This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. *Preliminary, subjecttochange. May __,2010 M toDTCinNewYork,for delivery NewYork oritscustodial agent onoraboutJune__,2010. Levin, Cohn, Ferris, Mintz, Glovsky and counsel, Popeo,its by P.C., Underwriters the for upon Boston, Massachusetts. passed It be is expected will that the matters Bonds in definitive legal form will Certain LLP,be available Gray Massachusetts. & Boston, Ropes counsel, its by Institution the for upon passed be will matters legal Certain Authority. the to Counsel Bond Massachusetts, Boston, LLP,PalmerDodge Angell Edwards& by matters other certain and legality their of approval the to and notice, without offer the of OF DEFAULT BY THEINSTITUTION.AUTHORITY DOESNOTHAVE ANYTAXING POWER. OBLIGATIONMORAL OF THE COMMONWEALTH OF MASSACHUSETTS TO PAY DEBT SERVICE IN THE EVENT WAYSO-CALLED ANY A CREATEIN NOT DOES ACT THE BONDS. THE ANY,ON IF INTEREST PREMIUM, OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR REDEMPTION ANY OF COMMONWEALTHOR MASSACHUSETTSTHE OF TAXINGOF THE POWER NOR CREDIT FAITHAND THE NEITHER AGREEMENT. THE UNDER PROVIDED REVENUES THE FROM THEREOF,PAYABLE BUT SOLELY BE SUBDIVISION SHALL POLITICAL SUCH ANY OR MASSACHUSETTS OF COMMONWEALTH THE OF OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION THEREOF, OR A PLEDGE OF THE FAITH AND CREDIT Medical Centeralsohasgrantedamortgageoncertainreal estatetosecure theNoteandPrior Obligations(asdefinedherein). Trustee,Master The herein.as described ParentmoreAssociation, fully the as National between Bank supplemented, U.S. and and defined herein) of the Parent and the Medical Center pursuant to a Master Trust Indenture dated as of December 1, 1998, Toas amended (as TrusteeGrossAgreement,ParentReceipts the the the the to of under Note pledge securepayments a secureda the issue by will Trustee. Such payments pursuant to the Agreement are the joint and several, general obligation of the Parentthe and Institution Authority,“Agreement”),and the the the Medical (the Center.among 2010 and 1, by June of Trustas and dated AgreementLoan the of Memorial Medical Center, Inc. (the “Medical Center” and together with the Parent, the “Institution”) in accordance including payments to the Trustee,with the for the account of the Authority by provisionsUMass Memorial Health Care, Inc. (the “Parent”) and UMass forth inthisOfficialStatement. the to Bondowners ofrecord1 July asofclosebusinessonthefifteenthdaymonthpreceding thedateonwhichinterestand istobepaid. 1 January each on thereafter semiannually and 2010, 1, July on moreBondowner, payable as such be will to Interestdirectly herein. made described fully be will payments Bondowner,such the is Co., & Cede nominee, its or DTC as long So System” herein. shall mean Cede & Co., as aforesaid, and shall not mean Bonds the Beneficial Owners of in the Bonds. interestSee “THE BONDS - their Book-Entry-Only representingregistered or references certificates Bondowner,Bondowners owners DTC, the the of hereinis to receivenominee Co. as & Cede as long not So purchased. will Purchasers thereof. multiple any or $5,000 of denominations in form, book-entry in made be will Bonds Purchasesthe of Bonds. the for York,depository New securities as York.act New will DTC Trust Depository The for nominee and (“DTC”), Bondowner Company as Co. registered& be Cede will of issued, name when the in UMass Memorial Issue, Series G (2010) (the “Bonds”). The Bonds will be issued only as fully registered bonds without coupons and, Dated: DateofDelivery of, ortheaccrualreceipt ofinterest on,theBonds.See“TAX EXEMPTION”herein. disposition or ownership relatedthe regardingconsequences to expressesopinion tax Counsel no other Bond any property taxes. personal Massachusetts fromareexempt Bonds the and taxes income personal Massachusetts fromareexempt Bonds the of sale when calculating corporate alternative minimum taxable income. Under existing law, interest on the Bonds and any profit on the of the federal individual or corporate alternative minimum taxes, although such interest is included in adjusted current earnings income tax purposes under the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal NEW ISSUE–Book-Entry-Only organ The The Bonds are offered when, as and if issued and received by the Underwriters, subject to prior sale, to withdrawal or modification THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE COMMONWEALTH Authority, the of herein, defined as Revenues, the from solely payable Authority the of obligations special be shall Bonds The set circumstances,as certain maturity,in redemptionto redemptionpar areto prior including at Bonds subject The “Trustee”).(the trustee as Association, National Bank U.S. by paid be will Bonds the on interest semiannual and of Principal n h oiin f dad Agl Ple & og LP Bn Cusl bsd pn n nlss f xsig a and law existing of analysis an upon based Counsel, LLP, Bond Dodge & Palmer Angell Edwards of opinion the In Massachusetts Health and Educational Facilities“Authority”)Educational (the AuthorityBonds, and Revenue Health $59,970,000* Massachusetts its offering is S tanley

PRELIMINARY OFFICIALSTATEMENT DATED MAY6,2010

EDUCATIONAL FACILITIES AUTHORITY

Revenue Bonds, UMass Memorial Issue Revenue Bonds,UMassMemorialIssue MASSACHUSETTS HEALTHMASSACHUSETTS AND Series G(2010) $59,970,000* $59,970,000* Due: July1,asshownontheinsidecover R ATINGS: B ofA M See“RATINGS” herein. errill L ynch

$59,970,000* Massachusetts Health and Educational Facilities Authority Revenue Bonds, UMass Memorial Issue Series G (2010)

Delivery Date: June __, 2010

Maturity Interest CUSIP Maturity Interest CUSIP (July 1)* Principal* Rate Yield Number** (July 1)* Principal* Rate Yield Number** 2011 $4,960,000 2017 $4,485,000 2012 4,745,000 2018 5,075,000 2013 4,635,000 2019 5,135,000 2014 4,960,000 2020 5,385,000 2015 4,310,000 2021 5,740,000 2016 4,645,000 2022 5,895,000

* Preliminary, subject to change. ** Copyright, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers may change as a result of the secondary market.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

No dealer, broker, salesperson or other person has been authorized by the Authority, the Institution or the Underwriters to give information or to make representations with respect to the Bonds, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. Certain information contained herein has been obtained from the Institution, The Depository Trust Company and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of the Authority. This Official Statement is submitted in connection with the sale of securities referred to herein and may not be used, in whole or in part, for any other purpose. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof.

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

The Bonds have not been registered under the Securities Act of 1933, as amended, and the Agreement has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts.

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

SOURCES OF PAYMENT AND SECURITY FOR THE BONDS ...... 2

THE AUTHORITY ...... 5

THE BONDS ...... 8

CERTAIN FINANCIAL COVENANTS ...... 12

ESTIMATED SOURCES AND USES OF FUNDS ...... 13

PLAN OF REFUNDING ...... 13

ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ...... 14

BONDOWNERS’ RISKS ...... 15

CONTINUING DISCLOSURE ...... 20

TAX EXEMPTION ...... 20

LEGALITY OF THE BONDS FOR INVESTMENT AND DEPOSIT ...... 21

RATINGS ...... 22

COMMONWEALTH NOT LIABLE ON THE BONDS ...... 22

UNDERWRITING ...... 22

LEGAL MATTERS ...... 23

VERIFICATION OF MATHEMATICAL COMPUTATIONS ...... 23

MISCELLANEOUS ...... 23

APPENDIX A Letter from the Institution A-1 APPENDIX B Financial Statements of UMass Memorial Health Care, Inc. and Affiliates for September 30, 2009 and 2008 B-1 APPENDIX C-1 Definitions of Certain Terms C-1-1 APPENDIX C-2 Summary of Certain Provisions of the Master Indenture C-2-1 APPENDIX C-3 Summary of Certain Provisions of the Supplemental Master Indenture C-3-1 APPENDIX C-4 Summary of Certain Provisions of the Loan and Trust Agreement C-4-1 APPENDIX C-5 Summary of the Mortgage C-5-1 APPENDIX D Proposed Form of Bond Counsel Opinion D-1 APPENDIX E Form of Continuing Disclosure Agreement E-1

ii [THIS PAGE INTENTIONALLY LEFT BLANK]

MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

99 SUMMER STREET, BOSTON, MASSACHUSETTS 02110

CHRISTINE C. SCHUSTER, Chair GILL E. ENOS MARK P. BILOTTA, Vice Chair MARVIN A. GORDON TIMOTHY O’CONNOR, Secretary ALLEN R. LARSON DARRELL C. BYERS MICHAEL P. MONAHAN JACQUELINE J. CONRAD

BENSON T. CASWELL, Executive Director

OFFICIAL STATEMENT Relating to

$59,970,000* MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Revenue Bonds, UMass Memorial Issue, Series G (2010)

INTRODUCTION

Purpose of this Official Statement

The purpose of this Official Statement is to set forth certain information concerning the Massachusetts Health and Educational Facilities Authority (the “Authority”) Revenue Bonds, UMass Memorial Issue, Series G (2010) (the “Bonds”) issued pursuant to the Loan and Trust Agreement dated as of June 1, 2010 (the “Agreement”) by and among the Authority, UMass Memorial Health Care, Inc. (the “Parent”), UMass Memorial Medical Center, Inc. (the “Medical Center” and together with the Parent, the “Institution”) and U.S. Bank National Association, as trustee (the “Trustee”), and in accordance with the provisions of Chapter 614 of the Massachusetts Acts of 1968, as amended from time to time (the “Act”) and the Agreement. The information contained in this Official Statement is provided for use in connection with the initial sale of the Bonds. The definitions of certain terms used and not otherwise defined herein are contained in APPENDIX C-1 - “DEFINITIONS OF CERTAIN TERMS.”

Use of Proceeds

The proceeds from the sale of the Bonds, together with other available funds of the Institution, will be used (i) subject to market conditions at the time of sale of the Bonds, to refund on a current basis the Authority’s Revenue Bonds, Medical Center of Central Massachusetts Issue, Series B (1992) (the “Memorial Series B Bonds”) and Central New England Health System, Inc. Issue, Series A (1993) (the “CNEHA Series A Bonds” and, collectively, the “Refunded Bonds”) and (ii) to pay costs of issuing the Bonds. See “PLAN OF REFUNDING” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

______*Preliminary, subject to change.

SOURCES OF PAYMENT AND SECURITY FOR THE BONDS

The Agreement

The Authority, the Institution and the Trustee shall execute the Agreement which provides that to the extent permitted by law the obligation of the Institution to make payments to the Authority and the Trustee thereunder is the joint and several, general obligation of the Parent and the Medical Center to which the full faith and credit of the Parent and the Medical Center are pledged. The Agreement also provides, among other things, that the Institution shall make payments to the Trustee equal to principal of and interest on the Bonds and certain other payments required by the Agreement. The Agreement shall remain in full force and effect until such time as all of the Bonds and the interest thereon have been fully paid or until adequate provision for such payments has been made.

The Bonds are special obligations of the Authority, equally and ratably secured by and payable from a pledge of and lien on, to the extent provided by the Agreement, the moneys received with respect to the Bonds by the Trustee for the account of the Authority pursuant to the Agreement.

Under the Agreement, the Authority assigns and pledges to the Trustee in trust upon the terms of the Agreement (i) all Revenues to be received from the Institution or derived from any security provided thereunder, and (ii) all rights to receive such Revenues and the proceeds of such rights. Under the Act, to the extent authorized or permitted by law, the pledge of Revenues is valid and binding from the time when such pledge is made and the Revenues and all income and receipts earned on funds held by the Trustee for the account of the Authority shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Authority irrespective of whether such parties have notice thereof.

The assignment and pledge by the Authority does not include (i) the rights of the Authority pursuant to provisions for consent, concurrence, approval or other action by the Authority, notice to the Authority or the filing of reports, certificates or other documents with the Authority, or (ii) the powers of the Authority as stated in the Agreement to enforce the provisions thereof.

As additional security for its payment obligations under the Agreement, the Institution, pursuant to the Agreement, grants to the Trustee a security interest in the moneys and other investments and any proceeds thereof held in the funds established under the Agreement.

The Trustee may declare all of the Bonds immediately due and payable prior to maturity at par, plus accrued interest, upon the occurrence of an Event of Default under the Agreement. See APPENDIX C-4 - “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AND TRUST AGREEMENT” under the heading “Remedies for Events of Default.”

THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT, LIABILITY OR MORAL OBLIGATION OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES DERIVED BY THE AUTHORITY UNDER THE AGREEMENT. THE AUTHORITY DOES NOT HAVE TAXING POWER.

The Master Trust Indenture

To evidence the loan made to the Parent and the Medical Center under the Agreement, the Obligated Group, the sole member of which is the Parent, will issue and deliver Obligation No. 9 (the “Note”) in a principal amount equal to the principal amount of the Bonds. The Note will be issued and secured under a Master Trust Indenture dated as of December 1, 1998 (the “Master Trust Indenture”) between the Parent and State Street Bank and Trust Company, predecessor to U.S. Bank National Association, as Master Trustee (the “Master Trustee”), as supplemented and amended by Supplemental Master Indenture for Obligations No. 1, No. 2, No. 3 and No. 4 dated as of December 1, 1998, by Supplemental Master Indenture for Obligation No. 5 dated as of February 13, 2001, by Supplemental Master Indenture for Obligation No. 6 dated as of July 12, 2005, by Supplemental Master Indenture for Obligation No. 7 dated as of May 1, 2009, by Supplemental Master Indenture for Obligation No. 8 dated as of May 1, 2009 and by Supplemental Master Indenture for Obligation No. 9 dated as of June 1, 2010 (the

2

“Supplemental Master Indenture”) each among the Parent, the Medical Center and the Master Trustee (the Master Trust Indenture, as supplemented and amended is referred to as the “Master Indenture”). The terms of the Note require payments from the Obligated Group which will be sufficient to provide for the timely payment of principal of and interest on the Bonds.

In December 1998, the Obligated Group issued and delivered four Obligations. Obligation No. 1 (“Obligation No. 1”) was issued to secure the Memorial Series B Bonds issued in the original principal amount of $81,145,000 and outstanding as of April 1, 2010 in the principal amount of $58,000,000. The Memorial Series B Bonds are being refunded by the Bonds and are expected to be redeemed in full on July 5, 2010.* See “PLAN OF REFUNDING.” Obligation No. 2 (“Obligation No. 2”) was issued to secure a guaranty from the Institution to Ambac Assurance Corporation, which provided a bond insurance policy with respect to the Authority’s $20,000,000 Revenue Bonds, Central New England HealthAlliance Obligated Group Issue, Series B (the “CNEHA Series B Bonds”). As of April 1, 2010, the current outstanding principal balance of the CNEHA Series B Bonds was $13,505,000. Obligation No. 3 (“Obligation No. 3”) was issued to secure the Authority’s $83,245,000 Revenue Bonds, UMass Memorial Issue, Series A (the “Series A Bonds”). Obligation No. 4 (“Obligation No. 4” and collectively with Obligation No. 1, Obligation No. 2 and Obligation No. 3, “Obligations Nos. 1-4”) was issued to secure the Authority’s $28,600,000 Revenue Bonds, UMass Memorial Issue, Series B (the “Series B Bonds”). In May 2001, the Obligated Group issued Obligation No. 5 (“Obligation No. 5”) to secure the Authority’s $78,910,000 UMass Memorial Issue, Series C (the “Series C Bonds”). In August 2005, the Obligated Group Issued Obligation No. 6 (“Obligation No. 6”) to secure the Authority’s $107,450,000 Revenue Bonds, UMass Memorial Issue Series D (2005) (the “Series D Bonds”). In May 2009, the Obligated Group issued Obligation No. 7 (“Obligation No. 7”) to secure the Authority’s $30,000,000 Variable Rate Demand Revenue Bonds, UMass Memorial Issue, Series E (the “Series E Bonds”). In May 2009, the Obligated Group Issued Obligation No. 8 (“Obligation No. 8”) to secure the Authority’s $30,000,000 Variable Rate Demand Revenue Bonds, UMass Memorial Issue, Series F (the “Series F Bonds”). As of April 1, 2010, the current outstanding balances of the Series A Bonds, the Series B Bonds, the Series C Bonds, the Series D Bonds, the Series E Bonds and the Series F Bonds were $56,420,000, $18,700,000, $74,960,000, $107,450,000, $30,000,000 and $30,000,000, respectively. Obligation No. 1, Obligation No. 2, Obligation No. 3, Obligation No. 4, Obligation No. 5, Obligation No. 6, Obligation No. 7 and Obligation No. 8 are referred to collectively as the “Prior Obligations.” The Note and the Prior Obligations are referred to collectively as the “Issued Obligations.”

The Parent, as sole current Member of the Obligated Group, has designated the Medical Center as a “Designated Member” under the Master Indenture with respect to the Issued Obligations. The Parent, as Representative of the Obligated Group, may designate additional Designated Members from time to time. The Members of the Obligated Group and the Designated Members are collectively referred to as the “Combined Group.” Currently, the Parent and the Medical Center are the sole members of the Combined Group. The Parent covenants, to the extent permitted by law, to cause each Designated Member, including the Medical Center, under the Master Indenture to pay or otherwise transfer such amounts as are necessary to duly and punctually pay the principal of and premium, if any, and interest on all Obligations or portions thereof securing indebtedness issued or secured under the Master Indenture, the proceeds of which were loaned to or otherwise made available to such Designated Member or that was otherwise issued for the benefit of such Designated Member, when and as the same become payable. Pursuant to the Master Indenture, the Issued Obligations are the joint and several obligation of the Parent and the Medical Center. Except with respect to the obligation of the Medical Center to make payments relating to the Issued Obligations, no Designated Member will be directly obligated to make payments with respect to any Obligation, and the Parent will not be required to cause such Designated Member under the Master Indenture to make payments with respect to future Obligations unless the proceeds of Indebtedness issued or secured under the Master Indenture were loaned to or otherwise made available to such Designated Member or such Indebtedness was otherwise issued for the benefit of such Designated Member.

The Master Indenture restricts the issuance by each Member of the Obligated Group and each Designated Member of unsecured or parity debt, through compliance with the Master Indenture’s limits on Long-Term and Short-Term Indebtedness. See APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Limitations on Incurrence of Additional Indebtedness.” The Master Indenture further restricts the granting of Liens on the Property of the Members of the Obligated Group and the Designated Members, but

* Preliminary, subject to change.

3

provides that any Member of the Obligated Group or any Designated Member may grant (i) Liens on its Gross Receipts to secure equally and ratably all Indenture Indebtedness issued or secured under the Master Indenture and (ii) Liens on its Property provided that such Liens constitute “Permitted Liens” under the Master Indenture. See APPENDIX C-1 - “DEFINITIONS OF CERTAIN TERMS” and APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Limitations on Creation of Liens” and “Pledge of Gross Receipts.” The Master Indenture does not restrict the granting of Liens by Persons who are not Members of the Obligated Group or Designated Members. See APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE” under the headings “Consolidation, Merger, Sale or Conveyance” and “Limitations on Creation of Liens.”

The sale, lease or disposition of Property by each Member of the Combined Group is restricted by the Master Indenture. See APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Sale, Lease or Other Disposition of Property.” In addition, the merger or consolidation with and the sale or conveyance of assets by Members of the Obligated Group is also restricted under the Master Indenture. See APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Consolidation, Merger, Sale or Conveyance.”

The Master Indenture permits the addition of new Members of the Obligated Group and new Designated Members. Each Member of the Obligated Group will be jointly and severally liable for all Obligations issued under the Master Indenture. See APPENDIX C-2 – “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Membership in the Obligated Group.” The Master Indenture permits the withdrawal of Obligated Group Members, other than the Parent, and permits the Obligated Group Representative to release Persons as Designated Members. Notwithstanding the foregoing, the Parent has covenanted not to release the Medical Center as a Designated Member while the Issued Obligations are Outstanding. See APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE” under the headings “Conditions for Membership in the Obligated Group,” “Withdrawal From the Obligated Group” and “Covenants Regarding Designated Members.”

In order to secure the Note and the Prior Obligations, the Parent and the Medical Center have each granted to the Trustee a Lien on their Gross Receipts, subject to certain Permitted Liens and certain Short-Term Indebtedness described in the Master Indenture. All of the Issued Obligations are equally and ratably secured by such Lien without priority or preference among such Issued Obligations. See “APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Pledge of Gross Receipts.” See also “BONDOWNERS’ RISKS under the headings “Enforceability of Lien on Gross Receipts” and “Enforceability of Master Trust Indenture and Agreement.”

The Medical Center has granted the Master Trustee a mortgage Lien on the Memorial Campus, and all buildings, facilities and improvements thereon to secure equally and ratably all Issued Obligations, including the Note. The Medical Center is not granting a mortgage lien on the University Campus, the Hahnemann Campus or any other real property of the Medical Center or on the equipment, furnishings or other personal property on the Memorial Campus. See APPENDIX A under the heading “UMass Memorial Medical Center, Inc.” for definitions and descriptions of the Memorial Campus, the University Campus and the Hahnemann Campus. The Medical Center has covenanted not to create any encumbrance on the Mortgaged Property, except that the Mortgaged Property may become subject to any of the Permitted Liens described in the Master Indenture. Upon payment and discharge of the Issued Obligations and the related bonds, or when adequate provision has been made for payment therefor as provided in the agreements providing for the issuance of such bonds, including the Agreement, the Master Trustee will release and cancel the Mortgage. See “SUMMARY OF THE MORTGAGE” attached hereto as APPENDIX C-5. See “BONDOWNERS’ RISKS” under the subheadings “Status of Lien on Mortgaged Property” and “Realization of Value on the Mortgaged Property.”

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THE AUTHORITY

The Authority is a body politic and corporate and a public instrumentality of The Commonwealth of Massachusetts (the “Commonwealth”), organized and existing under and by virtue of the Act. The purpose of the Authority, as stated in the Act, is essentially to provide assistance for public and private nonprofit institutions for higher education, private nonprofit schools for the handicapped, nonprofit hospitals and their nonprofit affiliates, nonprofit nursing homes, and nonprofit cultural institutions in the construction, financing, and refinancing of projects to be undertaken in relation to programs for such institutions.

Authority Membership and Organization

The Act provides that the Authority shall consist of nine members who shall be appointed by the Governor and shall be residents of the Commonwealth. At least two members shall be associated with institutions for higher education, at least two shall be associated with hospitals, at least one shall be knowledgeable in the field of state and municipal finance (by virtue of business or other association) and at least one shall be knowledgeable in the field of building construction. All Authority members serve without compensation, but are entitled to reimbursement for necessary expenses incurred in the performance of their duties as members of the Authority. The Authority shall elect annually one of its members to serve as Chair and one to serve as Vice Chair.

Currently, the members of the Authority are as follows.

CHRISTINE C. SCHUSTER, RN; Chair: term as Member expires July 1, 2013.

Ms. Schuster, a resident of Sudbury, is President and Chief Executive Officer of Emerson Health System located in Concord, Massachusetts. Ms. Schuster has over twenty years of experience in the healthcare industry. Prior to joining Emerson Hospital, Ms. Schuster held the position of President and Chief Executive Officer of Quincy Medical Center and previously Athol Memorial Hospital. She also served as the Chief Operating Officer of the Extended Care Division of Tenet Saint Vincent Healthcare System, Director of Critical Care Services at the New England Deaconess Hospital; and five years as a healthcare management consultant with Coopers & Lybrand. Ms. Schuster serves on the Board of Directors of the VHA Northeast, the Massachusetts Council of Community Hospitals, Trustee and Secretary of PowerOptions, Inc., and the Concord Chamber of Commerce and Secretary to the Concord Economic Council. Ms. Schuster was elected to the American Hospital Association (AHA) Council of Metropolitan Hospitals and also served on the American Hospital Regional Policy Board. She has served on the Board of the Massachusetts Hospital Association (MHA) where she was Chair of the Clinical Issues Advisory Council (CIAC) and was a member of the Finance Committee, and is currently a member of the CIAC and the Leadership Education Committee. Ms. Schuster is also an Honorary Commander of Hanscom Air Force Base in Bedford, Massachusetts. Ms. Schuster was recognized by Modern Healthcare magazine and Witt Kieffer Associates as one of the Year 2000 “Up and Comers Award” recipients. She is a frequent speaker both locally and nationally on a wide variety of healthcare topics. Ms. Schuster received an M.B.A. with Honors from the University of Chicago Graduate School of Business and a B.S. in Nursing from Boston University.

MARK P. BILOTTA; Vice Chair: term as Member expires July 1, 2013.

Mr. Bilotta, a resident of Worcester, is the Chief Executive Officer of the Colleges of Worcester Consortium in Worcester, Massachusetts, a non-profit association of twelve central Massachusetts –based colleges and universities providing academic and member services, higher education access services and promoting community and economic development partnerships. From 1999 to 2006, Mr. Bilotta was the Executive Assistant to the President of Assumption College in Worcester, Massachusetts. He held the position of Associate Director of Admissions for Enrollment and Marketing at Worcester State College from 1996 to 1998. From 1990 to 1991 he was a Graduate Assistant at Clark University. During the period of 1984 to 1989 he held the positions of Admissions Counselor, Assistant Director of Admissions, and Associate Director of Admissions at the College of the Holy Cross in Worcester, Massachusetts. Mr. Bilotta has been actively engaged in several non-profit, charitable and civic activities. He presently serves as Chairman of the Board of Directors for the United Way of Central Massachusetts, Board of Directors to the Worcester Regional Research Bureau, Destination Worcester, Board of Trustees to Spectrum Health Systems, Inc., and Corporator, Webster Five Cents Savings Bank. Mr. Bilotta holds a B.A. from College of the Holy Cross, Worcester, and an M.B.A. from Clark University.

5

TIMOTHY O’CONNOR; Secretary: term as Member expired July 1, 2009. Mr. O’Connor will continue to serve until he is reappointed or his successor takes office.

Mr. O’Connor, a resident of Salem, is Executive Vice President, Chief Financial Officer and Treasurer of Lahey Clinic Foundation, Inc.; Lahey Clinic Hospital, Inc.; Lahey Clinic, Inc.; Lahey Clinic Affiliated Services, Inc. and Lahey Clinic Canadian Foundation. In addition Mr. O’Connor is also President, Chief Financial Officer and Treasurer of Lahey Clinic Insurance Company Limited. His memberships and affiliations include the American Medical Group Association, the Healthcare Financial Management Association, the Healthcare Information and Management Systems Society and the Massachusetts Hospital Association’s Committee on Finance.

DARRELL C. BYERS; term as Member expires July 1, 2016.

Mr. Byers, a resident of West Roxbury, is Vice Chancellor of University Advancement at the University of Massachusetts Boston, Boston, Massachusetts since 2005. Previously he served as Director of Business Development at WGBH; Senior Major Gifts Office and Planned Giving Director at the Harvard Graduate School of Education; Director of Corporate and Foundation Relations at Georgetown University Medical Center which included Georgetown University Hospital, Georgetown School of Medicine, Georgetown School of Nursing and Health Sciences and Lombardi Comprehensive Cancer Center; and also served as Vice President of Development at Caritas Norwood Hospital. Mr. Byers serves on the Board of Overseers at Children’s Hospital Boston, the WGBH Corporate Executive Council, the Association of Fundraising Professionals of Massachusetts where he co-founded the Advancement Institute at UMass Boston, and the City Mission Society of Boston. In 2009 Mr. Byers was the recipient of the CASE District 1 New England and Eastern Canada Eleanor Collier Award which is presented to a current member of CASE District 1 whose contribution to their organization and or to the professions encompassed by the membership reflect honor on CASE, education and those fields of professional expertise. Mr. Byers holds a B.A. from College of the Holy Cross, Worcester.

JACQUELINE J. CONRAD; term as Member expires July 1, 2010.

Ms. Conrad, a resident of Milton, is Principal of delaCruz Communications in Boston, Massachusetts, a multicultural consulting firm that specializes in cause- related health awareness and strategic marketing campaigns for ethnic audiences, such as the African American and Latino communities. In addition, she is the Executive Director of the Latino Professional Network, one of Boston’s premier networking associations that creates career, educational and social opportunities for Latino professionals. Ms. Conrad is a sought after speaker at business roundtables and leadership seminars, on subjects ranging from Hispanic marketing and urban entrepreneurship, to home-ownership and property investments. Her present affiliations and memberships include Advisory Board Member to the Latino After School Initiative, and Vice President of the Christian Economic Development Association, Inc. Ms. Conrad has served as Advisory Board Member to the Women of Ethnic Diversity Initiative, Advisory Committee Member to Senator John Kerry’s Committee on Child Care and Small Business, Board of Directors of the Simmons Club, and Member of the Hispanic American Chamber of Commerce. Ms. Conrad holds a B.A. degree in Sociology from Suffolk University and an M.A. degree from Simmons College.

GILL E. ENOS; term as Member expires July 1, 2012.

Mr. Enos, a resident of Taunton, is the Budget Director of the City of Taunton, Massachusetts. Prior to his position as Budget Director, Mr. Enos served as Assistant to the Mayor of the City of Taunton from 2004 to 2007 and from 1992 to 2000. He also held positions with State Street Bank and Trust Co. as Portfolio Accountant from 1986 to 1988, Auditor from 1988 to 1990, and Fund Group Manager from 1990 to 1992. Mr. Enos currently serves as a Member of the Taunton Retirement Board and is a past Member of the Taunton Zoning Board of Appeals and has served as a Member, Director and Past Vice Chairman of the Southeastern Regional Services Group, and Member and past Vice Chairman of the Taunton Emergency Task Force. His community involvement includes coach of the Taunton Park & Recreation Basketball, Taunton West Little League, and Taunton Area Babe Ruth. Mr. Enos holds a B.S in Management Science from Bridgewater State College.

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MARVIN A. GORDON; term as Member expires July 1, 2010.

Mr. Gordon, a resident of Milton, is Chairman of the Board and Chief Executive Officer of Gordon Logistics, L.L.C. in Mansfield, Massachusetts. From 1974 to 2001, Mr. Gordon was Chief Executive Officer and Chairman of Whitehall Co. Ltd. of Norwood, Massachusetts. From 1994 to 1996, Mr. Gordon served on the Board of Directors to Techniek Development Co. of San Diego, California. He also served as Chairman of the Board of US Trust Norfolk (Milton Bank and Trust) from 1974 to 1976 and as Vice President and Member of the Executive Committee from 1971 to 1974. Mr. Gordon has been actively engaged in non-profit, charitable and civic activities. His present affiliations include Board Member and Chairman of the Audit and Compliance Committee of The Milton Hospital Foundation, Inc. and Board Member of Milton Hospital, Inc., and President of Milton Fuller Housing Corporation. Mr. Gordon has been elected to and appointed to a number of public boards including serving as a Milton Selectman from 1986 to 1993 and belongs to several civic associations. Mr. Gordon holds a degree from Harvard College and Harvard Business School.

ALLEN R. LARSON; term as Member expires July 1, 2014.

Mr. Larson, a resident of Yarmouth Port, is the founding principal of a law firm and a separate consulting firm, the Enterprise Management Group, that advise business and non-profit clients on matters of government regulation, business competition, market entry, and economic development. Prior to establishing his law firm in 1984, Mr. Larson worked as an antitrust attorney for the Federal Trade Commission in Washington, D.C. Currently, he is a director of the Cape Cod Center for Sustainability Inc., the Highlands Center, Inc., and Ecology Project International. Mr. Larson graduated from Dartmouth College earned a J.D. from Albany Law School and received an M.B.A. from the University of Minnesota.

MICHAEL P. MONAHAN; term as Member expires July 1, 2011.

Mr. Monahan, a resident of South Boston, is Business Manager of the International Brotherhood of Electrical Workers, Local 103, Boston, Massachusetts. Mr. Monahan represents the interests of more than 7,000 members; is Principal Negotiator of more than 40 Collective Bargaining Agreements, and is Trustee of Benefit Funds worth over $1 billion. From 1982 until present he has held several positions within the International Brotherhood of Electrical Workers, Local 103. From 2002 to present he has served as a Member of the Zoning Board of Appeals in the City of Boston. Mr. Monahan is a volunteer for many charitable organizations, such as WiFi, City of Boston; Habitat for Humanity; NET Day, City of Boston; Rosie’s Place, Homeless Shelter for Women; Long Island Shelter and Family Inn, Brookline; Strive, Codman Square, Dorchester.

Staff and Advisors

BENSON T. CASWELL, a resident of North Andover, was appointed Executive Director of the Authority on April 9, 2002, and is responsible for the management of the Authority’s affairs. From 1992 through 2002, Mr. Caswell worked for Ponder & Co. in Chicago where he was a Senior Vice President. From 1987 through 1992, he was Vice President of Ziegler Securities, Chicago, Illinois. From 1983 through 1986, he was an attorney with Gardner, Carton & Douglas. Mr. Caswell holds a Juris Doctor from the University of Chicago, an MBA from Lehigh University and a B.S. from the University of Maine.

EDWARDS ANGELL PALMER & DODGE LLP, attorneys of Boston, Massachusetts, are serving as Bond Counsel to the Authority and will submit their approving opinion with regard to the legality of the Bonds in substantially the form attached hereto as APPENDIX D.

The Act provides that the Authority may employ such other counsel, engineers, architects, accountants, construction and financial experts, or others as the Authority deems necessary.

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Powers of the Authority

Under the Act, the Authority is authorized and empowered, among other things, directly or by and through a participating institution for higher education, a participating school for the handicapped, a participating hospital or hospital affiliate, a participating nursing home or a participating cultural institution as its agent, to acquire real and personal property and to take title thereto in its own name or in the name of one or more participants as its agent; to construct, reconstruct, remodel, maintain, manage, enlarge, alter, add to, repair, operate, lease, as lessee or lessor, and regulate any project; to enter into contracts for any or all of such purposes, or for the management and operation of a project; to issue bonds, bond anticipation notes and other obligations, and to fund or refund the same; to fix and revise from time to time and charge and collect rates, rents, fees and charges for the use of and for the services furnished or to be furnished by a project or any portion thereof and to enter into contracts in respect thereof; to establish rules and regulations for the use of a project or any portion thereof; to receive and accept from any public agency loans or grants for or in the aid of the construction of a project or any portion thereof; to mortgage any project and the site thereof for the benefit of the holders of revenue bonds issued to finance such projects; to make loans to any participant for the cost of a project or to refund outstanding obligations, mortgages or advances issued, made or given by such participant for the cost of a project; to charge participants its administrative costs and expenses incurred; to acquire any federally guaranteed security and to pledge or use such security to secure or provide for the repayment of its bonds; and to do all things necessary or convenient to carry out the purposes of the Act. Additionally, the Authority may undertake a joint project or projects for two or more participants.

The Authority has heretofore authorized and issued certain series of its revenue bonds for public and private colleges and universities, and private hospitals and their affiliates, community providers, cultural institutions, schools for the handicapped and nursing homes in the Commonwealth. Each series of revenue bonds has been a special obligation of the Authority.

The Authority expects to enter into separate agreements with eligible institutions in the Commonwealth for the purpose of financing projects for such institutions. Each series of bonds issued by the Authority constitutes a separate obligation of the borrowing institution for such series, and the general funds of the Authority are not pledged to any bonds or notes.

THE BONDS

Description of the Bonds

The Bonds will be dated their date of delivery and will bear interest from such date, payable on July 1, 2010 and on each January 1 and July 1 thereafter. The Bonds will mature on the dates and bear interest at the rates set forth on the inside cover page hereof. Interest on the Bonds will be calculated on the basis of a 360-day year consisting of 12 30-day months.

Subject to the provisions discussed under “Book-Entry-Only System” below, the Bonds are issuable as fully-registered bonds without coupons in the minimum denomination of $5,000 or any multiple thereof. The principal or redemption price of the Bonds will be payable at the corporate trust office of the Trustee, and interest on the Bonds will be paid by check or draft mailed to the registered owner determined as of the close of business on the record date; provided that interest is payable by wire or bank transfer within the United States to any registered owner of $1,000,000 or more in principal amount of the Bonds upon direction satisfactory to the Trustee prior to the record date. The record date is the 15th day of the month preceding the date on which interest is to be paid, provided that, with respect to overdue interest or interest payable on redemption of a bond other than on an interest payment date or interest on any overdue amount, the Trustee may establish a special record date that is no more than 20 days before the payment date.

Book-Entry-Only System

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-

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registered bond certificate will be issued for each maturity of the Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

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

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

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

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

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

Principal and interest payments and redemption premium, if any, with respect to the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Authority or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest, and redemption premium, if any, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Beneficial Owner of the Bonds shall give notice to elect to have its Bonds purchased or tendered through its Participant to the Broker-Dealer, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Broker-Dealer. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Broker-Dealer’s DTC account.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered. See “Certificated Bonds” below.

THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY BELIEVES TO BE RELIABLE, BUT NONE OF THE AUTHORITY, THE INSTITUTION OR THE UNDERWRITERS TAKE RESPONSIBILITY FOR THE ACCURACY THEREOF.

No Responsibility of Authority, Institution and Trustee. NONE OF THE AUTHORITY, THE INSTITUTION OR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DIRECT PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS, OR BENEFICIAL OWNERS.

SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDOWNERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS.

Certificated Bonds. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority and the Trustee. In addition, the Authority may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interest of the Beneficial Owners. If, for either reason the book-entry-only system is discontinued, Bond certificates will be delivered as described in the Agreement and the Beneficial Owner, upon registration of certificates held in the Beneficial Owner’s name, will become the Bondowner. Thereafter, Bonds may be exchanged for an equal aggregate principal amount of Bonds in other authorized denominations and of the same maturity, upon

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surrender thereof at the principal corporate trust office of the Trustee. The transfer of any Bond may be registered on the books maintained by the Trustee for such purpose only upon assignment in form satisfactory to the Trustee. For every exchange or registration of transfer of Bonds, the Authority and the Trustee may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge may be made to the Bondowner for any exchange or registration of transfer of the Bonds. The Trustee will not be required to transfer or exchange any Bond during the notice period preceding any redemption if such Bond (or any part thereof) is eligible to be selected or has been selected for redemption.

Redemption of the Bonds

Optional Redemption of the Bonds. The Bonds maturing after July 1, ____ are subject to optional redemption prior to maturity, on and after July 1, ____ at the option of the Authority with the written consent of the Institution or by the written direction of the Institution to the Authority and the Trustee, as a whole or in part at any time in such order of maturity as directed by the Institution at their principal amount, without premium, plus accrued interest to the redemption date.

Purchase in Lieu of Redemption. The Institution may purchase Bonds of any maturity and credit them against the principal payment of such maturity by delivering them to the Trustee for cancellation at least sixty (60) days before the principal payment date.

Special Redemption of the Bonds. The Bonds are subject to special redemption prior to maturity, in whole or in part at any time, in such order of maturity as directed by the Institution at their principal amounts, without premium, plus accrued interest to the redemption date, at the option of the Institution, in the event of damage to or destruction or taking of the Project as defined in the Agreement, which produces insurance or condemnation award proceeds allocable to the Bonds pursuant to the special redemption provisions in the Agreement. See APPENDIX C-4 “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AND TRUST AGREEMENT” under the heading “Option to Redeem Bonds Upon Casualty or Taking.” If the amount available in the Redemption Fund to redeem the Bonds at any time is less than $50,000, the Trustee may, and upon direction of the Institution shall, transfer it to the Debt Service Fund for credit against deposits otherwise required to be made therein with respect to principal instead of calling Bonds for redemption.

Selection of the Bonds. If less than all of the Bonds of any maturity are to be redeemed, the portion of the Bonds to be redeemed shall be selected by the Trustee by lot or in any customary manner of selection as determined by the Trustee; provided, however, that so long as DTC or its nominee is the Bondowner, the particular portions of the Bonds to be redeemed shall be selected by lot by DTC in such manner as DTC may determine. If a Bond is of a denomination in excess of five thousand dollars ($5,000), portions of the principal amount in the amount of five thousand dollars ($5,000) or any multiple thereof may be redeemed.

Notice of Redemption and Other Notices. So long as DTC or its nominee is the Bondowner, the Authority and the Trustee will recognize DTC or its nominee as the Bondowner for all purposes, including notices and voting. 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 and regulatory requirements which may be in effect from time to time.

The Trustee shall give notice of redemption to the Bondowners not less than thirty (30) days nor more than forty-five (45) days prior to the date fixed for redemption. Such notice of redemption may state that the proposed redemption is conditioned upon there being on deposit in the Redemption Fund on the redemption date sufficient funds to pay the full redemption price of the Bonds to be redeemed. Failure to mail notice to a particular Bondowner, or any defect in the notice to such Bondowner, shall not affect the redemption of any other Bond. So long as DTC or its nominee is the Bondowner, any failure on the part of DTC or failure on the part of a nominee of a Beneficial Owner (having received notice from a DTC Participant or otherwise) to notify the Beneficial Owner so affected shall not affect the validity of the redemption.

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Effect of Redemption. On the redemption date, the redemption price of each Bond to be redeemed will become due and payable; and from and after such date, notice having been properly given and amounts having been made available and set aside from such redemption in accordance with the provisions of the Agreement, notwithstanding that any Bonds called for redemption have not been surrendered, no further interest will accrue on any Bonds called for redemption.

CERTAIN FINANCIAL COVENANTS

Under the Master Indenture, the Obligated Group agrees, subject to any Legal Limitations, to charge and collect (and to cause its Designated Members to charge and collect) rates and charges which collectively shall, together with other available moneys, provide moneys sufficient at all times to make any payments required under the Master Indenture and to comply with the Master Indenture in all other respects, and to satisfy all other obligations of the Combined Group in a timely fashion. The Obligated Group shall, subject to Legal Limitations, charge and collect (and cause each of its Designated Members to charge and collect) rates and charges which, together with other available moneys, in each Fiscal Year will produce revenue at least sufficient to meet expenses of the Combined Group.

The Obligated Group agrees, subject to Legal Limitations, to use its best efforts (and cause each of its Designated Members to use its best efforts) to maintain a Historical Debt Service Coverage Ratio of the Combined Group of at least 1.10 in each Fiscal Year. If the Historical Debt Service Coverage Ratio of the Combined Group, as calculated at the end of any Fiscal Year, is less than 1.10, the Obligated Group covenants to retain a Consultant to make recommendations to increase such ratio for subsequent Fiscal Years to the levels required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest practicable level. Each Member of the Obligated Group agrees that it will (and will cause each Designated Member to), subject to Legal Limitations, substantially follow the recommendations of the Consultant or file with the Master Trustee its reasons for not following the recommendations. So long as the Obligated Group shall retain a Consultant and each Member of the Obligated Group (and Designated Member) shall follow such Consultant’s recommendations except as described above, this covenant shall be deemed to have been complied with even if the ratio for any subsequent Fiscal Year is less than 1.10 but not less than 1.00. Provided that the Historical Debt Service Coverage Ratio of the Combined Group has not been below 1.10 for the three most recent consecutive Fiscal Years, if in any Fiscal Year the Historical Debt Service Coverage Ratio of the Combined Group is less than 1.10, the Obligated Group will not be required to retain a Consultant to make such recommendations if a written report of a Consultant is filed with the Master Trustee which contains an opinion of such Consultant that (i) applicable laws and regulations have prevented the maintenance of the 1.10 ratio, (ii) the Members of the Obligated Group (and Designated Members) have generated the maximum amount of Income Available for Debt Service which in the opinion of such Consultant could reasonably have been generated given such laws and regulations during the period affected thereby and (iii) the ratio actually achieved was at least 1.00.

The Combined Group covenants in the Supplemental Master Indenture to maintain at all times a minimum of 60 Days Cash on Hand. This covenant, together with the other covenants in the Master Indenture, may be waived at any time with the written consent of owners of at least a majority in aggregate principal amount of Obligations Outstanding, including the Note and the Prior Obligations.

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ESTIMATED SOURCES AND USES OF FUNDS

The proceeds from the sale of the Bonds, rounded to the nearest dollar, and other available funds are expected to be applied as follows:

Sources of Funds: Aggregate Principal Amount of the Bonds Net Original Issue Premium/Discount Other Available Funds of the Institution

Total Sources of Funds:

Uses of Funds: Deposit to Refunding Trust Fund for CNEHA Series A Bonds Deposit to Refunding Trust Fund for Memorial Series B Bonds Cost of Issuance (including Underwriter’s discount)

Total Uses of Funds:

PLAN OF REFUNDING

The proceeds of the Bonds and other available funds of the Institution will be deposited in refunding trust funds held by U.S. Bank National Association, as refunding trustee for the Memorial Series B Bonds and by The Bank of New York Mellon Trust Company, N.A., as refunding trustee for the CNEHA Series A Bonds, respectively, and applied to the redemption of the Refunded Bonds on July 5, 2010.* The Refunded Bonds will be currently refunded and redeemed at a price of 100% of their principal amount plus accrued interest to the redemption date. Prior to the redemption date, the applicable refunding trustee will invest such funds in direct obligations of the United States of America. According to the report described under “VERIFICATION OF MATHEMATICAL COMPUTATIONS,” such investments will mature at such times and earn interest in such amounts to produce, together with any initial cash deposits, sufficient moneys to provide for the payment of principal of and redemption premium, and interest on the Refunded Bonds on the redemption date. The refunding is contingent upon the delivery of the Bonds.

* Preliminary, subject to change.

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ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS

The following table sets forth, for each respective year ending September 30, the amounts (rounded to the nearest dollar) required to be made available by the Institution in such year for payment of (i) the principal of and interest on the Bonds, (ii) the principal of and interest on the Prior Obligations and (iii) total combined debt service on the Bonds and the Prior Obligations in such year.

The Bonds Total Combined Debt Service on the Total Total Debt Service on Bonds and Prior Year* Principal* Interest Debt Service Prior Obligations(1) Obligations 2010 - $14,035,411 2011 $4,960,000 23,583,656 2012 4,745,000 23,683,147 2013 4,635,000 23,777,609 2014 4,960,000 23,750,614 2015 4,310,000 23,854,705 2016 4,645,000 23,938,760 2017 4,485,000 23,946,847 2018 5,075,000 24,021,300 2019 5,135,000 23,948,001 2020 5,385,000 24,037,474 2021 5,740,000 24,131,612 2022 5,895,000 22,050,280 2023 - 25,750,513 2024 - 25,814,108 2025 - 25,865,670 2026 - 25,897,522 2027 - 25,944,107 2028 - 25,993,063 2029 - 26,186,621 2030 - 26,241,867 2031 - 26,280,737 2032 - 26,680,653 2033 - 27,217,008 2034 - 4,160,766 2035 - 4,203,563

______(1) Assumes refunding of the Memorial Series B Bonds and the discharge of the related Obligation No. 1. * Preliminary, subject to change.

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BONDOWNERS’ RISKS

For an explanation of the definitions of “Obligated Group,” “Designated Members” and “Combined Group” see APPENDIX C-1 - “DEFINITIONS OF CERTAIN TERMS.”

General

There are risks associated with the purchase of the Bonds. The principal of, redemption premium, if any, and interest on the Bonds are payable solely from the amounts paid by the Institution to the Authority under the Agreement and from amounts which may be paid to the Trustee pursuant to the Master Indenture, including moneys paid by the Institution under the Note. No representation or assurance can be made that revenues will be realized by the Institution in the amounts necessary to make payments at the times and in the amounts sufficient to pay the debt service on the Bonds.

Under the Master Indenture, Designated Members are not obligated to make payments with respect to any Obligations, although each Member of the Obligated Group has covenanted to cause each Designated Member as to which it exercises control to pay or transfer funds to satisfy such portion, if any, of the indebtedness secured by Obligations as was issued for the benefit of such Designated Member. No Obligated Group Member is obligated to exercise such control or cause payments to be made from any Designated Member that has not received the proceeds or benefit of indebtedness secured by Obligations. Notwithstanding the foregoing, the Medical Center has agreed to be directly obligated to make payments on the Issued Obligations. References to the Combined Group or Members of the Combined Group in this section entitled “BONDOWNERS’ RISKS” should not be construed to imply that any entity other than the Members of the Combined Group are directly or indirectly obligated with respect to the Obligations.

Future revenues and expenses will be affected by events and conditions relating generally to, among other things, demand for the Institution’s services, the ability of the Institution to provide the services required by patients, physicians’ relationships with the Institution, management capabilities, the design and success of the Institution’s strategic plans, economic developments in the Institution’s service area, the Institution’s ability to control expenses, maintenance of the Institution’s relationships with health maintenance organizations and other payers, competition, rates, costs, third-party payments, legislation, and governmental regulation. Third-party payment and charge-control statutes and regulations are likely to change, and unanticipated events and circumstances may occur which cause variations from the Institution’s expectations, and the variations may be material. See APPENDIX A under the heading “Bondowners’ Risks and Matters Affecting the Health Care Industry.”

National Health Reform

On March 23, 2010, the President signed into law comprehensive health reform through the Patient Protection and Affordable Health Care Act (Pub. L. 111-148). On March 30, 2010, the President signed a budget reconciliation bill that included amendments (Pub. L. 111-152). These laws in combination form the health reform legislation. The final legislation and implementing regulations could have a material adverse effect on healthcare providers such as the Medical Center and, in turn, the Medical Center’s ability to make payments under the Agreement. Given the many interconnected components of reform and its impact on both private and public insurance programs, it is difficult to predict whether the net impact will be positive or negative. The provisions of the legislation are comprehensive and varied. They are generally directed at: implementing health insurance reforms; increasing health insurance coverage and reducing the number of uninsured; and reshaping the health care delivery system to increase quality and efficiency and reduce cost.

Some of the key coverage elements of the health reform legislation include: the development of state-based health insurance exchanges through which individuals and employers may purchase plans meeting federal requirements for affordability and benefits; individual and employer mandates related to insurance coverage; subsidies to low-income individuals and small businesses for the purchase of health insurance coverage; mandatory expansion of the Medicaid program to all individuals under 133% of the federal poverty level (with voluntary expansion permitted in 2010) and enhanced assistance to states to finance the expansion; and expanded coverage in the Medicare Part D “donut hole.” The ultimate provider rates under the exchange plans, the comprehensiveness of those plans, and the numbers of residual uninsured could all be of financial impact to the Medical Center. In

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Massachusetts, there is question of whether the existing state exchange will be grandfathered, although there are potentially significant differences in the requirements of the exchanges envisioned in the reform bill that could impact, among other things, participation in the exchange. Given the coverage expansions already accomplished through Massachusetts health reform, the Commonwealth will be eligible for more limited, phased-in assistance to so-called “expansion states” for non-pregnant, childless adults up to 133% of poverty beginning in 2014, which could be a source of additional federal funding to the Commonwealth. The Commonwealth’s fiscal status, particularly in the interim when it cannot reduce eligibility for its Medicaid program and when enhanced federal assistance under the American Recovery and Reinvestment Act of 2009 may expire, could in turn impact the rates paid to providers under Medicaid.

The delivery system changes in the reform legislation, among other things, increasingly link provider payments to quality and coordination of care. As described in “Sources of Patient Service Revenue - Medicare” in Appendix A, hospitals will be subject to Medicare payment withholds or bonuses based on performance scores under a new value-based purchasing program, and hospitals with excess readmissions will face payment reductions. Under both Medicare and Medicaid, hospitals will not receive payments for certain hospital-acquired conditions, and hospitals will the highest rates of hospital-acquired conditions with be subject to Medicare payment penalties on all discharges. In addition, there will be opportunities to participate in pilot programs related to Medicare bundled reimbursement for hospital and physician services, and creation of Medicare accountable care organizations, in which a hospital can share in cost savings. States may also participate in Medicaid demonstrations, including a Medicaid Global Payments demonstration available in up to five states from 2010 to 2012 under which a large, safety net hospital system could alter its provider payment system to a capitated, global payment structure— potentially in alignment with Massachusetts’ state reform proposals.

The health reform legislation also implements significant changes to health care fraud and abuse laws that will intensify the risks and consequences of enforcement actions. These include expansion of the False Claims Act by: narrowing the public disclosure bar; explicitly stating that violations of the anti-kickback statute trigger false claims liability; and, applying the False Claims Act to payments under the new exchanges to the extent the payments are made with federal funds. In addition, health reform lessens the intent requirements under the anti-kickback statute to provide that a person may violate the statue without knowledge or specific intent. The legislation includes a potentially very broad requirement that State Medicaid programs exclude the parent or jointly owned subsidiary of any entity that has “delinquent” unpaid overpayments; has been suspended, excluded or terminated from Medicaid participation; or that is affiliated with an entity that has been suspended, excluded, or terminated. The health reform legislation also provides new funding and expanded powers to investigate fraud, including through expansion of the Medicare Recovery Audit Contractor (“RAC”) program to Medicare Parts C and D and Medicaid. Finally, the legislation creates enhanced penalties for noncompliance, including increase criminal penalties and expansion of administrative penalties under Medicare and Medicaid. Also of potential cost to the Medical Center, all hospitals must establish and maintain compliance programs that satisfy certain federal requirements as a condition of enrollment in Medicare, Medicaid and Children’s Health Insurance Program (“CHIP”), and tax-exempt hospitals must also comply with new community benefit reporting requirements.

Finally, several provisions included to fund the cost of health reform could have an adverse impact on provider payment rates. See “Sources of Patient Service Revenue - Medicare” in Appendix A. These include: reductions in Medicare market basket updates to inpatient and outpatient hospital payment rates and further reductions to these market basket updates to account for economy-wide productivity gains; $22 billion in Medicare disproportionate share hospital (“DSH”) cuts from 2014 to 2019 (although it is not possible to determine the specific impact on the Medical Center until Centers for Medicare & Medicaid Services (“CMS”) calculates the funding to be redistributed to hospitals based on their relative uncompensated care costs); and, $18 billion in Medicaid DSH cuts from 2014 to 2020 (although it is not possible to determine the specific impact on the Medical Center until CMS determines the allocation of cuts to each state and the Commonwealth determines the allocation of remaining funds among providers). In addition, there will be a new Independent Payment Advisory Board that provides to Congress and the President annual recommendations on curtailing Medicare cost growth and non-binding recommendations on constraining costs and improving quality in the private sector. Starting in 2020, the Medicare proposals related to inpatient and outpatient hospitals will be automatically implemented unless Congress passes an alternative package that meets the same savings targets; recommendations for physician payments may take effect beginning in 2015.

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The impact of these wide-ranging reform initiatives and the mechanisms to finance them will be significant for the health care industry as a whole and for the Medical Center in particular. Management is not able to predict the effect of the health care reform legislation.

Enforceability of Lien on Gross Receipts

The obligation of the Combined Group to make the payments required under the Agreement is secured by the Note, which in turn is secured by a security interest granted to the Master Trustee in the Gross Receipts of the Combined Group.

To the extent that Gross Receipts are derived from payments by the federal or state government under the Medicare or Medicaid program, any right of the Master Trustee to receive such payments directly during such time as the Lien on Gross Receipts remains in effect may be unenforceable. The Social Security Act and state regulations prohibit anyone other than the individual receiving care or the entity 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 Gross Receipts not subject to the Lien in favor of the Master Trustee, the Master Trustee would occupy the position of an unsecured creditor. Counsel to the Institution has not provided an opinion with regard to the enforceability of the Lien on Gross Receipts of the Institution, where such Gross Receipts are derived from the Medicare and Medicaid programs.

In the event of bankruptcy of a Member of the Combined 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 Institution before paying the debt service on the Bonds.

Pursuant to the Massachusetts 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 the Combined Group within twenty days of receipt. The Combined Group is obligated to pay over such proceeds within twenty days of receipt only in the event of a failure to make required payment on the Obligations issued under the Master Indenture or on any bonds secured by any such Obligation (and, as noted above, the Lien on Gross Receipts may be released upon the fulfillment of certain conditions). If any payment is not made when due, the Members of the Combined Group 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 a Member of the Combined Group 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 Members of the Combined Group have granted a parity Lien on their Gross Receipts to secure the Prior Obligations. The value of the security interest in the Gross Receipts could be further diluted by the incurrence of additional indebtedness secured equally and ratably with the Bonds as to the security interest in the Gross Receipts.

Status of Lien on Mortgaged Property

The Issued Obligations are equally and ratably secured by a Mortgage on the Memorial Campus located in Worcester, Massachusetts, which includes the 319 bed hospital building formerly known as Memorial Hospital. None of the University Campus, Hahnemann Campus nor any other real property of the Combined Group is subject to the Mortgage. The Medical Center will covenant not to create any encumbrance on the Mortgaged Property, except that the Mortgaged Property may become subject to any of the Permitted Liens described in the Master Indenture. The Lien of the Mortgage has not been insured under a title insurance policy. The existence of any liens on the Mortgaged Property having priority over the Lien created by the Mortgage may reduce the amount realized by the Master Trustee in the event of a foreclosure of the Mortgage.

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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. Consequently, it would be difficult to find a buyer or lessee for the Mortgaged Property if it were necessary to foreclose on the Mortgaged Property. Thus, upon any default, it may not be possible to realize the outstanding interest on and principal of the Bonds from a sale or a lease of the Mortgaged Property.

In addition, in order to operate the Mortgaged Property as a health care facility, a purchaser of the Mortgaged Property at a foreclosure sale would under present law have to obtain a determination of need from the Massachusetts Department of Public Health and a license for the facility. The Medical Center is not granting a lien on equipment or furnishings at the Mortgaged Property. Therefore, the ability to operate the Mortgaged Property as a health care facility might be affected accordingly.

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

Enforceability of Master Indenture and Agreement

Under Massachusetts law, a nonprofit corporation may guarantee the debt of another corporation only if such guaranty is in furtherance of the corporate purposes of such guarantor nonprofit corporation. In addition, it is possible that the security interest granted by a Member of the Combined Group and the obligation of a Member to make payments due, if any, under any Obligations issued under the Master Indenture, including the Note, relating to indebtedness issued for the benefit of another Member of the Combined Group, may be declared void in an action brought by third-party creditors pursuant to the Massachusetts fraudulent conveyance statutes or may be avoided by a Member of the Combined Group or a trustee in bankruptcy in the event of the bankruptcy of the Member of the Combined Group from which payment is requested. An obligation may be voided under the federal Bankruptcy Code or under the Massachusetts fraudulent conveyance statute, if (a) the obligation was incurred without receipt by the obligor of “fair consideration” or “reasonably equivalent value,” and (b) the obligation renders the obligor “insolvent,” as such terms are defined under the applicable statute. Interpretation by the courts of the tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. For example, the obligation, if any, of a Combined Group Member under the Master Indenture to make all payments thereunder, including payments in respect of funds used for the benefit of the other Members of the Combined Group, may be held to be a “transfer” which makes such Member of the Combined Group “insolvent” in the sense that the total amount due under the Master Indenture could be considered as causing its liabilities to exceed its assets. Also, one of the Members of the Combined Group may be deemed to have received less than “fair consideration” for such obligation because none or only a portion of the proceeds of the indebtedness are to be used to finance projects occupied or used by such Member of the Combined Group. While the Members of the Combined Group may benefit generally from the projects financed from the indebtedness for the other Members of the Combined Group, the actual cash value of this benefit may be less than the obligation incurred. The rights under the Massachusetts fraudulent conveyance statutes may be asserted for a period of up to six years from the incurring of the obligations or granting of security under the Master Indenture.

In addition, the assets of any Member of the Combined Group may be held by a court to be subject to a charitable trust which prohibits payments in respect of obligations incurred by or for the benefit of others, particularly if a Member of the Combined Group has insufficient assets remaining to carry out its own charitable functions or, under certain circumstances, if the obligations paid by such Member were issued for purposes inconsistent with or beyond the scope of the charitable purposes for which the Member of the Combined Group was organized. The enforceability of similar master indentures has been challenged in jurisdictions outside of the Commonwealth. In the absence of clear legal precedent in this area, the extent to which the assets of any Member of

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the Combined Group can be used to pay Obligations issued by or on behalf of others cannot be determined at this time.

The Master Indenture permits Members of the Combined Group to incur unsecured debt and debt secured on a parity with the Bonds under certain circumstances. Members of the Combined Group, subject to restrictions set forth in the Master Indenture, may sell assets to or merge or consolidate with other Persons (whether or not then affiliated with such Member).

Provided no default results therefrom, a Designated Member may withdraw from the Combined Group at any time provided, however, that the Parent has covenanted not to release the Medical Center as a Designated Member while the Note is outstanding.

Covenant to Maintain Tax-Exempt Status of the Bonds

The excludability of interest on the Bonds from the gross income of the recipients thereof for federal income tax purposes is dependent in part on the continued compliance by the Authority and the Combined Group with certain covenants contained in the Agreement. These covenants relate generally to arbitrage limitations, use of bond proceeds, rebate of certain investment earnings to the federal government, and restrictions on the amount of costs of issuance financed with the proceeds of the Bonds. Failure to comply with any of these covenants may result in the inclusion of interest on the Bonds in the gross income of the recipients thereof for federal income tax purposes retroactive to the date of issuance.

Effect of Bankruptcy

If any Combined Group member obtains protection under the federal Bankruptcy Code, its revenues may not be subject to the security interests created under the Master Indenture. Property acquired after the bankruptcy will not be subject to the security interests created under the Master Indenture. The commencement of the case under the federal Bankruptcy Code operates as an automatic stay of any act or proceeding to enforce a lien upon property of the affected members of the Combined Group. The member’s property, including accounts receivable and proceeds thereof, also could be used for the benefit of the member despite the security interest of the Master Trustee in such accounts receivable if the Bankruptcy Court finds that “adequate protection” of the lien holder’s interest in the property exists or is given.

In a Chapter 11 case, the petitioner could file a plan for the adjustment of its debts which modifies the rights of creditors generally, or any class of creditors, secured or unsecured. The plan, if confirmed by the court, binds all creditors and discharges all claims held by creditors who had notice or knowledge of the bankruptcy except as set forth in the plan. No plan may be confirmed unless, among numerous other conditions, the plan is determined to be in the best interest of creditors, is feasible and either has been accepted by each class of claims impaired thereunder, or the court has found sufficient grounds to confirm the plan over the objections of a dissenting class. To accept the plan, at least two-thirds in dollar amount and more than one-half in number of the allowed claims of the class that vote with respect to the plan must accept the plan. Even if the plan is not so accepted, it may still be confirmed if the court finds that the plan is “fair and equitable” with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly in favor of junior creditors.

Security May Not Be Sufficient in the Event of a Default

In the event the Institution is unable to operate its facilities so as to generate sufficient moneys to pay debt service on the Bonds and the other expenses of the Institution, the only assets which may be available to the Trustee to pay the Bonds would be any available funds held by the Trustee and the Master Trustee and the Mortgaged Property. No appraisal of the Mortgaged Property has been obtained, and the value of the Mortgaged Property may not be sufficient to fully pay the Note in the event of a foreclosure of the Mortgage. See “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS” herein.

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Damage, Destruction or Condemnation

The Institution will be required to obtain insurance in the amount and against such risks as are customarily insured against by similar institutions in the area. Due to significant contraction in the property insurance markets following the September 11 terrorist attacks, it has become increasingly difficult for businesses, including the Institution, to obtain the level of property coverage previously available at reasonable expense.

For additional Bondowners’ Risks, see APPENDIX A - “Bondowners’ Risks and Matters Affecting the Health Care Industry.”

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Bonds or to any decision to purchase, hold or sell the Bonds, and the Authority will not provide any such information. The Institution has undertaken all responsibility for any continuing disclosure to owners of the Bonds as described below, and the Authority shall have no liability to the owners of the Bonds or any other person with respect to Securities and Exchange Commission Rule 15c2-12.

The Parent has covenanted for the benefit of holders and beneficial owners of the Bonds to provide certain financial information relating to the Parent and its affiliates and financial information and operating data relating to the Institution following the end of each of the Institution’s fiscal year (the “Annual Report”) and the end of each of the fiscal quarters (the “Quarterly Statements”), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed on behalf of the Institution not later than 120 days following the end of each fiscal year and the Quarterly Statements will be filed not later than 60 days after each of the first three fiscal quarters and not later than 90 days after the end of the fourth fiscal quarter with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (“EMMA”). The notices of material events will be filed on behalf of the Institution with EMMA. The specific nature of the information to be contained in the Annual Report and the Quarterly Statements or the notices of material events is summarized in APPENDIX E -- “FORM OF CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12 promulgated by the Securities and Exchange Commission. Failure to comply with these covenants is not an event of default under the Master Indenture or the Agreement.

The Institution has not failed to fulfill any other continuing disclosure undertakings with respect to its outstanding debt.

TAX EXEMPTION

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond counsel expresses no opinion regarding any other federal tax consequences with respect to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The Authority and the Institution have covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these covenants.

Bond Counsel is also of the opinion that, under existing law, interest on the Bonds and any profit on the sale of the Bonds are exempt from Massachusetts personal income taxes and that the Bonds are exempt from

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Massachusetts personal property taxes. Bond Counsel has not opined as to other Massachusetts tax consequences arising with respect to the Bonds. Prospective Bondowners should be aware, however, that the Bonds are included in the measure of Massachusetts estate and inheritance taxes, and the Bonds and the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond Counsel has not opined as to the taxability of the Bonds or the income therefrom under the laws of any state other than Massachusetts. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondowners should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

Prospective Bondowners should be aware that certain requirements and procedures contained or referred to in the Agreement and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Further, no assurance can be given that pending or future legislation, including amendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or any future judicial, regulatory or administrative interpretation or development with respect to existing law, will not adversely affect the value of, or the tax status of interest on, the Bonds. Prospective Bondowners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondowner’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondowner or the Bondowner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondowners should consult with their own tax advisors with respect to such consequences.

LEGALITY OF THE BONDS FOR INVESTMENT AND DEPOSIT

The Act provides that the Bonds are securities in which all public officers and public bodies of the Commonwealth and its political subdivisions, all Massachusetts insurance companies, trust companies, savings banks, cooperative banks, banking associations, investment companies, executors, administrators, trustees and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them. The Bonds, under the Act, are securities which may properly and legally be deposited with and received by any Commonwealth or municipal officer or any agency or political subdivision of the Commonwealth for any purpose for which the deposit of bonds or obligations of the Commonwealth is now or may hereafter be authorized by law.

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RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. (“S&P”) will assign ratings of “Baa1” (Stable outlook) and “BBB+” (Positive outlook), respectively, to the Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: Moody’s, 99 Church Street, New York, New York, 10004, and S&P, 55 Water Street, New York, New York, 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely at any time by the rating agencies.

The above ratings are not recommendations to buy, sell or own the Bonds, and such ratings may be subject to revision or withdrawal at any time by the ratings agencies. Any downward revision or withdrawal of any or both ratings may have an adverse effect on the market price of the Bonds.

FINANCIAL STATEMENTS

The audited consolidated balance sheets of the Parent and affiliates as of September 30, 2008 and 2009, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, together with supplemental consolidating information and the report of PricewaterhouseCoopers LLP, independent accountants, are included as Appendix B to this Official Statement. Appendix B includes financial information for entities that are not Members of the Obligated Group or otherwise obligated with respect to the Bonds.

COMMONWEALTH NOT LIABLE ON THE BONDS

The Bonds shall not be deemed to constitute a debt or liability of the Commonwealth or any political subdivision thereof, or a pledge of the faith and credit of the Commonwealth or any such political subdivision, but shall be payable solely from the Revenues derived by the Authority under the Agreement. Neither the faith and credit nor the taxing power of the Commonwealth or of any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds. The Act does not in any way create a so-called moral obligation of the Commonwealth or of any political subdivision thereof to pay debt service on the Bonds in the event of default by the Institution. The Authority does not have taxing power.

UNDERWRITING

The Bonds are being purchased for reoffering by the Underwriters named on the cover page hereof (the “Underwriters”) pursuant to a purchase contract among the Medical Center, the Parent, the Authority and Morgan Stanley, as representative of the Underwriters (the “Purchase Contract”). The Underwriters have agreed to purchase the Bonds at an aggregate discount of $______from the public offering prices set forth on the inside cover page hereof. The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts, certain of which may be sponsored or managed by the Underwriters) and others at prices lower than the public offering prices stated on the inside cover page hereof. The Purchase Contract provides that the Underwriters will purchase all the Bonds if any are purchased and provides that the Institution will indemnify the Underwriters and the Authority and certain other parties against losses, claims, damages, and liabilities arising out of any incorrect statements of information, including the omission material facts, contained in this Official Statement and pertaining to the Institution and other specified matters. The Underwriters may allow concessions from the public offering price to certain dealers, banks and others. After the initial public offering at the offering price or prices set forth on the inside cover of this Official Statement, the public offering price or prices may be varied from time to time by the Underwriters. Morgan Stanley, parent company of Morgan Stanley & Co. Incorporated, an underwriter of the Bonds, has entered into a retail brokerage joint venture with Citigroup Inc. As part of the joint venture, Morgan Stanley & Co. Incorporated will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1,

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2009. As part of this arrangement, Morgan Stanley & Co. Incorporated will compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

LEGAL MATTERS

Certain legal matters incidental to the authorization and issuance of the Bonds by the Authority are subject to the approval of Edwards Angell Palmer & Dodge LLP, Boston, Massachusetts, Bond Counsel, whose opinion approving the validity and tax exempt status of the Bonds will be delivered with the Bonds. A copy of the proposed form of the opinion of Bond Counsel is attached hereto as APPENDIX D. Certain legal matters will be passed on for the Institution by its counsel, Ropes & Gray LLP, Boston, Massachusetts. Certain legal matters will be passed on for the Underwriters by their counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts.

There is not now pending any litigation restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization, or existence of the Authority, nor the title of the present members or other officers of the Authority to their respective offices is being contested. See APPENDIX A - “LETTER FROM THE INSTITUTION” with respect to any material litigation affecting the Institution.

FINANCIAL ADVISOR Ponder & Co. (“Ponder”) is serving as financial advisor to the Institution in connection with the issuance of the Bonds. Ponder is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement. Ponder is an independent financial advisory firm and is not engaged in the business of underwriting, trading, or distributing securities.

VERIFICATION OF MATHEMATICAL COMPUTATIONS

Chris D. Berens, CPA, P.C. (the “Verification Agent”), a firm of independent certified public accountants, will deliver to the Authority, the Institution and the Underwriters on or before the delivery date of the Bonds, its verification report indicating that it has verified, in accordance with standards established by the American Institute of Certified Public Accountants, the information and assertions provided by the Institution and its representatives. Included in the scope of the report will be a verification of the mathematical accuracy of (a) the mathematical computations of the adequacy of the cash and the maturing principal of and interest on, obligations of the United States of America to pay, when due, the maturing principal of, interest on and related call premium requirements of the Refunded Bonds and (b) the mathematical computations supporting the conclusion of Bond Counsel that the Bonds are not “arbitrage bonds” under the Code and the regulations promulgated thereunder.

MISCELLANEOUS

The references to the Act, the Agreement, the Master Trust Indenture, the Note, the Supplemental Master Indenture and the Continuing Disclosure Agreement are brief summaries of certain provisions thereof. Such summaries do not purport to be complete, and reference is made to the Act, the Agreement, the Master Trust Indenture, the Note, the Supplemental Master Indenture and the Continuing Disclosure Agreement for full and complete statements of such provisions. The agreements of the Authority with the holders of the Bonds are fully set forth in the Agreement, and neither any advertisement of the Bonds nor this Official Statement is to be construed as constituting an agreement with the Bondowners. So far as any statements are made in this Official Statement 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 documents mentioned in this paragraph are on file at the offices of the Authority and of the Trustee.

Information relating to DTC and the book-entry system described herein under the heading “THE BONDS - Book-Entry-Only System” has been furnished by DTC and is believed to be reliable, but none of the Authority, the Institution or the Underwriters makes any representations or warranties whatsoever with respect to such information.

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The Authority and the Underwriters have relied on the information provided by the Institution contained in APPENDIX A - “LETTER FROM THE INSTITUTION” and in APPENDIX B – “FINANCIAL STATEMENTS OF UMASS MEMORIAL HEALTH CARE, INC. AND AFFILIATES FOR SEPTEMBER 30, 2009 AND 2008.”

While the information contained therein is believed to be reliable, the Authority and the Underwriters make no representations or warranties whatsoever with respect to the information contained therein except, as to the Underwriters, as set forth on page i hereof.

APPENDIX C-1 - “DEFINITIONS OF CERTAIN TERMS,” APPENDIX C-2 - “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE,” APPENDIX C-3 - “SUMMARY OF CERTAIN PROVISIONS OF THE SUPPLEMENTAL MASTER TRUST INDENTURE,” APPENDIX C-4 - “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AND TRUST AGREEMENT,” APPENDIX D - “PROPOSED FORM OF BOND COUNSEL OPINION” and APPENDIX E - “FORM OF CONTINUING DISCLOSURE AGREEMENT” have been prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority.

APPENDIX C-5 - “SUMMARY OF THE MORTGAGE” has been prepared by Ropes & Gray LLP, counsel to the Institution.

All appendices are incorporated as an integral part of this Official Statement.

The Institution has reviewed the portions of this Official Statement describing the Institution, the Plan of Refunding, Estimated Sources and Uses of Funds, Bondowners’ Risks and Continuing Disclosure as it pertains to the Institution, has furnished APPENDIX A and APPENDIX B to this Official Statement, and has approved all such information for use with this Official Statement. At the closing, the Institution will certify that such portions of this Official Statement, except for any projections and opinions contained in such portions, do not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading.

The execution and delivery of this Official Statement by its Executive Director has been duly authorized by the Authority.

MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY

By: ______Benson T. Caswell Executive Director

24 APPENDIX A UMASS MEMORIAL HEALTH CARE, INC. TABLE OF CONTENTS

OVERVIEW ...... 1

HISTORY ...... 1

PRINCIPAL AFFILIATES ...... 3

UMASS MEMORIAL MEDICAL CENTER, INC...... 4

GOVERNANCE OF THE COMBINED GROUP ...... 14

MANAGEMENT ...... 15

FINANCIAL INFORMATION OF THE COMBINED GROUP ...... 17

MANAGEMENT’S DISCUSSION OF RECENT FINANCIAL PERFORMANCE ...... 18

SUPPLEMENTAL FINANCIAL INFORMATION FOR THE COMBINED GROUP ...... 22

FINANCIAL INFORMATION OF THE NON-OBLIGATED GROUP ...... 24

FACILITIES ...... 25

OUTSTANDING INDEBTEDNESS ...... 25

LITIGATION AND REGULATORY MATTERS ...... 25

INSURANCE ...... 26

OTHER CORPORATE AFFILIATES ...... 27

CLINICAL AFFILIATES ...... 29

SOURCES OF PATIENT SERVICE REVENUE ...... 29

MEDICAL EDUCATION SERVICES ...... 36

BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY ...... 36

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May __, 2010

Massachusetts Health and Educational Facilities Authority 99 Summer Street – Suite 1000 Boston, Massachusetts 02110 1240

Dear Members of the Authority:

In connection with the issuance by the Massachusetts Health and Educational Facilities Authority (the “Authority”) of its Revenue Bonds, UMass Memorial Issue, Series G (2010) (the “Bonds”), we are pleased to submit the following information regarding UMass Memorial Health Care, Inc. (the “Parent”) and UMass Memorial Medical Center, Inc. (the “Medical Center”) (the Parent and Medical Center are referred to herein collectively as the “Combined Group”) for inclusion in the Official Statement of the Authority. Unless otherwise indicated, all financial, utilization, workforce and patient service revenue data for any year refer to such data for the Combined Group for the fiscal year ended September 30. Terms defined elsewhere in the Official Statement and not otherwise defined in this Appendix A are used herein with the meanings so defined.

OVERVIEW

The Parent is a Massachusetts not-for-profit corporation formed to develop and coordinate an integrated health care delivery system, and is the sole member of the Medical Center. The Parent is the direct or indirect member, stockholder, owner or partner of approximately 30 corporations, limited liability companies or partnerships (each an “Affiliate” and collectively, the “Affiliates”) that provide a broad range of health care and related services to Worcester and the surrounding central Massachusetts communities. See “PRINCIPAL AFFILIATES.” The Parent and the Affiliates are collectively referred to herein as the “UMass Memorial Health Care System” or the “System.” The Affiliates excluding the Combined Group are referred to herein as the “Non-Obligated Group.”

The Internal Revenue Service has issued determination letters that the Parent and the Medical Center are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.

The Combined Group had approximately $1.20 billion in assets as of September 30, 2009, generated approximately $1.36 billion in revenue for the year then ended, and had an excess of revenue over expenses of $66.0 million. The System had, on a combined basis, approximately $1.76 billion in assets as of September 30, 2009, generated approximately $2.13 billion in revenue for the year then ended, and had an excess of revenue over expenses of $91.6 million.

The Parent and Medical Center are jointly and severally liable under the Agreement with respect to the Bonds and other prior obligations as described in the forepart of this Official Statement under the heading “Security for the Bonds.” The Combined Group has granted a lien on their gross receipts to secure payments relating to the Bonds, and the Medical Center has granted a lien on certain real property to secure payments relating to the Bonds. No entities other than the Combined Group are obligated under the Agreement, and none of the revenues or assets of any entity other than the Combined Group are available for payment of the principal of, or premium or interest on, or as security for, the loan of the proceeds of the Bonds. Information in this Appendix A relating to the other Affiliates is provided solely for informational purposes.

HISTORY

Formation of the Parent

The Parent was formed on March 4, 1997 in anticipation of the combination, effective March 31, 1998, of the acute care hospital and related activities of two Worcester-based health care systems: (1) the state-owned Clinical Division of the University of Massachusetts (the “University”), which included a 337-bed teaching hospital (the

A-1 “Teaching Hospital”), a 559-member physician group practice (the “Group Practice”), and a number of affiliated health care providers and support organizations (collectively, “University of Massachusetts Medical Center,” or “UMMC”), and (2) a private, not-for-profit health care system controlled by Memorial Health Care, Inc. (the “Memorial Parent”), the parent corporation of Memorial Hospital, Inc. (“Memorial Hospital”), a 324-bed acute care hospital, and its affiliated entities, including a 115-member physician group practice (such combination is referred to herein collectively as the “Transaction”).

The University is a public institution of higher education of The Commonwealth of Massachusetts (the “Commonwealth”). Prior to the Transaction, the University operated the Teaching Hospital and the Group Practice. The Teaching Hospital opened in 1976 and had its origins in the 1965 selection of Worcester as the site of the University’s new Medical School (the “Medical School”), which graduates approximately 100 medical students each year. The University gradually expanded the scope of activities of the Teaching Hospital, and in 1981, the Teaching Hospital became the Commonwealth’s first Level I trauma center.

In 1991, the former Worcester City Hospital site was acquired by the Worcester City Campus Corporation (“WCCC”), a corporation authorized by the Massachusetts Legislature to hold the Worcester City Hospital property and develop an integrated health care delivery system supporting the missions of the University. WCCC thereafter continued its expansion of the UMMC-affiliated network which included acquiring controlling interests in Clinton Hospital, a 41-bed hospital located in Clinton, Massachusetts, and Marlborough Hospital, a 79-licensed bed hospital located in Marlborough, Massachusetts.

Prior to the Transaction, Memorial Hospital had separately existed as a private, not-for-profit hospital in the Worcester area since 1871. Memorial Hospital operated two main campuses, the Memorial Hospital (which provided acute care services), and the Hahnemann campus (which offered sub-acute and ambulatory care), and also provided various satellite services.

Currently, there are three campuses, University, Memorial and Hahnemann, which make up the Medical Center and are located within approximately two miles of each other.

Description of the Transaction

In late 1996, the University and the Memorial Parent began discussions concerning a potential combination of their clinical activities.

Following execution of an agreement setting forth the principal terms of the proposed transaction, the University, WCCC, and the Memorial Parent obtained legislative approval for the transaction in November of 1997 as a result of the passage of Chapter 163 of the Acts of 1997 (the “Act”). Following enactment of the Act, various conforming changes were made to finalize the terms of the transaction, resulting in the execution of the Amended and Restated Definitive Agreement among the University, WCCC, the Memorial Parent, the Parent, and the Medical Center dated as of March 31, 1998 (the “Definitive Agreement”).

Pursuant to the Definitive Agreement and the Act, and as of March 31, 1998, the Memorial Parent merged with and into, the Parent, a new Massachusetts not-for-profit corporation named UMass Memorial Health Care, Inc., and Memorial Hospital merged with and into, the Medical Center, a new Massachusetts not-for-profit corporation named UMass Memorial Medical Center, Inc. Simultaneously, substantially all of the assets and liabilities of the clinical activities of UMMC were transferred to and assumed by the Parent or the Medical Center and one or more entities under the control of the Parent. Substantially all of the assets and liabilities and all of the affiliates of WCCC were transferred to the direct or indirect control of the Parent.

Other principal terms of the arrangement among the University, WCCC and the Parent and/or its Affiliates are set forth in a series of documents contemplated by or executed simultaneously with the Definitive Agreement. These include the following documents (which, together with the Definitive Agreement, are collectively referred to herein as the “Transaction Agreements”):

A-2 • An Occupancy and Shared Services Agreement (the “Occupancy Agreement”), pursuant to which the Medical Center is granted the right to occupy certain portions of the University’s campus used principally by the Teaching Hospital for the clinical activities of UMMC and under which the University and the Medical Center agree to designated responsibility for various capital and operating expenses relating to the occupied premises;

• An Academic Affiliation and Support Agreement (the “Affiliation Agreement”), pursuant to which the Medical Center and Parent agree to make certain payments to the University, described further below;

• A License Agreement, pursuant to which the Parent and its Affiliates are entitled to use the name “UMass” under certain circumstances; and

• One or more agreements relating to the leasing of certain employees by the University to the Medical Center or its Affiliates pursuant to which the Medical Center agrees to indemnify the University for substantially all liabilities relating to such leased employees.

The Transaction Agreements and the Act contemplate a long-term, 99-year affiliation among the Parent, the Parent’s Affiliates, and the University. The Transaction includes a series of arrangements set forth in detail in the Transaction Agreements, as subsequently amended, which are incorporated herein by reference. Certain principal components of the Transaction are as follows:

• Pursuant to the 99-year Affiliation Agreement, the Medical Center retains its historic role as the principal teaching hospital for the Medical School student training programs and remains the principal site for clinical trials for the University’s research endeavors.

• Pursuant to the 99-year Occupancy Agreement, the Combined Group is granted the right to use portions of the University’s campus required for the operation of the former Teaching Hospital and other clinical activities (approximately 860,000 square feet). The Medical Center is obligated to maintain, update, and replace the portion of the facilities occupied by the Medical Center and to return the facilities to the University at the end of the Occupancy Agreement.

• So long as the University continues to operate the Medical School with substantial numbers of students and amounts of research funding, the Combined Group is jointly and severally obligated to pay to the University an annual fee of $12 million plus an annual inflation adjustment, in total $17.2 million as of March 31, 2010, and a percent of the net combined operating income of the System (with certain exclusions for new affiliates located outside of Worcester County and other exceptions) based on a graduated formula designed to yield up to 20% of net combined operating income if the Medical Center and its Affiliates produce substantial net operating income without regard to certain negotiated items (the “Base Payment”). This amount may be reduced under certain conditions if the Medical School’s ongoing programs and research activities substantially decrease. Management anticipates that during or after 2010, the Combined Group may be required to fund this annual fee depending on operating results and other factors.

• In the event the University were ever to cease to operate a medical school with substantial numbers of students and amounts of research funding during the 99-year term of the Occupancy Agreement and the Affiliation Agreement, the obligation to make the Base Payment will be converted into a rental payment at the then fair market value of the used premises, subject to certain adjustments.

PRINCIPAL AFFILIATES

The System encompasses a group of approximately 30 Affiliates. Certain principal Affiliates are shown on the following chart. None of the revenues or assets of any of the Affiliates other than the Combined Group are available for payment of the principal of, or premium or interest on, or as security for, the Bonds.

A-3 PRINCIPAL AFFILIATES OF UMASS MEMORIAL HEALTH CARE, INC.*

UMass Memorial Health Care, Inc.

UMass Memorial Commonwealth UMass Memorial UMass Memorial UMass Memorial Behavioral Professional UMass Health Ventures, Realty, Inc. Hospitals, Inc. Health System, Assurance Memorial Inc. Inc. Company, Ltd. Medical Center, Inc. UMass Memorial Medical Group, Community Inc. Healthlink, Inc.

Central New Wing The Clinton Marlborough England Memorial Hospital Hospital Health Hospital Association Alliance, Inc. Corporation

HealthAlliance Obligated with Hospitals, Inc. respect to bonds

* Includes all Affiliates representing more than 5% of combined 2009 revenues of UMass Memorial Health Care System and certain select Affiliates.

UMASS MEMORIAL MEDICAL CENTER, INC.

The Parent is the sole corporate member of the Medical Center. The Medical Center is the Parent’s largest Affiliate, accounting for $1.1 billion or 62.1% of the System’s assets as of September 30, 2009 and generating $1.3 billion or 61.8% of the System’s revenues for 2009. The Medical Center operates a 736-bed acute care hospital located on two inpatient campuses and provides a full range of services, including all major specialties and subspecialties of inpatient care and ambulatory care. The Medical Center is designated by the Massachusetts Department of Public Health as a Level I trauma center. The Medical Center also operates a 45-bed psychiatric unit located on the site of Worcester State Hospital in Worcester, Massachusetts. The Medical Center is licensed by the Massachusetts Department of Public Health with an acute care hospital license that covers all inpatient sites.

The Medical Center is composed of the former Teaching Hospital and the former Memorial Hospital. See “HISTORY - Formation of the Parent.” As a result of the Transaction, the Medical Center operates two principal inpatient acute care campuses: the Memorial campus at 119 Belmont Street, Worcester (the “Memorial Campus”), and the University campus at 55 Lake Avenue North, Worcester (the “University Campus”) (each a “Campus” and collectively, the “Campuses”). The Medical Center’s two principal inpatient acute care Campuses are located approximately one mile from each other. The Medical Center also operates multiple outpatient facilities, including the Hahnemann campus (the “Hahnemann Campus”). The Hahnemann Campus is an outpatient surgical center and medical office building with a particular emphasis on dermatology, plastic and cosmetic surgery, hand and upper extremities, and primary care.

Patient Care and Special Services

The Medical Center provides a full range of primary and tertiary acute care services to patients. As of March 31, 2010 the number of licensed beds for the Medical Center was as follows:

A-4 LICENSED BEDS

Beds University Memorial Total Total Campus Campus Licensed Staffed

Medical / Surgical 234 204 438 395

Intensive Care / Coronary Care / Burn Unit 80 23 103 98

Obstetrics / Gynecology 0 65 65 65

Neonatal Intensive Care 0 27 27 27

Pediatric 52 0 52 48

Psychiatry 96* 0 96 51

Total 462 319 781 684 * Includes 45 beds located at Worcester State Hospital. Source: System records

The University Campus serves as a tertiary-care referral center with particular focus on advanced cardiology care, bone disease, neurology, radiation therapy and other forms of cancer care, and with a full complement of technology and support services. The University Campus also includes a comprehensive Children’s Medical Center, with specialists in all principal fields, including orthopedics, psychiatry and surgery. The Children’s Medical Center is an institutional member of the National Association of Children’s Hospitals and Related Institutions, an association of leading pediatric programs. In addition, the University Campus has the only pediatric intensive care unit, pediatric AIDS treatment facility, Cystic Fibrosis Center and Pediatric Diabetes Center in central Massachusetts. The University Campus also provides advanced tertiary care unavailable at other sites in central Massachusetts, including heart, pancreas, kidney and liver transplantation, advanced laser technology and forensic psychiatry. It is also home to the only Level I trauma center in central Massachusetts.

The Memorial Campus provides a broad array of primary, secondary, and selected tertiary care services. It is the regional referral center for women with high-risk pregnancies, the regional intensive care center for seriously ill newborns, and a leading center for the care and treatment of cancer patients from throughout the central Massachusetts region. The Medical Center also provides inpatient and outpatient psychiatric services at a number of locations, including a psychiatric unit at Worcester State Hospital with 45 licensed beds, located less than one mile from the University Campus. In addition, the Medical Center provides home care services and hospice care.

The Medical Center offers comprehensive emergency services with Emergency Departments located on both its Memorial and University Campuses available on a 24-hour basis. Total emergency room visits for 2009 were 138,159 compared to 132,628 in 2008 and 128,250 in 2007, representing a 4.2% growth from 2008 to 2009, and a 3.4% growth from 2007 to 2008. The University Campus Emergency Department is currently a 90-bed unit, which includes adult and pediatric treatment areas. The Memorial Campus Emergency Department is a 46-bed unit, which, in addition to emergency care treatment areas, includes an urgent care treatment area staffed from 11 a.m. to 11 p.m. daily, for the treatment of less severe illnesses and injuries.

A-5 EMERGENCY ROOM VISITS Six Months Ended Year Ended September 30, March 31, Location 2007 2008 2009 2009 2010 University Campus 80,794 85,583 90,631 43,794 45,116 Memorial Campus 47,456 47,045 47,528 22,741 23,058 Consolidated Worcester Campuses 128,250 132,628 138,159 66,535 68,174 Source: Medical Center records

The University Campus is home to LifeFlight, New England’s first hospital-based air ambulance. As the central and western Massachusetts region’s only emergency air ambulance transport, this lifesaving service is available to critically ill and injured patients needing immediate transport to up-to-date lifesaving medical technology, equipment and staff. LifeFlight, which is operated by the Medical Center using a leased aircraft, provided 641 flights in 2009. It responds directly to accident scenes or referring hospitals for the transport of patients to the nearest trauma center.

The Medical Center offers numerous ambulatory care programs on all the main Worcester campuses. University Campus clinics include Anticoagulation, Behavioral Medicine and Psychiatry, Cardiology, Cardiac and Vascular Surgery, Endocrinology, Family Medicine, Gastroenterology, Kidney/Pancreas Transplant, the Lung/Allergy Center, Neurology, Oncology, Orthopedics, Otolaryngology, Pediatrics, Renal Medicine/Diabetes, Surgery Clinic, the Weight Center and the Wound Center. Memorial Campus clinics include the Comprehensive Breast and Women’s Centers, Diabetes, Gynecologic Oncology, Infectious Disease, Multiple Sclerosis, Rheumatology, the Spine and Joint Center and Oncology. Hahnemann Campus clinics include Dermatology, Family Health, the Foot Ankle Center, the Hand and Upper Extremity Center, Ophthalmology, Plastic and Cosmetic Surgery and Sports Medicine. In addition to the above, three other health center clinics operate at off-site locations, including Barre Primary Care, the Plumley Village Health Center and the Tri-River Family Health Center.

Medical Staff

The following table summarizes the medical staff memberships at the Medical Center as of September 30, 2009 and March 31, 2010:

NUMBER OF PHYSICIANS Designation September 30, 2009 March 31, 2010

Active 1,221 1,215 Other* 368 367 Total 1,589 1,582

Board Certified** 90% 90% *The designation “Other” includes Courtesy and Consulting Medical Staff. **The designation “Board Certified” includes Active, Courtesy and Consulting Medical Staff. Source: Medical Center records

The UMass Memorial Medical Group, Inc. (the “Medical Group”) is the principal provider of physician services to the Medical Center. The Medical Group currently provides primary care services at over 80 sites or offices located in 22 municipalities in and around Worcester, Massachusetts. As of March 31, 2010, 952 physicians (865 full-time equivalents or “FTEs”) were employed directly by the Medical Group. The employed physicians of the Medical Group were the attending physicians responsible for approximately 81.0% of the Medical Center’s discharges in 2009.

A-6 Workforce

The Medical Center is the largest employer in Worcester County, with a workforce as of March 31, 2010 of 10,539 employees (8,183.4 FTEs) and 1,251 per diem employees, including 1,497.3 FTE registered nurses and 138.4 FTE licensed practical nurses. The Medical Center employed 2,093 registered nurses and 175 licensed practical nurses as of March 31, 2010. The turnover rate for the nursing population as of March 31, 2010 was 6.33%. The vacancy rate for registered nurses was 1.22% as of March 31, 2010.

As of March 31, 2010, Medical Center employees were represented for purposes of collective bargaining by five labor organizations: State Healthcare and Research Employees (“SHARE”) (2,783 employees or 2,463.1 FTEs); United Food and Commercial Workers (“UFCW”) (1,299 employees or 1,182.2 FTEs); Massachusetts Nurses Association (“MNA”) (2,093 employees or 1,493.6 FTEs); National Association of Government Employees (“NAGE”) (41 employees or 40 FTEs); and the International Union, Security, Police and Fire Professionals of America (“SPFPA”) (25 employees or 20.8 FTEs).

The current NAGE contract began July 1, 2009 and expires June 30, 2012. The current SHARE contract began October 1, 2007 and expires on September 30, 2011. The UFCW contract began November 28, 2006 and expires May 29, 2010. The Medical Center expects to renegotiate the UFCW contract. UFCW also contracts for skilled maintenance workers. This contract began on April 29, 2007 and expires on October 30, 2010. The MNA union representing the Memorial and Hahnemann Campuses, home health and hospice employees’ contract began January 1, 2007 and expired December 31, 2009. The Medical Center is currently in negotiations with the MNA representing the Memorial and Hahnemann campuses, and is honoring the terms of the expired contract during negotiations. The MNA contract for University Campus employees began on April 5, 2009 and expires on April 5, 2012. Finally, the SPFPA agreement began on April 1, 2008 and expires on March 31, 2012. Another 3,187 employees (2,948.7 FTEs) including professional employees and physician practice employees are not represented for the purposes of collective bargaining.

The Medical Center sponsors a noncontributory defined benefit pension plan and a defined contribution pension plan covering substantially all employees who have met age and service requirements. The benefits under the defined benefit plan are based primarily on years of service and employees’ compensation. The funding policy is to make contributions to the plans at least equal to the minimum amount required under the law. For further information, see footnote 10 to the audited consolidated financial statements included as Appendix B. In addition, the Medical Center provides postretirement medical benefits to certain of it employees. Medical benefits are funded from the general assets of the Medical Center on a current basis. The plan pays a portion of health insurance costs for eligible participants.

The Medical Center is not currently experiencing a workforce challenge recruiting trained clinicians, including Registered Nurses. However, the Medical Center does encounter occasional difficulty recruiting experienced nurses in specialized areas; therefore the Medical Center has increased its outreach efforts to include electronic and professional associations as well as publications with a significant subscriber base of clinicians in those areas of expertise.

In addition, competition to recruit qualified physicians in a number of specialties, including radiology, neurosurgery pulmonary and some surgical specialties remains high. There is also a growing shortage in primary care as Internal Medicine residents are pursuing more highly paid sub-specialties or becoming hospitalists. Management expects that competition to recruit various medical specialties will remain a significant challenge for the foreseeable future.

Management believes that the relationship between the Medical Center and its employees is a professional and productive one. For a discussion of workforce shortages and their potential effect on the Medical Center, see “BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY – Nursing and Other Shortages.”

A-7 Service Area

Worcester, Massachusetts, with a population of 182,596 (City of Worcester, 2010 published estimate), is the second largest city in New England. Worcester developed in the early 1900s as a center of heavy manufacturing and mechanical invention. Today, the city has evolved to include a focus on biotechnology, education and intermodal commerce, while retaining over 400 manufacturers.

According to the U.S. Census Bureau, Worcester County had an estimated 2008 population of 783,806, a 4.5% increase since 2000, compared to a 2.3% increase for the Commonwealth overall during the same time period. According to the 2000 U.S. Census Bureau estimates of population characteristics, the 2008 median household income was estimated to be slightly higher than that of the Commonwealth, at $66,389 as compared to $65,304. The percentage of persons below the poverty level was 8.4% for Worcester County, as compared to 10.1% for the Commonwealth.

The Medical Center draws patients from Worcester and the surrounding communities, from other parts of the Commonwealth, and from other states. For historical comparability purposes, management defines the Medical Center’s service area as the City of Worcester and the 64 surrounding cities and towns. For 2008, the primary service area and secondary service area as defined, accounted for 88.2% of all Medical Center discharges.

Worcester and 22 other surrounding communities make up the Medical Center’s primary service area (“PSA”). With the exception of two towns (Oakham and Princeton), the PSA includes those cities and towns from which the Medical Center derived 150 or more discharges and in which the Medical Center had a market share of 60% or greater in 2008, the most recent year for which data are available. Oakham and Princeton are included in the PSA for historical reasons. Discharges from the PSA accounted for approximately 66.5% of the Medical Center’s total discharges in 2008.

The remaining 43 cities and towns in the service area constitute the Medical Center’s secondary service area (“SSA”). The SSA accounted for approximately 21.7% of the Medical Center’s 2008 discharges.

The map on the following page illustrates the Medical Center’s PSA and SSA.

A-8 UMMHC Members Royalston Ashby Townsend Pepperell Dunstable ro Dracut 1 UMass Memorial Medical Center Winchendon bo gs Ashburnham yn Marlborough Hospital T Lowell T 2 C ew rg h u e ks 3 b lm b Clinton Hospital h Groton s ur Athol tc W fo y T i Lunenburg e r r y d 4 e e F 5 st HealthAlliance - Leominster Campus m t e f s l o n r rd p Gardner i i I-495 P l h Ayer e m 5 HealthAlliance - Burbank Campus h t t S i o s l e l n i W Competitors in Primary Service Area p 4 Littleton s Carlisle t o rd Rt. 2 6 Saint Vincent Hospital n Leominster va ter x- s Har o Acton a B gh c ou 7 MetroWest Medical Center Hubbardston I-190 bor m on an sha et L eter c g Baystate Medical Center P in n 8 r i P l r Bolton Stow e t 3 Barre S on lint Rutland n C Sudbury o Hudson t Berlin t s n s l o PrimaryPrimary ServiceService AreaArea e y t O o ls 2 Holden W a B y Marlb Hardwick k o orough F h P r a B h- a a ort m New m x N y ugh i t r ro h- n SecondarySecondary ServiceService AreaArea intree o bo out g 7 Bra u S n ough h b bor a d s - m l st Rt. 9 h e S e A t i w W h p g shl r f 1 e ou W o k L 6 r e r bo B e o a r st N n e h nd o o i ok r c c S f e Worcester ie B e ld r s n t n e o Hopkinton t to r f s d a i l y r ll ie r f Auburn u G o k East lb Upton H o il Milf Millis

o Brookfield Warren r M B ord Medway O Hopedale x - f Sutton rth e o No Norfolk g r dge id d ri n r b i b Charlton m l r a k u Mass Pike Mendon h n

g a Fox St r U r - I-90 e x n F t b Millville i bo l rough s r m Douglas id l a b South- Dudley g ck- e th e e Bla n bridge one B re W st W

I-395

8

A-9

MEDICAL CENTER DISCHARGES BY PATIENT ORIGIN 2006-2008

2006 2007 2008

Discharges % Discharges % Discharges % Primary Service Area 27,024 68% 27,326 67% 27,562 66% Secondary Service Area 8,481 21 8,683 21 9,077 22 Other Massachusetts 2,443 6 2,681 7 2,852 7 Other 1,920 5 2,077 5 2,022 5 Total* 39,868 100% 40,767 100% 41,443 100% *Discharges as collected by the Massachusetts Health Data Consortium and used in the “Discharges by Patient Origin” table may vary up to 1.5% due to record keeping differences. Includes all discharges except normal newborns. Source: Massachusetts Health Data Consortium

Competition

The Medical Center accounted for 60% of all patients discharged from the PSA in 2008. In addition, discharges from patients residing within the PSA accounted for 66.5% of all Medical Center discharges in 2008, the latest year for which data are available. Management considers Worcester Medical Center (formerly Saint Vincent Hospital) to be the Medical Center’s principal competitor physically located within the PSA. Worcester Medical Center is a 351-licensed bed acute care hospital located in Worcester and purchased in January 2005 by Vanguard Health System, a national for-profit hospital chain, which maintained a 24.8% market share of discharges in 2008. The facility was opened and occupied in April 2000.

The following table summarizes market share information for the Medical Center and its competitors in the Medical Center’s PSA. For 2008 no competing hospital other than Worcester Medical Center exceeded 3% of total discharges for the PSA.

PRIMARY SERVICE AREA DISCHARGES BY HOSPITAL 2006-2008

2006 2007 2008 Primary Service Area Discharges % Discharges % Discharges % Medical Center 27,024 57% 27,326 59% 27,562 60% Other System Hospitals 1,228 3 1,264 3 1,243 3 Worcester Medical Center 13,182 28 12,512 27 11,371 25 Other Hospitals 5,950 13 5,579 12 5,721 12 Total* 47,384 100% 46,681 100% 45,897 100% *“Other System Hospitals” includes the Health Alliance Hospitals, Wing Memorial Hospital, Marlborough Hospital and The Clinton Hospital Association. Source: Massachusetts Health Data Consortium

The Medical School provides residents to Worcester Medical Center under a contractual arrangement.

Utilization

A summary of significant utilization data for the Medical Center for the three years ended September 30, 2009 and for the six months ended March 31, 2010 and 2009 is contained in the following table.

A-10 MEDICAL CENTER UTILIZATION Six Months Ended Year Ended September 30, March 31, 2007 2008 2009 2009 2010

Acute Care Average Beds Available 685 707 710 705 712 Discharges 40,039 40,566 42,474 21,121 20,598 Patient Days 206,457 211,095 216,350 106,696 107,369 Percent Occupancy 83% 82% 84% 83% 83% Average Length Of Stay 5.2 5.2 5.1 5.1 5.2 (Days) Case Mix Index* 1.36 1.41 1.42 1.42 1.47 Observation Cases 3,505 4,477 5,485 2,611 2,913 Emergency Room Visits 128,250 132,628 138,159 66,535 68,174 Cardiac Cath Procedures 6,484 6,891 7,065 3,524 3,164 Lab Tests 11,518,104 13,480,684 18,483,822 8,409,897 14,153,038 Radiology Procedures 427,110 450,096 474,025 228,968 235,558 Life Flight 931 731 641 322 279

Surgery Inpatient Surgery Cases 12,475 12,485 13,167 6,419 6,475 Outpatient Surgery Cases 35,413 36,092 37,714 18,386 19,178 Total Surgery 47,888 48,577 50,881 24,805 25,653

Other Ambulatory Clinic Visits 583,111 604,292 624,033 305,939 320,451 Health Center Visits 106,843 110,633 101,215 50,922 55,494 Home Health Visits 130,158 112,083 105,793 52,574 47,108 *Medicare case mix index for all patients except psychiatric and transfer patients. Source: Medical Center records

Management’s Discussion of Utilization Trends

From 2007 to 2009, inpatient discharges grew from 40,039 to 42,474. Management believes that average length of stay, a key indicator of resource consumption, and case mix index, a measure of patient acuity, are also important utilization statistics. Though average length of stay decreased by 2.0% from 5.2 in 2007 to 5.1 in 2009; average length of stay has been maintained at 5.2 for the first six months of 2010. Management believes that a focused investment in the centers of excellence, which in general includes populations of patients with higher acuity levels, is contributing to this increase. This is also confirmed by the increase in case mix realized through March 31, 2010.

In 2009, outpatient revenue represented 44.6% of total patient care revenue. Ambulatory clinic visits, health center visits, and home health visits have grown approximately 1.3% from 2007 to 2009. Ambulatory clinic visits have increased by 7.0% while health center visits have decreased by 5.3% over the three-year period. Although there has been a continued shift of some lower acuity services from the inpatient setting to the outpatient setting, the Medical Center has experienced growth in both inpatient and outpatient volumes from 2007 to 2009. These increases result from the Medical Center’s efforts to focus on volume growth at the service line level. Ambulatory clinic visits increased in the six-month period ended March 31, 2010 by 4.7% compared to the comparable prior year’s period. The increase in the number of employed physicians has contributed to the increase in ambulatory clinic visits.

Surgical cases have increased over the three-year period by 6.3%, largely driven by outpatient surgical cases which have increased by 6.5%. Management again attributes these increases to the strategic programmatic investments and an overall increase in the number of physicians. For the six-month period ended March 31, 2010, total surgical cases were up 3.4% over the prior year’s comparable period. Outpatient surgical cases were up 4.3% over the prior year’s comparable period while inpatient surgical cases increased slightly by 0.9%, reflecting a continued shift to outpatient services.

A-11 Educational Affiliations and Programs

The Medical Center serves as the principal teaching site for the Medical School’s medical students and residents and as the site for its clinical trials. There are 23 accredited residency programs, and 29 accredited and 16 non-standard clinical fellowship programs with 545 residents and fellows. There are eight major participating institutions and numerous additional affiliated training sites, for the residency and fellowship programs.

In addition, the Medical Center provides clinical training and affiliations for various educational purposes, serving students with various majors including: physical therapy, nursing, pharmacology, laboratory and radiological technology, dietetic, health information management, surgical technology, respiratory and occupational therapy, social work, medicine and health care administration. The Medical Center supports ongoing professional education for its staff through tuition reimbursement, scholarship awards, in-service education and management training.

Licensure, Accreditation and Memberships

The University, Memorial and Hahnemann Campuses function under a single license granted to the Medical Center by the Massachusetts Department of Public Health effective April 1, 1998. The Joint Commission most recently accredited the Medical Center on November 7, 2008 and the Medical Center is fully accredited. The Medical Center is required to submit an annual Periodic Performance Review to The Joint Commission, the most recent of which was submitted in November 2009. The Medical Center is a member of the American Hospital Association and the Massachusetts Hospital Association. The Medical Center’s Continuing Medical Education Program is accredited by the Massachusetts Medical Society.

Other Affiliates

The Parent is the direct or indirect corporate member, stockholder, owner or partner of approximately 30 Affiliates in addition to the Medical Center. In aggregate, these Affiliates accounted for $952.8 million or 44.8% of the System’s revenue in 2009, $633.3 million or 36.0% of the System’s assets as of September 30, 2009, and $25.6 million or 27.9% of the System’s excess of revenue over expenses in 2009 before intercompany eliminations. See Appendix B for information concerning the Combined Group compared to the Non-Obligated Group Affiliates.

The following table presents total unrestricted revenue and other support and the excess (deficiency) of revenue over expenses of the System for 2009 and total assets as of September 30, 2009.

A-12 UMASS MEMORIAL HEALTH CARE SYSTEM SUMMARIZED FISCAL YEAR 2009 FINANCIAL INFORMATION BY PRINCIPAL AFFILIATE (dollars in millions)

Excess (Deficiency) of Revenue Over Revenues % of Total Total Assets % of Total Expenses Medical Center $ 1,316.5 61.8% $ 1,092.5 62.1% $ 70.6 Parent 164.4 7.7 281.3 16.0 (2.3) Commonwealth Professional Assurance Company, Ltd. (23.9) (1.1) (117.3) (6.7) (2.3) (CPAC)* Eliminations** (94.9) (4.4) (52.2) (3.0) - Subtotal Combined Group 1,362.1 64.0 1,204.3 68.4 66.0

Central New England HealthAlliance, Inc. 183.8 8.7 187.4 10.6 5.1 and its Affiliates Commonwealth Professional Assurance Company, Ltd. 23.9 1.1 117.3 6.7 2.3 (CPAC) The Clinton Hospital Association 25.9 1.2 23.3 1.3 0.8 Community Healthlink, Inc. 47.2 2.2 14.4 0.8 --- Marlborough Hospital 69.7 3.3 46.0 2.6 1.6 Wing Memorial Hospital Corporation 69.9 3.3 61.2 3.5 0.4 UMass Memorial Medical Group, Inc. 400.1 18.8 102.0 5.8 (0.1) Additional Affiliates 132.8 6.2 82.6 4.7 15.5 Eliminations*** (0.5) (0.0) (0.9) - - Subtotal Non-Obligated Group 952.8 44.8 633.3 36.0 25.6

Eliminations and Combining Entries**** (186.5) (8.8) (77.5) (4.4) -

Total $ 2,128.4 100% $ 1,760.1 100% $ 91.6 * Represents reclassification of CPAC, a subsidiary of the Parent, from the Combined Group to the Non-Obligated Group. ** Eliminations representing transactions between the Parent (excluding CPAC) and the Medical Center. *** Eliminations representing transactions among the Non-Obligated Group. **** Eliminations representing transactions between the Combined Group and Non-Obligated Group. Source: System records

For summary descriptions of each hospital entity and Affiliates joining the System subsequent to the Transaction as well as a list of all other Affiliates and their principal activities, see “OTHER CORPORATE AFFILIATES”. In addition, significant assets and liabilities relating to the Group Practice and the insurance trust fund established by the University to provide coverage for the Teaching Hospital, the Group Practice, and certain others (the “Self- Insurance Trust” or the “Trust”) were assumed by the Parent or the Affiliates in connection with the Transaction. (See “UMASS MEMORIAL MEDICAL CENTER, INC. - Medical Staff” and “INSURANCE”). The assets and liabilities of the Group Practice were transferred to the newly formed Medical Group, and the assets and liabilities of the Self Insurance Trust were transferred into the Commonwealth Professional Assurance Company, Ltd., a captive insurance company formed in Grand Cayman, British West Indies.

A-13 GOVERNANCE OF THE COMBINED GROUP

The Parent and the Medical Center have identical Boards of Trustees, consisting of the following individuals. There are 19 voting trustees who are generally limited to two consecutive full four-year terms.

Years of Tenure with Name System and/or Principal Affiliation Predecessor

Michael Aronson, M.D. 3 Employed Physician, UMass Memorial Medical Group, Inc., Worcester, MA David L. Bennett 29 Principal Attorney, Bennett & Forts, P.C., Holden, MA Dennis D. Berkey 4 President, Worcester Polytechnic Institute, Worcester, MA John H. Budd, Esq. 37 Attorney, Mirick, O’Connell, DeMallie & Lougee, LLP, Worcester, MA Michael Collins, M.D. 3 Chancellor, University of Massachusetts Medical School, Worcester, MA Lois Dehls Cornell 4 Senior Vice President, General Counsel & Senior Compliance Officer, Tufts Health Plan, Watertown, MA Edward D’Alelio 6 months Director, LTSave & Trump Hotels Dix F. Davis 18 Community Leader, formerly Allmerica Asset Management, Princeton, MA Terence Flotte, M.D. 3 Dean, University of Massachusetts Medical School, Worcester, MA James Young 1 Medical Student, University of Massachusetts Medical School, Worcester, MA Harris MacNeill 2 months President, CEO and Owner of MacNeill Engineering Cynthia M. McMullen, Ed.D. 14 Principal (Retired), Doherty Memorial High School, Worcester, MA Mary Ellen McNamara 2 months Director of Quality Assurance, Staples, Inc. John O’Brien 6 President, Chief Executive Officer, UMass Memorial Health Care, Inc, Worcester, MA O. Nsidnanya Okike, M.D. 4 Surgeon, UMass Memorial Medical Center, Inc., Worcester, MA Edward Parry, III 6 Independent Advisor Thoru Pederson 7 Associate Vice Chancellor for Research, University of Massachusetts Medical School, Worcester, MA Irina Simmons 3 Sr. Vice President & Treasurer, EMC, Hopkinton, MA Lynda M. Young 4 Physician, Chandler Pediatrics, Worcester, MA

There are eight standing committees of the Board of the Parent: Audit, Finance, Governance, Investment and Pension, Compensation and Senior Management Evaluation, Academic Integration, Compliance and Community Benefits. Pursuant to the Definitive Agreement and the Act, and during the 99-year term of the Affiliation Agreement, the Chancellor of the University of Massachusetts Medical School will be an ex-officio member of the board of trustees, and is entitled to appoint four individuals to the board of trustees of the Medical Center.

From time to time, the Combined Group does business with firms with which its trustees are affiliated. Management believes that such transactions are on terms no less favorable to the Combined Group than could be obtained from other parties. The Combined Group has a written policy pursuant to which trustees having a conflict of interest must disclose such conflict and abstain from voting on the matter. The policy requires each trustee to complete and sign an annual conflict of interest disclosure statement and to supplement such statement with ongoing disclosures of potential or actual conflicts of interest.

A-14 MANAGEMENT

The operations of the Combined Group are managed through the CEO Team. This CEO Team includes the President and Chief Executive Officer of the Parent, the Chief Financial Officer of the Parent and Medical Center, the President of the Medical Center, the Executive Vice President and Chief Operating Officer of the Medical Center, the President of the Medical Group, the Executive Director of the Medical Group, the Chief Medical Officer of the Medical Center, the Chief Information Officer of the Parent, the Chief Human Resources Officer of the Parent, the Chief Nursing Officer of the Medical Center, the Senior Vice President of the Parent, the Senior Vice President and General Counsel of the Parent, the Senior Vice President and Chief Facilities Officer for the Parent, and the Chief of Staff of the Parent.

John G. O’Brien, age 60, is President and Chief Executive Officer of the Parent. He joined the Combined Group in September 2002 after 26 years at Cambridge Health Alliance, where he began his career as a financial manager and became Chief Executive Officer in 1986. He previously served as Commissioner of Health for the City of Cambridge from 1995 to 2002. Mr. O’Brien is responsible for the Combined Group’s strategic plan and vision, and ensuring alignment with the University of Massachusetts Medical School. He is involved in a variety of health advocacy and civic activities locally and nationally. He is currently a board member of the Public Health Institute, American Hospital Association’s Health Research and Educational Trust’s Board of Directors, Audit Committee and Foster McGaw Prize Committee. Mr. O’Brien is also a past member of the American Hospital Association Board of Trustees, and past chair of both the Board of National Association of Public Hospitals and the Board of the Massachusetts Hospital Association. Mr. O’Brien is a graduate of Harvard College where he majored in Economics. He received an M.B.A. in health care administration from Boston University.

Walter H. Ettinger, M.D., age 58, was appointed President and Chief Executive Officer of the Medical Center in January 2004. Dr. Ettinger previously served as Vice President of Medical Affairs and Medical Education at Lenox Hill Hospital in New York City; Executive Vice President of Virtua Health in Marlton, New Jersey; and Director of the J. Paul Sticht Center on Aging at the Wake Forest Baptist Medical Center in Winston-Salem, North Carolina. Dr. Ettinger received his M.D. from The Johns Hopkins University and M.B.A. from Wake Forest University. He is board certified in internal medicine, rheumatology and geriatric medicine.

Todd A. Keating, age 51, was appointed Chief Financial Officer for the Parent and the Medical Center in January 1999. Previously, Mr. Keating was Chief Financial Officer of the Clinical System of the University of Massachusetts Medical School. Mr. Keating also served as the Controller, Director of Financial Planning for the University of Massachusetts Medical School Clinical System. Additionally, Mr. Keating held positions at Windham Hospital, Willimantic, Connecticut; Lawrence and Memorial Hospital, New London, Connecticut; and Ernst & Young, Hartford, Connecticut. Mr. Keating received a B.A. degree from Tufts University and a M.B.A. degree from Duke University.

George Brenckle, Ph.D, age 55, was appointed Senior Vice President and Chief Information Officer for the Parent in March 2007. Prior to his appointment, Dr. Brenckle served as Chief Information Officer for the University of Pennsylvania Health System (“UPHS”). Prior to UPHS, he was the Director of Information Services at the Medical Center of Delaware (now Christiana Care) and also held technical positions with Chesapeake Software and ICI Americas in Delaware. Dr. Brenckle received his B.S. in Chemistry in 1976 from the University of Connecticut and a Ph.D in Molecular Biology in 1981 from Washington University School of Medicine. Dr. Brenckle has been involved in healthcare information technology since 1987.

Douglas S. Brown, age 47, was appointed Senior Vice President and General Counsel for the Parent in October 2003. For the nine years preceding his appointment, Mr. Brown served in various legal and executive roles in Massachusetts state government, including service as an Assistant Attorney General; General Counsel to the Senate Committee on Ways and Means; and General Counsel, Deputy Commissioner and Acting Commissioner of the Division of Medical Assistance (the state Medicaid agency). Mr. Brown spent the first six years of his legal career at two large law firms; one in San Francisco and one in Boston. Mr. Brown received his B.A. in international relations and J.D. from Boston University. He is a member of the Massachusetts bar.

Jennifer Daley, M.D., age 60, was appointed Executive Vice President and Chief Operating Officer of the Medical Center in March 2010. Her responsibilities include oversight of all clinical services at the Medical Center including

A-15 ambulatory and inpatient care, critical care, emergency medicine, peri-operative services, women and children’s health and mental health. Dr. Daley is a Professor of Medicine at the Medical School. Dr. Daley was previously the Chief Medical Officer of the Partners Community Healthcare Inc. (2007-2010) and the Chief Medical Officer of Tenet Healthcare (2002-2007). Dr. Daley received her B.A. degree from Brown University in 1971 and her M.D. degree from Tufts University in 1976. Dr. Daley is board-certified in internal medicine.

Nancy Kruger, age 64, was appointed Chief Nursing Officer of the Medical Center in March 2007. Dr. Kruger came to the Medical Center from The Brigham and Women’s Hospital where she served as the Vice President for Patient Care Services and Chief Nursing Officer. Formerly she was the Chief of Patient Care and Chief Nursing Officer at The Milton S. Hershey Medical Center, The Pennsylvania State University in Hershey, Pennsylvania. Dr. Kruger received her doctorate in nursing from the University of Pennsylvania. She also received her B.S. from Skidmore College and her M.A. from New York University. In addition, she is certified as an adult nurse practitioner and has held numerous academic appointments.

Gary N. Lapidas, age 57, was appointed Senior Vice President for the Parent in August 2001. Among other areas, Mr. Lapidas is responsible for oversight of the System’s owned community hospitals and community mental health agency, MRI centers, joint ventures for imaging and rehabilitation hospital services, managed care contracting/ administration, government relations and community relations. Before joining the Parent, Mr. Lapidas served as President/Chief Executive Officer and Principal/Owner of HealthPro, Inc., a utilization management and disability determination company located in Westboro, Massachusetts that was subsequently acquired by United Healthcare. Mr. Lapidas has previously served as Chief Executive Officer of Health New England, a health maintenance organization (“HMO”) in Springfield, Massachusetts and as Chief Operating Officer and interim Chief Executive Officer of Central Mass Health Care, an HMO in Worcester, Massachusetts. He has also served as a consultant to numerous HMOs, health care systems, behavioral health companies, nursing homes, and the federal government. Mr. Lapidas received a B.S. degree in public health from the University of Massachusetts.

Cheryl M. Lapriore, age 42, was appointed Vice President and Chief of Staff for the Parent in October 2007. Working in partnership with the President and Chief Executive Officer of the Parent and the senior teams, Ms. Lapriore is responsible for strategic planning, marketing, communications, media and public relations and is responsible for the overall management of the Office of the President and CEO. Before joining UMass Memorial, Ms. Lapriore was the Vice President of Corporate Relations at The Hanover Insurance Group, Inc., a $2.0 billion regional property and casualty insurer. In addition, Ms. Lapriore served as the President of The Hanover Insurance Group Foundation, Inc., a $8.7 million charitable foundation that had oversight for all community relations work in Worcester, Massachusetts; Howell, Michigan and twenty-five other states nationwide. Prior to her work at The Hanover Insurance Group, Ms. Lapriore served as Vice President and Chief of Staff to the President of Allmerica Financial Life Insurance and Annuity Company. Ms. Lapriore is active in the Worcester community and serves as an advisor for several social service organizations, is a corporator for Children’s Friend and the Ecotarium and is actively involved in supporting the activities of Central Massachusetts Housing Alliance in their efforts to alleviate homelessness. She received her B.S. degree in Marketing from Bentley College and an M.B.A. from Nichols College.

Dana E. Swenson, age 52, was appointed Senior Vice President and Chief Facilities Officer for the Parent in March 2004. In this role he is responsible for construction, space planning, real estate, plant operations, public safety, environmental health and safety, food services and housekeeping for the Medical Center. Mr. Swenson served as Vice President for Facilities at the Beth Israel Deaconess Medical Center, the Director of Patient Care Facilities at the University of Texas, M.D. Anderson Cancer Center in Houston, and Director of Facilities at the Medical Center Hospital of Vermont. Mr. Swenson received his B.S. in Mechanical Engineering in 1979 from the U.S. Naval Academy in Annapolis, Maryland. Mr. Swenson is registered as a Professional Engineer in Electrical Engineering, and received an M.B.A. from Sam Houston State University in 1999. Mr. Swenson has served as an officer in the U.S. Navy and holds a rank of Commander in the Reserves.

Daniel Lasser, M.D., age 61, was appointed Senior Vice President for Primary Care in 2006, and as interim President of Medical Group in April 2007. Dr. Lasser joined the University of Massachusetts Medical School in 1979 as Director of its Worcester Family Medicine residency. From 1989 to 1991, he served as Clinical Director for Family Medicine at Erie County Medical Center (Buffalo, NY). He returned to Worcester to serve as Chair of the Department of Family Medicine at Worcester Memorial Hospital, and was appointed as clinical and academic Chair

A-16 of the Department of Family Medicine and Community Health when Memorial Hospital and UMass University Hospital merged to become UMass Memorial. He received his B.A. and M.D. degrees from the State University of New York at Buffalo, and his M.P.H. from the Harvard School of Public Health. He is board certified in Family Medicine.

Michele Streeter, age 43, was appointed Executive Director of the Medical Group in April 2008. Previously, Ms. Streeter served the Medical Group as Vice President for Finance and Administration and as Chief Financial Officer. Ms. Streeter also served as Director of Finance for the Community Medical Group of UMass Memorial Medical Group. After receiving her B.A. degree from Merrimack College and her C.P.A. in 1991, Ms. Streeter joined Memorial Hospital, one of the predecessors of the Medical Center, in 1992.

Stephen E. Tosi, M.D., age 65, was appointed Chief Medical Officer of the Medical Center in February 2002. Prior to that time, he served as Deputy Chair of the Department of Surgery of the Medical Center. He was formerly the Chief of Surgery and Chief of Urology of Memorial Hospital, one of the predecessors of the Medical Center. Dr. Tosi has served as the Chair of the Committee on Professional Liability of the Massachusetts Medical Society and on the Board of Directors of the Physicians Insurance Agency of Massachusetts, a subsidiary of the Massachusetts Medical Society. Dr. Tosi received his A.B. degree from Dartmouth College and his M.D. degree from Cornell University Medical College. He is Board Certified in Adult and Pediatric Urology and is a Fellow of the American College of Surgeons.

Patricia Webb, FACHE, age 57, was appointed Senior Vice President and Chief Human Resources Officer for the Parent in December 2007. In this role, Ms. Webb is responsible for the development and implementation of human resources strategies, policies, and procedures focusing on performance management, talent acquisition and management, training and professional development, organizational effectiveness, diversity, employee relations, labor relations, compensation, and benefits. Ms. Webb has more than 20 years of experience in health care and human resources, having previously worked for Boston Medical Center (“BMC”), where she served as the vice president of human resources. Prior to her work at BMC, she held leadership positions at Wake Medical Center in Raleigh, N.C., and University Medical Center in Jacksonville, Florida. Ms. Webb received her B.S. degree in management and marketing from Florida A&M University and her M.S. degree in business and human resources management from the University of North Florida. She is a Fellow in the American College of Healthcare Executives.

FINANCIAL INFORMATION OF THE COMBINED GROUP

The following summary statements of operations of the Combined Group for the years ended September 30, 2007, 2008 and 2009 were derived from the supplemental consolidating information included within the consolidated financial statements of the Parent and its Affiliates. For information relating to the Non-Obligated Group, see “SUPPLEMENTAL FINANCIAL INFORMATION FOR THE NON-OBLIGATED GROUP.”

Appendix B to this Official Statement sets forth the audited consolidated balance sheets of the Parent and its Affiliates as of September 30, 2008 and 2009, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, together with supplemental consolidating information and the report of PricewaterhouseCoopers LLP, independent accountants on the 2009 consolidated financial statements. Appendix B includes financial information for entities that are not obligated with respect to the Bonds.

The summary statements of operations of the Combined Group for the six-month periods ended March 31, 2009 and 2010 were derived from the unaudited financial statements of the Combined Group prepared by management. In the opinion of management, such summary statements of operations include all adjustments necessary for a fair presentation of the information shown therein. The results of operations and the changes in net assets for the interim periods presented should not be taken as indicative of the results for a full year.

The summary statements of operations should be read in conjunction with the complete consolidated financial statements and supplemental consolidating information of the Combined Group for 2008 and 2009, together with the related notes and the independent auditors’ report included in Appendix B.

A-17

COMBINED GROUP STATEMENTS OF OPERATIONS (dollars in thousands)

Unaudited Years Ended September 30, Six Months Ended March 31, 2007 2008 2009 2009 2010

Unrestricted revenues, gains and other support Net patient service revenue $1,062,138 $1,196,124 $1,263,122 $596,192 $619,012 Net assets released from restrictions used for 1,404 3,566 3,310 1,079 1,096 operations Other revenue 68,704 78,201 95,665 47,134 45,129

Total revenues, gains and other support 1,132,246 1,277,891 1,362,097 644,405 665,237

Expenses Salaries, benefits and contracted labor 521,232 578,650 610,643 301,283 326,551 Supplies and other expenses 459,534 547,375 575,468 265,519 273,037 Depreciation and amortization 53,463 58,095 63,666 33,907 33,674 Interest 20,798 20,116 20,483 9,868 10,029 Provision for bad debts 32,092 32,039 36,245 14,944 11,001

Total expenses 1,087,119 1,236,275 1,306,505 625,521 654,292

Income from operations 45,127 41,616 55,592 18,884 10,945 Nonoperating income (expense) Investment income 5,890 5,581 5,450 3,054 4,497 Net realized and unrealized gain (loss) on 6,542 (7,014) 5,003 (25,883) 6,301 investments Total nonoperating income (expense) 12,432 (1,433) 10,453 (22,829) 10,798

Excess of revenues over expenses 57,559 40,183 66,045 (3,945) 21,743

Other changes in net assets Net assets released from restrictions used 9,468 8,013 2,094 84 1,408 for purchase of property and equipment Change in net unrealized gains and losses on 10,274 (25,013) 1,206 1,206 - investments Minimum pension liability adjustment 11,687 - - - - Pension related changes other than net - (21,547) (129,574) 3,041 6,508 periodic benefit cost Transfers (to) from related parties (7,583) (13,591) 22,632 (4,548) (6,896)

Increase (decrease) in unrestricted net assets 81,405 (11,955) (37,597) (4,162) 22,763 before changes in accounting principles

Changes in accounting principles (102,383) - 5,728 5,728 -

Increase (decrease) in unrestricted net assets (20,978) (11,955) (31,869) 1,566 22,763

Unrestricted net assets, beginning of year As previously reported 244,848 223,870 211,915 211,915 178,250 Adjustment for change in accounting for - - (1,796) - - pensions and postretirement benefits As adjusted 244,848 223,870 210,119 211,915 178,250

Unrestricted net assets, end of year $223,870 $211,915 $178,250 $213,481 $201,013 Source: Combined Group records

MANAGEMENT’S DISCUSSION OF RECENT FINANCIAL PERFORMANCE

The Combined Group generated revenue in excess of expenses of $57.6 million in 2007, $40.2 million in 2008, and $66.0 million in 2009. Over the same period, the Combined Group recorded a decrease in unrestricted net assets of $(21.0) million in 2007, $(12.0) million in 2008, and $(31.9) million in 2009. For the first six months of 2010, the

A-18 Combined Group generated revenue in excess of expenses of $21.7 million, compared to a deficiency of revenue over expenses of $(3.9) million for the comparable prior year period. Over the same period, the Combined Group recorded an increase in unrestricted net assets of $22.8 million in 2010 and $1.6 million in 2009. A discussion of the results of the Combined Group is set forth below.

Six Months Ended March 31, 2010 Compared to March 31, 2009

Revenues, Gains and Other Support - Total revenue, gains and other support of the Combined Group increased from $644.4 million to $665.2 million for the six months ended March 31, 2010, as compared to the six months ended March 31, 2009. The net patient service revenue of the Combined Group increased from $596.2 million to $619.0 million for the six months ended March 31, 2010, compared to the comparable prior year period, or by $22.8 million (3.8%). Management attributes this growth in net patient service revenue to certain rate and volume increases and in shifts of volume between payors. This growth was offset by a decrease in Medicaid Supplemental Funds of $4.9 million, as well as increases in free care expense of $3.6 million and administrative allowances of $3.6 million over the comparable prior period. Health center visits increased by 9.0%, emergency visits increased by 2.5%, surgeries increased by 3.4%, and patient days increased by 0.6%. Home health visits decreased by 10.4% and discharges decreased by 2.5%. Other revenue decreased from $47.1 million to $45.1 million, or by $2.0 million (4.3%), due principally to reclassifying certain lab outreach activity that was previously recorded in net patient service revenue in the comparable prior year period. This reclassification was offset by an increase in affiliate contract income representing UMass Memorial Laboratories, Inc. Lab Outreach Program activity due to the Medical Center.

Expenses - Total expenses of the Combined Group increased from $625.5 million for the six months ended March 31, 2009, to $654.3 million for the six months ended March 31, 2010, or $28.8 million (4.6%). Management attributes this increase in expenses to increases in salaries, fringe benefits and contracted labor of $25.3 million and supplies and other expenses of $7.5 million. The increase in salaries, fringe benefits and contracted labor is attributable to wage inflation, increases in certain fringe benefits provided to the labor base, and additional FTEs. The increase in supplies and other expenses is primarily due to increases in purchased services, medical surgical areas such as pharmaceuticals and medical supplies, and other expenses such as maintenance fees and utilities. Medical education services expense decreased by $5.5 million for the six months ended March 31, 2010, as compared to the prior year period. The provision for bad debts decreased by $3.9 million, as compared to the prior year period. The decrease in the provision for bad debts is primarily due to decreases in reserve rates specifically associated with free care as a payor category and also takes into consideration the potential lagging of the Commonwealth processing payments on free care claims. All other expense categories are generally consistent when comparing the six month period ended March 31, 2010, to the six month period ended March 31, 2009.

Non-operating Income (Expense) - During the six months ended March 31, 2010, the Combined Group reported investment income of $4.5 million and net realized and unrealized gains on investments of $6.3 million, which includes net realized gains of $0.9 million and net unrealized gains of $5.4 million.

Other Changes in Net Assets - During the six months ended March 31, 2010, the Combined Group made net equity transfers of $6.9 million to Affiliates and recorded an increase in net assets for Pension Related Changes Other than net periodic benefit cost of $6.5 million. The Combined Group transferred $5.1 million to the Medical Group, $1.3 million to Marlborough Hospital, $0.4 million to UMass Memorial Realty, Inc. (“Realty Corp.”), and $0.1 million to The Clinton Hospital Association (the “Clinton Hospital”). The Combined Group also recorded $1.4 million of net assets released from restrictions used for property and equipment during the six months ended March 31, 2010. The System reports all amounts paid from the Combined Group to the Non-Obligated Group for which there is no expectation of repayment, nor immediate economic value, as equity transfers.

2009 Compared to 2008

Revenues, Gains and Other Support - Total revenues, gains and other support of the Combined Group increased from $1.3 billion to $1.4 billion for 2009, as compared to 2008. The net patient service revenue of the Combined Group increased from $1.2 billion to $1.3 billion for 2009, compared to prior year, or by $67.0 million (5.6%). Management attributes this growth in net patient service revenue to certain rate and volume increases and in shifts of volume between payors. This growth was offset by a decrease in Medicaid Supplemental Funds of $7.1 million, as well as increases in free care expense and administrative allowances of $14.4 million and $3.9 million, respectively,

A-19 over the comparable prior period. Discharges increased by 4.7%, surgeries increased by 4.7%, emergency visits increased by 4.2%, and patient days increased by 2.5%. Health center visits decreased by 8.5% and home health visits decreased by 5.6%. Other revenue increased from $78.2 million to $95.7 million, or by $17.5 million, due principally to an increase in corporate overhead costs of the Non-Obligated Group entities that are charged to each respective entity and are reported as other revenue to the Combined Group, an increase in UMass Memorial Laboratories, Inc. Lab Outreach Program activity, and increases in affiliate agreements such as malpractice premiums.

Expenses - Total expenses of the Combined Group increased from $1.2 billion for 2008, to $1.3 billion for 2009, or $70.2 million (5.7%). Management attributes this increase in expenses to increases in salaries, fringe benefits and contracted labor of $32.0 million, supplies and other expenses of $28.1 million, depreciation and amortization expense of $5.6 million, and an increase in the provision for bad debts of $4.2 million. The increase in salaries, fringe benefits and contracted labor is attributable to wage inflation, increases in certain fringe benefits provided to the labor base, and additional FTEs. The increase in supplies and other expenses is primarily due to increases in purchased services, including purchased services from the Medical Group and medical surgical areas such as pharmaceuticals and medical supplies. Medical education services expense decreased by $10.0 million for the twelve months ended September 30, 2009, as compared to the prior year period. The increase in the provision for bad debts is primarily due to fluctuations in certain payor categories experienced in the receivable balances as compared to the prior period.

Non-operating Income (Expense) - During 2009, the Combined Group reported investment income of $5.5 million and net realized and unrealized gains on investments of $5.0 million, which includes net realized losses of $8.4 million and net unrealized gains of $13.4 million.

Other Changes in Net Assets - During 2009, the Combined Group received net equity transfers of $22.6 million from Affiliates, reported an increase in net unrealized gains and losses on investments of $1.2 million related to a cumulative effect adjustment as a result in adoption of the fair value option of accounting for certain of its investments, and recorded a decrease in net assets for pension related changes other than net periodic benefit cost of $129.6 million. The Combined Group received $33.3 million from UMass Memorial Health Ventures, Inc. and transferred $7.4 million to the Medical Group, $1.2 million to Marlborough Hospital, $1.1 million to Clinton Hospital, $0.7 million to Realty Corp., and $0.3 million to Wing Memorial Hospital Corporation. The Combined Group also recorded $2.1 million of net assets released from restrictions used for purchase of property and equipment. The System reports all amounts paid from the Combined Group to the Non-Obligated Group for which there is no expectation of repayment, nor immediate economic value, as equity transfers.

2008 Compared to 2007

Revenues, Gains and Other Support - Total revenues, gains and other support of the Combined Group increased from $1.1 billion to $1.3 billion for 2008, as compared to 2007. The net patient service revenue of the Combined Group increased from $1.1 billion to $1.2 billion for 2008, compared to the comparable prior year period, or by $134.0 million (12.6%). Management attributes this growth in net patient service revenue to certain rate and volume increases and in shifts of volume between payors, and an increase in Medicaid Supplemental Funds of $24.8 million for the twelve months ended September 30, 2008, as compared to the prior year period. Administrative allowances decreased net patient service revenue by $0.9 million. Health center visits increased by 3.5%, emergency visits increased by 3.4%, patient days increased by 2.2%, surgeries increased by 1.4%, and discharges increased by 1.3%. Home health visits decreased by 13.9%. Other revenue increased from $68.7 million to $78.2 million, or by $9.5 million, due principally to an increase in corporate overhead costs of the Non-Obligated Group entities that are charged to each respective entity and are reported as other revenue to the Combined Group, an increase in Affiliate Contract Income representing UMass Memorial Laboratories, Inc. Lab Outreach Program activity and an increase in other affiliate agreements such as malpractice premiums. Net assets released from restrictions used for operations increased from $1.4 million to $3.6 million or by $2.2 million due principally to an increase in institutional fund income of $1.1 million and additional grant receipts of $1.1 million.

Expenses - Total expenses of the Combined Group increased from $1.1 billion for 2007, to $1.2 billion for 2008, or $149.1 million (13.7%). Management attributes this increase in expenses to increases in supplies and other expenses of $87.8 million, salaries, fringe benefits and contracted labor of $57.4 million, and depreciation and amortization

A-20 expense of $4.6 million. These increases were offset by a decrease in interest expense of $0.7 million. The increase in supplies and other expenses is primarily due to increases in purchased services, including purchased services from the Medical Group, medical surgical areas such as pharmaceuticals and medical supplies, and other increases such as professional liability, contribution expense and professional fees. The increase in salaries, fringe benefits and contracted labor is attributable to wage inflation, increases in certain fringe benefits provided to the labor base and additional FTEs. Medical education services expense increased by $23.1 million for the twelve months ended September 30, 2008, as compared to the prior year period.

Non-operating Income (Expense) – During 2008, the Combined Group reported investment income of $5.6 million and net realized losses on investments of $7.0 million.

Other Changes in Net Assets - During 2008, the Combined Group made net equity transfers of $13.6 million to Affiliates, reported a decrease in net unrealized gains and losses on investments of $25.0 million, and recorded a $21.5 million decrease in net assets for pension related changes other than net periodic benefit cost. The Combined Group transferred $8.4 million to the Medical Group, $3.4 million to Marlborough Hospital, $1.0 million to Clinton Hospital, $0.8 million to Realty Corp., $0.3 million to Wing Memorial Hospital Corporation, and received $0.3 million from UMass Memorial Laboratories, Inc. The Combined Group also recorded $8.0 million of net assets released from restrictions used for purchase of property and equipment. The System reports all amounts paid from the Combined Group to the Non-Obligated Group for which there is no expectation of repayment, nor immediate economic value, as equity transfers.

Current Challenges

The System recognizes that the financial and business model for health systems is changing due to the passage of national health reform. In Massachusetts, a form of health care reform was enacted several years ago. In addition, Massachusetts is exploring modifying the reimbursement system to migrate away from a procedure based model to a risk adjusted global based payment model. To that end, the System is transitioning from individual, entity planning to a strategic planning approach for the System. The strategic planning process was kicked off in 2009 with three main objectives:

1. Create a rolling, strategic planning process for the System that is sustainable over time.

2. Refresh/create an integrated strategic plan for 2010-2013 using a participative process that includes clinical, administration, and physician leadership for the health care system.

3. Utilize the integrated plan to support clinical service line planning for the organization, beginning in 2010.

From the above process, four major strategic goals were developed from which specific priorities, objectives and tactics are being developed to support the accomplishment of the major goals. The four major goals are as follows:

Strategic Goal 1: Pursue High Quality, Patient-Centered Care and Service Excellence.

Strategic Goal 2: Grow the Number of Patients Served through New Strategic Partnerships and Targeted Investment in Marquee Patient Care Services.

Strategic Goal 3: Pursue Integrated and Coordinated Care Across the Continuum through a High Performing System.

Strategic Goal 4: Implement a Robust Strategy to Create a Sustainable Financial Model for the System that Focuses on Cost Control, Productivity and Implementing Value Based Care Processes.

The particular challenge for the next three to five years for the System will be to maintain a financially sustainable organization under the current payor system while anticipating a still undecided system of health care financing. Annual increases in payments for healthcare services have generally exceeded overall inflation; however, with the

A-21 enactment of national health care reform it is anticipated that future increases in Medicare payments will be lower than inflation. The System also anticipates similar actions on payments from the Massachusetts Medicaid program.

Management tracks performance related to its established goals on a regular basis with presentations to senior management and its governance boards. Continued improvements in revenue growth and managing expenses will be necessary to improve the cash position of the Combined Group and achieve the goals of the Combined Group’s strategic plan. Any significant failure related to the above initiatives may have a material adverse effect on the Combined Group. For a discussion of the liquidity of the Combined Group, see “SUPPLEMENTAL FINANCIAL INFORMATION FOR THE COMBINED GROUP”. For a discussion of financial pressures on the health care industry, generally, see “BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY.”

SUPPLEMENTAL FINANCIAL INFORMATION FOR THE COMBINED GROUP

The following chart sets forth the historical coverage of annual debt service on long-term debt of the Combined Group. The debt service coverage ratio is based on income available for debt service during 2007, 2008 and 2009. The pro forma calculation sets forth the historical coverage of estimated maximum annual debt service on all outstanding long-term indebtedness of the Combined Group assuming issuance of the Bonds, calculated in accordance with the Master Trust Indenture. There can be no assurance that the Combined Group will generate income available for debt service in future years comparable to historical performance.

COMBINED GROUP Actual and Pro Forma Historical Debt Service Coverage (dollars in thousands)

2007 2008 2009

Excess of Revenue over Expenses $57,559 $40,183 $66,045 Income from irrevocable deposits (1,318) (808) (656) Depreciation and Amortization 53,463 58,095 63,666 Interest Expense 20,798 20,116 20,483 Income Available for Debt Service $130,502 $117,586 $149,538

Actual Debt Service* $36,972 $38,498 $42,394

Historical Coverage of Actual Debt 3.53 3.05 3.53 Service**

Pro Forma Estimated $37,926 $38,822 $42,718 Maximum Annual Debt Service***

Historical Coverage of Pro Forma 3.50 3.00 3.50 Maximum Annual Debt Service *** * Includes the sum of interest expense plus current portion of long-term debt, and certain debt guarantees for Non-Obligated Group entities. ** Income Available for Debt Service divided by Actual Debt Service, as defined in the Master Trust Indenture. *** Represents the estimated maximum annual debt service on long-term indebtedness of the Combined Group following issuance of the Bonds. Source: Combined Group records

In the Master Trust Indenture, the Combined Group has agreed to maintain not less than 60 Days Cash on Hand at the end of each fiscal year. The following chart sets forth the actual Days Cash on Hand as of 2007, 2008 and 2009 and as of March 31, 2010. There can be no assurance that Days Cash on Hand for future fiscal years will be maintained at the historical levels shown, and failure to achieve and maintain the 60 Days Cash on Hand ratio would constitute a default under the Master Trust Indenture.

A-22 COMBINED GROUP Cash and Investments (dollars in thousands)

Year Ended September 30, Six Months Ended March 31, 2007 2008 2009 2010 Cash, cash equivalents and marketable securities* $271,332 $237,633 $363,341 $387,915 Amounts on Deposit in Construction Funds 3,686 6,252 38,647 23,141 Total Cash $275,018 $243,885 $401,988 $411,056

Operating Expenses $889,722 $1,011,601 $1,079,999 $564,785

Days Cash on Hand 113 88 136 133 *Excluding funds on deposit in construction funds. Source: Combined Group records

Liquidity

Total cash, which consists of unrestricted cash, cash equivalents, marketable securities and amounts on deposit in construction funds (“cash”) of the Combined Group increased by $158.1 million from 2008 to 2009. The increase in cash was primarily due to the receipt of special Medicaid payments of $286.1 million from the Massachusetts Division of Medical Assistance (“DMA”) offset by medical education service payments of $233.7 million to the Medical School. In May 2009, the Medical Center received proceeds of $60 million from the Authority’s Variable Rate Demand Revenue Bonds, UMass Memorial Issue, Series E and F (the “Series E and F Bonds”) for financing capital projects and $20.0 million in July 2009 for capital lease financing. In addition, the market value of investments increased by $13.4 million during 2009. The increase in cash was partially offset by payments of liabilities to vendors, scheduled payments on long-term debt, capital leases and pension obligations. As of March 31, 2010, the Combined Group had approximately $411.1 million (133 days) of cash on hand.

March 31, 2010 Compared to September 30, 2009

Total cash of the Combined Group increased by $9.1 million from September 30, 2009, to March 31, 2010. The increase in cash was primarily due to payments received from third-party payors including special Medicaid payments of $23.5 million received from the DMA. The market value of investments increased by $5.4 million during the six-month period ended March 31, 2010. The increases in cash were primarily offset by expenditures related to (1) payments of liabilities to vendors, (2) scheduled payments on long-term debt and capital leases, (3) pension obligations and (4) payments to the Medical School for shared services.

2009 Compared to 2008

The excess of revenue over expenses, after adding back depreciation and amortization expense of $63.7 million, provided $129.7 million in cash in 2009. In addition, cash was provided by operating activities during 2009 due to a $9.9 million increase in accrued compensation. These increases in cash were partially offset in 2009 by a $16.7 million increase in net patient accounts receivable and a $0.2 million decrease in accounts payable and accrued expenses.

2008 Compared to 2007

The excess of revenue over expenses, after adding back depreciation and amortization expense of $58.1 million, provided $97.1 million in cash in 2008. In addition, cash was provided by operating activities during 2008 due to a $14.9 million increase in accounts payable, accrued expenses and accrued compensation. These increases in cash were partially offset in 2008 by a $19.4 million increase in net patient accounts receivable.

A-23 FINANCIAL INFORMATION OF THE NON-OBLIGATED GROUP

The System includes a number of organizations that are not members of the Combined Group (such organizations that are members of the System but not members of the Combined Group are referred to as the Non-Obligated Group). The Non-Obligated Group has no obligation with respect to the Bonds or under the Master Trust Indenture and none of the assets or revenues of the Non-Obligated Group are available for or pledged to support debt service on the Bonds. NON-OBLIGATED GROUP STATEMENTS OF OPERATIONS (dollars in thousands) Unaudited Years Ended Six Months September 30, Ended March 31, 2007 2008 2009 2009 2010 Unrestricted revenues, gains and other support Net patient service revenue $ 592,999 $ 633,952 $ 675,259 $ 324,558 $ 348,743 Net assets released from restrictions used 1,820 1,154 1,025 380 404 for operations Other revenue 186,844 218,260 276,563 131,809 154,456

Total revenues, gains and other support 781,663 853,366 952,847 456,747 503,603

Expenses Salaries, benefits and contracted labor 445,249 497,495 549,725 268,784 291,964 Supplies and other expenses 259,978 291,057 327,861 151,666 174,980 Depreciation and amortization 18,711 19,849 21,345 10,923 11,620 Interest 3,628 3,177 3,399 1,652 1,618 Provision for bad debts 22,697 23,577 23,288 12,148 14,493

Total expenses 750,263 835,155 925,618 445,173 494,675

Income from operations 31,400 18,211 27,229 11,574 8,928 Nonoperating income (expense) Investment income 2,756 632 2,486 1,838 830 Net realized and unrealized gain (loss) on 1,906 (3,158) (4,159) (26,494) 5,415 investments Total nonoperating income (expense) 4,662 (2,526) (1,673) (24,656) 6,245

Excess of revenues over expenses 36,062 15,685 25,556 (13,082) 15,173

Other changes in net assets Gain (loss) from discontinued operations (1,251) 1,208 (198) (96) - Net assets released from restrictions used 1,738 2,197 1,959 898 479 for purchase of property and equipment Change in net unrealized gains and losses 11,010 (27,029) (920) (920) - on investments Minimum pension liability adjustment 1,048 - - - - Pension related changes other than net - (1,467) (4,589) 75 288 periodic benefit cost Transfers from related parties 7,583 13,591 (22,632) 4,548 6,896

Increase (decrease) in unrestricted net assets 56,190 4,185 (824) (8,577) 22,836 before changes in accounting principles

Changes in accounting principles (2,151) - 4,170 4,170 -

Increase (decrease) in unrestricted net 54,039 4,185 3,346 (4,407) 22,836 assets

Unrestricted net assets, beginning of year As previously reported 221,630 275,669 279,854 279,854 282,305 Adjustment for change in accounting - - (895) - - for pensions and postretirement benefits As adjusted 221,630 275,669 278,959 279,854 282,305

Unrestricted net assets, end of year $ 275,669 $ 279,854 $ 282,305 $ 275,447 $ 305,141 Source: System records

A-24 FACILITIES

The principal facilities of the Medical Center are located at the University, Memorial, and Hahnemann Campuses. The facilities located at the Memorial Campus consist of approximately 720,000 square feet, with a significant renovation of inpatient facilities completed in 1996. The Hahnemann Campus is used for outpatient services and ambulatory surgery. Various renovation projects have occurred at the Memorial and Hahnemann Campuses since 1996. The facilities located at the University Campus consist of approximately 1,120,000 square feet of space owned by the University and used by the Medical Center pursuant to a 99-year occupancy agreement that terminates in 2097, which space was principally constructed in 1975. See “HISTORY – Description of the Transaction.” In 2006, a significant expansion to the University Campus of 264,000 square feet (included in the above number) was completed and known as the “Lakeside Expansion”. This project included a significant expansion of the Emergency Department facilities, along with construction of 10 new operating rooms, 66 treatment rooms, 16 new ICU beds, and a complete reconfiguration of ambulance and LifeFlight access, including a new helipad. Shell space in the original project has since been fitted out to accommodate 16 additional ICU beds plus 18 Step-Down and Medical/Surgical beds.

In addition, the Parent or the Affiliates own or lease approximately 200,000 square feet of space at various other locations in the central Massachusetts area.

The Medical Center has expended approximately $414.3 million on capital projects in the last five years through September 30, 2009, and anticipates future capital renovation, equipment, and improvement projects in the next few years. The Medical Center currently expects to fund such future expenditures through operating revenues, development funds and, depending upon market conditions, tax-exempt financing.

OUTSTANDING INDEBTEDNESS

Outstanding long-term indebtedness of the Combined Group as of September 30, 2009, and as of September 30, 2008, is presented in the audited consolidated financial statements and consolidating supplemental schedules set forth in Appendix B to this Official Statement. The Medical Center entered into a $20.0 million master lease agreement in November 2006 for the purchase of medical equipment used in health care operations throughout the System. As of March 31, 2010, the Combined Group has drawn $20.0 million from this facility for reimbursement for equipment purchases. The Medical Center entered into an additional $20.0 million master lease agreement in April 2008 for the purchase of medical equipment used in health care operations throughout the System. As of March 31, 2010, the Combined Group has drawn down $20.0 million from this facility for reimbursement for equipment purchases. In May 2009, the Medical Center entered into two agreements with the Authority to issue the Series E and F Bonds, in the aggregate amount of $60.0 million. These amounts were for the renovation, equipping, and construction projects throughout the System. As of February 28, 2010, the Combined Group has drawn down $35.0 million from this facility for reimbursement; $25.0 million remains in funds held in escrow pending future expenditures. In July 2009, the Medical Center entered into a $20.0 million master lease agreement for the purchase of medical equipment used in health care operations throughout the System. As of February 28, 2010, the Combined Group has drawn down $11.4 million from this facility for reimbursement for equipment purchases; $8.6 million remains in funds held in escrow pending future equipment purchases. In addition to the indebtedness reflected in Appendix B, Members of the Combined Group have guaranteed various other borrowings by Non- Obligated Group Affiliates, including without limitation a guarantee of $20.0 million in principal amount of bonds for Central New England HealthAlliance, Inc. (“CNEHA”). For further information, see footnote 7 to the audited consolidated financial statements and consolidating supplemental schedules as set forth in Appendix B to this Official Statement. The Combined Group has not been required to make any payments under any of these guarantees.

LITIGATION AND REGULATORY MATTERS

The Medical Center has malpractice matters and other litigation that management believes to be adequately covered by insurance or existing reserves. The following more significant matters are currently pending:

A-25 United States Office of Inspector General Audit The Office of Audit Services of the Office of Inspector General of the United States Health & Human Services (the “OIG”) commenced an audit in 2005 of the Commonwealth of Massachusetts’ Medicaid Program to determine whether supplemental payments made by the Medicaid program to the Medical Center were appropriate and made in accordance with Federal requirements and the approved state Medicaid plan. The audit was directed to the federal fiscal years 2004 and 2005, but the accountants reviewed claims from fiscal years 2000 through and including 2005. In December, 2009, the OIG released its final report to Centers for Medicare and Medicaid Services (“CMS”) in the form of a recommendation for final determination. The report, which is advisory only, identified $11.5 million in alleged overpayments ($5.75 million federal share) and suggested the state work with CMS to determine the appropriateness of an additional $5.6 million ($2.8 million federal share) in other supplemental payments, although the OIG rendered no opinion with respect to those funds. The state agency has submitted comments to the OIG and CMS indicating its disagreement with $8.5 million of this $11.5 million finding. The Medical Center concurs with the state agency’s position. The Commonwealth is currently in discussions with CMS over whether and to what extent any repayment will be made. If the Commonwealth is unsuccessful in its discussions and the total findings are accepted by CMS, management does not believe that any repayment would have a material adverse effect on the Medical Center’s financial condition, results of operations, or cash flows.

CMS Notice of Deferral On March 17, 2006, CMS sent to the state Medicaid agency notice of a deferral of federal financial participation (“FFP”) for certain supplemental payments made to the Parent. The federal share of the amounts deferred relating to the Parent is approximately $27 million. The stated reason for the deferral is that the state had not provided sufficient information to CMS upon which to evaluate the claim for FFP. The Parent worked with the Commonwealth to prepare a response, which was sent to CMS in the spring of 2006. The Parent has not yet received any response from CMS, although CMS has not released the deferred funds. The state Medicaid agency has not recouped any funds from the Parent as a result of the deferral. If CMS turns the deferral into a disallowance, and the Commonwealth recoups this funding from the Parent, management does not believe that any repayment would have a material adverse effect on the System’s financial statements.

Wage and Hour Class Action

The Medical Center, along with several other Affiliates, have been named in two separate but related class action lawsuits (one filed in federal court and the other filed in state court) alleging various violations of federal and state wage and hour laws. The lawsuits also allege violations of ERISA, RICO, fraud and several other related claims. The lawsuits are part of a national effort by a law firm targeting health care facilities across the country. Four other of the largest systems in Massachusetts were sued on virtually identical claims on the same day that the Medical Center (and several Affiliates) were sued. The essence of the claims in both cases is that Medical Center (and several Affiliates) has not paid its non-exempt employees for all time actually worked. Plaintiffs claim that they were improperly subject to an automatic deduction for meal periods that were missed or interrupted. They also claim that the Medical Center (and several Affiliates) was aware that employees were not being properly paid for their meal periods and other off the clock work.

The Medical Center has hired an experienced, national labor and employment law firm to defend its interests in this matter. The firm has engaged in an extensive investigation of the claims, has removed the state action to federal court and has filed several motions to dismiss the complaint or claims contained therein. Management does not believe that this matter will have a material adverse effect on the consolidated financial statements even if plaintiffs are successful on their claims.

INSURANCE

The Parent and certain of its Affiliates are self-insured for certain professional and general liability, health insurance, and workers’ compensation benefit programs. In addition, a range of commercial insurance coverage is in place for certain exposures that are not self-insured, along with commercial excess insurance over the self-insured programs.

A-26 The University’s Self-Insurance Trust was established effective July 1, 1985 as an irrevocable self-insurance trust. The Trust was established to provide professional liability, University Campus premises liability and physicians’ and surgeons’ liability coverage on an occurrence basis for incidents arising subsequent to June 30, 1985 for the Teaching Hospital and the Group Practice. In addition, the Trust provided coverage for interns and residents working off-site.

At the time of the Transaction, the University transferred substantially all of the assets and liabilities of the Trust to the Parent. On April 1, 1999, the Commonwealth Professional Assurance Company, Ltd. (“CPAC”), a captive insurance company, was incorporated in Grand Cayman, British West Indies. The Parent is the sole shareholder of CPAC, which provides insurance for the Parent’s Self Insurance Program (“SIP”).

CPAC provides professional malpractice coverage of $5 million per incident with a $60 million annual aggregate to employees (including residents) and physicians of the Medical Center and the Medical Group and other Affiliates, and general liability coverage for the Medical Center premises. The Parent purchases reinsurance of $50 million over the primary CPAC program. Effective October 1, 2002, CPAC also began to fund the workers compensation liability at statutory limits for the Medical Center and the Medical Group, with excess insurance currently purchased on a commercial basis for claims exceeding a $750,000 self-insured retention. Effective October 1, 2003, all of the Member Affiliate hospitals and entities were brought into the CPAC program and share in the same aggregate coverage levels for professional and general liability and workers compensation.

Other types of insurance coverage, purchased commercially, include directors and officers and employment practices liability, fiduciary, property and business interruption, stop-loss reinsurance over the self-funded health insurance plans, aviation and helipad, travel accident, crime, motor vehicle/ambulance, and professional and general liability for the long term care facilities. The Combined Group also has an umbrella policy with limits of $5 million over the automobile, ambulance and employers liability lines of coverage.

OTHER CORPORATE AFFILIATES

Central New England HealthAlliance, Inc. & Affiliates

UMass Memorial Hospitals, Inc. is the sole corporate member of CNEHA, and CNEHA is the sole corporate member of HealthAlliance Hospitals, Inc. (“HealthAlliance”). HealthAlliance operates a general acute hospital facility on two campuses in Leominster, Massachusetts and Fitchburg, Massachusetts with a total of 103 medical/surgical beds, 15 psychiatric beds, and 25 rehabilitation beds. In 2009, CNEHA and its affiliates had combined revenues of $183.8 million, an excess of revenues over expenses of $5.1 million and, as of September 30, 2009, had combined assets of $187.4 million.

CNEHA maintains local community representation on its own Board of Trustees. The Parent has guaranteed $20 million of revenue bonds issued on behalf of CNEHA and certain of its affiliates to pay for a portion of CNEHA’s master facility plan ($13.5 million remained outstanding as of September 30, 2009). The Parent has not been called upon to make any payments with respect to such guarantee.

Other affiliates of CNEHA include: HealthAlliance Realty Corp., which owns three medical office buildings; Coordinated Primary Care, Inc., which is an employed physician group practice; and HealthAlliance Home Health and Hospice, Inc., which operates a home health care agency.

CPAC

On April 1, 1999, CPAC was incorporated as an insurance company in Grand Cayman, British West Indies. The Parent is the sole shareholder and member of CPAC and annually appoints its Board of Directors. CPAC provides insurance for the Combined Group. See “INSURANCE.” As of September 30, 2009, CPAC held assets of $117.3 million and had actuarially estimated liabilities of $102.0 million (75% confidence level, discounted by 4.0% for both professional and general liability and workers compensation, expected valuation of liability, and includes malpractice, general liability, and workers compensation liabilities).

A-27 The Clinton Hospital Association

Clinton Hospital became an affiliate of WCCC in 1995 and became an Affiliate of the Parent as part of the Transaction. Clinton Hospital is a 41-bed community hospital located in Clinton, Massachusetts. Clinton Hospital’s largest inpatient service is geriatric psychiatry. In 2009, Clinton Hospital had revenues of $25.9 million and an excess of revenues over expenses of $0.8 million and, as of September 30, 2009, total assets of $23.3 million.

Community Healthlink, Inc.

Effective June 30, 1998, UMass Memorial Behavioral Health Systems, Inc., of which the Parent is sole corporate member, became the sole corporate member of Community Healthlink, Inc. (“CHL”). CHL provides community mental health, substance abuse, homeless and rehabilitation services for adults, children and families in central Massachusetts, serving over 17,000 clients in 2009. In 2009, CHL had revenues of $47.2 million, revenues over expenses of $33,000 and, as of September 30, 2009, total assets of $14.4 million.

Marlborough Hospital

Marlborough Hospital became an affiliate of WCCC in 1995 and became an Affiliate of the Parent as part of the Transaction. Marlborough Hospital is a 79-licensed bed community hospital located in Marlborough, Massachusetts. In 2009, Marlborough Hospital had revenues of $69.7 million, revenues over expenses of $1.6 million and, as of September 30, 2009, total assets of $46.0 million.

Wing Memorial Hospital Corporation

Wing Memorial Hospital Corporation (“Wing Memorial”) became an Affiliate of the System effective October 1, 1999. Wing Memorial is a 74-bed community hospital located in Palmer, Massachusetts. In 2009, Wing Memorial had revenues of $69.9 million, excess of revenues over expenses of $0.4 million and, as of September 30, 2009, total assets of $61.2 million.

UMass Memorial Medical Group, Inc.

The Medical Group is an Affiliate of the Parent and is the principal provider of physician services to the Medical Center. As of March 31, 2010, 952 (865 FTEs) physicians were employed directly by the Medical Group. In 2009, the Medical Group had revenues of $400.1 million, a deficiency of revenues over expenses of $0.1 million and, as of September 30, 2009, total assets of $102.0 million. See “UMASS MEMORIAL MEDICAL CENTER, INC. - Medical Staff” for a further discussion of the Medical Group.

Additional Corporate Affiliates

Except as noted below, the Parent is also a direct or indirect corporate member, stockholder, owner or partner of the following Affiliates which, in the aggregate, accounted for approximately 6.2% of the revenues generated by the System during 2009.

Entity Principal Activity

Caitlin Raymond International Registry A comprehensive resource for patients and physicians conducting searches for unrelated marrow, cord blood or peripheral blood stem cell donors. Develops and implements procedures and practices for stem cell donor searches. Coordinates bone marrow, peripheral blood stem cell and placental cord unit searches.

Central Massachusetts Magnetic Imaging Center Provides magnetic resonance imaging services (owned in part with others). Part owner of UMass Memorial

A-28 Entity Principal Activity MRI and Imaging Center, LLC.

New England Rehabilitation Services of Central Operates inpatient rehabilitation hospital (d/b/a Fairlawn Massachusetts, Inc. Rehabilitation Hospital) (owned in part with others).

UMass Memorial Health Ventures, Inc. Functions as holding company for various Affiliates. Operates the Caitlin-Raymond International Program and the New England Bone Marrow Donor Registry.

UMass Memorial Investment Partnership, LLP Manages pooled investments for participating System entities.

UMass Memorial Laboratories, Inc. Provides laboratory support services and manages laboratory outreach services.

UMass Memorial Realty, Inc. Owns and leases real property.

In addition, the following Affiliates serve principally as holding companies for Affiliates: Commons II, Inc., MedPro, Inc., UMass Memorial Behavioral Health System, Inc., and UMass Memorial Hospitals, Inc. Members of the System are also participating in joint ventures relating to MRI services, philanthropy, investment management, physician-hospital joint contracting, pharmacy benefit management, and other health related activities.

CLINICAL AFFILIATES

In addition to its primary academic affiliation with the Medical School, the Medical Center maintains clinical affiliations with the following providers:

Berkshire Health System Day Kimball Hospital Harrington Memorial Hospital Heywood Hospital Holyoke Hospital Milford Regional Medical Center Noble Hospital

These affiliation arrangements range from the pursuit of special projects to the provision of clinical and professional services to educational and training opportunities for various departments of the clinical affiliates.

SOURCES OF PATIENT SERVICE REVENUE

The Medical Center maintains agreements with the United States Department of Health and Human Services (“DHHS”) under the Medicare program, the Commonwealth under the Medicaid program, Blue Cross and Blue Shield of Massachusetts, Inc. (“BCBSMA”), and certain other managed care programs that govern payment to the Medical Center for services rendered to patients covered by these programs. Net patient service revenue is recorded after deductions for free care, charity and other discounts and allowances.

The following table shows the distribution of gross patient service revenue for the Medical Center by payor source and by inpatient and outpatient designation for the three fiscal years ended September 30, 2009. This information is based on patient classification at the time of discharge billing.

A-29 SOURCE OF GROSS PATIENT REVENUE Fiscal Year Ended September 30, 2007 2008 2009 SOURCE Medicare - Non-Managed Care 27.4% 26.6% 26.5% Medicare, Managed Care-Other 7.5 7.9 9.0 Medicaid - Non Managed Care 11.1 11.0 10.9 Medicaid, Managed Care-Other 6.2 7.6 6.9 Managed Care-Other* 38.8 38.8 38.1 Commercial Insurance 4.9 4.9 5.1 Other 4.1 3.2 3.5 TOTAL 100.0% 100.0% 100.0% Inpatient 57.4% 57.2% 55.4% Outpatient 42.6 42.8 44.6 TOTAL 100.0% 100.0% 100.0% *Management has determined that Blue Cross has significantly transitioned to managed care products. As a result, Blue Cross information has been combined with Managed Care-Other and all periods presented have been reclassified. Source: Medical Center records

While the method of payment varies substantially from one payor category to another and even within certain payor categories, the Medical Center, in common with the broader hospital industry, has generally experienced a shift from payors who pay on the basis of charges or discounted charges, to payors who pay on a per diem or diagnosis basis.

Health Care Reform

On March 23, 2010, the President signed into law comprehensive health reform through the Patient Protection and Affordable Health Care Act (Pub. L. 111-148). On March 30, 2010, the President signed a budget reconciliation bill that included amendments to the prior legislation (Pub. L. 111-152). These laws in combination form the “health reform legislation.” The legislation will extend coverage to 32 million Americans currently without health insurance and will attempt to address the issue of escalating health care costs in this country. Some of the provisions in the national health reform legislation are similar to the provisions put in place in 2006 when Massachusetts passed its own health care reform law. For more detail, see “BONDOWNERS’ RISKS – National Health Reform” in the forepart of this Official Statement and “SOURCES OF PATIENT SERVICE REVENUE” under the headings “Medicare,” “Medicaid” and “Health Safety Net Fund” herein.

Medicare

Medicare is a federal health care program created by Title XVIII of the Social Security Act (the “SSA”). Medicare covers both hospital and physician services for eligible individuals who are elderly, disabled or subject to certain chronic conditions.

Medicare generally pays acute care hospitals, such as the Hospital, for most general medical/surgical services provided to eligible inpatients under a prospective payment system (“PPS”) known as inpatient prospective payment system or “IPPS.” Under IPPS, hospitals receive a predetermined payment amount for each Medicare discharge. This IPPS payment is a standard national amount based on the diagnosis related group (“DRG”) for the discharge subject to a geographic adjustment that takes into account wage differentials. DRGs classify treatments for illnesses according to the estimated costs of hospital resources necessary to furnish care for each patient’s principal diagnosis and establish a payment amount for that diagnosis treatment group (based on a weighting factor that takes into account use of hospital resources within that DRG relative to other DRGs). Hospitals are thus at financial risk for providing services to a patient at an actual cost greater than the applicable DRG payment. DRG rates are updated and DRG weights are recalibrated annually.

Beginning in federal fiscal year (“FY”) 2007, the IPPS system was revised. To ensure that payments more accurately reflect the costs of services provided by hospitals, CMS transitioned to a system that uses DRG relative weights based on hospital costs rather than charges. CMS implemented the new weights over a three year period.

A-30 FY 2009 was the first year in which hospitals were paid based solely on cost-based DRG weights. CMS also implemented a new DRG classification system, referred to as the Medicare-Severity DRGs (“MS-DRGs”), replacing the previous 538 DRGs with 745 new MS-DRGs based on the presence or absence of a complication or comorbidity. FY 2009 was the first year in which the relative weights were based entirely on the MS-DRG system. To account for the possibility that the adoption of MS-DRGs might lead to increases in aggregate payments to hospitals without a corresponding increase in actual patient severity of illness due to incentives for additional documentation and coding, CMS reduced the IPPS standardized payment amount by 0.6% in FY 2008 and 0.9% in FY 2009, and may make additional adjustments in FY 2010, 2011 and 2012 after a full analysis of relevant data can be completed.

The DRG payment is comprised of a labor-related share and a non-labor related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. An urban hospital, however, cannot have a wage index that is lower than that received by rural hospitals within the same state. CMS has created an “imputed” floor for all-urban states. The rural and imputed floors are applied in a budget neutral manner. In FY 2009, in connection with determining the applicable wage index factor, CMS adopted a policy of applying a budget neutrality adjustment to the rural and imputed floors on a within-state basis rather than on a national basis, to be phased in over three years. The use of a statewide rather than national budget neutrality adjustment may impact the DRG payment amount.

DRG rates are updated annually by the hospital market basket percentage increase, which is the measure of the inflation experienced by hospitals in purchasing the goods and services they need to provide inpatient services (the “IPPS payment update”). The health reform legislation implements market basket reductions of .25% in 2010 and 2011, and continuing at different levels through 2019. The legislation calls for additional reductions to inpatient (and outpatient) hospital market basket increases to account for economy-wide productivity gains, beginning in FY 2012.

In addition, since October 1, 2004, hospitals must report specific quality measures for inpatient services and satisfy a certain data validation threshold or receive a 2% reduction in their market basket updates in the year in which the hospital failed to submit its data. To receive the full market basket update in FY 2010, hospitals had to report on 42 quality measures, and will have to report on 46 measures in FY 2011. The Hospital submitted the quality data necessary to obtain full inpatient rate increases in 2005 through 2009. In addition, the health reform legislation introduces a new value-based purchasing program for hospitals beginning in 2013. IPPS payments will be reduced each (1% in FY 2013 and increasing to 2% in FYs 2017 and thereafter) to fund incentive payments to hospitals achieving quality-based performance scores.

Since October 1, 2008, Medicare has precluded payments to hospitals for the additional costs of treating a patient who acquires certain conditions (including an infection) during a hospital stay (referred to as “hospital-acquired conditions”). Under health reform, beginning in FY 2015, hospitals in the top quartile of national, risk-adjusted rates of hospital-acquired conditions will receive 99% of their otherwise applicable Medicare inpatient payments. In addition, beginning in FY 2013, Medicare payments for all of a hospital’s discharges will be reduced to account for excess readmissions for a limited number of conditions. In addition, under health reform, Medicare will increasingly tie reimbursement to improved coordination and efficiency. Medicare demonstrations will begin, for example, a pilot program to evaluate alternative payment methodologies that promote care coordination, including bundled payments, for certain conditions beginning on January 1, 2012.

Certain hospitals also receive additional payment from Medicare to reimburse for the direct and indirect costs of graduate medical education (“GME”). DGME and IME reimbursement is subject to certain limitations, including a cap on a hospital’s reimbursable residents based on the number of residents in a base year. In 2009, the Medical Center received reimbursement in the amount of $56.1 million for DGME and IME. Under the health reform legislation, unused residency slots will be redistributed in 2011, potentially affecting the amount of the hospital’s DGME and IME payments. In addition, health reform adds some flexibility in training activities for which GME funding is available, potentially increasing these payments. Medicare also makes capital IME payments to teaching hospitals. CMS updates capital rates annually based on its calculation of the change in prices of capital related costs as measured by the capital input price index and adjusted by other policy factors (the “annual payment update”). Medicare also makes additional payments to hospitals that serve large numbers of low-income patients – known as

A-31 the DSH adjustment. Under health reform, Medicare DSH payments will be cut by 75% in 2014 and some of the cut funds redistributed to hospitals based on their amount of uncompensated care.

There is no assurance that the operating and capital IPPS payment rates plus additional payments will be sufficient to cover the actual cost of providing hospital services or that these payments will continue at their current payment levels.

The Medical Center has an inpatient psychiatric unit. Certain hospital inpatient facilities or units providing specialized services, including psychiatric and rehabilitation units, are reimbursed under separate prospective payment systems. These payments are also subject to reductions to their annual market basket increases in FYs 2010 through 2019, as well as additional reductions to reflect economy-wide productivity gains beginning in FY 2012, under health reform. There is no assurance that these payments will be sufficient to cover the actual cost of providing hospital services.

Most hospital outpatient services are reimbursed under the outpatient PPS (“OPPS”), based upon ambulatory payment classification (“APC”) groups. An APC group includes various services that are similar clinically and with respect to resource use. A single rate applies for all services in the group. In recent years, CMS has expanded the scope of services packaged into a single APC by including additional ancillary services deemed integral to the performance of primary diagnostic and treatment procedures. CMS has also introduced composite APCs which provide one payment for the totality of hospital outpatient care provided during an outpatient encounter. CMS initially established five composite APCs and increased the number of composite APCs to ten in FY 2009.

APC rates are determined based on the relative use of resources within an APC compared to other APCs, and are subject to a geographic adjustment. APCs also are adjusted annually based on the hospital inpatient market basket index subject to a budget neutrality factor. Like inpatient payments, outpatient hospital payment rates are subject to market basket reductions for FYs 2012 through 2019, and additional productivity adjustments beginning in FY 2012. Beginning in FY 2008, hospitals were required to report on seven quality outpatient measures, increased to 11 measures for FYs 2009 and 2010, or receive a 2% reduction in the market basket update for the succeeding year. The Hospital submitted the quality data necessary to obtain full outpatient rate increases in 2009 and 2010.

There is no assurance that the hospital OPPS payment rate will be sufficient to cover the actual costs of outpatient hospital services.

As part of the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”), beginning in October 2010, the Hospital may be eligible for incentive payments if it qualifies under CMS’s regulations as a “meaningful user” of electronic health records (“EHR”). Beginning in FY 2015, however, the Hospital will be penalized with reduced IPPS payment updates if it does not qualify under Medicare regulations as a meaningful EHR user. CMS has published a proposed rule to define meaningful use of certified EHR technology and establish criteria for the incentive program. See “BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY – The American Recovery and Reinvestment Act of 2009.”

Medicaid

Under Title XIX of the Social Security Act, the Federal government provides matching funds to the Commonwealth for expenditures made under the Medical Assistance Program (“Medicaid”). The Executive Office of Health and Human Services (“EOHHS”) Office of Medicaid administers the Massachusetts Medicaid program, also known as MassHealth. MassHealth members (“MassHealth Members”) may be enrolled in a plan administered by EOHHS or in one of five private plans or Medicaid managed care organizations (“MCOs”).

Medicaid rates for acute hospitals are set by contracts between the hospitals and the state agency. Under the contract that the Medical Center has signed with DMA, Medicaid pays for acute inpatient and outpatient services prospectively on a per discharge or per episode basis. The payment amount per discharge or payment amount per episode (“PAPE”) is a standardized statewide average cost per discharge or episode (for services provided on a single calendar day) adjusted by several factors, including the hospital-specific case mix index. With respect to inpatient payments, additional payments are provided for malpractice, capital and organ acquisition and hospitals are

A-32 further eligible for outlier payments and transfer per diem payments. However, the Governor’s initial budget for state fiscal year 2011 has proposed the elimination of outlier payments for adults. With respect to outpatient payments, the PAPE outpatient payment system represents a revised payment system implemented in October, 2003. The per episode amount is established from payment data in a base year as submitted by all hospitals to the Massachusetts Division of Health Care Finance and Policy, updated for inflation and changes in service mix.

Since 1991, the DMA has been making supplemental Medicaid payments to certain hospitals. The Medical Center and its predecessor, the Teaching Hospital of the University, have received these payments since 1998. These hospital supplemental payments are authorized in the Massachusetts Medicaid state plan. Supplemental payments are in addition to ordinary Medicaid rate payments for providing care to Medicaid members. The state Medicaid agency revised the standard Medicaid rates of the Medical Center to allow these supplemental payments to include payment of unreimbursed charges related to providing services to patients eligible for medical assistance under Title XIX or to low-income patients.

The funds received by the Medical Center are paid in part to purchase specified educational services from the Medical School pursuant to a Medical Education Service Agreement (“MESA”). The MESA contemplates that, without such Medicaid Supplemental Funds, the Medical Center would not be in a position to pay for the same amount and scope of medical education services and, therefore, the MESA formula for payment contemplates a reduction in payment under such circumstances.

A portion of the Massachusetts Medicaid program operates as a demonstration program that has been granted waivers of certain federal Medicaid requirements. Originally approved in 1995, this demonstration program is currently effective through June 30, 2011. EOHHS submitted to CMS in March 2010 a further amendment to the waiver program, as described below. This program mandates that many Medicaid beneficiaries enroll in Medicaid managed care programs. EOHHS has contracted with MCOs to provide health care services to Medicaid beneficiaries who enroll in Medicaid managed care. The Medical Center has contracts with the Medicaid MCOs, while all of the Medical Group employed primary care physicians participate in the primary care clinician program. For fiscal year 2010, all MCOs will receive no inflationary increase from EOHHS.

Management expects that the Commonwealth will continue to modify and reduce funding for the Medicaid program. Recent changes include an elimination of disproportionate share hospital payments in 2009 and proposed elimination of direct medical education payments in 2010. Under the national health reform legislation, federal Medicaid DSH funds across all states will be cut by $18 billion over the period from 2014 through 2020. The impact on Massachusetts’ program depends on how cuts are allocated to specific states, although the methodology to be adopted by the Secretary must take into account the extent to which Massachusetts uses a portion of its DSH allotment to fund the coverage expansion under the demonstration described below.

Under the national health reform legislation, federal efforts will be implemented to tie reimbursement to quality and coordination. Medicaid will not pay for inpatient hospital services related to health care-acquired conditions beginning July 1, 2011. In addition, Medicaid demonstrations will begin. Demonstrations include: a demonstration to bundle payments for hospitalization and physician services provided during the hospitalization beginning on January 1, 2012; a Medicaid Global Payments demonstration in up to five states from 2010 to 2012 under which a safety net hospital system could alter its provider payment system from fee-for-service to a capitated, global payment structure; grants to establish Community-Based Collaborative Care Networks of providers to provide coordinated and comprehensive care to low-income patients; and, a five-year demonstration beginning on January 1, 2012, in which qualifying pediatric providers in participating states will be eligible to be recognized as pediatric accountable care organizations and to achieve incentive payments based on shared savings. The national health reform legislation also creates a new Medicaid state plan option under which Medicaid enrollees with chronic conditions could designate a provider as their health home, including providers based at a hospital.

In March 2010, EOHHS submitted to CMS a proposed waiver amendment that, if enacted, could have an even more significant impact on reimbursement to hospitals. It is expected that the Commonwealth will issue a report on its findings and proposed solutions in the spring of 2010 and will issue regulations to mandate the implementation of changes during the summer of 2010. Consistent with the recommendations of the Massachusetts Special Commission on the Health Care Payment System and the Massachusetts Health Care Quality and Cost Council, Massachusetts would transition over five years to a system of global payments for healthcare providers. This would

A-33 be accomplished through a framework of accountable care organizations (“ACOs”) and an emphasis on the medical home model. All payors, both private and public (including Medicaid and Medicare), would be involved. During the implementation period, EOHHS has proposed a “Transitional Relief for Private Hospitals” (“TRPH”) program meant to also assist hospitals during the economic downturn. The Commonwealth would provide $135 million in additional payments to all private hospitals for state fiscal years 2010 and 2011 through the Safety Net Care Pool, prioritizing those hospitals for which Medicaid and other state supported programs for low-income individuals represent a large share of total services delivered. At this time, it is uncertain whether and to what extent the Medical Center will benefit from the TRPH program, if enacted. CMS approval and state legislation is required to enact these proposals.

Under the Stimulus Act, the Commonwealth is receiving an increased federal match for Medicaid expenditures. This increased federal match is set to expire at the end of calendar year 2012, unless current proposals to extend the enhanced funding through June 2011 as passed by Congress. The expiration of this enhanced funding could further stress the Commonwealth’s fiscal situation. In addition, under the national health reform legislation, states are prohibited from reducing eligibility under their Medicaid programs until 2014, with limited exceptions for certain populations in states certifying that they are facing budget deficits. This could further stress the Commonwealth’s budget and lead to a risk of cuts to provider payments.

Also under national health reform, states must expand the Medicaid program to all individuals under 133% of poverty in 2014, and will receive enhanced federal assistance for expenditures for the newly-eligible. Massachusetts, given the coverage expansions already accomplished through state health reform, will be eligible for more limited, phased-in assistance to so-called “expansion states” for non-pregnant, childless adults up to 133% of poverty until 2020, at which point it will receive the same federal match percentage as other states for this population. This could be a source of additional federal funding to the Commonwealth beginning in 2014. In the interim, however, the Commonwealth cannot reduce eligibility for its Medicaid program, which could create budget stress and cause the Commonwealth to consider other reductions, such as cuts to provider rates. Medicaid eligibility for children cannot be reduced until after 2019, which, while it could contribute to budget pressures, will also ensure continued coverage for the Hospital’s patients.

As part of the Stimulus Act, the Medical Center may be eligible for Medicaid incentive payments if it qualifies under CMS’s regulations as a “meaningful user” of EHR. Payments may begin in FY 2011, and in FY 2010 in early-acting states, and providers only need to make efforts to meet the meaningful use requirements to receive the first year of payments. Physicians and certain other professionals may also qualify for payments, although hospital- based physicians are not eligible. CMS published a proposed rule in late 2009 to define meaningful use of certified EHR technology and establish criteria for the incentives program. (see “BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY – The American Recovery and Reinvestment Act of 2009” herein.)

Health Safety Net Fund

Massachusetts operates the Health Safety Net Fund (“HSN”). The HSN is funded by payments from the Commonwealth, which are supported through federal matching funds, hospitals, patients and the insurance industry. Hospital payments into the HSN are based upon a statewide rate applied to each hospital’s private sector patient care gross revenue. Payments from the HSN are made to hospitals and have also been used by the Commonwealth to support other healthcare programs and demonstration projects. Total funding for the HSN is capped and the cap varies year to year depending upon the level of funding. Beginning in 2008, the payment methodology for the HSN changed from a block grant methodology to a claims-based methodology using rates equivalent to Medicare payment rates. Under the new methodology, a hospital’s monthly payment from the HSN is determined by the number of eligible HSN patients seen by the hospital for which valid claims are submitted to the HSN Office within the Commonwealth’s Division of Health Care Finance and Policy. In 2009, as in prior years, the Medical Center was a net receiver from the HSN (the HSN payments to the Medical Center were more than the assessment paid into the HSN). Also, beginning in October 2007, many changes were made to the eligibility criteria for the HSN as a result of the health care reform effort in Massachusetts, along with a decrease in the funding for the HSN. Because of health care reform, many patients that were previously eligible for the Uncompensated Care Pool are now eligible for other state programs and are not eligible for the HSN. There continues to be significant political controversy

A-34 surrounding the HSN and its funding level and sources as the Commonwealth faces the challenge of financing health care reform. As a result, it is not possible to accurately predict the amount of future funding from the HSN.

Non-Governmental Payors

In 1991, the acute care hospital industry payment system in Massachusetts was essentially deregulated by a legislative act that permitted each payor (other than Medicare) to contract separately with each hospital. Deregulation has resulted in significant changes and increased competition in the hospital marketplace. Management believes that competition between acute care hospitals based largely on price will continue to intensify for the foreseeable future.

Commercial Insurance

Since the deregulation of hospital payments in 1991, commercial insurers have been free to negotiate contracts directly with hospitals, and the Medical Center has several such contracts. Under these contracts, commercial insurers make payments either directly or on behalf of self-funded employer accounts, health benefit plans or other entities, primarily on the basis of established and/or discounted charges for covered services. Patients carrying such coverage are generally responsible to the hospitals providing services for certain co-payments and deductibles.

Managed Care Programs

MCOs, including health maintenance organizations and preferred provider organizations, are organizations that provide insurance coverage through a network of health care providers to members for a fixed monthly premium or provide administrative services to self-funded employers. To control costs, these organizations typically contract with hospitals and other providers, review medical services for medical necessity, and channel patients to contracted providers of health care services.

Under the traditional fee-for-service method of health care delivery, hospitals, physicians and other providers are compensated on a per-service basis. MCOs may contract with providers to provide health care services under a fee for service payment methodology or under a capitated methodology. Under the fee-for-service payment methodology, providers are generally compensated on a per-service basis. A portion of the payment may be withheld or an additional payment provided contingent upon the provider meeting certain utilization or other performance goals. Under a capitated payment arrangement, providers are compensated on a “per member, per month” basis and, consequently, the provider bears some or all of the risk if the cost of services provided exceeds the amount of the capitated payments. This payment methodology creates an incentive to control utilization of services.

The Medical Center has contracts with all the major MCOs in the region including, but not limited to, BCBSMA, Harvard Pilgrim Health Care, Tufts Health Plan, and Fallon Community Health Plan. Inpatient services under these contracts are based on either DRGs or negotiated per diems and may include payments that are at risk based on various performance measures. Payments for outpatient services are on the basis of fee schedules or discounted charges. The Medical Center negotiated renewals of its managed care contracts with BCBSMA for the three year period commencing October 1, 2008. The Medical Center recently completed renewal negotiations with Fallon Community Health Plan, Harvard Pilgrim Health Care and Tufts Health Plan beginning January 1, 2010.

The managed care plans referring the highest volume of inpatients to the Medical Center for 2009 are summarized in the following table:

A-35 MEDICAL CENTER’S COMBINED DISCHARGES BY PAYOR Payor 2007 2008 2009

Blue Cross Blue Shield – HMO Blue 11.5% 10.8% 9.9% Blue Cross Blue Shield – MA PPO 2.3 2.1 2.2 Blue Cross Blue Shield – BC 65 4.0 4.0 4.0 CIGNA 1.7 1.2 1.2 Fallon Community Health Plan 6.5 6.5 6.8 Harvard Pilgrim Health Care 4.7 5.2 5.0 Tufts Associated Health Plan 4.6 4.7 4.8 Other Managed Care 10.7 14.1 14.2 Subtotal 45.9% 48.6% 48.1% Non-Managed Care 54.1% 51.4% 51.9% Total 100.0% 100.0% 100.0% Source: Medical Center records

Total managed care contracts accounted for approximately 48% of discharges and approximately 50% of gross patient service revenue at the Medical Center for 2009. The Medical Center is a participating provider in Medicare managed care products offered by certain major MCOs. The Medical Center is currently participating in one Medicare contract through relationships with its affiliated physicians with BCBSMA.

Settlements from Third Party Payors

Cost reports are prepared annually for and are subject to audit by the Medicare program and the state Division of Health Care Finance and Policy. Changes occur frequently in the rules and regulations of various payors, in their interpretation of such rules and regulations, and in the data used to estimate amounts due to third parties. When appropriate, accruals for estimated settlements with Medicare and other third-party payors are established for unresolved items and incomplete data. The difference between the amount estimated and the actual final settlement is recorded as an adjustment to contractual allowances in the year in which the final settlement is determined. Management believes that adequate accruals for estimated settlements with third-party payors have been established based on information consistent with the current regulatory environment. The audited consolidated financial statements, included as Appendix B to this Official Statement, provide further discussion of the accounting treatment of this issue.

BCBSMA

In general, the standard hospital contract calls for hospital inpatient payments on a DRG basis and hospital outpatient payments on a fee schedule basis. The Medical Center has its own contract with BCBSMA, which expires September 30, 2011.

MEDICAL EDUCATION SERVICES

As part of the academic affiliation between the Medical School and the Medical Center, the Medical School is the exclusive academic and medical teaching affiliate of the Medical Center. In connection with this academic affiliation, the Medical Center purchases from the Medical School certain teaching and education services required in connection with the educational activities of the Medical Center. The cost of these services was approximately $139.0 million in 2009, $143.7 million in 2008, and $97.8 million in 2007.

BONDOWNERS’ RISKS AND MATTERS AFFECTING THE HEALTH CARE INDUSTRY

In addition to the risks set forth in the forepart of this Official Statement, the following factors, among others, constitute risks with respect to the Bonds. The ability of the Combined Group to pay amounts due with respect to the Bonds is subject to significant risks relating to both the health care industry generally and, more specifically, to the enforceability of the Master Trust Indenture. For a discussion of national health reform, see “BONDOWNERS’ RISKS - National Health Reform” in the forepart of this Official Statement.

A-36 In General

Future revenues and expenses of the Combined Group will be affected by events and conditions relating generally to, among other things, demand for the services of the Combined Group, the ability of the Combined Group to provide the services required by patients, physicians’ relationships with the Affiliates, management capabilities, the correctness of the design and success of the Combined Group’s strategic plans, the degree of cooperation among and competition with other hospitals in the Combined Group’s area, changes in private philanthropy, malpractice claims and other litigation, economic developments in the Combined Group’s service area, the Combined Group’s ability to control expenses and maintain relationships with MCOs and other managed health care organizations and third-party payors, competition, rates, costs, third-party reimbursement, legislation, and government regulation. While the Combined Group reasonably expects to generate sufficient revenues in the future to cover its expenses, third-party payments, regulations, and contractual terms and provisions may change, 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 Combined Group or utilization of the Combined Group’s facilities will not be adversely affected, and there can be no guarantee that there will be sufficient revenues to make payments with respect to the Bonds. The following general factors, among others, could affect the level of revenues to the Combined Group or its financial condition or otherwise result in risks for Bondowners in addition to the risks set forth in the Official Statement under “BONDOWNERS’ RISKS” in the forepart hereof.

Economic Turmoil

The current economic turmoil has had and will continue to have negative repercussions upon the United States and global economies. Within the past year, this turmoil has particularly affected the financial sector, prompting a number of banks and other financial institutions to seek additional capital, to merge, and, in some cases, to cease operating. These events collectively have led to a scarcity of credit, lack of confidence in the financial sector, volatility in the financial markets, fluctuations in interest rates, reduced economic activity, increased business failures, and increased consumer and business bankruptcies.

Hospitals are required to provide emergency care without regard to a patient’s ability to pay. Poor economic conditions and increased unemployment can enlarge the population that does not have health care coverage and thus cannot pay for care out-of-pocket, which in turn can increase the uncompensated care that the Combined Group provides. Tax-exempt hospitals, in particular, often treat large numbers of indigent patients who are unable to pay in full for their medical care. In addition, poor economic conditions and increased unemployment can lead patients to postpone or forego elective procedures, thereby reducing volume and revenue.

If the current economic turmoil continues and the economy further weakens, health care providers could be materially and adversely affected in a number of ways, including reduced investment income, reduced access to the credit markets, difficulties in obtaining new liquidity facilities or extensions of existing liquidity facilities, significant draws on internal liquidity due to difficulties with remarketing existing variable rate bonds and commercial paper, increase in bad debt expense and charity care write-offs, and increased borrowing costs, any of which may negatively affect the operations or financial condition of a provider.

Increased Competition

Following Massachusetts’ transition in the 1990s to a deregulated rate system for acute care hospitals, competition among these hospitals and in some instances their affiliated health systems has increased significantly. In an effort to improve market share and profitability, a number of acute care hospitals have embarked on significant expansion and refurbishment projects.

Hospitals are also expanding or reconfiguring their service lines in order to capture incremental market share, to enter potentially lucrative service lines, or to reduce or limit services in service lines that generate losses. For example, a number of community hospitals have recently opened invasive cardiac surgery programs that compete directly for cardiac cases formerly performed exclusively at academic medical centers.

A-37 Other forms of competition may affect the Combined Group’s ability to maintain or improve its market share, including increasing competition with physicians, who are seeking to capture a greater percentage of outpatient and ambulatory surgical procedure revenue as changes in technology make possible delivery of care in an office or ambulatory surgical setting, care that was formerly delivered solely in an inpatient setting. Such physician ventures avoid the costs associated with having to maintain emergency departments, 24-hour coverage for most disciplines and other high cost functions while permitting the physicians to focus solely on more profitable lines of business. It can be particularly difficult for a hospital to compete aggressively with such ventures if the hospital’s own medical staff members are owners or participants in such ventures.

In addition, other forms of competition include competition (i) with other hospitals for physician recruitment, (ii) between physicians who generally use hospitals and non-physician practitioners such as nurse-midwives, nurse practitioners, chiropractors, physical and occupational therapists and others who may not generally use hospitals, and (iii) from home health agencies, ambulatory care facilities, surgical centers, rehabilitation and therapy centers, physician group practices and other non-hospital providers of many services for which patients generally and currently rely on the Combined Group.

In addition, no assurance can be made that the Combined Group will be able to obtain or maintain contracts with various MCOs, or that if obtained, such contracts will be on financially viable or favorable terms.

In order to recruit and retain professional and nursing staff to strengthen clinical services, the Combined Group has offered and in the future intends to offer competitive salaries to both newly recruited individuals and existing staff. In some years such salaries have increased, and in the future may continue to increase more than the rate of inflation. Such increases also have exceeded and in the future may exceed increases in the Combined Group’s rate of reimbursement.

Management believes that sustained growth in patient volume, together with firm cost controls, will be increasingly important as the health care environment becomes more competitive. There are many limitations on a provider’s ability to increase volume and control costs, and there can be no assurance that volume increases or expense reductions needed to maintain the financial stability of the Combined Group will occur.

Legislative, Regulatory and Contractual Matters Affecting Revenues

The Combined Group is subject to a wide variety of federal and state regulatory actions and is dependent on governmental sources for a substantial portion of revenues. It is also subject to legislative and policy changes by the governmental and private agencies that administer Medicare, Medicaid, other third-party payors and governmental payors and actions by, among others, the Department of Public Health (“DPH”), DHHS, The Joint Commission, CMS, and other federal, state and local government agencies. These agencies have broad discretion to alter or eliminate programs that contribute significantly to revenues of the Combined Group.

In the past, there have been frequent and significant changes in the methods and standards used by government agencies to compensate and to regulate the operations of hospitals. There is reason to believe such legislative bodies may enact legislation that imposes significant new burdens on the operations of the Combined Group in the future. Legislation is periodically introduced in Congress and in the Massachusetts legislature that could result in limitations on hospital revenues, third-party payments and costs or charges, or that could require an increase in the quantity of indigent care required to maintain the Combined Group’s members’ tax-exempt status, or that could eliminate such status altogether regardless of the level of indigent care. There can be no assurance that such legislative bodies will not make legislative policy changes (or direct governmental agencies to promulgate regulatory changes) that adversely affect the Combined Group’s ability to generate revenues or effect the favorable utilization of the Combined Group’s facilities.

The General Court of the Commonwealth is currently considering House No. 2663, a bill to establish minimum registered nurse-to-patient ratios in all Massachusetts hospitals. In its current form, the bill would prohibit the use of mandatory overtime and the reduction of ancillary staff to meet any staffing ratios imposed, among other provisions that would have an adverse financial effect on the Combined Group. Similar legislation has been introduced in recent years, but has not been adopted by the General Court. However, if House No. 2663 or any similar legislation

A-38 is ultimately enacted, it could have a materially adverse effect on the salary and benefit expense and therefore financial results of the Combined Group.

Payment Uncertainty

Governmental sources of revenue are subject to statutory and regulatory changes, administrative rulings, interpretations of policy, determinations by fiscal intermediaries and government funding restrictions, all of which may materially increase or decrease the rates of payment and cash flow to hospitals. Many of these changes are implemented retroactively, resulting in significant subsequent year adjustments. There is no assurance that payments made under such programs will remain at levels comparable to the present levels or that they will ever be sufficient to cover all operating and fixed costs. Currently, the Commonwealth, like many other states, continues to experience financial difficulties, and has had to reduce budgeted spending. If these factors continue or escalate in severity, the impact on health care providers could be material. Restrictive policies and budget cuts at both the state and federal level have contributed to declining revenues and operating losses for many Massachusetts hospitals. In recent years, a number of hospitals in New England, as well as in other areas of the United States, have closed or have been converted to non-acute care facilities.

The Combined Group also is subject to regulatory and administrative actions by those governmental and private entities that administer the federal health programs and by DPH, the Commonwealth’s Division of Health Care Finance and Policy, the Food and Drug Administration, the Department of Labor, the National Labor Relations Board, The Joint Commission and other federal, state and local government agencies and private bodies. Actions of these organizations could adversely affect future operations of the Combined Group. Renewal and continuation of the Combined Group’s operating licenses, certifications and accreditations are based on inspections, surveys, investigations and other reviews, some of which may require or include affirmative action or response by the Combined Group. These activities are conducted in the normal course of business of health facilities, both in connection with periodic renewals and in response to specific complaints, which may be made to governmental agencies, private agencies or even the media by patients, ombudsmen or employees, among others.

The Combined Group has received, from time to time, subpoenas, civil investigatory demands, or other formal inquiries from state and federal governmental agencies or investigators. It is often impossible to determine the specific nature of the investigation, or whether the Combined Group might have any potential liability under a cause of action that might subsequently be asserted by the government. Moreover, the Combined Group is generally not informed when such investigations are resolved without the assertion of any claims. Management considers these investigations to be a routine part of operations in the current health care climate, and expects them to continue in the future. (See “LITIGATION AND REGULATORY MATTERS” herein).

The Combined Group is also subject to Recovery Audit Contractor (“RAC”) audits under a program originally established under section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “MMA”). RACs are private companies that contract with CMS on a contingency fee basis to conduct audits of claims and to identify and correct Medicare overpayments. RAC review is not intended to replace the level of analysis conducted by the Medicare Administrative Contractors; rather, it creates a supplemental level of review. The RAC program is intended to detect and correct improper Medicare payments by reviewing claims data received from a hospital’s fiscal intermediary every 45 days. The RAC auditors are authorized to look back three years from the date the claim was paid, but in no event earlier than October 1, 2007, and to review the appropriateness of each claim by applying the same standards and guidance as would a Medicare contractor at the time. A hospital’s failure to submit a requested medical record to a RAC within 45 days, absent good cause for delay, results in disallowance of a claim and demand for recoupment of any reimbursement paid. The Tax Relief and Health Care Act of 2006 has since required the expansion of the RAC program to all 50 states by 2010. The Combined Group was part of the RAC demonstration audit and made a payment of approximately $70,000. In addition, the health reform legislation expands the RAC program to Medicare Parts C and D and Medicaid by 2011.

Non-Profit Health Care Environment

As non-profit tax-exempt organizations, the Combined Group is subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including their operation for charitable purposes. At the same time, the Combined Group conducts large-scale complex business transactions and are a

A-39 significant employer in their geographic 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.

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

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 and Community Benefit” below.

Bond Examinations. IRS officials have recently indicated that more resources will be invested in audits of tax- exempt bonds in the charitable organization sector with specific review of private use. In addition, in 2007 the IRS sent approximately two hundred post-issuance compliance questionnaires to 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 nonprofit corporation’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. In September 2008, the IRS issued an interim report analyzing the responses from the completed questionnaires. The report indicates that there are significant gaps in the implementation by nonprofit corporations of post-issuance and record retention procedures for tax-exempt bonds. IRS representatives indicate that after analyzing responses from the first set of questionnaires, thousands more will be sent.

Revision of IRS Form 990 for Nonprofit Corporations. The IRS Form 990 is used by 501(c)(3) not-for-profit organizations (including the Combined Group) to submit information required by the federal government for tax exemption. The revised Form 990 requires detailed public disclosure of compensation practices, corporate governance, loans to management and others, joint ventures and other types of transactions, political campaign activities, and other areas the IRS deems to be compliance risk areas. The revised form also requires the disclosure of a significantly greater amount of both hard data and anecdotal information on community benefit information on Schedule H to the Form, and establishes uniform standards for reporting of information relating to tax exempt bonds, including compliance with the arbitrage rules and rules limiting private use of bond-financed facilities, including compliance with the safe harbor guidance in connection with management contracts and research contracts. The redesigned Form 990 is intended to result in enhanced transparency as to the operations of exempt organizations. It is also likely to result in enhanced enforcement, as the redesigned Form 990 will make a wealth of detailed information on compliance risk areas available to the IRS and other enforcement agencies. At this time it is difficult to predict the additional burden that completion of the revised Form 990 may place on the Combined Group and its operations.

Internal Revenue Service Examination of Compensation Practices and Community Benefit. In 2004, the IRS began a new compliance 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 February 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 indicates that the IRS (1) will continue to heavily scrutinize executive compensation arrangements, practices and procedures of tax-exempt hospitals and other tax-exempt organizations; and (2) in certain circumstances, may conduct further investigations or impose fines on such organizations.

A-40 The IRS has also undertaken a community benefit initiative directed at hospitals. The most recent IRS report on this initiative determined that a lack of uniformity in definitions of community benefit used by reporting hospitals, including those regarding uncompensated care and various types of community benefit, made it difficult for the IRS to assess whether any particular hospital is in compliance with current law. The revised Form 990 includes a new schedule, Schedule H, which hospitals must use to report their community benefit activities, including the cost of providing charity care and other tax-exemption related information. Proposals have also been made within Congressional committee to codify the requirements for hospitals’ tax-exempt status, including requirements to conduct a regular community needs analysis and to provide minimum levels of charity care.

The health reform legislation went further to impose four new requirements on non-profit hospitals in order to maintain their tax-exempt status. First, each hospital must conduct a community health needs assessment at least once every three taxable years and adopt an implementation strategy to meet the needs identified, or be subject to an excise tax penalty of $50,000. Hospitals must complete the first community health needs assessment by the end of the taxable year beginning after March 23, 2012, and disclose a summary of the assessment and implementation strategy and audited financial statements on the IRS Form 990. The Secretary of the Treasury must review the community benefit activities of each tax-exempt hospital at least once every three years. Second, each hospital must adopt, implement and publicize a financial assistance policy. Third, hospitals must limit the charges for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy to not more than the amounts generally billed to individuals who have insurance that covers such care. Finally, a hospital may not engage in extraordinary collection actions before making reasonable efforts to determine whether an individual is eligible for assistance under the organization’s financial assistance policy.

Litigation Relating to Billing and Collection Practices. Lawsuits have been filed in both federal and state courts alleging, among other things, that hospitals have failed to fulfill their obligations to provide charity care to uninsured patients and have overcharged uninsured patients. Many of these cases have since been dismissed by the courts but a number of cases are still pending in various courts around the country with inconsistent results. While it is not possible to make general predictions, some hospitals and health systems have entered into substantial settlements.

Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain non- profit health care providers by state and local taxing authorities have been challenged in other states on the grounds that the health care providers were not engaged in sufficient charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. The highest court in Illinois recently upheld the revocation of real property tax exemption for a large non- profit hospital.

The American Recovery and Reinvestment Act of 2009

The Stimulus Act includes several provisions that are intended to provide financial relief to the health care sector, including $86.6 billion in federal payments to states to fund the Medicaid program and $24.7 billion to provide a 65% subsidy to the recently unemployed for health insurance premium costs. The Stimulus Act also includes: $19 billion to establish a framework for the implementation of a nationally-based health information technology (“HIT”) program, including incentive payments to hospitals commencing FY 2011; $10 billion for health research and construction of National Institutes of Health facilities; and $1 billion for prevention and wellness programs. As a component of the federal objective of implementing EHRs for all Americans by 2014, the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) included in the Stimulus Act requires the development of regulations to establish HIT standards to which Hospital physicians and acute care hospitals will be subject. Certain physicians and acute care hospitals that are also “meaningful users” of EHRs will be eligible for Medicare and Medicaid incentive payments generally beginning in 2011. (In order to be eligible for Medicaid payments, hospitals (except children’s hospitals) must have at least 10 percent Medicaid patient volume.) Thereafter, incentive payments for hospital EHR adoption and reporting of quality data will decrease on an annual basis and hospitals that do not comply will face Medicare penalties beginning in FY 2015. The effect of the Stimulus Act and any future regulatory actions on the Combined Group cannot be determined at this time. However, the expiration of the enhanced Medicaid funding at the end of December 2010, unless current Congressional proposals to extend the enhancement through June 2011 are passed, could have a significant adverse affect on the Commonwealth’s budget crisis.

A-41 Changes in Patient Service Volume and Revenue

Reduction in patient service volume could have a material adverse effect on patient service revenue. The Combined Group’s percentage of gross patient service revenue attributable to managed care plans has increased from 52.5% in 2007 to 54.0% in 2009. However, an increase in the number of persons enrolled in managed care plans may result in material reductions in patient volume levels, reduced payment levels, and other changes which may challenge Management to operate under different payment incentives, including capitated arrangements. Such changes may have a material adverse effect on future revenue levels of the Combined Group. National health reform could lead to an expansion of coverage, as well as migration of some individuals previously covered under employer plans to the new exchanges, which could affect patient mix and revenue. (See “SOURCES OF PATIENT SERVICE REVENUE” herein).

Determination of Need Restrictions; Limits on Reduction of “Essential Services”

The Commonwealth maintains a Determination of Need (“DON”) 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. With respect to acute care hospitals, the capital expenditure threshold for inpatient services is approximately $12 million, subject to annual indexing for inflation. Without DON approval, acute care hospitals may not offer new technologies or innovative services including, but not limited to, open heart surgery, cardiac catheterization services, magnetic resonance imaging, free standing ambulatory surgery or certain non-acute services.

The existence of the DON program has two different implications for providers such as the Combined Group. First, the program may limit a provider’s ability to respond on a timely basis to competitive programs offered by other providers who may not be subject to similar DON requirements. The time required for approval of a DON application is sometimes several years. Further, a moratorium on the filing of new DON applications has been imposed on occasion, and in certain instances, DPH has refused to accept or consider pending applications due to the absence of need for a particular program, or delays in processing DON applications have occurred. Second, while the existence of the DON 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.

Pursuant to legislation enacted in calendar year 2000, new limits have been imposed on the ability of an acute care hospital to terminate “essential services” without prior notice to DPH, a public hearing, and various remedial actions, including in certain circumstances financial payments to support or continue public access to such services through other means. This law limits the flexibility of acute care hospitals to reconfigure their service lines in pursuit of cost reduction initiatives or other goals.

Transfer to Non-Obligated Group Affiliates

The System includes numerous affiliated entities that are not members of the Combined Group. The Non-Obligated Group entities represented 44.8% of 2009 revenues and 36.0% of 2009 assets of the System. Members of the Combined Group have from time to time made intercompany loans or gifts to support such Non-Obligated Group entities. In the event that such losses increase and the Combined Group determines that it is necessary or desirable to support such Non-Obligated entities, the Combined Group will provide such loans or gifts and such loans or gifts will reduce the liquidity of the Combined Group, subject to the limitations in the Master Indenture.

Fraud and Abuse Enforcement and other Governmental Enforcement

“Fraud” in government funded health care programs is a significant concern of DHHS, CMS and many states, and is one of the federal government’s prime law enforcement priorities. The federal government and, to a lesser degree, state governments impose a wide variety of extraordinarily complex and technical requirements intended to prevent over-utilization based on economic inducements, misallocation of expenses, overcharging and other forms of “fraud” in the Medicare and Medicaid programs, as well as other state and federally-funded health care programs. This body of regulation affects a broad spectrum of hospital commercial activity, including billing, accounting,

A-42 recordkeeping, medical staff oversight, physician contracting and recruiting, cost allocation, clinical trials, discounts and other functions and transactions.

Violations carry significant civil, criminal or administrative sanctions. The government often pursues aggressive investigative and enforcement actions. The government has a wide array of civil, criminal and monetary penalties, including withholding essential hospital 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 settlements, payment of fines and prospective restrictions that may have a materially adverse impact on hospital operations, financial condition, results of operations and reputation. Multi-million dollar fines and settlements are common. These risks are generally uninsured. Government enforcement and private whistleblower suits are generally expected to increase in the hospital sector. See “BONDOWNERS’ RISKS - National Health Reform” in the forepart of this Official Statement for expansion of fraud and abuse liabilities and enforcement under health reform.

Federal Fraud and Abuse Liability of Health Care Providers. Both individuals and organizations are subject to prosecution under the criminal and civil fraud and abuse statutes relating to health care providers. The sentencing of organizations for federal health care crimes is governed by the U.S. Sentencing Guidelines, which permit the imposition of substantial fines, but which permit the fine to be reduced significantly if the provider had in place at the time of the crime an effective corporate compliance program and/or accepts responsibility for its actions. Criminal conviction for an offense related to a health care provider’s participation in the Medicare program results in the provider’s exclusion and debarment from all government programs; exclusion may also result from other types of health care fraud convictions. Exclusion from the Medicare or other federal or state funded program would have a material adverse effect on the Combined Group’s financial condition.

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

Under the civil FCA, health care providers may be liable if they take steps to obtain improper payments from the government by submitting false claims. Civil FCA violations have been alleged solely on the existence of alleged kickback or self-referral arrangements. Even in the absence of evidence that literally false claims have been submitted, these cases argue that the improper business relationship tainted the subsequently submitted claims, thereby rendering the claims false under the civil FCA. Other civil FCA cases have proceeded on a theory that providers are liable for the submission of false claims when they are not in full compliance with applicable legal and regulatory standards. It is impossible to predict with certainty whether courts will uniformly hold that regulatory non-compliance and anti-kickback or self-referral violations are subject to prosecutions as false claims. If a provider is faced with a civil FCA prosecution based on one of these theories, however, allocation of the funds required to contest or settle the matter could have a material adverse impact on that provider and, potentially, its affiliates.

Violations of the civil FCA can result in penalties up to triple the actual damages incurred by the government and also monetary penalties. To avoid or reduce civil FCA liability, health care providers may choose to maintain a corporate culture of compliance with all applicable legal requirements, establish systems that enable them to learn of potential problems before a qui tam plaintiff files suit, consider making voluntary disclosures of information to the government if they discover wrongdoing or attempt to persuade the government not to proceed by cooperating with the government’s investigation.

Anti-Kickback Law. The federal Anti-Kickback Law is a criminal statute that prohibits anyone from knowingly or willfully 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 covered by any federal or state health care program. The Anti-Kickback Law applies to virtually every person and entity with which a hospital does business. Activities subject to the Anti-Kickback Law include almost any arrangement between a hospital and

A-43 a person or entity in a position to generate business for the hospital or benefit from business from the hospital. Such arrangements may involve physicians (e.g., practice acquisitions, physician recruiting and retention programs; various forms of hospital assistance to individual physicians, medical practices or physician contracting entities; physician referral services; hospital-physician service or management contracts; and space or equipment rentals between hospitals and physicians), other providers or suppliers (e.g., referral arrangements with nursing homes or home health agencies), or vendors. In recent years, the Anti-Kickback Law has been aggressively enforced. Health care providers, their subsidiaries, affiliates, and physicians, all have some exposure relating to the Anti-Kickback Law.

Violation of the Anti-Kickback Law is a felony, subject to a maximum fine of $25,000 for each criminal act, imprisonment for up to five years and exclusion from the Medicare and Medicaid programs. The OIG, the enforcement arm of the DHHS, can also initiate an administrative exclusion of a provider from the Medicare and Medicaid programs. In addition, civil monetary penalties for each act in violation of the Anti-Kickback Law or damages equal to three times the amount of prohibited remuneration may be imposed.

The outcome of any government efforts to enforce the Anti-Kickback Law against health care providers is difficult to predict due, in part, to government discretion in pursuing enforcement and the lack of significant case law. Health care providers may act to reduce their financial exposure for Anti-Kickback violations through prompt repayment of sums received as a result of inaccurate claims, prompt voluntary reporting to the government of illegal arrangements, implementation of effective corporate compliance programs, and by taking steps to require that their subsidiaries and affiliates do the same.

HIPAA. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) 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 required DHHS to adopt national standards for electronic health care transactions, including federal privacy standards for the protection of health information kept by health care providers, among others, that conduct certain financial and administrative transactions electronically (the “Privacy Rule”) and standards relating to the security of such health information (the “Security Rule”). Compliance with the requirements of the Privacy Rule, the Security Rule and other HIPAA requirements has required the Combined Group to develop and use policies and procedures designed to inform patients about their privacy rights and how their protected health information may be used, to keep protected information secure, to train employees so that they understand the privacy procedures and practices of the Combined Group and to designate a privacy officer responsible for seeing that privacy procedures are adopted and followed. HIPAA imposes civil monetary penalties and criminal penalties for knowingly obtaining or using individually identifiable health information.

On February 17, 2009, President Obama signed into law the HITECH Act, which is part of the Stimulus Act. The HITECH Act expands the scope and application of the administrative simplification provisions of HIPAA, and its implementing regulation, (i) extending the reach of the Privacy Rule and Security Rule to business associates, (ii) imposing a written notice obligation upon covered entities for security breaches involving “unsecured” protected health information, (iii) limiting certain uses and disclosures of protected health information, (iv) increasing individuals’ rights with respect to protected health information, (v) increasing penalties for violations, and (vi) providing for enforcement of violations by State attorneys general. Many of the HITECH Act’s provisions became effective on February 17, 2010, but other provisions require implementing regulations and may become effective at some point in 2011 or thereafter. While the effects of the HITECH Act cannot be predicted at this time, the obligations imposed thereunder could have a material adverse effect on the financial condition of the Combined Group.

Security Breaches and Unauthorized Releases of Personal Information. State and local authorities are increasingly focused on the importance of protecting the confidentiality of individuals’ personal information, including patient health information. Many states have enacted laws requiring businesses to notify individuals of security breaches that result in the unauthorized release of personal information. In some states, notification

A-44 requirements may be triggered even where information has not been used or disclosed, but rather has been inappropriately accessed. State consumer protection laws may also provide the basis for legal action for privacy and security breaches and frequently, unlike HIPAA, authorize a private right of action. In particular, the public nature of security breaches exposes health organizations to increased risk of individual or class action lawsuits from patients or other affected persons, in addition to government enforcement. Failure to comply with restrictions on patient privacy or to maintain robust information security safeguards, including taking steps to ensure that contractors who have access to sensitive patient information maintain the confidentiality of such information, could consequently damage a health care provider’s reputation and materially adversely affect business operations.

Stark Referral Law. The federal Stark statute prohibits the referral of Medicare and Medicaid patients for certain “designated health services” (including inpatient and outpatient hospital services, home health services, clinical laboratory services, radiology services and radiation therapy services and supplies, physical and occupational therapy, outpatient prescription drugs, and durable medical equipment and supplies) to entities with which the referring physician or an immediate family member has a financial relationship. The statute also prohibits the entity furnishing “designated health services” from billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited referral. The statute is a “strict liability” statute, which means that the government does not need to prove that the entity knew that the referral was prohibited or intended to engage in a prohibited financial relationship in order to establish a Stark violation. Most providers of the “designated health services” with physician relationships have some exposure to liability under the Stark statute. A financial relationship includes both an ownership or an investment interest in the entity or a compensation arrangement between the physician (or immediate family member) and the entity. Many ordinary business practices and economically desirable arrangements with physicians would constitute “financial relationships” within the meaning of the Stark statute, thus triggering the prohibition on referrals and billing. There are certain statutory and regulatory exceptions to the statutory prohibition, but these exceptions are narrow and an arrangement must fully comply with the exception.

Upon determination that there is a Stark violation, a Medicare carrier or intermediary must deny payment of the affected claims, and the entity providing the designated health services must refund the amounts collected from the Medicare program and any other payor or for services rendered pursuant to the prohibited referral. Further, DHHS may seek civil monetary penalties. Additionally, the entity may be liable to pay an assessment of up to three times the payment for prohibited referrals and may be excluded from the Medicare and Medicaid programs. Such enforcement actions would have a material adverse impact on the financial condition of a health care provider, including the Combined Group. Providers may act to reduce their exposure for Stark violations by establishing an effective corporate compliance program that periodically reviews hospital-physician relationships for compliance with Stark, promptly returning to the government any payments received by way of illegal referrals, and responding in an effective manner to complaints regarding prohibited referrals or financial arrangements that would trigger the Stark prohibitions.

EMTALA. In response to concerns regarding inappropriate hospital transfers of emergency patients based on the patient’s inability to pay for the services provided, Congress enacted the Emergency Medical Treatment and Active Labor Act (“EMTALA”), the so-called “anti-dumping” statute. EMTALA requires hospitals with emergency rooms, including those of the Combined Group, to treat or conduct an appropriate and uniform medical screening for emergency conditions (including active labor) on all patients and to stabilize a patient’s emergency medical condition before releasing, discharging or transferring the patient to another hospital. 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 is liable for any claim by an individual who has suffered harm as a result of such violation.

Administrative Enforcement. As with civil laws, administrative regulations require a relatively low standard of proof of a violation, and thus, health care providers have a high risk of imposition of monetary penalties as a result of an administrative enforcement action.

Civil Monetary Penalty Act. The federal Civil Monetary Penalty Act (“CMPA”) provides for administrative sanctions against health care providers for a broad range of billing and other abuses. A health care provider is liable under the CMPA if it knowingly presents, or causes to be presented, improper claims for reimbursement under Medicare, Medicaid and other federal health care programs. A hospital that participates in arrangements known as

A-45 “gainsharing” by paying a physician to limit or reduce services to Medicare fee-for-service beneficiaries also would be subject to CMPA penalties. A health care provider that provides benefits to Medicare or Medicaid beneficiaries that such provider knows or should know are likely to induce the beneficiaries to choose the provider for their care also would be subject to CMPA penalties. The CMPA authorizes imposition of a civil money penalty and treble damages.

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

Exclusions from Medicare or Medicaid Participation. The Secretary of DHHS is required to exclude from governmental program participation (including Medicare and Medicaid) for not less than five years any individual or entity who has been convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state health care program, any criminal offense relating to patient neglect or abuse in connection with the delivery of health care, felony fraud against any federal, state or locally financed health care program or an offense relating to the illegal manufacture, distribution, prescription, or dispensing of a controlled substance. The Secretary of DHHS also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, theft, embezzlement, breach of fiduciary duty, or other financial misconduct relating either to the delivery of health care in general, or to participation in a federal, state or local government program.

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 Combined Group.

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 similar payments 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 Combined 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 Combined Group, regardless of the outcome, and could have material adverse consequences on the financial condition of the Combined Group.

OIG Compliance Guidelines. In 1998, the OIG published Compliance Program Guidance for the hospital industry which it supplemented in 2005 with the publication of the Supplemental Compliance Program Guidance. These issuances (collectively, the “OIG Guidances”) provide recommendations to hospitals for adopting and implementing effective programs to promote compliance with applicable Federal and state law and the program requirements of Federal, state, and private health plans, and they include a discussion of significant risk areas for hospitals. Compliance with the OIG Guidances is voluntary but is nevertheless an important factor in controlling risk because the OIG will consider the existence of an effective compliance program that pre-dated any governmental investigation when addressing the appropriateness of administrative penalties. However, the presence of a compliance program is not an assurance that healthcare providers, such as the Combined Group, will not be investigated by one or more Federal or state agencies that enforce healthcare fraud and abuse laws or that they will not be required to make repayments to various healthcare insurers (including the Medicare and/or Medicaid programs). The Federal Deficit Reduction Act of 2005 added specific requirements effective January 1, 2007. Those requirements include creating a Medicaid Compliance Plan, as well as educating staff, agents and contractors about state and Federal anti-fraud and abuse laws. Having a Medicaid Compliance Plan is a prerequisite to entitlement to receive Medicaid payments.

A-46 Limitations on Contractual and Other Arrangements with Physicians Imposed by the Internal Revenue Code

Third-party reimbursement methodologies create financial incentives for hospitals to recruit and retain physicians who will admit patients and utilize hospital services. The Combined Group’s use of these incentives is limited, however, by legal restrictions, including limitations with respect to permitted activities of tax-exempt organizations. As a tax-exempt organization, a hospital is limited with respect to its use of practice income guarantees, reduced rent on medical office space, below market-rate loans, joint venture programs, and other means of recruiting and retaining physicians. The Internal Revenue Service (the “IRS”) has intensified its scrutiny of a broad variety of contractual relationships commonly entered into by hospitals, including the issuance of detailed hospital audit guidelines and the commencement of intensive audits of selected health care providers to determine whether the activities of these providers are consistent with their continued tax-exempt status. The IRS has also indicated that, in certain circumstances, violation of the Anti-Kickback Law could constitute grounds for revocation of a hospital’s tax-exempt status.

The Combined Group, like many health care providers, may have entered into arrangements, directly or through affiliates, with physicians that are of the kind that the IRS has indicated it will examine in connection with audits of tax-exempt hospitals. Any suspension, limitation, or revocation of the Combined Group’s tax-exempt status or assessment of significant tax liability could have a materially adverse effect on the Combined Group and might lead to loss of tax exemption of interest on the Bonds. Management is not aware of any current inquiry, challenge or investigation, and believes that all such arrangements entered into by the Combined Group are consistent in material respects with the limits imposed on tax-exempt organizations.

Antitrust

Enforcement of the antitrust laws against health care providers is becoming more common. Antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, payor contracting, physician relations, joint ventures, merger, acquisition and affiliation 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 still evolving, and enforcement activity appears to be increasing. 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. The most common areas of potential liability are joint action among providers with respect to payor contracting, medical staff credentialing, merger, acquisition and affiliation activity and use of a hospital’s local market power for entry into related health care businesses. From time to time, the Combined Group is or may be involved with all of these types of activities. In general, it cannot be predicted 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. With respect to payor contracting, the Combined Group may, from time to time, be involved in joint contracting activity with other hospitals or providers. The precise degree to which this or similar joint contracting activities may expose the participants to antitrust risk from governmental or private sources is dependent on a myriad of factual matters which may change from time to time.

If any medical group or other provider with which the Combined Group becomes affiliated is determined to have violated the antitrust laws, the Combined Group also may be subject to liability as a joint actor, or the value of any investment in such group or provider may be affected.

Physicians who are subject to adverse peer review proceedings may file federal antitrust actions against hospitals and seek treble damages. Hospitals regularly have disputes with physicians regarding credentialing and peer review and therefore, may be subject to liability in this area. In addition, hospitals occasionally indemnify medical staff members who are involved in such credentialing or peer review activities and also may be liable with respect to such indemnity. Recent court decisions also have established private causes of action against hospitals that use their local market power to promote ancillary health care businesses in which they have an interest. Such activities may result in monetary liability for the participating hospitals under certain circumstances where a competitor suffers business damage.

A-47 Physician Medical Staff

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

Nursing and Other Shortages

The shortage of nurses that had existed for several years and was projected to intensify in the coming years due to the retirements of “baby boomers,” has eased somewhat due to the economic crisis that began in September 2008. However, when the economy improves, this interruption is expected to end, and it is predicted that the health care professionals labor market will return to the critical shortage situation it has been in for many years.

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 the affected members. In addition, employee strikes or other adverse labor actions may have an adverse impact on the Combined Group.

Revocation of Tax Exemption; Private Inurement

Revocation of the tax-exempt status of the Combined Group under Section 501(c)(3) of the Internal Revenue Code (the “Code”) could subject the interest paid to Bondowners to federal income tax retroactively to the date of issuance of the Bonds. Section 501(c)(3) of the Code specifically conditions the continuing exemption of all organizations described in such section upon the requirement, among others, that no part of the net earnings of the organization inure to the benefit of any private individual. Any violation of the prohibition against private inurement may cause the organization to lose its status as tax exempt under Section 501(c)(3). The IRS has issued guidance in informal private letter rulings and general counsel memoranda on some situations that give rise to private inurement, but there is no definitive body of law, regulations or public advisory rulings that address many common arrangements between exempt hospitals and non-exempt individuals or entities. While management of the Combined Group believes that the arrangements between the Combined Group and private persons and entities are generally consistent with the IRS’s guidance, there can be no assurance concerning the outcome of an audit or other investigation by the IRS given the lack of clear authority interpreting the range of activities undertaken by the Combined Group.

Intermediate sanctions legislation enacted in 1996 imposes penalty excise taxes in cases where an exempt organization is found to have engaged in an “excess benefit transaction” with a “disqualified person.” Such penalty excise taxes may be imposed in lieu of revocation of exemption, or in addition to such revocation in cases where the magnitude or nature of the excess benefit calls into question whether the organization functions as a public charity. The tax is imposed both on the “disqualified person” receiving such excess benefit and on any officer, director, trustee or other person having similar powers or responsibilities who participated in the transaction willfully or without reasonable cause, knowing it to involve “excess benefit.” “Excess benefit transactions” include transactions in which a “disqualified person” receives unreasonable compensation for services, or receives other economic benefit from the organization that either exceeds fair value or is determined in whole or in part by the revenues of one or more activities of such organization. “Disqualified persons” include “insiders” such as board members, officers, and senior management.

A-48 Although management believes that the sanction of revocation of tax-exempt status is likely to be imposed only in cases of pervasive excess benefit, the imposition of penalty excise taxes in lieu of revocation based upon a finding that the Combined Group engaged in an “excess benefit transaction” is likely to result in negative publicity and other consequences that could have a materially adverse effect on the operations, property or assets of the Combined Group.

Maintenance of Tax-Exempt Status of Interest on the Bonds.

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

IRS officials have recently indicated that more resources will be invested in audits of tax-exempt bonds in the charitable organization sector. The Bonds may be, from time to time, subject to audits by the IRS.

Environmental Laws and Regulations

Health care providers are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations that address, among other things, provider operations or facilities and properties owned or operated by providers. The types of regulatory requirements faced by health care providers include: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos, polychlorinated biphenyls and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the provider; and requirements for training employees in the proper handling and management of hazardous materials and wastes.

In its role as an owner and/or operator of properties or facilities, the Members of the Combined Group may be subject to liability for investigating and remedying any hazardous substances that have come to be located on their property, including any such substances that may have migrated off the property. Typical health care provider operations include, but are not limited to, in various combinations, the handling, use, storage, transportation, disposal and/or discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. As such, health care provider operations are particularly susceptible to the practical, financial and legal risks associated with the obligations imposed by applicable environmental laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations and/or increase their cost; may result in legal liability, damages, injunctions or fines and may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and may not be covered by insurance. There can be no assurance that the Combined Group will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Combined Group.

Management is not aware of any pending or threatened claim, investigation or enforcement action regarding such environmental issues or any instance of contamination which, if determined adversely to the Combined Group, would have material adverse consequences to the Combined Group.

Licensing, Surveys, Investigations and Audits

Health facilities, including those of the Combined Group, are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements relating to Medicare and Medicaid participation and payment, state licensing agencies, private payors and the Joint Commission. Renewal and continuation of certain of these licenses, certifications and accreditations are based on inspections, surveys, audits, investigations or other reviews, some of which may require or include affirmative

A-49 activity or response by the Combined Group. These activities generally are conducted in the normal course of business of health facilities. Nevertheless, an adverse result could cause a loss or reduction in the Combined Group’s scope of licensure, certification or accreditation, could reduce the payment received, or could require repayment of amounts previously remitted to the provider.

Professional Liability Claims and General Liability Insurance

Professional liability and other actions alleging wrongful conduct and seeking punitive damages are often filed against health care providers. Insurance does not provide coverage for judgments for punitive damages. Litigation also arises from the corporate and business activities of the Combined Group, from the Combined Group’s status as an employer or as a result of medical staff or provider network peer review or the denial of medical staff or provider network privileges. Certain risks are covered by insurance, but some are not. For example, some antitrust claims or business disputes are not covered by insurance or other sources and may, in whole or in part, be a liability of the Combined Group if determined or settled adversely.

The Combined Group currently carries malpractice, directors’ and officers’ liability and general liability insurance (some of which is through a captive insurer), which management considers adequate, but no assurance can be given that the Combined 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 Combined 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 Combined Group, including coverage by a captive insurer, see “INSURANCE” herein.

Pension Funding

The Combined Group sponsors a defined benefit pension plan and provides post-retirement medical benefits to certain of its employees. The Combined Group is also obligated to make certain payments relating to pension and post-retirement medical benefits to certain employees (principally physicians) leased to System Affiliates. The amount of required funding relating to these liabilities can vary significantly on an annual basis as a result of changes in actuarial assumptions, market returns, and other factors. Such variations may result in material and unexpectedly large cash expenditures particularly in volatile equity environments. For further information, see footnote 10 to the audited consolidated financial statements included as Appendix B.

Other Risk Factors

In the future, the following factors, among others, may adversely affect the operations of health care providers, including the Members of the Combined Group or the market value of the Bonds, to an extent that cannot be determined at this time:

(a) Reduced demand for the services of the Combined Group that might result from decreases in population;

(b) Bankruptcy of an indemnity/commercial insurer, managed care plan or other payor;

(c) The occurrence of a natural or man-made disaster that could damage the Combined Group’s facilities, interrupt utility service to the facilities, result in an abnormally high demand for health care services or otherwise impair the Combined Group’s operations and the generation of revenues from the facilities; and

(d) Adoption of a so-called “flat tax” federal income tax, a reduction in the marginal rates of federal income taxation or replacement of the federal income tax with another form of taxation, any of which might adversely affect the market value of the Bonds and the level of charitable giving to the Combined Group.

This letter and the information herein are submitted to the Authority for inclusion in its Official Statement relating to its Revenue Bonds, UMass Memorial Issue, Series G (2010). The use of this letter by the Authority in connection with the initial sale and public offering of the Bonds, and its execution and delivery by the authorized officers of the Combined Group, have been duly authorized by the Board of Trustees of the Combined Group.

A-50 UMASS MEMORIAL HEALTH CARE, INC. UMASS MEMORIAL MEDICAL CENTER, INC.

By: John G. O’Brien Chief Executive Officer

By: Todd A. Keating Chief Financial Officer

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[THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C-1

DEFINITIONS OF CERTAIN TERMS

In addition to terms defined elsewhere in this Official Statement, unless the context otherwise requires, the following definitions shall apply:

DEFINITIONS PERTAINING TO THE MASTER INDENTURE

“Additional Indebtedness” shall mean any Indebtedness (including all Indenture Indebtedness) incurred by any Member of the Obligated Group, subsequent to its becoming a Member of the Obligated Group, which shall not include: (a) the Authority’s Revenue Bonds, The Medical Center of Central Massachusetts Issue, Series B and Obligation No. 1 securing such bonds; (b) the Guaranty dated as of December 2, 1998 issued by the Representative to the Ambac Assurance Corporation to secure the payment of the Authority’s Revenue Bonds, Central New England HealthAlliance Obligated Group Issue, Series B and Obligation No. 2 securing such Guaranty; (c) the Authority’s Revenue Bonds, UMass Memorial Issue, Series A and Obligation No. 3 securing such bonds; (d) the Authority’s Revenue Bonds, UMass Memorial Issue, Series B (Auction Rate Certificates) and Obligation No. 4 securing such bonds; and (e) the Authority’s Revenue Bonds, UMass Memorial Issue, Series C and Obligation No. 5 securing such bonds.

“Adjusted Annual Operating Revenues” shall mean, as to any Fiscal Year, the aggregate of operating revenues of all Members of the Obligated Group for such year, less contractual allowances, free care and uncollectible accounts, determined in accordance with generally accepted accounting principles and in such a manner that no portion of the operating revenues, contractual allowances, free care or uncollectible accounts of any Member is included more than once.

“Affiliate” shall mean a corporation, partnership, joint venture, association, business trust or similar entity organized under the laws of the United States of America or any state thereof: (a) which Controls or which is Controlled, directly or indirectly, by the Parent or any Affiliate; or (b) a majority of the members of any Governing Body of which are members of the Governing Body of the Parent.

“Aggregate Debt Service Requirement” shall mean, as to any period, the aggregate of the Debt Service Requirements of all members of the Combined Group for such period, determined in such a manner that no portion of the Debt Service Requirement of any member is included more than once.

“Aggregate Income Available for Debt Service” shall mean, as to any period, the aggregate of Income Available for Debt Service of all members of the Combined Group for such period, determined in such a manner that no portion of Income Available for Debt Service of any such member is included more than once.

“Authority” shall mean the Massachusetts Health and Educational Facilities Authority and its successors.

“Balloon Indebtedness” shall mean (i) Long-Term Indebtedness which is part of an issue of Indebtedness 25% or more of which has its Date of Maturity in the same 12 month period or (ii) any portion of an issue of Long-Term Indebtedness which is so designated by the Member whose debt it is pursuant to an Officer’s Certificate stating that such portion shall be deemed to constitute a separate issue of Balloon Indebtedness.

“Bond Insurance Policy” means the municipal bond insurance policy or policies issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Massachusetts Health and Educational Facilities Authority Revenue Bonds, UMass Memorial Issue, Series A, and UMass Memorial Issue, Series B (Auction Rate Certificates) as provided therein.

“Bond Insurer” means Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company and its successors.

C-1-1 APPENDIX C-1

“Book Value,” when used in connection with Property of any member of the Combined Group, shall mean the cost of such Property, net of accumulated depreciation, calculated in conformity with generally accepted accounting principles, and when used in connection with Property of the Combined Group, means the aggregate of the values so determined with respect to such Property of all members of the Combined Group determined in such a manner that no portion of such value of Property of any member is included more than once.

“Capitalization” shall mean the sum of (i) the aggregate principal amount of all Outstanding Long-Term Indebtedness of the Members of the Obligated Group plus (ii) the aggregate Unrestricted Fund Balance of the Members of the Obligated Group.

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

“Combined Group” shall mean the Parent, all other Members of the Obligated Group and all Designated Members.

“Commonwealth” shall mean The Commonwealth of Massachusetts.

“Completion Indebtedness” shall mean any Long-Term Indebtedness incurred by any Member of the Obligated Group for the purpose of financing the completion of constructing or equipping facilities for the construction or equipping of which Long-Term Indebtedness has theretofore been incurred to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time such prior Long-Term Indebtedness was originally incurred and for the purpose of financing a related debt service reserve fund, if any.

“Consultant” shall mean an independent firm which is a certified public accountant or professional management consultant, selected by the Parent or other Member of the Obligated Group, as the case may be, reasonably acceptable to the Master Trustee and having the skill and experience necessary to render the particular report required by the provision hereof in which such requirement appears.

“Controlling Member” shall mean the Member of the Obligated Group designated by the Representative to establish and maintain control over a Designated Member as provided by the Indenture.

“Corporate Trust Office” shall mean the office of the Master Trustee at which its principal corporate trust business is conducted, which at the date hereof is located at U.S. Bank Corporate Trust Services, One Federal Street, Boston, Massachusetts 02110.

“Date of Maturity” shall mean as to any Indebtedness, as of any date of determination, the first date thereafter on which such Indebtedness is payable, whether at maturity, by mandatory (including sinking fund) redemption (or purchase) or by redemption (or purchase) at the option of the holders; provided that if portions of any Indebtedness are payable on different dates, the Date of Maturity shall be separately determined for each such portion. If there is a refinancing arrangement for any Indebtedness meeting the requirements of the Indenture, in determining Dates of Maturity, such Indebtedness shall be deemed to be payable in accordance with the terms of the refinancing arrangement.

“Debt Service Requirement” shall mean, with respect to each member of the Combined Group, as to any period of time, the aggregate of the amounts required to be paid to amortize principal of Outstanding Long-Term Indebtedness and to pay interest (other than capitalized interest) on Outstanding Long-Term Indebtedness of such member during such period, taking into account in determining the Debt Service Requirement (A) for any future period that (i) Indebtedness described in the Indenture shall be deemed payable on the dates and in the amounts contemplated in such Sections and (ii) except as otherwise expressly permitted in the Indenture, principal on all Indebtedness shall be deemed to be payable on the Date of Maturity thereof, and (B) for any period with respect to Indebtedness that has been refunded or refinanced or is secured by an Irrevocable Deposit, the amounts of principal and interest taken into account during such period shall exclude amounts payable from proceeds of such refunding or refinancing or from such Irrevocable Deposit.

“Designated Member” shall mean any Person that has been designated as such pursuant to the Indenture.

C-1-2 APPENDIX C-1

“Event of Default” shall mean any one or more of those events set forth in the Indenture.

“Fiscal Year” shall mean any twelve-month period beginning on October 1 of any calendar year and ending on September 30 of such calendar year or such other consecutive twelve-month period selected by the Representative as the fiscal year for the Combined Group and designated from time to time in writing by the Representative to the Master Trustee; for purposes of making historical calculations or determinations set forth in the Indenture on a Fiscal Year basis, or for purposes of combinations or consolidation of accounting information, with respect to those entities whose actual fiscal year is different from that designated above, the actual fiscal year of such entities which ended within the Fiscal Year of the Combined Group shall be used; provided, however, that for purposes of making any calculations or determinations as set forth in the Indenture, the Representative may designate in writing to the Master Trustee as the “Fiscal Year” any twelve-month period. Whenever the Master Indenture refers to a Fiscal Year of a specific entity, such reference shall be to the actual fiscal year adopted by such entity.

“Governing Body” shall mean, when used with respect to the Parent or any other member of the Combined Group, its board of directors, board of trustees, or other board or group of individuals, or the individual, in which the powers of the Parent or the member of the Combined Group are vested.

“Government or Equivalent Obligations” shall mean (i) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), and (ii) obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America.

“Governmental Issuer” shall mean any federal, state or municipal corporation or political subdivision thereof or any instrumentality of any of the foregoing empowered to issue obligations.

“Gross Receipts” shall mean revenues and receipts from all sources (other than gifts, grants or bequests which may not lawfully be used to fulfill the obligations under the Master Indenture), whether in the form of proceeds of accounts receivable or contract rights or otherwise.

“Guaranty” shall mean all obligations of any member of the Combined Group guaranteeing in any manner whether directly or indirectly any obligation of any other Person provided that if such Person is not a member of the Combined Group, such obligations would constitute Indebtedness under the Indenture if such other Person were a member of the Combined Group.

“Historical Debt Service Coverage Ratio” shall mean, for any period of time, the ratio determined by dividing Aggregate Income Available for Debt Service for that period by the Aggregate Debt Service Requirement for such period.

“Income Available for Debt Service” shall mean, with respect to each member of the Combined Group, as to any period of time, the excess of revenue and gains over expenses and losses (excluding from revenue and expenses extraordinary items, infrequently occurring items or unusual items and the cumulative effect of changes in accounting principles, excluding income from Irrevocable Deposits and excluding from expenses depreciation, interest on Long-Term Indebtedness and amortization of bond discount and financing expenses), all as determined in accordance with generally accepted accounting principles.

“Indebtedness” shall mean all obligations for borrowed money, or installment sale and capitalized lease obligations, incurred or assumed by any member of the Combined Group, including Guaranties (other than any Guaranty by any member of the Combined Group of Indebtedness of any other member of the Combined Group), Long-Term Indebtedness, Short-Term Indebtedness, subordinated Indebtedness or any other obligation of a member for payments of principal and interest with respect to money borrowed except obligations of a member of the Combined Group to another member of the Combined Group.

“Indenture” or “Master Indenture” shall mean the Master Indenture dated as of December 1, 1998 among the Parent, any other Members of the Obligated Group and the Master Trustee as supplemented from time to time.

C-1-3 APPENDIX C-1

“Indenture Indebtedness” shall mean any Indebtedness evidenced by or the repayment of which is secured by an Obligation or Obligations issued and delivered under the Indenture and authenticated by the Master Trustee pursuant to the Indenture.

“Insurance Consultant” shall mean an independent Person or firm which is selected by the Parent or other Member of the Obligated Group, as the case may be, and acceptable to the Master Trustee and qualified to survey risks and to recommend insurance coverage for hospitals, health-related facilities and services and organizations engaged in such operations.

“Irrevocable Deposit” shall mean the irrevocable deposit in trust of cash in an amount (or Government or Equivalent Obligations the principal of and interest on which will be in an amount) and under terms sufficient to pay all or a portion of the principal of, premium, if any, and interest on, as the same shall become due, any Indebtedness which immediately prior to the time of such deposit is Outstanding. The trustee of such deposit may be the Master Trustee, a Related Bond Trustee or any other trustee authorized to act in such capacity.

“Lien” shall mean any mortgage or pledge of, security interest in or lien or encumbrance on any Property of any member of the Combined Group which secures any Indebtedness or any other obligation of any member of the Combined Group, or which secures any obligation of any Person other than an obligation to any member of the Combined Group, excluding liens applicable to Property in which the member of the Combined Group has only a leasehold interest unless the lien secures Indebtedness of any member of the Combined Group.

“Long-Term Indebtedness” shall mean any Indebtedness which is not Short-Term Indebtedness.

“Master Trustee” shall mean U.S. Bank National Association, and its successors as trustee under the Indenture.

“Maximum Annual Debt Service” shall mean the highest Aggregate Debt Service Requirement for the then current or any succeeding Fiscal Year.

“Member of the Obligated Group” or “Member” shall mean (i) the Parent, (ii) any Person which at any time after the delivery of the Indenture has become a Member of the Obligated Group in accordance with the Indenture and has not withdrawn from the Obligated Group pursuant to the Indenture.

“Obligated Group” shall mean the Parent and each other Member of the Obligated Group, if any.

“Obligation” shall mean an instrument evidencing or securing the repayment of particular Indenture Indebtedness, provided such instrument has been issued in accordance with the Indenture and executed and authenticated as provided in the Indenture.

“Obligation Holder” or “Holder” shall mean the registered owner of any Obligation.

“Officer’s Certificate” shall mean a certificate meeting the requirements of the Indenture, an original of which shall be received by the Master Trustee, signed by the chief financial officer or such other person designated in writing by the chief financial officer or by resolution of the Governing Body of the Parent or other Member of the Obligated Group, as the case may be.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by an attorney or firm of attorneys acceptable to the Master Trustee and experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds.

“Opinion of Counsel” shall mean an opinion in writing signed by an attorney or firm of attorneys, acceptable to the Master Trustee, who may be counsel for any Member of the Obligated Group, or other counsel.

“Outstanding” when used with reference to Indebtedness, shall mean, as of any date of determination, all Indebtedness theretofore issued or incurred and not paid and discharged other than (i) Obligations theretofore

C-1-4 APPENDIX C-1 cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, (ii) Indebtedness deemed paid and no longer Outstanding as provided in the Indenture, and (iii) Obligations and any coupons appurtenant thereto in lieu of which other Obligations have been authenticated and delivered pursuant to the provisions of the Related Supplement regarding mutilated, destroyed, lost or stolen Obligations unless proof satisfactory to the Master Trustee has been received that any such Obligation is held by a bona fide purchaser.

“Parent” shall mean UMass Memorial Health Care, Inc., a Massachusetts nonprofit corporation, and its successors and assigns permitted by the Indenture.

“Permitted Lien” shall have the meaning given in the Indenture.

“Person” shall include an individual, association, unincorporated organization, a corporation, trust, partnership, joint venture, or a government or an agency or a political subdivision thereof.

“Projected Debt Service Coverage Ratio” shall mean, for any future forecast period of time, the ratio determined by dividing projected or forecasted Aggregate Income Available for Debt Service during such period by Maximum Annual Debt Service during such period.

“Projection” shall mean a forecast or determination of the Projected Debt Service Coverage Ratio or a determination of historical coverage of pro forma Indebtedness.

“Property” shall mean with respect to each member of the Combined Group any and all of its rights, titles and interests in and to any and all property, whether real or personal, tangible or intangible and wherever situated including, without limitation, accounts, accounts receivable, contract rights and general intangibles, and all proceeds of all of the foregoing, whether cash or non-cash.

“Property, Plant and Equipment” shall mean all Property of the members of the Combined Group which is property, plant and equipment under generally accepted accounting principles.

“Related Bond Indenture” shall mean any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued, together with any mortgage, note, loan agreement or similar instrument securing such series of Related Bonds.

“Related Bond Issuer” shall mean the Governmental Issuer of any issue of Related Bonds.

“Related Bonds” shall mean the revenue bonds, notes, other evidences of indebtedness or any other obligations issued by a Governmental Issuer, pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to or for the benefit of a Member of the Obligated Group, directly or indirectly, in consideration, in whole or in part, of the execution, authentication and delivery of an Obligation or series of Obligations to or for the order of such Governmental Issuer or Related Bond Trustee.

“Related Bond Trustee” shall mean the trustee and its successors in the trust created under any Related Bond Indenture, and if there is no such trustee, shall mean the Related Bond Issuer.

“Related Supplement” shall mean an indenture supplemental to, and authorized and executed pursuant to the terms of, the Indenture for the purpose of authorizing obligations to evidence or secure Indenture Indebtedness issued under the Indenture.

“Representative” shall mean the Parent or such other Member of the Obligated Group as may be designated from time to time pursuant to written notice to the Master Trustee executed by each Member of the Obligated Group.

C-1-5 APPENDIX C-1

“Second Supplemental Master Indenture” or “RS2” means the Supplemental Master Indenture for Obligation No. 5 dated as of February 13, 2001 among the Parent, the Medical Center and the Master Trustee, as consented to by the Bond Insurer.

“Short-Term Indebtedness” shall mean any issue of Indebtedness no portion of which has a Date of Maturity more than one year from the date of original issuance thereof.

“Sixth Supplemental Master Indenture” or “RS6” means the Supplemental Master Indenture for Obligation No. 9 dated as of June 1, 2010, among the Parent, the Medical Center and the Master Trustee.

“Third Supplemental Master Indenture” or “RS3” means the Supplemental Master Indenture for Obligation No. 6 dated as of July 12, 2005, among the Parent, the Medical Center and the Master Trustee.

“Unrestricted Fund Balance” shall mean, as of any date of determination, (i) for each Member which is a tax-exempt entity, the aggregate unrestricted fund balance of such Member, and (ii) for each-Member which is not a tax-exempt entity, the excess of assets over liabilities of such Member, in each case as shown on the Member’s then most recent audited financial statements.

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C-1-6 APPENDIX C-1

DEFINITIONS PERTAINING TO THE LOAN AND TRUST AGREEMENT

“Act” means Chapter 614 of the Massachusetts Acts of 1968, as amended from time to time.

“Authorized Officer” means: (i) in the case of the Authority, the Chair, Vice Chair, Executive Director, Director of Financing Programs, Associate Director of Financing Programs, Deputy Director of Financing Programs or Director of Finance, and when used with reference to an act or document of the Authority also means any other person authorized to perform the act or execute the document; and (ii) in the case of the Institution, the Chair or other presiding officer of the Board of Trustees, the President, Director or other chief executive or administrative officer, any Vice President or Vice Chair, the Treasurer or other chief financial officer or any Assistant Treasurer, in each case of the Parent or the Medical Center, as appropriate, and when used with reference to an act or document of the Institution, also means any other person authorized to perform the act or execute the document.

“Bond Counsel” means any attorney at law or firm of attorneys selected by the Authority, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States, but shall not include counsel for the Institution.

“Bond Year” means each one year period (or shorter period from the date of issue of the Bonds) ending on September 30.

“Bondowners” means the registered owners of the Bonds from time to time as shown in the books kept by the Trustee as bond registrar and transfer agent.

“Bonds” or “Series G Bonds” means the $______Massachusetts Health and Educational Facilities Authority Revenue Bonds, UMass Memorial Issue, Series G (2010), dated the date of their delivery, and any Bond or Bonds duly issued in exchange or replacement therefor.

“Business Day” means a day on which banks in the city in which the principal office of the Trustee is located is not required or authorized to remain closed and on which the New York Stock Exchange is not closed.

“Continuing Disclosure Agreement” means the Continuing Disclosure Agreement dated as of the date of issuance of the Bonds between the Institution and the Trustee, as originally executed and as it may be amended from time to time in accordance with its terms.

“Government or Equivalent Obligations” means (i) obligations issued or guaranteed by the United States; (ii) certificates evidencing ownership of the right to the payment of the principal of and interest on obligations described in clause (i), provided that such obligations are held in the custody of a bank or trust company satisfactory to the Trustee or the Authority, as the case may be, in a special account separate from the general assets of such custodian; and (iii) shares of any open-end or closed-end management type investment company or trust registered under 15 U.S.C. §80(a)-1 et seq., provided that the portfolio of such investment company or trust is limited to obligations described in clause (i) and repurchase agreements fully collateralized by such obligations, and provided further that such investment company or trust shall take custody of such collateral either directly or through a custodian satisfactory to the Trustee or the Authority.

“IRC” means the Internal Revenue Code of 1986, as it may be amended and applied to the Bonds from time to time.

“Master Indenture” means the Master Indenture dated as of December 1, 1998 between the Parent and the Master Trustee, as amended and supplemented from time to time, including by Supplemental Master Indenture for Obligations No. 1, No. 2, No. 3 and No. 4 dated as of December 1, 1998, by Supplemental Master Indenture for Obligation No. 5 dated as of February 13, 2001, by Supplemental Master Indenture for Obligation No. 6 dated as of July 12, 2005, by Supplemental Master Indenture for Obligation No. 7 dated as of May 1, 2009, by Supplemental

C-1-7 APPENDIX C-1

Master Indenture for Obligation No. 8 dated as of May 1, 2009 and by Supplemental Master Indenture for Obligation No. 9 dated June 1, 2010 each among the Parent, the Medical Center and the Master Trustee.

“Master Trustee” means U.S. Bank National Association, and its successors as master trustee under the Master Indenture.

“Medical Center” means UMass Memorial Medical Center, Inc. and its successors and assigns.

“Member” means a Member of the Obligated Group, as defined in the Master Indenture.

“Moody’s” means Moody’s Investors Service, Inc., or any successor rating agency.

“Note” means Obligation No. 9 issued under the Master Indenture.

“Obligated Group” means the Parent and any other entities admitted pursuant to the Master Indenture.

“Obligation No. 9” means Obligation No. 9 dated as of June 1, 2010, issued under the Master Indenture.

“Opinion of Bond Counsel” means an opinion of Bond Counsel to the effect that the matter or action in question will not have an adverse impact on the tax-exempt status of the Bonds for federal income tax purposes.

“Outstanding,” when used to modify Bonds, refers to Bonds issued under the Agreement, excluding: (i) Bonds which have been exchanged or replaced, or delivered to the Trustee for credit against a principal payment or a sinking fund installment; (ii) Bonds which have been paid; (iii) Bonds which have become due and for the payment of which moneys have been duly provided; and (iv) Bonds for which there have been irrevocably set aside sufficient funds, or Government or Equivalent Obligations described in clause (i) or (ii) of the definition thereof bearing interest at such rates, and with such maturities as will provide sufficient funds, to pay or redeem them, provided, however, that if any such Bonds are to be redeemed prior to maturity, the Authority shall have taken all action necessary to redeem such Bonds and notice of such redemption shall have been duly mailed in accordance with the Agreement or irrevocable instructions so to mail shall have been given to the Trustee.

“Parent” means UMass Memorial Health Care, Inc. and its successors and assigns.

“Project” means the acquisition of land, site development, construction or alteration of buildings or the acquisition or installation of furnishings and equipment, or any combination of the foregoing, in connection with the following:

(A) refinancing of the CNEHA Series A Bonds, which financed and/or refinanced the following projects owned and operated by the Central New England HealthAlliance, Inc. and its affiliate HealthAlliance Hospitals, Inc., located at 275 Nichols Road, Fitchburg (the “Burbank Campus”) and 60 Hospital Road, Leominster (the “Leominster Campus”), generally consisting of:

(1) construction of the Simmons Building, a 95,781 square foot building used as a mental health unit and to provide cancer care and urgent care at the Burbank Campus;

(2) at the Burbank Campus, (i) renovation of, and acquisition and installation of equipment used at, the Emergency Room/ Outpatient Department, the Mental Health Unit-Locked Unit, the Labor and Delivery/ Birthing Room and the Surgery/ Same Day Recovery Room, (ii) the acquisition and installation of window treatments and cubicle curtains and (iii) the acquisition and installation of a fire alarm system; and

(3) renovation of Burbank House for Diversified Home Services, Inc. at 335 Nichols Road, Fitchburg; and

(B) refinancing of the Memorial Series B Bonds which financed and/or refinanced the following projects owned and operated by the Medical Center (formerly known as the Medical Center of Central

C-1-8 APPENDIX C-1

Massachusetts, Inc.) or its affiliates, and located at the Medical Center’s campus bounded by Belmont Street, Oak Avenue, Catherine and Hooper Streets, Worcester (the “Memorial Campus”), on the Medical Center’s campus bounded by Lincoln Street, Shaffner Street, Duxbury Road and Uxbridge Street, Worcester (the “Hahnemann Campus”), and at the addresses listed below, generally consisting of:

(1) construction and equipping of a 6-story, approximately 224,000 square foot facility at 119 Belmont Street on the Memorial Campus to establish a 55-bed maternity care unit, relocation of the Neonatal Intensive Care Unit, relocation and addition of operating rooms, relocation of the Emergency Department and other outpatient ancillary and support services, and establishment of a 10-bed Surgical Intensive Care Unit;

(2) renovation and equipping of approximately 60,000 square feet of existing space at 119 Belmont Street on the Memorial Campus for outpatient and ancillary services, and various other renovations to existing facilities on the Memorial Campus;

(3) construction and renovation on the Hahnemann Campus for Hahnemann Parking facilities and laboratory facilities;

(4) (i) renovation of 11 Shattuck Street, Worcester, for human resources use, (ii) expansion of the Wachusett Home Health Agency facility at 52 Boyden Road, Holden, (iii) renovation of the mental health clinic in the Morgan Building at Lincoln Square, Worcester, (iv) expansion of Barre Regional Health Center on Route 22, Barre, and (v) routine renovation projects at the Memorial and Hahnemann Campuses completed in fiscal years 1992 through 1995; and

(5) acquisition of capital equipment at the Medical Center’s facilities made in fiscal years 1992 through 1995.

The word “Project” also refers to the facilities which result or have resulted from the foregoing activities. The scope of the Project may be increased or decreased upon certification by the Project Officer on behalf of the Institution to the Trustee and the Authority describing the change, estimating the resulting increase or decrease in the cost of the Project and stating: (A) that the amendment will not cause the Project to violate any applicable building, zoning, land use, environmental protection, historical, sanitary, safety or health care laws, rules and regulations or applicable grant, reimbursement or insurance requirements or the provisions of the Agreement; (B) that the changes are covered by a Determination of Need (which shall mean a determination pursuant to Chapter 111, Section 25C, of the Massachusetts General Laws) or are exempt from the requirement of a Determination of Need; (C) with respect to any portion of the Project to which the amendment relates and for which a Determination of Need has been obtained, that the amendment is consistent with the Determination of Need and is not expected to increase its cost beyond the amount approved in the Determination of Need; (D) with respect to any portion of the Project to which the amendment relates and which is exempt from the requirement of a Determination of Need, that the amendment is consistent with the exemption; and (E) as to any portion to which the amendment relates and which is exempt by reason of its cost being not more than the amount exempted by statute, that the amendment is not expected to increase its cost beyond that amount. The scope of the Project may be increased only upon receipt by the Trustee and the Authority of an Opinion of Bond Counsel regarding the increase in scope.

“Project Costs” means the costs of issuing the Bonds and carrying out the Project, including repayment of external loans and internal advances for the same to the extent permitted by the Agreement and the Tax Certificate, working capital expenditures directly related to the Project to the extent permitted by the IRC, and interest prior to, during and for up to one year after construction is substantially complete, but excluding general administrative expenses, overhead of the Institution and interest on internal advances.

“Project Officer” means the Treasurer of the Parent or an alternate or successor appointed by the Institution.

“Rebate Year” means the one year period (or shorter period beginning on the date of issue) ending on September 30.

C-1-9 APPENDIX C-1

“Series 1992 Refunding Trust Agreement” means the Refunding Trust Agreement dated as of June 1, 2010 among the Authority, The Medical Center and U.S. Bank National Association (successor to Shawmut Bank, N.A.), as Refunding Bond Trustee, relating to the Authority’s Revenue Bonds, Medical Center of Central Massachusetts Issue, Series B-2 and B-3 (1992) (the “Memorial Series B Bonds”).

“Series 1993 Refunding Trust Agreement” means the Refunding Trust Agreement dated as of June 1, 2010 among the Authority, HealthAlliance Hospitals, Inc. (successor to Burbank Hospital), HealthAlliance Home Health and Hospice, Inc. (successor to Diversified Home Services, Inc.) and Central New England HealthAlliance, Inc. (successor to Central New England Health System, Inc.) and The Bank of New York Mellon Trust Company, N.A. (successor to The First National Bank of Boston), as Refunding Bond Trustee, relating to the Authority’s Revenue Bonds, Central New England Health System, Inc. Issue, Series A (1993) (the “CNEHA Series A Bonds”).

“Revenues” means all rates, mortgage payments, rents, fees, charges, and other income and receipts, including proceeds of insurance, eminent domain and sale, and including proceeds derived from any security provided under the Agreement, payable to the Authority or the Trustee under the Agreement, excluding administrative fees of the Authority, fees of the Trustee, reimbursements to the Authority or the Trustee for expenses incurred by the Authority or the Trustee, and indemnification of the Authority and the Trustee.

“S&P” means Standard & Poor’s Ratings Group, Inc., or any successor rating agency.

“Tax Certificate” means the Tax Certificate and Agreement among the Authority, the Parent and the Medical Center dated the date of original issuance of the Bonds.

“Trustee” means U.S. Bank National Association and its successors and assigns.

“UCC” means the Massachusetts Uniform Commercial Code.

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C-1-10 APPENDIX C-2

The following are brief summaries, prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority, of certain provisions of the Master Trust Indenture (the “Indenture” or the “MI”) dated as of December 1, 1998 as amended by the Second Supplemental Master Indenture (“RS2”), the Third Supplemental Master Indenture (“RS3”) and the Sixth Supplemental Indenture (“RS6”). These summaries do not purport to be complete, and reference is made to the documents for full and complete statements of such and all provisions.

SUMMARY OF THE MASTER INDENTURE

Amount of Indenture Indebtedness

The number of Obligations evidencing or securing Indenture Indebtedness that may be created under the Indenture is not limited. The aggregate principal amount of Indenture Indebtedness and the principal amount of each Obligation that may be issued, authenticated and delivered under the Indenture is not limited except as limited by the provisions of the Indenture or of the Related Supplements. (MI Section 2.01)

Designation of Indenture Indebtedness

Obligations shall be issued in such forms as may from time to time be determined by Related Supplements permitted under the Indenture. Each Obligation or series of Obligations shall be created by a different Related Supplement and each Obligation shall be designated in such a manner as will differentiate such Obligation from any other Obligation. (MI Section 2.02)

Security for Obligations

Any Obligation issued under the Indenture may be secured by security (including, without limitation, letters or lines of credit, insurance, or security interests in depreciation reserves, debt service or interest reserves or debt service or similar funds), which additional security need not extend to any other Indebtedness (including any other Obligations). (MI Section 2.06)

Pledge of Gross Receipts

Each Member of the Obligated Group grants, and each Designated Member grants (with respect to Obligations for which such Designated Member has been appointed a Designated Member) to the Master Trustee a Lien on and security interest in its Gross Receipts to secure all Indenture Indebtedness (or in the case of a Designated Member, Indenture Indebtedness for which it is a Designated Member) subject to its right to grant a prior Lien to secure Short-Term Indebtedness described in subsection (d) of the section captioned “Limitations on Incurrence of Additional Indebtedness.” If any required payment on any Indenture Indebtedness is not made when due, any Gross Receipts with respect to which this security interest remains perfected pursuant to law shall be transferred or paid over immediately to the Master Trustee without being commingled with other funds (unless already so commingled) and any Gross Receipts thereafter received shall upon receipt by a Member of the Obligated or the appropriate Designated Member be transferred to the Master Trustee in the form received (with necessary endorsements) to the extent necessary to cover the deficiency. The Members of the Obligated Group and the Designated Members each represents and warrants that the Lien granted by this Section is and at all times will be a first Lien, subject only to (i) Liens permitted by the Indenture and (ii) non-consensual Liens arising by operation of law. The Members of the Obligated Group and the Designated Members each further represents and warrants that the encumbrances and Liens mentioned in clause (ii) of this Section are and will at all times be of an aggregate amount which is not material to the security for all Indenture Indebtedness. (MI Section 2.07 as added by RS2 Section 8)

Gross Receipts paid by any Member of the Combined Group to other parties in the ordinary course might no longer be subject to the lien of the Indenture and might therefore be unavailable to the Master Trustee. The enforcement of the lien on Gross Receipts is also subject to the exercise of discretion by a court of equity which, under certain circumstances, may have power to direct the use thereof to meet expenses of the Combined Group

C-2-1 APPENDIX C-2 before paying debt service. In the event of the bankruptcy of any member of the Combined Group, any receivables coming into existence, and any Gross Receipts received, 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, might not be subject to the lien of the Indenture. With respect to Gross Receipts not subject to the lien, the Master Trustee would occupy the position of an unsecured creditor.

Conditions for Membership in the Obligated Group

The Parent is the only initial Member of the Obligated Group. A Person may become a Member of the Obligated Group upon the following conditions:

(a) Such Person shall execute and deliver to the Master Trustee an appropriate instrument, in such form as may be satisfactory to the Master Trustee, (i) containing the agreement of such Person to become a Member of the Obligated Group under the Indenture and thereby to become subject to compliance with all provisions of the Indenture pertaining to a Member of the Obligated Group, including the performance and observance of all covenants and obligations of a Member of the Obligated Group under the Indenture whether then existing or thereafter arising; and (ii) unconditionally and irrevocably guaranteeing to the Master Trustee and each other Member of the Obligated Group that all Obligations issued and then Outstanding under the Indenture will be paid in accordance with the terms thereof and of the Indenture when due;

(b) The Master Trustee shall have received an Opinion of Counsel to the effect that the Indenture and the instrument executed and delivered by such Person in accordance with paragraph (a) are valid and binding obligations of such Person, enforceable against such Person in accordance with their terms; provided that such opinion as to enforceability may be qualified to the extent that enforcement of the rights and remedies created by the Indenture or such instrument is subject to general principles of equity or to bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights in general, and federal and state law prohibiting or limiting the ability of a charitable corporation to undertake or make payment on an obligation incurred by or for the benefit of another corporation, and other exceptions customarily included in opinions of this type; and provided further that such opinion may be qualified to the extent that the making of such instrument or any payment required to be made by such Person pursuant to the Indenture or such instrument, with respect to Indenture Indebtedness other than that for which it is primarily liable (as provided in the Indenture), might constitute a fraudulent conveyance under applicable bankruptcy and insolvency laws;

(c) The Master Trustee shall have received an Officer’s Certificate to the effect that the Representative consents to such person becoming a Member of the Obligated Group;

(d) The Master Trustee shall have received an Opinion of Counsel to the effect that the conditions contained in the Indenture relating to membership in the Obligated Group have been satisfied, and that under then existing law such Person’s becoming a Member of the Obligated Group will not subject any Obligation or Indenture Indebtedness to the registration provisions of the Securities Act of 1933, as amended (or that such Obligation or Indenture Indebtedness has been so registered if registration is required);

(e) If any Related Bond which bears interest that is not includable in gross income under the Code has not been fully paid, the Master Trustee shall have received an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law such Person’s becoming a Member of the Obligated Group would not cause the interest payable on such Related Bond to become includable in gross income under the Code; and

(f) The Master Trustee shall have received an Officer’s Certificate from the Representative to the effect that, immediately after the admission of such Person to the Obligated Group, the Obligated Group will not be in default in the performance or observance of any covenant or condition to be performed or observed under the Indenture; provided, however, that the Master Trustee may waive the requirement of this subsection if it determines that it is in the best interests of the Holders of a majority in the principal amount of Indenture Indebtedness to do so. (MI Section 3.01) For so long as the Bond Insurance Policy is in full force and effect, Bond Insurer consent shall be required with respect to any waiver granted by the Master Trustee under this subsection (f). (RS2 Section 8)

C-2-2 APPENDIX C-2

Joint and Several Obligation; Individual Obligation

Each Member of the Obligated Group unconditionally and irrevocably agrees that it shall be jointly and severally obligated, and agrees to pay all amounts becoming due and payable on all Obligations issued under the Indenture according to the terms thereof. If for any reason any payment required pursuant to the terms of any Obligations issued under the Indenture has not been timely paid, each Member shall be obligated to make such payment.

Each Member agrees that, with respect to Indenture Indebtedness incurred on its behalf or the net proceeds of which have been received by it or for its direct benefit and evidenced or secured by an Obligation, it will be primarily liable to make full and timely payment on such Indenture Indebtedness. (MI Section 4.02)

Withdrawal From the Obligated Group

(a) The Parent may not withdraw from the Obligated Group. No other Member of the Obligated Group may withdraw from the Obligated Group unless:

(i) the Parent consents to such withdrawal in writing;

(ii) such Member is not a party to a Related Bond Indenture with respect to Related Bonds then Outstanding and is not primarily liable for the payment of any Indenture Indebtedness or such Member makes provision prior to withdrawal for the payment or defeasance of such Related Bonds in accordance with the provisions of the Related Bond Indenture, or Indenture Indebtedness;

(iii) if any Related Bond which bears interest that is not includable in gross income under the Code has not been paid, the Master Trustee shall have received an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law such Member’s withdrawal from the Obligated Group would not cause the interest payable on such Related Bond to become includable in gross income under the Code; and

(iv) the Master Trustee shall have received an Officer’s Certificate of the Representative to the effect that, immediately after the withdrawal of such Member from the Obligated Group, the Obligated Group will not be in default in the performance or observance of any covenant or condition to be performed under the Indenture.

(b) Upon compliance with the conditions contained in paragraph (a), the Master Trustee shall execute any documents reasonably requested by the withdrawing Member and the remaining Members to evidence the termination, in whole or in part, as appropriate, of such Members’ obligations under the Indenture, under any Related Supplements and under all Obligations. (MI Section 4.03)

Covenants Regarding Designated Members

(a) To the extent permitted by law, each Member of the Obligated Group agrees to cause each Designated Member which it Controls to pay or otherwise transfer to the Representative or such other Obligated Group Member such amounts as are necessary to duly and punctually pay the principal of and premium, if any, interest and any other amount payable on all Obligations or portions thereof securing Indenture Indebtedness the proceeds of which were loaned or otherwise made available to such Designated Member or that was otherwise issued for the benefit of such Designated Member, and any other payments required by the terms of such Obligations, the applicable Related Supplement and the Indenture, when and as the same become payable, whether at maturity, upon call for redemptions, by acceleration of maturity or otherwise.

(b) The Representative shall at all times maintain an accurate and complete list of all Designated Members. The Representative, by resolution duly adopted by its Governing Body, may designate any Person as a Designated Member under the Indenture. The Representative, by resolution duly adopted by its Governing Body, shall also designate for each Designated Member a Member of the Obligated Group to serve as the Controlling

C-2-3 APPENDIX C-2

Member for such Designated Member. Each Controlling Member shall cause the Designated Member to provide the Representative a resolution, duly adopted by its Governing Body, accepting its status as a Designated Member. So long as a Person is designated as a Designated Member, the Representative or such Controlling Member shall, to the extent permitted by law, either (i) maintain, directly or indirectly, control of such Designated Member, including the power to direct the management, policies, disposition of assets and actions of such Designated Member to the extent required to cause such Designated Member to comply with the terms and conditions of the Indenture, whether through the ownership of voting securities, by contract, partnership interests, membership, reserved powers, or the power to appoint members, trustees or directors or otherwise, or (ii) execute and have in effect such contracts or other agreements that the Representative and the Controlling Member, each in the sole judgment of their respective Governing Body, deem sufficient for the Controlling Member to cause such Designated Member to comply with the terms and conditions of the Indenture.

(c) Subject to any provisions to the contrary in a Related Supplement, a Person will cease to be a Designated Member and will not be subject to any of the provisions of the Indenture upon the declaration of the Governing Body of the Representative. The Representative shall deliver to the Master Trustee each resolution (i) designating a Designated Member and the Controlling Member of such Designated Member or (ii) declaring that such Person is no longer a Designated Member.

(d) Each Controlling Member covenants that, to the extent permitted by law, it will cause each of its Designated Members to comply with the terms and conditions of the Indenture which are applicable to such Designated Member, and of the Related Bond Indentures, if any, to which such Designated Member is a party. (MI Section 4.04)

Covenants as to Corporate Existence, Maintenance of Properties, Etc.

Each Member of the Obligated Group, respectively, covenants that it shall (and shall cause each of the Designated Members with respect to which it is the Controlling Member to):

(a) Except as otherwise expressly provided in the Indenture, preserve its corporate or other separate legal existence and all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and be qualified to do business and conduct its affairs in each jurisdiction where its ownership of Property or the conduct of its business or affairs requires such qualifications; provided, however, that nothing in the Indenture contained shall be construed to obligate it to retain or preserve any of its rights or licenses no longer used or, in the reasonable judgment of its Governing Body, useful in the conduct of its business or affairs.

(b) At all times cause its Properties to be maintained, preserved and kept in good repair, working order and condition and all needful and proper repairs, renewals and replacements thereof to be made; provided, however, that nothing contained in this paragraph (b) shall be construed (i) to prevent it from ceasing to operate any portion of its Properties if in its judgment (evidenced, in the case of such a cessation other than in the ordinary course of business, by a reasonable determination by its Governing Body) it is advisable not to operate the same, or if it intends to sell or otherwise dispose of the same and within a reasonable time endeavors to effect such sale or other disposition, or (ii) to obligate it to retain, preserve, repair, renew or replace any Property, leases, rights, privileges or licenses no longer used or, in the reasonable judgment of its Governing Body, useful in the conduct of its business or affairs.

(c) Do all things reasonably necessary to conduct its affairs and carry on its business and operations in such manner as to comply in all material respects with any and all material and applicable laws of the United States and the several states thereof and with all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Properties; provided, nevertheless, that nothing in the Indenture contained shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof or the applicability thereof to it shall be contested diligently and in good faith.

(d) Promptly pay all lawful taxes, governmental charges and assessments at any time levied or assessed upon or against it or its Properties; provided, however, that it shall have the right to contest diligently and

C-2-4 APPENDIX C-2 in good faith any such taxes, charges or assessments or the collection of any such sums and pending such contest may (unless otherwise required by law) delay or defer payment thereof.

(e) Procure and maintain all necessary licenses and permits and use its best efforts to procure and maintain accreditation of its health care facilities (other than those of a type for which accreditation is not available) by the Joint Commission on Accreditation of Healthcare Organizations or other applicable recognized accrediting body, when and as available, and the status of its health care facilities (if it owns or operates such facilities) as a provider of health care services eligible for reimbursement under the Medicare program; provided, however, that it need not comply with this paragraph if and to the extent that its Governing Body shall have determined in good faith, evidenced by an Officer’s Certificate, that such compliance is not in its best interests and that lack of such compliance would not materially impair its ability to pay its indebtedness when due. (MI Section 5.02)

Insurance

Each Member of the Obligated Group shall (and will cause each Designated Member with respect to which it is the Controlling Member to) (i) keep its plant, equipment and furnishings included in its Property insured against fire, lightning and extended coverage perils and against such other risks as are customarily insured against by similar institutions in the area; (ii) to the extent required by law, carry worker’s compensation insurance (which may be through the so-called Massachusetts Self-Insurance Group), disability insurance and other insurance covering injury, sickness, disability or death of employees; (iii) maintain insurance against liability of the Member (or Designated Member) imposed by law or assumed by contract for injuries to persons (excluding liability covered by clauses (iv) and (v)), and for death of persons from such injuries; (iv) maintain motor vehicle liability insurance covering owned, unowned and hired motor vehicles, protecting the Member (or Designated Member) against liability for property damage; and (v) if it provides health care services, maintain insurance against liability of the Member (or Designated Member) for professional malpractice.

In lieu of obtaining third-party coverage for the risks described in the foregoing paragraph (except with respect to clause (i) of the foregoing paragraph), a Member may (and may allow a Designated Member to) self- insure any of the required coverages or a portion thereof (or may participate in captive insurance programs sponsored by the Parent, any Affiliate, or any association or organization exposed to comparable risks. As long as any Member (or Designated Member) maintains any self-insurance pursuant to this paragraph, it will provide the Master Trustee annually with a report of an Insurance Consultant concerning the adequacy of funding and the funding determination processes employed in connection therewith. (MI Section 5.03)

Limitations on Creation of Liens

Each Member of the Obligated Group, respectively, agrees that it will not (and will cause each Designated Member which it Controls to not) create or suffer to be created or exist any Lien upon any Property now owned or hereafter acquired by it other than Permitted Liens.

Permitted Liens shall consist of the following:

(i) Any judgment lien or notice of pending action against any member of the Combined Group so long as such judgment or pending action is being contested and execution thereon is stayed within 60 days of entry or while the period for responsive pleading has not lapsed;

(ii) (A) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Property, to (1) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of the member’s Property or materially and adversely affect the value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Property; (B) any liens on any Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics,

C-2-5 APPENDIX C-2 materialmen, and laborers, have been due for less than 60 days; (C) easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any Property which do not materially impair the use of such Property or materially and adversely affect the value thereof; and (D) rights reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such Property or materially and adversely affect the value thereof;

(iii) Purchase money security interests and security interests existing on any Property prior to the time of its acquisition through purchase, merger, consolidation or otherwise, or placed upon Property to secure a portion of the purchase price thereof, or lessor’s interests in leases required to be capitalized in accordance with generally accepted accounting principles; provided that the aggregate principal amounts secured by any such interests shall not exceed at the time of incurrence or assumption the fair market value of such Property;

(iv) Any Lien in favor of the Master Trustee securing all Indenture Indebtedness equally and ratably;

(v) Liens arising by reason of good faith deposits in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(vi) Any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any member of the Combined Group to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit-sharing plans or other similar arrangements, or to share in the privileges or benefits required for companies participating in such arrangements or to secure letters or lines of credit or surety bonds relating to any of the foregoing;

(vii) Any Lien arising by reason of an Irrevocable Deposit;

(viii) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds or on moneys to repay Indebtedness while held in a debt service reserve fund or on any moneys to secure payment of the trustee’s fees; and banker’s liens and rights of setoff in connection with the deposit of funds or investments;

(ix) Liens on moneys deposited by patients or others with any member of the Combined Group as security for or as prepayment for the cost of patient care;

(x) Liens on Property received by any member of the Combined Group through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or the income thereon, up to the fair market value of such Property;

(xi) Statutory rights of the United States of America by reason of federal funds made available under 42 U.S.C. §291 et seq. and similar rights under other federal and state statutes;

(xii) Liens for taxes or special assessments not then delinquent or which are being contested in accordance with the Indenture;

(xiii) Liens on Property due to rights of third-party payers for recoupment or setoff of amounts paid to any member of the Combined Group;

(xiv) Liens securing Indebtedness, provided either (a) that the aggregate amount of Indebtedness, including any Indebtedness secured by a lien permitted under paragraph (iii) above, of the members of the Combined Group (other than capitalized leases) which is secured pursuant to this Paragraph (xiv) shall not at any

C-2-6 APPENDIX C-2 time exceed 33% of the total Book Value of the Property, Plant and Equipment of the Combined Group; or (b) that such Lien is permitted under Paragraph (iv) above;

(xv) Existing Liens on any Property of the members of the Combined Group on the date of the Indenture or any Lien that is existing on any Property on the date of acquisition thereof, or that is existing on the Property of any Person on the date such Person becomes a member of the Combined Group or resulting from a consolidation, merger or acquisition of assets pursuant to the section captioned “Consolidation, Merger, Sale or Conveyance”;

(xvi) Liens created by any member of the Combined Group as security for Indebtedness owed to any other member of the Combined Group; and

(xvii) Any Lien arising solely by reason of a lease of Property to others which (1) is customary for health care facilities (such as physician offices, coffee shops, gift shops, imaging centers, and similar support services) or (2) is for fair market value or (3) would not have any material adverse effect upon (a) the security for the Outstanding Obligations, (b) the operations of the Property of the Combined Group or (c) the Aggregate Income Available for Debt Service;

A determination by the Master Trustee that a Lien is a Permitted Lien pursuant to Paragraph (xvii) shall not be required, but if such a determination is made, it shall be binding upon the Obligation Holders. (MI Section 5.04)

Debt Service on Guaranties

In determining the Debt Service Requirement of any Member, whether historical or projected, computations of debt service on Long-Term Indebtedness shall include an amount equal to twenty percent (20%) of the debt service on Guaranties for the period during which such Debt Service Requirement is computed; provided, however, that debt service on Guaranties with respect to which a payment has been made during the preceding twelve (12) months or with respect to which the primary obligor is in default by reason of bankruptcy or insolvency shall be included at one hundred percent (100%) of such debt service. (MI Section 5.13 as amended by RS2 Section 8)

Debt Service on Balloon Indebtedness and Variable Rate Indebtedness

(a) At the election of any Member, for the purpose of any computation of the Debt Service Requirement, whether historical or projected, the principal and interest deemed to be payable on Balloon Indebtedness of such Member Outstanding for the period during which such Debt Service Requirement is computed, shall be as set forth below:

(i) If the Member has obtained a binding commitment of a financial institution to refinance such Balloon Indebtedness (or a portion thereof), including without limitation, a letter of credit or a line of credit, which commitment is subject only to usual conditions applicable to loans to entities similar to such Member, the Balloon Indebtedness (or portion thereof) may be deemed to be payable in accordance with the terms of the refinancing arrangement; or

(ii) If (A) the Date of Maturity of any portion of such Balloon Indebtedness is more than eighteen (18) months after the date of any transaction for which a Projection is made or (B) the condition of paragraph (i), above is satisfied with respect to such portion by a financing arrangement having a term not less than eighteen (18) months, such portion of such Balloon Indebtedness may be deemed to be Indebtedness payable over a twenty-five (25) year term, at the interest rate certified below or with respect to Indebtedness which bears interest at other than a fixed rate, as provided in Subsection (b), in equal annual installments of principal and interest, provided that the Representative has delivered to the Master Trustee a certificate of an investment banker satisfactory to the Master Trustee stating that it is reasonable to assume that such Indebtedness of the Member could be sold and stating the interest rate then applicable to twenty-five (25) year obligations of comparable quality and type.

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(b) In determining the Debt Service Requirement of any Member, whether historical or projected, the interest deemed to be payable on Indebtedness which bears interest at other than a fixed rate shall be calculated, at the option of the Obligated Group, either at the average interest rate for the preceding twelve (12) months or the interest rate on obligations with a maturity of twenty-five (25) years as set forth in a certificate of an investment banking firm acceptable to the Master Trustee; provided, however, that the Obligated Group may make other assumptions with respect to such Indebtedness as it deems reasonable and as are reasonably acceptable to the Master Trustee. (MI Section 5.14 as added by RS2 Section 8)

(c) In determining the Debt Service Requirement of any Member (or Designated Member), on any Indebtedness which is the subject of a hedging transaction, account may be taken of amounts payable by or to the Member (or Designated Member) pursuant to the hedging transaction. (MI Sections 5.06 and 5.14 as amended by RS2 Section 8)

Debt Service Coverage Ratios

The Obligated Group agrees, subject to any limitations imposed by applicable governmental, contractual, third-party payor, fiduciary and other restrictions and limitations on its legal authority (collectively, “Legal Limitations”), to charge and collect (and cause each of its Designated Members to charge and collect) rates and charges which shall, together with other available moneys, provide moneys sufficient at all times to make any payments required under the Indenture and to comply with the Indenture in all other respects, and to satisfy all other obligations of the Combined Group in a timely fashion. Without limiting the generality of the foregoing, the Obligated Group shall, subject to Legal Limitations, charge and collect (and cause each of its Designated Members to charge and collect) rates and charges which, together with other available moneys, in each Fiscal Year will produce revenue at least sufficient to meet expenses of the Combined Group (excluding from revenues and expenses extraordinary items, infrequently occurring items or unusual items and the cumulative effect of changes in accounting principles and excluding from expenses depreciation but including interest on and amortization of Long- Term Indebtedness). As soon as practicable but in no event later than five months after the end of each Fiscal Year, the Obligated Group shall furnish to the Trustee a letter from its auditors confirming that the requirement of the foregoing sentence was met during the Fiscal Year.

The Obligated Group agrees, subject to Legal Limitations, to use its best efforts (and cause each of its Designated Members to use its best efforts) to maintain the Historical Debt Service Coverage Ratio of the Combined Group at least equal to 1.10 in each Fiscal Year. If the Historical Debt Service Coverage Ratio of the Combined Group, as calculated at the end of any Fiscal Year, is less than 1.10, the Obligated Group covenants to retain a Consultant to make recommendations to increase such ratio for subsequent Fiscal Years to the levels required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest practicable level. Each Member of the Obligated Group, respectively, agrees that it will (and will cause each Designated Member), subject to Legal Limitations, substantially follow the recommendations of the Consultant or file with the Master Trustee its reasons for not following the recommendations. So long as the Obligated Group shall retain a Consultant and each Member of the Obligated Group (and Designated Member) shall follow such Consultant’s recommendations except as set forth above, this section shall be deemed to have been complied with even if such ratio for any subsequent Fiscal Year is less than 1.10 but not less than 1.00. Provided that the Historical Debt Service Coverage Ratio of the Combined Group has not been below 1.10 for the three most recent consecutive Fiscal Years, if in any Fiscal Year the Historical Debt Service Coverage Ratio of the Combined Group is less than 1.10, the Obligated Group will not be required to retain a Consultant to make such recommendations if a written report of a Consultant is filed with the Master Trustee which contains an opinion of such Consultant that (i) applicable laws or regulations have prevented the maintenance of the 1.10 ratio, (ii) the Members of the Obligated Group (and Designated Members) have generated the maximum amount of Income Available for Debt Service which in the opinion of such Consultant could reasonably have been generated given such laws and regulations during the period affected thereby and (iii) the ratio actually achieved was at least 1.00. The Obligated Group shall not be required to cause the Consultant’s report referred to in this paragraph to be prepared more frequently than once every two Fiscal Years if at the end of such two Fiscal Years the Obligated Group provides to the Master Trustee (who shall provide a copy to each Obligation Holder, Related Bond Trustee and Related Issuer) an opinion of Independent Counsel (which Counsel and opinion, including without limitation the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee) to the effect that the applicable laws and regulations underlying the Consultant’s report delivered in respect of the previous Fiscal Year have not changed in any material way. (MI Section 5.07)

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Consolidation, Merger, Sale or Conveyance

Each Member of the Obligated Group, respectively, 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 to any Person not a Member of the Obligated Group unless:

(i) Either it will be the surviving 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, if not a Member of the Obligated Group, shall expressly assume the due and punctual payment of the principal of and premium, if any, and interest on all Outstanding Obligations issued under the Indenture, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture by a supplement satisfactory to the Master Trustee, executed and delivered to the Master Trustee by such corporation;

(ii) If any Related Bond which bears interest that is not includable in gross income under the Code has not been fully paid, the Master Trustee shall have received an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance, whether or not contemplated on any date of the delivery of such Related Bond, would not cause the interest payable on such Related Bonds to be includable in gross income under the Code; and

(iii) The Master Trustee shall have received an Officer’s Certificate of the Representative to the effect that immediately following such transaction the Obligated Group will not be in default in the performance or observance of any covenant or condition to be performed or observed under the Indenture; provided that the Master Trustee may waive the provisions of this paragraph upon determining that it is in the interests of the Holders of a majority in the principal amount of Indenture Indebtedness to do so.

In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named in the Indenture as a Member of the Obligated Group.

In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate.

The Master Trustee shall receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of this section, that any such assumption is valid and that it is proper for the Master Trustee under the provisions of the Indenture relating to Amendments and Supplements and of this section to join in the execution of the supplement provided for in this section. (MI Section 5.10)

Substitution of Master Indenture

In connection with any merger, consolidation or similar transaction involving an affiliation of the Obligated Group with an entity or entities subject to an existing master trust indenture or similar financing document, the Obligation Holders, by their acceptance of an Obligation, agree to surrender the Obligations to the Master Trustee upon presentation to the Obligation Holders and the Master Trustee of the following:

(i) original replacement notes or similar obligations (the “Substitute Obligations”) issued by the Obligated Group or a surviving, resulting or transferee entity meeting the requirements of the section “Consolidation, Merger, Sale or Conveyance” (the “Substitute Obligated Group”) under and pursuant to and secured by such existing master trust indenture or similar financing document (the “Substitute Master Indenture”) executed by the Obligated Group or any Substitute Obligated Group, all then current Obligated Groups and any other parties named therein (collectively, the “New Group”) and an independent corporate trustee (the “New Trustee”) (which may be the Master Trustee) meeting the eligibility requirements of the Master Trustee as set forth in the Indenture, which Substitute Obligations have been duly authenticated by the New Trustee;

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(ii) the Substitute Master Indenture which shall contain (a) a pledge of any security granted and in effect under any Related Supplement, (b) the agreement of each member of the New Group (i) to become a member of the New Group and thereby to become subject to compliance with all provisions of the Substitute Master Indenture and (ii) unconditionally and irrevocably (subject to the right of such Person to cease its status as a member of the New Group pursuant to the terms and conditions of the Substitute Master Indenture) to jointly and severally make payments upon each obligation, including the Substitute Obligations, issued under the Substitute Master Indenture at the times and in the amount provided in each such obligation and (c) terms, covenants and provisions which, in the opinion of the Representative based upon an Officer’s Certificate, substantially cover the matters and do not materially weaken the requirements imposed for the benefit of the Obligation Holders contained in the Indenture (including the defined terms used in the Indenture);

(iii) an Opinion of Bond Counsel that the replacement of the Obligations will not adversely affect the validity of any Indenture Indebtedness or any exemption for the purposes of federal income taxation to which interest on such Indenture Indebtedness would otherwise be entitled;

(iv) an Opinion of Counsel to the Obligated Group that the conditions in this section for the surrender of the Substitute Obligation have been met and that, to the best of such Counsel’s knowledge, as of the date of such surrender, no event of default shall have occurred and be continuing under the Indenture or the Substitute Master Indenture;

(v) an original executed counterpart of the Substitute Master Indenture; and

(vi) such other opinions and certificates as the Master Trustee and the Obligation Holders may reasonably require, together with such reasonable indemnities as the Master Trustee and the Obligation Holders may request.

The provisions of this section described in the Indenture may be implemented by the Obligated Group so long as the provisions of this section are complied with by the Obligated Group.

Following the surrender of the Obligations, and satisfaction of the conditions set forth above in this section, and receipt of security and indemnity satisfactory to the Master Trustee, the Master Trustee will cancel the Obligations and assign, set over and transfer all of its right, title and interest in and to the trust estate under the Indenture, to the New Trustee, and shall execute such documents and instruments as are necessary and appropriate to effect such transfer and assignment and to discharge the lien of the Indenture upon the trust estate. Then and thereafter, Obligation Holders shall no longer be entitled to any rights and remedies under the Indenture, but shall have all of the rights and remedies granted under the Substitute Master Indenture. (MI Section 5.11)

For so long as the Bond Insurance Policy is in full force and effect, Bond Insurer consent shall be required with respect to any substitution of Obligations with Substitute Obligations under this section. (RS2 Section 8)

For so long as Obligation No. 6 is Outstanding, the Obligated Group shall not, without the consent of the Holder of Obligation No. 6, substitute the Master Indenture in accordance with the provisions of the section of the Master Indenture described under this heading. (RS3 Section 11)

Limitations on Incurrence of Additional Indebtedness

Each Member of the Obligated Group, respectively, agrees that it will not (and will cause each Designated Member which it controls to not) incur any Additional Indebtedness except as follows:

(a) Long-Term Indebtedness, including Indenture Indebtedness, if prior to incurrence of the Long-Term Indebtedness, there is delivered to the Master Trustee an Officer’s Certificate of the Representative’s chief financial officer or, if not based on audited financial statements or if requested by the Master Trustee with respect to Subparagraph (ii)(B) of this Section in accordance with the last sentence of this clause (a), a report of a Consultant, certifying that:

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(i) The ratio determined by dividing Aggregate Income Available for Debt Service for the most recent Fiscal Year for which the combined financial statements of the Obligated Group have been reported upon by independent certified public accountants or for any twelve (12) consecutive calendar months ending not more than one hundred and eighty (180) days prior to the issuance of the proposed Indebtedness, by Maximum Annual Debt Service including the Additional Indebtedness, is not less than 1.20; or

(ii) Subject to the provisions of Subsection (g) below, (A) the Historical Debt Service Coverage Ratio for the period mentioned in Paragraph (a)(i) of this Section, not including the proposed Additional Indebtedness, is not less than 1.10; and (B) the Projected Debt Service Coverage Ratio, taking the proposed Additional Indebtedness into account, for (1) in the case of Additional Indebtedness to finance capital improvements, the first full Fiscal Year succeeding the date on which such capital improvements are expected to be placed in operation, or (2) in the case of Long-Term Indebtedness refinancing other Indebtedness for completed capital projects or Long-Term Indebtedness not financing capital improvements, the first full Fiscal Year succeeding the date in which the Indebtedness is incurred, is not less than 1.20, as shown by combined pro forma balance sheets, statements of income or of revenue and expenses and statements of changes in financial position for each such period, accompanied by a statement of the relevant assumptions upon which such pro forma statements are based, delivered to the Master Trustee along with the Officer’s Certificate or Consultant’s report, as the case may be; or (C) immediately after the incurring of such Additional Indebtedness, the aggregate principal amount of all Outstanding Long-Term Indebtedness (other than Guaranties for which no Member has made a payment during the preceding twelve months) will not exceed sixty-six percent (66%) of the aggregate Capitalization of the Obligated Group reported on by independent certified public accountants.

For purposes of any calculation of the Projected Debt Service Coverage Ratio required under paragraph (ii)(B) of this subsection, the Consultant’s report shall not be required if an Officer’s Certificate stating that the Projected Debt Service Coverage Ratio is at least 1.35 is delivered to the Master Trustee.

(b) Completion Indebtedness.

(c) Long-Term Indebtedness incurred for the purpose of refunding any Long-Term Indebtedness if the conditions described in Subsection (a) of this Section are met with respect to such proposed Long-Term Indebtedness or if upon the incurrence thereof an Officer’s Certificate is delivered to the Master Trustee stating that, taking the proposed Long-Term Indebtedness and the refunding of the existing Long-Term Indebtedness into account, Maximum Annual Debt Service will not be increased by more than 15%.

(d) Short-Term Indebtedness if: (A) immediately after the incurrence of such Short-Term Indebtedness, the principal amount of all Outstanding Short-Term Indebtedness does not exceed the greater of (1) twenty percent (20%) of the Adjusted Annual Operating Revenues or (2) seventy-five percent (75%) of the aggregate accounts receivable (net of provision for uncollectible accounts and contractual adjustments) of the Obligated Group as of the end of the most recent Fiscal Year for which the combined financial statements of the Obligated Group have been reported upon by independent certified public accountants, and (B) during the 12 months immediately preceding the incurrence of such Short-Term Indebtedness there shall have been a period of at least 20 consecutive days in which the Obligated Group had Outstanding Short-Term Indebtedness of no more than five percent (5%) of Adjusted Annual Operating Revenues, provided that the Master Trustee shall waive the requirement of this clause (B) if (i) there is delivered to the Master Trustee a Consultant’s report confirming that there is a temporary interruption in the flow of reimbursement revenues from third parties, or (ii) if and to the extent that such Short-Term Indebtedness could be incurred under Subparagraph (i) or (ii) of Subsection (a) above as if it were Long-Term Indebtedness. Failure to comply with the provisions described in clause (B) shall not be a default under the Indenture, but until the provisions described in clause (B) shall be satisfied, all amounts of Short-Term Indebtedness in excess of five percent (5%) of Adjusted Annual Operating Revenues permitted under the Indenture shall be deemed to be Long-Term Indebtedness for the purposes of calculating Maximum Annual Debt Service.

(e) Indebtedness the payment of which is non-recourse or subordinated in a manner satisfactory to the Master Trustee to the payment of all Indenture Indebtedness.

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(f) Indebtedness relating to letters or lines of credit or similar credit facilities used to secure Additional Indebtedness incurred in accordance with the provisions of this Section.

(g) If the Obligated Group is unable to satisfy the requirements of Paragraph (a)(ii) above, such otherwise unmet requirements shall be deemed satisfied if there shall be filed with the Master Trustee a report by a Consultant containing the following opinions:

(i) That applicable laws or regulations, and contracts generally applicable to all similar health care providers in the Commonwealth have prevented or will prevent generation of the required level of Aggregate Income Available for Debt Service, and, if requested by the Master Trustee, an accompanying Opinion of Counsel acceptable to the Master Trustee setting forth any conclusions of law relevant to such opinion;

(ii) That, with regard to a failure to satisfy the requirements of clause (A) of Paragraph (a)(ii) above, the Obligated Group has generated the maximum amount of Aggregate Income Available for Debt Service which could reasonably be generated given such governing laws and regulations during the applicable period and that the Historical Debt Service Coverage Ratio for the period was at least 1.00; and

(iii) That, with regard to a failure to satisfy the requirements of clause (B) of Paragraph (a)(ii) above based upon forecasts and estimates contained in the report, the Obligated Group will generate the maximum amount of Aggregate Income Available for Debt Service which can reasonably be generated given such governing laws and regulations during the applicable period and that the Projected Debt Service Coverage Ratio for the applicable period is not less than 1.00.

(h) Long-Term Indebtedness constituting a capital lease with the principal amount of such Long-Term Indebtedness incurred under this provision does not exceed fifteen percent (15%) of Adjusted Annual Operating Revenues.

(i) Indebtedness in the form of installment purchase contracts and Indebtedness secured by Liens of the type permitted by clause (iii) in the section captioned “Limitations on Creation of Liens”.”

(j) Indebtedness incurred for the purpose of funding a debt service reserve fund established in connection with any series of Related Bonds.

(k) Indebtedness to any Member of the Obligated Group or between any Member of the Obligated Group and any Designated Member.

(l) Indebtedness, including Indenture Indebtedness, not exceeding in aggregate principal amount Outstanding at any time fifteen percent (15%) of Adjusted Annual Operating Revenues for the most recent Fiscal Year for which the combined financial statements of the Obligated Group have been reported upon by independent certified public accountants. Any Outstanding Indebtedness incurred under this Subsection (l) shall be deemed to have been incurred under another provision of this Section captioned “Limitations on Incurrence of Additional Indebtedness” upon the satisfaction of such other provision as if such Outstanding Indebtedness were then being incurred. To the extent that Indebtedness is deemed to be incurred pursuant to another provision of this section captioned “Limitations on Incurrence of Additional Indebtedness”, it shall not reduce the amount of Indebtedness permitted to be incurred pursuant to this Subsection (l). (MI Section 5.12 as added by RS2 Section 8)

Sale, Lease or Other Disposition of Property

For purposes of this Section, “GAAP value”, when used in connection with Property of any Member of the Combined Group, shall mean the cost of such Property, net of accumulated depreciation, calculated in conformity with generally accepted accounting principles, and when used in connection with Property of the Combined Group, means the aggregate of the values so determined with respect to such Property of all Members of the Combined Group determined in a manner such that no portion of such value of Property of any Member is included more than once; provided, however, that if generally accepted accounting principles require the valuation of any particular

C-2-12 APPENDIX C-2 asset or class of assets in a different manner (e.g., investments shall be valued at market value), then the required GAAP valuation method shall apply.

For so long as the Bonds are Outstanding, each Member of the Combined Group, respectively, agrees that it will not in any Fiscal Year sell, lease or otherwise dispose of any Property, the disposition of which would cause the aggregate Book Value of Property so transferred by the Members of the Combined Group in such year to exceed 5% of the GAAP Value of the Property of the Combined Group, or $5,000,000, whichever is greater, except in the ordinary course of business and except for transfers of Property:

(1) To any Person if prior to the sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate stating that in the judgment of the signer such Property has become, or within the next succeeding 24 calendar months is reasonably expected to become, inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property;

(2) To another Member of the Combined Group;

(3) To any Person provided that prior to the sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate of the corporation’s chief financial officer to the effect that (i) the Combined Group could issue $1 of additional Long-Term Indebtedness pursuant to subsection (a) of the Section captioned “Limitations on Incurrence of Additional Indebtedness” or (ii) the Projected Debt Service Coverage Ratio for the Fiscal Year immediately following such transfer is no less than it would be if such transfer were not to occur;

(4) As part of a merger, consolidation, sale or conveyance permitted by the Indenture;

(5) To any Person if in exchange therefor such Member receives the fair value of the Property so transferred, provided that, in the case of transfers of real property, prior to such transfer there is delivered to the Master Trustee a report of an independent appraiser selected by the Member and approved by the Master Trustee, confirming the fair market value of such real property and an Officer’s Certificate certifying that the Member will receive the fair market value of such real property;

(6) To any person in connection with a “sale and lease back” transaction that would constitute and be treated as a true sale and lease back under the Code;

(7) Notwithstanding anything to the contrary in the Indenture, transfers to the University of Massachusetts (the “University”) or UMass Memorial Medical Group (or, with respect solely to transfers under clause (c) below, transfers to any other entity that is a participant of the contractual arrangement giving rise to the capitation payments described therein) for the following purposes shall be deemed to constitute a sale, lease, or disposition of Property for fair market value and shall not otherwise be required to comply with the provisions of this Section:

(a) Reimbursement for recruitment costs or stipend or similar support for the compensation of clinical department chairs, chiefs, vice chairs, vice-chiefs, and similar senior administrative/clinical personnel;

(b) Reimbursement of costs and subsidies relating students, interns, residents, and teaching fellows;

(c) Allocation of capitation premiums;

(d) (i) Payment of amounts required under that certain Amended and Restated Definitive Agreement between University of Massachusetts (the “University”) and UMass Memorial Health System, UMass Memorial Medical Center, Inc., Worcester City Campus Corporation, Memorial Health Care, Inc., and Memorial Hospital, dated as of March 31, 1998, as amended (the “Definitive Agreement”), with respect to (A) funding of the research building described therein; (B) the Base Payment and the Participation Payment (as defined therein); (C) infrastructure payments relating to shared facilities and costs under the Occupancy Agreement (as defined in the Definitive Agreement), including without limitation costs of repairing the façade of the campus located at 55 Lake

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Avenue North, Worcester, Massachusetts ; (D) any special state funding attributable to Medicaid disproportionate share hospital costs; and (E) funding of the so-called Department Education Fund (as defined therein), or any similar or substitute dean’s tax methodology supporting the academic mission of the clinical departments of the University; and

(ii) (A) transfers to the University or its designee during the Institution’s fiscal years ending 2001, 2002, and 2003 in an aggregated amount not to exceed $110,000,000, but only if and to the extent an equivalent amount of funds has been received by the Institution from the Medical Assistance Intergovernmental Transfer Account within the Uncompensated Care Trust Fund for a one-time supplemental rate payment to the Institution by the Commonwealth’s Division of Medical Assistance or any other governmental agency or division; and (B) transfers to the University that are merely pass-through transfers of funding received in equal dollar amount to that received from governmental sources. (MI Section 5.15 as added by RS2 Section 8)

Events of Default

Event of Default, as used in the Indenture, shall mean any of the following events:

(a) Any payment of the principal of, the premium, if any, and interest on any Obligation issued and Outstanding under the Indenture is not made after same shall become due and payable, and after any applicable grace period, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof, of the Indenture and the Related Supplement;

(b) Any Member of the Obligated Group (or Designated Member) shall fail duly to observe or perform any covenant or agreement on its part under the Indenture for a period of 60 days (or such longer period as permitted in writing by the Master Trustee at the direction of the Holders of at least a majority in aggregate principal amount of the Obligations then Outstanding) after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Members of the Obligated Group by the Master Trustee, or to the Members of the Obligated Group and the Master Trustee by the Holders of at least 25% in aggregate principal amount of Obligations then Outstanding;

(c) With respect to Indebtedness for borrowed money relating to loans exceeding $5,000,000, a breach shall occur (and continue beyond any applicable grace period) with respect to a payment by any Member (or Designated Member) of such Indebtedness, or with respect to the performance of any agreement securing such Indebtedness or pursuant to which the same was issued or incurred, or an event shall occur with respect to provisions of any such agreement relating to matters of the character referred to in this section, and as a result of such breach or occurrence a holder or holders of such Indebtedness or a trustee or trustees under any such agreement accelerates any such Indebtedness in an amount exceeding $5,000,000; but an Event of Default shall not be deemed to be in existence or to be continuing under this clause (c) if (i) the Member (or Designated Member) is in good faith contesting the existence of such breach or event and if such acceleration is being stayed by judicial proceedings, (ii) the acceleration ceases to be in effect, or (iii) such breach or event is remedied and the acceleration is wholly annulled. Each Member shall notify the Master Trustee of any such breach or event immediately upon becoming aware of its occurrence and shall from time to time furnish such information as the Master Trustee may reasonably request for the purpose of determining whether a breach or event described in this paragraph has occurred and whether such acceleration has been exercised or continues to be in effect;

(d) The Obligated Group (or Designated Member) shall fail to make any payment of the principal of, premium, if any, or interest on any note or under any loan agreement or similar agreement securing any Related Bonds within 14 days after the same shall become due and payable in accordance with the terms thereof;

(e) The entry of a decree or order by a court having jurisdiction in the premises adjudging any Member of the Obligated Group (or Designated Member) a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Member (or Designated Member) under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of such Member (or Designated Member) or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance

C-2-14 APPENDIX C-2 of any such decree or order unstayed and in effect for a period of 60 consecutive days or the consent of such Member (or Designated Member) to such decree or order;

(f) The institution by any Member of the Obligated Group of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other similar applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of such Member or of any substantial part of its Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due.

If the Master Trustee determines that a default has been cured before the entry of any final judgment or decree with respect to it, the Master Trustee may waive the default and its consequences, including any acceleration, by written notice to the Parent and shall do so upon written instruction of the Holders of at least twenty-five (25%) in principal amount of the Outstanding Obligations. (MI Section 6.01)

Acceleration; Annulment of Acceleration

Upon the occurrence and during the continuation of an Event of Default under the Indenture, the Master Trustee may, and upon the written request of the Holders of at least a majority in aggregate principal amount of the Obligations Outstanding, shall, by notice to the Members of the Obligated Group, declare all Obligations Outstanding immediately due and payable, whereupon such Obligations shall become and be immediately due and payable without any further action or notice, anything in the Obligations or in the Indenture to the contrary notwithstanding. In such event, there shall be due and payable on the Obligations an amount equal to the total principal amount of all such Obligations, plus all interest accrued thereon and, to the extent permitted by applicable law, which accrues to the date of payment.

At any time after the principal of the Outstanding Obligations shall have been so declared to be due and payable and before the entry of final judgment or decree on any suit, action or proceeding instituted on account of such default, if (i) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay all matured installments of interest, and interest on installments of principal and interest, and principal or redemption prices then due (other than the principal then due only because of such declaration) of all Obligations Outstanding, (ii) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Master Trustee and any paying agents incurred as a result of such Event of Default, (iii) all other amounts then payable by the Obligated Group under the Indenture shall have been paid or a sum sufficient to pay the same shall have been deposited with the Master Trustee, and (iv) every Event of Default (other than a default in the payment of the principal of such Obligations then due only because of such declaration) shall have been remedied, then, unless otherwise directed in writing by Holders of not less than 50% in aggregate principal amount of the Obligations then Outstanding, the Master Trustee shall annul such declaration and its consequences with respect to any Obligations or portions thereof not then due by its terms. No such annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. (MI Section 6.02)

Additional Remedies and Enforcement of Remedies

Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than 25% in aggregate principal amount of the Obligations Outstanding, together with indemnification of the Master Trustee to its satisfaction therefor, shall proceed forthwith to protect and enforce its rights and the rights of the Obligation Holders under the Indenture by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient.

Regardless of the occurrence of an Event of Default, the Master Trustee, if requested in writing by the Holders of not less than 25% in aggregate principal amount of Obligations then Outstanding, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient to prevent any impairment of the security under the Indenture by any acts which may be

C-2-15 APPENDIX C-2 unlawful or in violation of the Indenture or which with the giving of notice or the passage of time or both would constitute an Event of Default. (MI Section 6.03)

Application of Revenues and Other Moneys After Default

During the continuance of an Event of Default, the Master Trustee may by written notice to the Representative require that all payments of Outstanding Obligations be made to the Master Trustee when due in immediately available funds. During the continuance of an Event of Default all moneys received by the Master Trustee pursuant to any right given or action taken, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses and advances incurred or made by the Master Trustee with respect thereto shall be applied as follows:

First: To the payment to the Persons entitled thereto of all installments of interest then due on Obligations in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the Persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the Persons entitled thereto of the unpaid principal installments of any Obligations which shall have become due, whether at maturity or by call for redemption, without regard to their due dates, and if the amounts available shall not be sufficient to pay in full all Obligations, then to the payment thereof ratably to the Persons entitled thereto, without any discrimination or preference. (MI Section 6.04)

Obligation Holders’ Control of Proceedings

If an Event of Default shall have occurred and be continuing, notwithstanding anything in the Indenture to the contrary, the Holders of at least a majority in aggregate principal amount of Obligations then Outstanding shall have the right, at any time, by an instrument in writing executed and delivered to the Master Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions of the Indenture or for the appointment of a receiver or any other proceedings under the Indenture, provided that such direction is not in conflict with any applicable law or the provisions of the Indenture and is not unduly prejudicial to the interest of Obligation Holders not joining in such direction. (MI Section 6.07)

Waiver of Event of Default

The Master Trustee may waive any Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Indenture, or before the completion of the enforcement of any other remedy under the Indenture.

The Master Trustee, upon the written request of the Holders of at least a majority in aggregate principal amount of the Obligations Outstanding, shall waive any Event of Default under the Indenture and its consequences; provided, however, that a default in the payment of the principal of, premium, if any, or interest on any Obligation, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Obligations at the time Outstanding unless (i) the conditions set forth in clauses (ii) to (iv) of the section captioned “Acceleration; Annulment of Acceleration” above are satisfied and (ii) if the principal of the Obligations has been declared due and payable, such declaration has been annulled. (MI Section 6.09)

Limitation on Responsibility of Master Trustee

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 a majority in principal amount of the Outstanding Obligations 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 the Indenture.

C-2-16 APPENDIX C-2

Master Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Indenture, 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. (MI Section 7.01)

Except as provided in the Indenture, the Master Trustee shall not be required to monitor the financial condition of the Members of the Obligated Group (or Designated Members) or the physical condition of the Property and, except as specifically provided in the Indenture, shall not have any responsibility with respect to reports, notices, certificates or other documents filed or to be filed with it under the Indenture. The Master Trustee shall not be required to take notice of any breach or default under the Indenture by the Parent or any Member of the Obligated Group (or any Designated Member), except for (i) those of which it receives written notice by an Obligation Holder, and (ii) the failure of the Master Trustee to receive certificates, reports, or opinions specifically required to be furnished to the Master Trustee by the Indenture. 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, direction, consent, order, bond, note or other paper or document, but the Master Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Master Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of any Member of the Obligated Group (and Designated Member), personally or by agent or attorney. (MI Section 7.02)

Supplements to Indenture Not Requiring Consent of Obligation Holders

The Representative, on behalf of each Member of the Obligated Group, when authorized by resolution of the Governing Body of the Representative, and the Master Trustee may, without the consent of or notice to any of the Holders enter into one or more supplements for one or more of the following purposes:

(i) To cure any ambiguity or formal defect or omission in the Indenture.

(ii) To correct or supplement any provision in the Indenture which may be inconsistent with any other provision in the Indenture, or to make any other provisions with respect to matters or questions arising under the Indenture which shall not materially and adversely affect the interests of the Holders.

(iii) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them subject to the provisions of the Indenture.

(iv) To qualify the Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect.

(v) To create and provide for the issuance of Obligations as permitted under the Indenture.

(vi) To obligate another Member of the Obligated Group or to release such Person as provided in the Indenture.

(vii) To add additional security for the benefit of the Holders.

(viii) To designate any Person as a Designated Member or to release such Person pursuant to the Indenture.

(ix) To merge or consolidate with a corporation not a Member of the Obligated Group, sell or convey, substantially all of its assets to a Person not a member of the Obligated Group or substitute the Indenture, all as provided in the Indenture. (MI Section 8.01)

C-2-17 APPENDIX C-2

Supplements to Indenture Requiring Consent of Obligation Holders

Other than supplements referred to in the section captioned “Supplements to Indenture Not Requiring Consent of Obligation Holders” and subject to the terms and provisions and limitations contained in the Indenture and not otherwise, the Holders of not less than a majority in aggregate principal amount of Obligations then Outstanding shall have the right, from time to time, anything contained in the Indenture to the contrary notwithstanding, to consent to and approve the execution by each Member of the Obligated Group, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee of such supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided, however, nothing in this section shall permit or be construed as permitting a supplement which would:

(i) Extend the stated maturity of or time for paying interest on any Obligations or reduce the principal amount of or the redemption premium, if any, or rate of interest payable on any Obligations;

(ii) Make any Obligation redeemable other than in accordance with its terms;

(iii) Create a preference or priority of one Obligation over any other Obligation; or

(iv) Reduce the aggregate principal amount of Obligations the consent of the Holders of which is required to authorize any such supplement without the unanimous written consent of the Holders of Obligations then Outstanding affected (in the sole determination of the Master Trustee) by such supplement. (MI Section 8.02)

Satisfaction and Discharge of Indenture

If (A) (i) all Members of the Obligated Group shall deliver to the Master Trustee for cancellation all Obligations theretofore authenticated (other than any Obligations which shall have been mutilated, destroyed, lost or stolen and which shall have been replaced or paid as provided in the Related Supplement) and not theretofore cancelled, or (ii) all Obligations not theretofore cancelled or delivered to the Master Trustee for cancellation shall have become due and payable and shall have been paid, or (iii) the Members of the Obligated Group shall deposit with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between the Representative and such bank or trust company in form acceptable to the Master Trustee) as trust funds cash or Government or Equivalent Obligations bearing interest at such rates and with such maturities as will provide sufficient funds to pay or redeem in full all Obligations not theretofore cancelled or delivered to the Master Trustee for cancellation, including principal and interest due or to become due to such date of maturity or redemption date, as the case may be, and (B) the Members of the Obligated Group shall also pay or cause to be paid all other sums payable under the Indenture by the Members of the Obligated Group or any thereof, then the Indenture shall cease to be of further effect, and the Master Trustee, on demand of the Members of the Obligated Group or any thereof, and at the cost and expense of the Members of the Obligated Group or any thereof, shall execute proper instruments acknowledging satisfaction of and discharging the Indenture. If any Obligation is to be redeemed prior to Maturity thereof, the Indenture shall not cease to be in effect until all action necessary to redeem such Obligation shall have been taken or irrevocable provision satisfactory to the Master Trustee has been made for the taking of such action. Each Member of the Obligated Group, respectively, agrees to reimburse the Master Trustee for any costs or expenses theretofore or thereafter reasonably and properly incurred by the Master Trustee in connection with the Indenture or such Obligations. (MI Section 9.01)

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C-2-18 APPENDIX C-3

The following are brief summaries, prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority, of certain provisions of the Supplemental Master Indenture for Obligation No. 9 (the “Related Supplement” or “RS6”) dated as of June 1, 2010. These summaries do not purport to be complete, and reference is made to the document for full and complete statements of such and all provisions.

SUMMARY OF THE SUPPLEMENTAL MASTER INDENTURE

Issuance of Obligation No. 9

The Supplemental Indenture for Obligation No. 9 creates and authorizes the issuance of an Obligation under the Master Indenture (“Obligation No. 9”) in an aggregate principal amount of $_____. (RS6 Section 3)

Payments on Obligation No. 9; Credits

Payment on amounts due on Obligation No. 9 are payable in lawful money of the United States of America, and shall be payable in the amounts and on the dates that payments of principal of, premium, if any, and interest on the Bonds shall become due.

Obligation No. 9 shall be prepayable in the same manner and effect and at the same prices as the Bonds.

When all Outstanding Obligations are deemed to have been paid in full when due or prepaid in whole and all other conditions imposed thereon are satisfied, Obligation No. 9 shall be deemed to have been paid and to be no longer Outstanding under the Indenture. (RS6 Sections 4 and 7)

Default

Upon the occurrence of certain “Events of Default” (as defined in the Indenture), the principal of all Outstanding Obligations may be declared, and thereupon shall become due and payable as provided in the Indenture.

The Holder of Obligation No. 9 shall have no right to enforce the provisions of the Indenture, institute any action to enforce the covenants of the Indenture, take any action with respect to any default under the Indenture, or institute, appear in or defend any other suit or proceeding with respect to the Master Indenture, except as provided in the Indenture. (RS6 Section 7)

Days Cash on Hand Covenant Relating to Obligation No. 9

For so long as the Series G Bonds are Outstanding, the following provisions shall apply to the Series G Bonds and Obligation No. 9:

(a) The Representative agrees to cause the Combined Group to maintain at all times a minimum of 60 Days Cash on Hand. If the Combined Group fails to achieve a minimum of 60 Days Cash on Hand as of the end of any Fiscal year, no Event of Default shall have occurred provided that the Representative employs a Consultant to make recommendations as to rates and charges and other aspects of hospital management and operation. Copies of the report of the Consultant shall be filed with the Master Trustee. The Representative, subject to applicable Legal Limitations, shall cause the Combined Group to revise its rates and charges and other aspects of its management and operation in conformity with the recommendations or file with the Master Trustee its reasons for not following the recommendations. The Combined Group shall thereafter achieve a minimum of 60 Days Cash on Hand unless the Consultant certifies that the Combined Group is prevented from doing so by Legal Limitations.

(b) Additional definitions pertaining to this section:

C-3-1 APPENDIX C-3

“Days Cash on Hand” means as of the last day of each Fiscal Year an amount equal to: (A)(1) the amount of total unrestricted cash, cash equivalents, and marketable securities (excluding amounts on deposit in the funds and accounts created with respect to payment of interest on and principal of securities) as of the last day of such Fiscal Year divided by (2) an amount equal to the Operating Expenses for the twelve-month period then ending (or if operations have not been conducted for a full twelve months, an amount equal to Operating Expenses for such shorter period, annualized) (B) multiplied by 365.

“Operating Expenses” means those expenses which are reasonable and necessary expenses of operation including (i) salaries, wages and benefits, and unemployment, worker’s compensation and FICA contributions; (ii) reserves or escrows for ad valorem (including real estate but not income or other) taxes, insurance sewer assessment; and (iii) equipment rental fees, utilities, corporate costs and other actual operating expenses and maintenance expenses. Operating Expenses shall not include: extraordinary items, infrequently occurring items or unusual items and the cumulative effect of changes in accounting principles, depreciation, amortization or other non-cash charges, interest or principal payments on the Prior Bonds or the Bonds, unsecured debt obligations, capital leases or any other indebtedness, income taxes, bad debt expenses or losses on sales of assets. (RS6 Section 8)

Amendments to the Master Indenture Regarding GAAP

The Series G Bondowners by agreeing to own the Series G Bonds and the Holder of Obligation No. 9, by agreeing to hold Obligation No. 9, consent to the following amendments to the Indenture. Such amendments shall take effect at such time as a majority in aggregate principal amount of Obligation Holders agree to such provisions or are deemed to have agreed to such provisions by agreeing to become Obligation Holders.

To avoid doubt, the Sixth Related Supplement amends the Master Indenture to state that provisions calling for or referring to a calculation, with respect to the Obligated Group in accordance with generally accepted accounting principles (“GAAP”), will be deemed not to require the consolidation of accounts of entities that are not Members of the Obligated Group, as the case may be, even if GAAP would require such consolidation.

The Sixth Related Supplement further amends the Master Indenture to add a tenth purpose for which the Representative on behalf of each Member of the Obligated Group, and the Master Trustee may enter into one or more supplements without the consent of Bondowners. The purpose is to make any changes relating (1) to the application of GAAP or the definition or determination of Book Value, Indebtedness (which for the avoidance of doubt includes all definitions incorporating the definition of Indebtedness, including, without limitation, Aggregate Debt Service Requirement, Aggregate Income Available for Debt Service, Balloon Indebtedness, Debt Service Requirement, Indenture Indebtedness, Long-Term Indebtedness and Short-Term Indebtedness), or Income Available for Debt Service, or (2) to the provisions of the Master Indenture, in each case, that are necessary to address a change in GAAP that solely in and of itself would cause any Member of the Obligated Group to be in default of any of the covenants set forth in the Indenture. (RS6 Section 12)

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C-3-2 APPENDIX C-4

The following is a brief summary, prepared by Edwards Angell Palmer & Dodge LLP, Bond Counsel to the Authority, of certain provisions of the Loan and Trust Agreement (the “Agreement” or “LTA”) dated as of June 1, 2010 among the Authority, UMass Memorial Health Care, Inc. (the “Parent”), UMass Memorial Medial Center, Inc. (the “Medical Center” and together with the Parent, the “Institution”) and the Trustee, pertaining to the Bonds. This summary does not purport to be complete, and reference is made to the Agreement for full and complete statements of such and all provisions.

SUMMARY OF THE LOAN AND TRUST AGREEMENT

Establishment of Funds

In conjunction with the issuance of the Bonds, the following funds shall be established and maintained with the Trustee for the account of the Institution, to be held in trust by the Trustee and applied to the provisions of the Agreement:

Debt Service Fund; Redemption Fund; and Rebate Fund.

The Expense Fund shall be established with the Authority to be held by the Authority in trust for the account of the Institution and applied subject to the provisions of the Agreement. (LTA Sections 303, 305, 306, 307 and 401)

Debt Service Fund

The moneys in the Debt Service Fund and any investments held as part of such Fund shall be held in trust and, except as otherwise provided, shall be applied solely to the payment of the principal (including sinking fund installments), redemption premium, if any, and interest on the Bonds. (LTA Section 303)

Redemption Fund

The moneys in the Redemption Fund and any investments held as a part of such Fund shall be applied, except as otherwise provided, to the redemption of Bonds. The Trustee may, and upon written direction of the Institution for specific purchases shall, apply moneys in the Redemption Fund to the purchase of Bonds for cancellation at prices not exceeding the price at which they are then redeemable (or next redeemable if they are not then redeemable), but not within the forty-five (45) days preceding a redemption date.

If on any date the amount in the Debt Service Fund is less than the amount then required to be applied by the Trustee to pay the principal (including sinking fund installments) and interest then due on the Bonds or if on any date the amount in the Rebate Fund is less than the amount then required to be paid to the United States, the Trustee shall apply the amount in the Redemption Fund (other than any sum irrevocably set aside for the redemption of particular Bonds or required to purchase Bonds under outstanding purchase contracts) first, to the Rebate Fund, and second, to the Debt Service Fund to the extent necessary to meet the deficiency. The Institution shall remain liable for any sums which it has not paid into the Debt Service Fund or Rebate Fund and any subsequent payment thereof shall be used to restore the funds so applied.

If any moneys in the Redemption Fund are invested in accordance with the Agreement and a loss results therefrom so that there are insufficient funds to pay the redemption price of Bonds called for redemption in accordance with the Agreement, then the Institution shall immediately supply the deficiency. (LTA Section 305)

C-4-1 APPENDIX C-4

Rebate Fund

As more fully described in the Agreement, a Rebate Fund shall be established by the Trustee for the purpose of complying with IRC Section 148(f) and the regulations thereunder. Amounts in the Rebate Fund shall not be available to pay principal, interest, or redemption premium on the Bonds. (LTA Section 306)

Application of Moneys

If available moneys in the Debt Service Fund after any required transfers from the Redemption Fund are not sufficient on any day to pay all principal (including sinking fund installments), redemption price and interest on the Outstanding Bonds then due or overdue, such moneys (other than any sum in the Redemption Fund irrevocably set aside for the redemption of particular Bonds or required to purchase Bonds under outstanding purchase contracts) shall, after payment of all charges and disbursements of the Trustee in accordance with the Agreement, be applied (in the order such Funds are named in this section) first to the payment of interest, including interest on overdue principal, in the order in which the same became due (pro rata with respect to interest which became due at the same time) and second to the payment of principal (including sinking fund installments) and redemption premiums, if any, without regard to the order in which the same became due (in proportion to the amounts due). For this purpose interest on overdue principal shall be treated as coming due on the first day of each month. Whenever moneys are to be applied pursuant to this section, such moneys shall be applied at such times, and from time to time, as the Trustee in its discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall exercise such discretion it shall fix the date (which shall be the first of a month unless the Trustee shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the fixing of any such date. When interest or a portion of the principal is to be paid on an overdue Bond, the Trustee may require presentation of the Bond for endorsement of the payment. (LTA Section 308)

Payments by the Institution

The Institution shall pay to the Trustee for deposit in the Debt Service Fund on or before the fifteenth (15th) day of each month one-sixth (1/6) of the interest coming due on the Bonds on the next January 1 or July 1, as the case may be, and one-twelfth (1/12) of the principal (including any sinking fund installment) coming due on the Bonds on the next July 1.

At any time when any principal (including sinking fund installments) of the Bonds is overdue, the Institution shall also have a continuing obligation to pay to the Trustee for deposit in the Debt Service Fund an amount equal to interest on the overdue principal but the installment payments required under this section shall not otherwise bear interest. Redemption premiums shall not bear interest. (LTA Section 309)

Investments

(a) Pending their use under the Agreement, moneys in the Funds and Accounts established pursuant to the Agreement may be invested by the Trustee or the Authority, as the case may be, in Permitted Investments (as defined below) maturing or redeemable at the option of the holder at or before the time when such moneys are expected to be needed and shall be so invested pursuant to written direction of the Institution if there is not then an Event of Default known to the Trustee or the Authority, as appropriate, provided that the Institution shall not request, authorize or permit any investment which would cause any Bonds to be classified as “arbitrage bonds” as defined in IRC §148. Any investments pursuant to this subsection shall be held by the Trustee or the Authority, as applicable, as a part of the applicable Fund and shall be sold or redeemed to the extent necessary to make payments or transfers or anticipated payments or transfers from such Fund, subject to the notice provisions of Section 9-611 of the UCC to the extent applicable.

(b) Except as set forth below, any interest realized on investments in any Fund and any profit realized upon the sale or other disposition thereof shall be credited to the Fund with respect to which they were earned and any loss shall be charged thereto. Earnings (which for this purpose include net profit and are after deduction of net

C-4-2 APPENDIX C-4 loss) on the Expense Fund shall be transferred to the Debt Service Fund not less often than quarterly. Earnings on the Redemption Fund shall be transferred to the Debt Service Fund and credited against payments otherwise required to be made thereto not less often than quarterly.

(c) (i) The term “Permitted Investments” means (A) Government or Equivalent Obligations; (B) (1) “tax exempt bonds” as defined in IRC §150(a)(6), other than “specified private activity bonds” as defined in IRC §57(a)(5)(C), and (2) bonds issued pursuant to Section 54A, 54AA or 1400U of the IRC, in any case rated at least “AA” or “Aa2” by S&P and Moody’s, respectively, or the equivalent by any other nationally recognized rating agency, at the time of acquisition thereof or shares of a so-called money market or mutual fund that do not constitute “investment property” within the meaning of IRC §148(b)(2), provided either that the fund has all of its assets invested in obligations of such rating quality or, if such obligations are not so rated, that the fund has comparable creditworthiness through insurance or otherwise and which fund is rated “AAm” or “AAm-G” if rated by S&P, (C) negotiable certificates of deposit or other evidences of deposit issued by a nationally or state-chartered bank or a state or federal savings and loan association or by a state-licensed branch of a foreign bank, which have assets of not less than $1,000,000,000, provided that the senior debt obligations of the issuing institution are rated “Aa3” or “AA- ” or better by Moody’s or S&P and mature not more than two years after the date of purchase, (D) bills of exchange or time drafts drawn on and accepted by a commercial bank (otherwise known as bankers acceptances), provided that such bankers acceptances may not exceed 180 days maturity, and provided further that the accepting bank has the highest short-term letter and numerical rating as provided by Moody’s or S&P, (E) Repurchase Agreements, (F) (i) the Massachusetts Health and Educational Facilities Authority Short Term Asset Reserve (STAR) Fund, or any other similar fund established by, or on behalf of, the Authority, which is rated “AAAm-G,” “AAAm” or “AAm” by S&P, and (ii) money market funds which have a rating of “AAAm-G,” “AAAm” or “AAm” by S&P, provided that the fund is registered under the Federal Investment Company Act of 1940 and whose shares are registered under the Federal Securities Act of 1933, (G) investment agreements with providers rated at least “AA-” and “Aa3” by S&P and Moody’s, respectively, (H) collateralized investment agreements with providers rated at least “A-” and “A3” by S&P and Moody’s, respectively, (I) Federal Agency Securities and participation certificates issued by the Federal National Mortgage Association, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank System, Student Loan Marketing Association, World Bank or Federal Agricultural Mortgage Corporation, and (J) commercial paper which is rated at the time of purchase at least “A-1+” by S&P or “P-1” by Moody’s and which matures not more than 270 days after the date of purchase. The term “Repurchase Agreement” shall mean a written agreement under which a bank or trust company which has a capital and surplus of not less than $50,000,000 or a government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York sells to, and agrees to repurchase from the Authority or the Trustee obligations issued or guaranteed by the United States; provided that the market value of such obligations is at the time of entering into the agreement at least one hundred and three percent (103%) of the repurchase price specified in the agreement and that such obligations are segregated from the unencumbered assets of such bank or trust company or government bond dealer; and provided further that unless the agreement is with a bank or trust company, such agreement shall require the repurchase to occur on demand or on a date certain which is not later than one (1) year after such agreement is entered into and shall expressly authorize the Trustee or the Authority, as the case may be, to liquidate the purchased obligations in the event of the insolvency of the party required to repurchase such obligations or the commencement against such party of a case under the federal Bankruptcy Code or the appointment of or taking possession by a trustee or custodian in a case against such party under the Bankruptcy Code. Any such investments may be purchased from or through the Trustee.

(ii) Permitted Investments shall not include the following:

(A) Government or Equivalent Obligations, certificates of deposit and bankers’ acceptances, in each case with yields lower than either (1) the yield available on comparable obligations then offered by the United States Treasury, or (2) the highest yield published or posted by the provider of the Permitted Investments to be currently available from the provider on reasonably comparable investments;

(B) any demand deposit or similar account with a bank, trust company or broker, unless (1) the account is used for holding funds for a short period of time until such funds are

C-4-3 APPENDIX C-4

reinvested or spent, and (2) substantially all the funds in the account are withdrawn for reinvestment or expenditure within fifteen (15) days of their deposit therein; or

(C) Repurchase Agreements or investment agreements, unless (1) at least three (3) bids are obtained on the proposed Repurchase Agreement or investment agreement from persons other than those with an interest in the Bonds, (2) the highest yielding Repurchase Agreement or investment agreement for which a qualifying bid is received is purchased, (3) the terms of the Repurchase Agreement or investment agreement, including collateral requirements, are reasonable, (4) the provider of the Repurchase Agreement or investment agreement certifies that the yield on the Repurchase Agreement or investment agreement is not less than the yield then available from the provider on reasonably comparable Repurchase Agreements or investment agreements, as applicable, if any, offered to persons who are purchasing the agreement from a source other than proceeds of tax-exempt bonds and (5) a written record of the yield offered by each bidder is maintained.

Any of the requirements of this paragraph (ii) shall not apply to moneys allocable to any investment as to which the Trustee and the Authority shall have received an Opinion of Bond Counsel regarding the waiver of such requirements. Permitted Investments shall not include any investment that would cause any of the Bonds to be federally guaranteed within the meaning of IRC §149(b). (LTA Section 312)

Option to Redeem Bonds upon Casualty or Taking

The Bonds are subject to special redemption, at the option of the Institution, in the event that there is damage to or destruction or taking of the Project which produces proceeds of insurance or condemnation awards. In the case of a casualty or taking producing proceeds of insurance or eminent domain proceeds, the Bonds shall be subject to such special redemption only to the extent such proceeds exceed the lesser of ten percent (10%) of the fully insurable value of the Project prior to the time of such casualty or taking as determined by the Trustee (who may rely on the advice of a consultant in making such determination) or twenty percent (20%) of the principal amount of Outstanding Bonds. Upon such determination and payment by the Institution of such proceeds to the Trustee, the Trustee shall use the same to redeem Bonds. (LTA Section 406)

Events of Default; Default

“Event of Default” under the Agreement means any one of the events set forth below and “default” means any Event of Default without regard to any lapse of time or notice.

Debt Service. Any principal or interest or redemption premium on the Bonds shall not be paid when due or the Institution shall fail to make any payment required of it under the Agreement within seven (7) days after the same becomes due and payable.

Other Obligations. The Institution shall fail to make any other required payment to the Trustee, and such failure is not remedied within seven (7) days after written notice thereof is given by the Trustee or the Authority to the Institution, or the Institution shall fail to perform its obligations under the section of the Master Indenture captioned “Insurance” or the section of the LTA captioned “Maintenance of Corporate Existence,” and such failure is not remedied within seven (7) days after written notice thereof is given by the Trustee or the Authority to the Institution; or the Institution shall fail to observe or perform any of its other agreements, covenants or obligations under the Agreement and such failure is not remedied within sixty (60) days after written notice thereof is given by the Trustee or the Authority to the Institution.

Warranties. There shall be a material breach of warranty made in the Agreement by the Institution as of the date it was intended to be effective and the breach is not cured within sixty (60) days after written notice thereof is given by the Authority or the Trustee to the Institution.

Voluntary Bankruptcy. The Institution shall commence a voluntary case under the federal bankruptcy laws, or shall become insolvent or unable to pay its debts as they become due, or shall make an assignment for the

C-4-4 APPENDIX C-4 benefit of creditors, or shall apply for, consent to or acquiesce in the appointment of, or taking possession by, a trustee, receiver, custodian or similar official or agent for itself or any substantial part of its property.

Appointment of Receiver. A trustee, receiver, custodian or similar official or agent shall be appointed for the Institution or for any substantial part of its property and such trustee or receiver shall not be discharged within sixty (60) days.

Involuntary Bankruptcy. The Institution shall have an order or decree for relief in an involuntary case under the federal bankruptcy laws entered against it, or a petition seeking reorganization, readjustment, arrangement, composition, or other similar relief as to it under the federal bankruptcy laws or any similar law for the relief of debtors shall be brought against it and shall be consented to by it or shall remain undismissed for sixty (60) days.

Breach of Other Agreements. A breach shall occur (and continue beyond any applicable grace period) with respect to the payment of indebtedness of the Institution for borrowed money with respect to loans exceeding $5,000,000, or with respect to the performance of any agreement securing such indebtedness or pursuant to which the same was issued or incurred, or an event shall occur with respect to provisions of any such agreement relating to matters of the character referred to in this default section, so that a holder or holders of such indebtedness or a trustee or trustees under any such agreement accelerates any such indebtedness; but an Event of Default shall not be deemed to be in existence or to be continuing under this paragraph if (A) the Institution is in good faith contesting the existence of such breach or event and if such acceleration is being stayed by judicial proceedings, or (B) such breach or event is remedied and the acceleration, if any, is wholly annulled. The Institution shall notify the Authority and the Trustee of any such breach or event immediately upon the Institution becoming aware of its occurrence and shall from time to time furnish such information as the Authority or the Trustee may reasonably request for the purpose of determining whether a breach or event described in this paragraph has occurred and whether such power of acceleration continues to be in effect.

Default Under Master Indenture. An Event of Default shall occur under the Master Indenture. (LTA Section 601)

Remedies for Events of Default

If an Event of Default occurs and is continuing:

Acceleration. The Trustee may by written notice to the Institution and the Authority declare immediately due and payable the principal amount of the Outstanding Bonds and the payments to be made by the Institution therefor, and accrued interest on the foregoing, whereupon the same shall become immediately due and payable without any further action or notice.

Rights as a Secured Party. The Trustee may exercise all of the rights and remedies of a secured party under the UCC with respect to the Note issued under the Master Indenture. The Trustee may exercise all of the rights and remedies of a secured party under the UCC with respect to securities in the Debt Service Fund and the Redemption Fund, and the Authority may exercise all of the rights and remedies of a secured party under the UCC with respect to securities in the Expense Fund, including the right to retain such securities in satisfaction of the obligations of the Institution under the Agreement.

Rights as Note Holder. The Trustee may exercise all its rights and remedies under the Master Indenture as the holder of the Note, including but not limited to directing the Master Trustee as to the exercise of its remedies and the conduct of proceedings, the acceleration of Obligations (as defined in the Master Indenture), the annulment of any such acceleration and the waiver of Events of Default (as defined in the Master Indenture). If the Note is declared to be due and payable because of an Event of Default under the Master Indenture which does not arise from or cause (otherwise than by such declaration) an Event of Default as described under Events of Default; Default – Debt Service, Other Obligations or Warranties, and if the Trustee determines in good faith that such Event of Default under the Master Indenture is cured and certain conditions of the Master Indenture are satisfied, the Trustee shall refrain from directing the Master Trustee not to annul such declaration and its consequences. (LTA Section 602)

C-4-5 APPENDIX C-4

Court Proceedings

The Trustee may enforce the obligations under the Agreement by legal proceedings for the specific performance of any covenant, obligation or agreement contained in the Agreement, whether or not an Event of Default exists, or for the enforcement of any other appropriate legal or equitable remedy, and may recover damages caused by any breach of the provisions of the Agreement, including (to the extent the Agreement may lawfully provide) court costs, reasonable attorneys’ fees and other costs and expenses incurred in enforcing the obligations of the Authority under the Agreement. (LTA Section 603)

Revenues after Default

If an Event of Default occurs and is continuing, the proceeds from the Note issued under the Master Indenture together with any other funds pledged as security under the Agreement, less all reasonable fees and expenses of the Trustee and the Authority in connection therewith (together with reserves for the foregoing to the extent deemed necessary by the Trustee) shall be applied to the obligations of the Institution under the Agreement in such order as may be determined by the Trustee and any surplus thereof shall be paid to the Institution. (LTA Section 604)

Trustee May Perform Obligations

If the Institution fails to observe or perform any covenant, condition, agreement or provision contained in the Agreement with respect to the Project (including, without limitation, the insurance, maintenance or repair of the Project and the payment of taxes or other governmental charges thereon), whether or not there is an Event of Default under the Agreement, the Trustee may perform such covenant, condition, agreement or provision in its own name or in the Institution’s name, and is irrevocably appointed the Institution’s attorney-in-fact for such purpose. The Trustee shall give at least seven (7) days’ notice to the Institution before taking action under this section, except that in the case of emergency as reasonably determined by the Trustee, the Trustee may act on lesser notice or give the notice promptly after rather than before taking the action. The reasonable cost of any such action by the Trustee shall be paid or reimbursed by the Institution pursuant to the Agreement. (LTA Section 702)

Remedies Cumulative

The rights and remedies under the Agreement shall be cumulative and shall not exclude any other rights and remedies allowed by law, provided there is no duplication of recovery. The failure to insist upon a strict performance of any of the obligations of the Institution or to exercise any remedy for any violation thereof shall not be taken as a waiver for the future of the right to insist upon strict performance by the Institution or of the right to exercise any remedy for the violation. (LTA Section 605)

Covenants as to Operation

The Institution shall not take or omit to take any action if such action or omission would cause the Bonds to be “arbitrage” bonds under Section 148 of the IRC or cause the Bonds not to meet any of the requirements of Section 149 of the IRC or cause the Bonds to cease to be “qualified 501(c)(3) bonds” under Section 145 of the IRC. (LTA Section 1002)

Resignation or Removal of the Trustee

The Trustee may resign on not less than thirty (30) days’ notice given in writing to the Authority, the Bondowners and the Institution, but such resignation shall not take effect until a successor has been appointed. The Trustee will promptly certify to the Authority that it has mailed such notice to all Bondowners and such certificate will be conclusive evidence that such notice was given in the manner required hereby. The Trustee may be removed by written notice (i) from the owners of a majority in principal amount of the Outstanding Bonds to the Trustee, the Authority and the Institution; or (ii) so long as no default or Event of Default exists under the Agreement or the Master Indenture, from the Institution to the Trustee and the Authority. (LTA Section 704)

C-4-6 APPENDIX C-4

Maintenance of Corporate Existence

Each Institution shall maintain its existence as a nonprofit corporation qualified to do business in Massachusetts and shall not dissolve or sell or convey all or substantially all of its assets to any Person or consolidate with or merge into another entity or entities, or permit one or more other entities to consolidate with or merge into it, except as permitted by the Master Indenture. (LTA Section 1004)

Withdrawal from the Obligated Group

Upon its satisfaction of the conditions for withdrawal from the Obligated Group set forth in the Master Indenture, any Member of the Obligated Group (other than as described in the Master Indenture) may withdraw from the Obligated Group for purposes of the Agreement. (LTA Section 1008)

Amendment

The Agreement may be amended by the parties without Bondowner consent for any of the following purposes: (a) to subject additional property to the lien of the Agreement, (b) to provide for the establishment or amendment of a book-entry system of registration for any series of Bonds through a securities depository (which may or may not be DTC), (c) to add to the covenants and agreements of the Institution or to surrender or limit any right or power of the Institution, (d) to cure any ambiguity or defect, or to add provisions which are not inconsistent with the Agreement and which do not impair the security for the Bonds, or (e) to make changes consistent with the withdrawal of a Member of the Obligated Group.

Except as provided in the foregoing paragraph, the Agreement may be amended only with the written consent of the owners of a majority in principal amount of the Outstanding Bonds; provided, however, that no amendment of the Agreement may be made without the unanimous written consent of the affected Bondowners for any of the following purposes: (i) to extend the maturity of any Bond, (ii) to reduce the principal amount or interest rate of any Bond, (iii) to make any Bond redeemable other than in accordance with its terms, (iv) to create a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (v) to reduce the percentage of the Bonds required to be represented by the Bondowners giving their consent to any amendment.

Any amendment of the Agreement shall be accompanied by an opinion of Bond Counsel to the effect that the amendment (i) is permitted by the Agreement and (ii) will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. (LTA Section 1101)

Defeasance

When there are in the Debt Service Fund and Redemption Fund sufficient funds, or non-callable Government or Equivalent Obligations described in clause (i) or (ii) of the definition thereof in such principal amounts, bearing interest at such rates and with such maturities as will provide sufficient funds to pay or redeem the Bonds in full, and when all the rights under the Agreement of the Authority and the Trustee have been provided for, upon written notice from the Institution to the Authority and the Trustee, the Bondowners shall cease to be entitled to any benefit or security under the Agreement except the right to receive payment of the funds deposited and held for payment and other rights which by their nature cannot be satisfied prior to or simultaneously with termination of the lien of the Agreement, the security interests created by the Agreement (except in such funds and investments) shall terminate and the Authority and the Trustee shall execute and deliver such instruments as may be necessary to discharge the lien and security interests created under the Agreement; provided, however, that if any such Bonds are to be redeemed prior to the maturity thereof, the Authority shall have taken all action necessary to redeem such Bonds and notice of such redemption shall have been duly mailed in accordance with the Agreement or irrevocable instructions so to mail shall have been given to the Trustee. Upon such defeasance, the funds and investments required to pay or redeem the Bonds in full shall be irrevocably set aside for that purpose, and moneys held for defeasance shall be invested only as provided above in this section. Any funds or property held by the Trustee and not required for payment or redemption of the Bonds in full shall, after satisfaction of all the rights of the Authority and the Trustee and after allowance for payment into the Rebate Fund, be distributed to the Institution upon such indemnification, if any, as the Authority or the Trustee may reasonably require. (LTA Section 202)

C-4-7 APPENDIX C-4

Amendment of Master Indenture

In the event that the consent or direction of the Holder (as defined in the Master Indenture) of the Note is required under the Master Indenture, the Trustee, as the Holder of the Note, shall act in accordance with the written consent or direction of the owners of a majority in principal amount of the Outstanding Bonds. (LTA Section 1102)

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C-4-8 APPENDIX C-5

The following is a brief summary, prepared by Ropes & Gray LLP, counsel to the Combined Group, of certain provisions of the Mortgage dated as of February 13, 2001, as amended (the “Mortgage”). This summary does not purport to be complete, and reference is made to the document for full and complete statements of such and all provisions.

MORTGAGE SUMMARY

Pursuant to the Mortgage, the Medical Center as Mortgagor (the “Mortgagor”) has granted a mortgage on certain real property and improvements located in Worcester, Massachusetts described in Appendix A to this Official Statement as the “Memorial Campus” (the “Property”). The Master Trustee is the Mortgagee and holder under the Mortgage.

Power of Sale. The Master Trustee shall have the statutory power of sale.

Right as a Secured Party. The Master Trustee may exercise all of the rights and remedies of a secured party under the Massachusetts Uniform Commercial Code (the “UCC”) with respect to that portion of the Property which is or may be treated as collateral under the UCC.

Casualty and Eminent Domain Proceeds. In the event of damage to or destruction of all or any part of the Property, any applicable proceeds shall be paid to the Master Trustee; such awards shall be used for repair or replacement, or to be applied to or toward the indebtedness secured hereby in such order as the Master Trustee may determine.

Permitted Substitutions, Releases and Subordinations with Respect to the Property. The Master Trustee shall execute such documents as are necessary or appropriate to effect the granting of Permitted Liens or any sale, lease or other disposition of property permitted under the Master Indenture. The Master Trustee may also release easements in or over the Property, may subordinate or release the lien of the Agreement on vacant land to facilitate financing of construction thereon and may make other releases, substitutions and subordinations. The Mortgagor may erect additional buildings on the Property or may alter, remodel or improve the Property and, with the written consent of the Master Trustee (which consent should not be unreasonably withheld) may demolish buildings and structures.

Mandatory Release and Subordinations. If the Mortgagor undertakes the construction (whether financed by internal capital, restricted or unrestricted endowment or by third party interim or construction financing) of a building or structure on land included in the Property on which no buildings or structures are then located or contemplated as part of the Project, so long as there is not then an Event of Default, the Master Trustee shall release such land from the lien of the Mortgage or subordinate the lien of the Mortgage with respect to such land as requested by the Combined Group.

Excluded Space and Rights. There is excepted and excluded from the Property, and reserved to the Mortgagor, the fee simple title in and to the space situated above the structure existing on the Property from time to time, and as appurtenant thereto, all necessary rights and easements, for the purpose of constructing, using and mortgaging, from time to time, vertical extensions of such buildings situated on the Property.

C-5-1 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX D

PROPOSED FORM OF BOND COUNSEL OPINION

[Date of delivery]

Massachusetts Health and Educational Facilities Authority 99 Summer Street, Suite 1000 Boston, Massachusetts 02110

$_____ Massachusetts Health and Educational Facilities Authority Revenue Bonds, UMass Memorial Issue, Series G (2010), Dated the Date of Delivery (the “Bonds”)

We have acted as bond counsel to the Massachusetts Health and Educational Facilities Authority (the “Authority”) in connection with the issuance by the Authority of the above-referenced bonds (the “Bonds”). In such capacity, we have examined the law and such certified proceedings and other papers as deemed necessary to render this opinion, including the Loan and Trust Agreement (the “Agreement”) dated as of June 1, 2010 among the Authority, UMass Memorial Health Care, Inc. (the “Parent”), UMass Memorial Medical Center, Inc. (the “Medical Center” and together with the Parent, the “Institution”) and U.S. Bank National Association, as Trustee (the “Trustee”); the Master Indenture (the “Master Indenture”) dated as of December 1, 1998 between the Parent (referred to therein as the sole initial “Member of the Obligated Group”) and State Street Bank and Trust Company, predecessor to U.S. Bank National Association, as Master Trustee (the “Master Trustee”), as previously amended and supplemented and as further amended and supplemented by the Supplemental Master Indenture for Obligation No. 9 (the “Sixth Supplement” and collectively the Master Indenture as previously amended and supplemented, the “Indenture”) dated as of June 1, 2010 among the Parent, as Representative of the Obligated Group, the Medical Center, as a Designated Member (as defined in the Master Indenture), and the Master Trustee (the Members of the Obligated Group and the Designated Members being collectively referred to as the “Combined Group”).

As to questions of fact material to our opinion we have relied upon representations and covenants of the Authority and the Institution contained in the Agreement and of the Combined Group contained in the Indenture, the certified proceedings and other certifications of public officials furnished to us, and certifications of officials of the Institution and others, without undertaking to verify the same by independent investigation.

The Bonds are issued pursuant to the Agreement. The Bonds are payable solely from funds to be provided therefor by the Institution pursuant to the Agreement. Under the Agreement the Institution has agreed to make payments sufficient to pay when due the principal (including D-1 BOS111 12482802.3

sinking fund installments) and purchase or redemption price of and interest on the Bonds. Such payments and other moneys payable to the Authority or the Trustee under the Agreement, including proceeds derived from any security provided thereunder (collectively the “Revenues”), and the rights of the Authority under the Agreement to receive the same (excluding, however, certain administrative fees, indemnification, and reimbursements), are pledged and assigned by the Authority as security for the Bonds. The Bonds are payable solely from the Revenues.

We express no opinion with respect to compliance by the Institution with applicable legal requirements with respect to the Agreement or in connection with the operation of the Project (as defined in the Agreement) being refinanced by the Bonds.

Reference is made to an opinion of even date of Ropes & Gray LLP, counsel to the Institution and the Combined Group, with respect to, among other matters, the corporate existence of the Institution and the Combined Group, the power of the Institution to carry out the Project, the power of the Institution and the Combined Group to enter into and perform their respective obligations under the Agreement, the Indenture and the Sixth Supplement (such instruments and agreements being collectively called the “Bond Documents”), the authorization, execution and delivery of the Bond Documents by the Institution and the Combined Group and the extent to which the Bond Documents are binding and enforceable upon the Institution and the Combined Group and to an opinion of even date of Frank W. Smith, Associate General Counsel, counsel to HealthAlliance Hospitals, Inc., HealthAlliance Home Health and Hospice, Inc. and Central New England HealthAlliance, Inc., which are affiliates (the “Affiliates”) of the Institution and are expected to be users of the Project. We have relied on such opinions with regard to such matters and to the other matters addressed therein, including, without limitation, the current qualification of the Parent, the Medical Center and the Affiliates as organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). We note that such opinions are subject to the limitations and conditions described therein. Failure of the Institution to maintain its status as an organization described in Section 501(c)(3) of the Code or to use the Project in activities of the Institution, or the Affiliates, as applicable, that do not constitute unrelated trades or businesses of the Institution within the meaning of Section 513 of the Code may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Bonds.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Authority is a duly created and validly existing body corporate and politic and a public instrumentality of The Commonwealth of Massachusetts with the power to enter into and perform the Agreement and to issue the Bonds.

2. The Agreement has been duly authorized, executed and delivered by the Authority and is a valid and binding obligation of the Authority enforceable against the Authority. As provided in Section 13 of Chapter 614 of the Acts of 1968 of The Commonwealth

D-2

of Massachusetts, as amended, the Agreement creates a valid lien on the Revenues and on the rights of the Authority or the Trustee on behalf of the Authority to receive Revenues under the Agreement (except certain rights to indemnification, reimbursements and fees).

3. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding special obligations of the Authority, payable solely from the Revenues.

4. Interest on the Bonds is excluded from the gross income of the owners of the Bonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes. However, such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. In rendering the opinions set forth in this paragraph, we have assumed compliance by the Authority and the Institution with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The Institution and, to the extent necessary, the Authority have covenanted in the Agreement to comply with all such requirements. Failure by the Authority or the Institution to comply with certain of such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

5. Interest on the Bonds and any profit made on the sale thereof are exempt from Massachusetts personal income taxes and the Bonds are exempt from Massachusetts personal property taxes. We express no opinion regarding any other Massachusetts tax consequences arising with respect to the Bonds or any tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts.

This opinion is expressed as of the date hereof, and we neither assume nor undertake any obligation to update, revise, supplement or restate this opinion to reflect any action taken or omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may hereafter arise or occur, or for any other reason.

The rights of the holders of the Bonds and the enforceability of the Bonds and the Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

EDWARDS ANGELL PALMER & DODGE LLP

D-3 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E

CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by UMass Memorial Health Care, Inc. (the “Obligated Group Representative”), on behalf of itself and UMass Memorial Medical Center, Inc. (the “Medical Center”) and U.S. Bank National Association (the “Trustee”) in connection with the issuance of $______Massachusetts Health and Educational Facilities Authority Revenue Bonds, UMass Memorial Issue, Series G (2010) (the “Bonds”). The Bonds are being issued pursuant to a Loan and Trust Agreement (the “Agreement”) dated as of June 1, 2010 among the Massachusetts Health and Educational Facilities Authority (the “Authority”), the Trustee, the Obligated Group Representative and the Medical Center. The proceeds of the Bonds are being loaned by the Authority to the Obligated Group Representative and the Medical Center pursuant to the Agreement. Pursuant to a Master Indenture (the “Master Indenture”) dated as of December 1, 1998, as amended and supplemented from time to time, among the Obligated Group Representative, such other persons as are from time to time Members of the Obligated Group (the Obligated Group Representative and each such other person that is a Member of the Obligated Group are each referred to as an “Obligated Group Member” and collectively referred to as the “Obligated Group;” the Obligated Group, together with any Designated Members (as defined in the Master Indenture), are collectively referred to as the “Combined Group”) and State Street Bank and Trust Company, predecessor to U.S. Bank National Association, as Master Trustee, each Obligated Group Member has agreed to be jointly and severally liable for the repayment of the loan from the Authority. The Obligated Group Representative and the Trustee covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Obligated Group Representative and the Trustee for the benefit of the Bondowners and in order to assist the Participating Underwriter (defined below) in complying with the Rule (defined below). The Obligated Group Representative and the Trustee acknowledge that the Authority has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any Bondowner, with respect to any such reports, notices or disclosures. The Trustee, except as provided in Section 3(c), has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any Bondowner, with respect to any such reports, notices or disclosures except for its negligent failure to comply with its obligations under Section 3(c).

SECTION 2. Definitions. In addition to the definitions set forth in the Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Obligated Group Representative pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

E-1 APPENDIX E

“Bondowner” shall mean the registered owner of a Bond and any beneficial owner thereof, as established to the reasonable satisfaction of the Trustee or Obligated Group Representative.

“Dissemination Agent” shall mean any Dissemination Agent or successor Dissemination Agent designated in writing by the Obligated Group Representative and which has filed with the Obligated Group Representative, the Trustee and the Authority a written acceptance of such designation. The same entity may serve as both Trustee and Dissemination Agent. The initial Dissemination Agent shall be the Trustee. In the absence of a third-party Dissemination Agent, the Obligated Group Representative shall serve as the Dissemination Agent.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

“MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Agreement. Filing information relating to the MSRB is set forth in Exhibit B hereto.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Quarterly Statement” shall mean any Quarterly Statement provided by the Obligated Group Representative pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports and Quarterly Statements.

(a) Commencing with the fiscal year ending September 30, 2010, the Dissemination Agent, not later than 120 days after the end of each fiscal year (the “Annual Report Filing Deadline”), shall provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Commencing in 2010 for the fiscal quarter ending June 30, the Dissemination Agent, not later than 60 days after the end of each of the first, second and third fiscal quarters (i.e., the fiscal quarters ending December 31, March 31 and June 30) and not later than 90 days after the end of the fourth fiscal quarter (i.e., the fiscal quarter ending September 30) (each a “Quarterly Statement Filing Deadline;” and together with the Annual Report Filing Deadline, the “Filing Deadline”), shall provide to the MSRB a Quarterly Statement that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than two (2) Business Days prior to each Filing Deadline, the Obligated Group Representative (if it is not the Dissemination Agent) shall provide the Annual Report or Quarterly Statement, as applicable, to the Dissemination Agent. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Combined Group may be submitted separately from, and at a later

E-2 APPENDIX E date than, the balance of the Annual Report if such audited financial statements are not available as of the date set forth above. If the Dissemination Agent submits the audited financial statements of the Combined Group includable in the Annual Report at a later date, it shall provide unaudited financial statements by the Annual Report Filing Deadline and shall provide the audited financial statements as soon as practicable after the audited financial statements become available. The Obligated Group Representative shall submit the audited financial statements to the Dissemination Agent and the Trustee as soon as practicable after they become available and the Dissemination Agent shall submit the audited financial statements to the MSRB as soon as practicable thereafter. The Obligated Group Representative shall provide a copy of each Annual Report and Quarterly Statement to the Trustee. For purposes of this Section and this Disclosure Agreement, “audited financial statements” shall, at the election of the Obligated Group Representative, mean audited consolidated or combined financial statements of any health system that includes the Combined Group.

(b) The Dissemination Agent shall:

(i) file a report with the Obligated Group Representative and the Trustee certifying that the Annual Report, or Quarterly Statement, as applicable, has been provided pursuant to this Disclosure Agreement and stating the date it was provided (the “Compliance Certificate”); such report shall include a certification from the Obligated Group Representative that the Annual Report, or Quarterly Statement, as applicable, complies with the requirements of this Disclosure Agreement; and

(ii) upon request of any Bondowner or Beneficial Owner to the Chief Financial Officer of the Obligated Group Representative, the Obligated Group Representative shall provide the most recent Quarterly Statements directly to such requesting Bondowner or Beneficial Owner, and the costs of complying with such requests will be borne by the Obligated Group Representative.

(c) If the Trustee has not received a Compliance Certificate by the Filing Deadline, the Trustee shall send, and the Obligated Group Representative hereby authorizes and directs the Trustee to submit on its behalf, a notice to the MSRB in substantially the form attached as Exhibit A.

(d) If the Dissemination Agent has not provided the Annual Report or Quarterly Statements to the MSRB by the applicable Filing Deadline, the Obligated Group Representative shall send, or cause the Dissemination Agent to send, a notice substantially in the form of Exhibit A irrespective of whether the Trustee submits such notice.

SECTION 4. Content of Annual Reports and Quarterly Statements.

(a) The Annual Report submitted by the Obligated Group Representative shall contain or incorporate by reference the following:

(i) The year–end Financial Statements of the Combined Group and Independent Auditor’s Report similar in form and scope to the statements, information and reports included in Appendix B to the Official Statement dated May __, 2010 (the “Official Statement”) with respect to the Bonds (which Financial Statements may be

E-3 APPENDIX E

provided on a combined or consolidated basis and may include one or more other entities as long as supplemental schedules are provided showing the Obligated Group Representative separately from such other entities, or on a stand-alone basis, at the election of the Obligated Group Representative); and (ii) information of the type included in the tables in Appendix A to the Official Statement captioned “Medical Center Utilization” and “Source of Gross Patient Service Revenue.”

The financial statements included as part of the Annual Report pursuant to Sections 3 and 4 of this Disclosure Agreement shall be prepared in conformity with generally accepted accounting principles, as in effect from time to time. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which a Combined Group member is an “obligated person” (as defined by the Rule), that (i) are available to the public on the MSRB Internet Web site, or (ii) have been filed with the Securities and Exchange Commission. The Obligated Group Representative shall clearly identify each such other document so incorporated by reference.

(b) Each Quarterly Statement submitted by the Obligated Group Representative shall contain information relating to the fiscal quarter and for the year to date of the type included in the tables entitled “Combined Group Statements of Operations” and “Medical Center Utilization” that are included in Appendix A to the Official Statement (which shall be provided on a combined basis for the Parent and its Affiliates, with supplemental schedules showing the Combined Group only).

(c) In the event an additional Combined Group member joins the Combined Group and such Combined Group member accounts for more than 10% of net revenues of the Combined Group, the following financial and operating data shall be provided with respect to such Combined Group member on a consolidated basis (if such information was presented on a consolidated basis in Appendix A to the Official Statement or, at the election of the Obligated Group Representative, if such Combined Group member is engaged in a similar line of business as another Combined Group member) or on an individual basis (if such information was presented on an individual basis in Appendix A to the Official Statement or, at the election of the Obligated Group Representative, if such Combined Group member is engaged in a different line of business from other Combined Group members): the same financial and operating data (to the extent applicable) required to be provided as for existing Combined Group members.

SECTION 5. Reporting of Significant Events.

(a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events:

1. Principal or interest payment delinquencies on the Bonds or under the Agreement or the Master Indenture.

2. Occurrence of any default under the Agreement or the Master Indenture (other than as described in clause (1) above).

3. Any unscheduled draw on the Debt Service Reserve Fund reflecting financial difficulties.

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4. Any unscheduled draw on credit enhancements reflecting financial difficulties.

5. Substitution of credit or liquidity providers, or their failure to perform.

6. The rendering of an opinion of bond counsel to the effect that there has been an adverse development affecting the tax-exempt status of the Bonds, or the occurrence of any event adversely affecting the tax-exempt status of the Bonds.

7. Modifications to the rights of the Bondowners.

8. Giving of a notice of redemption of any Bonds. (The giving of notice of regularly scheduled mandatory sinking fund redemption shall not be deemed material for this purpose under clause (b) of this Section 5.)

9. Defeasance of the Bonds or any portion thereof.

10. Release, substitution or sale of property securing repayment of the Bonds.

11. Any change in the rating on the Bonds.

(b) Whenever the Obligated Group Representative obtains knowledge of the occurrence of a Listed Event, if such Listed Event is material, the Obligated Group Representative shall, in a timely manner, direct the Dissemination Agent to file a notice of such occurrence with the MSRB. The Obligated Group Representative shall provide a copy of each such notice to the Authority and the Trustee. The Dissemination Agent, if other than the Obligated Group Representative, shall have no duty to file a notice of an event described hereunder unless it is directed in writing to do so by the Obligated Group Representative, and shall have no responsibility for verifying any of the information in any such notice or determining the materiality of the event described in such notice.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The Obligated Group Representative’s obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds or upon delivery to the Trustee of an opinion of counsel expert in federal securities laws selected by the Obligated Group Representative and acceptable to the Trustee to the effect that compliance with this Disclosure Agreement no longer is required by the Rule,provided however, that the Obligated Group Representative shall be required to provide Quarterly Statements in the manner required hereunder for so long as the Obligated Group Representative is required to comply with the other provisions of this Disclosure Agreement regardless of whether the provision of Quarterly Statements is required by the Rule. If the Obligated Group Representative’s obligations under the Agreement or the Master Indenture are assumed in full by some other entity, such person shall be responsible for compliance with this Disclosure Agreement in the same manner as if it

E-5 APPENDIX E were the Obligated Group Representative and the original Obligated Group Representative shall have no further responsibility hereunder. If any Combined Group member ceases to be a Combined Group member in conformity with the release provisions of the Master Indenture, the disclosures required under this Disclosure Agreement shall cease to include data or information relating to such former Combined Group member. If any Combined Group member does not meet or ceases to meet the criteria specified in Section 4(c) with respect to the relative size of such Combined Group Member, the individual disclosures required under this Disclosure Agreement with respect to such Combined Group member shall not be required for such Combined Group member.

SECTION 8. Dissemination Agent. The Obligated Group Representative may, from time to time with notice to the Trustee and the Authority, appoint or engage a third-party Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may, with notice to the Trustee and the Authority, discharge any such third-party Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent (if other than the Obligated Group Representative) may resign upon 30 days’ written notice to the Obligated Group Representative, the Trustee and the Authority.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Obligated Group Representative and the Trustee may amend this Disclosure Agreement (and the Trustee shall agree to any amendment so requested by the Obligated Group Representative) and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both the Obligated Group Representative and the Trustee to the effect that such amendment or waiver would not, in and of itself, violate the Rule, provided however, that no amendment or waiver which eliminates or diminishes the requirement to deliver Quarterly Statements may be made unless the amendment is consented to by the Bondowners as though it were an amendment to the Agreement pursuant to Section 1101 of the Agreement. Without limiting the foregoing, the Obligated Group Representative and the Trustee may amend this Disclosure Agreement if (a) such amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the Combined Group or a Combined Group member or of the type of business conducted by the Combined Group or a Combined Group member, (b) this Disclosure Agreement, as so amended, would have complied with the requirements of the Rule at the time the Bonds were issued, taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) (i) the Trustee determines, or the Trustee receives an opinion of counsel expert in federal securities laws and acceptable to the Trustee to the effect that, the amendment does not materially impair the interests of the Bondowners or (ii) the amendment is consented to by the Bondowners as though it were an amendment to the Agreement pursuant to Section 1101 of the Agreement. The annual financial information containing the amended operating data or financial information will explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. Neither the Trustee nor the Dissemination Agent shall be required to accept or acknowledge any amendment of this Disclosure Agreement if the amendment adversely affects its respective rights or immunities or increases its respective duties hereunder.

E-6 APPENDIX E

SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Obligated Group Representative from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, Quarterly Statement or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Obligated Group Representative chooses to include any information in any Annual Report, Quarterly Statement or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Agreement, the Obligated Group Representative shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Quarterly Statement or notice of occurrence of a Listed Event.

SECTION 11. Default. In the event of a failure of the Obligated Group Representative or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the request of Bondowners representing at least 25% in aggregate principal amount of Outstanding Bonds, shall), take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Obligated Group Representative or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. Without regard to the foregoing, any Bondowner may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Obligated Group Representative or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Obligated Group Representative or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance and not for monetary damages in any amount.

SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. As to the Trustee, Article VII of the Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Agreement. The Dissemination Agent (if other than the Obligated Group Representative) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Combined Group agrees to indemnify and save the Dissemination Agent (if other than the Obligated Group Representative), its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or wilful misconduct. The obligations of the Combined Group under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Obligated Group Representative covenants that whenever it is serving as Dissemination Agent, it shall take any action required of the Dissemination Agent under this Disclosure Agreement.

The Trustee shall have no obligation under this Disclosure Agreement to report any information to the MSRB or any Bondowner. If an officer of the Trustee obtains actual knowledge of the occurrence of an event described in Section 5 hereunder, whether or not such event is material, the Trustee shall timely notify the Obligated Group Representative of such

E-7 APPENDIX E occurrence, provided, however, that any failure by the Trustee to give such notice to the Obligated Group Representative shall not affect the Combined Group’s obligations under this Disclosure Agreement or give rise to any liability by the Trustee for such failure.

SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Obligated Group, the Trustee, the Dissemination Agent, the Participating Underwriters and the Bondowners, and shall create no rights in any other person or entity.

SECTION 14. Disclaimer. No Annual Report or notice of a Listed Event filed by or on behalf of the Obligated Group under this Disclosure Agreement shall obligate the Combined Group to file any information regarding matters other than those specifically described in Section 4 and Section 5 hereof, nor shall any such filing constitute a representation by the Combined Group or any Combined Group member or raise any inference that no other material events have occurred with respect to the Combined Group, any Combined Group member or the Bonds or that all material information regarding the Combined Group, each Combined Group member or the Bonds has been disclosed. The Combined Group shall have no obligation under this Disclosure Agreement to update information provided pursuant to this Disclosure Agreement except as specifically stated herein.

SECTION 15. Notices. Unless otherwise expressly provided, all notices to the Authority, the Obligated Group Representative, the Trustee and the Dissemination Agent shall be in writing and shall be deemed sufficiently given if sent by registered or certified mail, postage prepaid, or delivered or sent by facsimile during business hours to such parties at the address specified in Section 1104 of the Agreement or, as to all of the foregoing, to such other address as the addressee shall have indicated by prior written notice to the party giving notice.

SECTION 16. Governing Law. This instrument shall be governed by the laws of The Commonwealth of Massachusetts.

SECTION 17. All Obligated Group Members Bound. The Obligated Group Representative hereby represents and warrants that it has full authority to bind each current Obligated Group Member to provide to the Obligated Group Representative on a timely basis all information with respect to such Obligated Group Member and any Designated Members required for the Obligated Group Representative to comply with its undertakings under this Disclosure Agreement. The Obligated Group Representative further represents and warrants that, pursuant to Section 3.01 of the Master Indenture, it is a condition to the entry into the Obligated Group of any additional Obligated Group Member that such additional Obligated Group Member agree in writing to provide (i) to the Obligated Group Representative all such information on a timely basis and (ii) to the Trustee an opinion of counsel that such agreement is valid, binding and enforceable, subject to bankruptcy and other normal exceptions. The Obligated Group Representative covenants to enforce the undertakings of each Obligated Group Member to provide all such information to the Obligated Group Representative on a timely basis.

Date: _____, 2010

E-8 APPENDIX E

UMASS MEMORIAL HEALTH CARE, INC. on behalf of itself and UMass Memorial Medical Center, Inc.

By ______

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By ______Authorized Officer

E-9 APPENDIX E

EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Massachusetts Health and Educational Facilities Authority

Name of Bond Issue: UMass Memorial Issue, Series G (2010)

Name of Obligated Person: UMass Memorial Health Care, Inc.

Date of Issuance: _____, 2010

NOTICE IS HEREBY GIVEN that UMass Memorial Health Care, Inc. (the “Obligated Group Representative”) has not provided an Annual Report or Quarterly Statement with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated _____, 2010 between the Obligated Group Representative and U.S. Bank National Association.

Dated: ______

U.S. Bank National Association, on behalf of the OBLIGATED GROUP REPRESENTATIVE

cc: Obligated Group Representative

E-10 APPENDIX E

EXHIBIT B

Filing information relating to the Municipal Securities Rulemaking Board is as follows:

Municipal Securities Rulemaking Board

http://emma.msrb.org

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MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY • Revenue Bonds, UMass Memorial Issue, Series G (2010)