Island (the “Corporation”). The Series 2016C Notes are being issued pursuant to a Trust Indenture dated as of September 1, 2016 (the “Note Indenture”) between the Corporation and The Bank of New York Mellon Trust Company, N.A., a national banking association (in such capacity, the “Note Trustee”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Note Indenture.

The Series 2016C Notes constitute general obligations of the Corporation for the payment of which its general credit has been pledged.

The Corporation has entered into a Master Trust Indenture dated as of September 1, 2016, as heretofore supplemented and as supplemented by a Second Supplemental Master Indenture dated as of September 1, 2016 entered into in connection with the issuance of the Series 2016C Master Indenture Note referred to below (as so supplemented, the “Master Indenture”), with The Bank of New York Mellon Trust Company, N.A., a national banking association (in such capacity, the “Master Trustee”), whereby the Corporation may from time to time issue its obligations (the “Obligations”) for any lawful purpose. As security for the Corporation’s obligations under the Note Indenture and the Series 2016C Notes, the Corporation has issued to the Note Trustee its Series 2016C Master Indenture Note (the “Series 2016C Obligation”) under the Master Indenture. The Series 2016C Obligation is payable at times and in amounts corresponding to the required payments of debt service on the Series 2016C Notes. Payments by the Corporation under the Note Indenture and the Series 2016C Notes will be credited against the payments due under the Series 2016C Obligation.

Pursuant to the Master Indenture, payment of the Series 2016C Obligation is secured by a pledge of certain revenues of the members of the Care New England obligated group (as identified in the Master Indenture, the “Obligated Group”) with respect to the health care facilities of the members of the Obligated Group (the “Gross Revenues”) as well as certain mortgages in favor of the Master Trustee from certain members of the Obligated Group (the “Mortgages”). The Series 2016C Obligation will be secured by the Mortgages and the Gross Revenues on an equal and proportionate basis with the other obligations issued under the Master Indenture.

In connection with the issuance of the Series 2016C Notes and the delivery of this opinion, we have acted as counsel to the Corporation.

E-1 2.

We have examined executed counterparts of the Master Indenture, the Note Indenture and the Mortgages, the executed Series 2016C Notes and Series 2016C Obligation and such other certificates, proceedings, proofs and documents as we have deemed necessary in connection with the opinions hereinafter set forth.

As to various questions of fact material to our opinion, we have relied upon the representations made in the documents described above and upon certificates of certain public officials and officers of the Corporation, the Note Trustee and the Master Trustee, without undertaking to verify the same by independent investigation.

Based upon the foregoing, and upon such investigation as we have deemed necessary, we are of the opinion that:

1. The Corporation has been duly organized as a non-profit corporation under the laws of the State of Rhode Island.

2. The Corporation and, to the extent applicable, each other member of the Obligated Group has corporate power and authority to enter into and perform its obligations under the Note Indenture, the Master Indenture and the Mortgages and to issue and deliver the Series 2016C Notes and the Series 2016C Obligation. The execution, delivery and performance of its obligations under the Note Indenture, the Master Indenture and the Mortgages and the issuance and delivery of the Series 2016C Notes and the Series 2016C Obligation by the Corporation and, to the extent applicable, the other members of the Obligated Group, have been duly authorized by all requisite corporate action, and the Note Indenture, the Master Indenture, the Mortgages, the Series 2016C Notes and the Series 2016C Obligation have been duly executed and delivered by the Corporation and, to the extent applicable, the other members of the Obligated Group.

3. The Series 2016C Notes constitute legal, valid and binding general obligations of the Corporation and the Series 2016C Obligation constitutes a legal, valid and binding general obligation of the members of the Obligated Group.

4. The Note Indenture, the Master Indenture and the Mortgage constitute legal, valid and binding obligations of the Corporation and, to the extent applicable, the other members of the Obligated Group, and are enforceable against the Corporation and, to the extent applicable, the other members of the Obligated Group, in accordance with their terms.

5. The Master Indenture creates a valid lien on the Gross Revenues for the security of the Series 2016C Obligation on a parity with other obligations issued under the Master Indenture. The Mortgages create valid liens on the Mortgaged Property for the security of the Series 2016C Obligation on a parity with other obligations issued under the Master Indenture.

We express no opinion herein regarding the priority of the lien of the Mortgages. We note with respect to the lien of the Mortgage on the Mortgaged Property that a title insurance policy insuring the lien of the Mortgages has been issued to the Master Trustee.

The rights of the holders of the Series 2016C Notes and the Series 2016C Obligation and the enforceability of the Series 2016C Notes, the Note Indenture, the Series 2016C Obligation, the Master Indenture and the Mortgages may be limited or affected by (1) bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights and (2) general principles of equity, including the exercise of judicial discretion in appropriate cases. The Trustee and the Master Trustee will have the right in any court of competent jurisdiction to enforce their respective rights and the rights of the holders of the Series 2016C Notes and the Series 2016C Obligation against the Corporation, and, to the extent

E-2 3. applicable, the other members of the Obligated Group, including the application of the Corporation’s, and, to the extent applicable, the other members of the Obligated Group’s funds (including the Gross Revenues) to the payment of the Series 2016C Notes and the Series 2016C Obligation in accordance with the terms of the Note Indenture and the Master Indenture.

This opinion is given as of the date hereof and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Very truly yours,

BUTLER SNOW LLP

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APPENDIX F

The DTC Book-Entry Only System

[THIS PAGE INTENTIONALLY LEFT BLANK] The DTC Book-Entry Only System

Book-Entry Only System

The Depository Trust Company (“DTC”) will act as securities depository for the Series 2016C Taxable Notes. The ownership of one fully registered Bond for each maturity, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE SERIES 2016C TAXABLE NOTES, AS NOMINEE OF DTC, REFERENCES IN THE OFFERING MEMORANDUM TO THE NOTEHOLDERS, NOTE OWNERS OR REGISTERED OWNERS OF THE SERIES 2016C TAXABLE NOTES SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE SERIES 2016C TAXABLE NOTES.

DTC is a limited-purpose trust company organized under the New York Banking Law, a “Banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (“DTC Participants”) deposit with DTC. DTC also facilitates the settlement among DTC Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in DTC Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of the DTC Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (“Indirect Participants”). The rules applicable to DTC and the DTC Participants are on file with the Securities and Exchange Commission.

Purchases of beneficial ownership interests in the Series 2016C Taxable Notes under the DTC system must be made by or through DTC Participants, which will receive a credit for the Series 2016C Taxable Notes on DTC’s records. The ownership interest of each beneficial owner of a Bond (a “Beneficial Owner”) is in turn to be recorded on the DTC Participants’ and Indirect Participants’ records. Beneficial Owners will not receive written communication from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of beneficial ownership interests in the Series 2016C Taxable Notes are to be accomplished by entries made on the books of DTC Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their beneficial ownership interests in the Series 2016C Taxable Notes, except in the event that use of the book-entry only system for the Series 2016C Taxable Notes is discontinued.

To facilitate subsequent transfers, all Series 2016C Taxable Notes deposited by DTC Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Series 2016C Taxable Notes with DTC and their registration in the name of Cede & Co. effects no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016C Taxable Notes. DTC’s records reflect only the identity of the DTC Participants to whose accounts such Series 2016C Taxable Notes are credited, which may or may not be the Beneficial Owners. The DTC Participants will remain responsible for keeping account of their holdings on behalf of their customers.

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

Redemption notices shall be sent to Cede & Co. If less than all of the Series 2016C Taxable Notes are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each DTC Participant to be redeemed.

F-1 Neither DTC nor Cede & Co. will consent or vote with respect to Series 2016C Taxable Notes. Under its usual procedures, DTC mails an “Omnibus Proxy” to CNE as soon as possible after the record date. The “Omnibus Proxy” assigns Cede & Co.’s consenting or voting rights to those DTC Participants to whose accounts the Series 2016C Taxable Notes are credited on the record date identified in a listing attached to the “Omnibus Proxy.”

Principal, premium and interest payments on the Series 2016C Taxable Notes will be made to DTC. DTC’s practice is to credit DTC Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the issuer or the Trustee on payable date in accordance with their respective holdings shown on DTC’s records. Payments by DTC 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 DTC Participants and not of DTC, the Trustee or CNE, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium (if any) and interest to DTC is the responsibility of the Trustee. Disbursement of such payments to DTC Participants shall be the responsibility of DTC and disbursement of such payments to the Beneficial Owners shall be the responsibility of the DTC Participants and Indirect Participants.

THE SYSTEM AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SERIES 2016C TAXABLE NOTES (1) PAYMENTS OF PRINCIPAL, REDEMPTION PRICE OR PURCHASE PRICE OF, OR INTEREST ON THE SERIES 2016C TAXABLE NOTES; (2) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN SERIES 2016C TAXABLE NOTES OR (3) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE SERIES 2016C TAXABLE NOTES, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFERING MEMORANDUM. THE CURRENT “RULES” APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT “PROCEDURES” OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC.

NEITHER THE SYSTEM NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE SERIES 2016C TAXABLE NOTES; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE SERIES 2016C TAXABLE NOTES; (4) THE DELIVERY BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO NOTEHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2016C TAXABLE NOTES; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS NOTEHOLDER.

Discontinuation of Book-Entry Only System

DTC may determine to discontinue providing its services with respect to the Series 2016C Taxable Notes at any time by giving notice to CNE and the Trustee and discharging its responsibilities with respect thereto under applicable law. Upon the giving of such notice, the book-entry only system for the Series 2016C Taxable Notes will be discontinued unless a successor securities depository is appointed by CNE. In addition, CNE may discontinue the book-entry only system for the Series 2016C Taxable Notes at any time by giving reasonable notice to DTC.

In the event that the book-entry only system for the Series 2016C Taxable Notes is discontinued, the Indenture provides alternate provisions for the transfer, registration, exchange and payment of Series 2016C Taxable Notes.

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Care New England Health System • Series 2016C Taxable Notes